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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington D.C. 20549



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FORM 20-F



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ANNUAL REPORT PURSUANT TO SECTIONS 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT
OF 1934



For the fiscal year ended March 31, 2005



Commission file number 1 - 6784



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MATSUSHITA DENKI SANGYO KABUSHIKI KAISHA

(Exact name of Registrant as
specified in its charter)



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MATSUSHITA ELECTRIC INDUSTRIAL CO., LTD.

(Translation of Registrants name into English)



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Japan

(Jurisdiction of incorporation or organization)



1006, Oaza Kadoma, Kadoma-shi, Osaka 571-8501, Japan

(Address of principal
executive offices)



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Securities registered or to be registered pursuant to Section 12(b) of the Act.



|                            |  |                                          
|--------------------------- |  | -----------------------------------------
|Title of each class         |  | Name of each exchange on which registered
|American Depositary Shares* |  | New York Stock Exchange                  
|Common Stock                |  | New York Stock Exchange                  



|* | American Depositary Shares evidenced by American Depositary Receipts. Each American Depositary Share represents one share of Common Stock.
|- | ------------------------------------------------------------------------------------------------------------------------------------------



Securities registered or to be registered pursuant to Section 12(g) of the
Act.



None

(Title of Class)



Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act.



None

(Title of Class)



Indicate the number of outstanding shares (excluding treasury stock) of each of the issuers classes of capital or common stock as of the close of the period covered by the annual report.



|                                                                      |  |                             |  |                               
|--------------------------------------------------------------------- |  | --------------------------- |  | ------------------------------
|                                                                      |  | Outstanding as of          
|Title of Class                                                        |  | March 31, 2005 (Japan Time) |  | March 31, 2005 (New York Time)
|Common Stock                                                          |  | 2,258,357,710               |  |                               
|American Depositary Shares, each representing 1 share of Common Stock |  |                             |  | 120,787,794                   



Indicate by check mark whether the
Company (1) has filed all reports required to be filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Company was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.    Yes  x    No ̈.



Indicate by check mark which
financial statement item the Company has elected to follow.

Item 17. ̈Item 18.  x.



If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
    Yes ̈No  x



This form contains 172 pages.



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##### Table of Contents

CONTENTS



|                                                          |  |                                                       |  |                                               |  |     
|--------------------------------------------------------- |  | ----------------------------------------------------- |  | --------------------------------------------- |  | ----
|                                                          |  |                                                       |  |                                               |  | Page
|Cautionary Statement Regarding Forward-Looking Statements |  | 1                                                    
|                                                          | 
|About the Company                                         |  | 1                                                    
|                                                          |  |                                                       | 
|                                                          |  |                                                       |  | PART I                                        |  |     
|                                                          |  |                                                      
|Item 1.                                                   |  | Identity of Directors, Senior Management and Advisers |  | 2                                            
|                                                          |  |                                                      
|Item 2.                                                   |  | Offer Statistics and Expected Timetable               |  | 2                                            
|                                                          |  |                                                      
|Item 3.                                                   |  | Key Information                                       |  | 2                                            
|                                                          |  |                                                       | 
|                                                          |  | A.                                                    |  | Selected Financial Data                       |  | 2   
|                                                          |  | B.                                                    |  | Capitalization and Indebtedness               |  | 3   
|                                                          |  | C.                                                    |  | Reasons for the Offer and Use of Proceeds     |  | 3   
|                                                          |  | D.                                                    |  | Risk Factors                                  |  | 3   
|                                                          |  |                                                      
|Item 4.                                                   |  | Information on the Company                            |  | 10                                           
|                                                          |  |                                                       | 
|                                                          |  | A.                                                    |  | History and Development of the Company        |  | 10  
|                                                          |  | B.                                                    |  | Business Overview                             |  | 16  
|                                                          |  | C.                                                    |  | Organizational Structure                      |  | 31  
|                                                          |  | D.                                                    |  | Property, Plants and Equipment                |  | 33  
|                                                          |  |                                                      
|Item 5.                                                   |  | Operating and Financial Review and Prospects          |  | 35                                           
|                                                          |  |                                                       | 
|                                                          |  | A.                                                    |  | Operating Results                             |  | 35  
|                                                          |  | B.                                                    |  | Liquidity and Capital Resources               |  | 47  
|                                                          |  | C.                                                    |  | Research and Development                      |  | 50  
|                                                          |  | D.                                                    |  | Trend Information                             |  | 51  
|                                                          |  | E.                                                    |  | Off-Balance Sheet Arrangements                |  | 53  
|                                                          |  | F.                                                    |  | Tabular Disclosure of Contractual Obligations |  | 53  
|                                                          |  | G.                                                    |  | Safe Harbor                                   |  | 54  
|                                                          |  | H.                                                    |  | Accounting Principles                         |  | 54  
|                                                          |  |                                                      
|Item 6.                                                   |  | Directors, Senior Management and Employees            |  | 59                                           
|                                                          |  |                                                       | 
|                                                          |  | A.                                                    |  | Directors and Senior Management               |  | 59  
|                                                          |  | B.                                                    |  | Compensation                                  |  | 68  
|                                                          |  | C.                                                    |  | Board Practices                               |  | 68  
|                                                          |  | D.                                                    |  | Employees                                     |  | 68  
|                                                          |  | E.                                                    |  | Share Ownership                               |  | 69  



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|         |  |                                                                              |  |                                                         |  |     
|-------- |  | ---------------------------------------------------------------------------- |  | ------------------------------------------------------- |  | ----
|         |  |                                                                              |  |                                                         |  | Page
|Item 7.  |  | Major Shareholders and Related Party Transactions                            |  | 71                                                     
|         |  |                                                                              | 
|         |  | A.                                                                           |  | Major Shareholders                                      |  | 71  
|         |  | B.                                                                           |  | Related Party Transactions                              |  | 72  
|         |  | C.                                                                           |  | Interests of Experts and Counsel                        |  | 72  
|         |  |                                                                             
|Item 8.  |  | Financial Information                                                        |  | 73                                                     
|         |  |                                                                              | 
|         |  | A.                                                                           |  | Consolidated Statements and Other Financial Information |  | 73  
|         |  | B.                                                                           |  | Significant Changes                                     |  | 73  
|         |  |                                                                             
|Item 9.  |  | The Offer and Listing                                                        |  | 74                                                     
|         |  |                                                                              | 
|         |  | A.                                                                           |  | Offer and Listing Details                               |  | 74  
|         |  | B.                                                                           |  | Plan of Distribution                                    |  | 75  
|         |  | C.                                                                           |  | Markets                                                 |  | 75  
|         |  | D.                                                                           |  | Selling Shareholders                                    |  | 75  
|         |  | E.                                                                           |  | Dilution                                                |  | 75  
|         |  | F.                                                                           |  | Expenses of the Issue                                   |  | 76  
|         |  |                                                                             
|Item 10. |  | Additional Information                                                       |  | 76                                                     
|         |  |                                                                              | 
|         |  | A.                                                                           |  | Share Capital                                           |  | 76  
|         |  | B.                                                                           |  | Memorandum and Articles of Association                  |  | 76  
|         |  | C.                                                                           |  | Material Contracts                                      |  | 89  
|         |  | D.                                                                           |  | Exchange Controls                                       |  | 89  
|         |  | E.                                                                           |  | Taxation                                                |  | 90  
|         |  | F.                                                                           |  | Dividends and Paying Agents                             |  | 95  
|         |  | G.                                                                           |  | Statement by Experts                                    |  | 95  
|         |  | H.                                                                           |  | Documents on Display                                    |  | 96  
|         |  | I.                                                                           |  | Subsidiary Information                                  |  | 96  
|         |  |                                                                             
|Item 11. |  | Quantitative and Qualitative Disclosures about Market Risk                   |  | 96                                                     
|         |  |                                                                             
|Item 12. |  | Description of Securities Other than Equity Securities                       |  | 99                                                     
|         |  |                                                                              | 
|         |  |                                                                              |  | PART II                                                 |  |     
|         |  |                                                                             
|Item 13. |  | Defaults, Dividend Arrearages and Delinquencies                              |  | 100                                                    
|         |  |                                                                             
|Item 14. |  | Material Modifications to the Rights of Security Holders and Use of Proceeds |  | 100                                                    
|         |  |                                                                             
|Item 15. |  | Controls and Procedures                                                      |  | 100                                                    



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|          |  |  |  |                                                                        |  |     
|--------- |  |  |  | ---------------------------------------------------------------------- |  | ----
|          |  |  |  |                                                                        |  | Page
|Item 16A. |  |  |  | Audit Committee Financial Expert                                       |  | 100 
|          |  |  | 
|Item 16B. |  |  |  | Code of Ethics                                                         |  | 100 
|          |  |  | 
|Item 16C. |  |  |  | Principal Accountant Fees and Services                                 |  | 101 
|          |  |  | 
|Item 16D. |  |  |  | Exemptions from the Listing Standards for Audit Committees             |  | 102 
|          |  |  | 
|Item 16E. |  |  |  | Purchases of Equity Securities by the Issuer and Affiliated Purchasers |  | 102 
|          | 
|PART III  |  | 
|          |  |  | 
|Item 17.  |  |  |  | Financial Statements                                                   |  | 104 
|          |  |  | 
|Item 18.  |  |  |  | Financial Statements                                                   |  | 104 
|          |  |  | 
|Item 19.  |  |  |  | Exhibits                                                               |  | 170 



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All information contained in this Report is as of March 31, 2005 or for the year ended March 31, 2005 (fiscal 2005)
unless the context otherwise indicates.



The noon buying rate for yen in New
York City as certified for customs purposes by the Federal Reserve Bank of New York on August 23, 2005 was 109.83 yen = U.S.$1.





Cautionary Statement Regarding Forward-Looking Statements



This annual report includes forward-looking statements (within the meaning of Section 27A of the U.S. Securities Act of 1933 and Section 21E of the U.S. Securities Exchange Act of 1934) about Matsushita and its Group companies (the
Matsushita Group). To the extent that statements in this annual report do not relate to historical or current facts, they constitute forward-looking statements. These forward-looking statements are based on the current assumptions and beliefs of the
Matsushita Group in light of the information currently available to it, and involve known and unknown risks, uncertainties and other factors. Such risks, uncertainties and other factors may cause the Matsushita Groups actual results,
performance, achievements or financial position to be materially different from any future results, performance, achievements or financial position expressed or implied by these forward-looking statements. Matsushita undertakes no obligation to
publicly update any forward-looking statements after the date of this annual report (September 2005). Investors are advised to consult any further disclosures by Matsushita in its subsequent filings with the U.S. Securities and Exchange Commission
pursuant to the Securities Exchange Act of 1934 and its other filings.



The
risks, uncertainties and other factors referred to above include, but are not limited to, economic conditions, particularly consumer spending and corporate capital expenditures in the United States, Europe, Japan, China, and other Asian countries;
volatility in demand for electronic equipment and components from business and industrial customers, as well as consumers in many product and geographical markets; currency rate fluctuations, notably between the yen, the U.S. dollar, the euro, the
Chinese yuan, Asian currencies and other currencies in which the Matsushita Group operates businesses, or in which assets and liabilities of the Matsushita Group are denominated; the ability of the Matsushita Group to respond to rapid technological
changes and changing consumer preferences with timely and cost-effective introductions of new products in markets that are highly competitive in terms of both price and technology; the ability of the Matsushita Group to achieve its business
objectives through joint ventures and other collaborative agreements with other companies; the ability of the Matsushita Group to maintain competitive strength in many product and geographical areas; current and potential, direct and indirect
restrictions imposed by other countries over trade, manufacturing, labor and operations; fluctuations in market prices of securities and other assets in which the Matsushita Group has holdings; future changes or revisions to accounting policies or
accounting rules; as well as natural disasters including earthquakes and other events that may negatively impact business activities of the Matsushita Group.



About the Company



Matsushita Electric Industrial
Co., Ltd. (hereinafter, unless the context otherwise requires, Matsushita or the Company refers to Matsushita Electric Industrial Co., Ltd. and its consolidated subsidiaries as a group), best known for its
Panasonic brand name, is one of the worlds leading manufacturers of electronic and electric products for a wide range of consumer, business and industrial uses, as well as a wide variety of components. Based in Osaka, Japan, the
Company recorded consolidated net sales of approximately 8,714 billion yen for fiscal 2005. Over the past eight decades, the Company has grown from a small domestic household electrical equipment manufacturer into a comprehensive electronic and
electric equipment, systems and components manufacturer operating internationally. Of the fiscal 2005 net sales, nearly one-half was represented by sales in Japan, with the rest by overseas sales.







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PART I



|Item 1. | Identity of Directors, Senior Management and Advisers
|------- | -----------------------------------------------------



Not applicable





|Item 2. | Offer Statistics and Expected Timetable
|------- | ---------------------------------------



Not applicable





|Item 3. | Key Information
|------- | ---------------



|A. | Selected Financial Data
|-- | -----------------------



|                                                |  |                                                                 |   |  |           |   |  |           |   |  |           |   |  |           |  
|----------------------------------------------- |  | --------------------------------------------------------------- | - |  | --------- | - |  | --------- | - |  | --------- | - |  | --------- | -
|                                                |  | Yen (billions), except per share amounts and yen exchange rates |  
|                                                |  | Fiscal year ended March 31,                                     |  
|                                                |  | 2005                                                            |   |  | 2004      |   |  | 2003      |   |  | 2002      |   |  | 2001      |  
|Income Statement Data:                          |  |                                                                 |   |  |           |   |  |           |   |  |           |   |  |           |  
|Net sales                                       |  | 8,714                                                           |   |  | 7,480     |   |  | 7,402     |   |  | 7,074     |   |  | 7,781     |  
|Income (loss) before income taxes               |  | 247                                                             |   |  | 171       |   |  | 69        |   |  | (538      | ) |  | 105       |  
|Net income (loss)                               |  | 58                                                              |   |  | 42        |   |  | (19       | ) |  | (428      | ) |  | 42        |  
|Per common share:                               |  |                                                                 |   |  |           |   |  |           |   |  |           |   |  |           |  
|Net income (loss):                              |  |                                                                 |   |  |           |   |  |           |   |  |           |   |  |           |  
|Basic                                           |  | 25.49                                                           |   |  | 18.15     |   |  | (8.70     | ) |  | (206.09   | ) |  | 19.96     |  
|Diluted                                         |  | 25.49                                                           |   |  | 18.00     |   |  | (8.70     | ) |  | (206.09   | ) |  | 19.56     |  
|Dividends                                       |  | 15.25                                                           |   |  | 12.50     |   |  | 10.00     |   |  | 12.50     |   |  | 12.50     |  
|                                                |  | ($0.145                                                         | ) |  | ($0.109   | ) |  | ($0.107   | ) |  | ($0.100   | ) |  | ($0.116   | )
|                                                |  |                                                                 |   |  |          
|Balance Sheet Data:                             |  |                                                                 |   |  |           |   |  |           |   |  |           |   |  |           |  
|Total assets                                    |  | 8,057                                                           |   |  | 7,438     |   |  | 7,835     |   |  | 7,768     |   |  | 8,295     |  
|Long-term debt                                  |  | 477                                                             |   |  | 461       |   |  | 588       |   |  | 708       |   |  | 563       |  
|Stockholders equity                            |  | 3,544                                                           |   |  | 3,452     |   |  | 3,178     |   |  | 3,248     |   |  | 3,770     |  
|Common stock                                    |  | 259                                                             |   |  | 259       |   |  | 259       |   |  | 259       |   |  | 211       |  
|Number of shares issued at year-end (thousands) |  | 2,453,053                                                       |   |  | 2,453,053 |   |  | 2,447,923 |   |  | 2,138,515 |   |  | 2,079,573 |  
|                                                |  |                                                                 |   |  |          
|Yen exchange rates per U.S. dollar:             |  |                                                                 |   |  |           |   |  |           |   |  |           |   |  |           |  
|Year-end                                        |  | 107.22                                                          |   |  | 104.18    |   |  | 118.07    |   |  | 132.70    |   |  | 125.54    |  
|Average                                         |  | 107.49                                                          |   |  | 113.07    |   |  | 121.96    |   |  | 125.05    |   |  | 110.60    |  
|High                                            |  | 102.26                                                          |   |  | 104.18    |   |  | 115.71    |   |  | 115.89    |   |  | 104.19    |  
|Low                                             |  | 114.30                                                          |   |  | 120.55    |   |  | 133.40    |   |  | 134.77    |   |  | 125.54    |  



|                                                                 |  |          |  |  |  |          |  |  |  |          |  |  |  |         |  |  |  |          |  |  |  |         
|---------------------------------------------------------------- |  | -------- |  |  |  | -------- |  |  |  | -------- |  |  |  | ------- |  |  |  | -------- |  |  |  | --------
|                                                                 |  | Feb.2005 |  |  |  | Mar.2005 |  |  |  | Apr.2005 |  |  |  | May2005 |  |  |  | Jun.2005 |  |  |  | Jul.2005
|Yen exchange rates for each monthduring the previous six months: |  |          |  |  |  |          |  |  |  |          |  |  |  |         |  |  |  |          |  |  |  |         
|High                                                             |  | 103.70   |  |  |  | 103.87   |  |  |  | 104.64   |  |  |  | 104.41  |  |  |  | 106.64   |  |  |  | 110.47  
|Low                                                              |  | 105.84   |  |  |  | 107.49   |  |  |  | 108.67   |  |  |  | 108.17  |  |  |  | 110.91   |  |  |  | 113.42  



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|      |  |                                                                                                                                                                                        
|----- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Note: |  | Dividends per share reflect those paid during each fiscal year. The dollar amounts of the dividends per share have been computed at the exchange rates on the respective payment
dates.





|B. | Capitalization and Indebtedness
|-- | -------------------------------



Not applicable





|C. | Reasons for the Offer and Use of Proceeds
|-- | -----------------------------------------



Not applicable





|D. | Risk Factors
|-- | ------------



Primarily because of the business areas and geographical areas where it operates and the highly competitive nature of the industry to which it belongs,
Matsushita is exposed to a variety of risks and uncertainties in carrying out its businesses, including, but not limited to, the following:



Risks Related to Economic Conditions





Weakness in Japanese and global economies may cause reduced demand for
the products of Matsushita



Demand for Matsushitas
products and services may be affected by general economic trends in the countries or regions in which Matsushitas products and services are sold. Economic downturns and resulting declines in demand in Matsushitas major markets worldwide
may thus adversely affect the Companys business results and financial condition. Although Matsushita continued to achieve improvements in its business performance in fiscal 2005, it currently foresees severe conditions, such as
ever-intensifying price declines for the Companys products and rising raw materials prices, including crude oil prices, as well as uncertainty regarding economic conditions in the United States, Europe and China. These conditions may continue
in the short- to mid-term, thereby further negatively affecting Matsushitas businesses. Furthermore, if Japanese and global economies fall into stagnation, resulting decreased demand and slowdown in capital investment may adversely affect
Matsushitas overall business.



Currency exchange rate
fluctuations could adversely affect Matsushitas financial results



Matsushita is exposed to risks of foreign currency exchange rate fluctuations. Matsushitas consolidated financial statements, which are presented in Japanese yen, are affected by foreign exchange rate changes.
These changes affect Matsushitas international business transactions and costs and prices of Matsushitas products and services in overseas countries in relation to the yen. They can also affect the yen value of Matsushitas
investments in overseas assets and liabilities. Generally, an appreciation of the yen against other major currencies such as the U.S. dollar and the euro may adversely affect Matsushitas business results and financial condition. Meanwhile, a
depreciation of the yen against aforementioned major currencies may have a favorable impact on Matsushitas business results and financial condition. Although Matsushita is taking measures to reduce or hedge against foreign currency exchange
risks, foreign exchange rate fluctuations may hurt its businesses, results of operations and financial condition.



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Interest rate fluctuations may adversely affect Matsushitas financial results



Matsushita is exposed to the risk of interest rate fluctuations, which,
despite the measures taken by Matsushita to hedge a portion of its exposure to interest rate fluctuations, may affect its overall operational costs, interest expense, interest income and the value of its financial assets and liabilities.



The decrease in the value of Japanese stocks may adversely affect
Matsushitas financial results



Matsushita holds
mostly Japanese stocks as part of its investment securities. The value of most of these stocks, however, dropped substantially over the past several years due to the stagnant Japanese economy. Matsushita recorded a loss in valuation declines in its
investment securities. The decrease in the value of stocks may continue and adversely affect Matsushitas financial results. The decrease in the value of Japanese stocks may also reduce stockholders equity in the balance sheet, as
unrealized holding gains (losses) of available-for-sale securities are included as part of accumulated other comprehensive income (loss).



Risks Related to Matsushitas Business





Matsushita is subject to intense competition in areas in which it
operates, and this may adversely affect its ability to maintain its profitability



Matsushita produces a broad range of products and therefore faces many different types of competitors, from large international companies to relatively small, rapidly growing, and highly specialized organizations.
Matsushita may choose not to fund or invest in one or more of its businesses to the same degree as its competitors in those businesses do, or it may not be able to do so in a timely manner or at all. These competitors may have greater financial,
technological, and marketing resources available to them than Matsushita has in the respective businesses in which they compete.



Rapid declines in product prices may adversely affect Matsushitas financial results



Matsushitas business is subject to intense price competition
worldwide, which makes it difficult for the Company to decide product prices so that it can obtain adequate profits. Such intensified price competition may adversely affect Matsushitas profits, especially in terms of decreases in demand or
oversupply in the market. For the year ending March 31, 2006, Matsushita expects prices in many product areas in which it deals to decline at the same rate as, or more rapidly than, in recent fiscal years. Matsushita also expects fierce price
competition in digital products with shortened product life cycles. Matsushita believes that this trend will affect its businesses, especially those in the area of its AVC Networks category and its Components and Devices category.



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Matsushitas business is, and will continue to be, subject to the risks generally associated with
international business operations



One of
Matsushitas business strategies is business expansion in overseas markets. In many of these markets, Matsushita may face risks generally associated with international manufacturing and other business operations, such as political instability,
cultural and religious differences and labor relations, as well as economic uncertainty and foreign currency exchange risks. Matsushita may also face barriers in commercial and business customs in foreign countries, including difficulties in timely
collection of accounts receivable or in building and expanding relationships with customers, subcontractors or parts suppliers. Matsushita may also experience various political, legal or other restrictions over investment, trade, manufacturing,
labor or other aspects of operations, including restrictions on foreign investment or the repatriation of profits on invested capital, nationalization of local industry, changes in export or import restrictions or foreign exchange controls, and
changes in the tax system or rate of taxation in countries where Matsushita operates businesses. With respect to the products exported overseas, tariffs, other barriers or shipping costs may make Matsushitas products less competitive.
Expanding its overseas business may require significant investments long before Matsushita realizes returns on such investments, and increased investments may result in expenses growing at a faster rate than revenues.



Matsushita may not be able to keep pace with technological changes and
develop new products and services in a timely manner to remain competitive



Matsushita may fail to introduce new products and services in response to technological changes in a timely manner despite its efforts to develop new products and services continuously. Some of Matsushitas core
businesses, such as consumer digital electronics and key components and devices, are concentrated in industries where technological innovation is the central competitive factor. Matsushita continuously faces the challenge of developing and
introducing viable and innovative new products. Matsushita must predict with reasonable accuracy both future demand and new technologies that will be available to meet such demand. If Matsushita fails to do so, it will not be able to compete in new
markets.



Matsushita may not be able to
develop product formats that can prevail asde factostandards



Matsushita has been forming alliances and partnerships with other major manufacturers to strengthen technologies and the development of product formats,
such as next-generation home and mobile networking products, data storage devices, and software systems. Despite these efforts by Matsushita, its competitors may be the ones who develop the de factostandards for future products. If that
happens, Matsushitas business in those business areas, its results of operations and financial condition, could be adversely affected.



Matsushita may not be able to successfully recruit and retain skilled employees, particularly scientific and technical personnel



Matsushitas future success depends largely on its ability to attract
and retain certain key personnel, including scientific, technical and management personnel. Matsushita anticipates that it will need to hire additional skilled personnel in all areas of its business. Industry demand for skilled employees, however,
exceeds the number of personnel available, and the competition for attracting and retaining these employees, especially scientific and technical employees, is intense. Because of this intense competition for these skilled employees, Matsushita may
be unable to retain its existing personnel or attract additional qualified employees to keep up with its future business needs. If this should happen, it could adversely affect Matsushitas future growth, results of operations and financial
condition.



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The alliances with, and strategic investments in, third parties undertaken by Matsushita may not
produce positive results



Matsushita develops its business
by forming alliances or joint ventures with, and making strategic investments in, other companies, including investments in venture companies. Matsushitas reliance on the strategy of partnering with third parties is increasing. Such
partnerships are crucial to Matsushitas goal of introducing new products and services, but Matsushita may not be able to successfully collaborate or achieve expected synergies with its partners. Matsushita does not, however, control these
partners, who may make decisions regarding their business undertakings with Matsushita that may be contrary to Matsushitas interests. In addition, if these partners change their business strategies, Matsushita may fail to maintain these
partnerships.



Matsushita is dependent on the ability of
third parties to deliver parts, components and services in adequate quality and quantity in a timely manner, and in reasonable price



Matsushitas manufacturing operations depend on obtaining deliveries of raw materials, parts and components, equipment and other supplies from
reliable suppliers in adequate quality and quantity in a timely manner. It may be difficult for Matsushita to substitute one supplier for another, increase suppliers or change one component for another in a timely manner or at all due to the
interruption of supply or increased industry demand. This may adversely affect the Matsushita Groups operations. Although Matsushita decides purchase prices by contract, these prices may become higher due to changes in supply and demand. Some
components are only available from a limited number of suppliers and may adversely affect Matsushitas operations. For example, Matsushita uses steel and rare metals for most of its products, and an increase in prices of these products may
adversely affect Matsushitas operating results.



Matsushita is exposed to the risk that its customers, including those to whom it has provided vendor financing, may encounter financial difficulties



Matsushita provides vendor financing to its customers. As more businesses utilize vendor financing, Matsushita may also
provide increased vendor financing in the future. In addition, many of Matsushitas customers purchase products and services from it on payment terms that do not provide for immediate payment. If customers to whom Matsushita has extended or
guaranteed vendor financing, or from whom it has substantial accounts receivable, encounter financial difficulties and are unable to make payments on time, Matsushitas business, operating results and financial condition could be adversely
affected.



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Risks Related to Matsushitas Management Plans





Matsushita has implemented its new mid-term management plan, Leap Ahead 21, (announced on January 9, 2004) for the three-year term ending March 2007. Matsushitas business vision focuses on realizing a ubiquitous
networking society and contributing to coexistence with the global environment through leading-edge technologies. Based on this vision, Matsushita aims to become a company that creates more value for customers. Due mainly to the
various risk factors described in this section, Matsushita may not be successful in achieving all the goals set out in its mid-term business plan. Furthermore, in fiscal 2004, Matsushita introduced an autonomous business domain-based organizational
structure. Under the management structure, Matsushita completed large-scale business restructuring, and implemented new growth strategies through the synergies expected from such business restructuring. Matsushita may not, however, be able to
improve efficiency, reduce costs or realize growth through these measures due to unexpected additional reorganization or restructuring, improper allocation of operational resources or other unpredictable factors. Also, Matsushita has implemented its
annual forecast and major initiatives (announced on April 28, 2005) for the year ending March 31, 2006. Matsushita may not be successful in achieving all the targets or in realizing the benefits expected because of external and internal factors.



Risks Related to Legal Restrictions and
Litigations





Matsushita may be subject to product liability or warranty claims that could result in significant direct or indirect costs



Although Matsushita strictly follows its prescribed quality control
standards for manufacturing, there is a risk that defects may occur in Matsushitas products and services. The occurrence of defects could make Matsushita liable for damages not covered by product and completed operation liability insurance.
Due to negative publicity concerning these problems, Matsushitas reputation, corporate and brand image, and sales activities may be adversely affected.



Matsushita may fail to protect its proprietary intellectual properties, or face a claim of intellectual property infringement by a third party, and may
lose its intellectual property rights on key technologies or be liable for significant damages



Matsushitas success depends on its ability to obtain intellectual property rights covering its products and product design. Patents may not be
granted or may not be of sufficient scope or strength to provide Matsushita with enough protection or commercial advantage. In addition, effective copyright and trade secret protections may be unavailable or limited in some countries in which
Matsushita operates. Competitors or other third parties may also develop technologies that are protected by patents and other intellectual property rights, which make such technologies unavailable or available only on terms unfavorable to
Matsushita. Matsushita obtains licenses for intellectual property rights from others, however, such licenses may not be available at all or on acceptable terms in the future. Litigation may also be necessary to enforce Matsushitas intellectual
property rights or to defend against intellectual property infringement claims brought against Matsushita by third parties. In such cases, Matsushita may incur significant expenses for such lawsuits. Furthermore, Matsushita may be prohibited from
using certain important technologies or liable for damages in cases of admitted violations of intellectual property rights of others.



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Changes in accounting standards and tax systems may adversely affect Matsushitas financial
results and condition



Introduction of new accounting
standards or tax systems, or changes thereof, which Matsushita can not predict, may have a material adverse effect on the Companys financial results and operations. In addition, if tax authorities have different opinions from Matsushita on the
Companys tax declarations, Matsushita may need to make tax payments more than estimated.



Payments or compensation related to environmental regulations or issues may adversely affect Matsushitas business, operating results and financial condition



Matsushita is subject to environmental regulations such as those relating to
air pollution, water pollution, elimination of hazardous substances, waste management, product recycling, and soil and groundwater contamination, and may be held responsible for certain related payments or compensation, despite its strict compliance
with these regulations. Furthermore, if these regulations become more strict and an additional duty of eliminating the use of environmentally hazardous materials is imposed, or if the Company determines that it is necessary and appropriate, from the
viewpoint of corporate social responsibility, to respond to environmental issues, the payment of penalties for the violation of these regulations or voluntary payment of compensation for consolation parties affected by such issues may adversely
affect Matsushitas business, operating results and financial condition.



Leak of confidential information may adversely affect Matsushitas business



In the normal course of business, Matsushita holds confidential information, including individual information on its customers. Although Matsushita keeps
confidential information with utmost care, such information may be leaked due to an accident or other inevitable cause and any material leakage of confidential information may result in significant expenses for related lawsuits and adversely affect
Matsushitas image. Moreover, Matsushitas trade secrets may be illegally leaked by a third party, and this would negatively affect Matsushitas business.



Governmental laws and regulations may limit Matsushitas activities or increase its operating costs



Matsushita is subject to governmental regulations in Japan and other
countries in which it conducts its business, including governmental approvals required for conducting business and investments, laws and regulations governing the telecommunications businesses and electric product safety, national security-related
laws and regulations and export/import laws and regulations, as well as commercial, antitrust, patent, product liability, environmental laws and regulations, consumer protection, financial and business taxation laws and regulations due to the
implementation of stricter laws and regulations and more strict interpretations. However, to the extent that Matsushita cannot comply with these laws and regulations, or if they become more strict and Matsushita determines that it would not be
economical to continue to comply with them, Matsushita would need to limit its activities in the affected business areas. In addition, these laws and regulations could increase Matsushitas operating costs.



Other Risks





External economic conditions may adversely affect Matsushitas pension plans



Matsushita has contributory, funded benefit pension plans covering substantially all employees in Japan who meet eligibility requirements. A decline in
interest rates may cause a decrease in the discount rate on benefit obligations. A decrease in the value of stocks may also affect the return on plan assets. As a result, the unrecognized portion of actuarial loss may increase, leading to a future
recognized actuarial loss on an increase in future net periodic benefit costs of these pension plans.



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Some long-lived assets may not produce adequate returns



Matsushita has many long-lived assets, such as plant, property and
equipment, and goodwill, that generate returns. The Company periodically reviews the recorded value of its long-lived assets to determine if the future cash flows to be derived from these properties will be sufficient to recover the remaining
recorded asset values. If these long-lived assets do not generate sufficient cash flows, impairment losses will have to be recognized, adversely affecting Matsushitas results of operations and financial condition.



Valuation allowance against deferred tax assets could be recognized and
Matsushitas provision for income tax may increase



In assessing the realizability of deferred tax assets based on the expected future generation of taxable income, Matsushita considers whether it is more likely than not that any portion or all of the deferred tax assets will not be
realized. If Matsushita determines that temporary differences and loss carryforwards can not be realized upon the generation of future taxable income during the deductible periods due to deteriorating business conditions, valuation allowance against
deferred tax assets could be recognized and Matsushitas provision for income tax may increase.



Financial results and condition of associated companies may adversely affect Matsushitas results of operations and financial condition



Matsushita holds equities of several associated companies.
Matsushita can exercise influence over operating and financing policies of these companies. However, Matsushita does not have the right to make decisions for them since the companies operate independently. Some companies may record losses. If these
associated companies do not generate profits, Matsushitas business results and financial condition may be adversely affected.



Matsushitas facilities and information systems could be damaged as a result of disasters or unpredictable events, which could have an adverse
effect on its business operations



Matsushitas
headquarters and major facilities including manufacturing plants, sales offices and research and development centers are located in Japan. In addition, Matsushitas operations, including procurement, manufacturing, logistics, sales and research
and development facilities are located all over the world. If major disasters such as earthquakes, fires, floods, wars, terrorist attacks, computer viruses or other events occur, Matsushitas facilities may be damaged and it may have to stop or
delay its production and shipment. Matsushita may incur expenses relating to such damages.



American Depositary Share (ADS) holders have fewer rights than shareholders and may not be able to enforce judgments based on U.S. securities laws



The rights of shareholders under Japanese law to take actions, including exercising their voting rights, receiving dividends
and distributions, bringing derivative actions, examining Matsushitas accounting books and records, and exercising appraisal rights are available only to shareholders of record. Because the depositary, through its nominee, is the record holder
of the shares underlying the ADSs, only the depositary can exercise those rights in connection with the deposited shares. The depositary will make efforts to exercise their voting rights underlying ADSs in accordance with the instructions of ADS
holders and will pay the dividends and distributions collected from Matsushita. However, ADS holders will not be able to bring a derivative action, examine Matsushitas accounting books and records, or exercise appraisal rights through the
depositary.



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|Item 4. | Information on the Company
|------- | --------------------------



|A. | History and Development of the Company
|-- | --------------------------------------



GENERAL



The Company was incorporated in Japan on December 15, 1935 under the laws of Japan as Matsushita Denki Sangyo Kabushiki Kaisha (Address : 1006, Oaza
Kadoma, Kadoma-shi, Osaka 571-8501, Japan. Phone : +81-6-6908-1121 / Agent : Mr. Yukitoshi Onda, President of Panasonic Finance (America), Inc.) as the successor to an unincorporated enterprise founded in 1918 by the late Konosuke Matsushita. Mr.
Matsushita led the Company with his corporate philosophy of contributing to the peace, happiness and prosperity of humankind through the supply of quality consumer electric and electronic goods. The Companys business expanded rapidly with the
recovery and growth of the Japanese economy after World War II, as it met rising demand for consumer electric and electronic products, starting with washing machines, black-and-white TVs and refrigerators. During the 1950s, Matsushita expanded its
operations by establishing mass production and mass sales structures to meet increasing domestic demand, while also creating subsidiaries, making acquisitions and forming alliances. During the 1960s, Matsushita expanded its overseas businesses, and
its products started obtaining worldwide recognition.



During
the global recession caused by the first oil crisis in 1973, Matsushita strengthened its structure and overseas business relations. The advent and popularity of the video cassette recorder (VCR) from the late 1970s enabled Matsushita to receive
worldwide recognition as a global consumer electronics manufacturer. In the 1980s, Matsushita further worked to evolve from a consumer products manufacturer to a comprehensive electronics products manufacturer, expanding its business in the areas of
information and communications technology, industrial equipment and components and devices. Since the 1990s, Matsushita has been emphasizing technological development and the use of advanced technology in every phase of life. In particular,
Matsushita has been expanding its development activities in such areas as next-generation audiovisual (AV) equipment, multimedia products, and advanced electronic components and devices, many of which incorporate digital technology.



Matsushita currently offers a comprehensive range of products, systems and
components for consumer, business and industrial use based on sophisticated electronics and precision technology, expanding to building materials and equipment, and housing business. Most of the Companys products are marketed under the
Panasonic brand name worldwide, along with other product- or region-specific brand names, including National primarily for home appliances and household electric equipment sold in Japan and Technics for certain
hi-fi products. Some of its subsidiaries also use their own brand names, such as Quasar, Victor, JVC and PanaHome. To sustain the future growth in the forthcoming ubiquitous networking age, Matsushita
continues to emphasize technological development and the creation of new businesses, concentrating on several priority areas, such as digital AV networking equipment, mobile communications, data storage devices, environmental systems and related key
components and devices and software. The Company is also striving to develop new service-oriented businesses, such as systems solutions and engineering services, as areas of potential growth over the mid-term.



In June 1995, Matsushita sold an 80% equity interest in MCA (subsequently
renamed Universal Studios, Inc.) which the Company purchased in December 1990, to The Seagram Company Ltd. (currently Vivendi Universal S.A.) for approximately U.S.$5.7 billion, leaving the Company with a minority interest.



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In April 1997, Matsushita established four internal divisional companies  responsible for AVC
(audiovisual and computer products), home appliances and household equipment, air conditioners, and electric motors  by grouping a majority of its some 50 product divisions, in order to facilitate strategic planning, effective decision making
and more efficient allocation of resources across a broader range than that afforded by each single product division.



In March 1998, the Company announced a package of new management initiatives aimed at better sharing interests with shareholders. As part of this package,
management implemented, with approval at the annual shareholders meeting in June 1998, the repurchase of 50 million shares of the Companys common stock, spending approximately 99 billion yen during fiscal 1999. At the same time, as an
incentive to Board members and employees toward the enhancement of corporate value, the Company introduced stock option plans for Board members and select senior executives, and a stock-price-linked remuneration plan for employees of manager-level
or above. The Company has been continuing share repurchases in subsequent years.



In October 1999, EPCOS AG, a German electronic components joint venture of the Company and Siemens AG of Germany, had its initial public offering, listing its shares on German and U.S. stock exchanges. Following EPCOS
AGs public offering, Matsushitas 45% (held by a subsidiary) and Siemens AGs 55% holdings in EPCOS AG were each reduced to nearly 12.5%. Matsushita realized a 59 billion yen gain from the sale of its shares in EPCOS AG in fiscal
2000.



In April 2000, the Company made two of its
majority-owned subsidiaries, Matsushita Refrigeration Company and Wakayama Precision Company, into wholly-owned subsidiaries by means of share exchanges. As a result of the share exchanges, Matsushita issued 16,321,187 shares of its common stock to
shareholders of the respective companies.



VALUE
CREATION 21 PLAN



In June 2000, Kunio Nakamura became
President of Matsushita and, under his leadership, the Company implemented a new three-year business plan, called Value Creation 21, in April 2001. As the plans theme Deconstruction and Creation indicates, its objective was to
transform Matsushita into a company that meets the needs of the 21st century through structural reforms and growth strategies with emphasis on enhancing growth potential, profitability and capital efficiency, thereby ensuring the Companys
continued contribution to society.



During fiscal 2002, the
Company implemented a series of structural reforms under this Value Creation 21 plan, including the restructuring of domestic consumer sales and distribution structures, management initiatives through the use of information technology (IT) such as
supply chain management (SCM), the selective integration of businesses and manufacturing locations, manufacturing reforms such as the introduction of cell-style production, the reform of Companywide research, development and design (R&DD)
structures to concentrate development resources into strategic product or core technology areas, and employment restructuring initiatives including the regional-based employee remuneration system and early retirement programs.



In April 2001, the Company absorbed Matsushita Electronics Corporation (MEC),
its wholly-owned subsidiary, by merger to implement unified operational management in such key device areas as semiconductors and display devices.



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In April 2002, Matsushita and Toshiba Corporation (Toshiba) separated their respective liquid crystal
display (LCD) panel operations and established a joint venture company, Toshiba Matsushita Display Technology Co., Ltd., for the development, manufacture and sale of LCD panels and next-generation display devices. Of the new companys initial
stated capital of 10 billion yen, 60% was invested by Toshiba and 40% by Matsushita.



As a drastic structural reform aimed at achieving new growth under the Value Creation 21 plan, Matsushita implemented share exchanges on October 1, 2002 with five of its majority-owned subsidiaries (Matsushita
Communication Industrial Co., Ltd., Kyushu Matsushita Electric Co., Ltd., Matsushita Seiko Co., Ltd., Matsushita Kotobuki Electronics Industries, Ltd. and Matsushita Graphic Communication Systems, Inc.) and transformed them into wholly-owned
subsidiaries of Matsushita. Following the completion of the share exchanges, Matsushita implemented a comprehensive Groupwide business reorganization on January 1, 2003 via company splits, business combinations and business transfers among several
Group companies, including the parent companys internal divisional companies, whereby businesses of most of the Matsushita Group were reorganized into 14 new business domains.



As an extension of this Groupwide reorganization, Matsushita transformed two of its majority-owned subsidiaries, Matsushita
Electronic Components Co., Ltd. and Matsushita Battery Industrial Co., Ltd., into wholly-owned subsidiaries via share exchanges, effective April 1, 2003.



Also on April 1, 2003, Matsushita launched another joint venture company with Toshiba, upon separating their respective cathode ray tube (CRT) businesses
with the exception of domestic CRT manufacturing operations. The new company, Matsushita Toshiba Picture Display Co., Ltd., now the third largest TV-use CRT operation in the world, aims to maintain a competitive position in the global CRT market by
integrating Matsushita and Toshibas advanced CRT technologies, as well as both companies product development and manufacturing capabilities. Matsushita has a 64.5% equity ownership in the new joint venture company, but this is accounted
for under the equity method of accounting as Toshiba has a substantive participating right.



Upon the aforementioned Groupwide restructurings, in April 2003, to prepare a framework that enables each business domain company to implement autonomously responsible management, Matsushita established a new global
consolidated management system that focuses on capital efficiency and cash flows.



Based on an agreement with Minebea Co., Ltd. signed in August 2003, certain businesses in the information equipment motor field of Matsushita were transferred to Minebea-Matsushita Motor Corporation, a joint venture
of Matsushita and Minebea established on April 1, 2004. Of the new joint venture companys stated capital of 10 billion yen, 60% was invested by Minebea and 40% by Matsushita.



Since fiscal 2003, Matsushita has been gradually shifting its focus from restructuring to growth. Matsushita made concerted
efforts to enhance product competitiveness. V-products, which aim to capture leading shares in high-volume markets, made a significant contribution to overall business results.



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As a result of a Groupwide commitment to this initiative, Matsushita increased market share in many
product categories in fiscal 2003. In markets with shortened product lifecycles, particularly digital AV equipment, the gradual launch of products into global markets results in lost sales and profit opportunities. Matsushita therefore came to
utilize simultaneous global product introductions aimed at increasing both sales and profits. In fiscal 2004, Matsushita selected new V-products and increased sales through global simultaneous product introductions, particularly in digital AV
equipment, such as DVD recorders.



In April 2003, Matsushita
announced that it would position the Panasonic brand as a globally unified brand for overseas markets under the slogan of Panasonic ideas for life. This new brand strategy conveys to customers all over the world a new image for the
Company and its products, while further enhancing brand value.



In R&D, to increase efficiency, the Company realigned technological management categorization and systems. In corporate R&D functions, to encourage engineers to concentrate on prioritized R&D themes and cutting-edge
technologies, Matsushita introduced a new management system with which it can administrate themes at each step in the research process. In business domain companies R&D functions, Matsushita significantly reduced lead time for product
development by introducing an innovative R&D process management developed from the standpoint of return on investment.



Through the aforementioned initiatives within Value Creation 21, Matsushita has established a firm foundation for achieving growth in the future.



COLLABORATION WITH MEW



In December 2003, Matsushita reached a basic agreement regarding a
comprehensive business collaboration with its affiliate, Matsushita Electric Works, Ltd. (MEW), after which Matsushita initiated a tender offer for additional shares of MEW. As a result of the tender offer in which the Company purchased an
additional 140,550 thousand shares of common stock of MEW at the total cost of 147 billion yen, MEW, PanaHome Corporation and their respective subsidiaries became consolidated subsidiaries of the Company in April 2004. Through collaboration,
Matsushita and MEW aim for global excellence by maximizing synergy effects between the two companies to create new growth. The two companies also integrated their brand strategies, whereby, from October 2004, the NAIS and
National brands used by MEW were unified under the National brand for products sold in Japan, and the Panasonic brand for those sold in overseas markets. Furthermore, Matsushita and MEW unified product designs,
opened joint showrooms and introduced a series of Collaboration V-products that incorporate black-box technologies of both companies, such as modular furniture systems, tank-less toilets, bathroom systems, high efficiency lighting systems and
Integrated IP Network Platforms for building and area security management systems. For fiscal 2005, Matsushita and MEW also integrated overlapping businesses in the area of electrical supplies, building materials and equipment, home appliances and
industrial equipment, and reformed distribution channels to establish an optimized, customer-oriented operational structure.



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LEAP AHEAD 21 PLAN



Matsushitas business vision focuses on realizing a ubiquitous networking society and contributing to
coexistence with the global environment through leading-edge technologies. Based on this vision, Matsushita will make efforts to achieve global excellence in 2010, or in other words, to become a leading company in all aspects of management and
a company that is supported by its customers worldwide. As the midpoint toward achieving this goal, Matsushita established its new mid-term management plan Leap Ahead 21, for the three-year term from fiscal 2005 through 2007, and
commenced initiatives for sustainable growth.



For fiscal 2005,
the first year of the new mid-term management plan, Matsushita implemented various initiatives to achieve growth and strengthen management structures at each business domain company.



Accelerating Growth Businesses

In fiscal 2005, Matsushita aggressively launched a new line of V-products to capture top shares in high-volume markets and make a significant contribution to overall business results. At the same time, the Company
strengthened Companywide marketing efforts for these products. Through the above mentioned collaboration activities with MEW, Matsushita succeeded in creating an organizational structure under which the Company can provide customers all over the
world with solutions for comfortable living in the home and office. Meanwhile, the Company carried out structural reforms through selection and concentration of management resources into priority areas and restructuring of locations.



Matsushita continued to investments into strategic business and promoted
business alliances primarily for flat-panel TVs which global demand is expected to increase significantly.



In January 2005, Matsushita jointly established IPS Alpha Technology, Ltd. with Hitachi, Ltd. (Hitachi), Hitachi Displays, Ltd. and Toshiba Corporation.
IPS Alpha Technology, Ltd. is scheduled to begin mass production in the second quarter of the year ending March 31, 2007 (fiscal 2007) to ensure a stable supply of high-quality panels for 26- to 32- inch LCD TVs.



The Company also continues comprehensive collaboration with Hitachi in PDP
business, covering development, production, marketing and intellectual property rights. Together, Matsushita and Hitachi will work to improve product performance, lower costs, raise productivity and conduct joint sales promotions, with the aim of
building a mutually beneficial cross-licensing relationship.



The Company is also taking various initiatives to strengthen overseas operations as an engine for overall corporate growth. For the mid-term, Matsushita aims to achieve over 60% of total operating profit from its overseas operation.
Specifically, the Company plans to accelerate operational expansion in China, aiming for sales of approximately 1 trillion yen in fiscal 2007.



Reinforcing Management Structures

Matsushita will increase the speed with which it recovers invested capital by reducing assets and further implementing the selection of priority businesses and concentration of management resources into such businesses. Furthermore, in
addition to drastically reducing materials procurement costs, Matsushita will further strengthen its management structures through other aggressive cost reduction projects to enhance profitability.



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Since 2001, Matsushita has utilized a cell-style production system, mainly at domestic facilities, where
assembly of each product is performed by a single person or a small team. In the process, Matsushita have achieved notable results in terms of improved productivity and employee job satisfaction. Cell-style production results in improved
cost-competitiveness by making continual improvements, shortening delivery times and minimizing inventory. In March 2005, Matsushita expanded this initiative with a Next Cell Production Project, which targets the further reduction of inventories.
Furthermore, the Company will utilize IT to manage such initiatives at Just in Time Production and Vendor Managed Inventory, in which inventory is controlled by each vendor.



In June 2003, Matsushita launched a Corporate Cost Busters Project aimed at lowering expenses on a Companywide basis. To
extend this initiative throughout the Matsushita Group, the Company began a Second Corporate Cost Busters Project in fiscal 2006 to eliminate redundancies throughout all areas of the Company.



Reducing consolidated total assets is also a key of Matsushitas
commitment to management that focuses on cash flows. Since fiscal 2002, Matsushita has carried out initiatives aimed at reducing total assets, with particular emphasis on inventory reductions as well as fixed asset reductions. Going forward,
Matsushita will strive to enhance capital efficiency across all businesses to maximize cash flows.



R&D Strategy

With regard to
R&D, the Company will strengthen technological capabilities from a 10-year perspective, with the ultimate goal of consistently creating new value-added products and services. In line with this goal, the Corporate R&D Group established the
10-year Technology Vision as a corporate roadmap for the development of technologies in such areas as next-generation system LSIs, networkable consumer electronics and fuel cell cogeneration systems for the home. Shared Companywide and reviewed
annually, this roadmap will be the basis for the selection of R&D projects, and the concentration of resources into them. Through Development Process Innovation Management (DPIM) at each business domain company, based on evaluation of return on
investment, Matsushita will further reduce product development lead times. These initiatives will focus investment into strategic products, while promoting further efficiency improvements in terms of the ratio of R&D expenditures to sales.



New Initiatives to Maximize Shareholder Value

In fiscal 2005, Matsushita started to implement new initiatives to maximize shareholder value, including policies to increase dividend
payments and execute own share repurchases. Historically, Matsushita has maintained stable levels of cash dividends. Then, in fiscal 2005, the Company reassessed this policy and, in line with growth strategies outlined in the Leap Ahead 21 plan,
decided to proactively return profits to shareholders taking into consideration consolidated business performance. Specifically, the Company provides shareholder return in the form of cash dividends and share repurchases, with due consideration to
the level of cash flows. With respect to dividends, Matsushita pursues steady and continuous growth of return to shareholders, while at the same time taking into consideration various factors including mid-term business performance, capital
expenditure requirements and the Companys financial condition. As for share repurchases, the Company aims to achieve reductions in the total number of outstanding shares, in effect, in an effort to raise shareholder value on a per-share basis.
Based on this new policy, in fiscal 2005, Matsushita increased annual cash dividends to 15.00 yen per share and, in effect, reduced outstanding shares through repurchases of approximately 60 million of its own shares for approximately 92.9 billion
yen from the market and 0.8 billion yen from MEW, a consolidated subsidiary of the Company.



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Meanwhile, with recent trends toward the globalization of capital markets, corporate acquisitions are
likely to increase. Under the basic philosophy that shareholders should make final decisions regarding large-scale purchases of Matsushita shares, the Company established a new policy regarding large-scale purchases of Matsushita shares (ESV* plan).
(For further details, see No. 15.1 of Item 19.)



* ESV stands
for Enhancement of Shareholder Value.



CAPITAL INVESTMENT



Total capital investment amounted to 251 billion yen, 271
billion yen and 374 billion yen for fiscal 2003, 2004 and 2005, respectively. The increase of capital investment during fiscal 2005 from the previous year is attributed partly to the consolidation of MEW and PanaHome and their respective
subsidiaries. (For a reconciliation of capital investment to the most directly comparable U.S. GAAP financial measures, see OverviewKey performance indicators in Section A of Item 5.) In these years, Matsushita curbed capital
investment in a number of business areas, in line with an increased management emphasis on cash flows and capital efficiency, as seen in an increased adoption of cell-style production, which allowed the use of smaller scale facilities. Matsushita
did, however, selectively invest in facilities for those product areas that are expected to drive future growth, including such key areas as semiconductors, particularly advanced system LSIs, PDPs and other strategic products.



|B. | Business Overview
|-- | -----------------



SALES BY PRODUCT CATEGORY



Matsushita is engaged in the production and sales of electronic and electric products in a broad array of business areas. The following table sets forth the Companys sales breakdown by product category for the
last three fiscal years:



|                                         |  |                             |  |     |      |  |       |      |     |   |  |       |  |     |  
|---------------------------------------- |  | --------------------------- |  | --- | ---- |  | ----- | ---- | --- | - |  | ----- |  | --- | -
|                                         |  | Yen (billions) (%)          | 
|                                         |  | Fiscal year ended March 31, | 
|                                         |  | 2005                        |  |     | 2004 |  |       | 2003 |    
|AVC Networks:                            |  |                             |  |     |      |  |       |      |     |   |  |       |  |     |  
|Video and audio equipment                |  | 1,483                       |  | 17  | %    |  | 1,418 |      | 19  | % |  | 1,398 |  | 19  | %
|Information and communications equipment |  | 2,076                       |  | 24  |      |  | 2,206 |      | 29  |   |  | 2,114 |  | 29  |  
|                                         |  |                             |  |     |      |  |       |      |     |   |  |       |  |     |  
|Subtotal                                 |  | 3,559                       |  | 41  |      |  | 3,624 |      | 48  |   |  | 3,512 |  | 48  |  
|                                         |  |                             |  |     |      | 
|Home Appliances                          |  | 1,218                       |  | 14  |      |  | 1,189 |      | 16  |   |  | 1,184 |  | 16  |  
|Components and Devices                   |  | 1,112                       |  | 13  |      |  | 1,142 |      | 15  |   |  | 1,194 |  | 16  |  
|MEW and PanaHome                         |  | 1,498                       |  | 17  |      |  |      |      |    |   |  |      |  |    |  
|JVC                                      |  | 718                         |  | 8   |      |  | 803   |      | 11  |   |  | 828   |  | 11  |  
|Other                                    |  | 609                         |  | 7   |      |  | 722   |      | 10  |   |  | 684   |  | 9   |  
|                                         |  |                             |  |     |      |  |       |      |     |   |  |       |  |     |  
|Total                                    |  | 8,714                       |  | 100 | %    |  | 7,480 |      | 100 | % |  | 7,402 |  | 100 | %
|                                         |  |                             |  |     |      |  |       |      |     |   |  |       |  |     |  



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|      |  |                                                                                                                                                                                                                                       
|----- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Note: |  | On April 1, 2004, MEW, PanaHome and their respective subsidiaries became consolidated subsidiaries of the Company. Accordingly, a new category, MEW and PanaHome, has been added to the
Companys product categories from fiscal 2005.



AVC Networks



Matsushitas principal products in the AVC Networks
category include video and audio equipment and information and communications equipment. Products in this category have been undergoing rapid technological changes as a result of digitization and networking, along with rapidly evolving broadband
communications, which in turn have provided new business opportunities. As a leading manufacturer in many product lines in the AVC Networks category, Matsushita has been striving to achieve new growth by offering competitive digital and networkable
products based on black-box technologies, designed to differentiate products and strengthen cost-competitiveness by in-house production of key components and devices aiming at contributing to the creation of a ubiquitous networking
society.



Video and Audio Equipment



Principal products in this sector include TVs, DVD players and recorders,
VCRs, camcorders, digital cameras, and personal and home audio equipment. Matsushita maintains a leading share in the domestic and overseas markets for a number of major products in this field. During the three-year period ended March 31, 2005,
Matsushita expanded sales in this category by aggressively introducing a series of competitive V-products, despite the negative effects of intensified global price competition. From fiscal 2004, Matsushita focused its management resources in the
3D value chainconsisting of digital TVs (DTVs), DVDs and secure digital memory cards (SD Memory Cards) and compatible products, which contributed greatly to sales growth.



In TVs, Matsushita produces a broad range of models to meet all segments of
demand in domestic and international markets, ranging from cathode ray tube (CRT) models to flat-panel TVs, such as plasma TVs and liquid crystal display (LCD) TVs. For large-screen plasma TVs in sizes above 37-inches, the global demand for which is
rapidly expanding, Matsushita maintains a vertically integrated manufacturing structure, which includes everything from key components and devices to finished products. Matsushita introduced new 9.9cm-thick plasma TVs in fiscal 2003, which were the
worlds first to integrate digital tuners for broadcast satellite (BS), communications satellite and terrestrial broadcasting. In fiscal 2004, Matsushita introduced new high-definition plasma TVs with built-in slots for compact SD Memory Cards
and a picture enhancement accelerator with kinetic system (PEAKS) for outstanding picture quality. In fiscal 2005, Matsushita introduced digital high-definition plasma TVs, which realized the highest level of picture quality in the industry,
featuring an advanced PEAKS system, as well as enhanced media networking functions that can record video on SD Memory Cards. The Company also introduced the industrys first 65-inch high-definition plasma display. To maintain top market shares
in plasma TVs, the Company has been expanding PDP manufacturing facilities and strengthening its production capabilities. From June 2001, the Company started manufacturing of plasma TVs at its No. 1 domestic plant in Osaka, Japan. At the No. 2
domestic plant in Osaka, Japan, which began operations in February 2004, the facility was reinforced to realize a production capacity of 1.2 million units per year in December 2004. Overseas, the Company began integrated manufacturing of PDPs at its
plasma TV assembly plant in Shanghai, China in December 2002, thus expediting total annual production to 1.8 million units of these three factories in December 2004. In response to anticipated sharp growth in plasma TV demand, a No. 3 domestic plant
is currently under construction in Hyogo, Japan, and will commence operation in the Fall of 2005.



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Regarding CRTs, in order to strengthen competitiveness, Matsushita and Toshiba integrated CRT operations
and established Matsushita Toshiba Picture Display Co., Ltd., in April 2003. Regarding LCDs, Matsushita and Toshiba combined their respective LCD operations and jointly established Toshiba Matsushita Display Technology Co., Ltd. in April 2002, which
now manufactures LCD panels for PCs, cellular phones and smaller screen TVs with screen sizes 20-inches and under. For LCD TVs with screen sizes of 26- to 32-inches, the Company jointly established IPS Alpha Technology, Ltd. with Hitachi, Ltd.
(Hitachi), Hitachi Displays, Ltd. and Toshiba in January 2005 aiming to secure a stable supply of high-quality TV-use LCD panels. (See Section A of this Item 4 for more information joint ventures related to CRT and LCD.)



As for DVDs, Matsushita offers a wide range of DVD players and recorders.
Since introducing the worlds first consumer-use DVD recorder in 2000, the Company has been the market forerunner in this category. In fiscal 2004, Matsushita began simultaneous global product introductions for a new line of DVD recorders, and
reinforced product lineups by introducing a VCR combination model with dual tuners for the simultaneous recording of two channels. In fiscal 2005, the Company continued to lead the industry by launching a series of competitive models, such as the
industrys first DVD/VCR combination models with built-in hard disk drives (HDDs) and IP network-compatible models which allow access from personal computers (PCs) and cellular phones.



In the digital camera and camcorder area, Matsushita has been expanding its
range of digital cameras and digital camcorders that incorporate SD Memory Card slots for data storage and enhanced networking convenience. In fiscal 2004, new models of digital cameras that leverage unique and advanced technologies, such as
aspherical lenses and optical image stabilizers (OIS), enjoyed notable market success. In fiscal 2005, a new model featuring OIS and a large 2.5-inch LCD in a slim 24.2mm body achieved one of the top shares in the domestic market and contributed to
sales growth. For camcorders, Matsushita introduced a new line of compact easy-to-use models featuring outstanding picture quality for both video and still pictures. The 3 CCD camera system which uses a separate CCD to process each of the three
primary components of light (Red/Green/Blue) boasts one of the highest levels of picture quality in the industry.



In audio equipment, Matsushita produces a variety of products, including compact disc (CD) players, CD radio cassette recorders and Mini Disc players, as
well as radios, tape recorders, portable headphone players and general audio products. The demand for audio equipment is shifting rapidly from analog to digital products. In response to this trend, Matsushita has launched portable audio products
with improved performance in terms of compact design, power efficiency and extended recording time. Regarding hi-fi audio component systems, the Company enhanced product design in the areas of multiple CD changers and MP3 functions.



Matsushita has also expanded its range of SD Memory Card compatible products,
covering not only video and audio equipment, but also information and communications equipment and home appliances. In addition to providing flat-panel TVs and other digital AV products, use of the SD Memory Card as a bridge media in cellular phones
and other new product areas is increasing at a rapid pace. This success has helped to solidify the SD Memory Cards position as the industry standard.



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Information and Communications Equipment



Information equipment includes products such as PCs, CD-ROM, DVD-ROM,
DVD-RAM and other optical disc drives, copiers and printers. Communications equipment includes products such as facsimile machines, cordless telephones, cellular phones and other mobile communications equipment, and digital private branch exchanges.
Products in this sector also include other systems equipment, such as car audio and navigation equipment, cable TV systems, broadcast- and business-use AV equipment and systems, large-screen visual equipment and communications network-related
equipment. Matsushita is a global leader in such business lines as optical disc drives, facsimile machines, broadcast-use digital VCR equipment and airline in-flight AV systems. The Company also maintains a leading position in the Japanese cellular
phone industry.



With respect to PCs, Matsushita continued to
upgrade its notebook models over the last several years, concentrating on lightweight notebook PCs and ruggedized notebook PCs. In fiscal 2004, Matsushita introduced the worlds lightest (1,299 grams) B5-sized notebook PC with a 12.1-inch LCD
screen and a built-in DVD-ROM and CD-R/RW combination drive. In fiscal 2005, Matsushita introduced the worlds lightest (1,290 grams) B5-sized notebook PC with a 12.1-inch LCD screen and a built-in DVD Super Multi Drive that is compatible with
the DVD-RAM, DVD-R, DVD-RW, +R and +RW formats.



In the area of
PC peripherals, Matsushita has been focusing on upgrading its optical disc drive lineups. To meet the demand for slimmer, lighter-weight optical disc drives for notebook PCs, in fiscal 2004, the Company introduced the industrys thinnest and
lightest DVD multi drives compatible with DVD-RAM, DVD-R and DVD-RW formats. In fiscal 2005, Matsushita released the industrys thinnest and lightest DVD Super Multi Drive.



In the area of mobile communications equipment, in recent years Matsushita has developed and introduced a number of new
cellular phones, including third generation (3G) products with a focus on advanced function, stylish design and ease-of-use. Early in fiscal 2003, the Company launched new thin cellular phones for NTT DoCoMo, Inc. that are mobile Internet-compatible
with high picture quality. Then, in the second half of fiscal 2003, in response to rapid increases in demand, the Company introduced new models with built-in cameras. These new models were well received and helped to boost the Companys
reputation in the Japanese cellular phone market. Meanwhile, Matsushita expanded its business in overseas markets, and in fiscal 2004, GSM standard cellular models including clamshell design camera-equipped handsets and ultra-compact, stylish models
received favorable acclaim in Europe and China, thereby improving the Companys brand image. However, in fiscal 2005, performance of cellular phones on the whole was unfavorable, due to such factors as increased inventory in the Chinese market
and intensified price competition in Europe and Asia. Regarding 3G cellular phones, whose demand is expected to increase rapidly overseas, Matsushita has accumulated significant know-how in both wideband base code division multiple access (W-CDMA)
base stations and terminals since NTT DoCoMo commenced W-CDMA services in Japan. In fiscal 2003, a new W-CDMA cellular phone that boasts a rotating LCD screen for camcorder-style recording of video and still images was introduced. In fiscal 2004,
Matsushita introduced a new model with a built-in auto-focus 1.28 megapixel CCD camera and interchangeable decorative jackets with which users may enjoy their favorite designs. Moreover, in fiscal 2005, new models with interchangeable decorative
jackets and SD memory card-compatibility, aimed at strengthening coordination with AV equipment, were introduced. The Company intends to solidify its competitive position as a leader in the 3G mobile communications market.



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In the area of fixed-line communications, Matsushita integrated its communications and digital imaging
technologies through a merger of two major subsidiaries in early 2003. As a result, in addition to its lineup of telecom products such as facsimile equipment, cordless telephones, copiers and printers, the Company has, in recent years, developed
multi-function digital equipment that integrate facsimile, copier, printer, scanner and telephone functions into a single unit. The Company has also introduced network cameras which are compatible with IPv6, the next-generation communications
standard, and other network-related products such as TV door intercom systems with wireless color-monitor-equipped handsets.



In the area of automotive electronics, Matsushita supplies advanced car navigation systems for the domestic market, while further promoting global
expansion in car audio equipment. Demand has grown steadily for DVD-equipped car multimedia systems. In response, in fiscal 2004, the Company introduced a new car navigation system series in Japan that incorporates DVD and other AV entertainment
features. The Company continued to launch new products in this series in fiscal 2005. Favorable sales of these car navigation systems, featuring improved AV functions such as outstanding picture quality and high-resolution wide-screen monitors,
improved Matsushitas domestic market share. Overseas, in recent years, the Company launched new car audio equipment in the North American market, including a rear-seat entertainment system that features a flat-panel, large-screen LCD with a
built-in DVD player, and a digital surround sound car audio systems compatible with high-quality DVD audio. Meanwhile, to address the recent expansion of electronic toll collection services in Japan, the Company has recorded increased sales of
in-car terminals, as well as related infrastructure equipment.



In the area of broadcast-use AV equipment and systems, DVCPRO camera recorder systems remain the Companys flagship product. In fiscal 2004, Matsushita announced the new DVCPRO P2, which is designed to use SD Memory Cards as an
alternative recording media to video tape. Meanwhile, with the start of terrestrial digital broadcasting in Japan in December 2003, Matsushita supplied digital broadcasting systems, including a compact, lightweight DVCPRO series, to major TV
broadcasting stations in Japan. Sales of set-top boxes for cable TVs were also favorable. Meanwhile, Matsushitas leading position in the global in-flight AV systems market has been strengthened by continued deliveries of popular AV systems
with LCD monitors and advanced personal multimedia systems that allow passengers to enjoy in-flight entertainment and shopping from their seats.



Home Appliances





Matsushitas principal products in this category include home
appliances, such as washing machines, clothes dryers, vacuum cleaners, electric irons, microwave ovens, cooking appliances and dishwasher/dryers; refrigeration and air conditioning equipment such as refrigerators and room air conditioners; and
household equipment, mainly electric and gas water heating systems, and sanitary equipment. This category also includes healthcare systems, lighting, and environmental systems.



As the leading manufacturer in the Japanese home appliance industry, Matsushita provides value added products that meet
rapidly changing customer needs and heightened consumer awareness about health and environmental issues through advanced technologies and synergies achieved between companies in the Matsushita Group.



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In the area of electric home appliances and refrigeration and air conditioning equipment, Matsushita in
fiscal 2003 introduced new products such as a washer/dryer with a foam washing system, a combination steamer/microwave oven that preserves moisture in food without the use of plastic wrap, and a vacuum cleaner that is comparable to a mop in the
cleaning of hard surfaced flooring, thanks to a new minus-ion technology. In fiscal 2004, Matsushita introduced a hydrofluorocarbon (HFC)-free, energy-saving refrigerator that preserves food while removing odors and eliminating bacteria, and an air
conditioner that features ventilating functions and a unique oxygen charging technology. Also in fiscal 2004, the Company announced a tilted-drum washer/dryer incorporating universal design concepts and environmentally friendly features. In fiscal
2005, the Company expanded its lineup, and these washer/dryers seized the top share in domestic unit sales by model type. Also in fiscal 2005, Matsushita launched a dishwasher/dryer that utilizes a highly concentrated detergent mist to lift and
remove stains, air conditioners with automatic filter cleaning and dust removal functions, refrigerators with full-open food drawers that allow easy access to hard-to-reach areas, and other unique products. Furthermore, in global markets, the
Company expanded sales of high-value-added home appliances in China and Asia, while at the same time enhancing brand image. Products for these markets include tilted-drum washer/dryers, HFC-free refrigerators and air conditioners with oxygen
enrichment functions.



In the area of household equipment,
safe, energy efficient built-in 200V induction-heating (IH) cooking equipment marked favorable sales in the domestic market. In fiscal 2004, a new water heating system was launched. This product uses CO2as a natural refrigerant and boasts the industrys highest energy efficiency. In fiscal 2005, Matsushita, together with Tokyo Gas Co., Ltd., introduced a
fuel cell co-generation system for the home.



In the healthcare
systems business, in fiscal 2004, Matsushitas blood glucose monitoring system that measures the glucose level quickly and accurately with just a small amount of blood contributed to the Companys sales increase. In fiscal 2005, Matsushita
expanded product lines of ultrasonic diagnostic equipment.



In
the lighting business, in fiscal 2003 Matsushita developed an electrodeless ballasted compact fluorescent lamp featuring low power consumption and extended life. In fiscal 2004, the Company introduced an incandescent lamp with double the life-span
of current models. In fiscal 2005, an energy-saving lamp characterized by its spiral-shaped fluorescent tube was introduced with a wide product range.



In the environment systems business, Matsushita began construction of ventilation and air purification systems for the Hai Van Tunnel in Vietnam in fiscal
2003. In fiscal 2004, Matsushita enjoyed favorable domestic sales of a new product that simultaneously supplies and ventilates air. The Company also supplied solar and wind power generation systems to the 2004 Athens Olympics in fiscal 2004, and the
Aichi World Expo in fiscal 2005.



Components and Devices





Major products included in this category are semiconductors, general components, display devices, batteries and electric motors. Components and devices are used in Matsushitas finished products and sold to other
manufacturers.



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Matsushita implements various initiatives to develop and supply competitive products in components and
devices by concentrating efforts on black-box, or proprietary technologies, particularly in the area of semiconductors such as system LSIs, the key to Matsushitas differentiation in digital AV and information/communications
equipment. The Company is enhancing cooperation between components and devices divisions and finished product divisions from the product development stage to create effective value chains. Matsushita is also expanding sales of components and devices
to external customers to enhance sales growth and profitability.



Matsushitas semiconductor business is primarily made up of integrated circuits (ICs), such as system LSIs and bipolar ICs, discrete devices and image sensors including charge coupled devices (CCDs). Through high speed, low-power
consumption, and ultra fine process technologies, Matsushita has focused its efforts on five main growth businesses, including the four system LSI fields of optical disc-related products, digital TVs, mobile communications, and networks/SD, in
addition to image sensors.



In fiscal 2003, Matsushita
developed a power-efficient multi-codec system LSI, enabling extended continuous operating time for cellular phones that provide video phone and other video content capabilities, and a new system LSI for digital high-definition television (HDTV)
broadcast receivers that accomplishes all back-end processing functions on a single chip. In fiscal 2004, Matsushita began mass production of 0.18-micron FeRAM (ferroelectric random-access memory)-embedded system-on-a-chip (SoC), a system LSI for
mobile network applications. Furthermore, in fiscal 2005, to address the challenge of shortened product lifecycles, Matsushita developed an Integrated Platform that combines software and hardware resources across differing product categories to
improve R&D efficiency and design quality.



In the area of
image sensors, in fiscal 2004, the Company developed a MOS image sensor, featuring high image quality and low power consumption. In fiscal 2005, the Company expanded product lines, and began mass-producing and shipping the industrys smallest
camera modules featuring this MOS image sensor.



Regarding
production, overseas operations have been strengthened and expanded. In fiscal 2004, Matsushita began mass production of image sensors in Singapore. Moreover, in Japan, to advance process technology of LSIs from the conventional 0.13-micrometer
process, the Company began construction of a new semiconductor factory, establishing a cutting-edge production process for 300mm wafers in fiscal 2005.



Matsushita manufactures a variety of components and devices, including capacitors, modules, printed circuit boards, power supply and inductive products,
circuit components, electromechanical components and speakers for digital AV products, automotive electronics and information/communications equipment. In fiscal 2003, Matsushita developed three-dimensional integrated circuit modules that help
downsize and enhance mobile electronic devices and networked products. In fiscal 2004, Matsushita expanded sales with a focus on priority areas including high-fidelity speakers for flat-panel TVs, weight sensors for protective airbags and multilayer
printed circuit boards. In fiscal 2005, the Company concentrated efforts in the development of ALIVH multilayer printed circuit boards for compact design and DTV tuners that enable exceptional picture quality. Matsushita will continue to pursue
further growth and profitability in these businesses, working together with the Companys finished product and semiconductor divisions to create value-added products for customers.



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The battery business consists of primary batteries, including dry batteries, and rechargeable batteries,
such as lithium-ion batteries. Responding to increased performance requirements for digital equipment, including digital cameras, cellular phones and notebook PCs, Matsushita develops and supplies compact and high-performance batteries, such as
long-life alkaline batteries and lithium-ion rechargeable batteries. To meet increasing demand from cellular phone manufacturers, in fiscal 2003, Matsushita further expanded its production capacity of lithium-ion batteries in Osaka, and in April
2004 the Company began manufacturing these batteries in China. Meanwhile, in fiscal 2005, Matsushita launched Oxyride, a revolutionary dry battery that provides increased output, and approximately 1.5 times longer battery life, compared with
ordinary alkaline batteries in Japan.



Matsushitas line
of electric motors includes those for various products, including home appliances, AV equipment and industrial equipment. Matsushita is also a major manufacturer of brushless motors for appliances and servo motors for FA equipment. In the area of
information equipment motors, Matsushita is an industry leader in polygon mirror-scanner motors for Laser Beam Printer. Since fiscal 2003, the Company has implemented restructuring in this business area to concentrate resources into growth areas,
such as brushless motors and FA servo motors. In October 2003, Matsushita transferred the HDD-use fluid dynamic bearing motor business to Matsushita Kotobuki Electronics Industries, Ltd., and closed two manufacturing locations in Japan in December
of that year. In April 2004, Matsushita shifted its information equipment motor business, excluding brushless motors, to a new company jointly established with Minebea Co., Ltd. Meanwhile, in fiscal 2005, with the aim of concentrating in brushless
motors, Matsushita formed joint ventures with Zhejiang Wolong Hi-Tech Co., Ltd. of China and Daikin Industries, Ltd. of Japan, in the field of induction motors for home appliances. The Company also expanded its home- and industrial-use electric
motor manufacturing operations in China to better serve the needs of finished product manufacturers expanding in that region. In addition, Matsushita strengthened ties with its finished products operations by supplying motors for washing machines,
DVD recorders and other products.



MEW and PanaHome





This category includes Matsushita Electric Works, Ltd. (MEW), PanaHome Corporation (PanaHome) and their respective subsidiaries. Major products in this business include MEWs electrical construction materials
(lighting products, information equipment and wiring products), home appliances, building products, electronic and plastic materials, and automation controls, and PanaHomes housing, home remodeling, and asset and property management
businesses.



As MEW and PanaHome category was added to the
Companys product categories from fiscal 2005, information for this product category only pertains to the most recent fiscal year.



MEW has developed and marketed products that reflect the growing interest of consumers regarding the environment and energy-efficiency. Products include
those in the fields of crime prevention, disaster response, information networking, all-electric homes, home remodeling, healthcare and solutions for comfortable living. MEW has strengthened its operations to provide total solutions in hardware,
software and services by taking full advantage of its strengths in the areas of wiring/networking technologies for facility infrastructure and building equipment, and construction/installation techniques. To maximize customer satisfaction and
respond to ever-changing lifestyles, MEW offers products and services that inspire and improve the quality of life, while providing materials and components that support the amenity and good life.



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In the electrical construction materials business, MEW recorded sales growth in compact LED lighting
fixtures with longer life and energy saving features for atmosphere lighting and landscape lighting. In the field of information equipment and wiring products, residential fire alarm systems and access control systems increased sales.



In the home appliance business, MEW is exerting efforts to develop highly
functional products in the wellness field, which includes various products related to beauty, health and comfort. Sales of fitness machines that simulate horseback riding to exercise key muscle groups and massage loungers were increased.



In building products, interior and storage infrastructure operations
contributed to overall sales. In addition, MEW developed the home renovation market, and broadened the scope of its housing materials operations. As well, sales of Collaboration V-products such as bathroom systems and tank-less toilets that boast
low running costs also increased.



In electronic and plastic
materials, environmentally friendly multilayer printed circuit board materials, mainly for digital home appliances, high performance cellular phones and automobiles recorded increased sales.



In automation controls, connecters for IT terminals such as cellular phones,
automotive relays, switches and sensors had strong sales.



To
provide living spaces that are friendly to both people and the global environment, PanaHome focused its basic product strategies on the Eco-Life Home concept, which emphasizes safety and security, health and comfort, and high energy
efficiency. PanaHome has expanded its main businesses, especially detached housing, asset and property management and home remodeling based on the aforementioned Eco-Life concept.



In detached housing, PanaHome is focusing on solar power generation systems
and housing products with features compliant to next-generation energy conservation standards. PanaHome also introduced its original exterior wall using photocatalyst technology to reduce maintenance costs.



In asset and property management, PanaHome provides various products and
services relevant for landowners and tenants. PanaHome developed loan programs specializing in financing for nursing facilities, and is expanding its businesses in product lines that respond to the needs of medical and nursing facilities.



In remodeling, PanaHome is further developing its sales staff,
and strengthening capabilities in consultation sales through advice from various experts in the field in line with the Eco-Life housing concept. With its showrooms, PanaHome strives to expand the remodeling business.



JVC





The JVC category consists of businesses of
Victor Company of Japan, Ltd. and its group companies. Major products in this category include consumer electronic equipment such as TVs, camcorders, DVD recorders and players, audio systems, car AV, and other AV products, professional electronic
equipment, components, and prerecorded audio and video software and recordable media. These products are sold under the Victor or JVC brand names primarily through JVCs own sales and distribution networks in Japan and
overseas.



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Over the last three fiscal years, JVC has placed priority on developing its Only One product
series that incorporates JVCs original market-leading audio and visual technology. As a result of these efforts, in fiscal 2005 JVC introduced an HD-ILA rear projection TV employing JVCs unique high-definition micro display device and
the industrys first palm-sized hard disk camcorder Everio.



In the consumer electronics field, JVC has placed principal emphasis on display and optical disc products. JVC aims to achieve its mid-term management plan through these and other key businesses, including camcorders,
car electronics equipment, and AV systems. In fiscal 2003, success was achieved in AV products such as high-definition TVs and PDP TVs, while the company launched the worlds first consumer-use digital high-definition camcorder. Meanwhile, as
part of a global realignment of its manufacturing bases, JVC positioned its Yokosuka Plant as the main location for consumer electronics production. JVC also implemented other business structural reforms to ready itself for the next phase of growth.



Digital products and related equipment are growing rapidly in
the consumer electronics industry, and in fiscal 2004, JVC expanded its range of LCD TVs and DVD recorders. In fiscal 2005, despite difficult market conditions due to price declines, sales of LCD TVs and the companys three-in-one VCR-HDD-DVD
recorders were successful in Japan, exceeding overall market growth. Overseas, JVCs unique HD-ILA rear-projection TV was launched in the U.S., and full-scale market introduction also progressed. Car electronics products recorded strong growth,
but sales of digital camcorders were down, and audio systems sales slackened in Europe.



In the professional electronics field, JVC has focused on two categories, security and presentation systems. Over the last three fiscal years, sales of security systems, including surveillance cameras, recorded
consistent growth. Although presentation systems grew at a sluggish pace, JVC intends to expand this area by enhancing sales of its newly-developed professional HDV camera recorder.



In the area of components and devices, the fluid dynamic bearing motor for HDD has received market acclaim for its high
quality, and thus has grown to become a pillar of the business. In addition to motors, JVC strives to develop key devices such as optical pickups and high-density multilayer printed circuit boards, which create added value and differentiation of JVC
products.



JVCs software and media businesses are
comprised of the media business which manufactures and sells recordable media and prerecorded audio and video software, and the software business which identifies, develops and manages promising artists, and produces, sells and distributes content.



JVCs software business has been operated mainly in
Japan. In Japan, the number of million-seller songs have decreased, and the Japanese music software market has fallen into an industry-wide slump. In such an environment, JVC conducted structural reforms and laid the foundation for a profitable
business structure during fiscal 2003. In fiscal 2004, JVC released hit albums from such artists as the Southern All Stars and SMAP. To reinforce its content rights business, JVC established JEN (JVC Entertainment Networks Inc.). Fiscal 2005 was
also characterized by severe business circumstances, due to postponement of major releases by popular artists, and decrease in sales of music software stemming from the expiration of sales consignment contracts with key industry players. As for the
media business operating worldwide, JVC strengthened sales of such digital media as DVD-RW and Mini DV tapes. Market conditions in fiscal 2005 were tough for recording tapes due to rapid fall in sales prices of Mini DV tapes and declining demand in
VHS recording tapes. However, recordable DVD discs grew strongly with the popularization of DVD recorders, mainly in Japan.



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Other





Matsushitas Other category includes factory automation (FA) equipment,
industrial robots, welding machines, power distribution equipment and other industrial equipment. Matsushita strives to enhance services provided to customers through innovative manufacturing processes in circuit manufacturing technology. Responding
to various needs of customers at the factory, the Company provides optimal solutions in electronic component mounting, semiconductor mounting, manufacturing processes, welding machines and robots.



In the area of FA equipment, Matsushita is a global leader in the electronic
components mounting machine business. The Company also supplies products that support the manufacturing infrastructures of its customers, including fine device bonding systems, fine process equipment, and industrial robots. Within the mainstay
electronic components mounting machine business, while developing and launching products with higher processing-speed and higher functionality, the Company has been building new core businesses by augmenting its lineups of high-growth device bonding
systems. As part of this strategy, Matsushita introduced a new type of modular placement machine in fiscal 2003. In fiscal 2004, the Company enhanced growth by strengthening the electronic-parts mounting system business and fine device bonding
system business supported by active FA equipment demand from Euro-American Electronics Manufacturing Services (EMS) in China, Taiwan and Korea, and Taiwanese manufacturers Original Design Manufacturing (ODM) as a result of increasing demand
for digital AV products, cellular phones and PCs. Furthermore, in fiscal 2005, the high-speed modular placement machines that boast the industrys highest productivity recorded solid sales performance. In the semiconductor mounting business,
LCD panel bonders, high-speed die bonders and plasma cleaners achieved favorable results with high levels of precision and productivity.



In the area of welding machines, Matsushita introduced fully digital automatic welding robots in fiscal 2003. In fiscal 2004, Matsushita expanded
deliveries of fully digital automatic welding machines and industrial robots to automobile-related industries. In fiscal 2005, as part of business restructuring of the Matsushita Group companies, power distribution equipment and monitoring and
control system operations of Matsushita Industrial Information Equipment Co., Ltd. (MIIE) were transferred to MEW, while MIIEs information machine business was shifted to Panasonic Communications Co., Ltd. Subsequently, MIIE was absorbed by
Matsushita in April 2005, and no longer operates as a separate entity.



MARKETING CHANNELS



The table below shows a
breakdown of Matsushitas net sales by geographical area for the periods indicated:



|                        |  |                             |  |     |      |  |       |      |     |   |  |       |  |     |  
|----------------------- |  | --------------------------- |  | --- | ---- |  | ----- | ---- | --- | - |  | ----- |  | --- | -
|                        |  | Yen (billions) (%)          | 
|                        |  | Fiscal year ended March 31, | 
|                        |  | 2005                        |  |     | 2004 |  |       | 2003 |    
|Japan                   |  | 4,581                       |  | 53  | %    |  | 3,478 |      | 46  | % |  | 3,454 |  | 47  | %
|North and South America |  | 1,283                       |  | 14  |      |  | 1,327 |      | 18  |   |  | 1,421 |  | 19  |  
|Europe                  |  | 1,122                       |  | 13  |      |  | 1,080 |      | 15  |   |  | 1,000 |  | 13  |  
|Asia and Others         |  | 1,728                       |  | 20  |      |  | 1,595 |      | 21  |   |  | 1,527 |  | 21  |  
|                        |  |                             |  |     |      |  |       |      |     |   |  |       |  |     |  
|Total                   |  | 8,714                       |  | 100 | %    |  | 7,480 |      | 100 | % |  | 7,402 |  | 100 | %
|                        |  |                             |  |     |      |  |       |      |     |   |  |       |  |     |  



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Sales and Distribution in Japan



In Japan, Matsushitas products are sold through several sales channels,
each established according to the type of products or customers: Sales of consumer and household products are handled or coordinated by relevant corporate sales divisions, such as the Corporate Marketing Division for Panasonic Brand and the
Corporate Marketing Division for National Brand, while sales of general electronic components and certain other devices to manufacturers are handled by the Corporate Industrial Marketing & Sales Division, in each case to stay close to respective
customers and meet their specific and ever-diversifying needs. For other products, there are also organizations under the direct control of business domain companies that conduct sales and marketing of their own products, mostly to non-consumer
customers, such as industrial and business corporations, public institutions, construction companies and governments through their sales offices and subsidiaries or through outside agencies.



Of the above, the Corporate Marketing Division for Panasonic Brand and the
Corporate Marketing Division for National Brand were established in April 2001 as part of Matsushitas domestic consumer sales and distribution structure reorganizations, whereby the former corporate consumer products sales divisions, sales
functions within individual product divisions and the Advertising Division were integrated into the two new corporate marketing divisions to provide greater customer satisfaction by shortening the distance between factories and consumers.



In fiscal 2005, Matsushita and MEW integrated the sales
functions of each of the electrical supplies, building materials and equipment, and home appliances businesses as a part of collaboration between the two companies. Regarding the electrical supplies business, in January 2005, the Corporate
Electrical Supplies Sales Division of Matsushita was integrated into MEW and the Corporate Construction Business Promotion Division was newly established within Matsushita. In April 2005, in the building materials and equipment business, the
Corporate Housing Equipment Sales Division of Matsushita, excluding the businesses for city gas companies and OEM sales of equipment and instruments, and the Matsushita Housing Equipment & Systems Corporation was transferred and integrated to
MEW. Furthermore, in the home appliances business, MEW sales functions for beauty and health products were integrated into Matsushita, whereby Matsushita reorganized the integrated MEWs sales functions and Corporate Marketing Division for
National Brand of Matsushita into a new Corporate Marketing Division for National Brand Home Appliances and Corporate Marketing Division for National Brand Wellness Products. The Corporate Marketing Division for National Brand Home Appliances
handles such large electric appliances as air conditioners, refrigerators and washing machines, while the Corporate Marketing Division for National Brand Wellness Products is responsible for products in fields such as beauty, health, batteries and
lamps.



Overseas Operations





Worldwide, Matsushita has 628 consolidated companies as well as 66 companies which are reflected by the equity method. International marketing and sales of Matsushitas products are handled mainly through its sales subsidiaries and
affiliates located in respective countries or regions in coordination with business domain companies and regional headquarter companies. In some countries, however, marketing and sales are handled through independent agents or distributors,
depending on regional characteristics. Additionally, certain products are also sold on an OEM basis and marketed under the brand names of third parties.



Overseas sales represented approximately 47% of the Companys total consolidated sales in fiscal 2005.



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In order to promote global business development, Matsushita has been expanding its overseas manufacturing
operations. The Companys overseas manufacturing is conducted by overseas manufacturing subsidiaries and affiliates under the control of business domain companies in coordination with regional headquarter companies. In April 2003, a new
business performance evaluation system (which had previously been applied at domestic companies only) was extended to overseas operations, whereby the performance of each business domain company is now evaluated based on Capital Cost Management
(CCM), which measures capital efficiency, and cash flows, on a global consolidated basis, including overseas companies under its control. This provides incentive to each business domain company to further establish globally optimized operational
structures.



In recent years, the Company established a
globally optimized manufacturing structure, taking into consideration cost and proximity to market as well as social, political and environmental factors. Currently, the Company views Asia, China and Eastern Europe as critical to this structure.
Specifically, Matsushita has focused on China as a large potential market and a production site to supply global, as well as Chinese markets. As such, the Company has been enhancing production capacity at its Chinese facilities for such borderless
products as DVD players, microwave ovens, compressors and components, as well as such new growth products as PDPs.



Matsushita also places an emphasis on promoting localization of research and development of products and technologies to enhance competitiveness of
overseas manufacturing sites. Such endeavors included establishment of a second R&D base in China in fiscal 2003 to speed up local-based product development and to build an optimum global R&D network. In January 2004, Matsushita established
a software development site in China to minimize escalating software development costs in areas such as digital consumer electronics. In March 2005, Matsushita and MEW established the Chinese Lifestyle Research Center in Shanghai, China to
strengthen product planning activity. In Asia, the Company established the Panasonic R&D Center Malaysia in October 2003 as a digital networking multi-media software development base.



Customers





The largest markets for Matsushita have traditionally been consumer
products. However, since the 1980s, the proportion of sales to non-consumer customers, such as industrial and business corporations, governments and other institutions, including large customers such as electric and electronic equipment
manufacturers, automotive manufacturers and various other machinery makers, has been rising as Matsushita places increasing emphasis on industrial and commercial products and systems and electronic components. Matsushitas business is not
materially dependent on any single customer.



SEASONALITY OF BUSINESS



The
Companys business has no significant seasonality in terms of sales or profits. However, for the consumer electronics business, the fiscal third quarter (October to December) is normally a peak because it falls in the year-end shopping season
in Japan and many overseas markets. Additionally, seasonal appliances, such as air conditioners and refrigerators, have different business cycles, sales of which peak in summer. These do not have a material effect upon the Companys overall
operations.



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RAW MATERIALS AND SOURCE OF SUPPLY



Matsushita purchases a wide variety of parts and materials from various
suppliers in Japan and abroad. The Company applies a multi-sourcing policynot depending upon any one particular source of supply for most essential items. The Company has also been endeavoring to promote a policy of global optimum purchasing
by concentrating order placements to qualified suppliers from all over the world and buying the most competitive parts and materials.



In an attempt to improve operational efficiency and to reduce parts and materials costs, Matsushita has been increasing centralized purchasing at its
headquarters for materials commonly used in many product divisions throughout Matsushita, such as steel, plastics, semiconductors and electronic components, while at the same time accelerating the initiatives to standardize parts and materials. Such
efforts are coordinated by the Corporate Centralized Purchasing Center established in April 2003. At the business domain company level, an increasing focus has been put on centralized purchasing for parts and materials commonly used in factories
within each business domain company.



In fiscal 2005, to
minimize the adverse effects of global price increases of raw materials, Matsushita further strengthened materials cost reduction initiatives including a reduction in the number of parts through the standardization of design, use of Value
Engineering techniques, and additional cost reduction activities covering indirect materials.



PATENT LICENSE AGREEMENTS



Matsushita holds numerous Japanese and foreign patent registrations for its products, and shares technologies with a number of Japanese and foreign
manufacturers. Its technical assistance, or licensing, to other manufacturers has been increasing year by year.



For example, Matsushitas patents related to MPEG2 technology, which is widely used in digital TVs, are licensed to other companies through MPEG LA
LLC. Patents which are essential to DVD technology are licensed as a part of the joint licensing program operated by seven Japanese and U.S. companies. Furthermore, the Companys patents relating to CD technology are licensed to many
manufacturers.



Matsushita is a licensee under various license
agreements which cover a wide range of products, including AV products, computers, communications equipment, semiconductors and other components. Matsushita has non-exclusive patent license agreements with, among others, Thomson Licensing Inc. and
Thomson Licensing S.A. covering a broad range of products, including TVs, VCRs and DVD products. Matsushita has non-exclusive patent cross-license agreements with, among others, Texas Instruments Incorporated and International Business Machines
Corporation, both covering semiconductors, information equipment and certain other related products. Matsushita has non-exclusive patent cross- license agreements with Koninklijke Philips Electronics N.V. covering semiconductor devices, various
lamps, cathode-ray and electron tubes and certain other products.



The Company considers all of its technical exchange and license agreements beneficial to its operations.



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COMPETITION



The markets in which the Company sells its products are highly competitive. Matsushitas principal competitors, across
the full range of its products, consist of several large Japanese and overseas manufacturers and a number of smaller and more specialized companies. Advancements toward a borderless economy have also applied pressure to Japanese manufacturers,
including Matsushita, in terms of global price competition, especially from Chinese and Korean manufacturers. To counter this, the Company is devising various measures to enhance its competitiveness, with a focus on the development of differentiated
products and cost reduction and efficiency improvements. Such measures include the development of products with Matsushitas black-box or proprietary technologies, innovation of manufacturing processes through the use of information
technology, increasing overseas production for optimum manufacturing allocation from a global perspective, and shortening production and distribution lead time through the expansion of SCM in cooperation with several overseas and domestic mass-scale
retailers and the introduction of cell-style production, as well as developing joint ventures and other cooperative agreements with domestic and overseas partners.



Also, with the development of digital and networking technologies, competition in terms of the so-called de
facto standard has become crucial. In response, Matsushita has been strengthening its efforts toward alliances with leaders not only in the electronics industry but also the software, devices, broadcasting, communications services and
other diverse industries.



GOVERNMENT
REGULATIONS



Like other electronics manufacturers,
Matsushita is subject to government regulations related to the environment.



Matsushita has established an efficient system to collect and recycle end-of-life home appliances, comprising air conditioners, TVs, refrigerators, washing machines and PCs in compliance with the Japanese Law for
Recycling of Specified Kinds of Consumer Electric Goods (the Recycling Law) effective April 1, 2001. The Company also established the Matsushita Eco Technology Center Co., Ltd. not only for dismantling used products and recycling scrapped materials,
but also for research and development of recycling technology. Likewise, Matsushita, as the leader in the domestic home electric and electronic equipment industry, has been consistently working on environmental protection initiatives that
appropriately meet the standards set forth in the Recycling Law or other relevant laws or regulations, including those regarding water and land-soil anti-pollution.



In January 2003, the Company announced that disposed electric equipment that contained polychlorinated byphenyls (PCB) might
be buried in the ground of its four manufacturing facilities and one former manufacturing facility in Japan. The applicable laws in Japan require that PCB equipment be appropriately maintained and disposed of by July 2016. The Company has accrued
estimated total cost of approximately 17 billion yen at March 31, 2005 for necessary actions, such as investigating whether the PCB equipment is buried at the facilities, including excavations, maintaining and disposing the PCB equipment that is
already discovered, and soil remediation, since it represents managements best estimate or minimum of the cost, but the payments are not considered to be fixed and reliably determinable.



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In Europe, two environmental directives went into force in February 2003 and 25 member states are
currently drawing up their state laws. One of these directives is the WEEE Directive designed to promote the recycling of electric and electronic equipments, and the other is the RoHS Directive that practically prohibits the use of six specified
hazardous substances (Lead, Mercury, Cadmium, Hexavalent chromium, Polybrominated biphenyls, Polybrominated diphenyl ethers) in products. Preparing for mandatory recycling under the WEEE Directive, effective August 2005, Matsushita established
Ecology Net Europe GmbH (ENE) in Germany in April 2005. Matsushita promotes construction of networks connecting manufacturers, recycling companies and hauling companies through ENE. Matsushita has also made progress globally in eliminating the use
of environmentally hazardous materials, and expects to have eliminated the use of such materials in its products, in accordance with RoHS. In these efforts, Matsushita is carrying out its compliance programs not only to meet the requirements of
these two directives but also to establish cost efficient systems that will further enhance its competitive edge.



Following in the footsteps of these EU directives, an increasing number of recycling and hazardous substance-related legislations are being enacted
worldwide. Based on its corporate policy of contributing to coexistence with the global environment, Matsushita is implementing appropriate measures to address these legislations at each business domain company and in each region.



The Company is subject to a number of other government
regulations in Japan and overseas, but overall, it presently manages to operate its businesses without any significant difficulty or financial burden in coping with them.





|C. | Organizational Structure
|-- | ------------------------



In order to maintain production, sales and service activities effectively in broad business areas as a comprehensive electronics manufacturer, Matsushita
has been operating under a decentralized divisional management structure with substantial delegation of authority to divisional companies and subsidiaries, with the headquarters focusing on Groupwide strategic functions. In January 2003, Matsushita
launched a new business domain-based organizational structure, and introduced new Group management control systems from April 1, 2003. Under this new structure, each business domain company, either an internal divisional company of the parent
company or a subsidiary, takes full responsibility in its own business area, thereby establishing an autonomous management structure that expedites self-completive business operations to accelerate growth. On April 1, 2004, MEW, PanaHome and their
respective subsidiaries became consolidated subsidiaries of the Company. Accordingly, the Company successfully eliminated overlaps in R&D, manufacturing and sales, thereby creating an optimum Group structure that facilitates the effective use of
management resources to achieve growth strategies.



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Principal divisional companies and subsidiaries as of March 31, 2005 are as listed below:



| | (1) | Internal divisional companies of Matsushita Electric Industrial Co., Ltd.:
| | --- | --------------------------------------------------------------------------



|                                     |  | 
|------------------------------------ |  | 
|Name of internal divisional company  |  | 
|Panasonic AVC Networks Company       | 
|Panasonic Automotive Systems Company | 
|Panasonic System Solutions Company   | 
|Matsushita Home Appliances Company   | 
|Healthcare Business Company          | 
|Lighting Company                     | 
|Semiconductor Company                | 
|Motor Company                        | 



| | (2) | Principal domestic subsidiaries:
| | --- | --------------------------------



|                                                      |  |                 |  
|----------------------------------------------------- |  | --------------- | -
|Name of company                                       |  | Percentageowned |  
|Matsushita Electric Works, Ltd.                       |  | 52.6            | %
|Victor Company of Japan, Ltd.                         |  | 52.7            |  
|Panasonic Communications Co., Ltd.                    |  | 100.0           |  
|PanaHome Corporation                                  |  | 54.8            |  
|Matsushita Electronic Components Co., Ltd.            |  | 100.0           |  
|Panasonic Mobile Communications Co., Ltd.             |  | 100.0           |  
|Matsushita PDP Co., Ltd.                              |  | 75.0            |  
|Panasonic Factory Solutions Co., Ltd.                 |  | 100.0           |  
|Matsushita Ecology Systems Co., Ltd.                  |  | 100.0           |  
|Matsushita Refrigeration Company                      |  | 100.0           |  
|Matsushita Battery Industrial Co., Ltd.               |  | 100.0           |  
|Matsushita Kotobuki Electronics Industries, Ltd.      |  | 100.0           |  
|Matsushita Industrial Information Equipment Co., Ltd. |  | 100.0           |  



Note:    Organizational changes implemented, effective April 1, 2005, are as follows:



| |  |  | Matsushita Electronic Components Co., Ltd. was renamed Panasonic Electronic Devices Co., Ltd.
| | - |  | ---------------------------------------------------------------------------------------------



| |  |  | Matsushita Kotobuki Electronics Industries, Ltd. was renamed Panasonic Shikoku Electronics Co., Ltd.
| | - |  | ----------------------------------------------------------------------------------------------------



| |  |  | The Company absorbed Matsushita Industrial Information Equipment Co., Ltd.
| | - |  | --------------------------------------------------------------------------







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| | (3) | Principal overseas subsidiaries:
| | --- | --------------------------------



Name of company

Country ofincorporation

PercentageownedPanasonic Corporation of North America

U.S.A.

100.0
%Panasonic Europe Ltd.

U.K.

100.0Panasonic Mobile & Automotive Systems Czech s.r.o.

Czech

100.0Panasonic AVC Networks Czech s.r.o.

Czech

100.0Panasonic Asia Pacific Pte. Ltd.

Singapore

100.0Panasonic AVC Networks Singapore Pte. Ltd.

Singapore

100.0Panasonic AVC Networks Kuala Lumpur Malaysia Sdn. Bhd.

Malaysia

100.0Panasonic Taiwan Co., Ltd.

Taiwan

69.8Panasonic Corporation of China

China

100.0Guangzhou Matsushita Air-Conditioner Co., Ltd.

China

67.8




|      |  |                                                                                                                                                                           
|----- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Note: |  | Matsushitas consolidated financial statements as of March 31, 2005 comprise the accounts of 628 consolidated companies, with 66 companies reflected by the equity
method.





|D. | Property, Plants and Equipment
|-- | ------------------------------



The Companys principal executive offices and key research laboratories are located in Kadoma, Osaka, Japan.



Matsushitas manufacturing plants are located principally in Japan,
other countries in Asia, North and South America and Europe. The Company considers all of its factories well maintained and suitable for current production requirements.







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The following table sets forth information as of March 31, 2005 with respect to manufacturing facilities:



|                             |  |                                        |  |                                                                                                                                                                                                                                                                                             
|---------------------------- |  | -------------------------------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Location                     |  | Floor Space(thousands of  square feet) |  | Principal Products Manufactured                                                                                                                                                                                                                                                             
|Osaka                        |  | 10,719                                 |  | VCRs, plasma TVs, DVD products, audio equipment, washing machines, other home appliances, information equipment, industrial equipment,
components, batteries, kitchen fixtures, building products.                                                                                          
|Kanagawa                     |  | 4,209                                  |  | Communications, information and measuring equipment, VCRs, audio equipment, car AV equipment, compact discs, refrigerators,
batteries.                                                                                                                                                      
|Shiga                        |  | 5,918                                  |  | Air conditioners, refrigerators, compressors, vacuum cleaners, other home appliances, building products, housing
products.                                                                                                                                                                  
|Tochigi                      |  | 2,859                                  |  | TVs, TV picture tubes, information equipment, building products.                                                                                                                                                                                                                            
|Nara                         |  | 1,715                                  |  | Home appliances, gas and kerosene equipment, DVD discs.                                                                                                                                                                                                                                     
|Okayama                      |  | 1,983                                  |  | VCRs, components, magnetic tapes and discs.                                                                                                                                                                                                                                                 
|Kyoto                        |  | 2,056                                  |  | Semiconductors, components, lighting products.                                                                                                                                                                                                                                              
|Ibaraki                      |  | 2,491                                  |  | Magnetic tapes, information equipment, housing products.                                                                                                                                                                                                                                    
|Shikoku                      |  | 3,072                                  |  | VCRs, information equipment, home appliances, building products.                                                                                                                                                                                                                            
|Kyushu                       |  | 4,390                                  |  | Information and communications equipment, components, industrial equipment, building products, housing products.                                                                                                                                                                            
|North    America             |  | 7,782                                  |  | TVs, home appliances, VCRs, DVD discs, car audio equipment, communications equipment, components, batteries, automation controls, lighting
products.                                                                                                                                        
|Europe                       |  | 3,784                                  |  | VCRs, plasma TVs, TVs, audio equipment, car audio equipment, home appliances, components, information and communications equipment,
automation controls, lighting products.                                                                                                                 
|Asia    (excluding    China) |  | 20,581                                 |  | TVs, VCRs, DVD products, audio equipment, air conditioners, refrigerators, other home appliances, components, semiconductors, information
and communications equipment, industrial equipment, compressors, batteries, electronic and plastic materials, lighting products, housing products.
|China                        |  | 9,144                                  |  | TVs, plasma TVs, DVD products, audio equipment, air conditioners, washing machines, other home appliances, car audio equipment,
communications equipment, semiconductors, industrial equipment, compressors, components, batteries, automation controls, electronic and plastic materials.  
|Other                        |  | 25,136                                 |  | Home appliances, industrial equipment, components, semiconductors, video and audio equipment, batteries, information and communications
equipment, lighting products, automation controls, housing products.                                                                                
|                             |  |                                        |  |                                                                                                                                                                                                                                                                                             
|Total                        |  | 105,839                                |  |                                                                                                                                                                                                                                                                                             
|                             |  |                                        |  |                                                                                                                                                                                                                                                                                             



Substantially all of
the above facilities and properties are fully owned by the Company.



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In addition to its manufacturing facilities, Matsushitas properties all over the world include
sales offices located in various cities with an aggregate floor space of approximately 15.8 million square feet, research and development facilities with an aggregate floor space of approximately 6.9 million square feet, employee housing and welfare
facilities with an aggregate floor space of approximately 11.1 million square feet, and administrative offices with an aggregate floor space of approximately 24.7 million square feet.



As of March 31, 2005, Matsushita leased approximately 23.3 million square feet of floor space, most of which was for sales
office space.



Substantially all of Matsushitas
properties are free of material encumbrances and Matsushita believes such properties are in adequate condition for their purposes and suitably utilized. During fiscal 2005, there was no material problem, regarding both the productive capacity and
the extent of utilization of the Companys properties.



In
terms of environmental issues, all of the Matsushita Groups properties operate in compliance with governmental and municipal laws and regulations. Furthermore, the Company established a number of internal environmental guidelines which are
stricter than those provided by the authority. In case any occasional non-compliance may take place, such as the previously mentioned PCB issue, Matsushita takes immediate and appropriate actions to meet the regulatory requirements and to ensure
current good utilization standards.





|Item 5. | Operating and Financial Review and Prospects
|------- | --------------------------------------------



|A. | Operating Results
|-- | -----------------



Overview



Matsushita is one of the worlds leading producers of electronic and electric products. Matsushita currently offers a comprehensive range of
products, systems and components for consumer, business and industrial use based on sophisticated electronics and precision technology, expanding to building materials and equipment, and housing business. Most of Matsushitas products are
marketed under Panasonic, its principle brand name, and several other brand names, including National, Technics, Quasar, Victor, JVC and PanaHome. From this fiscal
year, Matsushita Electric Works, Ltd. (MEW) and PanaHome Corporation (PanaHome) and their respective subsidiaries became consolidated subsidiaries of the Company. Accordingly, Matsushita divides its businesses into six segments: AVC Networks, Home
Appliances, Components and Devices, MEW and PanaHome, JVC and Other. AVC Networks includes video and audio equipment, and information and communications equipment. Home Appliances includes home appliances and household
equipment and systems. Components and Devices includes electronic components, semiconductors, electric motors and batteries. MEW and PanaHome includes electrical supplies, electric products, building materials and equipment,
and housing business. JVC includes products marketed under the brand name of JVC or Victor. Other includes electronic-parts-mounting machines, industrial robots and industrial equipment.



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Economic environment



The Japanese economy over the last three fiscal years was generally characterized by gradual recovery from the long
continued stagnancy in the 1990s. In the first half of the year ended March 31, 2003, the Japanese economy showed signs of a pickup, with a revival in exports and consumer spending. The economic recovery, however, did not last long, and the
second half of that year again met stagnant consumer spending and a decline in exports. In the year ended March 31, 2004, economic growth in Japan showed moderate improvement as a result of rising exports and increased capital investment. In the
year ended March 31, 2005, the overall economic situation in Japan remained favorable, characterized by increased consumer spending, due mainly to an unusually hot summer and demand related to the Athens Olympics. However, the second half of the
year met a downturn in demand, mainly in components and devices industries, compared with the first half. Accordingly, Japans real gross domestic product, reflecting the aforementioned factors, achieved positive economic growth for three
consecutive years, recording a 0.8% increase in fiscal 2003, a 2.0% increase in fiscal 2004, and a 1.9% increase in fiscal 2005, respectively.



Overseas, the U.S. economy maintained its moderate growth in the year ended March 31, 2003, despite the war in Iraq. During the same period, Asian
economies enjoyed steady growth, including China, while European economies experienced slow growth. In the year ended March 31, 2004, the overseas economy was generally favorable owing to the continuously steady advances in the U.S. and Chinese
economies, although post-war Iraq and other unstable factors remained. In the year ended March 31, 2005, the global economy continued its moderate growth, although it slowed somewhat in the second fiscal half, characterized by the steady progress of
the U.S. economy with strong consumer spending, mainly a result of an improved U.S. employment situation, as well as the high-growth Chinese economy.



During the three-year period ended March 31, 2005, Japan experienced deflation due mainly to a demand and supply gap and an increased inflow of products
manufactured in low-cost countries. The consumer price index in Japan declined 0.6% in the year ended March 31, 2003 and declined 0.2% again in the year ended March 31, 2004. In the year ended March 31, 2005, the consumer price index continued to
fall, recording a decline of 0.1%. This deflationary trend has been reflected in the declining prices of goods and services in Japan, putting pressure on the earnings of Japanese businesses.



Condition of foreign currency exchange rates and Matsushitas policy



Foreign currency exchange rates fluctuated during the
three-year period ended March 31, 2005. In the year ended March 31, 2003, the Japanese yen strengthened against the U.S. dollar but weakened against the euro. In the following two years, this trend continued. In order to alleviate the effects of
currency-related transaction risks, Matsushita has traditionally used several currency risk hedging methods, such as forward foreign-exchange contracts and currency options contracts with leading banks. Matsushita has also increased matching of
export and import exchange contracts. As a basic countermeasure against currency exchange risk, the Company has been strengthening production operations outside Japan to meet overseas demand, while reducing dependence on exports from Japan. The
Company does not have any material unhedged monetary assets, liabilities or commitments denominated in currencies other than the individual operations functional currency.



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Initiatives implemented by Matsushita



Under the aforementioned economic environment, Matsushita implemented a
variety of major Companywide restructuring initiatives to transform itself into a lean and agile Matsushita, based on the theme Deconstruction and Creation of its mid-term business plan, Value Creation 21, which covered the
three-year period ended March 31, 2004. In fiscal 2004, Matsushita continued to implement business domain-based restructuring initiatives, while accelerating its growth strategies. Meanwhile, in fiscal 2005, the first year of its new mid-term Leap
Ahead 21 plan, ending March 2007, the Company focused on the growth strategies, which include (1) the launch of differentiated products such as a new line of V-products, (2) the comprehensive collaboration with MEW, through which
Matsushita integrated overlapping businesses and reformed distribution channels to establish an optimized, customer-oriented business structure, and (3) the acceleration of business and organizational restructuring that began in fiscal 2004,
including the selection and concentration of businesses and closure/integration of locations at each business domain company. (For details of the Leap Ahead 21 plan, see Section A of Item 4.)



Summary of operations



Matsushitas consolidated sales and earnings results during the last
three fiscal years, reflecting the aforementioned external and internal conditions, can be summarized as follows:



In fiscal 2003, net sales increased 4.6% to 7,402 billion yen, led by video and audio equipment in the AVC Networks category and products in the
Components and Devices category, largely on the success of V-products developed through integration of Matsushitas Groupwide technological resources. Despite the positive effects on earnings of this sales increase and the previous years
employment and business restructuring, the Company incurred a net loss of 19 billion yen, due in part to a write-down on investment securities, equity losses caused by losses of certain associated companies and losses related to adjustments of net
deferred tax assets necessitated by the introduction of a pro forma standard corporate taxation system in Japan.



In fiscal 2004, net sales increased 1.1% to 7,480 billion yen, led by strong sales of V-products, particularly digital AV products, cellular phones and
factory automation (FA) equipment, which were sufficient to offset sales declines in the Components and Devices and JVC categories. The sales increase positively affected earnings. In addition, Matsushita recorded a 72 billion yen gain from the
transfer to the Japanese government of the substitutional portion of Japanese Welfare Pension Insurance (JWPI) that the Company and certain of its subsidiaries operated on behalf of the Japanese government. Meanwhile, Matsushita incurred
restructuring charges of 45 billion yen for early retirement programs at certain domestic group companies, and losses of 52 billion yen on valuation of investment securities, mainly stocks of affiliated companies. Reflecting all these factors, and
despite an increase in minority interests due to improved earnings of certain subsidiaries and equity in losses of certain associated companies, the Company recorded a net income of 42 billion yen.



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In fiscal 2005, net sales increased 16.5% to 8,714 billion yen, led by favorable sales of digital AV
equipment and home appliances, especially V-products, and the addition of MEW, PanaHome and their respective subsidiaries to the Companys consolidated financial results. The above sales increase and comprehensive cost reduction efforts
contributed to the profit gains, sufficient to offset the negative factors such as a strong Japanese yen, rising raw materials prices, and intensified global price competitions. In addition, Matsushita enjoyed a 32 billion yen gain from the return
to the Japanese government of the substitutional portion of JWPI that certain of the Companys subsidiaries operated on behalf of the Japanese government, while recording a 16 billion yen write-down of investment securities. Meanwhile,
Matsushita incurred expenses of 111 billion yen due to the implementation of restructuring initiatives including the selection and concentration of management resources at each business domain company. Reflecting all these factors, and increases in
provision for income taxes and minority interests due to the consolidation of MEW, PanaHome and their respective subsidiaries, and a decrease in equity in losses of certain associated companies, the Company recorded a net income of 58 billion yen.



Key performance indicators



The following are performance measures that Matsushita believes are key
indicators of its business results for the last three fiscal years.



|                                                  |  |                             |   |  |       |   |  |       |  
|------------------------------------------------- |  | --------------------------- | - |  | ----- | - |  | ----- | -
|                                                  |  | Yen (billions) (%)          |  
|                                                  |  | Fiscal year ended March 31, |  
|                                                  |  | 2005                        |   |  | 2004  |   |  | 2003  |  
|Net sales                                         |  | 8,714                       |   |  | 7,480 |   |  | 7,402 |  
|Income before income taxes to net sales ratio     |  | 2.8                         | % |  | 2.3   | % |  | 0.9   | %
|Research and development costs to net sales ratio |  | 7.1                         | % |  | 7.7   | % |  | 7.4   | %
|Total assets                                      |  | 8,057                       |   |  | 7,438 |   |  | 7,835 |  
|Stockholders equity                              |  | 3,544                       |   |  | 3,452 |   |  | 3,178 |  
|Stockholders equity to total assets ratio        |  | 44.0                        | % |  | 46.4  | % |  | 40.6  | %
|Capital investment                                |  | 374                         |   |  | 271   |   |  | 251   |  
|Free cash flow                                    |  | 300                         |   |  | 404   |   |  | 687   |  



Matsushita defines
Capital investment as purchases of property, plant and equipment (PP&E) on an accrual basis which reflects the effects of timing differences between acquisition dates and payment dates. Matsushita has included the information
concerning capital investment because its management uses this indicator to manage its capital expenditures and it believes that such indicator is useful to investors to present accrual basis capital investments in addition to the cash basis
information in the consolidated statements of cash flows.



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Matsushitas management also believes that this indicator provides useful information when it is
compared with depreciation expenses, which are shown in Note 16 of the Notes to Consolidated Financial Statements, for purposes of evaluating the replacement of PP&E. This indicator is, however, subject to the limitation that capital investments
may not produce future returns (because current expenditures may not provide an efficient use of capital) and may also be subject to impairment. Also, this indicator is subject to the limitation that it may not represent the true cost of maintaining
the Companys portfolio of PP&E as it excludes expenditures for repairs and maintenance, operating leases, and intangible assets that may be integral to the use of PP&E. Matsushita compensates for these limitations by referring to this
indicator together with relevant U.S. GAAP financial measures, such as capital expenditures, depreciation and amortization, shown in its consolidated statements of cash flows, to present an accurate and complete picture for purposes of capital
expenditure analysis.



The following table shows a
reconciliation of capital investment to purchases of property, plant and equipment:



|                                                                                                                      |  |                             |  |      |   |  |     
|--------------------------------------------------------------------------------------------------------------------- |  | --------------------------- |  | ---- | - |  | ----
|                                                                                                                      |  | Yen (billions)             
|                                                                                                                      |  | Fiscal year ended March 31,
|                                                                                                                      |  | 2005                        |  | 2004 |   |  | 2003
|Purchases of property, plant and equipment shown as capital expenditures in the consolidated statements of cash flows |  | 352                         |  | 276  |   |  | 247 
|Effects of timing difference between acquisition dates and payment dates                                              |  | 22                          |  | (5   | ) |  | 4   
|                                                                                                                      |  |                             |  |      |   |  |     
|Capital investment                                                                                                    |  | 374                         |  | 271  |   |  | 251 
|                                                                                                                      |  |                             |  |      |   |  |     



Matsushita defines
Free cash flow as the sum of net cash provided by operating activities and net cash used in investing activities. Matsushita has included the information concerning free cash flow because its management uses this indicator, and it
believes that such indicator is useful to investors, to assess its cash availability after financing of its capital projects.



Matsushitas management also believes that this indicator is useful in understanding Matsushitas current liquidity and financing needs in light
of its operating and investing activities, i.e., its ability to pay down and draw on available cash. It should be noted, however, that free cash flow Matsushita reports may not be comparable to free cash flow reported by other companies. It should
also be noted that free cash flow should not be viewed in a manner that inappropriately implies that it represents the residual cash flow available for discretionary uses, since at any given time Matsushita may be subject to mandatory debt service
requirements and may have other non-discretionary expenditures that are not deducted from this indicator. Matsushita compensates for these limitations by referring to this indicator together with relevant U.S. GAAP financial measures shown in its
consolidated statements of cash flows and consolidated balance sheets, to present an accurate and complete picture for purposes of cash availability analysis.



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The following table shows a reconciliation of free cash flow to net cash provided by operating
activities:



|                                          |  |                             |   |  |      |   |  |      |  
|----------------------------------------- |  | --------------------------- | - |  | ---- | - |  | ---- | -
|                                          |  | Yen (billions)              |  
|                                          |  | Fiscal year ended March 31, |  
|                                          |  | 2005                        |   |  | 2004 |   |  | 2003 |  
|Net cash provided by operating activities |  | 478                         |   |  | 489  |   |  | 698  |  
|Net cash used in investing activities     |  | (178                        | ) |  | (85  | ) |  | (11  | )
|                                          |  |                             |   |  |      |   |  |      |  
|Free cash flow                            |  | 300                         |   |  | 404  |   |  | 687  |  
|                                          |  |                             |   |  |      |   |  |      |  





Details of Matsushitas consolidated sales and earnings results were as follows:



Year ended March 31, 2005 compared with 2004



|(1) | Sales
|--- | -----



Consolidated net sales for fiscal 2005 increased 16.5% to 8,714 billion yen, from 7,480 billion yen in the previous year, mainly contributed by a new
series of competitive V-products and the addition of MEW, PanaHome and their respective subsidiaries to the Companys consolidated financial results. As mentioned earlier, the overall economic situation in Japan during fiscal 2005 was
favorable, characterized by increased consumer spending, sufficient to offset the negative factors such as a strong Japanese yen, rising raw materials costs, and intensified global price competition. Amid these circumstances, Matsushita aimed to
increase sales and enhance profitability through the launch of a new series of competitive V-products. The Company also expanded simultaneous global product introductions in digital AV products, aiming at increasing market share and securing profits
at an early stage in product life cycles. As a result of these initiatives, consolidated sales gains were recorded in digital AV equipment and home appliances, especially V-products. Although sales in Components and Devices decreased due to downturn
of demand in the second half of the fiscal year, the annual sales increased compared with a year ago.



Domestic sales were up 31.7% to 4,581 billion yen. Although sales of products in the Home Appliances, Components and Devices, JVC and Other categories
below the previous year, the increase of sales in the AVC Networks category, especially flat-panel TVs, DVD equipment and cellular phones, and the addition of MEW and PanaHome and their respective subsidiaries contributed to the overall sales
increase. Overseas sales were 4,133 billion yen, up 3.3% when translated into yen with sales increases recorded in the Home Appliances and Other categories, and on a local currency basis, sales increased 6.0%.



|(2) | Cost of Sales and Selling, General and Administrative Expenses
|--- | --------------------------------------------------------------



In fiscal 2005, cost of sales increased 16.2% to 6,176 billion yen due to the increase in net sales, along with the consolidation of MEW, PanaHome and
their respective subsidiaries. Selling, general and administrative expenses were also up 13.1% to 2,229 billion yen due to the same reason.



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|(3) | Gain from the Transfer of the Substitutional Portion of JWPI
|--- | ------------------------------------------------------------



In fiscal 2005, Matsushita recorded a 32 billion yen gain from the transfer to the Japanese government of the substitutional portion of JWPI which
represents a decrease of 56% compared with 72 billion yen gain in the previous fiscal year. The Company believes this transfer has reduced the risks of managing plan assets related to the substitutional portion of JWPI. (For further details, see
Note 10 of the Notes to Consolidated Financial Statements.)



|(4) | Interest Income, Dividends Received and Other Income
|--- | ----------------------------------------------------



In fiscal 2005, interest income decreased 0.4% to 19 billion yen, and dividends received decreased 1.7% to 5 billion yen. In addition, other income
totaled 83 billion yen, a 39.1% increase from fiscal 2004, due mainly to increased net gain on sale of available-for-sale securities. (For further details, see Note 5 of the Notes to Consolidated Financial Statements.)



|(5) | Interest Expense and Other Deductions
|--- | -------------------------------------



In fiscal 2005, interest expense decreased 17.7% to 23 billion yen, owing to a reduction in the Companys borrowings. Other deductions increased
15.8% to 178 billion yen. Other deductions in fiscal 2005 include restructuring charges of 111 billion yen, mainly consisting of expenses for early retirement programs to employees at certain domestic and overseas group companies and expenses
associated with the closure/integration of locations, compared with 54 billion yen in the previous fiscal year. The substantial portion of the expenses for these restructuring activities were paid or settled in fiscal 2005 and related liability at
March 31, 2005 was 3 billion yen. The Company also incurred 30 billion yen for impairment losses on fixed assets, compared with 12 billion yen in fiscal 2004 and a write-down of 16 billion yen on investment securities, compared with 52 billion yen
in fiscal 2004. (For further details, see Notes 4, 5, 7 and 15 of the Notes to Consolidated Financial Statements.)



|(6) | Income before Income Taxes
|--- | --------------------------



As a result of the above-mentioned factors, income before income taxes for fiscal 2005 increased 44.5% to 247 billion yen, compared with 171 billion yen
in fiscal 2004. Its ratio to net sales increased 0.5% to 2.8%, compared with 2.3% in the previous year.



|(7) | Provision for Income Taxes
|--- | --------------------------



Provision for income taxes for fiscal 2005 amounted to 153 billion yen, compared with 99 billion yen in the previous year. Its ratio to income before
income taxes rose to 62.1%, from 57.7% a year ago, due mainly to an increase in valuation allowance allocated to income tax expenses in certain of its subsidiaries.



|(8) | Minority Interests
|--- | ------------------



Minority interests increased to 28 billion yen for fiscal 2005, compared with 20 billion yen in fiscal 2004, reflecting the increased minority interests
of the newly consolidated subsidiaries including MEW and PanaHome.



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|(9) | Equity in Losses of Associated Companies
|--- | ----------------------------------------



In fiscal 2005, equity in losses of associated companies decreased to 7 billion yen, from the previous years 11 billion yen, due mainly to improved
earnings or decreased losses at certain associated companies, despite a decreased equity in earnings of associated companies due to the consolidation of MEW, PanaHome and their respective subsidiaries.



|(10) | Net Income
|---- | ----------



As a result of all the factors stated in the preceding paragraphs, the Company recorded net income of 58 billion yen for fiscal 2005, compared with net
income of 42 billion yen in the previous fiscal year.



|(11) | Results of Operations
|---- | ---------------------



Results of operations by business segment for fiscal 2005, as compared with the previous fiscal year, were as follows*:



| | * | As described in Note 20 of the Notes to Consolidated Financial Statements, from fiscal 2005, the Company added a new segment, MEW and PanaHome to the Companys
business segment classifications. Accordingly, its business segment is classified to six segments: AVC Networks, Home Appliances, Components and Devices, MEW and PanaHome, JVC and Other.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|                           |  |                |   |  |        |   |  |                |   
|-------------------------- |  | -------------- | - |  | ------ | - |  | -------------- | --
|                           |  | Yen (billions) |   |  |        |  
|                           |  | 2005           |   |  | 2004   |   |  | Percent change |   
|Sales:                     |  |                |   |  |        |   |  |                |   
|AVC Networks               |  | 3,859          |   |  | 3,840  |   |  | 0.5            | % 
|Home Appliances            |  | 1,333          |   |  | 1,223  |   |  | 9.0            |   
|Components and Devices     |  | 1,469          |   |  | 1,660  |   |  | (11.5          | ) 
|MEW and PanaHome           |  | 1,556          |   |  |       |   |  |               |   
|JVC                        |  | 730            |   |  | 819    |   |  | (10.8          | ) 
|Other                      |  | 1,027          |   |  | 949    |   |  | 8.3            |   
|Eliminations               |  | (1,260         | ) |  | (1,011 | ) |  |               |   
|                           |  |                |   |  |        |   |  |                |   
|Total                      |  | 8,714          |   |  | 7,480  |   |  | 16.5           | % 
|                           |  |                |   |  |        |   |  |                |   
|Segment profit:            |  |                |   |  |        |   |  |                |   
|AVC Networks               |  | 127            |   |  | 129    |   |  | (1.3           | )%
|Home Appliances            |  | 78             |   |  | 53     |   |  | 47.1           |   
|Components and Devices     |  | 58             |   |  | 50     |   |  | 15.3           |   
|MEW and PanaHome           |  | 64             |   |  |       |   |  |               |   
|JVC                        |  | 10             |   |  | 25     |   |  | (59.9          | ) 
|Other                      |  | 38             |   |  | 15     |   |  | 160.9          |   
|Corporate and eliminations |  | (67            | ) |  | (77    | ) |  |               |   
|                           |  |                |   |  |        |   |  |                |   
|Total                      |  | 308            |   |  | 195    |   |  | 57.8           | % 
|                           |  |                |   |  |        |   |  |                |   



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Matsushita continues further implementing the selection of priority businesses and concentration of
management resources into growth businesses. For the fiscal 2005, Matsushita strengthened its management structure through various cost rationalization initiatives at each business domain company, including the closure and integration of locations,
the implementation of early retirement programs to employees, and the promotion of Company-wide cost reduction activities to eliminate redundancies throughout all areas.



Sales in the AVC Networks segment increased 0.5% to 3,859 billion yen, from 3,840 billion yen in the previous fiscal year.
Within this segment, sales of video and audio equipment increased, due mainly to growth in sales of such digital AV products as flat-panel TVs and digital cameras, which more than offset declines in audio equipment. Sales of information and
communications equipment decreased due mainly to the sales declines in cellular phones, fixed-line telephones and facsimile machines, which offset steady sales in PCs and automotive electronics.



With respect to this segment, profit decreased 1.3% from 129 billion yen for
fiscal 2004, to 127 billion yen for fiscal 2005. This decrease was attributable mainly to lower sales in cellular phones and price declines in digital products, in spite of a sales increase and cost rationalization.



Sales of Home Appliances increased 9.0% to 1,333 billion yen. In Japan, sales
gains were recorded in washing machines, air-conditioners and compressors, while overseas sales growth was achieved by strong sales including air-conditioners and compressors.



Profit in this segment rose 47.1% from 53 billion yen for fiscal 2004, to 78 billion yen for fiscal 2005. This increase was
due mainly to the successful introduction of new value-added products and domestic sales gains, combined with the effects of various rationalization efforts.



Sales of Components and Devices decreased 11.5% to 1,469 billion yen, due mainly to the sales declines in electric motors, despite sales in semiconductors
and general components remaining at the same level as previous year.



With respect to this segment, profit increased 15.3% from 50 billion yen for fiscal 2004, to 58 billion yen for fiscal 2005, owing largely to rationalization effects in general components and electric motors businesses, despite a decrease
in sales.



Sales of newly consolidated MEW and PanaHome were
1,556 billion yen. MEW registered robust sales in various key areas, especially building products such as residential furnishings and storage units, electronic devices, and automation controls for applications in cellular phones and automotive
devices. Meanwhile, performance at PanaHome, which is primarily involved in the housing field, was supported by steady sales in the residential real-estate market in Japan. With respect to this segment, profit amounted to 64 billion yen.



Sales of JVC were 730 billion yen, down 10.8% from the previous year.
Although domestic sales of AV equipment were favorable, sluggish sales in the Americas and Europe, slow introduction of new products and lower sales in music CDs in Japan led to an overall sales decline.



With respect to this segment, profit decreased 59.9% from 25 billion yen for
fiscal 2004, to 10 billion yen for fiscal 2005, due to decreased sales and effects of price declines in digital products, despite a reduction in materials procurement costs and a decrease in fixed costs.



Sales in the Other segment were 1,027 billion yen, up 8.3% from the previous
year, due mainly to sales increases in FA equipment and industrial equipment.



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With respect to this segment, profit increased 160.9% from 15 billion yen for fiscal 2004, to 38 billion
yen for fiscal 2005, owing to sales increases as well as the effects of various rationalization efforts.



Year ended March 31, 2004 compared with 2003



|(1) | Sales
|--- | -----



Consolidated net sales for fiscal 2004 increased 1.1% to 7,480 billion yen, from 7,402 billion yen in the previous year. As mentioned earlier, the
business environment during fiscal 2004 remained unstable but overall economic conditions began to show signs of a moderate recovery. Amid these circumstances, Matsushita aimed to increase sales and enhance profitability through the launch of a
series of competitive V-products, particularly those in the digital AV equipment area. The Company also expanded simultaneous global product introductions. As a result of these initiatives, consolidated sales marked gains, led by strong sales of
V-products, particularly in the areas of digital AV equipment, cellular phones and FA equipment, which were sufficient to offset sales declines in the Components and Devices, and JVC categories.



Domestic sales edged up 0.7% to 3,478 billion yen. Although sales of products
in the Home Appliances, Components and Devices, and Other categories remained at the same level as, or below the previous year, sales of products in the AVC Networks category, especially flat-panel TVs, DVD equipment and automotive electronics
increased. Overseas sales were 4,002 billion yen, up 1.4% with sales increases recorded in the AVC Networks, Home Appliances and Other categories, and on a local currency basis, sales increased 4.0%.



|(2) | Cost of Sales and Selling, General and Administrative Expenses
|--- | --------------------------------------------------------------



In fiscal 2004, despite the increase in net sales, cost of sales decreased 0.2% to 5,313 billion yen, reflecting a success in reducing materials costs.
Selling, general and administrative expenses edged up 1.0% to 1,971 billion yen due mainly to an increase in research and development costs.



|(3) | Gain from the Transfer of the Substitutional Portion of JWPI
|--- | ------------------------------------------------------------



In fiscal 2004, Matsushita recorded a 72 billion yen gain from the transfer to the Japanese government of the substitutional portion of JWPI, following
the enactment of changes to the Welfare Pension Insurance Law. The Company believes this transfer has reduced the risks of managing plan assets related to the substitutional portion of JWPI. (For further details, see Note 10 of the Notes to
Consolidated Financial Statements.)



|(4) | Interest Income, Dividends Received and Other Income
|--- | ----------------------------------------------------



In fiscal 2004, interest income decreased 12.1% to 20 billion yen, and dividends received increased 21.5% to 5 billion yen. In addition, other income
totaled 60 billion yen, a 7.9% decrease from fiscal 2003 when the Company recorded a one-time gain from the sale of Panasonic Disc Services Corporation.



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|(5) | Interest Expense and Other Deductions
|--- | -------------------------------------



In fiscal 2004, interest expense decreased 15.4% to 28 billion yen, owing to a reduction in the Companys borrowings. Other deductions increased
32.2% to 154 billion yen. Other deductions in fiscal 2004 include restructuring charges of 54 billion yen, mainly consisting of expenses for early retirement programs to employees at certain domestic and overseas group companies and expenses
associated with the closure/integration of locations, compared with 12 billion yen in the previous fiscal year. Under the newly inaugurated business domain-based organizational structure, several Group companies carried out closure/integration for
certain of their facilities that suffered losses from operation. Expenses for these restructuring activities were paid or settled in fiscal 2004 and no liability existed as of March 31, 2004. The Company also incurred 12 billion yen for impairment
losses on fixed assets, compared with 2 billion yen in fiscal 2003, and a write-down of 52 billion yen on investment securities, mainly stocks of affiliated companies, compared with 53 billion yen in fiscal 2003. (For further details, see Notes 4,
5, 7 and 15 of the Notes to Consolidated Financial Statements.)



|(6) | Income before Income Taxes
|--- | --------------------------



As a result of the above-mentioned factors, income before income taxes for fiscal 2004 increased 147.9% to 171 billion yen, compared with 69 billion yen
in fiscal 2003. Its ratio to net sales increased 1.4% to 2.3%, compared with 0.9% in the previous year.



|(7) | Provision for Income Taxes
|--- | --------------------------



Provision for income taxes amounted to 99 billion yen for fiscal 2004, compared with 71 billion yen in the previous year. Its ratio to income before
income taxes decreased to 57.7%, from 103.4% a year ago. This drop is caused mainly by a decrease in adjustments of net deferred tax assets to reflect the reduction in the statutory income tax rate due to revisions to local enterprise income tax
laws on the introduction of a new pro forma standard taxation system in Japan, as well as a decrease in valuation allowance allocated to income tax expenses.



|(8) | Minority Interests
|--- | ------------------



Minority interests increased to 20 billion yen for fiscal 2004, compared with 6 billion yen in fiscal 2003, reflecting the earnings improvements of
several subsidiaries.



|(9) | Equity in Losses of Associated Companies
|--- | ----------------------------------------



Equity in losses of associated companies decreased to 11 billion yen, from the previous years 12 billion yen, due mainly to improved earnings or
decreased losses at certain associated companies.



|(10) | Net Income (Loss)
|---- | -----------------



As a result of all the factors stated in the preceding paragraphs, the Company recorded a net income of 42 billion yen for fiscal 2004, compared with a
net loss of 19 billion yen in the previous fiscal year.



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|(11) | Results of Operations
|---- | ---------------------



Results of operations by business segment for fiscal 2004, as compared with the previous fiscal year, were as follows*:



| | * | In fiscal 2004, the Company changed its business segment classifications to five new segments: AVC Networks, Home Appliances, Components and Devices, JVC and Other. Prior year
figures have been restated to reflect this change.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|                           |  |                |   |  |                |   |  |      |  
|-------------------------- |  | -------------- | - |  | -------------- | - |  | ---- | -
|                           |  | Yen (billions) |   |  | Percent change |  
|                           |  | 2004           |   |  | 2003           |   | 
|Sales:                     |  |                |   |  |                |   |  |      |  
|AVC Networks               |  | 3,840          |   |  | 3,668          |   |  | 4.7  | %
|Home Appliances            |  | 1,223          |   |  | 1,197          |   |  | 2.1  |  
|Components and Devices     |  | 1,660          |   |  | 1,710          |   |  | (2.9 | )
|JVC                        |  | 819            |   |  | 852            |   |  | (3.8 | )
|Other                      |  | 949            |   |  | 819            |   |  | 15.8 |  
|Eliminations               |  | (1,011         | ) |  | (844           | ) |  |     |  
|                           |  |                |   |  |                |   |  |      |  
|Total                      |  | 7,480          |   |  | 7,402          |   |  | 1.1  | %
|                           |  |                |   |  |                |   |  |      |  
|Segment profit:            |  |                |   |  |                |   |  |      |  
|AVC Networks               |  | 129            |   |  | 83             |   |  | 55.9 | %
|Home Appliances            |  | 53             |   |  | 45             |   |  | 16.6 |  
|Components and Devices     |  | 50             |   |  | 31             |   |  | 60.5 |  
|JVC                        |  | 25             |   |  | 22             |   |  | 12.9 |  
|Other                      |  | 15             |   |  | 13             |   |  | 12.7 |  
|Corporate and eliminations |  | (77            | ) |  | (67            | ) |  |     |  
|                           |  |                |   |  |                |   |  |      |  
|Total                      |  | 195            |   |  | 127            |   |  | 54.5 | %
|                           |  |                |   |  |                |   |  |      |  



Sales in the AVC
Networks segment increased 4.7% to 3,840 billion yen, from 3,668 billion yen in the previous fiscal year. Within this segment, sales of video and audio equipment increased, due mainly to growth in sales of such digital AV products as flat-panel TVs
and DVD recorders, which more than offset declines in CRT TVs, VCRs and audio equipment. Sales of information and communications equipment also increased owing mainly to strong sales of automotive electronics and cellular phones, although sales of
fixed-line telephones and facsimile machines decreased.



With
respect to this segment, profit increased 55.9% from 83 billion yen for fiscal 2003, to 129 billion yen for fiscal 2004. This increase was attributable mainly to higher sales in digital AV equipment, cellular phones and car electronics equipment, as
well as positive effects of cost rationalization efforts.



Sales of Home Appliances increased 2.1% to 1,223 billion yen. Certain seasonal products recorded sales declines in Japan, but these were offset by solid sales of products such as washing machines, dishwashers and ventilation fans.



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Profit in this segment rose 16.6% from 45 billion yen for fiscal 2003, to 53 billion yen for fiscal 2004.
This increase was due mainly to the successful introduction of new value-added products and overseas sales growth, combined with the effects of various rationalization efforts.



Sales of Components and Devices decreased 2.9% to 1,660 billion yen. While semiconductor sales recorded solid gains, led by
system LSIs for digital AV equipment, sales declines in general components and electronic tubes led to lower sales overall in this segment.



With respect to this segment, profit increased 60.5% from 31 billion yen for fiscal 2003, to 50 billion yen for fiscal 2004, owing largely to positive
effects through the increased plant operating rate on higher sales in semiconductors, which more than offset the negative effects of decreased sales and price declines in general components and certain other product lines.



Sales of JVC were 819 billion yen, down 3.8% from the previous year. Despite
sales increases of flat-panel TVs and DVD recorders, overall sales of consumer electronics in Japan and the Americas declined, particularly in such products as CRT TVs and VCRs.



With respect to this segment, profit increased 12.9% from 22 billion yen for fiscal 2003, to 25 billion yen for fiscal 2004,
owing to such factors as a reduction in materials procurement costs and a decrease in personnel and other fixed costs, despite the decrease in sales and the effects of price declines.



Sales in the Other segment were 949 billion yen, up 15.8% from the previous year. FA equipment, especially modular placement
machines increased overseas.



With respect to this segment,
profit increased 12.7% from 13 billion yen for fiscal 2003, to 15 billion yen for fiscal 2004, owing to sales increases of FA equipment.





|B. | Liquidity and Capital Resources
|-- | -------------------------------



Matsushitas Policy on Financial Position and Liquidity



As its basic policy, Matsushita has long placed emphasis on maintaining sound balance sheets, and on generating as much
available funding as possible from internal sources through efforts to raise the operational efficiency or asset turnover ratios, so as not to overly rely on external fund raising. This conservativeness is exemplified in the tradition of maintaining
the ratio of stockholders equity to total assets at a relatively high level and keeping large cash balance. The ratio of stockholders equity to total assets as of March 31, 2005 stood at 44.0%, and the total of short-term borrowings and
long-term debt was 863 billion yen as of March 31, 2005, up from 751 billion yen a year ago. Cash balance (the total of cash and cash equivalents of 1,170 billion yen plus time deposits with a maturity of more than three months of 145 billion yen)
also remained at the relatively high level of 1,315 billion yen as of March 31, 2005, although it decreased from the year-earlier 1,445 billion yen (the total of cash and cash equivalents of 1,275 billion yen plus time deposits of 170 billion yen)
due mainly to the transfer of deposits from certain employees to external institutions.



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In order to facilitate access to global capital markets, Matsushita obtains credit ratings from the
worlds two leading credit rating agencies, Moodys Investors Service, Inc. (Moodys) and Standard & Poors Rating Services (S&P). In addition, Matsushita maintains credit ratings from Rating and Investment Information,
Inc. (R&I), a rating agency nationally recognized in Japan, primarily for access to the Japanese capital markets. As of March 31, 2005, Matsushitas debt ratings are: Moodys: Aa3 (long-term); S&P: A+(long-term, outlook: stable),
A-1 (short-term); and R&I: AA+ (long-term), a-1+ (short-term).



Within the rating classification system of R&I, a-1 is the highest of five categories for short-term debt and indicates a strong degree of certainty regarding debt repayment, with a plus (+) sign added to a
rating in that category to indicate an especially high degree of certainty regarding debt repayment; and AA is the second highest of nine categories for long-term debt and indicates a very high degree of certainty regarding debt
repayment, with a plus (+) or minus (-) sign added to a rating in that category to indicate its relative standing within that category.



Matsushita believes that its credit ratings include the rating agencies assessment of the general operating environment, its positions in the
markets in which it competes, reputation, movements and volatility in its earnings, risk management policies, liquidity and capital management. An adverse change in any of these factors could result in a reduction of Matsushitas credit
ratings, and that could, in turn, increase its borrowing costs and limit its access to the capital markets or require it to post additional collateral and permit counterparties to terminate transactions pursuant to certain contractual obligations.



With the above-mentioned cash balance, combined with the
generally high credit ratings from leading credit rating agencies, Matsushita believes that it has sufficient sources of liquidity for either working capital or long-term investment needs.



As of March 31, 2005, the outstanding balance of short-term borrowings
totaled 385 billion yen, and long-term debt was 477 billion yen. Matsushitas borrowings are not significantly affected by seasonal factors. (For further details, see Note 9 of the Notes to Consolidated Financial Statements.) Most borrowings
are at fixed rates.



In recent years, Matsushita has focused on
raising capital efficiency upon review of its balance sheet. As a part of this move, the Company initiated an endeavor to achieve more efficient utilization of available cash resources held by subsidiaries and associated companies. This is achieved
by lending such cash resources to other subsidiaries and associated companies, as necessary, through a network of cash management systems at the corporate headquarters and financial subsidiaries located in each global region.



Furthermore, Matsushita uses its system of evaluating the business domain
companies based on two results-based standards, namely Capital Cost Management (CCM), which measures capital efficiency, and cash flows, which represents a companys ability to generate cash. Both of these standards, that are deemed to share
interests with investors, are applied to each business domain companys performance on a global consolidated basis. Regarding cash flows, Matsushita uses free cash flow (see OverviewKey performance indicators in Section A of
this Item 5) as an important indicator to evaluate its performance.



Regarding the use of financial instruments for hedging purposes, see Item 11.



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Fiscal 2005 Financial Position and Liquidity



The Companys consolidated total assets as of the end of fiscal 2005
increased to 8,057 billion yen, compared with 7,438 billion yen at the end of fiscal 2004. The consolidation of MEW and PanaHome as of April 1, 2004 led to an increase in assets of 1,043 billion yen, which was offset by initiatives to decrease
assets, including the reduction of inventories.



Regarding
liabilities, the balance of retirement and severance benefits decreased significantly, mainly as a result of the return to the Government of the substitutional portion of the JWPI mentioned earlier.



Stockholders equity increased to 3,544 billion yen, compared with 3,452
billion yen at the end of fiscal 2004. This increase was due mainly to a substantial decrease in minimum pension liability adjustments, owing primarily to the transfer to the Japanese government of the substitutional portion of JWPI. Furthermore, a
decrease in the negative balance of cumulative translation adjustments, which resulted in a decrease in an accumulated other comprehensive loss, also led to an increase of stockholders equity. Stockholders equity to total assets ratio
decreased 2.4% to 44.0% from 46.4% at the end of fiscal 2004, due mainly to the consolidation of MEW and PanaHome. In addition, Matsushita continued to repurchase its own shares for 93 billion yen, as part of the Companys financial strategy to
enhance shareholder value.



Capital investment during fiscal
2005 totaled 374 billion yen, an increase of 38.0% from the previous fiscal years total of 271 billion yen, due partly to the consolidation of MEW and PanaHome. (For a reconciliation of capital investment to the most directly comparable U.S.
GAAP financial measure and related discussion, see OverviewKey performance indicators in Section A of this Item 5.) Matsushita curbed capital investment in a number of business areas, in line with increasing management emphasis on
cash flows and capital efficiency. Matsushita did, however, selectively invest in facilities for strategic businesses that are expected to drive future growth, including Components and Devices such as cutting-edge system LSIs for digital
products and AVC Networks such as PDPs.



Depreciation (excluding intangibles) during the fiscal year rose 13.3% to 287 billion yen, compared with 254 billion yen in the previous fiscal year, due primarily to the consolidation of MEW and PanaHome.



Net cash provided by operating activities in fiscal 2005 amounted to 478
billion yen, compared with 489 billion yen in the previous fiscal year. This decrease, despite the improvement in net income and a decrease in inventories, was attributable mainly to a decrease in trade payables. Net cash used in investing
activities amounted to 178 billion yen, compared with 85 billion yen in fiscal 2004, due mainly to a decrease in cash provided from time deposits, in spite of net cash inflows as a consequence of the acquisition of additional shares of newly
consolidated subsidiaries. Net cash used in financing activities was 419 billion yen, compared with 273 billion yen in fiscal 2004. This was mainly attributable to the refund of deposits from certain employees and repurchases of the Companys
common stock. All these activities, compounded by the effect of exchange rate fluctuations, resulted in a net decrease of 105 billion yen in cash and cash equivalents during fiscal 2005. Cash and cash equivalents at the end of fiscal 2005 totaled
1,170 billion yen, compared with 1,275 billion yen a year ago. These are held primarily in yen (65%), U.S. dollars (10%) and Euro (5%).



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Free cash flow in fiscal 2005 amounted to 300 billion yen, compared with 404 billion yen in fiscal 2004.
(For a reconciliation of free cash flow to the most directly comparable U.S. GAAP financial measure and related discussion, see OverviewKey performance indicators in Section A of this Item 5.)



Commitments for Capital Expenditures



As of March 31, 2005, commitments outstanding for the purchase of property,
plant and equipment amounted to 49 billion yen.





|C. | Research and Development
|-- | ------------------------



Matsushita considers research and development (R&D) to be a key factor in its success and essential to the achievement of its corporate theme: to
provide the utmost satisfaction to customers throughout the world through differentiated products and services and to contribute to the progress and happiness of mankind. Under this theme, Matsushita is committed to R&D activities that create
next-generation businesses from a mid- to long-term viewpoint, while at the same time supporting current or ongoing products and businesses. Also, to address the 21st centurys needs for more convenient lifestyles around the evolving
ubiquitous networking society and coexistence with the environment, the main focus of Matsushitas R&D activities has been increasingly directed to digital networks and environmental technologies. Matsushita has concurrently
been strengthening its global R&D networks to meet the needs of its overseas business expansion.



In fiscal 2003, Matsushita accelerated the development of V-products that would propel a sharp recovery in business performance through R&D efforts
conducted through the new R&D structures of Strategic Product Platforms that enable concentration of R&D resources into strategic areas, and corporate-level Core Technology Platforms that develop the basic and common technologies that
support strategic products. In these efforts, the Company places an emphasis on creation of its own Black-box or proprietary technologies which cannot be easily imitated by competitors. Matsushita also implemented the Technology Business Plan to
further increase R&D efficiency and strengthen technology management. Based on this plan, Matsushita created a system that infuses management resources in areas of comparative strength through the introduction of a scientific R&D management
approach and objective evaluations of the Companys technological competitiveness.



In fiscal 2004, Matsushita realigned technological management categorization and systems to further increase efficiency in R&D. In corporate R&D functions, to encourage engineers to concentrate on prioritized
R&D themes and leading-edge technologies, Matsushita introduced a new management system with which it can administrate themes at each step in the research process. In business domain companies R&D functions, Matsushita significantly
reduced lead time for product development by introducing an innovative R&D process management, developed from the standpoint of return on investment.



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In fiscal 2005, under the aforementioned new R&D management structure, Matsushita has strived to
enhance the efficiency of its R&D activities, while continuously selecting priority R&D themes at the Corporate R&D Group and innovating R&D management of development processes at business domain companies. These actions reduced lead
time for product development. Seeking to launch competitive products in the market in a shorter period of time, the Company pursued a common platform structure strategy aimed at ensuring the most effective use of technology assets at each business
domain company. As a result, the Company succeeded in increasing the efficiency of R&D. Matsushita developed an Integrated Platform that combines software and hardware resources across differing product categories to improve R&D efficiency
and design quality. The new platform successfully integrated Matsushitas accumulated technological assets in the areas of cellular phones, digital TVs, DVD recorders, camcorders and automotive AVC equipment based on the common platform
structure strategy. This integration is possible only through Matsushitas expertise in a wide range of product categories, making full use of Groupwide strengths. Furthermore, the Company reinforced its intellectual property rights initiatives
by effectively utilizing patents, while actively making patent application filings and rights acquisitions worldwide.



Research and development costs amounted to 551 billion yen, 579 billion yen and 616 billion yen for the three fiscal years ended March 31, 2003, 2004 and
2005, respectively, representing 7.4%, 7.7% and 7.1% of Matsushitas total net sales for each of those periods. These investments were used to strengthen R&D in core technologies, such as next-generation system LSIs, networkable electronic
home appliances and fuel cell co-generation systems. The increased research and development costs and the decreased ratio to Matsushitas total net sales for the fiscal 2005 are mainly due to the consolidation of MEW and PanaHome.





|D. | Trend Information
|-- | -----------------



To increase profitability and efficiency through structural reforms and a new growth strategy, the Company implemented various management reforms and
restructuring initiatives under the aforementioned three-year Value Creation 21 plan, ended March 31, 2004. Based on this plan, the Company also commenced new growth strategies in fiscal 2003 and 2004. These included the strategic development and
introduction of competitive V-products and the launch of a new business domain-based Group organizational structure. Under the new structure, business domain companies take full responsibility for R&D, manufacturing and sales in their respective
business areas.



In fiscal 2005, Matsushita embarked on a new
mid-term Leap Ahead 21 plan and implemented initiatives to achieve growth, especially V-products and the addition of MEW, PanaHome and their respective subsidiaries to the Companys results. Through collaboration with MEW, Matsushita will
strategically utilize the management resources of both companies. In areas such as electrical supplies, building materials and equipment, home appliances and industrial equipment, the two companies successfully eliminated overlaps in R&D,
manufacturing and sales, thereby creating an optimized group structure that facilitates the effective use of management resources to achieve growth strategies. Matsushita and MEW also opened joint showrooms and introduced a series of Collaboration
V-products that incorporate black box technologies from both companies.



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The Company also accelerated business and organizational restructuring. Major restructuring initiatives,
including the implementation of early retirement programs and the closure/integration of locations, have been autonomously carried out by each business domain company. As a result, Matsushita completed large-scale restructuring in fiscal 2005,
leading to improved business performance and further concentration of management resources into growth businesses. (For further details about the Leap Ahead 21 plan, see Section A of Item 4.)



As a result of these initiatives, Matsushita increased net income in fiscal
2005. The Company also achieved improvements in its balance sheets in fiscal 2005, as mentioned earlier. (See Liquidity and Capital Resources in Section B of this item 5.)



Regarding the business environment for fiscal 2006, Matsushita expects to encounter severe conditions, such as slowing
growth in the electronics industry, ever-intensifying global price declines in digital products and rising raw materials prices including crude oil prices. Under these circumstances, Matsushita views fiscal 2006 as critical to the success of its
Leap Ahead 21 plan for the three-year period ending March 2007. Accordingly, Matsushita is making efforts to achieve the goals of the plan by enhancing product competitiveness and management structures. Regarding growth strategies, Matsushita
intends to continuously develop V-products and expand simultaneous global product introductions, including more models in a wide variety of product categories to increase both sales and earnings. Specifically, Matsushita will provide customers with
solutions for comfortable living through the successive launch of Collaboration V-products and the expansion of systems solutions businesses, including security and energy control management.



Through the aforementioned initiatives, Matsushita expects to attain further
improvements in earnings, subject to external conditions including currency exchange volatility, the success of growth strategies and the effective establishment of management structures.



To establish reinforced management structures, Matsushita will implement further manufacturing innovations with a Next Cell
Production Project, which targets the reduction of inventories. Furthermore, the Company will utilize IT to manage such initiatives as Just in Time Production and Vendor Managed Inventory. Matsushita will also construct a corporate IT architecture
(CITA) and a common infrastructure for the Group. In this way, the Company will expedite the management process, strengthen the response capabilities to changes in the business environment, and reduce information systems costs. The Company will also
strengthen management structures and increase profitability through a corporate project to eliminate redundancies throughout all areas of the Company.



For fiscal 2006, Matsushita projects its capital investment will total approximately 360 billion yen. (For the definition of capital investment and
related discussion, see OverviewKey performance indicators in Section A of this item 5. For purposes of deriving this forward-looking figure, we have assumed that there are no material effects of timing difference between
acquisition dates and payment dates with respect to purchases of property, plant and equipment during fiscal 2006.) Matsushita will continue to focus investment into such strategic areas as core components and devices, particularly advanced system
LSIs, which are the key components in digital products, plasma TVs, for which global demand is expected to increase significantly, and fuel cell co-generation systems for the home to contribute to the prevention of global warming.



The discussion above includes forward-looking statements. For details about
Cautionary Statement Regarding Forward-Looking Statements, see page 1.



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|E. | Off-Balance Sheet Arrangements
|-- | ------------------------------



The Company established sale-leaseback arrangements for manufacturing machinery and equipment, and sale of receivables without recourse, as off-balance
sheet arrangements in order to reduce its total assets.



In
fiscal 2005, Matsushita sold machinery and equipment for 50 billion yen, which are used to manufacture semiconductors and plasma display panels, to SMBC Leasing Company, Limited, an affiliate of Sumitomo Mitsui Banking Corporation. The assets are
leased back to Matsushita over a period of four to five years. Matsushita guarantees a specific value of the leased assets. These leases are classified as operating leases for U.S. GAAP purposes. Including the above-mentioned, the amount of future
minimum lease payment under operating lease is 135 billion yen at March 31, 2005. (For further details, see Notes 6 and 19 of the Notes to Consolidated Financial Statements.)



In fiscal 2005, Matsushita also sold, without recourse, trade accounts receivable of 49 billion yen and loans receivable of
96 billion yen to independent third parties for proceeds of 48 billion yen and 107 billion yen, respectively.



In addition, the Company provides several types of guarantees and similar arrangements. (For further details, see Note 19 of the Notes to Consolidated
Financial Statements.)





|F. | Tabular Disclosure of Contractual Obligations
|-- | ---------------------------------------------



The two tables below show Matsushitas cash payment obligations and guarantees and other commercial commitments, broken down by the payment amounts
due for each of the periods specified below, as of March 31, 2005:



|                                   |  |                        |  |                 |  |           |  |              |  |              
|---------------------------------- |  | ---------------------- |  | --------------- |  | --------- |  | ------------ |  | -------------
|                                   |  | Yen (millions)        
|                                   |  | Payments Due by Period
|                                   |  | Total                  |  | Less than1 year |  | 1-3 years |  | 4-5    years |  | After 5 years
|Contractual Obligations:           |  |                        |  |                 |  |           |  |              |  |              
|Long-Term Debt Obligations         |  | 709,224                |  | 245,262         |  | 269,273   |  | 73,325       |  | 121,364      
|Capital Lease Obligations          |  | 23,683                 |  | 10,502          |  | 9,751     |  | 2,214        |  | 1,216        
|Operating Lease Obligations        |  | 134,541                |  | 42,957          |  | 62,986    |  | 22,375       |  | 6,223        
|Purchase Obligations               |  | 49,217                 |  | 49,217          |  |          |  |             |  |             
|                                   |  |                        |  |                 |  |           |  |              |  |              
|Total Contractual Cash Obligations |  | 916,665                |  | 347,938         |  | 342,010   |  | 97,914       |  | 128,803      
|                                   |  |                        |  |                 |  |           |  |              |  |              



|                              |  |                       
|----------------------------- |  | ----------------------
|                              | 
|                              |  | Yen (millions)        
|                              |  | Total AmountsCommitted
|Other Commercial Commitments: |  |                       
|Discounted exported bills     |  | 4,269                 
|Guarantees                    |  | 33,395                
|                              |  |                       
|Total Commercial Commitments  |  | 37,664                
|                              |  |                       



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Discounted exported bills generally have contractual lives of less than one year. Loan guarantees are
principally provided on behalf of employees, associated companies and customers and generally have long-term contractual lives coinciding with the maturities of the guaranteed obligations. (For further details, see Notes 6, 9 and 19 of the Notes to
Consolidated Financial Statements.)





|G. | Safe Harbor
|-- | -----------



Not applicable





|H. | Accounting Principles
|-- | ---------------------



Critical Accounting Policies



The Company has identified the following critical accounting policies which are important to its financial condition and results of operations, and
require managements judgment.



Long-lived Assets



The useful lives of long-lived assets are summarized in
Note 1(h) of the Notes to Consolidated Financial Statements included in this annual report and reflect the estimated period that the Company expects to derive economic benefit from their use. In estimating the useful lives and determining whether
subsequent revisions to the useful lives are necessary, the Company considers the likelihood of technological obsolescence, changes in demand for the products related to such assets, and other factors which may affect their utilization of the
long-lived assets. The effect of any future changes to the estimated useful lives of the long-lived assets could be significant to the Companys results of operations.



Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amounts
of assets may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future net cash flows (undiscounted and without interest charges) expected to be generated by the asset.
If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the asset exceeds the estimated fair value of the asset. Assets to be disposed of are reported at the lower of
the carrying amount or fair value less selling costs. Factors which may contribute to the need for future impairment charges include changes in the use of assets resulting from the Companys restructuring initiatives, technological changes or
any significant declines in the demand for related products.



Valuation of Investment Securities



The
Company holds available-for-sale securities, equity method securities and cost method securities, included in short-term investments and investments and advances. Available-for-sale securities are carried at fair value with unrealized holding gains
and losses included as a component of accumulated other comprehensive income (loss), net of applicable taxes.



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Individual securities are reduced to net realizable value by a charge to earnings for
other-than-temporary declines in fair value. Management regularly reviews each investment security for impairment based on criteria that include the extent to which cost exceeds market value, the duration of that market decline and the financial
health of and specific prospects for the issuer. Because such specific information may become available after the Company makes the impairment evaluation, and whether the impairment is other-than-temporary depends upon future events that may or may
not occur, the Company may be required to recognize an other-than-temporary impairment in the future. Determination of whether a decline in value is other-than-temporary requires judgment. At March 31, 2005, the Company has recorded 495 billion yen
of available-for-sale securities, 190 billion yen of cost method securities, 3 billion yen of equity method securities that have market values, and 470 billion yen of equity method securities that do not have market values, and advances, part or all
of which could be determined to be other-than-temporarily impaired in future periods, depending on changes to the current facts and assumptions. In fiscal 2005, the Company recorded 16 billion yen impairment losses on investment securities.



For further discussion on valuation of investment securities,
see Notes 4 and 5 of the Notes to Consolidated Financial Statements included in this annual report.



Valuation of Inventory



Inventories are stated at the lower of cost, determined on a first-in, first-out basis, or net realizable value. Net realizable value is the estimated
selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make a sale. The Company routinely reviews its inventories for their salability and for indications of obsolescence to
determine if inventories should be written-down to net realizable value. Judgments and estimates must be made and used in connection with establishing such allowances in any accounting period. In estimating the net realizable value of its
inventories, the Company considers the age of the inventories and the likelihood of spoilage or changes in market demand for its inventories.



Warranties



The Company makes estimates of potential warranty claims related to its goods sold. The Company provides for such costs based upon historical experience
and its estimate of the level of future claims. Management makes judgments and estimates in connection with establishing the warranty reserve in any accounting period. Differences may result in the amount and timing of its revenue for any period if
management makes different judgments or utilizes different estimates. (For further details, see Note 19 of the Notes to Consolidated Financial Statements.)



Valuation of Accounts Receivable and Noncurrent Receivables



The Company reviews its accounts receivable on a periodic basis and provides an allowance for doubtful receivables based on
historical loss experience and current economic conditions. In evaluating the collectibility of individual receivable balances, the Company considers the age of the balance, the customers historical payment history, their current
credit-worthiness and adequacy of collateral.



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The Company records noncurrent receivables, representing loans from finance lease transactions, at cost,
less the related allowance for impaired receivables. A loan is considered to be impaired when, based on current information and events, it is probable that the Company will be unable to collect all amounts due according to the contractual terms of
the loan agreement. When a loan is considered to be impaired, the amount of impairment is measured based on the present value of expected future cash flows or the fair value of the collateral. Cash receipts on impaired receivables are applied to
reduce the principal amount of such receivables until the principal has been recovered and are recognized as interest income thereafter. Managements judgment is required in making estimates of the future cash flows of an impaired loan. Such
estimates are based on current economic conditions and the current and expected financial condition of the debtor. (For further details, see Schedule II of Item 18.)



Valuation of Goodwill



Goodwill is tested for impairment on an annual basis, or more frequently if events or changes in circumstances indicate that the goodwill may be impaired,
such as an adverse change in business climate. Impairment is recorded if the fair value of goodwill is less than its carrying amount. The fair value determination used in the impairment assessment requires estimates based on quoted market prices,
prices of comparable businesses, present value or other valuation techniques, or a combination thereof, necessitating management to make subjective judgments and assumptions. These estimates and assumptions could result in significant differences to
the amounts reported if underlying circumstances were to change. At March 31, 2005, the Company has recorded 462 billion yen of goodwill, part or all of which could be determined to be impaired in future periods, depending on changes to the current
facts and assumptions. For further discussion on goodwill and other intangible assets, see Note 8 of the Notes to Consolidated Financial Statements included in this annual report.



Valuation of Deferred Tax Assets



In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some
portion or all of the deferred tax assets will not be realized based on available evidence. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary
differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies in making this assessment.



At March 31, 2005, the Company has recorded gross deferred tax assets of
1,089 billion yen with a total valuation allowance of 311 billion yen. Included in the gross deferred tax assets is 212 billion yen resulting from net operating loss carryforwards (NOLs) of 566 billion yen, which are available to offset future
taxable income. In order to fully realize these NOLs, the Company will need to generate sufficient taxable income by the expiration of these NOLs. These NOLs of 428 billion yen expire from fiscal 2009 through 2012 and the substantial majority of the
remaining balance expire thereafter or do not expire. Based upon the level of historical taxable income and projections for future taxable income over the periods in which the deferred tax assets are deductible, management believes it is more likely
than not that the Company will realize the benefits of these deductible differences, net of the existing valuation allowance at March 31, 2005 based on available evidence. The Company could be required to increase the valuation allowance if such
assumptions would change concluding that the Company would not be able to generate sufficient taxable income. For further discussion on valuation of deferred tax assets, see Note 11 of the Notes to Consolidated Financial Statements included in this
annual report.



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Retirement and Severance Benefits



Retirement and severance benefits costs and obligations are dependent on assumptions used in calculating such amounts. The
discount rate and expected return on assets are the most critical assumptions among others, including retirement rates, mortality rates and salary growth.



While management believes that the assumptions used are appropriate, actual results in any given year could differ from actuarial assumptions because of
economic and other factors. The resulting difference is accumulated and amortized over future periods and therefore, generally affect the Companys retirement and severance benefit cost and obligations.



The Company determines discount rates by looking to rates of return on
high-quality fixed income investments, and the expected long-term rate of return on pension plan assets by considering the current and expected asset allocations, as well as historical and expected returns on various categories of plan assets.



Decreases in discount rates lead to increases in benefit
obligations which, in turn, could lead to an increase in amortization cost through amortization of actuarial gain or loss, and vice versa. A decrease of 50 basis points in the discount rate is expected to increase the projected benefit obligation by
approximately nine percent.



A decline in market stock values
generally results in a lower expected rate of return on plan assets, which would result in an increase of future retirement and severance benefit costs.



Accounting for Derivatives



The Company has limited involvement with derivative financial instruments and does not use them for trading purposes. The Company uses derivative
instruments principally to manage foreign currency risks resulting from transactions denominated in currencies other than the Japanese yen. As discussed in Note 1(o) of the Notes to Consolidated Financial Statements included in this annual report,
the Company recognizes all derivatives as either assets or liabilities on the balance sheet at their fair values. Changes in the fair value of a derivative are reported in earnings or other comprehensive income depending on their use and whether
they qualify for hedge accounting. The accounting for gains and losses associated with changes in the fair value of the derivative depends on its hedge designation and whether the hedge is highly effective in achieving offsetting changes in the fair
value or cash flows of the hedged item. The Company evaluates and determines on a continuous basis if the derivative remains highly effective in offsetting changes in the fair value or cash flows of the hedged item. If the derivative ceases to be
highly effective in offsetting changes in the fair value or cash flows of the hedged item, the Company discontinues hedge accounting prospectively. Because the derivatives the Company uses are not complex, significant judgment is not required to
determine their fair values. Fair values are determined principally by receiving quotations from banks or brokers.



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Loss Contingencies



Loss contingencies may from time to time arise from situations such as product liability claims, warranty claims, disputes
over intellectual property rights, environmental remediation obligations, and other legal actions. Loss contingencies are recorded as liabilities when it is probable that a liability has been incurred and the amount of the loss is reasonably
estimable. Disclosure is required when there is a reasonable possibility that the ultimate loss will exceed the recorded provision. Contingent liabilities are often resolved over long time periods. In recording liabilities for probable losses,
management is required to make estimates and judgments regarding the amount or range of the probable loss. Management continually assesses the adequacy of estimated loss contingencies and, if necessary, adjusts the amounts recorded as better
information becomes known.



New Accounting Pronouncements



In December 2004, FASB issued SFAS No. 123 (revised
2004), Share-Based Payment (SFAS No. 123R), which addresses accounting for transactions in which an entity exchanges its equity instruments for goods or services, with a primary focus on transactions in which an entity obtains employee
services in share-based payment transactions. SFAS No. 123R is a revision to SFAS No. 123 and supersedes APB Opinion No. 25 and its related implementation guidance. SFAS No. 123R will require measurement of the cost of employee services received in
exchange for stock compensation based on the grant-date fair value of the employee stock options. Incremental compensation costs arising from subsequent modifications of awards after the grant date must be recognized. SFAS No. 123R will be effective
for the Company as of April 1, 2006. The application of SFAS No. 123R is not expected to have a material effect.



In December 2004, FASB issued SFAS No. 151, Inventory Costs, which clarifies the accounting for abnormal amounts of its idle facility expense,
freight, handling costs, and wasted material (spoilage). Under SFAS No. 151, such items will be recognized as current-period charges. In addition, SFAS No. 151 requires that allocation of fixed production overheads to the costs of conversion be
based on the normal capacity of the production facilities. SFAS No. 151 will be effective for the Company for inventory costs incurred on or after April 1, 2006. The Company is currently in the process of assessing the impact of the adoption of SFAS
No. 151.



In December 2004, FASB issued SFAS No. 153,
Exchanges of Nonmonetary Assets, which eliminates an exception in APB Opinion No. 29, Accounting for Nonmonetary Transactions, for nonmonetary exchanges of similar productive assets and replaces it with a general exception
for exchanges of nonmonetary assets that do not have commercial substance. SFAS No. 153 will be effective for the Company for nonmonetary asset exchanges occurring on or after April 1, 2006. The Company is currently in the process of assessing the
impact of the adoption of SFAS No. 153.



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|Item 6. | Directors, Senior Management and Employees
|------- | ------------------------------------------



|A. | Directors and Senior Management
|-- | -------------------------------



The Articles of Incorporation of the Company provide that the number of Directors of the Company shall be three or more and that of Corporate Auditors
shall be three or more. Directors and Corporate Auditors shall be elected by the general meeting of shareholders. The Board of Directors has ultimate responsibility for administration of the Companys affairs. Directors may, by resolution of
the Board of Directors, appoint a Chairman of the Board of Directors, a Vice Chairman of the Board of Directors, a President and Director, and one or more Executive Vice Presidents and Directors, Senior Managing Directors and Managing Directors, as
well as Representative Directors. The Chairman of the Board of Directors, Vice Chairman of the Board of Directors, President and Director, Executive Vice Presidents and Directors, and Senior Managing Directors are Representative Directors and
severally represent the Company. The term of office of Directors shall, under the Articles of Incorporation of the Company, expire at the conclusion of the ordinary general meeting of shareholders with respect to the last closing of accounts within
one year from their assumption of office, and in the case of Corporate Auditors, within four years from their assumption of office. However, they may serve any number of consecutive terms.



The Corporate Auditors of the Company are not required to be, and are not,
certified public accountants. Under the Commercial Code of Japan (Commercial Code) and other related laws and ordinances, at least one of the Corporate Auditors shall be a person who has not been a Director, corporate executive officer, general
manager or employee of the Company or any of its subsidiaries during the five-year period prior to his or her assumption of office as a Corporate Auditor. After the conclusion of the ordinary general meeting of shareholders to be held in June 2006,
at least half of the Corporate Auditors shall be required to be persons who have not been a Director, corporate executive officer, general manager or employee of the Company or its subsidiaries, prior to his or her assumption of office as a
Corporate Auditor. The Company already satisfies these requirements. Each Corporate Auditor has the statutory duty to audit the non-consolidated and consolidated financial statements and business reports to be submitted by the Board of Directors at
the general meeting of shareholders and also to audit the Directors execution of their duties. The Corporate Auditors are required to attend meetings of the Board of Directors and express opinions, if necessary, at such meetings, but they are
not entitled to vote.



The Corporate Auditors constitute the
Board of Corporate Auditors. The Board of Corporate Auditors has a statutory duty to prepare and submit its audit report to a Representative Director each year. A Corporate Auditor may note his or her opinion in the audit report if his or her
opinion is different from the opinion expressed in the audit report. The Board of Corporate Auditors is empowered to establish auditing policies, the manner of investigation of the status of the corporate affairs and assets of the Company, and any
other matters relating to the execution of the duties of the Corporate Auditors. However, the Board of Corporate Auditors may not prevent each Corporate Auditor from exercising his or her powers.



Corporate Auditors may not at the same time be directors, corporate executive
officers, managers or employees of the Company or any of its subsidiaries.



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Under the Commercial Code and the Articles of Incorporation of the Company, the Company may, by a
resolution of the Board of Directors, exempt Directors or Corporate Auditors from their liabilities owed to the Company arising in connection with their failure to perform their duties to the extent permitted by the Commercial Code. In addition, the
Company has entered into liability limitation agreements with each of the Outside Directors which limits the maximum amount of their liabilities owed to the Company arising in connection with their failure to perform their duties to the extent
permitted by the Commercial Code.



The Company implemented in
fiscal 2004 the reform of its corporate management and governance structure by (i) reorganizing the role of the current Board of Directors, (ii) introducing a Matsushitas own Executive Officer system* in its Group and (iii) strengthening its
Corporate Auditor system, all tailored to the Groups new business domain-based, autonomous management structure. (For details of the Groupwide reorganization, see explanation of the Value Creation 21 plan in, Section A of Item 4.)



Matsushitas Executive Officer system was introduced to
address the diversity of business operations over the entire Group through delegation of authority and to help integrate the comprehensive strengths of all Group companies in Japan and overseas. The Board of Directors appoints Executive Officers
mainly from the senior management personnel of business domain companies, such as internal divisional companies and subsidiaries, as well as from management personnel responsible for overseas subsidiaries and certain senior corporate staff. The
Executive Officers assume responsibility as the Groups executives regarding execution of business. The Executive Officers may be given such titles as Senior Managing Executive Officer, Managing Executive Officer and Executive Officer,
depending on the extent of responsibility and achievement of each individual. The term of office of the Executive Officers shall be one year from their assumption of office. Each of the Executive Officers has the authority to operate businesses for
which such Executive Officer is responsible, under the supervision of the Board of Directors and in accordance with the Board of Directors decisions of the management regarding corporate affairs.



The Board of Directors has, at the same time, been reformed in order to
concentrate its role to establish corporate strategies and to supervise implementation thereof by the Executive Officers. The Company has reduced the number of Directors to facilitate more effective decision-making, and shortened their term of
office to one year in order to clarify their responsibilities. Taking into consideration the diversified scope of Matsushitas business operations, the Company has chosen to hold its policy of having management personnel, who are well-versed in
day-to-day operations at operational fronts, be members of the Board of Directors, while Outside Directors continue to fully participate in such meetings.



Furthermore, compensation for members of the Board of Directors and Executive Officers is linked to the business performance evaluation standards, namely
CCM and cash flows, which are similar to the evaluation standards used by capital markets, to pursue management based on shareholder interests and enhance corporate value.



---

|* | Matsushitas Executive Officer (Yakuin) system is a non-statutory system and different from the corporate executive officer (Shikkoyaku)
system that large Japanese corporations may adopt at their option under the statutory corporate governance system referred to as Company with Committees system stipulated in the Commercial Code of Japan and related legislation, which
became effective on April 1, 2003.
|- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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In fiscal 2004, the non-statutory full-time Senior Auditors were newly appointed within the
Companys internal divisional companies in order to strengthen auditing functions at each business domain company. In addition, the Company has also launched the Group Auditors Meeting in order to promote collaboration between
the Companys Corporate Auditors, the non-statutory full-time Senior Auditors of the internal divisional companies and the corporate auditors of the Companys subsidiaries and affiliates.



The following table shows information about Matsushitas Directors and
Corporate Auditors as of June 29, 2005, including their dates of birth, positions, responsibilities and brief personal records.



|                |  |                                                        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |  |                                                                                                                                                                                                                                   
|--------------- |  | ------------------------------------------------------ |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Name            |  | Positions, responsibilities and brief personal records
|(Date of birth) |  |                                                        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|                |  |                                                       
|                |  | Yoichi Morishita                                       |  | Chairman of the Board of Directors  since June 2000                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|                |  | (Jun. 23, 1934)                                        |  | -1987 -1992 -1993                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |  | Director of the Company; Executive Vice President and
Director of the Company; President and Director of the Company.                                                                                                             
|                |  |                                                       
|                |  | Masayuki Matsushita                                    |  | Vice Chairman of the Board of Directors  since June 2000                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|                |  | (Oct. 16, 1945)                                        |  | -1986 -1990 -1992 -1996                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |  | Director of the Company; Managing Director of the
Company; Senior Managing Director of the Company; Executive
Vice President and Director of the Company.                                                                         
|                |  |                                                       
|                |  | Kunio Nakamura                                         |  | President and Director  since June 2000                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|                |  | (Jul. 5, 1939)                                         |  | -1993   -1996 -1997                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |  | Director of the Company, and Director of Corporate Management Division for the Americas; Managing Director of the Company; Senior Managing Director of the Company,
and President of AVC Company.                                 
|                |  |                                                       
|                |  | Kazuo Toda (Feb. 13, 1941)                             |  | Executive Vice President and Director  since June 2003 In charge of Corporate Marketing Division for Panasonic Brand, Corporate Marketing Division for National Brand Home Appliances, Corporate Marketing Division for National Brand Wellness Products, Corporate Sales
Strategy Division for National / Panasonic Retailers, Commodity Sales, Electrical Supplies Sales, Project Sales and Building Products Sales, Corporate Construction Business Promotion Division, Advertising, Logistics, Corporate CS
Division.
|                |  |                                                        |  | -1994 -1996 -1997 -1999 -2000                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |  | Director of the Company, and in charge of Home Appliance Business; Managing Director of the Company; President of Home Appliance & Housing Electronics Company; Senior Managing Director of the Company; President of AVC
Company.



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|                |  |                                                        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|--------------- |  | ------------------------------------------------------ |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Name            |  | Positions, responsibilities and brief
personal records
|(Date of birth) |  |                                                       
|                |  |                                                       
|                |  | Takami Sano*(Apr. 2, 1943)                             |  | Executive Vice President and Director  since June 2005 Representative in Tokyo, President of Panasonic Automotive Systems Company, and in charge of Industrial Sales. -1997    Senior Managing Director of Matsushita Battery Industrial Co.,  Ltd.; -1998    Director of the Company, and Director of Corporate Industrial Marketing  & Sales Division; -2000    Managing Director of the Company; -2002    President of Factory Automation Company; -2003    Senior Managing Director of the Company, and President of  Panasonic Automotive Systems
Company.
|                |  |                                                       
|                |  | Susumu Koike*(Nov. 15, 1945)                           |  | Senior Managing Director  since June 2003 In charge of Technology, Devices and Environmental Technology, Intellectual Property, Overseas Research Laboratories, and President of Semiconductor Company and Camera Module Business. -1998    Senior Managing Director of Matsushita Electronics Corporation,  Director of the Company, and
in charge of Semiconductor Technology; -2000    Managing Director of the Company; -2001    President of Semiconductor Company.                                                                                       
|                |  |                                                       
|                |  | Fumio Ohtsubo*(Sep. 5, 1945)                           |  | Senior Managing Director  since June 2003 President of Panasonic AVC Networks Company, and in charge of Storage Device Business. -1998    Director of the Company, and Vice President of AVC Company; -2000    Managing Director of the Company; -2001    Business Group
Executive of AVC Network Business Group; -2002    President of AVC Company; -2003    President of Panasonic AVC Networks Company.                                                                                                                                                     
|                |  |                                                       
|                |  | Tetsuya Kawakami*(Dec. 7, 1941)                        |  | Senior Managing Director  since June 2004 In charge of Finance and Accounting. -1996    General Manager of Corporate Accounting
Department; -2000    Director of the Company, and in charge of Accounting; -2003    Managing Director of the Company, and in charge of Finance  and
 Accounting.                                                                                                                                                                                                                                                               



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|                |  |                                                        |  |                                                                                                                                                                                                        |  |                                                                                                                                                                                        
|--------------- |  | ------------------------------------------------------ |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Name            |  | Positions, responsibilities and brief personal
records
|(Date of birth) |  |                                                        |  |                                                                                                                                                                                                       
|                |  |                                                       
|                |  | Yoshitaka Hayashi*(Jun. 7, 1946)                       |  | Senior Managing Director  since June 2005In charge of Home Appliances Business, and President of Matsushita
HomeAppliances Company, and in charge of Lighting Company and HealthcareBusiness Company.
|                |  |                                                        |  | -1999-2000                                                                                                                                                                                             |  | Vice President of Home Appliance & Housing Electronics Company; Director of the Company, and President of Home Appliance &Housing Electronics Company;                                 
|                |  |                                                        |  | -2001                                                                                                                                                                                                  |  | Director of Corporate Marketing Division for National Brand,  and in charge of Healthcare & Medical Business Center;                                                                   
|                |  |                                                        |  | -2002-2003                                                                                                                                                                                             |  | In charge of Appliance Business; Managing Director of
the Company, and President of MatsushitaHome Appliances Company.                                                                 
|                |  |                                                       
|                |  | Hidetsugu Otsuru*(Aug. 20, 1943)                       |  | Managing Director  since June 2001In charge of Facility Management, Quality Administration and EnvironmentalAffairs
and Recycling Business Promotion.                                                
|                |  |                                                        |  | -1998                                                                                                                                                                                                  |  | Director of the Company (resigned in March 1999), and in charge  of Corporate Quality Administration Division and PurchasingAdministration Department;                                 
|                |  |                                                        |  | -1999-2001                                                                                                                                                                                             |  | President of Matsushita Electronics Corporation; President of Display Devices Company.                                                                                                 
|                |  |                                                       
|                |  | Toshihiro Sakamoto*(Oct. 27, 1946)                     |  | Managing Director  since June 2004In charge of Planning.                                                                                                                                             
|                |  |                                                        |  | -1998-2000-2001-2003                                                                                                                                                                                   |  | President of Matsushita Electric (Taiwan) Co., Ltd.; Director of the Company, and Vice President of AVC Company; Senior Vice President of AVC Company; In charge of Corporate Planning.
|                |  |                                                       
|                |  | Takahiro Mori*(June 16, 1947)                          |  | Managing Director  since June 2005In charge of Corporate Communications Division and CSR Office.                                                                                                     
|                |  |                                                        |  | -2001-2003                                                                                                                                                                                             |  | Director of Corporate Communications Division; In
charge of CSR Office.                                                                                                                
|                |  |                                                       
|                |  | Shinichi Fukushima*(Nov. 13, 1948)                     |  | Managing Director  since June 2005In charge of Personnel, General Affairs and Social Relations.                                                                                                      
|                |  |                                                        |  | -1997-2003                                                                                                                                                                                             |  | General Manager of Personnel Department; Director of
the Company.                                                                                                                      
|                |  |                                                       
|                |  | Ikuo Uno(Jan. 4, 1935)                                 |  | Director  since June 2005(Chairman of the Board of Nippon Life Insurance Co.)                                                                                                                        
|                |  |                                                        |  | -1997-2005                                                                                                                                                                                             |  | President of Nippon Life Insurance Co.; Chairman of
the Board of Nippon Life Insurance Co.                                                                                             



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|                |  |                                                        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|--------------- |  | ------------------------------------------------------ |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Name            |  | Positions, responsibilities and brief
personal records
|(Date of birth) |  |                                                       
|                |  |                                                       
|                |  | Yoshifumi Nishikawa(Aug. 3, 1938)                      |  | Director  since June 2005 (Advisor of
Sumitomo Mitsui Banking Corporation) -1997    President of The Sumitomo Bank, Ltd.;
-2001    President of Sumitomo Mitsui Banking Corporation; -2002    President of Sumitomo Mitsui Financial Group, Inc.                                                                                                                                                                                                                                
|                |  |                                                       
|                |  | Masaki Akiyama*(Jun. 29, 1943)                         |  | Director  since June 2004 President of
Panasonic System Solutions Company, Director of Corporate Construction Business Promotion Division, and in charge of Corporate eNet Business Division. -1998    Senior Managing Director of Matsushita Communication Industrial  Co., Ltd.; -2000    Director of Corporate Systems Solutions Division of the Company; -2001    Director of the Company (resigned in June 2003); -2003    President of Panasonic System Solutions Company.
|                |  |                                                       
|                |  | Mikio Ito*(Nov. 29, 1946)                              |  | Director  since June 2004 Director of
Corporate Legal Affairs Division, and in charge of Corporate Risk Management, Corporate Information Security and Business Ethics. -1997    General Manager of Industrial Relations Department; -2001    Assistant Director of Tokyo Branch, and General Manager of  Corporate External Relations; -2003    Director of Tokyo Branch.                                                                                                      
|                |  |                                                       
|                |  | Ikusaburo Kashima*(Oct. 8, 1948)                       |  | Director  since June 2005 Deputy Chief
of Overseas Operations. -1999    Director General, Price Bureau of Economic Planning
Agency; -2001    Retired from office at Ministry of Economy, Trade and Industry, and
 Trustee of Agency of Industrial Science and Technology; -2003    Vice Chairman of
Information Technology Promotion Agency; -2004    Joined the Company as an Executive
Counsellor.                                                                            
|                |  |                                                       
|                |  | Masaharu Matsushita(Sep. 17, 1912)                     |  | Honorary Chairman of the Board of Directors and Executive Advisor  since June 2000 -1947    Director of the Company; -1961    President and Director of the Company; -1977    Chairman of the Board of Directors of the Company.                                                                                                                                                                                                                                                



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|                |  |                                                        |  |                                                                                |  |                                                                                                                                                                  
|--------------- |  | ------------------------------------------------------ |  | ------------------------------------------------------------------------------ |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------
|Name            |  | Positions, responsibilities and brief personal records
|(Date of birth) |  |                                                        |  |                                                                               
|                |  |                                                       
|                |  | Kazumi Kawaguchi                                       |  | Senior Corporate Auditor  since June 2003                                    
|                |  | (Oct. 25, 1943)                                        |  | -1996-1999                                                                     |  | Senior Managing Director of Kyushu Matsushita Electric Co., Ltd.; General Manager of Affiliates Management Department of the Company;                            
|                |  |                                                        |  | -2000-2001                                                                     |  | General Manager of Corporate Accounting Department; In
charge of Corporate Accounting Group.                                                                     
|                |  |                                                       
|                |  | Yukio Furuta                                           |  | Senior Corporate Auditor  since June 2004                                    
|                |  | (Sep. 20, 1944)                                        |  | -1995-2001                                                                     |  | Director of Matsushita Electronics Corporation; Director
of Corporate Manufacturing & Development Division of Semiconductor Company;                             
|                |  |                                                        |  | -2003                                                                          |  | Vice President of Semiconductor Company.                                                                                                                         
|                |  |                                                       
|                |  | Yasuo Yoshino(Oct. 5, 1939)                            |  | Corporate Auditor  since June 2003(Chairman of Sumitomo Life Insurance Co.)  
|                |  |                                                        |  | -2001                                                                          |  | Chairman of Sumitomo Life Insurance Co.                                                                                                                          
|                |  |                                                       
|                |  | Ikuo Hata(Aug. 6, 1931)                                |  | Corporate Auditor  since June 2004(Attorney at Law, Oh-ebashi LPC & Partners)
|                |  |                                                        |  | -1992-1995-1998                                                                |  | President of Osaka District Court; Registered as an
attorney-at-law (Osaka Bar Association); Vice Board Chairman of Japan Federation of Arbitration Associations;
|                |  |                                                        |  | -2001                                                                          |  | Member of Supreme Court Committee on Construction-related Disputes.                                                                                              



Asterisks (*) denote
members of the Board of Directors who concurrently serve as Executive Officers, pursuant to the Executive Officer system which was introduced to facilitate the development of optimum corporate strategies that integrate the Groups comprehensive
strengths.



There are no family relationships among any
Directors or Corporate Auditors except as described below:



Masayuki Matsushita, Vice Chairman of the Board of Directors is the son of Masaharu Matsushita, Honorary Chairman of the Board of Directors and Executive Advisor.



The following table shows information about Matsushitas Executive Officers as of June 29, 2005, including their
positions and responsibilities.



|     |  |                                |  |                                                                                                                                  
|---- |  | ------------------------------ |  | ---------------------------------------------------------------------------------------------------------------------------------
|Name |  | Positions and responsibilities
|     |  | Hajime Sakai                   |  | Senior Managing Executive Officer In charge of
Production Engineering, Groupwide Manufacturing Human Resources Innovation Project



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|     |  |                                |  |                                                                                                                                    
|---- |  | ------------------------------ |  | -----------------------------------------------------------------------------------------------------------------------------------
|Name |  | Positions and responsibilities
|     |  |                               
|     |  | Koshi Kitadai                  |  | Senior Managing Executive Officer President of
Panasonic Electronics Devices Co., Ltd.                                             
|     |  |                               
|     |  | Yoshiaki Kushiki               |  | Managing Executive Officer President of Panasonic
Mobile Communications Co., Ltd.                                                  
|     |  |                               
|     |  | Yasuo Katsura                  |  | Managing Executive Officer Director of Tokyo
Branch                                                                                
|     |  |                               
|     |  | Shunzo Ushimaru                |  | Managing Executive Officer Director of Corporate
Marketing Division for Panasonic Brand                                            
|     |  |                               
|     |  | Tameshige Hirata               |  | Managing Executive Officer President of Matsushita
Ecology Systems Co., Ltd.                                                       
|     |  |                               
|     |  | Toru Ishida                    |  | Executive Officer President of Matsushita Battery
Industrial Co., Ltd.                                                             
|     |  |                               
|     |  | Tomikazu Ise                   |  | Executive Officer Director of Corporate Management
Division for China and Northeast Asia Chairman of Panasonic Corporation of China
|     |  |                               
|     |  | Fujio Nakajima                 |  | Executive Officer Senior Vice President of Panasonic
AVC Networks Company Director of Technology Planning & Development Center     
|     |  |                               
|     |  | Tomiyasu Chiba                 |  | Executive Officer President of Panasonic Shikoku
Electronics Co., Ltd.                                                             
|     |  |                               
|     |  | Nobutane Yamamoto              |  | Executive Officer Director of Corporate Procurement
Division                                                                       
|     |  |                               
|     |  | Kazuyoshi Fujiyoshi            |  | Executive Officer President of Panasonic
Communications Co., Ltd.                                                                  
|     |  |                               
|     |  | Tomio Kawabe                   |  | Executive Officer Director of Corporate Management
Division for Asia and Oceania President of Panasonic Asia Pacific Pte. Ltd.     
|     |  |                               
|     |  | Junji Esaka                    |  | Executive Officer Vice President of Matsushita Home
Appliances Company, in charge of Refrigeration and Air Conditioning Business   
|     |  |                               
|     |  | Takae Makita                   |  | Executive Officer In charge of Information
Systems                                                                                 



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|     |  |                                |  |                                                                                                                                                   
|---- |  | ------------------------------ |  | --------------------------------------------------------------------------------------------------------------------------------------------------
|Name |  | Positions and responsibilities
|     |  |                               
|     |  | Hitoshi Otsuki                 |  | Executive Officer Director of Corporate Management
Division for Europe Chairman of Panasonic Europe Ltd.                                          
|     |  |                               
|     |  | Tsutomu Ueda                   |  | Executive Officer Senior Vice President of Panasonic
AVC Networks Company Director of Visual Products and Display Devices Business Group          
|     |  |                               
|     |  | Masashi Makino                 |  | Executive Officer Director of Corporate Manufacturing
Innovation Division                                                                         
|     |  |                               
|     |  | Katsutoshi Kanzaki             |  | Executive Officer President of Panasonic Factory
Solutions Co., Ltd. In charge of Matsushita Welding Systems Co., Ltd.                            
|     |  |                               
|     |  | Yoshinobu Sato                 |  | Executive Officer Director of Corporate Sales
Strategy Division for National/Panasonic Retailers                                                  
|     |  |                               
|     |  | Osamu Nishijima                |  | Executive Officer Vice President of Semiconductor
Company in charge of Technology                                                                 
|     |  |                               
|     |  | Joachim Reinhart               |  | Executive Officer COO of Panasonic Europe
Ltd.                                                                                                    
|     |  |                               
|     |  | Yutaka Mizuno                  |  | Executive Officer Executive Vice President of
Panasonic Automotive Systems Company in charge of Sales                                             
|     |  |                               
|     |  | Yoshihiko Yamada               |  | Executive Officer Director of Corporate Management
Division for North America Chairman of Panasonic Corporation of North America                  
|     |  |                               
|     |  | Kazuhiro Tsuga                 |  | Executive Officer In charge of Digital Network and
Software Technologies                                                                          
|     |  |                               
|     |  | Ikuo Miyamoto                  |  | Executive Officer President of Motor
Company                                                                                                      
|     |  |                               
|     |  | Ken Morita                     |  | Executive Officer Senior Vice President of Panasonic
AVC Networks Company Assistant Director of Visual Products and Display Devices Business Group



(Directors who
concurrently serve as Executive Officers are not included in the above list.)



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|B. | Compensation
|-- | ------------



The aggregate amount of remuneration, including bonuses, paid by the Company during fiscal 2005 to all Directors and Corporate Auditors (26 persons) for
services in all capacities was 905 million yen.



In accordance
with customary Japanese business practices, a retiring Director or Corporate Auditor receives a lump-sum retirement payment, which is subject to approval of the general meeting of shareholders. Retirement allowances provided for Directors and
Corporate Auditors for fiscal 2005 amounted to 110 million yen. (For details of the Companys stock option plans for Board members and select senior executives, see Section E of this Item 6.)





|C. | Board Practices
|-- | ---------------



For information on the Companys Directors and Corporate Auditors, see Section A of this Item 6.



The Company has made available on its web site
(http://panasonic.co.jp/global/governance/) a general summary of the significant differences between its corporate governance practices and those followed by U.S. companies under New York Stock Exchange (NYSE) listing standards.



The rights of ADR holders, including their rights relating to corporate
governance practices, are governed by the Amended and Restated Deposit Agreement (incorporated by reference to the Registration Statement on Form F-6 (File No. 333-12694) filed on October 4, 2000).





|D. | Employees
|-- | ---------



The following table lists the number of consolidated full-time employees of the Company as of March 31, 2005, 2004 and 2003:



|           |  |         |  |         |  |        
|---------- |  | ------- |  | ------- |  | -------
|           |  | 2005    |  | 2004    |  | 2003   
|Employees: |  |         |  |         |  |        
|Domestic   |  | 150,642 |  | 119,528 |  | 121,451
|Overseas   |  | 184,110 |  | 170,965 |  | 166,873
|           |  |         |  |         |  |        
|Total      |  | 334,752 |  | 290,493 |  | 288,324
|           |  |         |  |         |  |        



On April 1, 2004, MEW,
PanaHome and their respective subsidiaries became consolidated subsidiaries of the Company. Therefore the number of employees as of March 31, 2005 has increased compared with the number as of March 31, 2004.



Most regular employees in Japan, except management personnel, are union
members, principally of the Matsushita Electric Industrial Workers Union, which is affiliated with the Japanese Electrical Electronic & Information Union.



As is customary in Japan, Matsushita negotiates annually with the unions and revises annual wage. The annual bonuses of all employees are linked to the
Companys performance of the previous year. Matsushita also renews the terms and conditions of labor contracts, other than those relating to



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wages and bonuses, every other year. In recent years, Matsushita has introduced in Japan new comprehensive employment and personnel systems to satisfy the
diversified needs of employees.



Such systems include an
individual performance-oriented annual salary system, a regional-based employee remuneration system and an alternative payment system under which employees can receive retirement and fringe benefits up front as an addition to their semiannual
bonuses. During the last few years, the Company and its several subsidiaries have also implemented special early retirement programs for employees who wished to pursue careers outside Matsushita. For a quarter century, Matsushita has not experienced
any major labor strikes or disputes. Matsushita considers its labor relations to be excellent.



|E. | Share Ownership
|-- | ---------------



|(1) | The following table lists the number of shares owned by the Directors and Corporate Auditors of the Company as of June 29, 2005. The total is 17,854,225 shares constituting 0.79% of
all outstanding shares of the Companys common stock.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|                    |  |                                                                   |  |                                                     
|------------------- |  | ----------------------------------------------------------------- |  | ----------------------------------------------------
|Name                |  | Position                                                          |  | Number of Matsushita SharesOwned as of June 29, 2005
|                    |  |                                                                  
|Yoichi Morishita    |  | Chairman of the Board of Directors                                |  | 89,568                                              
|Masayuki Matsushita |  | Vice Chairman of the Board of Directors                           |  | 7,913,351                                           
|Kunio Nakamura      |  | President and Director                                            |  | 39,000                                              
|Kazuo Toda          |  | Executive Vice President and Director                             |  | 26,299                                              
|Takami Sano         |  | Executive Vice President and Director                             |  | 23,923                                              
|Susumu Koike        |  | Senior Managing Director                                          |  | 20,562                                              
|Fumio Ohtsubo       |  | Senior Managing Director                                          |  | 21,000                                              
|Tetsuya Kawakami    |  | Senior Managing Director                                          |  | 13,057                                              
|Yoshitaka Hayashi   |  | Senior Managing Director                                          |  | 16,798                                              
|Hidetsugu Otsuru    |  | Managing Director                                                 |  | 20,000                                              
|Toshihiro Sakamoto  |  | Managing Director                                                 |  | 12,278                                              
|Takahiro Mori       |  | Managing Director                                                 |  | 9,060                                               
|Shinichi Fukushima  |  | Managing Director                                                 |  | 8,005                                               
|Ikuo Uno            |  | Director                                                          |  | 0                                                   
|Yoshifumi Nishikawa |  | Director                                                          |  | 0                                                   
|Masaki Akiyama      |  | Director                                                          |  | 12,884                                              
|Mikio Ito           |  | Director                                                          |  | 6,000                                               
|Ikusaburo Kashima   |  | Director                                                          |  | 3,000                                               
|Masaharu Matsushita |  | Honorary Chairman of the Board of Directors and Executive Advisor |  | 9,598,637                                           
|Kazumi Kawaguchi    |  | Senior Corporate Auditor                                          |  | 11,803                                              
|Yukio Furuta        |  | Senior Corporate Auditor                                          |  | 6,000                                               
|Yasuo Yoshino       |  | Corporate Auditor                                                 |  | 3,000                                               
|Ikuo Hata           |  | Corporate Auditor                                                 |  | 0                                                   
|                    |  |                                                                   |  |                                                     
|Total               |  |                                                                   |  | 17,854,225                                          
|                    |  |                                                                   |  |                                                     



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At the ordinary general meeting of shareholders held in June 1999, the shareholders approved a stock
option plan for Board members and select senior executives. The then 32 Directors on the Board and four select senior executives were granted stock options at a price of 2,476 yen per share, exercisable from July 1, 2001 to June 30, 2005, ranging
from 2,000 to 10,000 shares of common stock each. For this purpose, the Company in early August 1999 purchased on the TSE a total of 116,000 shares of common stock with an aggregate purchase price of approximately 287 million yen.



In June 2000, another stock option plan for Board members and select senior
executives was approved at the ordinary general meeting of shareholders. The then 28 Directors on the Board and five select senior executives were granted stock options ranging from 2,000 to 10,000 shares of common stock each, at a price of 2,815
yen per share, exercisable from July 1, 2002 through June 30, 2006. For the stock option plan, the Company in early July 2000 purchased on the TSE a total of 109,000 shares of common stock with an aggregate purchase price of approximately 306
million yen.



In June 2001, another stock option plan for Board
members and select senior executives was approved at the ordinary general meeting of shareholders. The then 30 Directors on the Board and nine select senior executives were granted stock options ranging from 2,000 to 10,000 shares of common stock
each, at a price of 2,163 yen per share, exercisable from July 1, 2003 through June 30, 2007. For the stock option plan, the Company in early July 2001 purchased on the TSE a total of 128,000 shares of common stock with an aggregate purchase price
of approximately 250 million yen.



In June 2002, the Company
obtained approval at the ordinary general meeting of shareholders regarding the issue of stock acquisition rights as stock options for Board members and select senior executives, pursuant to Articles 280-20 and 280-21 of the Commercial Code of
Japan. Upon the shareholders approval, the Board of Directors adopted resolutions to issue at no charge an aggregate of 116 stock acquisition rights, each representing a stock option to purchase 1,000 shares of common stock of the Company, to
the then 27 Directors on the Board and eight select senior executives. The stock acquisition rights are exercisable during the period from July 1, 2004 through June 30, 2008. The amount to be paid by qualified persons upon exercise of each stock
acquisition right is set at 1,734 yen per share of common stock, which was calculated by a formula approved by shareholders at the said ordinary general meeting of shareholders.



In June 2003, the Company introduced new business performance evaluation standards (See Section A of this Item 6.) which
affect compensation of Directors and Executive Officers. This new evaluation system is intended to encourage pursuit of continuous growth and enhanced profitability for the Group as a whole, thereby accomplishing the goal of increasing corporate
value in the interest of shareholders. Upon the introduction of this incentive type compensation system, stock acquisition rights as stock options for Directors and select senior executives have not been offered since June 2003.



(For more details, see Note 12 of the Notes to Consolidated Financial
Statements.)



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|(2) | The full-time employees of Matsushita Electric Industrial Co., Ltd. and its major subsidiaries in Japan are eligible to participate in the Matsushita Electric Employee Shareholding
Association, whereby participating employees contribute a portion of their salaries to the Association and the Association purchases shares of the Companys common stock on their behalf. The Company had uniformly provided a 10% subsidy on top
of any funds employees contribute to the Association. However, from July 2004 the Company started to provide the subsidy in proportion to the number of points that each employee selects to exchange within certain limitations under the
Cafeteria Plan, the Companys new flexible benefit plan. Under the Cafeteria Plan, each employee is allotted a certain number of points based on prescribed standards, which he or she may exchange for various benefits, including the
Companys subsidy for contributions to the Association, subsidies for rental housing, subsidies for asset building savings, educational assistance, hotel accommodations, etc. As of March 31, 2005, the Association owned 38,358 thousand shares of
the Companys common stock constituting 1.56% of all outstanding shares of the Companys common stock.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Item 7. | Major Shareholders and Related Party Transactions
|------- | -------------------------------------------------



|A. | Major Shareholders
|-- | ------------------



|(1) | To the knowledge of the Company, except as discussed below, no shareholders beneficially own more than five percent of the Companys common stock, which is the only class of
stock it has issued.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





As explained in Section B of Item 10, the Securities and Exchange Law of Japan and regulations thereunder (collectively, SEL) requires any
person, regardless of his/her residence, who has become, beneficially and solely or jointly, a holder of more than five percent of the total issued shares of common stock of a company listed on any Japanese stock exchange or whose shares are traded
on the over-the-counter market in Japan, to file with the Director-General of a competent Local Finance Bureau of Ministry of Finance within five business days (or in the case of certain financial institutions prescribed by SEL, within certain
longer periods prescribed by SEL) a report concerning such shareholdings. The Company is aware of the July 14, 2005 filing by Dodge & Cox (an investment advisory company), stating that, as of the end of June 2005, Dodge & Cox and its
affiliates owned, beneficially or of record, 5.41% in total of the issued shares of the Companys common stock, as calculated pursuant to the Securities and Exchange Law of Japan.



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The shareholders that owned more than five percent of the Companys common stock on the register of
shareholders as of March 31, 2005 were Japan Trustee Services Bank, Ltd. (trust account) and The Master Trust Bank of Japan, Ltd. (trust account), which are securities processing services companies. The Company understands that these shareholders
are not the beneficial owners of the Companys common stock, but the Company does not have available further information concerning such beneficial ownership by these shareholders. The ten largest shareholders of record and their share holdings
as of the end of the last fiscal year are as follows:



|                                                      |  |                                         |  |                                
|----------------------------------------------------- |  | --------------------------------------- |  | -------------------------------
|Name                                                  |  | Share ownership(in thousands of shares) |  | Percentage oftotal issuedshares
|Japan Trustee Services Bank, Ltd. (trust account)     |  | 144,417                                 |  | 5.88%                          
|The Master Trust Bank of Japan, Ltd. (trust account)  |  | 139,872                                 |  | 5.70                           
|Moxley & Co.                                          |  | 120,802                                 |  | 4.92                           
|Sumitomo Mitsui Banking Corporation                   |  | 99,543                                  |  | 4.05                           
|Nippon Life Insurance Co.                             |  | 66,303                                  |  | 2.70                           
|Sumitomo Life Insurance Co.                           |  | 50,212                                  |  | 2.04                           
|State Street Bank and Trust Co. 505103                |  | 41,072                                  |  | 1.67                           
|Matsushita Electric Employee Shareholding Association |  | 38,358                                  |  | 1.56                           
|Mitsui Sumitomo Insurance Co., Ltd.                   |  | 35,106                                  |  | 1.43                           
|Euroclear Bank S.A/N.V.                               |  | 26,523                                  |  | 1.08                           



|(2) | As of March 31, 2005, approximately 13.30% of the Companys common stock was owned by 160 United States shareholders, including the ADR Depositarys nominee, Moxley &
Co., considered as one shareholder of record, owning approximately 4.92% of the total common stock.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(3) | Matsushita is not, directly or indirectly, owned or controlled by other corporations, by the Japanese government or any foreign government or by any natural or legal person or
persons severally or jointly.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(4) | As far as is known to the Company, there is no arrangement, the operation of which may at a subsequent date result in a change in control of Matsushita.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------





|B. | Related Party Transactions
|-- | --------------------------



Matsushita is not a party to any related party transactions that are required to be disclosed under Item 7.B of Form 20-F.





|C. | Interests of Experts and Counsel
|-- | --------------------------------



Not applicable



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|Item 8. | Financial Information
|------- | ---------------------



|A. | Consolidated Statements and Other Financial Information
|-- | -------------------------------------------------------



|(1) | Consolidated Statements
|--- | -----------------------



Refer to Consolidated Financial Statements and Notes to Consolidated Financial Statements (see Item 18).



Finished goods and materials sent out of Japan are mainly bound for
consolidated subsidiaries of the Matsushita Group, and are not, therefore, recorded as exports on a consolidated basis. For this reason, the proportion of exports to total net sales is not significant.



|(2) | Legal Proceedings
|--- | -----------------



There are some legal actions and administrative investigations against Matsushita. Management is of the opinion that damages, based on the information
currently available, if any, resulting from these actions will not have a material effect on Matsushitas results of operations or financial position.



|(3) | Dividend Policy
|--- | ---------------



Since its founding, Matsushita has consistently regarded returning profits to shareholders as a key management priority. Historically, Matsushita has
maintained stable levels of cash dividends. Then, in fiscal 2005, the Company reassessed this policy and in line with growth strategies outlined in the Leap Ahead 21 plan, decided to proactively return profits to shareholders taking into
consideration consolidated business performance. Specifically, the Company will provide shareholder return in the form of cash dividends and share repurchases, with due consideration to the level of cash flows. With respect to dividends, Matsushita
will pursue steady and continuous growth of return to shareholders, while at the same time taking into consideration various factors including mid-term business performance, capital expenditure requirements and the Companys financial
condition. As for share repurchases, the Company aims to achieve reductions in the total number of outstanding shares, in effect, in an effort to raise shareholder value on a per-share basis. Based on this new policy, in fiscal 2005 the Company
increased annual cash dividends to 15.00 yen consisting of an interim dividend of 7.50 yen per share and a year-end cash dividend of 7.50 yen per share that was approved at the ordinary general meeting of shareholders held on June 29, 2005.





|B. | Significant Changes
|-- | -------------------



No significant changes have occurred since the date of the annual financial statements included in this annual report.



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|Item 9. | The Offer and Listing
|------- | ---------------------



|A. | Offer and Listing Details
|-- | -------------------------



The primary market for the Companys common stock (Common Stock) is the Tokyo Stock Exchange (TSE). The Common Stock is traded on the First Section
of the TSE and is also listed on two other stock exchanges (Osaka and Nagoya) in Japan. In addition, the Companys Common Stock is listed on the Euronext Amsterdam Stock Exchange in the form of original Common Stock of the Company, and on the
Frankfurt Stock Exchange in the form of co-ownership shares in a Global Bearer Certificate. In the United States, the Companys American Depositary Shares (ADSs) have been listed on and traded in the NYSE in the form of American Depositary
Receipts (ADRs). There may from time to time be a differential between the Common Stocks price on exchanges outside the United States and the market price of ADSs in the United States.



Matsushita delisted its shares from two stock exchanges (Fukuoka and Sapporo)
in Japan in January 2004, Dusseldorf Stock Exchange in February 2004, the Pacific Exchange in March 2004 and Euronext Paris Stock Exchange in April 2004.



ADRs were originally issued pursuant to a Deposit Agreement dated as of April 28, 1970, as amended from time to time (Deposit Agreement), among the
Company, the Depositary for ADRs, and the holders of ADRs. The current Depositary for ADRs is JPMorgan Chase Bank, N.A., which succeeded to this business from Morgan Guaranty Trust Company of New York upon their merger. Effective December 11, 2000,
Matsushita again revised its ADR Deposit Agreement and executed a 10:1 ADS ratio change. As a result, one ADS now represents one share of Common Stock. ADRs evidence ADSs that represent the underlying Common Stock deposited under the Deposit
Agreement with Sumitomo Mitsui Banking Corporation, as agent of the Depositary.



The following table sets forth for the periods indicated the reported high and low closing prices of the Companys Common Stock on the TSE, and the reported high and low closing composite prices of the
Companys ADSs on the NYSE:



|                           |  |                                      |  |                                               |  |       |  |      
|-------------------------- |  | ------------------------------------ |  | --------------------------------------------- |  | ----- |  | -----
|                           |  | Tokyo Stock Exchange                 |  | New York Stock Exchange                      
|                           |  | Price per Share ofCommon Stock (yen) |  | Price per AmericanDepositary Share (dollars)*
|Fiscal Year ended March 31 |  | High                                 |  | Low                                           |  | High  |  | Low  
|2001                       |  | 3,180                                |  | 1,994                                         |  | 29.90 |  | 16.30
|2002                       |  | 2,325                                |  | 1,408                                         |  | 19.15 |  | 11.33
|2003                       |  | 1,780                                |  | 1,011                                         |  | 14.47 |  | 8.53 
|2004                       |  | 1,648                                |  | 875                                           |  | 15.57 |  | 7.33 
|2005                       |  | 1,685                                |  | 1,385                                         |  | 16.05 |  | 12.72
|                           |  |                                      |  |                                              
|2004                       |  |                                      |  |                                               |  |       |  |      
|1st quarter                |  | 1,189                                |  | 875                                           |  | 10.05 |  | 7.33 
|2nd quarter                |  | 1,580                                |  | 1,210                                         |  | 13.68 |  | 10.19
|3rd quarter                |  | 1,529                                |  | 1,322                                         |  | 14.06 |  | 12.21
|4th quarter                |  | 1,648                                |  | 1,494                                         |  | 15.57 |  | 13.95



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|                           |  |                                      |  |                                               |  |       |  |      
|-------------------------- |  | ------------------------------------ |  | --------------------------------------------- |  | ----- |  | -----
|                           |  | Tokyo Stock Exchange                 |  | New York Stock Exchange                      
|                           |  | Price per Share ofCommon Stock (yen) |  | Price per AmericanDepositary Share (dollars)*
|Fiscal Year ended March 31 |  | High                                 |  | Low                                           |  | High  |  | Low  
|                           |  |                                      |  |                                              
|2005                       |  |                                      |  |                                               |  |       |  |      
|1st quarter                |  | 1,685                                |  | 1,452                                         |  | 15.80 |  | 12.72
|2nd quarter                |  | 1,550                                |  | 1,385                                         |  | 14.22 |  | 12.72
|3rd quarter                |  | 1,626                                |  | 1,462                                         |  | 16.05 |  | 13.62
|4th quarter                |  | 1,629                                |  | 1,512                                         |  | 15.84 |  | 14.43
|                           |  |                                      |  |                                              
|2006                       |  |                                      |  |                                               |  |       |  |      
|1st quarter                |  | 1,695                                |  | 1,520                                         |  | 15.60 |  | 14.31
|                           |  |                                      |  |                                              
|Most recent 6 months       |  | High                                 |  | Low                                           |  | High  |  | Low  
|February 2005              |  | 1,590                                |  | 1,512                                         |  | 15.23 |  | 14.43
|March 2005                 |  | 1,584                                |  | 1,549                                         |  | 15.16 |  | 14.45
|April 2005                 |  | 1,631                                |  | 1,520                                         |  | 15.07 |  | 14.31
|May 2005                   |  | 1,651                                |  | 1,576                                         |  | 15.36 |  | 14.70
|June 2005                  |  | 1,695                                |  | 1,610                                         |  | 15.60 |  | 15.10
|July 2005                  |  | 1,832                                |  | 1,681                                         |  | 16.22 |  | 15.12



| | * | The prices of ADSs are based upon reports by the NYSE, with all fractional figures rounded up to the nearest two decimal points. The prices of ADSs, prior to the December 11, 2000
ADS ratio change, have been restated on the current basis that each ADS represents one share of Common Stock.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|B. | Plan of Distribution
|-- | --------------------



Not applicable





|C. | Markets
|-- | -------



See Section A of this Item 9.





|D. | Selling Shareholders
|-- | --------------------



Not applicable





|E. | Dilution
|-- | --------



Not applicable



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|F. | Expenses of the Issue
|-- | ---------------------



Not applicable





|Item 10. | Additional Information
|-------- | ----------------------



|A. | Share Capital
|-- | -------------



Not applicable



|B. | Memorandum and Articles of Association
|-- | --------------------------------------



Organization



The Company is a joint stock corporation (kabushiki kaisha)incorporated in Japan under the Commercial Code (shoho)of Japan (Commercial
Code). The Company is registered in the Commercial Register (shogyo tokibo)maintained by the Moriguchi Branch Office of the Osaka Legal Affairs Bureau.



Objects and purposes



Article 3 of the Articles of Incorporation of the Company provides that its purpose is to engage in the following lines of business:



| | 1. | manufacture and sale of electric machinery and equipment, communication and electronic equipment, as well as lighting equipment;
| | -- | --------------------------------------------------------------------------------------------------------------------------------



| | 2. | manufacture and sale of gas, kerosene and kitchen equipment, as well as machinery and equipment for building and housing;
| | -- | -------------------------------------------------------------------------------------------------------------------------



| | 3. | manufacture and sale of machinery and equipment for office and transportation, as well as for sales activities;
| | -- | ---------------------------------------------------------------------------------------------------------------



| | 4. | manufacture and sale of medical, health and hygienic equipment, apparatus and material;
| | -- | ---------------------------------------------------------------------------------------



| | 5. | manufacture and sale of optical and precision machinery and equipment;
| | -- | ----------------------------------------------------------------------



| | 6. | manufacture and sale of batteries, battery-operated products, carbon and manganese and other chemical and metal products;
| | -- | -------------------------------------------------------------------------------------------------------------------------



| | 7. | manufacture and sale of air conditioning and anti-pollution equipment, as well as industrial machinery and equipment;
| | -- | ---------------------------------------------------------------------------------------------------------------------



| | 8. | manufacture and sale of other machinery and equipment;
| | -- | ------------------------------------------------------



| | 9. | engineering and installation of machinery and equipment related to any of the preceding items as well as engineering and performance of and contracting for other construction work;
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 10. | production and sale of software;
| | --- | --------------------------------



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| | 11. | sale of iron and steel, nonferrous metals, minerals, oil, gas, ceramics, paper, pulp, rubber, leather, fibre and their products;
| | --- | --------------------------------------------------------------------------------------------------------------------------------



| | 12. | sale of foods, beverages, liquor and other alcoholics, agricultural, livestock, dairy and marine produces, animal feed and their raw materials;
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------



| | 13. | manufacture and sale of drugs, quasi-drugs, cosmetics, fertilizer, poisonous and deleterious substance and other chemical products;
| | --- | -----------------------------------------------------------------------------------------------------------------------------------



| | 14. | manufacture and sale of buildings and other structures and components thereof;
| | --- | ------------------------------------------------------------------------------



| | 15. | motion picture and musical entertainment business and promotion of sporting events;
| | --- | -----------------------------------------------------------------------------------



| | 16. | export and import of products, materials and software mentioned in each of the preceding items (other than item 9);
| | --- | -------------------------------------------------------------------------------------------------------------------



| | 17. | providing repair and maintenance services for the products, goods and software mentioned in each of the preceding items for itself and on behalf of others;
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------



| | 18. | provision of information and communication services, and broadcasting business;
| | --- | -------------------------------------------------------------------------------



| | 19. | provision of various services utilizing the Internet including Internet access and e-commerce;
| | --- | ----------------------------------------------------------------------------------------------



| | 20. | business related to publishing, printing, freight forwarding, security, maintenance of buildings, nursing care, dispatch of workers, general leasing, financing, non-life insurance
agency and buying, selling, maintaining and leasing of real estate;
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 21. | investment in various businesses;
| | --- | ---------------------------------



| | 22. | accepting commission for investigations, research, development and consulting related to any of the preceding items; and
| | --- | ------------------------------------------------------------------------------------------------------------------------



| | 23. | all other business or businesses incidental or related to any of the preceding items.
| | --- | -------------------------------------------------------------------------------------



Directors



Each Director (excluding an outside Director) has executive powers and duties to manage the affairs of the Company and each Representative Director, who
is elected from among the Directors by the Board of Directors, has the statutory authority to represent the Company in all respects. Under the Commercial Code, the Directors must refrain from engaging in any business competing with the Company
unless approved by the Board of Directors and any Director who has a special interest in the subject matter of a resolution to be taken by the Board of Directors cannot vote on such resolution. The maximum total amount of remuneration to Directors
and that to Corporate Auditors must be, and accordingly has been, approved at a general meeting of shareholders. The Company must also obtain the approval at a general meeting of shareholders if the Company desires to change such maximum amount of
compensation. Within such authorized amounts the amount of remuneration for each Director is determined by the Companys Representative Director who is delegated to do so by the Board of Directors, and the amount of remuneration for each
Corporate Auditor is determined upon discussions amongst the Corporate Auditors.



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Except as stated below, neither the Commercial Code nor the Companys Articles of Incorporation make
special provisions as to the Directors or Corporate Auditors power to vote in connection with their own compensation or retirement age, the borrowing power exercisable by a Representative Director (or a Director who is given power by a
Representative Director to exercise such power), or requirements to hold any shares of Common Stock of the Company. The Commercial Code requires the resolution of the Board of Directors in specific circumstances, e.g. for a company to acquire or
dispose of material assets; to borrow a substantial amount of money; to appoint or dismiss important employees and to establish, change or abolish material corporate organizations such as a branch office. The Regulations of the Board of Directors of
the Company require a resolution of the Board of Directors for the Company to borrow a large amount of money or to give a guarantee in a large amount. There is no statutory requirement as to what constitutes a large amount in these
contexts. However, it has been the general practice of the Companys Board of Directors to adopt a resolution for a borrowing in an amount not less than 10 billion yen or its equivalent.



Common Stock



General



Except as otherwise stated, set forth below is information relating to the
Companys Common Stock, including brief summaries of the relevant provisions of the Companys Articles of Incorporation and Share Handling Regulations, as currently in effect, and of the Commercial Code of Japan and related legislation.



A bill to modernize and make overall amendments to the
Commercial Code by replacing the current provisions with regard to corporations with a new company law (the New Company Law) was enacted on June 29, 2005. The New Company Law will come into effect within one year and a half after its
promulgation, and currently, it is expected that the New Company Law and other related laws and ordinances will take effect in the Spring of 2006. Descriptions of the New Company Law are made below to the extent necessary or appropriate in the
context and are not intended to constitute a complete analysis of the New Company Law.



Under the Commercial Code, generally, shares may be transferred only by delivering share certificates.



In order to assert shareholders rights against the Company, a shareholder must have its name and address registered on the Companys register
of shareholders, in accordance with the Companys Share Handling Regulations. The registered beneficial holder of deposited shares underlying the ADSs is the Depositary for the ADSs. Accordingly, holders of ADSs will not be able to directly
assert shareholders rights against the Company.



A new
law to establish a new central clearing system for shares of listed companies and to eliminate the issuance and use of certificates for such shares was promulgated in June 2004 and the relevant part of the law will come into effect within five years
of the date of the promulgation. On the effective date, a new central clearing system will be established and the shares of all Japanese companies listed on any Japanese stock exchange, including the shares of common stock of the Company, will be
subject to the new central clearing system. On the same day, all existing share certificates will become null and void and the companies are not required to withdraw those share certificates from shareholders. The transfer of such shares will be
effected through entry in the books maintained under the new central clearing system.



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Authorized capital



Article 5 of the Articles of Incorporation of the Company provides that the total number of shares authorized to be issued
by the Company is four billion nine hundred and fifty million (4,950,000,000) shares.



As of March 31, 2005, 2,453,053,497 shares of Common Stock were issued. All shares of Common Stock of the Company have no par value.



Dividends



Dividends  General



The Articles of Incorporation of the Company provide that the accounts shall be closed on March 31 of each year and that year-end dividends, if any, shall
be paid to its shareholders, beneficial shareholders and pledgees of record as of the end of such day. After the close of the fiscal period, the Board of Directors prepares, among other things, a proposed allocation of profits for year-end dividends
and other purposes; this proposal is submitted to the Board of Corporate Auditors of the Company and to independent certified public accountants and then submitted for approval at the ordinary general meeting of shareholders, which is normally held
in June each year.



Under the New Company Law, subject to
certain limitations on the distributable surplus as described below, a joint stock corporation may pay dividends, if any, to its shareholders, beneficial shareholders, and pledgees of record as of a record date as set forth by its articles of
incorporation or as determined by its board of directors from time to time. Dividends shall be paid by way of distribution of surplus. Dividends may be distributed in cash or in kind. In distributing dividends, it may determine the kind of assets to
be distributed, the book value of such assets, matters regarding allocation of such assets, and the effective date of such dividends, by a resolution of a general meeting of shareholders. However, it may generally determine such matters by a
resolution of its board of directors if (a) its articles of incorporation so provide, (b) the term of its directors is set to be until the conclusion of the ordinary general meeting of shareholders held with respect to the last closing of accounts
within one year after such Directors assumption of office, and (c) certain requirements regarding its financial statements and certain documents as set forth in an ordinance of the Ministry of Justice are met; provided, however, that when it
is to make in-kind dividends without giving shareholders the right to request payment of cash dividends in lieu of in-kind dividends, it shall determine such matters by a special shareholders resolution (as defined in Voting
Rights). When it makes payment of dividends, it shall allocate such dividends in proportion to the number of shares of any specific class held by each shareholder.



Dividends  Interim cash dividends



In addition to year-end dividends, the Board of Directors may by its resolution declare a cash distribution pursuant to
Article 293-5 of the Commercial Code and Article 36 of the Articles of Incorporation (an interim dividend) to shareholders, beneficial shareholders and pledgees of record as of the end of each September 30, without the shareholders
approval, but subject to the limitations described in subsequent sections.



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Under the New Company Law, notwithstanding the necessity of obtaining approval of the general meeting of
shareholders in general under the New Company Law as described above, a joint stock corporation is allowed to make payment of interim dividends during a fiscal year by way of distribution of surplus by resolution of its board of directors; provided,
however, that such payment of interim dividends shall be limited to cash dividends and also limited to once per fiscal year.



Dividends  Legal reserve



The Commercial Code provides that a company may not make any distribution of profit by way of year-end dividends or interim dividends for any fiscal
period unless it has set aside in its legal reserve an amount equal to at least one-tenth of the amount paid by way of appropriation of retained earnings for such fiscal period and equal to one-tenth of the amount of such interim dividends until the
aggregate amount of capital surplus and legal reserve equals to at least one-quarter of its stated capital.



The New Company Law provides that when a joint stock corporation makes a distribution of surplus, it shall set aside in its capital surplus or legal
reserve an amount equal to 10% of the amount of the surplus to be decreased as a result of such distribution of surplus in accordance with the provisions set forth in an ordinance of the Ministry of Justice.



Dividends  Distributable amount



Under the Commercial Code, the Company is permitted to distribute profits by
way of year-end or interim dividends out of the excess of its net assets, as appearing on its non-consolidated balance sheet as at the end of the preceding fiscal year, over the aggregate of:



| | (i) | its stated capital;
| | --- | -------------------



| | (ii) | its capital surplus;
| | ---- | --------------------



| | (iii) | its accumulated legal reserve;
| | ----- | ------------------------------



| | (iv) | the legal reserve to be set aside in respect of the fiscal period concerned; and
| | ---- | --------------------------------------------------------------------------------



| | (v) | such other amounts as provided for by an ordinance of the Ministry of Justice.
| | --- | ------------------------------------------------------------------------------



In the case of interim dividends, the net assets are calculated by reference to the non-consolidated balance sheet as at the last closing of the
Companys accounts in the same manner as year-end dividends, but adjusted to reflect; (a) the legal reserve to be set aside in respect of such interim dividends; (b) any subsequent payment by way of appropriation of retained earnings; (c) any
subsequent transfer of retained earnings to stated capital; (d) if the Company has been authorized, pursuant to a resolution of an ordinary general meeting of shareholders or a Board of Directors, to purchase shares of its Common Stock (see
Item 10.B. Memorandum and Articles of AssociationCommon StockAcquisition by the Company of its Common Stock), the total amount of the purchase price of such shares so authorized by such resolution that may be
paid by the Company; and (e) such other amounts as are set out in an ordinance of the Ministry of Justice, provided that (x) if the Company reduces its stated capital, capital surplus or accumulated legal reserve after the end of the preceding
fiscal year, the amount so reduced, less the amount paid to shareholders upon such reduction and certain other amounts, and (y) such other amounts as are set out in an ordinance of the Ministry of Justice, shall be added to the amount distributable
as interim dividends as described above. Interim dividends may not be paid when the net assets amount on the balance sheet at the end of the fiscal year is likely to fall below the total of the amounts referred to in (i) through (v) above.



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Under the New Company Law, a joint stock corporation is permitted to make distribution of surplus to the
extent that the aggregate book value of the assets to be distributed to shareholders does not exceed the Distributable Amount (as defined below) as at the effective date of such distribution of surplus. Under the New Company Law, the Distributable
Amount would include amounts gained or incurred as a result of certain events occurring after the end of the last fiscal year. In addition, under the New Company Law, a joint stock corporation will be permitted to prepare extraordinary financial
statements (Extraordinary Financial Statements) as of a certain date during the fiscal year immediately after the last fiscal year (the Extraordinary Account Settlement Date) which must be audited by its corporate auditors
and accounting auditors and approved by its board of directors and, in certain cases, its general meeting of shareholders. Once the Extraordinary Financial Statements are so audited and approved, it can make adjustments to the Distributable Amount
by adding net income or by deducting loss for the period after the end of the last fiscal year until the Extraordinary Account Settlement Date.



The amount of surplus of a joint stock corporation at any given time shall be the amount of its assets and the book value of its treasury stock after
subtracting the amounts of the following items (1) through (4) as they appear on its non-consolidated balance sheet as at the end of the last fiscal year, and after reflecting the changes in its surplus after the end of the last fiscal year, by
adding the amounts of the following items (5), (6) and (7) and/or subtracting the amounts of the following items (8), (9) and (10):



| | (1) | its liabilities;
| | --- | ----------------



| | (2) | its stated capital;
| | --- | -------------------



| | (3) | its capital surplus and accumulated legal reserve;
| | --- | --------------------------------------------------



| | (4) | other amounts as provided for by an ordinance of the Ministry of Justice;
| | --- | -------------------------------------------------------------------------



| | (5) | (if it transferred its treasury stock after the end of the last fiscal year) the transfer price of its treasury stock after subtracting the book value thereof;
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (6) | (if it decreased its stated capital after the end of the last fiscal year) the amount of decrease in its stated capital (excluding the amount transferred to the capital surplus or
legal reserve);
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (7) | (if it decreased its capital surplus or legal reserve after the end of the last fiscal year) the amount of decrease in its capital surplus or legal reserve (excluding the amount
transferred to the stated capital);
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (8) | (if it cancelled its treasury stock after the end of the last fiscal year) the book value of its treasury stock so cancelled;
| | --- | -----------------------------------------------------------------------------------------------------------------------------



| | (9) | (if it distributed surplus to shareholders after the end of the last fiscal year) the assets distributed to shareholders by way of such distribution of surplus; and
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (10) | other amounts as provided for by an ordinance of the Ministry of Justice.
| | ---- | -------------------------------------------------------------------------



The Distributable Amount of a joint stock corporation at any given time shall be the aggregate amount of (a) the surplus, (b) (if it prepares
Extraordinary Financial Statements) the amount of profit as recorded for the period after the end of the last fiscal year until the Extraordinary Account Settlement Date as provided for in an ordinance of the Ministry of Justice and (c) (if it
prepares Extraordinary Financial Statements) the transfer price of its treasury stock in the same period, after subtracting the amounts of the following items:



| | (1) | the book value of its treasury stock;
| | --- | -------------------------------------



| | (2) | (if it transferred its treasury stock after the end of the last fiscal year) the transfer price of its treasury stock;
| | --- | ----------------------------------------------------------------------------------------------------------------------



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| | (3) | (if it prepares Extraordinary Financial Statements) the losses as recorded for the period after the end of the last fiscal year until the Extraordinary Account Settlement Date as
provided for in an ordinance of the Ministry of Justice; and
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (4) | other amounts as provided for by an ordinance of the Ministry of Justice.
| | --- | -------------------------------------------------------------------------



Dividends  Ex-dividend date and prescription



In Japan the ex-dividend date and the record date for dividends precede the date of determination of the amount of the dividends to be paid.



Under its Articles of Incorporation, the Company is not obligated to pay
any dividends which are left unclaimed for a period of three years after the date on which they first became payable.



For information as to Japanese taxes on shareholder dividends, see E. TaxationJapanese Taxation.



Stock splits



The Company may at any time split shares in issue into a greater number of
shares by resolution of the Board of Directors, and may in principle amend its Articles of Incorporation to increase the number of authorized shares to be issued in proportion to the relevant stock split pursuant to a resolution of the Board of
Directors rather than a special shareholders resolution (as defined in Voting Rights) as is otherwise required for amending the Articles of Incorporation.



In the event of a stock split, generally, shareholders will not be required to exchange share certificates for new share
certificates, but certificates representing the additional shares resulting from the stock split will be issued to shareholders. When a stock split is to be made, the Company must give public notice of the stock split, specifying the record date
therefor, at least two weeks prior to such record date. In addition, promptly after the stock split takes effect, the Company must give notice to each shareholder specifying the number of shares to which such shareholder is entitled by virtue of the
stock split. After the New Company Law becomes effective, no such notice to each shareholder is required.



Consolidation of Shares



The Company may at any time consolidate shares in issue into a smaller number of shares by a special shareholders resolution (as defined in
Voting Rights). When a consolidation of shares is to be made, the Company must give public notice and notice to each shareholder that, within a period of not less than one month specified in the notice, share certificates must be
submitted to the Company for exchange. The Company must disclose the reason for the consolidation of shares at the general meeting of shareholders.



General meeting of shareholders



The ordinary general meeting of shareholders of the Company for each fiscal year is normally held in June in each year in Kadoma-shi, Osaka, Japan. In
addition, the Company may hold an extraordinary general meeting of shareholders whenever necessary by giving notice of convocation thereof at least two weeks prior to the date set for the meeting.



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Notice of convocation of a shareholders meeting setting forth the place, time and purpose thereof,
must be mailed to each shareholder having voting rights (or, in the case of a non-resident shareholder, to his or her standing proxy or mailing address in Japan) at least two weeks prior to the date set for the meeting. Under the Commercial Code,
such notice may be given to shareholders by electronic means, subject to the consent of the relevant shareholders. The record date for exercising voting rights at the ordinary general meeting of shareholders is March 31 of each year.



Any shareholder or group of shareholders holding at least three percent of
the total number of voting rights for a period of six months or more may require the convocation of a general meeting of shareholders for a particular purpose by submitting a written request to a Representative Director. Unless such
shareholders meeting is convened promptly or a convocation notice of a meeting which is to be held not later than eight weeks from the day of such demand is dispatched, the requiring shareholder may, upon obtaining a court approval, convene
such shareholders meeting.



Any shareholder or group of
shareholders holding at least 300 voting rights or one percent of the total number of voting rights for a period of six months or more may propose a matter to be considered at a general meeting of shareholders by submitting a written request to a
Representative Director at least eight weeks prior to the date of such meeting.



Under the New Company Law, any of minimum percentages, time periods and number of voting rights necessary for exercising the minority shareholder rights described above may be decreased or shortened if the articles of
incorporation of a joint stock corporation so provide.



Voting rights



So long as the Company
maintains the unit share system (see Item 10.B. Memorandum and Articles of Association  Common Stock  Unit share system below; currently 1,000 shares constitute one unit) a holder of shares constituting one or
more full units is entitled to one voting right per unit of shares subject to the limitations on voting rights set forth in the following two sentences. A corporate shareholder, more than one-quarter of whose total voting rights are directly or
indirectly owned by the Company (or, when the New Company Law becomes effective, management of which is being controlled in substance by the Company as provided for by an ordinance of the Ministry of Justice) may not exercise its voting rights with
respect to shares of Common Stock of the Company that it owns. In addition, the Company may not exercise its voting rights with respect to its shares that it owns. If the Company eliminates from its Articles of Incorporation the provisions relating
to the unit of shares, holders of Common Stock will have one voting right for each share they hold. Except as otherwise provided by law or by the Articles of Incorporation, a resolution can be adopted at a general meeting of shareholders by a
majority of the number of voting rights of all the shareholders represented at the meeting. The Commercial Code (or, when the New Company Law becomes effective, the New Company Law) and the Companys Articles of Incorporation provide, however,
that the quorum for the election of Directors and Corporate Auditors shall not be less than one-third of the total number of voting rights of all the shareholders. The Companys shareholders are not entitled to cumulative voting in the election
of Directors. Shareholders may exercise their voting rights through proxies, provided that the proxies are also shareholders holding voting rights. The Companys shareholders also may cast their votes in writing, or exercise their voting rights
by electronic means pursuant to the method determined by the Board of Directors.



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The Commercial Code (or, when the New Company Law becomes effective, the New Company Law) and the
Companys Articles of Incorporation provide that in order to amend the Articles of Incorporation and in certain other instances, including:



| | (1) | acquisition of its own shares from a specific party;
| | --- | ----------------------------------------------------



| | (2) | consolidation of shares;
| | --- | ------------------------



| | (3) | any offering of new shares at a specially favorable price (or any offering of stock acquisition rights to subscribe for or acquire shares of capital stock, or bonds with
stock acquisition rights at specially favorable conditions) to any persons other than shareholders;
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (4) | the removal of a Director or Corporate Auditor (when the New Company Law becomes effective, the removal of a board member who is elected by cumulative voting);
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (5) | the exemption of liability of a Director or Corporate Auditor with certain exceptions;
| | --- | --------------------------------------------------------------------------------------



| | (6) | a reduction of stated capital (when the New Company Law becomes effective, with certain exceptions in which a shareholders resolution is not required);
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------



| | (7) | (when the New Company Law becomes effective) a distribution of in-kind dividends which meets certain requirements;
| | --- | ------------------------------------------------------------------------------------------------------------------



| | (8) | dissolution, merger, or consolidation with certain exceptions in which a shareholders resolution is not required;
| | --- | ------------------------------------------------------------------------------------------------------------------



| | (9) | the transfer of the whole or a material part of the business;
| | --- | -------------------------------------------------------------



| | (10) | the taking over of the whole of the business of any other corporation with certain exceptions in which a shareholders resolution is not required;
| | ---- | --------------------------------------------------------------------------------------------------------------------------------------------------



| | (11) | share exchange or share transfer for the purpose of establishing 100% parent-subsidiary relationships with certain exceptions in which a shareholders resolution is not
required; or
| | ---- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (12) | separating of the corporation into two or more corporations with certain exceptions in which a shareholders resolution is not required,
| | ---- | ----------------------------------------------------------------------------------------------------------------------------------------



the quorum shall be one-third of the total voting rights of all the
shareholders and the approval by at least two-thirds of the voting rights of all the shareholders represented at the meeting is required (the special shareholders resolutions).



Pursuant to the terms of the Amended and Restated Deposit Agreement relating
to American Depositing Receipts (ADRs) evidencing American Depositing Shares (ADSs), each ADS representing one share of Common Stock of the Company, as soon as practicable after receipt of notice of any meeting of shareholders of the Company, the
Depositary (currently JPMorgan Chase Bank, N.A.) will mail to the record holders of ADRs a notice which will contain the information in the notice of the meeting. The record holders of ADRs on a date specified by the Depositary will be entitled to
instruct the Depositary as to the exercise of the voting rights pertaining to the shares of Common Stock of the Company represented by their ADSs. The Depositary will endeavor, in so far as practicable, to vote the number of shares of Common Stock
of the Company represented by such ADSs in accordance with such instructions. In the absence of such instructions, the Depositary has agreed to give a discretionary proxy to a person designated by the Company to vote in favor of any proposals or
recommendations of the Company. However, such proxy may not be given with respect to any matter which the Company informs the Depositary that the Company does not wish such proxy given, or for any proposal that has, in the discretion of the
Depositary, a materially adverse effect on the rights of shareholders of the Company.



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Issue of additional shares and pre-emptive rights



Holders of the Companys shares of Common Stock have no pre-emptive
rights under its Articles of Incorporation. Authorized but unissued shares may be issued at such times and upon such terms as the Board of Directors determines, subject to the limitations as to the offering of new shares at a specially
favorable price mentioned under Voting rights above. The Board of Directors may, however, determine that shareholders shall be given subscription rights regarding a particular issue of new shares, in which case such rights
must be given on uniform terms to all shareholders as at a record date at least two weeks prior to which public notice must be given. Each of the shareholders to whom such rights are given must also be given notice of the expiry thereof at least two
weeks prior to the date on which such rights expire.



Rights to
subscribe for new shares may be made generally transferable by a resolution of the Board of Directors. Whether the Company will make subscription rights generally transferable in future rights offerings will depend upon the circumstances at the time
of such offerings.



Subject to certain conditions, the Company
may issue stock acquisition rights or bonds with stock acquisition rights by a resolution of the Board of Directors. Holders of stock acquisition rights may exercise their rights to acquire a certain number of shares within the exercise period as
prescribed in the terms of their stock acquisition rights. Upon the exercise of stock acquisition rights, the Company will be obliged to issue the relevant number of new shares or alternatively to transfer the necessary number of treasury stock held
by it.



Liquidation rights



In the event of a liquidation of the Company, the assets remaining after
payment of all debts and liquidation expenses and taxes will be distributed among shareholders in proportion to the respective numbers of shares of Common Stock held.



Record date



March 31 is the record date for the Companys year-end dividends. So long as the Company maintains the unit share system, the shareholders and
beneficial shareholders who are registered as the holders of one or more units of shares in the Companys registers of shareholders and/or that of beneficial shareholders at the end of each March 31 are entitled to exercise shareholders
rights at the ordinary general meeting of shareholders with respect to the fiscal year ending on such March 31. September 30 is the record date for interim dividends. In addition, the Company may set a record date for determining the shareholders
and/or beneficial shareholders entitled to other rights and for other purposes by giving at least two weeks prior public notice.



The price of shares generally goes ex-dividends or ex-rights on Japanese stock exchanges on the third business day prior to a record date (or if the
record date is not a business day, the fourth business day prior thereto), for the purpose of dividends or rights offerings.



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Acquisition by the Company of its Common Stock



The Company may acquire its own shares: (a) through a stock exchange on
which such shares are listed or by way of tender offer, pursuant to an ordinary resolution of an ordinary general meeting of shareholders or a resolution of the Board of Directors; (b) by purchase from a specific party other than a subsidiary of the
Company, pursuant to a special shareholders resolution of an ordinary general meeting of shareholders; or (c) by purchase from a subsidiary of the Company, pursuant to a resolution of the Board of Directors.



Under the New Company Law, a joint stock corporation will be able to obtain
the approval of the acquisition of its own shares at its extraordinary general meeting of shareholders as well as at its ordinary general meeting of shareholders in the cases of (a) and (b) above.



If shares are purchased by the Company pursuant to a resolution of the Board
of Directors in the case of (a) above, then the reason for the purchase, as well as the kind, number and aggregate purchase price of such shares must be reported to the shareholders at the ordinary general meeting of shareholders to be held
immediately after such purchase of shares. When the proposal for such acquisition by the Company from a specific party other than a subsidiary of the Company is submitted to an ordinary general meeting of shareholders, any other shareholder may make
a written request to a Representative Director, more than five calendar days prior to the relevant shareholders meeting, to include him/her as the seller in the proposed purchase. However, under the New Company Law, the acquisition of its own
shares at a price not exceeding the then market price to be provided under an ordinance of the Ministry of Justice will not trigger the right of any shareholder to include him/her as the seller of his/her shares in such proposed purchase.



Any such acquisition of shares must satisfy the requirements
under the Commercial Code. In the case of the acquisition by the Company of its own shares pursuant to an ordinary resolution of an ordinary general meeting of shareholders, the total amount of the purchase price may not exceed the amount of the
retained earnings available for dividend payments after taking into account a reduction, if any, of the stated capital, capital surplus or legal reserve (if such reduction of the stated capital, capital surplus or legal reserve has been authorized
pursuant to a resolution of the relevant ordinary general meeting of shareholders), minus the amount to be paid by way of appropriation of retained earnings for the relevant fiscal year and the amount to be transferred from retained earnings to
stated capital. If the Company purchases shares pursuant to a resolution of the Board of Directors, the total amount of the purchase price may not exceed the amount of the retained earnings available for interim dividend payments minus the amount of
any interim dividend the Company actually paid. However, if it is anticipated that the net assets on the non-consolidated balance sheet as at the end of the relevant fiscal year will be less than the aggregate amount of the stated capital, capital
surplus and other items as described in (i) through (v) to DividendsDistributable amount above, the Company may not acquire such shares.



Under the New Company Law, the restriction on the source of funds for the acquisition by a joint stock corporation of its
own shares will be integrated into those for the distribution of surplus to the shareholders. See Section B of this Item 10  Memorandum and Articles of Association  Common Stock Dividends.



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Shares acquired by the Company may be held for any period or may be cancelled by a resolution of the
Board of Directors. The Company may also transfer such shares to any person, subject to a resolution of the Board of Directors and to other requirements similar to those applicable to the issuance of new shares, as described in Issue of
additional shares and pre-emptive rights above. The Company may also utilize its treasury stock for the purpose of transfer to any person upon exercise of stock acquisition rights or for the purpose of acquiring another company by way of
merger, share exchange or corporate split through exchange of treasury stock for shares or assets of the acquired company.



Unit share system



The Articles of Incorporation of the Company provide that 1,000 shares constitute one unit of shares of Common Stock. Although the number of shares
constituting one unit is included in the Articles of Incorporation, any amendment to the Articles of Incorporation reducing (but not increasing) the number of shares constituting one unit or eliminating the provisions for the unit of shares may be
made by a resolution of the Board of Directors rather than by a special shareholders resolution, which is otherwise required for amending the Articles of Incorporation. The number of shares constituting one unit, however, cannot exceed 1,000 or one
two-hundredth (1/200) of all issued shares.



Under the unit
share system, shareholders shall have one voting right for each unit of shares that they hold. Any number of shares less than a full unit will carry no voting rights.



Unless the Companys Board of Directors adopts a resolution to eliminate the provision for the unit shares from the
Articles of Incorporation or the shareholders amend the Articles of Incorporation by a special shareholders resolution to eliminate the provision not to issue share certificates for less than a unit of shares, a share certificate for any number of
shares less than one full unit will in general not be issued. As the transfer of shares normally requires the delivery of the share certificates therefor, any fraction of a unit for which no share certificates are issued is not transferable.



A holder of shares constituting less than one unit may
require the Company to purchase such shares at their market value in accordance with the provisions of the Share Handling Regulations of the Company. In addition, the Articles of Incorporation of the Company provide that a holder of shares
constituting less than one full unit may request the Company to sell to such holder such amount of shares which will, when added together with the shares constituting less than one full unit held by such holder, constitute one full unit of stock, in
accordance with the provisions of the Share Handling Regulations of the Company.



A holder who owns ADRs evidencing less than 1,000 ADSs will indirectly own less than one full unit of shares of Common Stock. Although, as discussed above, under the unit share system holders of less than one full
unit have the right to require the Company to purchase their shares or sell shares held by the Company to such holders, holders of ADRs evidencing ADSs that represent other than integral multiples of full units are unable to withdraw the underlying
shares of Common Stock representing less than one full unit and, therefore, are unable, as a practical matter, to exercise the rights to require the Company to purchase such underlying shares or sell shares held by the Company to such holders unless
the Companys Articles of Incorporation are amended to eliminate the provision not to issue share certificates for the numbers of shares less than a unit. As a result, access to the Japanese markets by holders of ADRs through the withdrawal
mechanism will not be available for dispositions of shares of Common Stock in lots less than one full unit. The unit share system does not affect the transferability of ADSs, which may be transferred in lots of any size.



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Sale by the Company of shares held by shareholders whose location is unknown



The Company is not required to send a notice to a shareholder if a notice to
such shareholder fails to arrive at the registered address of the shareholder in the Companys register of shareholders or at the address otherwise notified to the Company continuously for five years or more.



In addition, the Company may sell or otherwise dispose of shares of Common
Stock for which the location of the shareholder is unknown. Generally, if (i) notices to a shareholder fail to arrive continuously for five years or more at the shareholders registered address in the Companys register of shareholders or
at the address otherwise notified to the Company, and (ii) the shareholder fails to receive dividends on the shares continuously for five years or more at the address registered in the Companys register of shareholders or at the address
otherwise notified to the Company, the Company may sell or otherwise dispose of the shareholders shares by a resolution of the Board of Directors and after giving at least three months prior public and individual notice, and hold or
deposit the proceeds of such sale or disposal of shares at the then market price of the shares for the shareholder, the location of which is unknown.



Reporting of substantial shareholdings



The Securities and Exchange Law of Japan and regulations thereunder requires any person, regardless of his/her residence, who has become, beneficially and
solely or jointly, a holder of more than five percent of the total issued shares of common stock of a company listed on any Japanese stock exchange or whose shares are traded on the over-the-counter market in Japan, to file with the Director-General
of a competent Local Finance Bureau of Ministry of Finance within five business days a report concerning such shareholdings.



A similar report must also be filed in respect to any subsequent change of one percent or more in any such holding or any change in material matters set
out in reports previously filed, with certain exceptions. For this purpose, shares issuable to such person upon conversion of convertible securities or exercise of share subscription warrants or stock acquisition rights are taken into account in
determining both the number of shares held by such holder and the issuers total issued share capital. Copies of such report must also be furnished to the issuer of such shares and all Japanese stock exchanges on which the shares are listed or
(in the case of shares traded over-the-counter) the Japan Securities Dealers Association.



Except for the general limitations under Japanese anti-trust and anti-monopoly regulations against holding of shares of common stock of a Japanese corporation which leads or may lead to a restraint of trade or a
monopoly, and except for general limitations under the Commercial Code or the Companys Articles of Incorporation on the rights of shareholders applicable regardless of residence or nationality, there is practically no limitation under Japanese
laws and regulations applicable to the Company or under its Articles of Incorporation on the rights of non-resident or foreign shareholders to hold the shares of Common Stock of the Company or exercise voting rights thereon.



There is no provision in the Companys Articles of Incorporation that
would have an effect of delaying, deferring or preventing a change in control of the Company and that would operate only with respect to merger, consolidation, acquisition or corporate restructuring involving the Company.



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Daily price fluctuation limits under Japanese stock exchange rules



Stock prices on Japanese stock exchanges are determined on a real-time basis
by the balance between bids and offers. These stock exchanges are order-driven markets without specialists or market makers to guide price formation. In order to prevent excessive volatility, these stock exchanges set daily upward and downward price
range limitations for each listed stock, based on the previous days closing price. Although transactions may continue at the upward or downward limit price if the limit price is reached on a particular trading day, no transactions may take
place outside these limits. Consequently, an investor wishing to sell at a price above or below the relevant daily limit on these stock exchanges may not be able to effect a sale at such price on a particular trading day, or at all.





|C. | Material Contracts
|-- | ------------------



All contracts concluded by the Company during the two years preceding the date of this report were entered into in the ordinary course of business.





|D. | Exchange Controls
|-- | -----------------



The Foreign Exchange and Foreign Trade Law of Japan and its related cabinet orders and ministerial ordinances (the Foreign Exchange
Regulations) govern the acquisition and holding of shares of Common Stock of the Company by exchange non-residents and by foreign investors. The Foreign Exchange Regulations currently in effect do not, however, affect
transactions between exchange non-residents to purchase or sell shares outside Japan using currencies other than Japanese yen, except in limited circumstances.



Exchange non-residents are:



| | (i) | individuals who do not reside in Japan; and
| | --- | -------------------------------------------



| | (ii) | corporations whose principal offices are located outside Japan.
| | ---- | ---------------------------------------------------------------



Generally, branches and other offices of non-resident corporations that are located within Japan are regarded as residents of Japan. Conversely, branches
and other offices of Japanese corporations located outside Japan are regarded as exchange non-residents.



Foreign investors are:



| | (i) | individuals who are exchange non-residents;
| | --- | -------------------------------------------



| | (ii) | corporations that are organized under the laws of foreign countries or whose principal offices are located outside of Japan; and
| | ---- | --------------------------------------------------------------------------------------------------------------------------------



| | (iii) | corporations (1) of which 50% or more of their shares are held by individuals who are exchange non-residents and/or corporations (a) that are organized under the laws of foreign
countries or (b) whose principal offices are located outside of Japan or (2) a majority of whose officers, or officers having the power of representation, are individuals who are exchange non-residents.
| | ----- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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In general, the acquisition of shares of a Japanese company (such as the shares of Common Stock of the
Company) by an exchange non-resident from a resident of Japan is not subject to any prior filing requirements. In certain limited circumstances, however, the Minister of Finance may require prior approval of an acquisition of this type. While prior
approval, as described above, is not required, in the case where a resident of Japan transfers shares of a Japanese company (such as the shares of Common Stock of the Company) for consideration exceeding 100 million yen to an exchange non-resident,
the resident of Japan who transfers the shares is required to report the transfer to the Minister of Finance within 20 days from the date of the transfer, unless the transfer was made through a bank, securities company or financial futures trader
licensed under Japanese law.



If a foreign investor acquires
shares of a Japanese company that is listed on a Japanese stock exchange (such as the shares of Common Stock of the Company) or that is traded on an over-the-counter market in Japan and, as a result of the acquisition, the foreign investor, in
combination with any existing holdings, directly or indirectly holds 10% or more of the issued shares of the relevant company, the foreign investor must file a report of the acquisition with the Minister of Finance and any other competent Ministers
having jurisdiction over that Japanese company within 15 days from and including the date of the acquisition, except where the offering of the companys shares was made overseas. In limited circumstances, such as where the foreign investor is
in a country that is not listed on an exemption schedule in the Foreign Exchange Regulations, a prior notification of the acquisition must be filed with the Minister of Finance and any other competent Ministers, who may then modify or prohibit the
proposed acquisition.



Under the Foreign Exchange Regulations,
dividends paid on and the proceeds from the sale in Japan of shares of Common Stock of the Company held by non-residents of Japan may generally be converted into any foreign currency and repatriated abroad.



|E. | Taxation
|-- | --------



The discussion below is not intended to constitute a complete analysis of all tax consequences relating to the ownership and disposition of shares of
Common Stock and ADSs. Prospective purchasers and holders of the shares of Common Stock or ADSs should consult their own tax advisors concerning the tax consequences of their particular situations.



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The following is a summary of the principal Japanese national and U.S. federal tax consequences of the
ownership and disposition of shares of Common Stock or ADSs by an Eligible U.S. Holder and a U.S. Holder (each as defined below), as the case may be, that holds those shares or ADSs as capital assets (generally, property held for investment). This
summary does not purport to address all material tax consequences that may be relevant to holders of shares of Common Stock or ADSs, and does not take into account the specific circumstances of any particular investors, some of which (such as
tax-exempt entities, banks, insurance companies, broker-dealers, traders in securities that elect to use a mark-to-market method of accounting for their securities holdings, regulated investment companies, real estate investment trusts, investors
liable for alternative minimum tax, investors that own or are treated as owning 10% or more of the Companys voting stock, investors that hold shares of Common Stock or ADSs as part of a straddle, hedge, conversion or constructive sale
transaction or other integrated transaction, persons that hold shares of Common Stock or ADSs through a partnership or other pass-through entity and Eligible U.S. Holders and U.S. Holders, as the case may be, whose functional currency is not the
U.S. dollar) may be subject to special tax rules. This summary is based on the national or federal tax laws of Japan and of the United States as in effect on the date hereof, as well as on the current income tax convention between the United States
and Japan (the Treaty), all of which are subject to change (possibly with retroactive effect) and to differing interpretations.



In addition, this summary is based in part upon the representations of the Depositary and the assumption that each obligation in the Deposit Agreement for
ADSs and in any related agreement will be performed in accordance with its terms.



For purposes of this discussion, a U.S. Holder is any beneficial owner of shares of Common Stock or ADSs that, for U.S. federal income tax purposes, is:



| | (i) | a citizen or individual resident of the United States;
| | --- | ------------------------------------------------------



| | (ii) | a corporation or other entity taxable as a corporation for U.S. federal income tax purposes organized in or under the laws of the United States, any State, or the District of
Columbia;
| | ---- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (iii) | an estate the income of which is subject to U.S. federal income tax without regard to its source; or
| | ----- | ----------------------------------------------------------------------------------------------------



| | (iv) | a trust that is subject to the primary supervision of a U.S. court and the control of one or more U.S. persons, or that has a valid election in effect under applicable Treasury
regulations to be treated as a U.S. person.
| | ---- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



An
Eligible U.S. Holder is a U.S. Holder that:



| | (i) | is a resident of the United States for purposes of the Treaty;
| | --- | --------------------------------------------------------------



| | (ii) | does not maintain a permanent establishment in Japan (a) with which shares of Common Stock or ADSs are effectively connected or (b) of which shares of Common Stock or ADSs form part
of the business property; and
| | ---- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (iii) | is eligible for benefits under the Treaty, with respect to income and gain derived in connection with the shares of Common Stock or ADSs.
| | ----- | -----------------------------------------------------------------------------------------------------------------------------------------



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This summary does not address any aspects of U.S. federal tax law other than income taxation, and does
not discuss any aspects of Japanese tax law other than national income taxation, inheritance and gift taxation. Investors are urged to consult their tax advisors regarding the U.S. federal, state and local and Japanese and other tax consequences of
owning and disposing of shares of Common Stock or ADSs. In particular, where relevant, investors are urged to confirm their status as Eligible U.S. Holders with their tax advisors and to discuss with their tax advisors any possible consequences of
their failure to qualify as Eligible U.S. Holders. In general, taking into account the earlier assumption, for purposes of the Treaty and for U.S. federal income and Japanese income tax purposes, beneficial owners of ADRs evidencing ADSs will be
treated as the owners of the shares of Common Stock represented by those ADSs, and exchanges of shares of Common Stock for ADRs, and exchanges of ADRs for shares of Common Stock, will not be subject to U.S. federal income tax or Japanese income tax.



Japanese taxation



The following is a summary of the principal Japanese tax consequences
(limited to national taxes) to holders of shares of Common Stock of the Company or ADRs evidencing ADSs representing shares of Common Stock of the Company who are either individuals who are not residents of Japan or non-Japanese corporations,
without a permanent establishment in Japan (non-resident Holders).



Generally, an individual who is a non-resident of Japan or a non-Japanese corporation is subject to Japanese withholding tax on dividends paid by a Japanese corporation. The Company withholds taxes from dividends it
pays as required by Japanese law. Stock splits in themselves are not subject to Japanese income tax.



In the absence of an applicable treaty, convention or agreement reducing the maximum rate of Japanese withholding tax or allowing exemption from Japanese
withholding tax, the rate of Japanese withholding tax applicable to dividends paid by Japanese corporations to individuals who are non-residents of Japan or non-Japanese corporations is 20%. However, with respect to dividends paid on listed shares
issued by a Japanese corporation (such as the shares of Common Stock of the Company) to any corporate or individual shareholders (including those shareholders who are non-Japanese corporations or Japanese non-resident individuals, such as
non-resident Holders), except for any individual shareholder who holds 5% or more of the total issued shares of the relevant Japanese corporation, the aforementioned 20% withholding tax rate is reduced to (i) 7% for dividends due and payable on or
before March 31, 2008, and (ii) 15% for dividends due and payable on or after April 1, 2008. At the date of this annual report, Japan has income tax treaties, conventions or agreements whereby the above-mentioned withholding tax rate is reduced, in
most cases to 15% for portfolio investors with, among other countries, Australia, Belgium, Canada, Denmark, Finland, France, Germany, Ireland, Italy, Luxembourg, the Netherlands, New Zealand, Norway, Singapore, Spain, Sweden, Switzerland, and the
U.K.



Under the Treaty, the maximum rate of Japanese
withholding tax which may be imposed on dividends paid by a Japanese corporation to an Eligible U.S. Holder that is a portfolio investor is generally limited to 10% of the gross amount actually distributed, and dividends paid by a Japanese
corporation to an Eligible U.S. Holder that is a pension fund is exempt from Japanese taxation by way of withholding or otherwise unless such dividends are derived from the carrying on of a business, directly or indirectly, by such pension fund.



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If the maximum tax rate provided for in the income tax treaty applicable to dividends paid by the Company
to any particular non-resident Holder is lower than the withholding tax rate otherwise applicable under Japanese tax law or any particular non-resident Holder is exempt from Japanese income tax with respect to such dividends under the income tax
treaty applicable to such particular non-resident Holder, such non-resident Holder who is entitled to a reduced rate of or exemption from Japanese withholding tax on payment of dividends on the Companys shares of Common Stock is required to
submit an Application Form for Income Tax Convention Regarding Relief from Japanese Income Tax on Dividends in advance through the Company to the relevant tax authority before such payment of dividends. A standing proxy for non-resident Holders of a
Japanese corporation may provide this application service. With respect to ADSs, this reduced rate or exemption is applicable if the Depositary or its agent submits two Application Forms (one before payment of dividends, the other within eight
months after the Companys fiscal year-end or semi-fiscal year-end) to the Japanese tax authorities. To claim this reduced rate or exemption, any relevant non-resident Holder of ADSs will be required to file a proof of taxpayer status,
residence and beneficial ownership (as applicable) and to provide other information or documents as may be required by the Depositary. A non-resident Holder who is entitled, under an applicable income tax treaty, to a reduced treaty rate lower than
the withholding tax rate otherwise applicable under Japanese tax law or an exemption from the withholding tax, but failed to submit the required application in advance will be entitled to claim the refund of withholding taxes withheld in excess of
the rate under an applicable tax treaty (if such non-resident Holder is entitled to a reduced treaty rate under the applicable income tax treaty) or the whole of the withholding tax withheld (if such non-resident Holder is entitled to an exemption
under the applicable income tax treaty) from the relevant Japanese tax authority. The Company does not assume any responsibility to ensure withholding at the reduced treaty rate or not withholding for shareholders who would be eligible under an
applicable tax treaty but do not follow the required procedures as stated above.



Gains derived from the sale of shares of Common Stock or ADSs outside Japan by a non-resident Holder holding such shares or ADSs as a portfolio investor are, in general, not subject to Japanese income or corporation
tax. Eligible U.S. Holders are not subject to Japanese income or corporation tax with respect to such gains under the Treaty.



Japanese inheritance and gift taxes at progressive rates may be payable by an individual who has acquired shares of Common Stock or ADSs as a legatee,
heir or donee even though neither the individual nor the deceased nor donor is a Japanese resident.



Holders of shares of Common Stock of the Company or ADSs should consult their tax advisors regarding the effect of these taxes and, in the case of U.S.
Holders, the possible application of the Estate and Gift Tax Treaty between the U.S. and Japan.



U.S. federal income taxation



The following is a summary of certain United States federal income tax consequences of the ownership of shares of Common Stock or ADSs by a U.S. Holder.
This summary is based on United States tax laws, including the United States Internal Revenue Code of 1986, as amended, and on the Treaty all of which are subject to change possibly with retroactive effect.



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Taxation of dividends



Under the United States federal income tax laws, and subject to the passive foreign investment company (PFIC) rules
discussed below, the gross amount of any dividends received by a U.S. Holder (before reduction for Japanese withholding taxes) to the extent paid out of the Companys current or accumulated earnings and profits (as determined for United States
federal income tax purposes) will be subject to U.S. federal taxation. Dividends paid to non-corporate U.S. Holders in taxable years beginning before January 1, 2009 that constitute qualified dividend income will be taxable at a maximum tax rate of
15% provided that the U.S. Holders held the shares of Common Stock or ADSs for more than 60 days during the 121-day period beginning 60 days before the ex-dividend date and meet other holding period requirements. Dividends the Company pays with
respect to the shares of Common Stock or ADSs generally will be qualified dividend income. The U.S. Holder must include any Japanese tax withheld from the dividend payment in this gross amount even though it does not in fact receive it. The dividend
is taxable to the U.S. Holder when the U.S. Holder, in the case of shares of Common Stock, or the Depositary, in the case of ADSs, receives the dividend, actually or constructively. The dividend will not be eligible for the dividends-received
deduction generally allowed to United States corporations in respect of dividends received from other United States corporations. The amount of the dividend the U.S. Holder must include in its income will be the U.S. dollar value of the Japanese yen
payments made, determined at the spot Japanese yen/U.S. dollar rate on the date the dividend is includible in the U.S. Holders income, regardless of whether the payment is in fact converted into U.S. dollars. Generally, any gain or loss
resulting from currency exchange fluctuations during the period from the date the U.S. Holder includes the dividend payment in income to the date the U.S. Holder converts the payment into U.S. dollars will be treated as ordinary income or loss and
will not be eligible for the special tax rate applicable to qualified dividend income. The gain or loss generally will be income or loss from sources within the United States for foreign tax credit limitation purposes. Distributions in excess of
current and accumulated earnings and profits, as determined for United States federal income tax purposes, will be treated as a non-taxable return of capital to the extent of the U.S. Holders basis in the shares of Common Stock or ADSs and
thereafter as capital gain.



Subject to certain limitations,
the Japanese tax withheld in accordance with the Treaty will be creditable against the U.S. Holders United States federal income tax liability. Special rules apply in determining the foreign tax credit limitation with respect to dividends that
are subject to the maximum 15% tax rate. For foreign tax credit limitation purposes, the dividend will be income from sources outside the United States. Dividends paid in taxable years beginning before January 1, 2007 generally will be
passive or financial services income, and dividends paid in taxable years beginning after December 31, 2006 will, depending on the U.S. Holders circumstances, be passive or general income which,
in either case, is treated separately from other types of income for purposes of computing the foreign tax credit allowable to a U.S. Holder.



Taxation of capital gains



Subject to the PFIC rules discussed below, upon a sale or other disposition of shares of Common Stock or ADSs, a U.S. Holder will recognize gain or loss
in an amount equal to the difference between the U.S. dollar value of the amount realized and the U.S. Holders tax basis (determined in U.S. dollars) in such shares of Common Stock or ADSs. Generally, such gain or loss will be capital gain or
loss and will be long-term capital gain or loss if the U.S. Holders holding period for such shares of Common Stock or ADSs is greater than 1 year. Long-term capital gain of a non-corporate U.S. Holder that is recognized before January 1, 2009
is generally taxed at a maximum rate of 15%. Any such gain or loss will generally be income or loss from sources within the United States for foreign tax credit limitation purposes.



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Transfers of retained earnings and sales of shares of Common Stock to the Company



A transfer of retained earnings or legal reserve to stated capital is
generally treated as a dividend payment for Japanese tax purposes subject to withholding tax. A sale of shares of Common Stock or ADSs to the Company results in a deemed dividend to the selling shareholders to the extent that the sales price exceeds
the aggregate of the stated capital and the capital surplus attributable to the shares sold. Transfers of retained earnings or legal reserves to stated capital and deemed dividends that may result from sales of shares of Common Stock to the Company
are not generally taxable events that give rise to foreign source income for U.S. federal income tax purposes and U.S. Holders would not be able to use the foreign tax credit arising from any Japanese withholding tax imposed on such transactions
unless they can apply the credit (subject to limitations) against U.S. tax due or other foreign source income in the appropriate category for foreign tax credit purposes.



Passive foreign investment company considerations



The Company believes that shares of Common Stock and ADSs should not be treated as stock of a PFIC for United States federal
income tax purposes, but this conclusion is a factual determination made annually and thus may be subject to change. If the Company were to be treated as a PFIC (unless a U.S. Holder elects to be taxed annually on a mark-to-market basis with respect
to the shares of Common Stock or ADSs), gain realized on the sale or other disposition of shares of Common Stock or ADSs would in general not be treated as capital gain, and a U.S. Holder would be treated as if such holder had realized such gain and
certain excess distributions ratably over the holders holding period for the shares of Common Stock or ADSs and would be taxed at the highest tax rate in effect for each such year to which the gain was allocated, together with an
interest charge in respect of the tax attributable to each such year. With certain exceptions, shares of Common stock or ADSs will be treated as stock in a PFIC if the Company were a PFIC at any time during the U.S. Holders holding period in
the shares of Common Stock or ADSs. Dividends that such U.S. Holder receives from the Company will not be eligible for the special tax rates applicable to qualified dividend income if the Company is treated as a PFIC with respect to such U.S. Holder
either in the taxable year of the distribution or the preceding taxable year, but instead will be taxable at rates applicable to ordinary income.





|F. | Dividends and Paying Agents
|-- | ---------------------------



Not applicable





|G. | Statement by Experts
|-- | --------------------



Not applicable



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|H. | Documents on Display
|-- | --------------------



According to the Securities Exchange Act of 1934, as amended, Matsushita is subject to the requirements of informational disclosure. Matsushita files
various reports and other information, including its annual report on Form 20-F, with the U.S. Securities and Exchange Commission. These reports and other information may be inspected at the public reference room at the Securities and Exchange
Commission, 100 F Street, N.E., Washington D.C. 20549. You can also obtain a copy of such material by mail from the public reference room of the Securities and Exchange Commission at prescribed fees. You may obtain information on the operation of
the Securities and Exchange Commission public reference room by calling the Securities and Exchange Commission in the United States at 1-800-SEC-0330.



Also, documents filed via the Electronic Data Gathering, Analysis, and Retrieval system (EDGAR) are available at the website of the U.S. Securities and
Exchange Commission (http://www.sec.gov).





|I. | Subsidiary Information
|-- | ----------------------



Not applicable





|Item 11. | Quantitative and Qualitative Disclosures about Market Risk
|-------- | ----------------------------------------------------------



The Company is exposed to market risk, including changes of foreign exchange rates, interest rates and prices of marketable securities and commodities. In order to hedge
the risks of changes in foreign exchange rates, interest rates and commodity prices, the Company uses derivative financial instruments. The Company does not hold or issue financial instruments for trading purposes. Although the use of derivative
financial instruments exposes the Company to the risk of credit-related losses in the event of nonperformance by counterparties, the Company believes that such risk is minor because of the high credit rating of the counterparties.



Equity Price Risk



The Company holds available-for-sale securities included in short-term investments and investments and advances. In general, highly-liquid
and low risk instruments are preferred in the portfolio. Available-for-sale securities included in investments and advances are held as longer term investments. The Company does not hold marketable securities for trading purposes.



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Maturities, costs and fair values of available-for-sale securities were as follows at March 31, 2005 and 2004:



|                                       |  |                |  |           |  |         |  |          
|-------------------------------------- |  | -------------- |  | --------- |  | ------- |  | ---------
|                                       |  | Yen (millions)
|                                       |  | 2005           |  | 2004     
|                                       |  | Cost           |  | Fairvalue |  | Cost    |  | Fairvalue
|Due within one year                    |  | 11,978         |  | 11,978    |  | 2,683   |  | 2,684    
|Due after one year through five years  |  | 79,841         |  | 80,008    |  | 18,325  |  | 18,300   
|Due after five years through ten years |  | 10,261         |  | 10,378    |  |        |  |         
|Equity securities                      |  | 228,202        |  | 392,903   |  | 217,470 |  | 398,425  
|                                       |  |                |  |           |  |         |  |          
|                                       |  | 330,282        |  | 495,267   |  | 238,478 |  | 419,409  
|                                       |  |                |  |           |  |         |  |          



Foreign Exchange Risk



The primary purpose of the Companys foreign currency hedging activities
is to protect against the volatility associated with foreign currency transactions. The Company primarily utilizes forward exchange contracts and options with a duration of less than a few months. The Company also enters into foreign exchange
contracts from time to time to hedge the risk of fluctuation in foreign currency exchange rates associated with long-term debt that is denominated in foreign currencies. Foreign exchange contracts related to such long-term debt have the same
maturity as the underlying debt.



The following table provides the contract
amounts and fair values of foreign exchange contracts, primarily hedging U.S. dollar and euro revenues, at March 31, 2005 and 2004. Amounts related to foreign exchange contracts entered into in connection with long-term debt denominated in foreign
currencies which eliminate all foreign currency exposures, are shown in the table of Interest Rate Risk.



|                                             |  |                |  |           |      |  |                |  |           |  
|-------------------------------------------- |  | -------------- |  | --------- | ---- |  | -------------- |  | --------- | -
|                                             |  | Yen (millions) | 
|                                             |  | 2005           |  |           | 2004 | 
|                                             |  | Contractamount |  | Fairvalue |      |  | Contractamount |  | Fairvalue |  
|Forward:                                     |  |                |  |           |      |  |                |  |           |  
|To sell foreign currencies                   |  | 317,506        |  | (3,122    | )    |  | 398,782        |  | 9,446     |  
|To buy foreign currencies                    |  | 200,705        |  | 1,643     |      |  | 205,039        |  | (469      | )
|Options purchased to sell foreign currencies |  | 29,981         |  | 61        |      |  | 44,886         |  | 746       |  
|Options written to sell foreign currencies   |  |               |  |          |      |  | 29,046         |  | (455      | )
|Cross currency swaps                         |  | 16,879         |  | 123       |      |  | 14,914         |  | 227       |  



Commodity Price Risk



The Company is exposed to market risk of changes in prices of commodities
including various non-ferrous metals used in the manufacturing of electronic components and devices. The Company enters into commodity future contracts to offset such exposure.



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The following table provides the contract amounts and fair values of commodity futures, at March 31, 2005 and 2004.



|                   |  |                |  |           |      |  |                |  |           |  
|------------------ |  | -------------- |  | --------- | ---- |  | -------------- |  | --------- | -
|                   |  | Yen (millions) | 
|                   |  | 2005           |  |           | 2004 | 
|                   |  | Contractamount |  | Fairvalue |      |  | Contractamount |  | Fairvalue |  
|Commodity futures: |  |                |  |           |      |  |                |  |           |  
|To sell commodity  |  | 31,978         |  | (2,832    | )    |  | 14,915         |  | (1,223    | )
|To buy commodity   |  | 75,824         |  | 12,554    |      |  | 52,888         |  | 5,709     |  



Interest Rate Risk



The Companys exposure to market risk for changes in interest rates relates
principally to its debt obligations. The Company has long-term debt primarily with fixed rates. Fixed-rate debt obligations expose the Company to variability in their fair values due to changes in interest rates. To manage the variability in the
fair values caused by interest rate changes, the Company enters into interest rate swaps when it is determined to be appropriate based on market conditions. Interest rate swaps change fixed-rate debt obligations to variable-rate debt obligations by
entering into fixed-receiving, variable-paying interest rate swap contracts. The hedging relationship between interest rate swaps and hedged debt obligations is highly effective in achieving offsetting changes in fair values resulting from interest
rate risk. The following tables provide information about the Companys derivative financial instruments and other financial instruments that are sensitive to changes in interest rates at March 31, 2005 and 2004. For debt obligations, the table
presents principal cash flows by expected maturity dates, related weighted average interest rates and fair values of financial instruments. For interest rate swaps, the table presents notional principal amounts and weighted average interest rates by
expected maturity dates. Notional principal amounts are used to calculate the contractual payments to be exchanged under the contracts.



Long-term debt, including current portion:



|                                                       |  |                     |  |                                                          |  |         |  |         |  |        |  |        |  |       |  |             |  |          
|------------------------------------------------------ |  | ------------------- |  | -------------------------------------------------------- |  | ------- |  | ------- |  | ------ |  | ------ |  | ----- |  | ----------- |  | ---------
|                                                       |  |                     |  | Yen (millions)                                          
|                                                       |  |                     |  | Carrying amount and maturity date (as of March 31, 2005)
|                                                       |  | Averageinterestrate |  | Total                                                    |  | 2006    |  | 2007    |  | 2008   |  | 2009   |  | 2010  |  | There-after |  | Fairvalue
|Japanese yen convertible bonds                         |  | 0.9%                |  | 86,411                                                   |  | 86,411  |  |         |  |        |  |        |  |       |  |             |  | 87,197   
|Straight bonds                                         |  | 1.3%                |  | 200,084                                                  |  |         |  | 100,084 |  |        |  |        |  |       |  | 100,000     |  | 207,364  
|Straight bonds issued by subsidiaries                  |  | 1.3%                |  | 116,583                                                  |  | 36,583  |  | 20,000  |  | 10,000 |  | 30,000 |  |       |  | 20,000      |  | 119,093  
|Unsecured yen loans from banks and insurance companies |  | 0.5%                |  | 306,146                                                  |  | 122,268 |  | 82,987  |  | 56,202 |  | 36,379 |  | 6,946 |  | 1,364       |  | 305,400  
|                                                       |  |                     |  |                                                          |  |         |  |         |  |        |  |        |  |       |  |             |  |          
|Total                                                  |  |                     |  | 709,224                                                  |  | 245,262 |  | 203,071 |  | 66,202 |  | 66,379 |  | 6,946 |  | 121,364     |  | 719,054  
|                                                       |  |                     |  |                                                          |  |         |  |         |  |        |  |        |  |       |  |             |  |          



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|                                                       |  |                     |  |                                                          |  |         |  |         |  |         |  |        |  |        |  |              |  |          
|------------------------------------------------------ |  | ------------------- |  | -------------------------------------------------------- |  | ------- |  | ------- |  | ------- |  | ------ |  | ------ |  | ------------ |  | ---------
|                                                       |  |                     |  | Yen (millions)                                          
|                                                       |  |                     |  | Carrying amount and maturity date (as of March 31, 2004)
|                                                       |  | Averageinterestrate |  | Total                                                    |  | 2005    |  | 2006    |  | 2007    |  | 2008   |  | 2009   |  | There- after |  | Fairvalue
|Japanese yen convertible bonds                         |  | 0.9%                |  | 27,496                                                   |  | 10,968  |  | 16,528  |  |         |  |        |  |        |  |              |  | 28,272   
|Straight bonds                                         |  | 1.0%                |  | 300,135                                                  |  | 100,086 |  |         |  | 100,049 |  |        |  |        |  | 100,000      |  | 306,210  
|Straight bonds issued by subsidiaries                  |  | 1.8%                |  | 46,364                                                   |  |         |  | 16,364  |  | 20,000  |  | 10,000 |  |        |  |              |  | 47,633   
|Unsecured yen loans from banks and insurance companies |  | 0.5%                |  | 293,732                                                  |  | 101,623 |  | 85,928  |  | 59,998  |  | 30,616 |  | 15,083 |  | 484          |  | 292,112  
|                                                       |  |                     |  |                                                          |  |         |  |         |  |         |  |        |  |        |  |              |  |          
|Total                                                  |  |                     |  | 667,727                                                  |  | 212,677 |  | 118,820 |  | 180,047 |  | 40,616 |  | 15,083 |  | 100,484      |  | 674,227  
|                                                       |  |                     |  |                                                          |  |         |  |         |  |         |  |        |  |        |  |              |  |          







Interest rate swaps:



|                   |  |                     |  |                                                          |  |        |  |        |  |      |  |      |  |              |  |          
|------------------ |  | ------------------- |  | -------------------------------------------------------- |  | ------ |  | ------ |  | ---- |  | ---- |  | ------------ |  | ---------
|                   |  |                     |  | Yen (millions)                                          
|                   |  |                     |  | Notional amount and maturity date (as of March 31, 2005)
|Averagereceiverate |  | Average pay
rate    |  | 2006                                                     |  | 2007   |  | 2008   |  | 2009 |  | 2010 |  | There- after |  | Fairvalue
|0.87%              |  | JPY6M LIBOR + 0.40% |  |                                                          |  | 15,000 |  |        |  |      |  |      |  |              |  | 84       
|                   |  |                    
|                   |  |                     |  | Notional amount and maturity date (as of March 31, 2004)
|Averagereceiverate |  | Average pay
rate    |  | 2005                                                     |  | 2006   |  | 2007   |  | 2008 |  | 2009 |  | There-after  |  | Fairvalue
|0.42%              |  | JPY6M LIBOR + 0.21% |  | 100,000                                                  |  |        |  |        |  |      |  |      |  |              |  | 86       
|0.87%              |  | JPY6M LIBOR + 0.40% |  |                                                          |  |        |  | 15,000 |  |      |  |      |  |              |  | 49       







|Item 12. | Description of Securities Other than Equity Securities
|-------- | ------------------------------------------------------



Not applicable



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PART II



|Item 13. | Defaults, Dividend Arrearages and Delinquencies
|-------- | -----------------------------------------------



None





|Item 14. | Material Modifications to the Rights of Security Holders and Use of Proceeds
|-------- | ----------------------------------------------------------------------------



None





|Item 15. | Controls and Procedures
|-------- | -----------------------



The Companys management, with the participation of its principal executive and principal financial officers, evaluated the effectiveness of the Companys
disclosure controls and procedures (as defined in Rule 13a-15(e) under the U.S. Securities Exchange Act of 1934) as of March 31, 2005. Based on that evaluation, the Companys principal executive and principal financial officers concluded that
the disclosure controls and procedures were effective as of that date.



No
change in the Companys internal control over financial reporting (as defined in Rules 13a-15(f) under the U.S. Securities Exchange Act of 1934) occurred during the year ended March 31, 2005 that has materially affected, or is reasonably likely
to materially affect, the Companys internal control over financial reporting.





|Item 16A. | Audit Committee Financial Expert
|--------- | --------------------------------



Matsushitas Board of Corporate Auditors has determined that Kazumi Kawaguchi, a Senior Corporate Auditor of Matsushita, is an audit committee financial
expert as such term is defined by Item 16A of Form 20-F.





|Item 16B. | Code of Ethics
|--------- | --------------



Matsushita has adopted a Code of Ethics applicable to the Chief Executive Officer, the Chief Financial Officer and other Executive Officers. The Code of Ethics is attached as an exhibit to the annual report for the
fiscal year ended March 31, 2004 on Form 20-F. [incorporated by reference to the annual report on Form 20-F (File No. 1-06784) filed on September 13, 2004]



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|Item 16C. | Principal Accountant Fees and Services
|--------- | --------------------------------------



Fees and services by the Companys principal accountant



The following table shows the aggregate fees accrued or paid to KPMG AZSA & Co. and its member firms (KPMG), the Companys
principal accountant for the years ended March 31, 2005 and 2004:



|                   |  |                |  |      
|------------------ |  | -------------- |  | -----
|                   |  | Yen (millions)
|                   |  | 2005           |  | 2004 
|Audit fees         |  | 1,579          |  | 1,195
|Audit-related fees |  | 211            |  | 242  
|Tax fees           |  | 352            |  | 465  
|All other fees     |  | 27             |  | 15   
|                   |  |                |  |      
|Total              |  | 2,169          |  | 1,917
|                   |  |                |  |      



Audit fees are fees for professional
services for the audit of the Companys annual financial statements or services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements. Audit-related fees are fees for assurance and
related services that are reasonably related to the performance of the audit or review of the Companys financial statements and are not reported under the Audit fees category, such as assistance in review of internal controls related to the
Sarbanes-Oxley Act of 2002, due diligence and issuance of certificated documents. Tax fees are fees for professional services rendered mainly for tax compliance, tax advice, tax consulting associated with international transfer prices and expatriate
employee tax services. All other fees are fees for those services not reported under the Audit fees, Audit-related fees, and Tax fees categories, such as professional advices related to environmental regulations.



No services were provided for which pre-approval was waived pursuant to paragraph
(c)(7)(i)(C) of Rule 2-01 of Regulation S-X.



Policy of the Companys
Board of Corporate Auditors on pre-approval of audit or non-audit services



In accordance with paragraph (c)(7)(i) of Rule 2-01 of Regulation S-X and the related adopting release of the U.S. Securities and Exchange Commission, the Companys Board of Corporate Auditors must pre-approve the engagement of the
Companys principal accountant, currently KPMG, by Matsushita or its subsidiaries to render audit or non-audit services. Also, paragraph (c)(4) of Rule 2-01 of Regulation S-X provides that an accountant is not independent from an audit client
if the accountant provides certain non-audit services to the audit client. Under the policy adopted by the Companys Board of Corporate Auditors, all audit or non-audit services provided by KPMG must be specifically pre-approved by the Board of
Corporate Auditors. Such pre-approval is considered at the monthly meetings of the Board of Corporate Auditors. Any service that either falls into a category of services that are not permitted by the applicable law or regulation or is otherwise
deemed by the Board of Corporate Auditors to be inconsistent with the maintenance of the principal accountants independence is rejected. Managements requests for proposed engagement of the principal accountant to render services that
require immediate approval, if considered necessary, are pre-approved by a designated member of the Board of Corporate Auditors, and then reported to the Board of Corporate Auditors at its next meeting.



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|Item 16D. | Exemptions from the Listing Standards for Audit Committees
|--------- | ----------------------------------------------------------



Not applicable





|Item 16E. | Purchases of Equity Securities by the Issuer and Affiliated Purchasers
|--------- | ----------------------------------------------------------------------



The following table sets forth, for each of the months indicated, the total number of shares purchased by or on behalf of the Company or any affiliated purchaser, the
average price paid per share, the number of shares purchased as part of the repurchase plan announced on August 27, 2004 as described above and the maximum number of shares or approximate Japanese Yen value that may yet be purchased under the plans
or programs.



|                       |  |  |  |                                           |  |                                        |  |                                                                             |  |                                                                            
|---------------------- |  |  |  | ----------------------------------------- |  | -------------------------------------- |  | --------------------------------------------------------------------------- |  | ---------------------------------------------------------------------------
|Period                 |  |  |  | (a) TotalNumber ofSharesPurchased(Shares) |  | (b) Average Price Paid per Share (Yen) |  | (c) TotalNumber of SharesPurchased as Partof PubliclyAnnounced Plan(Shares) |  | (d) MaximumNumber of Shares that May Yet BePurchased Underthe Plan (Shares)
|April 1 - 30, 2004     |  |  |  | 119,044                                   |  | 1,625                                  |  |                                                                            |  |                                                                           
|May 1 - 31, 2004       |  |  |  | 65,732                                    |  | 1,537                                  |  |                                                                            |  |                                                                           
|June 1 - 30, 2004      |  |  |  | 68,439                                    |  | 1,526                                  |  |                                                                            |  |                                                                           
|July 1 - 31, 2004      |  |  |  | 169,320                                   |  | 1,497                                  |  |                                                                            |  |                                                                           
|August 1 - 31, 2004    |  |  |  | 103,338                                   |  | 1,448                                  |  |                                                                            |  | 80,000,000                                                                 
|September 1 - 30, 2004 |  |  |  | 14,042,527                                |  | 1,499                                  |  | 13,334,000                                                                  |  | 66,666,000                                                                 
|October 1 - 31, 2004   |  |  |  | 6,730,370                                 |  | 1,522                                  |  | 6,570,000                                                                   |  | 60,096,000                                                                 
|November 1 - 30, 2004  |  |  |  | 13,287,621                                |  | 1,535                                  |  | 13,026,000                                                                  |  | 47,070,000                                                                 
|December 1 - 31, 2004  |  |  |  | 10,173,574                                |  | 1,545                                  |  | 9,712,000                                                                   |  | 37,358,000                                                                 
|January 1 - 31, 2005   |  |  |  | 6,451,439                                 |  | 1,592                                  |  | 6,279,000                                                                   |  | 31,079,000                                                                 
|February 1 - 28, 2005  |  |  |  | 9,675,632                                 |  | 1,567                                  |  | 9,570,000                                                                   |  | 21,509,000                                                                 
|March 1 - 31, 2005     |  |  |  | 122,549                                   |  | 1,566                                  |  |                                                                            |  | 21,509,000                                                                 
|                       |  |  |  |                                           |  |                                        |  |                                                                             |  |                                                                            
|Total                  |  |  |  | 61,009,585                                |  | 1,538                                  |  | 58,491,000                                                                  |  |                                                                            
|                       |  |  |  |                                           |  |                                        |  |                                                                             |  |                                                                            



On August 27, 2004, the Company
announced that the Board of Directors resolved to repurchase its own shares, pursuant to Article 211-3, Paragraph 1, Item 2 of the Commercial Code of Japan as follows:



|                                          |  |   |  |                                            
|----------------------------------------- |  | - |  | -------------------------------------------
|Class of shares                           |  | : |  | Common stock                               
|Aggregate number of repurchaseable shares |  | : |  | Up to 80 million shares                    
|Aggregate repurchase amount               |  | : |  | Up to 100 billion yen                      
|Period of repurchase                      |  | : |  | Between August 30, 2004 and late March 2005



On September 29, 2004, the Company
repurchased its own shares from MEW, a consolidated subsidiary of the Company in conformity with provisions of Article 211-3, Paragraph 1, Item 1 of the Japanese Commercial Code. The details of the share repurchase are as follows:



|                                             |  |   |  |                
|-------------------------------------------- |  | - |  | ---------------
|Class of shares                              |  | : |  | Common stock   
|Aggregate number of shares to be repurchased |  | : |  | 574,922 shares 
|Aggregate repurchase amount                  |  | : |  | 845,710,262 yen







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Under the Commercial Code of Japan, a holder of shares constituting less than one full unit may require Matsushita to
purchase such shares at their market value (see Common StockUnit share system in Section B of Item 10). During the year ended March 31, 2005, Matsushita purchased 1,872,663 shares for a total purchase price of 2,885,356,887 yen
upon such requests from holders of shares constituting less than one full unit.



The Directors, Corporate Auditors, Executive Officers and Executive Counsellors in Japan are eligible to participate in the Matsushita Electric Directors and Executive Officers Shareholding Association, which is an affiliated purchaser, and
the Association purchases shares of the Companys common stock on their behalf. During the year ended March 31, 2005, the Association purchased 71,000 shares for a total purchase price of 108,526,000 yen.



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PART III



|Item 17. | Financial Statements
|-------- | --------------------



Not applicable





|Item 18. | Financial Statements
|-------- | --------------------



Index of Consolidated Financial Statements of Matsushita Electric Industrial Co., Ltd. and Subsidiaries:



|                                                                                                  |  |     
|------------------------------------------------------------------------------------------------- |  | ----
|                                                                                                  |  | Page
|Report of Independent Registered Public Accounting Firm                                           |  | 105 
|                                                                                                  | 
|Consolidated Balance Sheets as of March 31, 2005 and 2004                                         |  | 106 
|                                                                                                  | 
|Consolidated Statements of Operations for the years ended March 31, 2005, 2004 and 2003           |  | 108 
|                                                                                                  | 
|Consolidated Statements of Stockholders Equity for the years ended March 31, 2005, 2004 and 2003 |  | 109 
|                                                                                                  | 
|Consolidated Statements of Cash Flows for the years ended March 31, 2005, 2004 and 2003           |  | 111 
|                                                                                                  | 
|Notes to Consolidated Financial Statements                                                        |  | 113 



Schedule for the years ended March 31,
2005, 2004 and 2003:



|                                                                                                                 |  |    
|---------------------------------------------------------------------------------------------------------------- |  | ---
|Schedule II     Valuation and Qualifying Accounts and Reserves for the years ended March 31, 2005, 2004 and 2003 |  | 169



All other schedules are omitted as
permitted by the rules and regulations of the Securities and Exchange Commission as the required information is presented in the consolidated financial statements or notes thereto, or the schedules are not applicable.



---

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Report of Independent Registered Public Accounting Firm





The Board of Directors and Stockholders

Matsushita Electric Industrial Co., Ltd.:



We have audited the
consolidated financial statements of Matsushita Electric Industrial Co., Ltd. and subsidiaries as listed in the accompanying index. In connection with our audits of the consolidated financial statements, we also have audited the financial statement
schedule as listed in the accompanying index. These consolidated financial statements and financial statement schedule are the responsibility of the Companys management. Our responsibility is to express an opinion on these consolidated
financial statements and financial statement schedule based on our audits.



We
conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.



In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Matsushita Electric
Industrial Co., Ltd. and subsidiaries as of March 31, 2005 and 2004, and the results of their operations and their cash flows for each of the years in the three-year period ended March 31, 2005, in conformity with U.S. generally accepted accounting
principles. Also in our opinion, the related financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.





KPMG AZSA & Co.





Osaka, Japan

May 18, 2005



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MATSUSHITA ELECTRIC INDUSTRIAL CO., LTD.

AND SUBSIDIARIES



Consolidated Balance Sheets



March 31, 2005 and 2004



|                                               |  |                |   |  |           |  
|---------------------------------------------- |  | -------------- | - |  | --------- | -
|                                               |  | Yen (millions) |  
|Assets                                         |  | 2005           |   |  | 2004      |  
|Current assets:                                |  |                |   |  |           |  
|Cash and cash equivalents (Note 9)             |  | 1,169,756      |   |  | 1,275,014 |  
|Time deposits (Note 9)                         |  | 144,781        |   |  | 170,047   |  
|Short-term investments (Notes 5 and 18)        |  | 11,978         |   |  | 2,684     |  
|Trade receivables (Notes 6 and 9):             |  |                |   |  |           |  
|Related companies (Note 4)                     |  | 17,612         |   |  | 15,071    |  
|Notes                                          |  | 107,258        |   |  | 62,762    |  
|Accounts                                       |  | 1,170,704      |   |  | 1,037,707 |  
|Allowance for doubtful receivables             |  | (43,836        | ) |  | (47,873   | )
|                                               |  |                |   |  |           |  
|Net trade receivables                          |  | 1,251,738      |   |  | 1,067,667 |  
|                                               |  |                |   |  |           |  
|Inventories (Notes 3 and 9)                    |  | 893,425        |   |  | 777,540   |  
|Other current assets (Notes 7, 11 and 18)      |  | 558,854        |   |  | 482,025   |  
|                                               |  |                |   |  |           |  
|Total current assets                           |  | 4,030,532      |   |  | 3,774,977 |  
|                                               |  |                |   |  |           |  
|Noncurrent receivables (Note 6)                |  | 246,201        |   |  | 280,398   |  
|                                               |  |               
|Investments and advances (Notes 5 and 18):     |  |                |   |  |           |  
|Associated companies (Note 4)                  |  | 166,955        |   |  | 372,732   |  
|Other investments and advances                 |  | 979,550        |   |  | 864,695   |  
|                                               |  |                |   |  |           |  
|Total investments and advances                 |  | 1,146,505      |   |  | 1,237,427 |  
|                                               |  |                |   |  |           |  
|Property, plant and equipment (Notes 6 and 7): |  |                |   |  |           |  
|Land                                           |  | 393,635        |   |  | 251,419   |  
|Buildings                                      |  | 1,665,243      |   |  | 1,253,350 |  
|Machinery and equipment                        |  | 3,087,155      |   |  | 2,705,251 |  
|Construction in progress                       |  | 84,139         |   |  | 46,037    |  
|                                               |  |                |   |  |           |  
|                                               |  | 5,230,172      |   |  | 4,256,057 |  
|Less accumulated depreciation                  |  | 3,572,092      |   |  | 3,046,555 |  
|                                               |  |                |   |  |           |  
|Net property, plant and equipment              |  | 1,658,080      |   |  | 1,209,502 |  
|                                               |  |                |   |  |           |  
|Other assets:                                  |  |                |   |  |           |  
|Goodwill (Notes 2 and 8)                       |  | 461,912        |   |  | 418,907   |  
|Intangible assets (Notes 2 and 8)              |  | 101,585        |   |  | 73,099    |  
|Other assets (Notes 10 and 11)                 |  | 412,066        |   |  | 443,702   |  
|                                               |  |                |   |  |           |  
|Total other assets                             |  | 975,563        |   |  | 935,708   |  
|                                               |  |                |   |  |           |  
|                                               |  | 8,056,881      |   |  | 7,438,012 |  
|                                               |  |                |   |  |           |  



See
accompanying Notes to Consolidated Financial Statements.



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MATSUSHITA ELECTRIC INDUSTRIAL CO., LTD.

AND SUBSIDIARIES



Consolidated Balance Sheets



March 31, 2005 and 2004



|                                                                                                           |  |                |   |  |           |  
|---------------------------------------------------------------------------------------------------------- |  | -------------- | - |  | --------- | -
|                                                                                                           |  | Yen (millions) |  
|Liabilities and Stockholders Equity                                                                       |  | 2005           |   |  | 2004      |  
|Current liabilities:                                                                                       |  |                |   |  |           |  
|Short-term borrowings, including current portion of long-term debt (Notes 6, 9 and 18)                     |  | 385,474        |   |  | 290,208   |  
|Trade payables:                                                                                            |  |                |   |  |           |  
|Related companies (Note 4)                                                                                 |  | 30,121         |   |  | 41,325    |  
|Notes                                                                                                      |  | 37,099         |   |  | 36,162    |  
|Accounts                                                                                                   |  | 798,799        |   |  | 707,247   |  
|                                                                                                           |  |                |   |  |           |  
|Total trade payables                                                                                       |  | 866,019        |   |  | 784,734   |  
|                                                                                                           |  |                |   |  |           |  
|Accrued income taxes (Note 11)                                                                             |  | 47,916         |   |  | 44,179    |  
|Accrued payroll                                                                                            |  | 145,871        |   |  | 141,932   |  
|Other accrued expenses (Note 19)                                                                           |  | 789,999        |   |  | 696,741   |  
|Deposits and advances from customers                                                                       |  | 92,089         |   |  | 83,798    |  
|Employees deposits                                                                                        |  | 118,441        |   |  | 124,800   |  
|Other current liabilities (Notes 11 and 18)                                                                |  | 383,082        |   |  | 403,394   |  
|                                                                                                           |  |                |   |  |           |  
|Total current liabilities                                                                                  |  | 2,828,891      |   |  | 2,569,786 |  
|                                                                                                           |  |                |   |  |           |  
|Noncurrent liabilities:                                                                                    |  |                |   |  |           |  
|Long-term debt (Notes 6, 9 and 18)                                                                         |  | 477,143        |   |  | 460,639   |  
|Retirement and severance benefits (Note 10)                                                                |  | 597,163        |   |  | 801,199   |  
|Other liabilities (Note 11)                                                                                |  | 113,491        |   |  | 26,697    |  
|                                                                                                           |  |                |   |  |           |  
|Total noncurrent liabilities                                                                               |  | 1,187,797      |   |  | 1,288,535 |  
|                                                                                                           |  |                |   |  |           |  
|Minority interests                                                                                         |  | 495,941        |   |  | 128,115   |  
|                                                                                                           |  |               
|Stockholders equity:                                                                                      |  |                |   |  |           |  
|Common stock (Note 12):                                                                                    |  |                |   |  |           |  
|Authorized   - 4,950,000,000 shares Issued           - 2,453,053,497 shares (2,453,053,497 shares in
2004) |  | 258,740        |   |  | 258,740   |  
|Capital surplus (Note 12)                                                                                  |  | 1,230,701      |   |  | 1,230,476 |  
|Legal reserve (Note 12)                                                                                    |  | 87,838         |   |  | 83,175    |  
|Retained earnings (Note 12)                                                                                |  | 2,461,071      |   |  | 2,442,504 |  
|Accumulated other comprehensive income (loss) (Notes 5, 10, 13 and 17):                                    |  |                |   |  |           |  
|Cumulative translation adjustments                                                                         |  | (245,642       | ) |  | (282,287  | )
|Unrealized holding gains of available-for-sale securities                                                  |  | 72,608         |   |  | 88,104    |  
|Unrealized gains of derivative instruments                                                                 |  | 6,403          |   |  | 6,676     |  
|Minimum pension liability adjustments                                                                      |  | (71,746        | ) |  | (211,995  | )
|                                                                                                           |  |                |   |  |           |  
|Total accumulated other comprehensive income (loss)                                                        |  | (238,377       | ) |  | (399,502  | )
|                                                                                                           |  |                |   |  |           |  
|Treasury stock, at cost (Note 12):                                                                         |  |                |   |  |           |  
|194,695,787 shares (134,645,885 shares in 2004)                                                            |  | (255,721       | ) |  | (163,817  | )
|                                                                                                           |  |                |   |  |           |  
|Total stockholders equity                                                                                 |  | 3,544,252      |   |  | 3,451,576 |  
|                                                                                                           |  |               
|Commitments and contingent liabilities (Note 19)                                                           |  |                |   |  |           |  
|                                                                                                           |  |                |   |  |           |  
|                                                                                                           |  | 8,056,881      |   |  | 7,438,012 |  
|                                                                                                           |  |                |   |  |           |  



See
accompanying Notes to Consolidated Financial Statements.



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MATSUSHITA ELECTRIC INDUSTRIAL CO., LTD.

AND SUBSIDIARIES



Consolidated Statements of Operations



Years ended March 31, 2005, 2004 and 2003



|                                                                                                     |  |                |   |  |            |   |  |            |  
|---------------------------------------------------------------------------------------------------- |  | -------------- | - |  | ---------- | - |  | ---------- | -
|                                                                                                     |  | Yen (millions) |  
|                                                                                                     |  | 2005           |   |  | 2004       |   |  | 2003       |  
|Revenues, costs and expenses:                                                                        |  |                |   |  |            |   |  |            |  
|Net sales:                                                                                           |  |                |   |  |            |   |  |            |  
|Related companies (Note 4)                                                                           |  | 192,489        |   |  | 179,270    |   |  | 150,920    |  
|Other                                                                                                |  | 8,521,147      |   |  | 7,300,474  |   |  | 7,250,794  |  
|                                                                                                     |  |                |   |  |            |   |  |            |  
|Total net sales                                                                                      |  | 8,713,636      |   |  | 7,479,744  |   |  | 7,401,714  |  
|Cost of sales (Notes 4 and 16)                                                                       |  | (6,176,046     | ) |  | (5,313,065 | ) |  | (5,323,605 | )
|Selling, general and administrative expenses (Note 16)                                               |  | (2,229,096     | ) |  | (1,971,187 | ) |  | (1,951,538 | )
|                                                                                                     |  |                |  
|Interest income                                                                                      |  | 19,490         |   |  | 19,564     |   |  | 22,267     |  
|Dividends received                                                                                   |  | 5,383          |   |  | 5,475      |   |  | 4,506      |  
|Gain from the transfer of the substitutional portion of Japanese Welfare Pension Insurance (Note 10) |  | 31,509         |   |  | 72,228     |   |  |           |  
|Other income (Notes 5, 6, 16 and 17)                                                                 |  | 82,819         |   |  | 59,544     |   |  | 64,677     |  
|Interest expense                                                                                     |  | (22,827        | ) |  | (27,744    | ) |  | (32,805    | )
|Other deductions (Notes 4, 5, 7, 8, 15, 16 and 17)                                                   |  | (177,955       | ) |  | (153,737   | ) |  | (116,300   | )
|                                                                                                     |  |                |   |  |            |   |  |            |  
|Income before income taxes                                                                           |  | 246,913        |   |  | 170,822    |   |  | 68,916     |  
|                                                                                                     |  |                |  
|Provision for income taxes (Note 11):                                                                |  |                |   |  |            |   |  |            |  
|Current                                                                                              |  | 96,529         |   |  | 77,375     |   |  | 51,704     |  
|Deferred                                                                                             |  | 56,805         |   |  | 21,160     |   |  | 19,572     |  
|                                                                                                     |  |                |   |  |            |   |  |            |  
|                                                                                                     |  | 153,334        |   |  | 98,535     |   |  | 71,276     |  
|                                                                                                     |  |                |   |  |            |   |  |            |  
|Income (loss) before minority interests and equity in losses of associated companies                 |  | 93,579         |   |  | 72,287     |   |  | (2,360     | )
|                                                                                                     |  |                |  
|Minority interests                                                                                   |  | 27,719         |   |  | 19,618     |   |  | 5,505      |  
|                                                                                                     |  |                |  
|Equity in losses of associated companies (Note 4)                                                    |  | (7,379         | ) |  | (10,524    | ) |  | (11,588    | )
|                                                                                                     |  |                |   |  |            |   |  |            |  
|Net income (loss)                                                                                    |  | 58,481         |   |  | 42,145     |   |  | (19,453    | )
|                                                                                                     |  |                |   |  |            |   |  |            |  
|                                                                                                     | 
|                                                                                                     |  | Yen            |  
|Net income (loss) per share of common stock (Note 14):                                               |  |                |   |  |            |   |  |            |  
|Basic                                                                                                |  | 25.49          |   |  | 18.15      |   |  | (8.70      | )
|Diluted                                                                                              |  | 25.49          |   |  | 18.00      |   |  | (8.70      | )



See accompanying Notes to Consolidated
Financial Statements.



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##### Table of Contents

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MATSUSHITA ELECTRIC INDUSTRIAL CO., LTD.

AND SUBSIDIARIES



Consolidated Statements of Stockholders Equity



Years ended March 31, 2005, 2004 and 2003



|                                                              |  |                |   |  |           |   |  |           |  
|------------------------------------------------------------- |  | -------------- | - |  | --------- | - |  | --------- | -
|                                                              |  | Yen (millions) |  
|                                                              |  | 2005           |   |  | 2004      |   |  | 2003      |  
|Common stock (Notes 12 and 16):                               |  |                |   |  |           |   |  |           |  
|Balance at beginning of year                                  |  | 258,740        |   |  | 258,738   |   |  | 258,737   |  
|Issuance of common stock for conversion of bonds              |  |               |   |  | 2         |   |  | 1         |  
|                                                              |  |                |   |  |           |   |  |           |  
|Balance at end of year                                        |  | 258,740        |   |  | 258,740   |   |  | 258,738   |  
|                                                              |  |                |   |  |           |   |  |           |  
|Capital surplus (Notes 12 and 16):                            |  |                |   |  |           |   |  |           |  
|Balance at beginning of year                                  |  | 1,230,476      |   |  | 1,219,686 |   |  | 682,848   |  
|Issuance of common stock for conversion of bonds              |  |               |   |  | 2         |   |  | 1         |  
|Treasury stock provided for conversion of bonds               |  |               |   |  | 4,209     |   |  |          |  
|Stock issued under exchange offering (Note 2)                 |  |               |   |  | 6,579     |   |  | 537,487   |  
|Sale of treasury stock                                        |  | 225            |   |  |          |   |  |          |  
|Capital transactions by consolidated and associated companies |  |               |   |  |          |   |  | (650      | )
|                                                              |  |                |   |  |           |   |  |           |  
|Balance at end of year                                        |  | 1,230,701      |   |  | 1,230,476 |   |  | 1,219,686 |  
|                                                              |  |                |   |  |           |   |  |           |  
|Legal reserve (Note 12):                                      |  |                |   |  |           |   |  |           |  
|Balance at beginning of year                                  |  | 83,175         |   |  | 80,700    |   |  | 82,647    |  
|Transfer from (to) retained earnings                          |  | 4,663          |   |  | 2,475     |   |  | (1,947    | )
|                                                              |  |                |   |  |           |   |  |           |  
|Balance at end of year                                        |  | 87,838         |   |  | 83,175    |   |  | 80,700    |  
|                                                              |  |                |   |  |           |   |  |           |  
|Retained earnings (Note 12):                                  |  |                |   |  |           |   |  |           |  
|Balance at beginning of year                                  |  | 2,442,504      |   |  | 2,432,052 |   |  | 2,470,356 |  
|Net income (loss)                                             |  | 58,481         |   |  | 42,145    |   |  | (19,453   | )
|Cash dividends                                                |  | (35,251        | ) |  | (29,218   | ) |  | (20,798   | )
|Transfer from (to) legal reserve                              |  | (4,663         | ) |  | (2,475    | ) |  | 1,947     |  
|                                                              |  |                |   |  |           |   |  |           |  
|Balance at end of year                                        |  | 2,461,071      |   |  | 2,442,504 |   |  | 2,432,052 |  
|                                                              |  |                |   |  |           |   |  |           |  
|Accumulated other comprehensive income (loss) (Note 13):      |  |                |   |  |           |   |  |           |  
|Balance at beginning of year                                  |  | (399,502       | ) |  | (705,642  | ) |  | (154,543  | )
|Other comprehensive income (loss), net of tax                 |  | 161,125        |   |  | 306,140   |   |  | (551,099  | )
|                                                              |  |                |   |  |           |   |  |           |  
|Balance at end of year                                        |  | (238,377       | ) |  | (399,502  | ) |  | (705,642  | )
|                                                              |  |                |   |  |           |   |  |           |  



(Continued)



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##### Table of Contents

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MATSUSHITA ELECTRIC INDUSTRIAL CO., LTD.

AND SUBSIDIARIES



Consolidated Statements of Stockholders Equity



Years ended March 31, 2005, 2004 and 2003



|                                                                                                            |  |                |   |  |          |   |  |          |  
|----------------------------------------------------------------------------------------------------------- |  | -------------- | - |  | -------- | - |  | -------- | -
|                                                                                                            |  | Yen (millions) |  
|                                                                                                            |  | 2005           |   |  | 2004     |   |  | 2003     |  
|Treasury stock (Note 12):                                                                                   |  |                |   |  |          |   |  |          |  
|Balance at beginning of year                                                                                |  | (163,817       | ) |  | (107,134 | ) |  | (92,185  | )
|Treasury stock acquired due to acquisition of additional shares of newly consolidated subsidiaries (Note 2) |  | (124           | ) |  |         |   |  |         |  
|Repurchase of common stock                                                                                  |  | (92,879        | ) |  | (69,394  | ) |  | (115,770 | )
|Stock exchanged under exchange offering (Note 2)                                                            |  |               |   |  |         |   |  | 100,821  |  
|Sale of treasury stock                                                                                      |  | 1,099          |   |  |         |   |  |         |  
|Conversion of bonds                                                                                         |  |               |   |  | 12,711   |   |  |         |  
|                                                                                                            |  |                |   |  |          |   |  |          |  
|Balance at end of year                                                                                      |  | (255,721       | ) |  | (163,817 | ) |  | (107,134 | )
|                                                                                                            |  |                |   |  |          |   |  |          |  
|Disclosure of comprehensive income (loss) (Note 13):                                                        |  |                |   |  |          |   |  |          |  
|Net income (loss)                                                                                           |  | 58,481         |   |  | 42,145   |   |  | (19,453  | )
|Other comprehensive income (loss), net of tax:                                                              |  |                |   |  |          |   |  |          |  
|Translation adjustments                                                                                     |  | 36,645         |   |  | (121,163 | ) |  | (106,003 | )
|Unrealized holding gains (losses) of available-for-sale securities                                          |  | (15,496        | ) |  | 106,186  |   |  | (68,894  | )
|Unrealized gains (losses) of derivative instruments                                                         |  | (273           | ) |  | 7,766    |   |  | (1,218   | )
|Minimum pension liability adjustments                                                                       |  | 140,249        |   |  | 313,351  |   |  | (374,984 | )
|                                                                                                            |  |                |   |  |          |   |  |          |  
|Total comprehensive income (loss)                                                                           |  | 219,606        |   |  | 348,285  |   |  | (570,552 | )
|                                                                                                            |  |                |   |  |          |   |  |          |  



See accompanying Notes to Consolidated
Financial Statements.



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MATSUSHITA ELECTRIC INDUSTRIAL CO., LTD.

AND SUBSIDIARIES



Consolidated Statements of Cash Flows



Years ended March 31, 2005, 2004 and 2003



|                                                                                                     |  |                |   |  |          |   |  |          |  
|---------------------------------------------------------------------------------------------------- |  | -------------- | - |  | -------- | - |  | -------- | -
|                                                                                                     |  | Yen (millions) |  
|                                                                                                     |  | 2005           |   |  | 2004     |   |  | 2003     |  
|Cash flows from operating activities (Note 16):                                                      |  |                |   |  |          |   |  |          |  
|Net income (loss)                                                                                    |  | 58,481         |   |  | 42,145   |   |  | (19,453  | )
|Adjustments to reconcile net income (loss) to net cash provided by operating activities:             |  |                |   |  |          |   |  |          |  
|Depreciation and amortization                                                                        |  | 325,465        |   |  | 278,177  |   |  | 302,141  |  
|Net gain on sale of investments                                                                      |  | (31,399        | ) |  | (11,327  | ) |  | (93      | )
|Provision for doubtful receivables                                                                   |  | 4,963          |   |  | 3,154    |   |  | 17,621   |  
|Deferred income taxes                                                                                |  | 56,805         |   |  | 21,160   |   |  | 19,572   |  
|Write-down of investment securities (Notes 4 and 5)                                                  |  | 16,186         |   |  | 52,492   |   |  | 52,611   |  
|Impairment loss on long-lived assets (Notes 7 and 8)                                                 |  | 29,519         |   |  | 11,666   |   |  | 2,375    |  
|Minority interests                                                                                   |  | 27,719         |   |  | 19,618   |   |  | 5,505    |  
|(Increase) decrease in trade receivables                                                             |  | 61,207         |   |  | 35,248   |   |  | (72,604  | )
|(Increase) decrease in inventories                                                                   |  | 84,405         |   |  | (37,016  | ) |  | 82,573   |  
|(Increase) decrease in other current assets                                                          |  | 14,649         |   |  | 13,450   |   |  | 27,996   |  
|Increase (decrease) in trade payables                                                                |  | (74,276        | ) |  | 87,226   |   |  | 162,378  |  
|Increase (decrease) in accrued income taxes                                                          |  | (3,422         | ) |  | 12,254   |   |  | 4,960    |  
|Increase (decrease) in accrued expenses and other current liabilities                                |  | (10,736        | ) |  | 10,782   |   |  | 79,252   |  
|Increase (decrease) in retirement and severance benefits                                             |  | (99,499        | ) |  | (67,332  | ) |  | 16,622   |  
|Other                                                                                                |  | 18,368         |   |  | 17,435   |   |  | 16,861   |  
|                                                                                                     |  |                |   |  |          |   |  |          |  
|Net cash provided by operating activities                                                            |  | 478,435        |   |  | 489,132  |   |  | 698,317  |  
|                                                                                                     |  |                |   |  |          |   |  |          |  
|Cash flows from investing activities (Note 16):                                                      |  |                |   |  |          |   |  |          |  
|Proceeds from sale of short-term investments                                                         |  | 6,117          |   |  |         |   |  | 10,523   |  
|Purchase of short-term investments                                                                   |  | (9,001         | ) |  | (702     | ) |  |         |  
|Proceeds from disposition of investments and advances                                                |  | 101,374        |   |  | 68,468   |   |  | 121,001  |  
|Increase in investments and advances                                                                 |  | (133,636       | ) |  | (207,869 | ) |  | (80,774  | )
|Capital expenditures                                                                                 |  | (352,203       | ) |  | (275,544 | ) |  | (246,603 | )
|Proceeds from disposals of property, plant and equipment                                             |  | 78,131         |   |  | 113,008  |   |  | 58,270   |  
|(Increase) decrease in finance receivables                                                           |  | 26,823         |   |  | 30,697   |   |  | 29,158   |  
|(Increase) decrease in time deposits                                                                 |  | 27,748         |   |  | 202,808  |   |  | 96,371   |  
|Inflows due to acquisition of additional shares of newly consolidated subsidiaries, net of cash paid |  | 82,208         |   |  |         |   |  |         |  
|Other                                                                                                |  | (5,857         | ) |  | (16,311  | ) |  | 877      |  
|                                                                                                     |  |                |   |  |          |   |  |          |  
|Net cash used in investing activities                                                                |  | (178,296       | ) |  | (85,445  | ) |  | (11,177  | )
|                                                                                                     |  |                |   |  |          |   |  |          |  



(Continued)



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MATSUSHITA ELECTRIC INDUSTRIAL CO., LTD.

AND SUBSIDIARIES



Consolidated Statements of Cash Flows



Years ended March 31, 2005, 2004 and 2003



|                                                                          |  |                |   |  |           |   |  |           |  
|------------------------------------------------------------------------- |  | -------------- | - |  | --------- | - |  | --------- | -
|                                                                          |  | Yen (millions) |  
|                                                                          |  | 2005           |   |  | 2004      |   |  | 2003      |  
|Cash flows from financing activities (Note 16):                           |  |                |   |  |           |   |  |           |  
|Decrease in short-term borrowings                                         |  | (8,009         | ) |  | (39,577   | ) |  | (106,630  | )
|Increase (decrease) in deposits and advances from customers and employees |  | (139,134       | ) |  | (15,787   | ) |  | (20,589   | )
|Proceeds from long-term debt                                              |  | 119,422        |   |  | 108,026   |   |  | 122,288   |  
|Repayments of long-term debt                                              |  | (251,554       | ) |  | (228,039  | ) |  | (293,088  | )
|Dividends paid                                                            |  | (35,251        | ) |  | (29,218   | ) |  | (20,798   | )
|Dividends paid to minority interests                                      |  | (14,765        | ) |  | (4,675    | ) |  | (8,267    | )
|Repurchase of common stock (Note 12)                                      |  | (92,879        | ) |  | (69,394   | ) |  | (115,770  | )
|Sale of treasury stock (Note 12)                                          |  | 1,324          |   |  |          |   |  |          |  
|Other                                                                     |  | 1,395          |   |  | 5,963     |   |  |          |  
|                                                                          |  |                |   |  |           |   |  |           |  
|Net cash used in financing activities                                     |  | (419,451       | ) |  | (272,701  | ) |  | (442,854  | )
|                                                                          |  |                |   |  |           |   |  |           |  
|Effect of exchange rate changes on cash and cash equivalents              |  | 14,054         |   |  | (23,442   | ) |  | (9,948    | )
|                                                                          |  |                |   |  |           |   |  |           |  
|Net increase (decrease) in cash and cash equivalents                      |  | (105,258       | ) |  | 107,544   |   |  | 234,338   |  
|                                                                          |  |                |  
|Cash and cash equivalents at beginning of year                            |  | 1,275,014      |   |  | 1,167,470 |   |  | 933,132   |  
|                                                                          |  |                |   |  |           |   |  |           |  
|Cash and cash equivalents at end of year                                  |  | 1,169,756      |   |  | 1,275,014 |   |  | 1,167,470 |  
|                                                                          |  |                |   |  |           |   |  |           |  



See accompanying Notes to Consolidated
Financial Statements.



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MATSUSHITA ELECTRIC INDUSTRIAL CO., LTD.

AND SUBSIDIARIES



Notes to Consolidated Financial Statements



March 31, 2005, 2004 and 2003



|(1) | Summary of Significant Accounting Policies
|--- | ------------------------------------------



| | (a) | Description of Business
| | --- | -----------------------



Matsushita Electric Industrial Co., Ltd. (hereinafter, the Company, including consolidated subsidiaries, unless the context otherwise
requires) is one of the worlds leading producers of electronic and electric products. The Company currently offers a comprehensive range of products, systems and components for consumer, business and industrial use based on sophisticated
electronics and precision technology, expanding to building materials and equipment, and housing business. Most of the Companys products are marketed under Panasonic and several other trade names, including National,
Technics, Quasar, Victor, JVC and PanaHome.



Sales in fiscal 2005 were categorized as follows: AVC Networks41%, Home Appliances14%, Components and Devices13%, MEW and
PanaHome*17%, JVC8%, and Other7%. A sales breakdown in fiscal 2005 by geographical market was as follows: Japan53%, North and South America14%, Europe13%, and Asia and Others20%.



The Company is not dependent on a single supplier, and has no significant
difficulty in obtaining raw materials from suppliers.



| | * | MEW stands for Matsushita Electric Works, Ltd. and PanaHome stands for PanaHome Corporation.
| | - | --------------------------------------------------------------------------------------------



| | (b) | Basis of Presentation of Consolidated Financial Statements
| | --- | ----------------------------------------------------------



The Company and its domestic subsidiaries maintain their books of account in conformity with financial accounting standards of Japan, and its foreign
subsidiaries in conformity with those of the countries of their domicile.



The consolidated financial statements presented herein have been prepared in a manner and reflect the adjustments which are necessary to conform with U.S. generally accepted accounting principles.



| | (c) | Principles of Consolidation
| | --- | ---------------------------



The consolidated financial statements include the accounts of the Company and its majority-owned, controlled subsidiaries. The Company also consolidates
entities in which controlling interest exists through variable interests in accordance with Financial Accounting Standards Board (FASB) Interpretation No. 46 (revised December 2003), Consolidation of Variable Interest Entities (FIN 46R).
The Company currently does not have any variable interest entities to be consolidated.



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MATSUSHITA ELECTRIC INDUSTRIAL CO., LTD.

AND SUBSIDIARIES



Notes to Consolidated Financial Statements



| | (d) | Revenue Recognition
| | --- | -------------------



The Company generates revenue principally through the sale of consumer and industrial products, equipment, and supplies. The Company recognizes revenue
when persuasive evidence of an arrangement exists, delivery has occurred, and title and risk of loss have been transferred to the customer or services have been rendered, the sales price is fixed or determinable, and collectibility is reasonably
assured.



Revenue from sales of products is generally
recognized when the products are received by customers. Revenue from sales of certain products with customer acceptance provisions related to their functionality is recognized when the product is received by the customer and the specific criteria of
the product functionality are successfully tested and demonstrated.



The Company enters into arrangements with multiple elements, which may include any combination of products, equipment, installment and maintenance. The Company allocates revenue to each element based on its relative fair value if such
element meets the criteria for treatment as a separate unit of accounting as prescribed in the Emerging Issues Task Force (EITF) Issue 00-21, Revenue Arrangements with Multiple Deliverables (EITF 00-21). EITF 00-21 was effective for
revenue arrangements entered into after June 30, 2003. EITF 00-21 did not have a material effect on the accompanying consolidated financial statements.



The Companys policy is to accept product returns only in the case that the products are defective. The Company issues contractual product
warranties under which it guarantees the performance of products delivered and services rendered for a certain period of time. A liability for the estimated product warranty related cost is established at the time revenue is recognized, and is
included in Other accrued expenses. Estimates for accrued warranty cost are primarily based on historical experience and current information on repair cost.



Historically the Company has made certain allowances related to sales to its consumer business distributors. Such
allowances are generally provided to compensate the distributors for a decline in the products value, and are classified as a reduction of revenue on the consolidated statements of operations. Estimated price adjustments are accrued when the
related sales are recognized. The estimate is made based primarily on the historical experience or specific arrangements made with the distributors.



The Company also occasionally offers incentive programs to its distributors in the form of rebates. These rebates are accrued at the later of the date at
which the related revenue is recognized or the date at which the incentive is offered, and are recorded as reductions of sales in accordance with EITF 01-09, Accounting for Consideration Given by a Vendor to a Customer (Including a Reseller of
the Vendors Products).



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MATSUSHITA ELECTRIC INDUSTRIAL CO., LTD.

AND SUBSIDIARIES



Notes to Consolidated Financial Statements



| | (e) | Leases (See Note 6)
| | --- | -------------------



A subsidiary of the Company leases machinery and equipment. Leases of such assets are principally accounted for as direct financing leases and included
in Trade receivablesAccounts and Noncurrent receivables in the accompanying consolidated balance sheets.



| | (f) | Inventories (See Note 3)
| | --- | ------------------------



Finished goods and work in process are stated at the lower of cost (average) or market. Raw materials are stated at cost, principally on a first-in,
first-out basis, not in excess of current replacement cost.



| | (g) | Foreign Currency Translation (See Note 13)
| | --- | ------------------------------------------



Foreign currency financial statements are translated in accordance with Statement of Financial Accounting Standards (SFAS) No. 52, Foreign Currency
Translation, under which all assets and liabilities are translated into yen at year-end rates and income and expense accounts are translated at weighted-average rates. Adjustments resulting from the translation of financial statements are
reflected under the caption, Accumulated other comprehensive income (loss), a separate component of stockholders equity.



| | (h) | Property, Plant and Equipment
| | --- | -----------------------------



Property, plant and equipment is stated at cost. Depreciation is computed primarily using the declining balance method based on the following
estimated useful lives:



|                                                                                 |  |              
|-------------------------------------------------------------------------------- |  | -------------
|Buildings ...................................................................... |  | 5 to 50 years
|Machinery and equipment ............................................             |  | 2 to 10 years



| | (i) | Goodwill and Other Intangible assets (See Note 8)
| | --- | -------------------------------------------------



Goodwill represents the excess of costs over the fair value of net assets of businesses acquired. The Company adopted the provisions of SFAS No. 142,
Goodwill and Other Intangible Assets, from the fiscal year beginning April 1, 2002. Goodwill and intangible assets acquired in a purchase business combination and determined to have an indefinite useful life are not amortized, and are
instead tested for impairment at least annually in accordance with the provisions of SFAS No. 142. SFAS No. 142 also requires that intangible assets with estimable useful lives be amortized over their respective estimated useful lives to their
estimated residual values, and reviewed for impairment in accordance with SFAS No. 144, Accounting for Impairment or Disposal of Long-Lived Assets. SFAS No. 142 required the Company to perform an assessment of whether there was an
indication that goodwill is impaired as of the date of adoption. The results of this assessment did not require the Company to recognize an impairment loss.



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MATSUSHITA ELECTRIC INDUSTRIAL CO., LTD.

AND SUBSIDIARIES



Notes to Consolidated Financial Statements



| | (j) | Investmentsand Advances(See Notes 4, 5 and 13)
| | --- | ----------------------------------------------



Investments and advances primarily consist of investments in and advances to associated companies, cost method investments, available-for-sale
securities, and long-term deposits. Cost method investments and long-term deposits are recorded at historical cost.



The equity method is used to account for investments in associated companies in which the Company exerts significant influence, generally having a 20% to
50% ownership interest, and corporate joint ventures. The Company also uses the equity method for some subsidiaries if the minority shareholders have substantive participating rights. Under the equity method of accounting, investments are stated at
their underlying net equity value after elimination of intercompany profits. The cost method is used when the Company does not have significant influence.



The excess of cost of the stock of the associated companies over the Companys share of their net assets at the acquisition date, included in the
equity investment balance, was recognized as goodwill. Such equity method goodwill is not being amortized and is instead tested for impairment, in accordance with SFAS No. 142.



The Company accounts for debt and equity securities in accordance with SFAS No. 115, Accounting for Certain
Investments in Debt and Equity Securities.



SFAS No. 115
requires that certain investments in debt and equity securities be classified as held-to-maturity, trading, or available-for-sale securities. The Company classifies its existing marketable equity securities other than investments in associated
companies and all debt securities as available-for-sale. Available-for-sale securities are carried at fair value with unrealized holding gains or losses included as a component of accumulated other comprehensive income (loss), net of applicable
taxes.



Realized gains and losses are determined on the
average cost method and reflected in earnings.



On a
continuous basis, but no less frequently than at the end of each semi-annual period, the Company evaluates the carrying amount of each of the investments in associated companies, cost method investments and available-for-sale securities for possible
impairment. Factors considered in assessing whether an indication of other-than-temporary impairment exists include the period of time the fair value has been below the carrying amount or cost basis of investment, financial condition and prospects
of each investee, and other relevant factors.



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MATSUSHITA ELECTRIC INDUSTRIAL CO., LTD.

AND SUBSIDIARIES



Notes to Consolidated Financial Statements



Investments in associated companies, cost method investments and available-for-sale securities are reduced to fair value by a charge to earnings when impairment is considered to be other than temporary. Impairment is
measured based on the amount by which the carrying amount or cost basis of the investment exceeds its fair value. Fair value is determined based on quoted market prices, discounted cash flows or other valuation techniques as appropriate.



| | (k) | Income Taxes (See Note 11)
| | --- | --------------------------



Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences
attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases, and operating loss and tax credit carryforwards.



Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that
includes the enactment date.



| | (l) | Advertising (See Note 16)
| | --- | -------------------------



Advertising costs are expensed as incurred.



| | (m) | Net Income (Loss) per Share (See Notes 9, 12 and 14)
| | --- | ----------------------------------------------------



The Company accounts for net income (loss) per share in accordance with SFAS No. 128, Earnings per Share. This Statement establishes
standards for computing net income (loss) per share and requires dual presentation of basic and diluted net income (loss) per share on the face of the statements of operations for all entities with complex capital structures.



Under SFAS No. 128, basic net income (loss) per share is computed based on
the weighted-average number of common shares outstanding during each period, and diluted net income per share assumes the dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock
or resulted in the issuance of common stock.



| | (n) | Cash Equivalents
| | --- | ----------------



Cash equivalents include all highly liquid debt instruments purchased with a maturity of three months or less.



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MATSUSHITA ELECTRIC INDUSTRIAL CO., LTD.

AND SUBSIDIARIES



Notes to Consolidated Financial Statements



| | (o) | Derivative Financial Instruments (See Notes 17 and 18)
| | --- | ------------------------------------------------------



Derivative financial instruments utilized by the Company are comprised principally of foreign exchange contracts, interest rate swaps, cross currency
swaps and commodity futures used to hedge currency risk, interest rate risk and commodity price risk.



The Company accounts for derivative instruments in accordance with SFAS No. 133, Accounting for Derivative Instruments and Hedging
Activities, as amended. The Company recognizes derivatives in the consolidated balance sheets at their fair value in Other current assets, Other assets, Other current liabilities or Other
liabilities. On the date the derivative contract is entered into, the Company designates the derivative as either a hedge of the fair value of a recognized asset or liability or of an unrecognized firm commitment (fair-value
hedge), a hedge of a forecasted transaction or of the variability of cash flows to be received or paid related to a recognized asset or liability (cash-flow hedge), or a foreign-currency fair-value or cash-flow hedge
(foreign-currency hedge). The Company formally documents all relationships between hedging instruments and hedged items, as well as its risk-management objective and strategy for undertaking various hedge transactions. The Company also
formally assesses, both at the hedges inception and on an ongoing basis, whether the derivatives that are used in hedging transactions are highly effective in offsetting changes in fair values or cash flows of hedged items.



Changes in the fair value of a derivative that is highly effective and that
is designated and qualifies as a fair-value hedge, along with the loss or gain on the hedged asset or liability or unrecognized firm commitment of the hedged item that is attributable to the hedged risk, are recorded in earnings. Changes in the fair
value of a derivative that is highly effective and that is designated and qualifies as a cash-flow hedge are recorded in other comprehensive income (loss), until earnings are affected by the variability in cash flows of the designated hedged item.
Changes in the fair value of derivatives that are highly effective as hedges and that are designated and qualify as foreign-currency hedges are recorded in either earnings or other comprehensive income (loss), depending on whether the hedge
transaction is a fair-value hedge or a cash-flow hedge. The ineffective portion of the change in fair value of a derivative instrument that qualifies as either a fair-value hedge or a cash-flow hedge is reported in earnings.



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MATSUSHITA ELECTRIC INDUSTRIAL CO., LTD.

AND SUBSIDIARIES



Notes to Consolidated Financial Statements



| | (p) | Impairment of Long-Lived Assets (See Note 7)
| | --- | --------------------------------------------



The Company accounts for impairment or disposition of long-lived assets in accordance with SFAS No. 144. In accordance with SFAS No. 144, long-lived
assets, such as property, plant and equipment, and purchased intangibles subject to amortization, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.
Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated
future cash flows, an impairment charge is recognized for the amount by which the carrying amount of the asset exceeds the fair value of the asset.



| | (q) | Restructuring Charges (See Note 15)
| | --- | -----------------------------------



In June 2002, FASB issued SFAS No. 146, Accounting for Costs Associated with Exit or Disposal Activities. SFAS No. 146 addresses financial
accounting and reporting for costs associated with exit or disposal activities and nullifies EITF 94-3, Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity. The provisions of this Statement
are effective for exit or disposal activities that are initiated after December 31, 2002. The Company adopted SFAS No. 146 on January 1, 2003. Pursuant to SFAS No. 146, liabilities for restructuring costs are recognized when the liability is
incurred, which may be subsequent to the date when the Company has committed to a restructuring plan. The adoption of SFAS No. 146 did not have a material effect on the Companys consolidated financial statements.



| | (r) | Stock-Based Compensation (See Note 12)
| | --- | --------------------------------------



SFAS No. 123 Accounting for Stock-Based Compensation, and SFAS No. 148, Accounting for Stock-Based CompensationTransition and
Disclosure, an amendment of SFAS No. 123, established accounting and disclosure requirements using a fair-value-based method of accounting for stock-based employee compensation plans.



As permitted by existing accounting standards, the Company has elected to
continue to apply the intrinsic-based-method of accounting prescribed by Accounting Principles Board (APB) Opinion No. 25, Accounting for Stock Issued to Employees, and related interpretations to account for its stock option plans
described in Note 12, and has adopted only the disclosure requirements of SFAS No. 123, as amended.



As the option price at the date of grant exceeded the fair market value of common stock, no compensation costs have been recognized in connection with
the plans.



If the accounting provision of SFAS No. 123, as
amended, had been adopted, the impact on the Companys net income (loss) for the three years March 31, 2005 would not be material.



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MATSUSHITA ELECTRIC INDUSTRIAL CO., LTD.

AND SUBSIDIARIES



Notes to Consolidated Financial Statements



| | (s) | Use of Estimates
| | --- | ----------------



Management of the Company has made a number of estimates and assumptions relating to the reporting of assets and liabilities and the disclosure of
contingent assets and liabilities to prepare these financial statements in conformity with generally accepted accounting principles. Actual results could differ from those estimates.



| | (t) | New Accounting Pronouncements
| | --- | -----------------------------



In December 2004, FASB issued SFAS No. 123 (revised 2004), Share-Based Payment (SFAS No. 123R), which addresses accounting for transactions
in which an entity exchanges its equity instruments for goods or services, with a primary focus on transactions in which an entity obtains employee services in share-based payment transactions. SFAS No. 123R is a revision to SFAS No. 123 and
supersedes APB Opinion No. 25 and its related implementation guidance. SFAS No. 123R will require measurement of the cost of employee services received in exchange for stock compensation based on the grant-date fair value of the employee stock
options. Incremental compensation costs arising from subsequent modifications of awards after the grant date must be recognized. SFAS No. 123R will be effective for the Company as of April 1, 2006. The application of SFAS No. 123R is not expected to
have a material effect.



In December 2004, FASB issued SFAS
No. 151, Inventory Costs, which clarifies the accounting for abnormal amounts of its idle facility expense, freight, handling costs, and wasted material (spoilage). Under SFAS No. 151, such items will be recognized as current-period
charges. In addition, SFAS No. 151 requires that allocation of fixed production overheads to the costs of conversion be based on the normal capacity of the production facilities. SFAS No. 151 will be effective for the Company for inventory costs
incurred on or after April 1, 2006. The Company is currently in the process of assessing the impact of the adoption of SFAS No. 151.



In December 2004, FASB issued SFAS No. 153, Exchanges of Nonmonetary Assets, which eliminates an exception in APB Opinion No. 29,
Accounting for Nonmonetary Transactions, for nonmonetary exchanges of similar productive assets and replaces it with a general exception for exchanges of nonmonetary assets that do not have commercial substance. SFAS No. 153 will be
effective for the Company for nonmonetary asset exchanges occurring on or after April 1, 2006. The Company is currently in the process of assessing the impact of the adoption of SFAS No. 153.



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MATSUSHITA ELECTRIC INDUSTRIAL CO., LTD.

AND SUBSIDIARIES



Notes to Consolidated Financial Statements



| | (u) | Reclassifications
| | --- | -----------------



Certain reclassifications have been made to the prior years consolidated financial statements and notes thereto to conform with the presentation
used for the year ended March 31, 2005.



|(2) | Acquisition
|--- | -----------



On April 1, 2004, the Company acquired 19.2% of the issued common shares of Matsushita Electric Works, Ltd. (MEW) through a tender offer to obtain its
controlling interest. Until then, the Company had a 31.8% equity ownership.



This acquisition also resulted in another acquisition of controlling interest of PanaHome Corporation (PanaHome) because both the Company and MEW have 27% equity ownership.



The results of operations of MEW and PanaHome are included in the
consolidated financial statements since that date. MEW is a manufacturer of household electric equipment, building products and related materials based in Osaka, Japan. As a result of the acquisition, the Company is expected to provide a
comprehensive range of home electric and household equipment and systems in Japan. It also expects to reduce costs through economies of scale and sharing of research and development resources and marketing channels. The aggregate purchase cost of
additional MEW shares was 147,187 million yen and was paid in cash. The carrying value of the Companys common shares of MEW immediately before the acquisition was 200,174 million yen. The carrying value of the Companys existing common
shares of PanaHome at April 1, 2004 was 22,861 million yen.



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MATSUSHITA ELECTRIC INDUSTRIAL CO., LTD.

AND SUBSIDIARIES



Notes to Consolidated Financial Statements



The purchase price of additional MEW shares has been allocated based upon the estimated fair value of the identifiable assets acquired and liabilities assumed at the date of acquisition. The excess of the purchase
price over fair value of net identifiable assets was allocated to goodwill. The Companys new basis of investments in MEW and PanaHome upon the acquisition of additional shares of MEW was 343,844 million yen, which consisted of the purchase
price of acquired shares and the carrying value of the existing shares, net of deferred tax liabilities of 26,378 million yen on the outside basis of existing shares that had been accounted for using the equity method. Such new basis of investments
in MEW and PanaHome was allocated as follows:



|                                    |  |               
|----------------------------------- |  | --------------
|                                    |  | Yen (millions)
|Cash and cash equivalents           |  | 226,911       
|Other current assets                |  | 431,633       
|Property, plant and equipment       |  | 440,584       
|Goodwill                            |  | 41,523        
|Intangible assets                   |  | 25,533        
|In-process research and development |  | 311           
|Other assets                        |  | 220,631       
|                                    |  |               
|Total assets acquired               |  | 1,387,126     
|                                    |  |               
|Current liabilities                 |  | 335,899       
|Noncurrent liabilities              |  | 419,803       
|                                    |  |               
|Total liabilities assumed           |  | 755,702       
|                                    |  |               
|Minority interests                  |  | 287,580       
|                                    |  |               
|Net assets acquired                 |  | 343,844       
|                                    |  |               



In-process research
and development represents the estimated value of in-process research and development projects that had not yet reached technical feasibility. The related technology had no alternative use and required substantial additional development by the
Company. In-process research and development was charged to operations during the year ended March 31, 2005 and included in selling, general and administrative expenses in the consolidated statements of operations.



Of the 25,533 million yen of acquired intangible asset, 20,005 million yen
was assigned to assets subject to amortization, which have a weighted-average useful life of approximately seven years and include technologies of 9,592 million yen with a 10-year weighted-average useful life, and software of 8,892 million yen with
a 5-year weighted-average useful life.



The total amount of
goodwill is included in MEW and PanaHome segment, and is not deductible for tax purposes.



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MATSUSHITA ELECTRIC INDUSTRIAL CO., LTD.

AND SUBSIDIARIES



Notes to Consolidated Financial Statements



The unaudited pro forma information shows the results of the Companys consolidated operations for the year ended March 31, 2004 as though MEW and PanaHome had been consolidated at the beginning of fiscal 2004.
The unaudited pro forma results include the unaudited historical operating results of MEW and PanaHome for the year ended March 31, 2004.



The unaudited pro forma data is not necessarily indicative of the Companys results of operations that would actually have been reported if the
transaction in fact had occurred on April 1, 2003, and is not necessarily representative of the Companys consolidated results of operations for any future period.



|                      |  |               
|--------------------- |  | --------------
|                      |  | Unaudited     
|                      |  | Yen (millions)
|                      |  | 2004          
|Net sales             |  | 8,771,836     
|Net income            |  | 49,129        
|                      | 
|                      |  | Yen           
|                      |  | 2004          
|Net income per share: |  |               
|Basic                 |  | 21.16         
|Diluted               |  | 20.94         



On October 1, 2002,
Matsushita Electric Industrial Co., Ltd. (MEI) transformed Matsushita Communication Industrial Co., Ltd. (MCI), Kyushu Matsushita Electric Co., Ltd. (KME), Matsushita Seiko Co., Ltd. (MSC), Matsushita Kotobuki Electric Industries, Ltd. (MKEI) and
Matsushita Graphic Communication Systems, Inc. (MGCS) into wholly owned subsidiaries, through share exchange transactions, in order to facilitate optimum Groupwide allocation of management resources, as well as enhance management speed. Prior to
these transactions, MEI owned 56.3%, 51.5%, 57.6%, 57.6% and 67.8% of common stock of MCI, KME, MSC, MKEI and MGCS, respectively. The share exchange ratios were one share of MCI, KME, MSC, MKEI and MGCS for 2.884, 0.576, 0.332, 0.833 and 0.538
shares of MEI, respectively. MEI provided 309,407,251 shares of newly issued common stock and 59,984,408 shares of its treasury stock to the minority shareholders.



These transactions were accounted for using the purchase method of accounting. The fair value of the acquired minority
interests was determined based on the weighted-average quoted market price of 1,728 yen per share of MEI for a few days before and after January 10, 2002 when the terms of the share exchanges were agreed to and announced.



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MATSUSHITA ELECTRIC INDUSTRIAL CO., LTD.

AND SUBSIDIARIES



Notes to Consolidated Financial Statements



Effects of the transactions to the consolidated balance sheet at October 1, 2002 are as follows:



|                                                       |  |                |  
|------------------------------------------------------ |  | -------------- | -
|                                                       |  | Yen (millions) |  
|Acquisition costs:                                     |  |                |  
|Fair value of shares provided to minority interests    |  | 638,308        |  
|Direct costs                                           |  | 424            |  
|                                                       |  |                |  
|Total acquisition costs                                |  | 638,732        |  
|                                                       | 
|Book value of acquired minority interests              |  | 336,763        |  
|                                                       |  |                |  
|Excess costs over the book value of minority interests |  | 301,969        |  
|                                                       |  |                |  
|Excess of costs allocated to:                          |  |                |  
|Current assets                                         |  | 1,216          |  
|Property, plant and equipment                          |  | 38,343         |  
|Other assets:                                          |  |                |  
|Goodwill                                               |  | 314,436        |  
|Intangible assets                                      |  | 610            |  
|Other assets                                           |  | 8,386          |  
|Noncurrent liabilities                                 |  | (61,022        | )
|                                                       |  |                |  
|                                                       |  | 301,969        |  
|                                                       |  |                |  



The amount of goodwill
by reportable segment recognized through the above transactions is as follows:



|                |  |               
|--------------- |  | --------------
|                |  | Yen (millions)
|AVC Networks    |  | 305,780       
|Home Appliances |  | 7,562         
|Other           |  | 1,094         
|                |  |               
|                |  | 314,436       
|                |  |               



The total amount of
goodwill is not deductible for tax purposes.



Prior to these
transactions, those five subsidiaries were consolidated subsidiaries, and the Companys consolidated statements of operations included the operating results of those subsidiaries for the full year. After the date of the transactions, minority
interests relating to these subsidiaries were no longer recognized in the Companys consolidated financial statements.



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MATSUSHITA ELECTRIC INDUSTRIAL CO., LTD.

AND SUBSIDIARIES



Notes to Consolidated Financial Statements



The following unaudited pro forma information shows the results of the Companys consolidated operations for the year ended March 31, 2003 as though the transactions had been completed at the beginning of fiscal
2003.



|                    |  |                |  
|------------------- |  | -------------- | -
|                    |  | Unaudited      |  
|                    |  | Yen (millions) |  
|                    |  | 2003           |  
|Net loss            |  | (18,995        | )
|                    | 
|                    |  | Yen            |  
|                    |  | 2003           |  
|Net loss per share: |  |                |  
|Basic               |  | (7.85          | )
|Diluted             |  | (7.85          | )



|(3) | Inventories
|--- | -----------



Inventories at March 31, 2005 and 2004 are summarized as follows:



|                |  |                |  |        
|--------------- |  | -------------- |  | -------
|                |  | Yen (millions)
|                |  | 2005           |  | 2004   
|Finished goods  |  | 491,381        |  | 427,674
|Work in process |  | 139,745        |  | 126,215
|Raw materials   |  | 262,299        |  | 223,651
|                |  |                |  |        
|                |  | 893,425        |  | 777,540
|                |  |                |  |        



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MATSUSHITA ELECTRIC INDUSTRIAL CO., LTD.

AND SUBSIDIARIES



Notes to Consolidated Financial Statements



|(4) | Investments in and Advances to, and Transactions with Associated Companies
|--- | --------------------------------------------------------------------------



Certain financial information in respect of associated companies in aggregate at March 31, 2005 and 2004 and for the three
years ended March 31, 2005 is shown below. The most significant of these associated companies are Toshiba Matsushita Display Technology Co., Ltd. (TMD) and Matsushita Toshiba Picture Display Co., Ltd. (MTPD). At March 31, 2005, the Company has a 40%
equity ownership in TMD. At March 31, 2005, the Company has a 64.5% equity ownership in MTPD, but accounts for the investment under the equity method of accounting as the minority shareholder has a substantive participating right. As described in
Note 2, MEW, PanaHome and their respective subsidiaries, which were formerly accounted for under the equity method, became consolidated subsidiaries of the Company on April 1, 2004. Accordingly, the financial information associated with MEW,
PanaHome and their respective subsidiaries in fiscal 2005 are not included below.



|                               |  |                |  |          
|------------------------------ |  | -------------- |  | ---------
|                               |  | Yen (millions)
|                               |  | 2005           |  | 2004     
|Current assets                 |  | 417,848        |  | 1,047,518
|Other assets                   |  | 383,739        |  | 1,429,442
|                               |  |                |  |          
|                               |  | 801,587        |  | 2,476,960
|                               |  |               
|Current liabilities            |  | 423,858        |  | 996,607  
|Other liabilities              |  | 97,800         |  | 706,644  
|                               |  |                |  |          
|Net assets                     |  | 279,929        |  | 773,709  
|                               |  |                |  |          
|Companys equity in net assets |  | 118,489        |  | 276,966  
|                               |  |                |  |          



|             |  |                |   |  |           |   |  |           |  
|------------ |  | -------------- | - |  | --------- | - |  | --------- | -
|             |  | Yen (millions) |  
|             |  | 2005           |   |  | 2004      |   |  | 2003      |  
|Net sales    |  | 1,187,975      |   |  | 2,552,682 |   |  | 1,969,387 |  
|Gross profit |  | 176,765        |   |  | 577,451   |   |  | 479,985   |  
|Net loss     |  | (11,178        | ) |  | (6,598    | ) |  | (57,088   | )



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MATSUSHITA ELECTRIC INDUSTRIAL CO., LTD.

AND SUBSIDIARIES



Notes to Consolidated Financial Statements



Purchases and dividends received from associated companies for the three years ended March 31, 2005 are as follows:



|                   |  |                |  |         |  |        
|------------------ |  | -------------- |  | ------- |  | -------
|                   |  | Yen (millions)
|                   |  | 2005           |  | 2004    |  | 2003   
|Purchases from     |  | 260,745        |  | 366,943 |  | 234,608
|Dividends received |  | 1,480          |  | 5,525   |  | 7,927  



Retained earnings
include undistributed earnings of associated companies in the amount of 11,974 million yen and 56,303 million yen, as of March 31, 2005 and 2004, respectively.



During the years ended March 31, 2005 and 2004, the Company incurred a write-down of 2,833 million yen and 50,793 million yen, respectively, for
other-than-temporary impairment of investments in associated companies. The write-down is included in other deductions in the consolidated statements of operations.



Investments in associated companies include equity securities which have quoted market values at March 31, 2005 and 2004
compared with related carrying amounts as follows:



|                |  |                |  |        
|--------------- |  | -------------- |  | -------
|                |  | Yen (millions)
|                |  | 2005           |  | 2004   
|Carrying amount |  | 3,168          |  | 229,169
|Market value    |  | 4,133          |  | 261,476



|(5) | Investments in Securities
|--- | -------------------------



The Company classifies its existing marketable equity securities other than investments in associated companies and all debt securities as
available-for-sale.



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MATSUSHITA ELECTRIC INDUSTRIAL CO., LTD.

AND SUBSIDIARIES



Notes to Consolidated Financial Statements



The cost, fair value, gross unrealized holding gains, and gross unrealized holding losses of available-for-sale securities included in short-term investments and investments and advances at March 31, 2005 and 2004 are
as follows:



|                                      |  |                |  |           |  |                             |  |                             
|------------------------------------- |  | -------------- |  | --------- |  | --------------------------- |  | ----------------------------
|                                      |  | Yen (millions)
|                                      |  | 2005          
|                                      |  | Cost           |  | Fairvalue |  | Grossunrealizedholdinggains |  | Grossunrealizedholdinglosses
|Current:                              |  |                |  |           |  |                             |  |                             
|Japanese and foreign government bonds |  | 35             |  | 35        |  |                            |  |                            
|Convertible and straight bonds        |  | 5,000          |  | 5,000     |  |                            |  |                            
|Other debt securities                 |  | 6,943          |  | 6,943     |  |                            |  |                            
|                                      |  |                |  |           |  |                             |  |                             
|                                      |  | 11,978         |  | 11,978    |  |                            |  |                            
|                                      |  |                |  |           |  |                             |  |                             
|Noncurrent:                           |  |                |  |           |  |                             |  |                             
|Equity securities                     |  | 228,202        |  | 392,903   |  | 164,826                     |  | 125                         
|Japanese and foreign government bonds |  | 40,200         |  | 40,233    |  | 33                          |  |                            
|Convertible and straight bonds        |  | 31,644         |  | 31,871    |  | 230                         |  | 3                           
|Other debt securities                 |  | 18,258         |  | 18,282    |  | 101                         |  | 77                          
|                                      |  |                |  |           |  |                             |  |                             
|                                      |  | 318,304        |  | 483,289   |  | 165,190                     |  | 205                         
|                                      |  |                |  |           |  |                             |  |                             



|                               |  |         |  |           |  |                             |  |                             
|------------------------------ |  | ------- |  | --------- |  | --------------------------- |  | ----------------------------
|                               |  | 2004   
|                               |  | Cost    |  | Fairvalue |  | Grossunrealizedholdinggains |  | Grossunrealizedholdinglosses
|Current:                       |  |         |  |           |  |                             |  |                             
|Convertible and straight bonds |  | 1,000   |  | 1,001     |  | 1                           |  |                            
|Other debt securities          |  | 1,683   |  | 1,683     |  |                            |  |                            
|                               |  |         |  |           |  |                             |  |                             
|                               |  | 2,683   |  | 2,684     |  | 1                           |  |                            
|                               |  |         |  |           |  |                             |  |                             
|Noncurrent:                    |  |         |  |           |  |                             |  |                             
|Equity securities              |  | 217,470 |  | 398,425   |  | 181,219                     |  | 264                         
|Convertible and straight bonds |  | 8,254   |  | 8,229     |  | 4                           |  | 29                          
|Other debt securities          |  | 10,071  |  | 10,071    |  |                            |  |                            
|                               |  |         |  |           |  |                             |  |                             
|                               |  | 235,795 |  | 416,725   |  | 181,223                     |  | 293                         
|                               |  |         |  |           |  |                             |  |                             



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MATSUSHITA ELECTRIC INDUSTRIAL CO., LTD.

AND SUBSIDIARIES



Notes to Consolidated Financial Statements



Maturities of investments in available-for-sale securities at March 31, 2005 and 2004 are as follows:



|                                       |  |                |  |           |  |         |  |          
|-------------------------------------- |  | -------------- |  | --------- |  | ------- |  | ---------
|                                       |  | Yen (millions)
|                                       |  | 2005           |  | 2004     
|                                       |  | Cost           |  | Fairvalue |  | Cost    |  | Fairvalue
|Due within one year                    |  | 11,978         |  | 11,978    |  | 2,683   |  | 2,684    
|Due after one year through five years  |  | 79,841         |  | 80,008    |  | 18,325  |  | 18,300   
|Due after five years through ten years |  | 10,261         |  | 10,378    |  |        |  |         
|Equity securities                      |  | 228,202        |  | 392,903   |  | 217,470 |  | 398,425  
|                                       |  |                |  |           |  |         |  |          
|                                       |  | 330,282        |  | 495,267   |  | 238,478 |  | 419,409  
|                                       |  |                |  |           |  |         |  |          



Proceeds from sale of
available-for-sale securities for the years ended March 31, 2005, 2004 and 2003 were 74,719 million yen, 40,611 million yen and 94,864 million yen, respectively. The gross realized gains for the years ended March 31, 2005, 2004 and 2003 were 31,655
million yen, 12,391 million yen and 4,839 million yen, respectively. The gross realized losses on sale of available-for-sale securities for the years ended March 31, 2005, 2004 and 2003 were 256 million yen, 1,064 million yen and 4,746 million yen,
respectively. The cost of securities sold in computing gross realized gains and losses is determined by the average cost method.



During the years ended March 31, 2005, 2004 and 2003, the Company incurred a write-down of 2,661 million yen, 1,699 million yen and 52,611 million yen,
respectively, for other-than-temporary impairment of available-for-sale securities, mainly reflecting the aggravated condition of the Japanese stock market or market conditions of specific industries in Japan. The write-down is included in other
deductions in the consolidated statements of operations.



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MATSUSHITA ELECTRIC INDUSTRIAL CO., LTD.

AND SUBSIDIARIES



Notes to Consolidated Financial Statements



Gross unrealized holding losses on investment securities and the fair value of the related securities, aggregated by investment category and length of time that individual securities have been in a continuous
unrealized loss position, at March 31, 2005 and 2004, are as follows:



|                               |  |                     |  |                   |  |           |  |                  |  |           |  |                 
|------------------------------ |  | ------------------- |  | ----------------- |  | --------- |  | ---------------- |  | --------- |  | ----------------
|                               |  | Yen (millions)     
|                               |  | 2005               
|                               |  | Less than 12 months |  | 12 months or more |  | Total    
|                               |  | Fairvalue           |  | Unrealizedlosses  |  | Fairvalue |  | Unrealizedlosses |  | Fairvalue |  | Unrealizedlosses
|Equity securities              |  | 5,828               |  | 125               |  |          |  |                 |  | 5,828     |  | 125             
|Convertible and straight bonds |  | 1,497               |  | 3                 |  |          |  |                 |  | 1,497     |  | 3               
|Other debt securities          |  | 1,423               |  | 77                |  |          |  |                 |  | 1,423     |  | 77              
|                               |  |                     |  |                   |  |           |  |                  |  |           |  |                 
|                               |  | 8,748               |  | 205               |  |          |  |                 |  | 8,748     |  | 205             
|                               |  |                     |  |                   |  |           |  |                  |  |           |  |                 
|                               | 
|                               |  | 2004               
|                               |  | Less than 12 months |  | 12 months or more |  | Total    
|                               |  | Fairvalue           |  | Unrealizedlosses  |  | Fairvalue |  | Unrealizedlosses |  | Fairvalue |  | Unrealizedlosses
|Equity securities              |  | 13,334              |  | 264               |  |          |  |                 |  | 13,334    |  | 264             
|Convertible and straight bonds |  | 971                 |  | 29                |  |          |  |                 |  | 971       |  | 29              
|                               |  |                     |  |                   |  |           |  |                  |  |           |  |                 
|                               |  | 14,305              |  | 293               |  |          |  |                 |  | 14,305    |  | 293             
|                               |  |                     |  |                   |  |           |  |                  |  |           |  |                 



The gross unrealized
loss position has been continuing for a relatively short period of time. Based on this and other relevant factors, management has determined that these investments are not considered other-than-temporarily impaired. The Company has not held
unrealized losses for twelve months or more at March 31, 2005 or 2004.



The aggregate cost of the Companys cost method investments totaled 189,740 million yen at March 31, 2005. For investments with an aggregate cost of 34,245 million yen, the Company estimated that the fair value exceeded the cost of
investments (that is, the investments were not impaired). The remaining investments were considered other-than-temporarily impaired, resulting in a write-down of 10,692 million yen.



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MATSUSHITA ELECTRIC INDUSTRIAL CO., LTD.

AND SUBSIDIARIES



Notes to Consolidated Financial Statements



|(6) | Leases
|--- | ------



The Company has capital and operating leases for certain machinery and equipment. At March 31, 2005 and 2004, the gross book value of machinery and
equipment under capital leases was 47,765 million yen and 19,726 million yen, and the related accumulated depreciation recorded was 27,052 million yen and 10,148 million yen, respectively.



During the years ended March 31, 2005, 2004 and 2003, the Company sold and
leased back certain machinery and equipment for 49,574 million yen, 44,636 million yen and 21,083 million yen, respectively. The base lease term is 4 to 5 years. The resulting leases are being accounted for as operating leases. The resulting gains
of these transactions, included in other income in the consolidated statements of operations, were not significant. The Company has options to purchase the leased assets, or to terminate the leases and guarantee a specified value of the leased
assets thereof, subject to certain conditions, during or at the end of the lease term.



Rental expenses for operating leases, including the above-mentioned sale-leaseback transactions were 34,800 million yen, 29,049 million yen and 25,323 million yen for the years ended March 31, 2005, 2004 and 2003,
respectively.



Future minimum lease payments under
non-cancelable capital leases and operating leases at March 31, 2005 are as follows:



|                                            |  |                |  |                
|------------------------------------------- |  | -------------- |  | ---------------
|                                            |  | Yen (millions)
|Year ending March 31                        |  | Capitalleases  |  | Operatingleases
|2006                                        |  | 10,755         |  | 42,957         
|2007                                        |  | 6,303          |  | 42,142         
|2008                                        |  | 4,400          |  | 20,844         
|2009                                        |  | 1,749          |  | 14,408         
|2010                                        |  | 681            |  | 7,967          
|Thereafter                                  |  | 1,335          |  | 6,223          
|                                            |  |                |  |                
|Total minimum lease payments                |  | 25,223         |  | 134,541        
|                                            |  |                |  |                
|Less amount representing interest           |  | 1,540          |  |                
|                                            |  |                |  |                
|Present value of net minimum lease payments |  | 23,683         |  |                
|Less current portion                        |  | 10,502         |  |                
|                                            |  |                |  |                
|Long-term capital lease obligations         |  | 13,181         |  |                
|                                            |  |                |  |                

|
|







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MATSUSHITA ELECTRIC INDUSTRIAL CO., LTD.

AND SUBSIDIARIES



Notes to Consolidated Financial Statements



A subsidiary of the Company leases machinery and equipment. Leases of such assets are principally accounted for as direct financing leases. Subsequent to March 31, 2005, the Company sold the majority shares of this
subsidiary to a third party, and began to account for its remaining investment using the equity method (see Note 21). Investments in non-cancelable financing leases at March 31, 2005 and 2004 are as follows:



|                                                   |  |                |  |        
|-------------------------------------------------- |  | -------------- |  | -------
|                                                   |  | Yen (millions)
|                                                   |  | 2005           |  | 2004   
|Total minimum lease payments to be received        |  | 332,292        |  | 375,948
|Less amounts representing estimated executory cost |  | 13,840         |  | 15,405 
|Less unearned income                               |  | 15,677         |  | 18,720 
|                                                   |  |                |  |        
|                                                   |  | 302,775        |  | 341,823
|Less allowance for doubtful receivables            |  | 5,946          |  | 4,733  
|                                                   |  |                |  |        
|Net investment in financing leases                 |  | 296,829        |  | 337,090
|Less current portion                               |  | 105,817        |  | 118,358
|                                                   |  |                |  |        
|Long-term investment in financing leases           |  | 191,012        |  | 218,732
|                                                   |  |                |  |        



The aggregate annual
maturities of the investments in non-cancelable financing leases after March 31, 2005 are as follows:



|                                            |  |               
|------------------------------------------- |  | --------------
|Year ending March 31                        |  | Yen (millions)
|2006                                        |  | 119,654       
|2007                                        |  | 86,702        
|2008                                        |  | 61,680        
|2009                                        |  | 38,355        
|2010                                        |  | 17,722        
|Thereafter                                  |  | 8,179         
|                                            |  |               
|Total minimum lease payments to be received |  | 332,292       
|                                            |  |               



|(7) | Long-Lived Assets
|--- | -----------------



The Company periodically reviews the recorded value of its long-lived assets to determine if the future cash flows to be derived from these assets will be
sufficient to recover the remaining recorded asset values. As discussed in Note 1 (p), the Company accounts for impairment of long-lived assets in accordance with SFAS No. 144. Impairment losses included in other deductions in the consolidated
statements of operations, and are not charged to segment profit.



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MATSUSHITA ELECTRIC INDUSTRIAL CO., LTD.

AND SUBSIDIARIES



Notes to Consolidated Financial Statements



The Company recognized impairment losses in the aggregate of 28,265 million yen of property, plant and equipment during fiscal 2005.



Due to severe competition primarily in the domestic audio and visual industry, the Company is currently in the process of
realigning various branches of a certain domestic sales subsidiary. Consequently the Company decided to sell the land and buildings of the subsidiary near the end of fiscal 2005, and classified those land and buildings as assets held for sale, which
were included in other current assets in the consolidated balance sheets. As a result, the Company recognized an impairment loss. The fair value of the land and buildings was determined by using a purchase price offered by a third party.



The Company also recorded an impairment loss related to write-down of land
and buildings used in connection with the manufacture of certain information and communications equipment at a domestic subsidiary. As a result of plans to reduce production of these products, the Company estimated the carrying amounts would not be
recovered by the future cash flows. The fair value of land was determined by specific appraisal. The fair value of buildings was determined based on the discounted estimated future cash flow expected to result from the use of the buildings and their
eventual disposition.



Impairment losses of 13,393 million yen,
8,555 million yen and 6,317 million yen were related to AVC Networks, Home Appliances and the remaining segments, respectively.



The Company recognized impairment losses of 10,623 million yen of property, plant and equipment during fiscal 2004. One of the impairment losses is
related to write-down of certain land and buildings at a domestic sales subsidiary to the fair value. Those assets were unused and the Company estimated the carrying amounts would not be recovered by the future cash flows. The remaining impairment
loss is mainly related to write-down of machinery and equipment used in connection with the manufacture of certain electric components at a foreign subsidiary. As the prices of these products significantly decreased due to highly competitive market,
the Company projected that the future business of those products would result in operating losses. The fair value was determined by estimating the market value. Impairment losses of 2,530 million yen, 2,663 million yen, 4,099 million yen and 1,331
million yen were related to AVC Networks, Home Appliances, Components and Devices and the remaining segments, respectively.



Due to the sale of certain assets and liabilities that consisted of a portion of the entertainment media disc manufacturing business at Panasonic Disc
Services Corporation, the Company estimated that the carrying value of the remaining assets was impaired. As a result, the Company recognized an impairment loss of 2,375 million yen during fiscal 2003 related to write-down of the carrying value of
machinery and equipment to manufacture entertainment media discs to their estimated fair values. The impaired assets are reported in AVC Networks.



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MATSUSHITA ELECTRIC INDUSTRIAL CO., LTD.

AND SUBSIDIARIES



Notes to Consolidated Financial Statements



|(8) | Goodwill and Other Intangible Assets
|--- | ------------------------------------



The changes in the carrying amount of goodwill by business segment for the years ended March 31, 2005 and 2004 are as follows:



|                                  |  |                |  |                 |  |                       |  |                 |  |       |  |        |   |  |         |  
|--------------------------------- |  | -------------- |  | --------------- |  | --------------------- |  | --------------- |  | ----- |  | ------ | - |  | ------- | -
|                                  |  | Yen (millions) | 
|                                  |  | AVC Networks   |  | Home Appliances |  | Componentsand Devices |  | MEW andPanaHome |  | JVC   |  | Other  |   |  | Total   |  
|Balance at March 31, 2003         |  | 310,928        |  | 21,708          |  | 67,642                |  |                |  | 2,943 |  | 7,406  |   |  | 410,627 |  
|Goodwill acquired during the year |  | 1,072          |  | 82              |  | 2,889                 |  |                |  |      |  | 4,237  |   |  | 8,280   |  
|                                  |  |                |  |                 |  |                       |  |                 |  |       |  |        |   |  |         |  
|Balance at March 31, 2004         |  | 312,000        |  | 21,790          |  | 70,531                |  |                |  | 2,943 |  | 11,643 |   |  | 418,907 |  
|Goodwill acquired during the year |  | 25             |  | 698             |  | 376                   |  | 43,113          |  | 254   |  | 2,098  |   |  | 46,564  |  
|Goodwill impaired during the year |  |               |  |                |  |                      |  |                |  |      |  | (3,559 | ) |  | (3,559  | )
|                                  |  |                |  |                 |  |                       |  |                 |  |       |  |        |   |  |         |  
|Balance at March 31, 2005         |  | 312,025        |  | 22,488          |  | 70,907                |  | 43,113          |  | 3,197 |  | 10,182 |   |  | 461,912 |  
|                                  |  |                |  |                 |  |                       |  |                 |  |       |  |        |   |  |         |  



The Company
recognized an impairment loss of 3,559 million yen during fiscal 2005 related to goodwill of a cable-broadcasting subsidiary. As the growth rate of the cable-broadcasting business is lower than the Companys expectation, the carrying amount of
the cable-broadcasting unit was greater than the fair value of the reporting unit. The fair value was determined by using the estimated present fair value of future cash flows or quoted market prices. The impairment is included in other deductions
in the consolidated statements of operations.







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MATSUSHITA ELECTRIC INDUSTRIAL CO., LTD.

AND SUBSIDIARIES



Notes to Consolidated Financial Statements



Acquired intangible assets, excluding goodwill, at March 31, 2005 and 2004 are as follows:



|                              |  |                     |  |                         |  |                           |  |                         |  |         
|----------------------------- |  | ------------------- |  | ----------------------- |  | ------------------------- |  | ----------------------- |  | --------
|                              |  | Yen (millions)      |  |                        
|                              |  | 2005                |  | 2004                    |  | Averageamortizationperiod
|                              |  | Grosscarryingamount |  | Accumulatedamortization |  | Grosscarryingamount       |  | Accumulatedamortization | 
|Amortizing intangible assets: |  |                     |  |                         |  |                           |  |                         |  |         
|Patents                       |  | 39,183              |  | 27,901                  |  | 34,449                    |  | 24,769                  |  | 8 years 
|Software                      |  | 162,794             |  | 97,035                  |  | 112,470                   |  | 61,099                  |  | 4 years 
|Other                         |  | 25,183              |  | 11,237                  |  | 11,838                    |  | 6,461                   |  | 15 years
|                              |  |                     |  |                         |  |                           |  |                         |  |         
|                              |  | 227,160             |  | 136,173                 |  | 158,757                   |  | 92,329                  |  |         
|                              |  |                     |  |                         |  |                           |  |                         |  |         



|                                  |  |                |  |      
|--------------------------------- |  | -------------- |  | -----
|                                  |  | Yen (millions)
|                                  |  | 2005           |  | 2004 
|Non-amortizing intangible assets: |  |                |  |      
|Leasehold                         |  | 9,459          |  | 4,464
|Other                             |  | 1,139          |  | 2,207
|                                  |  |                |  |      
|                                  |  | 10,598         |  | 6,671
|                                  |  |                |  |      



Aggregate amortization
expense for amortizing intangible assets for the years ended March 31, 2005, 2004 and 2003 was 37,569 million yen, 23,789 million yen and 17,499 million yen, respectively. Estimated amortization expense for the next five years is as follows:



|                     |  |               
|-------------------- |  | --------------
|Year ending March 31 |  | Yen (millions)
|2006                 |  | 24,185        
|2007                 |  | 16,599        
|2008                 |  | 10,415        
|2009                 |  | 6,260         
|2010                 |  | 4,512         



The Company recorded
an impairment loss of 349 million yen of amortizing intangible assets in fiscal 2005. The Company estimated the carrying amount would not be recovered by the future cash flows, due to severe competition in the domestic market. The Company also
recognized an impairment loss of 905 million yen and 1,043 million yen of non-amortizing intangible assets, in connection with the decline of their market value during fiscal 2005 and 2004, respectively. The impairment loss is included in other
deductions in the consolidated statements of operations.







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MATSUSHITA ELECTRIC INDUSTRIAL CO., LTD.

AND SUBSIDIARIES



Notes to Consolidated Financial Statements



|(9) | Long-term Debt and Short-term Borrowings
|--- | ----------------------------------------



Long-term debt at March 31, 2005 and 2004 is set forth below:



|                                                                                                                                                         |  |                |  |        
|-------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -------------- |  | -------
|                                                                                                                                                         |  | Yen (millions)
|                                                                                                                                                         |  | 2005           |  | 2004   
|Convertible bonds issued by subsidiaries, due 2005, interest 0.55% - 1.5%                                                                                |  | 86,411         |  | 27,496 
|Straight bonds, due 2005, interest 0.42%                                                                                                                 |  |               |  | 100,086
|Straight bonds, due 2007, interest 0.87%                                                                                                                 |  | 100,084        |  | 100,049
|Straight bonds, due 2011, interest 1.64%                                                                                                                 |  | 100,000        |  | 100,000
|Straight bonds issued by subsidiaries, due 2005 - 2013, interest 0.6% - 2.15%                                                                            |  | 116,583        |  | 46,364 
|Unsecured yen loans from banks and insurance companies, principally by financial subsidiaries, due 2004 - 2014, effective interest 0.5% in
2005 and 2004 |  | 306,146        |  | 293,732
|Capital lease obligations                                                                                                                                |  | 23,683         |  | 10,087 
|                                                                                                                                                         |  |                |  |        
|                                                                                                                                                         |  | 732,907        |  | 677,814
|Less current portion                                                                                                                                     |  | 255,764        |  | 217,175
|                                                                                                                                                         |  |                |  |        
|                                                                                                                                                         |  | 477,143        |  | 460,639
|                                                                                                                                                         |  |                |  |        



The aggregate annual
maturities of long-term debt after March 31, 2005 are as follows:



|                     |  |               
|-------------------- |  | --------------
|Year ending March 31 |  | Yen (millions)
|2006                 |  | 255,764       
|2007                 |  | 208,813       
|2008                 |  | 70,211        
|2009                 |  | 67,973        
|2010                 |  | 7,566         



As is customary in
Japan, short-term and long-term bank loans are made under general agreements which provide that security and guarantees for future and present indebtedness will be given upon request of the bank, and that the bank shall have the right, as the
obligations become due, or in the event of their default, to offset cash deposits against such obligations due to the bank.







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MATSUSHITA ELECTRIC INDUSTRIAL CO., LTD.

AND SUBSIDIARIES



Notes to Consolidated Financial Statements



Each of the loan agreements grants the lender the right to request additional security or mortgages on property, plant and equipment. At March 31, 2005 and 2004, short-term loans subject to such general agreements
amounted to 29,687 million yen and 1,245 million yen, respectively. The balance of short-term loans also includes borrowings under acceptances and short-term loans of foreign subsidiaries. The weighted-average interest rate on short-term borrowings
outstanding at March 31, 2005 and 2004 was 4.0% and 4.6%, respectively.



Acceptances payable by foreign subsidiaries, in the amount of 465 million yen and 549 million yen at March 31, 2005 and 2004, respectively, are secured by a portion of the cash, accounts receivable and inventories of such subsidiaries. The
amount of assets pledged is not calculable.



The convertible
bonds maturing in 2005 issued by subsidiaries are redeemable at the option of the subsidiaries at prices of principal.



|(10) | Retirement and Severance Benefits
|---- | ---------------------------------



The Company and certain subsidiaries have contributory, funded benefit pension plans covering substantially all employees who meet eligibility
requirements. Benefits under the plans are primarily based on the combination of years of service and compensation.



Effective April 1, 2002, the Company and certain of its subsidiaries amended their benefit pension plans by introducing a point-based benefits
system, under which benefits are calculated based on accumulated points allocated to employees each year according to their job classification and years of service.



The contributory, funded benefit pension plans included those under Employees Pension Funds (EPF) as is stipulated by the
Welfare Pension Insurance Law (the Law). The pension plans under the EPF are composed of the substitutional portion of Japanese Welfare Pension Insurance that the Company and certain of its subsidiaries operate on behalf of the Japanese
Government, and the corporate portion which is the contributory defined benefit pension plan covering substantially all of their employees and provides benefits in addition to the substitutional portion.



In addition to the plans described above, upon retirement or termination of
employment for reasons other than dismissal, employees are entitled to lump-sum payments based on the current rate of pay and length of service. If the termination is involuntary or caused by death, the severance payment is greater than in the case
of voluntary termination. The lump-sum payment plans are not funded.



Effective April 1, 2002, the Company and certain of its subsidiaries amended their lump-sum payment plans to cash balance pension plans. Under the cash balance pension plans, each participant has an account which is credited yearly based on
the current rate of pay and market-related interest rate.







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MATSUSHITA ELECTRIC INDUSTRIAL CO., LTD.

AND SUBSIDIARIES



Notes to Consolidated Financial Statements



Effective October 1, 2003, the Company and certain of its subsidiaries amended a part of their contributory, funded benefit pension plans.



Following the enactment of changes to the Law, the Company and certain of its subsidiaries obtained Governments
approval for exemption from the benefit obligation related to future employee services under the substitutional portion in fiscal 2003. After obtaining the approval, some of these companies obtained another approval for separation of the remaining
benefit obligation of substitutional portion which is related to past employee services and returned the remaining benefit obligation along with the plan assets calculated pursuant to the Government formula by March 31, 2004. In accordance with EITF
03-2, Accounting for the Transfer to the Japanese Government of the Substitutional Portion of Employee Pension Fund Liabilities, the Company recognized a gain of 72,228 million yen under the caption of Gain from the transfer of the
substitutional portion of Japanese Welfare Pension Insurance for the year ended March 31, 2004. This consists of 287,145 million yen of a subsidy from the Government calculated as the difference between accumulated benefit obligation settled
and the amount transferred to the Government, 69,756 million yen of derecognition of previously accrued salary progression and 284,673 million yen of recognition of related unrecognized actuarial loss, at the time when the past benefit obligation
was transferred.



In fiscal 2005, certain other subsidiary of
the Company transferred the substitutional portion of Japanese Welfare Pension Insurance to the Government. The Company recognized a gain of 31,509 million yen in accordance with EITF 03-2. This consists of 165,266 million yen of a subsidy from the
Government, 22,660 million yen of derecognition of previously accrued salary progression and 156,417 million yen of recognition of related unrecognized actuarial loss.



The Company uses a December 31 measurement date for the majority of its benefit plans.



Net periodic benefit cost for the contributory, funded benefit pension plans,
the unfunded lump-sum payment plans, and the cash balance pension plans of the Company for the three years ended March 31, 2005 consisted of the following components:



|                                               |  |                |   |  |         |   |  |         |  
|---------------------------------------------- |  | -------------- | - |  | ------- | - |  | ------- | -
|                                               |  | Yen (millions) |  
|                                               |  | 2005           |   |  | 2004    |   |  | 2003    |  
|Service cost  benefits earned during the year |  | 71,081         |   |  | 69,614  |   |  | 73,536  |  
|Interest cost on projected benefit obligation  |  | 54,417         |   |  | 73,665  |   |  | 78,909  |  
|Expected return on plan assets                 |  | (35,101        | ) |  | (35,741 | ) |  | (46,496 | )
|Amortization of net transition obligation      |  |               |   |  |        |   |  | 3,298   |  
|Amortization of prior service benefit          |  | (23,533        | ) |  | (9,879  | ) |  | (6,442  | )
|Recognized actuarial loss                      |  | 48,641         |   |  | 63,746  |   |  | 45,347  |  
|                                               |  |                |   |  |         |   |  |         |  
|Net periodic benefit cost                      |  | 115,505        |   |  | 161,405 |   |  | 148,152 |  
|                                               |  |                |   |  |         |   |  |         |  



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MATSUSHITA ELECTRIC INDUSTRIAL CO., LTD.

AND SUBSIDIARIES



Notes to Consolidated Financial Statements



Reconciliation of beginning and ending balances of the benefit obligations of the contributory, funded benefit pension plans, the unfunded lump-sum payment plans, and the cash balance pension plans, and the fair value
of the plan assets at March 31, 2005 and 2004 are as follows:



|                                                                  |  |                |   |  |           |  
|----------------------------------------------------------------- |  | -------------- | - |  | --------- | -
|                                                                  |  | Yen (millions) |  
|                                                                  |  | 2005           |   |  | 2004      |  
|Change in benefit obligations:                                    |  |                |   |  |           |  
|Benefit obligations at beginning of year                          |  | 1,900,657      |   |  | 2,787,688 |  
|Service cost                                                      |  | 71,081         |   |  | 69,614    |  
|Interest cost                                                     |  | 54,417         |   |  | 73,665    |  
|Prior service benefit                                             |  | (97,360        | ) |  | (174,600  | )
|Actuarial (gain) loss                                             |  | (12,070        | ) |  | (34,189   | )
|Benefits paid                                                     |  | (86,803        | ) |  | (69,626   | )
|Transfer of the substitutional portion                            |  | (415,930       | ) |  | (747,917  | )
|Acquisition of MEW and PanaHome (Note 2)                          |  | 470,676        |   |  |          |  
|Foreign currency exchange impact                                  |  | 560            |   |  | (3,978    | )
|                                                                  |  |                |   |  |           |  
|Benefit obligations at end of year                                |  | 1,885,228      |   |  | 1,900,657 |  
|                                                                  |  |                |   |  |           |  
|Change in plan assets:                                            |  |                |   |  |           |  
|Fair value of plan assets at beginning of year                    |  | 1,072,621      |   |  | 1,256,922 |  
|Actual return on plan assets                                      |  | 74,873         |   |  | 117,406   |  
|Employer contributions                                            |  | 165,018        |   |  | 148,927   |  
|Benefits paid                                                     |  | (67,089        | ) |  | (57,403   | )
|Transfer of the substitutional portion                            |  | (228,004       | ) |  | (391,016  | )
|Acquisition of MEW and PanaHome (Note 2)                          |  | 276,566        |   |  |          |  
|Foreign currency exchange impact                                  |  | 321            |   |  | (2,215    | )
|                                                                  |  |                |   |  |           |  
|Fair value of plan assets at end of year                          |  | 1,294,306      |   |  | 1,072,621 |  
|                                                                  |  |                |   |  |           |  
|Funded status                                                     |  | (590,922       | ) |  | (828,036  | )
|                                                                  |  |                |   |  |           |  
|Unrecognized prior service benefit                                |  | (338,948       | ) |  | (261,857  | )
|Unrecognized actuarial loss                                       |  | 491,691        |   |  | 599,252   |  
|                                                                  |  |                |   |  |           |  
|Net amount recognized                                             |  | (438,179       | ) |  | (490,641  | )
|                                                                  |  |                |   |  |           |  
|Amounts recognized in the consolidated balance sheets consist of: |  |                |   |  |           |  
|Retirement and severance benefits                                 |  | (597,163       | ) |  | (801,199  | )
|Other assets                                                      |  | 22,462         |   |  |          |  
|Accumulated other comprehensive income (loss), gross of tax       |  | 136,522        |   |  | 310,558   |  
|                                                                  |  |                |   |  |           |  
|Net amount recognized                                             |  | (438,179       | ) |  | (490,641  | )
|                                                                  |  |                |   |  |           |  



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MATSUSHITA ELECTRIC INDUSTRIAL CO., LTD.

AND SUBSIDIARIES



Notes to Consolidated Financial Statements



The accumulated benefit obligation for the pension plans was 1,837,817 million yen and 1,834,134 million yen at March 31, 2005 and 2004, respectively.



Weighted-average assumptions used to determine benefit obligations at March 31, 2005 and 2004 are as follows:



|                              |  |      |  |      |  | 
|----------------------------- |  | ---- |  | ---- |  | 
|                              |  | 2005 |  | 2004 |  | 
|Discount rate                 |  | 2.7% |  | 2.7% | 
|Rate of compensation increase |  | 1.8% |  | 1.8% | 



Weighted-average
assumptions used to determine net cost for the three years ended March 31, 2005 are as follows:



|                               |  |      |  |      |  |     
|------------------------------ |  | ---- |  | ---- |  | ----
|                               |  | 2005 |  | 2004 |  | 2003
|Discount rate                  |  | 2.7% |  | 2.7% |  | 3.2%
|Expected return on plan assets |  | 3.0% |  | 2.7% |  | 3.5%
|Rate of compensation increase  |  | 1.8% |  | 2.0% |  | 2.6%



The expected return on
plan assets is determined based on the portfolio as a whole and not on the sum of the returns on individual asset categories, considering long-term historical returns, asset allocation, and future estimates of long-term investment returns.



During the years ended March 31, 2005 and 2004, the balance of
retirement and severance benefits decreased, mainly as a result of the derecognition of an additional minimum pension liability, due to the transfer of the substitutional portion of Japanese Welfare Pension Insurance and a plan amendment
of the Company and certain of its domestic subsidiaries.



The
weighted-average asset allocation of the Companys pension plans at March 31, 2005 and 2004 are as follows:



|                                        |  |      |  |      |  | 
|--------------------------------------- |  | ---- |  | ---- |  | 
|                                        |  | 2005 |  | 2004 |  | 
|Asset category:                         |  |      |  |      | 
|Equity securities                       |  | 44%  |  | 39%  | 
|Debt securities                         |  | 37   |  | 31   | 
|Life insurance company general accounts |  | 9    |  | 13   | 
|Other                                   |  | 10   |  | 17   | 
|                                        |  |      |  |      | 
|Total                                   |  | 100% |  | 100% | 
|                                        |  |      |  |      | 



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MATSUSHITA ELECTRIC INDUSTRIAL CO., LTD.

AND SUBSIDIARIES



Notes to Consolidated Financial Statements



Each plan of the Company has a different investment policy, which is designed to ensure sufficient plan assets are available to provide future payments of pension benefits to the eligible plan participants and is
individually monitored for compliance and appropriateness on an on-going basis. Considering the expected long-term rate of return on plan assets, each plan of the Company establishes a basic portfolio comprised of the optimal combination
of equity securities and debt securities. Plan assets are invested in individual equity and debt securities using the guidelines of the basic portfolio in order to generate a total return that will satisfy the expected return on a
mid-term to long-term basis. The Company evaluates the difference between expected return and actual return of invested plan assets on an annual basis to determine if such differences necessitate a revision in the formulation of the
basic portfolio. The Company revises the basic portfolio when and to the extent considered necessary to achieve the expected long-term rate of return on plan assets.



The Company expects to contribute 165,427 million yen to its defined benefit
plans in the year ending March 31, 2006.



The benefits expected
to be paid from the defined pension plans in each fiscal year 2006  2010 are 52,412 million yen, 59,375 million yen, 65,267 million yen, 71,383 million yen, and 78,037 million yen, respectively. The aggregate benefits expected to be paid in
the five years from fiscal 2011  2015 are 479,568 million yen. The expected benefits are based on the same assumptions used to measure the Companys benefit obligation at December 31 and include estimated future employee service.



|(11) | Income Taxes
|---- | ------------



Income (loss) before income taxes and income taxes for the three years ended March 31, 2005 are summarized as follows:



|                                  |  |                |  |         |   |  |        
|--------------------------------- |  | -------------- |  | ------- | - |  | -------
|                                  |  | Yen (millions)
|                                  |  | Domestic       |  | Foreign |   |  | Total  
|For the year ended March 31, 2005 |  |                |  |         |   |  |        
|Income before income taxes        |  | 140,464        |  | 106,449 |   |  | 246,913
|Income taxes:                     |  |                |  |         |   |  |        
|Current                           |  | 63,710         |  | 32,819  |   |  | 96,529 
|Deferred                          |  | 64,229         |  | (7,424  | ) |  | 56,805 
|                                  |  |                |  |         |   |  |        
|Total income taxes                |  | 127,939        |  | 25,395  |   |  | 153,334
|                                  |  |                |  |         |   |  |        



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MATSUSHITA ELECTRIC INDUSTRIAL CO., LTD.

AND SUBSIDIARIES



Notes to Consolidated Financial Statements



|                                  |  |                |   |  |         |   |  |        
|--------------------------------- |  | -------------- | - |  | ------- | - |  | -------
|                                  |  | Yen (millions)
|                                  |  | Domestic       |   |  | Foreign |   |  | Total  
|For the year ended March 31, 2004 |  |                |   |  |         |   |  |        
|Income before income taxes        |  | 40,353         |   |  | 130,469 |   |  | 170,822
|Income taxes:                     |  |                |   |  |         |   |  |        
|Current                           |  | 43,723         |   |  | 33,652  |   |  | 77,375 
|Deferred                          |  | 25,702         |   |  | (4,542  | ) |  | 21,160 
|                                  |  |                |   |  |         |   |  |        
|Total income taxes                |  | 69,425         |   |  | 29,110  |   |  | 98,535 
|                                  |  |                |   |  |         |   |  |        
|For the year ended March 31, 2003 |  |                |   |  |         |   |  |        
|Income (loss) before income taxes |  | (46,634        | ) |  | 115,550 |   |  | 68,916 
|Income taxes:                     |  |                |   |  |         |   |  |        
|Current                           |  | 27,224         |   |  | 24,480  |   |  | 51,704 
|Deferred                          |  | 18,162         |   |  | 1,410   |   |  | 19,572 
|                                  |  |                |   |  |         |   |  |        
|Total income taxes                |  | 45,386         |   |  | 25,890  |   |  | 71,276 
|                                  |  |                |   |  |         |   |  |        



For the years ended
March 31, 2004 and 2003, domestic income taxesdeferred include the impact of 8,614 million yen and 22,317 million yen, respectively, attributable to adjustments of net deferred tax assets to reflect the reduction in the statutory income tax
rate due to revisions to local enterprise income tax law on introduction of a new pro forma standard taxation system.



The Company and its subsidiaries in Japan are subject to a National tax of 30%, an Inhabitant tax of approximately 20.5%, and a deductible Enterprise tax
of approximately 7.4% varying by local jurisdiction, which, in aggregate, resulted in a combined statutory tax rate in Japan of approximately 40.5% for the year ended March 31, 2005. The Company and its subsidiaries in Japan were subject to a
National tax of 30%, an Inhabitant tax of approximately 20.5%, and a deductible Enterprise tax of approximately 9.9%, which, in aggregate, resulted in a combined statutory tax rate in Japan of approximately 41.9% for the years ended March 31, 2004
and 2003.



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MATSUSHITA ELECTRIC INDUSTRIAL CO., LTD.

AND SUBSIDIARIES



Notes to Consolidated Financial Statements



The effective tax rates for the years differ from the combined statutory tax rates for the following reasons:



|                                                                                             |  |      |   |  |       |   |  |       |  
|-------------------------------------------------------------------------------------------- |  | ---- | - |  | ----- | - |  | ----- | -
|                                                                                             |  | 2005 |   |  | 2004  |   |  | 2003  |  
|Combined statutory tax rate                                                                  |  | 40.5 | % |  | 41.9  | % |  | 41.9  | %
|Tax credit related to research expenses                                                      |  | (2.4 | ) |  | (1.3  | ) |  | (2.3  | )
|Lower tax rates of overseas subsidiaries                                                     |  | (5.9 | ) |  | (10.6 | ) |  | (18.7 | )
|Expenses not deductible for tax purposes                                                     |  | 2.8  |   |  | 3.0   |   |  | 4.9   |  
|Change in valuation allowance allocated to income tax expenses                               |  | 25.7 |   |  | 14.8  |   |  | 46.5  |  
|Adjustments of deferred tax assets and liabilities for enacted changes in tax laws and rates |  |     |   |  | 5.0   |   |  | 32.4  |  
|Tax effects attributable to investments in subsidiaries                                      |  | 4.4  |   |  | 2.3   |   |  | 0.1   |  
|Other                                                                                        |  | (3.0 | ) |  | 2.6   |   |  | (1.4  | )
|                                                                                             |  |      |   |  |       |   |  |       |  
|Effective tax rate                                                                           |  | 62.1 | % |  | 57.7  | % |  | 103.4 | %
|                                                                                             |  |      |   |  |       |   |  |       |  



The significant
components of deferred income tax expenses for the three years ended March 31, 2005 are as follows:



|                                                                                                  |  |                |   |  |        |   |  |         |  
|------------------------------------------------------------------------------------------------- |  | -------------- | - |  | ------ | - |  | ------- | -
|                                                                                                  |  | Yen (millions) |  
|                                                                                                  |  | 2005           |   |  | 2004   |   |  | 2003    |  
|Deferred tax expense (exclusive of the effects of other components listed below)                  |  | 78,649         |   |  | 20,376 |   |  | 27,608  |  
|Adjustment to deferred tax assets and liabilities for enacted changes in tax laws and regulations |  |               |   |  | 8,614  |   |  | 22,317  |  
|Benefits of net operating loss carryforwards                                                      |  | (21,844        | ) |  | (7,830 | ) |  | (30,353 | )
|                                                                                                  |  |                |   |  |        |   |  |         |  
|                                                                                                  |  | 56,805         |   |  | 21,160 |   |  | 19,572  |  
|                                                                                                  |  |                |   |  |        |   |  |         |  



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MATSUSHITA ELECTRIC INDUSTRIAL CO., LTD.

AND SUBSIDIARIES



Notes to Consolidated Financial Statements



The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities at March 31, 2005 and 2004 are presented below:



|                                                                                               |  |                |   |  |           |  
|---------------------------------------------------------------------------------------------- |  | -------------- | - |  | --------- | -
|                                                                                               |  | Yen (millions) |  
|                                                                                               |  | 2005           |   |  | 2004      |  
|Deferred tax assets:                                                                           |  |                |   |  |           |  
|Inventory valuation                                                                            |  | 73,414         |   |  | 77,476    |  
|Expenses accrued for financial statement purposes but not currently included in taxable income |  | 230,640        |   |  | 223,884   |  
|Property, plant and equipment                                                                  |  | 181,826        |   |  | 154,415   |  
|Retirement and severance benefits                                                              |  | 224,564        |   |  | 236,071   |  
|Tax loss carryforwards                                                                         |  | 211,996        |   |  | 181,214   |  
|Other                                                                                          |  | 166,247        |   |  | 166,878   |  
|                                                                                               |  |                |   |  |           |  
|Total gross deferred tax assets                                                                |  | 1,088,687      |   |  | 1,039,938 |  
|                                                                                               |  |               
|Less valuation allowance                                                                       |  | 311,153        |   |  | 246,026   |  
|                                                                                               |  |                |   |  |           |  
|Net deferred tax assets                                                                        |  | 777,534        |   |  | 793,912   |  
|                                                                                               |  |               
|Deferred tax liabilities:                                                                      |  |                |   |  |           |  
|Net unrealized holding gains of available-for-sale securities                                  |  | (65,744        | ) |  | (71,185   | )
|Other                                                                                          |  | (34,827        | ) |  | (43,341   | )
|                                                                                               |  |                |   |  |           |  
|Total gross deferred tax liabilities                                                           |  | (100,571       | ) |  | (114,526  | )
|                                                                                               |  |                |   |  |           |  
|Net deferred tax assets                                                                        |  | 676,963        |   |  | 679,386   |  
|                                                                                               |  |                |   |  |           |  



In assessing the
realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation
of future taxable income during the periods in which those temporary differences and loss carryforwards become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning
strategies in making this assessment. Based upon the level of historical taxable income and projections for future taxable income over the periods in which the deferred tax assets are deductible, management believes it is more likely than not that
the Company will realize the benefits of these deductible differences and loss carryforwards, net of the existing valuation allowances at March 31, 2005.



The net change in total valuation allowance for the years ended March 31, 2005, 2004 and 2003 was an increase of 65,127 million yen, 4,817 million yen and
15,259 million yen, respectively.



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MATSUSHITA ELECTRIC INDUSTRIAL CO., LTD.

AND SUBSIDIARIES



Notes to Consolidated Financial Statements



At March 31, 2005, the Company and certain of its subsidiaries had, for income tax purposes, net operating loss carryforwards of approximately 565,621 million yen, of which 428,267 million yen expire from fiscal 2009
through 2012 and the substantial majority of the remaining balance expire thereafter or do not expire.



Net deferred tax assets and liabilities at March 31, 2005 and 2004 are reflected in the accompanying consolidated balance sheets under the following
captions:



|                          |  |                |   |  |         |  
|------------------------- |  | -------------- | - |  | ------- | -
|                          |  | Yen (millions) |  
|                          |  | 2005           |   |  | 2004    |  
|Other current assets      |  | 343,038        |   |  | 320,098 |  
|Other assets              |  | 344,648        |   |  | 388,295 |  
|Other current liabilities |  | (1,340         | ) |  | (2,310  | )
|Other liabilities         |  | (9,383         | ) |  | (26,697 | )
|                          |  |                |   |  |         |  
|Net deferred tax assets   |  | 676,963        |   |  | 679,386 |  
|                          |  |                |   |  |         |  



The Company has not
recognized a deferred tax liability for the undistributed earnings of its foreign subsidiaries and foreign corporate joint ventures of 731,390 million yen as of March 31, 2005, because the Company currently does not expect those unremitted earnings
to reverse and become taxable to the Company in the foreseeable future. A deferred tax liability will be recognized when the Company no longer plans to permanently reinvest undistributed earnings. Calculation of related unrecognized deferred tax
liability is not practicable.



|(12) | Stockholders Equity
|---- | --------------------



In accordance with the Japanese Commercial Code, at least 50% of the amount of converted debt must be credited to the common stock account. The Company
issued 2,468 shares and 1,234 shares in connection with the conversion of bonds for the years ended March 31, 2004 and 2003, respectively.



The Company sold 888,683 shares of its treasury stock for the year ended March 31, 2005. The difference between sales price and book value was charged to
capital surplus in the consolidated balance sheets.



The
Company also provided 10,444,421 shares of its treasury stock in connection with the conversion of bonds for the year ended March 31, 2004. The difference of carrying values of the bonds converted and treasury stocks provided was charged to capital
surplus in the consolidated balance sheets.



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MATSUSHITA ELECTRIC INDUSTRIAL CO., LTD.

AND SUBSIDIARIES



Notes to Consolidated Financial Statements



On April 1, 2003, the Company issued 5,127,941 shares under share exchange transactions to transform two subsidiaries into wholly owned subsidiaries. On October 1, 2002, the Company issued 309,407,251 shares for the
share exchange transactions described in Note 2.



The Company
may repurchase its common stock from the market pursuant to the Japanese Commercial Code. For the years ended March 31, 2005, 2004 and 2003, respectively, 60,363,663, 56,483,929 and 93,797,377 shares were repurchased for the aggregate cost of
approximately 92,879 million yen, 69,394 million yen and 115,770 million yen, respectively, primarily with the intention to hold as treasury stock to improve capital efficiency.



For the year ended March 31, 2005, the Company recognized 574,922 shares of its common stock held by a newly consolidated
subsidiary as treasury stock.



As discussed in Note 2, MEI
transformed MCI, KME, MSC, MKEI and MGCS into wholly owned subsidiaries through share exchange transactions on October 1, 2002. MEI provided 309,407,251 shares of newly issued common stock and 59,984,408 shares of its treasury stock to the minority
shareholders.



The Japanese Commercial Code provides that an
amount equal to at least 10% of appropriations paid in cash be appropriated as a legal reserve until the aggregated amount of capital surplus and legal reserve equals 25% of stated capital. The capital surplus and legal reserve, up to 25% of stated
capital, are not available for dividends but may be used to reduce a deficit or may be transferred to stated capital. The capital surplus and legal reserve, exceeding 25% of stated capital, are available for distribution upon approval of the
shareholders meeting.



Cash dividends and transfers to
the legal reserve charged to retained earnings during the three years ended March 31, 2005 represent dividends paid out during the periods and related appropriation to the legal reserve. The accompanying consolidated financial statements do not
include any provision for the year-end dividend of 7.50 yen per share, totaling approximately 16,938 million yen, planned to be proposed in June 2005 in respect of the year ended March 31, 2005 or for the related appropriation.



In accordance with the Japanese Commercial Code, there are certain
restrictions on payment of dividends in connection with the treasury stock repurchased. As a result of restrictions on the treasury stock repurchased, retained earnings of 256,443 million yen at March 31, 2005 were restricted as to the payment of
cash dividends.



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MATSUSHITA ELECTRIC INDUSTRIAL CO., LTD.

AND SUBSIDIARIES



Notes to Consolidated Financial Statements



The Companys directors and certain senior executives were granted options to purchase the Companys common stock. All stock options become fully exercisable two years from the date of grant and have a
four-year term. Information with respect to stock options is as follows:



|                                                                       |  |                 |   |  |                                     
|---------------------------------------------------------------------- |  | --------------- | - |  | ------------------------------------
|                                                                       |  | Number ofshares |   |  | Weighted-averageexercise price (Yen)
|Balance at March 31, 2002                                              |  | 395,000         |   |  | 2,434                               
|Granted                                                                |  | 116,000         |   |  | 1,734                               
|Forfeited                                                              |  | (40,000         | ) |  | 2,398                               
|                                                                       |  |                 |   |  |                                     
|Balance at March 31, 2003                                              |  | 471,000         |   |  | 2,265                               
|Forfeited                                                              |  | (57,000         | ) |  | 2,574                               
|                                                                       |  |                 |   |  |                                     
|Balance at March 31, 2004                                              |  | 414,000         |   |  | 2,223                               
|Forfeited                                                              |  | (95,000         | ) |  | 2,285                               
|                                                                       |  |                 |   |  |                                     
|Balance at March 31, 2005,weighted-average remaining life  2.05 years |  | 319,000         |   |  | 2,204                               
|                                                                       |  |                 |   |  |                                     



Treasury stock
reserved for options at March 31, 2005 and 2004 was 203,000 shares and 298,000 shares, respectively.



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MATSUSHITA ELECTRIC INDUSTRIAL CO., LTD.

AND SUBSIDIARIES



Notes to Consolidated Financial Statements



|(13) | Other Comprehensive Income (Loss)
|---- | ---------------------------------



Components of other comprehensive income (loss) for the three years ended March 31, 2005 are as follows:



|                                                                    |  |                |   |  |            |   |  |                  |  
|------------------------------------------------------------------- |  | -------------- | - |  | ---------- | - |  | ---------------- | -
|                                                                    |  | Yen (millions) |  
|                                                                    |  | Pre-taxamount  |   |  | Taxexpense |   |  | Net-of-taxamount |  
|For the year ended March 31, 2005                                   |  |                |   |  |            |   |  |                  |  
|Translation adjustments                                             |  | 36,645         |   |  |           |   |  | 36,645           |  
|Unrealized holding gains of available-for-sale securities:          |  |                |   |  |            |   |  |                  |  
|Unrealized holding gains (losses) arising during the period         |  | 8,768          |   |  | (7,669     | ) |  | 1,099            |  
|Less: Reclassification adjustment for gains included in net income  |  | (27,611        | ) |  | 11,016     |   |  | (16,595          | )
|                                                                    |  |                |   |  |            |   |  |                  |  
|Net unrealized gains (losses)                                       |  | (18,843        | ) |  | 3,347      |   |  | (15,496          | )
|                                                                    |  |                |   |  |            |   |  |                  |  
|Unrealized holding gains of derivative instruments:                 |  |                |   |  |            |   |  |                  |  
|Unrealized holding gains (losses) arising during the period         |  | (8,156         | ) |  | 3,409      |   |  | (4,747           | )
|Less: Reclassification adjustment for losses included in net income |  | 7,520          |   |  | (3,046     | ) |  | 4,474            |  
|                                                                    |  |                |   |  |            |   |  |                  |  
|Net unrealized gains (losses)                                       |  | (636           | ) |  | 363        |   |  | (273             | )
|                                                                    |  |                |   |  |            |   |  |                  |  
|Minimum pension liability adjustments                               |  | 189,519        |   |  | (49,270    | ) |  | 140,249          |  
|                                                                    |  |                |   |  |            |   |  |                  |  
|Other comprehensive income (loss)                                   |  | 206,685        |   |  | (45,560    | ) |  | 161,125          |  
|                                                                    |  |                |   |  |            |   |  |                  |  



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MATSUSHITA ELECTRIC INDUSTRIAL CO., LTD.

AND SUBSIDIARIES



Notes to Consolidated Financial Statements



|                                                                   |  |                |   |  |            |   |  |                  |  
|------------------------------------------------------------------ |  | -------------- | - |  | ---------- | - |  | ---------------- | -
|                                                                   |  | Yen (millions) |  
|                                                                   |  | Pre-taxamount  |   |  | Taxexpense |   |  | Net-of-taxamount |  
|For the year ended March 31, 2004                                  |  |                |   |  |            |   |  |                  |  
|Translation adjustments                                            |  | (121,163       | ) |  |           |   |  | (121,163         | )
|Unrealized holding gains of available-for-sale securities:         |  |                |   |  |            |   |  |                  |  
|Unrealized holding gains (losses) arising during the period        |  | 179,822        |   |  | (67,626    | ) |  | 112,196          |  
|Less: Reclassification adjustment for gains included in net income |  | (9,628         | ) |  | 3,618      |   |  | (6,010           | )
|                                                                   |  |                |   |  |            |   |  |                  |  
|Net unrealized gains (losses)                                      |  | 170,194        |   |  | (64,008    | ) |  | 106,186          |  
|                                                                   |  |                |   |  |            |   |  |                  |  
|Unrealized holding gains of derivative instruments:                |  |                |   |  |            |   |  |                  |  
|Unrealized holding gains (losses) arising during the period        |  | 13,410         |   |  | (5,462     | ) |  | 7,948            |  
|Less: Reclassification adjustment for gains included in net income |  | (314           | ) |  | 132        |   |  | (182             | )
|                                                                   |  |                |   |  |            |   |  |                  |  
|Net unrealized gains (losses)                                      |  | 13,096         |   |  | (5,330     | ) |  | 7,766            |  
|                                                                   |  |                |   |  |            |   |  |                  |  
|Minimum pension liability adjustments                              |  | 502,543        |   |  | (189,192   | ) |  | 313,351          |  
|                                                                   |  |                |   |  |            |   |  |                  |  
|Other comprehensive income (loss)                                  |  | 564,670        |   |  | (258,530   | ) |  | 306,140          |  
|                                                                   |  |                |   |  |            |   |  |                  |  



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MATSUSHITA ELECTRIC INDUSTRIAL CO., LTD.

AND SUBSIDIARIES



Notes to Consolidated Financial Statements



|                                                                  |  |                |   |  |            |   |  |                  |  
|----------------------------------------------------------------- |  | -------------- | - |  | ---------- | - |  | ---------------- | -
|                                                                  |  | Yen (millions) |  
|                                                                  |  | Pre-taxamount  |   |  | Taxexpense |   |  | Net-of-taxamount |  
|For the year ended March 31, 2003                                 |  |                |   |  |            |   |  |                  |  
|Translation adjustments                                           |  | (106,003       | ) |  |           |   |  | (106,003         | )
|Unrealized holding gains of available-for-sale securities:        |  |                |   |  |            |   |  |                  |  
|Unrealized holding gains (losses) arising during the period       |  | (166,295       | ) |  | 63,963     |   |  | (102,332         | )
|Less: Reclassification adjustment for losses included in net loss |  | 52,518         |   |  | (19,080    | ) |  | 33,438           |  
|                                                                  |  |                |   |  |            |   |  |                  |  
|Net unrealized gains (losses)                                     |  | (113,777       | ) |  | 44,883     |   |  | (68,894          | )
|                                                                  |  |                |   |  |            |   |  |                  |  
|Unrealized holding gains of derivative instruments:               |  |                |   |  |            |   |  |                  |  
|Unrealized holding gains (losses) arising during the period       |  | (7,315         | ) |  | 3,077      |   |  | (4,238           | )
|Less: Reclassification adjustment for losses included in net loss |  | 5,198          |   |  | (2,178     | ) |  | 3,020            |  
|                                                                  |  |                |   |  |            |   |  |                  |  
|Net unrealized gains (losses)                                     |  | (2,117         | ) |  | 899        |   |  | (1,218           | )
|                                                                  |  |                |   |  |            |   |  |                  |  
|Minimum pension liability adjustments                             |  | (605,507       | ) |  | 230,523    |   |  | (374,984         | )
|                                                                  |  |                |   |  |            |   |  |                  |  
|Other comprehensive income (loss)                                 |  | (827,404       | ) |  | 276,305    |   |  | (551,099         | )
|                                                                  |  |                |   |  |            |   |  |                  |  



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MATSUSHITA ELECTRIC INDUSTRIAL CO., LTD.

AND SUBSIDIARIES



Notes to Consolidated Financial Statements



|(14) | Net Income (Loss) per Share
|---- | ---------------------------



A reconciliation of the numerators and denominators of the basic and diluted net income (loss) per share computation for the three years ended March 31,
2005 is as follows:



|                                                   |  |                |  |        |  |         |  
|-------------------------------------------------- |  | -------------- |  | ------ |  | ------- | -
|                                                   |  | Yen (millions) | 
|                                                   |  | 2005           |  | 2004   |  | 2003    |  
|Net income (loss) available to common stockholders |  | 58,481         |  | 42,145 |  | (19,453 | )
|Effect of assumed conversions:                     |  |                |  |        |  |         |  
|Convertible bonds, due 2004, interest 1.4%         |  |               |  | 727    |  |        |  
|                                                   |  |                |  |        |  |         |  
|Diluted net income (loss)                          |  | 58,481         |  | 42,872 |  | (19,453 | )
|                                                   |  |                |  |        |  |         |  



|                                           |  |                  |  |               |  |              
|------------------------------------------ |  | ---------------- |  | ------------- |  | -------------
|                                           | 
|                                           |  | Number of shares
|                                           |  | 2005             |  | 2004          |  | 2003         
|Average common shares outstanding          |  | 2,294,607,915    |  | 2,321,835,314 |  | 2,234,968,907
|Dilutive effect of assumed conversions:    |  |                  |  |               |  |              
|Convertible bonds, due 2004, interest 1.4% |  |                 |  | 59,460,443    |  |             
|                                           |  |                  |  |               |  |              
|Diluted common shares outstanding          |  | 2,294,607,915    |  | 2,381,295,757 |  | 2,234,968,907
|                                           |  |                  |  |               |  |              



|                             |  |       |  |       |  |       |  
|---------------------------- |  | ----- |  | ----- |  | ----- | -
|                             |  | Yen   | 
|                             |  | 2005  |  | 2004  |  | 2003  |  
|Net income (loss) per share: |  |       |  |       |  |       |  
|Basic                        |  | 25.49 |  | 18.15 |  | (8.70 | )
|Diluted                      |  | 25.49 |  | 18.00 |  | (8.70 | )



Stock options were
outstanding for the three years ended March 31, 2005, but were not included in the calculation of diluted net income per share because the stock options effect would be antidilutive (see Note 12).



The effect of potentially dilutive securities was not included in the
calculation of diluted net loss per share for the year ended March 31, 2003 as their effect would be antidilutive due to the net loss incurred for the year.



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MATSUSHITA ELECTRIC INDUSTRIAL CO., LTD.

AND SUBSIDIARIES



Notes to Consolidated Financial Statements



|(15) | Restructuring Charges
|---- | ---------------------



In connection with the reorganization of the Companys operations, the Company has incurred certain restructuring charges. Components and related
amounts of the restructuring charges, before the related tax effects, for the years ended March 31, 2005, 2004 and 2003 are as follows:



|                                                                          |  |                |  |        |  |       
|------------------------------------------------------------------------- |  | -------------- |  | ------ |  | ------
|                                                                          |  | Yen (millions)
|                                                                          |  | 2005           |  | 2004   |  | 2003  
|Expenses associated with the implementation of early retirement programs: |  |                |  |        |  |       
|Domestic                                                                  |  | 93,170         |  | 45,056 |  | 12,476
|Overseas                                                                  |  | 7,966          |  | 875    |  |      
|                                                                          |  |                |  |        |  |       
|Total                                                                     |  | 101,136        |  | 45,931 |  | 12,476
|                                                                          |  |                | 
|Expenses associated with the closure and integration of locations         |  | 9,432          |  | 8,216  |  |      
|                                                                          |  |                |  |        |  |       
|Total restructuring charges                                               |  | 110,568        |  | 54,147 |  | 12,476
|                                                                          |  |                |  |        |  |       



These restructuring
charges are included in other deductions in the consolidated statements of operations.



The Company has provided early retirement programs to those employees voluntarily leaving the Company. The accrued early retirement programs are recognized when the employees accept the offer and the amount can be
reasonably estimated. An analysis of the accrued early retirement programs for the years ended March 31, 2005, 2004 and 2003 is as follows:



|                                 |  |                |   |  |         |   |  |         |  
|-------------------------------- |  | -------------- | - |  | ------- | - |  | ------- | -
|                                 |  | Yen (millions) |  
|                                 |  | 2005           |   |  | 2004    |   |  | 2003    |  
|Balance at beginning of the year |  |               |   |  |        |   |  |        |  
|New charges                      |  | 101,136        |   |  | 45,931  |   |  | 12,476  |  
|Cash payments                    |  | (97,729        | ) |  | (45,931 | ) |  | (12,476 | )
|                                 |  |                |   |  |         |   |  |         |  
|Balance at end of the year       |  | 3,407          |   |  |        |   |  |        |  
|                                 |  |                |   |  |         |   |  |         |  



Expenses associated
with the closure and integration of locations include amounts such as moving expense of facilities and costs to terminate leasing contracts incurred at domestic and overseas manufacturing plants and sales offices. All the payments for expenses
associated with closure and integration of locations were completed by the end of each fiscal year.



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MATSUSHITA ELECTRIC INDUSTRIAL CO., LTD.

AND SUBSIDIARIES



Notes to Consolidated Financial Statements



The following represent significant restructuring activities for the year ended March 31, 2005 by business segment:



AVC Networks

AVC Networks segment
restructured mainly to cope with sharp price declines in digital products. The restructuring activities mainly consisted of the implementation of early retirement programs covering both video and audio equipment business and information and
communications equipment business in Japan and Europe, shutting down of the manufacturing plant in Europe for video and audio equipment business and closure and integration of manufacturing plants and sales offices in Japan for information and
communications equipment business.



Total restructuring
charges amounted to 57,742 million yen, including expenses associated with the implementation of early retirement programs 52,666 million yen.



Home Appliances

Home Appliances
segment restructured mainly to address rising raw material costs as well as to enhance cost competitiveness. The restructuring activities mainly consisted of the implementation of early retirement programs and closure and integration of locations in
Japan, and shutting down of the manufacturing plant in Europe for home appliances business.



Total restructuring charges amounted to 8,288 million yen, including expenses associated with the implementation of early retirement programs of 6,970 million yen.



Components and Devices

Components and Devices segment restructured to address the downturn in components and devices industries, such as price declines. The restructuring
activities mainly consisted of the implementation of early retirement programs in electronic components business and batteries business and closure and integration of manufacturing locations in Japan for electronic components business.



Total restructuring charges amounted to 22,986 million yen, including
expenses associated with the implementation of early retirement programs of 21,979 million yen.



MEW and PanaHome

MEW and PanaHome
segment incurred restructuring charges in the amount of 1,783 million yen, mainly related to a reorganization conducted to eliminate duplication of product lines and corporate functions with other Matsushita companies.



JVC

JVC segment restructured to enhance competitiveness in global markets. The restructuring activities mainly consisted of closure and integration of
locations in electronic components business. Total restructuring charges amounted to 9,208 million yen, mainly representing expenses associated with the implementation of early retirement programs.



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MATSUSHITA ELECTRIC INDUSTRIAL CO., LTD.

AND SUBSIDIARIES



Notes to Consolidated Financial Statements



Other

Other segment restructured to strengthen competitiveness of sales companies. The
restructuring activities mainly consisted of the implementation of early retirement programs in domestic and overseas sales companies.



Total restructuring charges amounted to 10,561 million yen, including expenses associated with the implementation of early retirement programs of 10,370
million yen.



The following represent significant restructuring
activities for the year ended March 31, 2004 by business segment:



AVC Networks

AVC Networks segment restructured mainly to address price declines in digital products. The restructuring
activities mainly consisted of the implementation of early retirement programs mainly in Japan for both video and audio equipment business and information and communications equipment business.



Total restructuring charges amounted to 4,187 million yen, representing
expenses associated with the implementation of early retirement programs.



Home Appliances

Home Appliances segment restructured to enhance cost competitiveness. The
restructuring activities consisted of the implementation of early retirement programs in Japan for refrigerator and air conditioner business.



Total restructuring charges amounted to 31,286 million yen, representing expenses associated with the implementation of early retirement programs.



Components and Devices

Components and Devices segment restructured to enhance cost competitiveness through selecting and concentrating on key business areas. The restructuring
activities mainly consisted of the implementation of early retirement programs and closure and integration of business locations in Japan and shutting down of the manufacturing plant in Asia for motor business.



Total restructuring charges amounted to 14,700 million yen, including
expenses associated with the closure and integration of locations of 8,305 million yen.



JVC

JVC segment restructured to enhance cost competitiveness. Total restructuring charges amounted
to 2,408 million yen, mainly representing expenses associated with the implementation of early retirement programs.



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AND SUBSIDIARIES



Notes to Consolidated Financial Statements



Other

Other segment incurred restructuring charges in the amount of 1,566 million yen for domestic
sales companies.



For the year ended March 31, 2003, JVC
segment restructured to strengthen its management structure.



Total restructuring charges amounted to 12,476 million yen in JVC segment, representing expenses associated with the implementation of early retirement programs.



|(16) | Supplementary Information to the Statements of Operations and Cash Flows
|---- | ------------------------------------------------------------------------



Research and development costs, advertising costs, shipping and handling costs and depreciation charged to operations for
the three years ended March 31, 2005 are as follows:



|                               |  |                |  |         |  |        
|------------------------------ |  | -------------- |  | ------- |  | -------
|                               |  | Yen (millions)
|                               |  | 2005           |  | 2004    |  | 2003   
|Research and development costs |  | 615,524        |  | 579,230 |  | 551,019
|Advertising costs              |  | 174,604        |  | 146,046 |  | 130,426
|Shipping and handling costs    |  | 166,404        |  | 141,570 |  | 140,498
|Depreciation                   |  | 287,400        |  | 253,762 |  | 283,434



Included in other
income for the year ended March 31, 2003 is a gain of 10,805 million yen from the sale of Panasonic Disc Services Corporation.



Foreign exchange gains and losses included in other deductions for the years ended March 31, 2005, 2004 and 2003 is a loss of 7,542 million yen, 13,588
million yen and 7,962 million yen, respectively.



Shipping and
handling costs are included in selling, general and administrative expenses in the consolidated statements of operations.



In fiscal 2005 and 2004, the Company sold, without recourse, trade accounts receivable of 48,578 million yen and 4,661 million yen to independent third
parties for proceeds of 48,469 million yen and 4,657 million yen, and recorded losses on the sale of trade accounts receivable of 109 million yen and 4 million yen, respectively, which is included in selling, general and administrative expenses. The
Company is responsible for servicing the receivables.



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MATSUSHITA ELECTRIC INDUSTRIAL CO., LTD.

AND SUBSIDIARIES



Notes to Consolidated Financial Statements



In fiscal 2005, the Company sold, without recourse, loans receivable of 96,339 million yen to independent third parities for proceeds of 106,779 million yen, and recorded gains on the sale of loans receivable of
10,440 million yen, which is included in other income. The sale of the receivables was accounted for under SFAS No. 140, Accounting for Transfer and Servicing of Financial Assets and Extinguishments of Liabilities.



Interest expenses and income taxes paid, and noncash investing and financing
activities for the three years ended March 31, 2005 are as follows:



|                                                               |  |                |  |        |  |        
|-------------------------------------------------------------- |  | -------------- |  | ------ |  | -------
|                                                               |  | Yen (millions)
|                                                               |  | 2005           |  | 2004   |  | 2003   
|Cash paid:                                                     |  |                |  |        |  |        
|Interest                                                       |  | 25,513         |  | 30,505 |  | 32,587 
|Income taxes                                                   |  | 99,951         |  | 65,121 |  | 46,744 
|Noncash investing and financing activities:                    |  |                |  |        |  |        
|Conversion of bonds                                            |  |               |  | 16,924 |  | 2      
|Capital transactions by consolidated and associated companies  |  |               |  |       |  | 650    
|Stock provided under exchange offering                         |  |               |  | 6,579  |  | 638,308
|Contribution of assets and liabilities to associated companies |  | 4,302          |  | 3,278  |  | 31,740 



|(17) | Derivatives and Hedging Activities
|---- | ----------------------------------



The Company operates internationally, giving rise to significant exposure to market risks arising from changes in foreign exchange rates, interest rates
and commodity prices. The Company assesses these risks by continually monitoring changes in these exposures and by evaluating hedging opportunities. Derivative financial instruments utilized by the Company to hedge these risks are comprised
principally of foreign exchange contracts, interest rate swaps, cross currency swaps and commodity derivatives. The Company does not hold or issue derivative financial instruments for any purposes other than hedging.



Gains and losses related to derivative instruments are classified in other
income (deductions) in the consolidated statements of operations. The amount of the hedging ineffectiveness and net gain or loss excluded from the assessment of hedge effectiveness is not material for the three years ended March 31, 2005. Amounts
included in accumulated other comprehensive income (loss) at March 31, 2005 are expected to be recognized in earnings principally over the next twelve months. The maximum term over which the Company is hedging exposures to the variability of cash
flows for foreign currency exchange risk is approximately five months.



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AND SUBSIDIARIES



Notes to Consolidated Financial Statements



The Company is exposed to credit risk in the event of non-performance by counterparties to the derivative contracts, but such risk is considered mitigated by the high credit rating of the counterparties.



The contract amounts of foreign exchange contracts, interest rate swaps,
cross currency swaps and commodity futures at March 31, 2005 and 2004 are as follows:



|                                             |  |                |  |        
|-------------------------------------------- |  | -------------- |  | -------
|                                             |  | Yen (millions)
|                                             |  | 2005           |  | 2004   
|Forward:                                     |  |                |  |        
|To sell foreign currencies                   |  | 317,506        |  | 398,782
|To buy foreign currencies                    |  | 200,705        |  | 205,039
|Options purchased to sell foreign currencies |  | 29,981         |  | 44,886 
|Options written to sell foreign currencies   |  |               |  | 29,046 
|Variable-paying interest rate swaps          |  | 15,000         |  | 115,000
|Cross currency swaps                         |  | 16,879         |  | 14,914 
|Commodity futures:                           |  |                |  |        
|To sell commodity                            |  | 31,978         |  | 14,915 
|To buy commodity                             |  | 75,824         |  | 52,888 



|(18) | Fair Value of Financial Instruments
|---- | -----------------------------------



The following methods and assumptions were used to estimate the fair value of each class of financial instruments for which it is practicable to estimate
that value:



Cash and cash equivalents, Time deposits, Trade
receivables, Short-term borrowings, Trade payables and Accrued expenses

The carrying amount approximates fair value because of the
short maturity of these instruments.



Short-term
investments

The fair value of short-term investments is estimated based on quoted market prices.



Noncurrent receivables

The carrying amount which is generally stated at the net realizable value approximates fair value.



Investments and advances

The fair value of investments and advances is estimated based on quoted market prices or the present value of future cash flows using appropriate current
discount rates.



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MATSUSHITA ELECTRIC INDUSTRIAL CO., LTD.

AND SUBSIDIARIES



Notes to Consolidated Financial Statements



Long-term debt

The fair value of long-term debt is estimated based on quoted market prices or the
present value of future cash flows using appropriate current discount rates.



Derivative financial instruments

The fair value of derivative financial instruments, all of which
are used for hedging purposes, are estimated by obtaining quotes from brokers.



The estimated fair values of financial instruments, all of which are held or issued for purposes other than trading, at March 31, 2005 and 2004 are as follows:



|                                             |  |                |   |  |           |   |  |                |   |  |           |  
|-------------------------------------------- |  | -------------- | - |  | --------- | - |  | -------------- | - |  | --------- | -
|                                             |  | Yen (millions) |  
|                                             |  | 2005           |   |  | 2004      |  
|                                             |  | Carryingamount |   |  | Fairvalue |   |  | Carryingamount |   |  | Fairvalue |  
|Non-derivatives:                             |  |                |   |  |           |   |  |                |   |  |           |  
|Assets:                                      |  |                |   |  |           |   |  |                |   |  |           |  
|Short-term investments                       |  | 11,978         |   |  | 11,978    |   |  | 2,684          |   |  | 2,684     |  
|Investments and advances                     |  | 945,759        |   |  | 943,981   |   |  | 812,586        |   |  | 813,750   |  
|Liabilities:                                 |  |                |   |  |           |   |  |                |   |  |           |  
|Long-term debt, including current portion    |  | (732,907       | ) |  | (742,737  | ) |  | (677,814       | ) |  | (684,314  | )
|Derivatives:                                 |  |                |   |  |           |   |  |                |   |  |           |  
|Other current assets:                        |  |                |   |  |           |   |  |                |   |  |           |  
|Forward:                                     |  |                |   |  |           |   |  |                |   |  |           |  
|To sell foreign currencies                   |  |               |   |  |          |   |  | 9,446          |   |  | 9,446     |  
|To buy foreign currencies                    |  | 1,643          |   |  | 1,643     |   |  |               |   |  |          |  
|Options purchased to sell foreign currencies |  | 61             |   |  | 61        |   |  | 746            |   |  | 746       |  
|Variable-paying interest rate swaps          |  | 84             |   |  | 84        |   |  | 135            |   |  | 135       |  
|Cross currency swaps                         |  | 123            |   |  | 123       |   |  | 229            |   |  | 229       |  
|Commodity futures to buy commodity           |  | 12,554         |   |  | 12,554    |   |  | 5,709          |   |  | 5,709     |  
|Other current liabilities:                   |  |                |   |  |           |   |  |                |   |  |           |  
|Forward:                                     |  |                |   |  |           |   |  |                |   |  |           |  
|To sell foreign currencies                   |  | (3,122         | ) |  | (3,122    | ) |  |               |   |  |          |  
|To buy foreign currencies                    |  |               |   |  |          |   |  | (469           | ) |  | (469      | )
|Options written to sell foreign currencies   |  |               |   |  |          |   |  | (455           | ) |  | (455      | )
|Cross currency swaps                         |  |               |   |  |          |   |  | (2             | ) |  | (2        | )
|Commodity futures to sell commodity          |  | (2,832         | ) |  | (2,832    | ) |  | (1,223         | ) |  | (1,223    | )



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MATSUSHITA ELECTRIC INDUSTRIAL CO., LTD.

AND SUBSIDIARIES



Notes to Consolidated Financial Statements



Limitations



Fair value
estimates are made at a specific point in time, based on relevant market information and information about the financial instruments. These estimates are subjective in nature and involve uncertainties and matters of significant judgements and
therefore cannot be determined with precision. Changes in assumptions could significantly affect the estimates.



|(19) | Commitments and Contingent Liabilities
|---- | --------------------------------------



The Company provides guarantees to third parties on bank loans provided to its employees, associated companies and customers. The guarantees for the
employees are principally made for their housing loans. The guarantees for associated companies and customers are made to enhance their credit. For each guarantee provided, the Company is required to perform under the guarantee if the guaranteed
party defaults on a payment. The maximum amount of undiscounted payments the Company would have to make in the event of default is 14,388 million yen. The carrying amount of the liabilities recognized for the Companys obligations as a
guarantor under those guarantees at March 31, 2005 and 2004 was insignificant.



A financial subsidiary of the Company provides guarantees to third parties on certain consumer loans of its customers. For each guarantee provided, the subsidiary is required to perform under the guarantee if the
guaranteed party defaults on a payment. The maximum amount of undiscounted payments the subsidiary would have to make in the event of default is 19,007 million yen. The carrying amount of the liabilities recognized for the subsidiarys
obligations as a guarantor under those guarantees at March 31, 2005 and 2004 was insignificant.



As discussed in Note 6, in connection with the sale and lease back of certain machinery and equipment, the Company guarantees a specific value of the
leased assets. For each guarantee provided, the Company is required to perform under the guarantee if certain conditions are met during or at the end of the lease term. The maximum amount of undiscounted payments the Company would have to make in
the event that these conditions are met is 35,315 million yen. The carrying amount of the liabilities recognized for the Companys obligations as guarantors under those guarantees at March 31, 2005 and 2004 was insignificant.



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MATSUSHITA ELECTRIC INDUSTRIAL CO., LTD.

AND SUBSIDIARIES



Notes to Consolidated Financial Statements



The Company issues contractual product warranties under which it generally guarantees the performance of products delivered and services rendered for a certain period or term. The change in accrued warranty costs for
the years ended March 31, 2005 and 2004 are summarized as follows:



|                                                                                            |  |                |   |  |         |  
|------------------------------------------------------------------------------------------- |  | -------------- | - |  | ------- | -
|                                                                                            |  | Yen (millions) |  
|                                                                                            |  | 2005           |   |  | 2004    |  
|Balance at beginning of year                                                                |  | 30,720         |   |  | 24,834  |  
|Increase due to acquisition (Note 2)                                                        |  | 2,482          |   |  |        |  
|Liabilities accrued for warranties issued during the period                                 |  | 51,471         |   |  | 39,409  |  
|Warranty claims paid during the period                                                      |  | (44,209        | ) |  | (31,805 | )
|Changes in liabilities for pre-existing warranties during the period, including expirations |  | (5,248         | ) |  | (1,718  | )
|                                                                                            |  |                |   |  |         |  
|Balance at end of year                                                                      |  | 35,216         |   |  | 30,720  |  
|                                                                                            |  |                |   |  |         |  



At March 31, 2005,
commitments outstanding for the purchase of property, plant and equipment approximated 49,217 million yen. Contingent liabilities at March 31, 2005 for discounted export bills of exchange amounted to 4,269 million yen.



Liabilities for environmental remediation costs are recorded when it is
probable that obligations have been incurred and the amounts can be reasonably estimated. In January 2003, the Company announced that disposed electric equipment that contained polychlorinated biphenyls (PCB equipment) might be buried in
the ground of its four manufacturing facilities and one former manufacturing facility. The applicable laws require that PCB equipment be appropriately maintained and disposed of by July 2016. The Company has accrued estimated total cost of 17,269
million yen for necessary actions such as investigating whether the PCB equipment is buried at the facilities, including excavations, and maintaining and disposing the PCB equipment that is already discovered, and soil remediation, since it
represents managements best estimate or minimum of the cost, but the payments are not considered to be fixed and reliably determinable.



There are a number of legal actions against the Company and certain subsidiaries. Management is of the opinion that damages, if any, resulting from these
actions will not have a material effect on the Companys consolidated financial statements.



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MATSUSHITA ELECTRIC INDUSTRIAL CO., LTD.

AND SUBSIDIARIES



Notes to Consolidated Financial Statements



|(20) | Segment Information
|---- | -------------------



In accordance with SFAS No. 131, Disclosures about Segments of an Enterprise and Related Information, the segments reported below are the
components of the Company for which separate financial information is available that is evaluated regularly by the chief operating decision maker of the Company in deciding how to allocate resources and in assessing performance.



Business segments correspond to categories of activity classified primarily
by markets, products and brand names. AVC Networks includes video and audio equipment, and information and communications equipment. Home Appliances includes home appliances and housing equipment and systems. Components
and Devices includes electronic components, semiconductors, electric motors and batteries. MEW and PanaHome includes electrical supplies, electric products, building materials and equipment, and housing business. JVC
includes products marketed under the brand name of JVC or Victor. Other includes electronic-parts-mounting machines, industrial robots and industrial equipment.



As discussed in Note 2, MEW, PanaHome and their respective subsidiaries became consolidated subsidiaries of the Company on
April 1, 2004. Accordingly, a new segment, MEW and PanaHome, has been added to the Companys business segment classifications from fiscal 2005.



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MATSUSHITA ELECTRIC INDUSTRIAL CO., LTD.

AND SUBSIDIARIES



Notes to Consolidated Financial Statements



Information by segment for the three years ended March 31, 2005 is shown in the tables below:



By Business Segment:



|                        |  |                |   |  |            |   |  |           |  
|----------------------- |  | -------------- | - |  | ---------- | - |  | --------- | -
|                        |  | Yen (millions) |  
|                        |  | 2005           |   |  | 2004       |   |  | 2003      |  
|Sales:                  |  |                |   |  |            |   |  |           |  
|AVC Networks:           |  |                |   |  |            |   |  |           |  
|Customers               |  | 3,745,339      |   |  | 3,771,516  |   |  | 3,621,211 |  
|Intersegment            |  | 113,442        |   |  | 68,752     |   |  | 46,984    |  
|                        |  |                |   |  |            |   |  |           |  
|Total                   |  | 3,858,781      |   |  | 3,840,268  |   |  | 3,668,195 |  
|Home Appliances:        |  |                |   |  |            |   |  |           |  
|Customers               |  | 1,245,478      |   |  | 1,174,138  |   |  | 1,169,608 |  
|Intersegment            |  | 87,298         |   |  | 49,052     |   |  | 27,873    |  
|                        |  |                |   |  |            |   |  |           |  
|Total                   |  | 1,332,776      |   |  | 1,223,190  |   |  | 1,197,481 |  
|Components and Devices: |  |                |   |  |            |   |  |           |  
|Customers               |  | 1,006,893      |   |  | 1,073,108  |   |  | 1,145,092 |  
|Intersegment            |  | 462,114        |   |  | 586,564    |   |  | 564,640   |  
|                        |  |                |   |  |            |   |  |           |  
|Total                   |  | 1,469,007      |   |  | 1,659,672  |   |  | 1,709,732 |  
|MEW and PanaHome:       |  |                |   |  |            |   |  |           |  
|Customers               |  | 1,485,689      |   |  |           |   |  |          |  
|Intersegment            |  | 70,374         |   |  |           |   |  |          |  
|                        |  |                |   |  |            |   |  |           |  
|Total                   |  | 1,556,063      |   |  |           |   |  |          |  
|JVC:                    |  |                |   |  |            |   |  |           |  
|Customers               |  | 721,391        |   |  | 802,650    |   |  | 827,967   |  
|Intersegment            |  | 8,818          |   |  | 16,349     |   |  | 23,542    |  
|                        |  |                |   |  |            |   |  |           |  
|Total                   |  | 730,209        |   |  | 818,999    |   |  | 851,509   |  
|Other:                  |  |                |   |  |            |   |  |           |  
|Customers               |  | 508,846        |   |  | 658,332    |   |  | 637,836   |  
|Intersegment            |  | 518,277        |   |  | 290,396    |   |  | 181,219   |  
|                        |  |                |   |  |            |   |  |           |  
|Total                   |  | 1,027,123      |   |  | 948,728    |   |  | 819,055   |  
|Eliminations            |  | (1,260,323     | ) |  | (1,011,113 | ) |  | (844,258  | )
|                        |  |                |   |  |            |   |  |           |  
|Consolidated total      |  | 8,713,636      |   |  | 7,479,744  |   |  | 7,401,714 |  
|                        |  |                |   |  |            |   |  |           |  



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AND SUBSIDIARIES



Notes to Consolidated Financial Statements



|                                                                                           |  |                |   |  |           |   |  |           |  
|------------------------------------------------------------------------------------------ |  | -------------- | - |  | --------- | - |  | --------- | -
|                                                                                           |  | Yen (millions) |  
|                                                                                           |  | 2005           |   |  | 2004      |   |  | 2003      |  
|Segment profit:                                                                            |  |                |   |  |           |   |  |           |  
|AVC Networks                                                                               |  | 127,366        |   |  | 129,102   |   |  | 82,828    |  
|Home Appliances                                                                            |  | 77,632         |   |  | 52,759    |   |  | 45,240    |  
|Components and Devices                                                                     |  | 57,761         |   |  | 50,099    |   |  | 31,213    |  
|MEW and PanaHome                                                                           |  | 63,923         |   |  |          |   |  |          |  
|JVC                                                                                        |  | 9,887          |   |  | 24,675    |   |  | 21,863    |  
|Other                                                                                      |  | 38,352         |   |  | 14,701    |   |  | 13,042    |  
|Corporate and eliminations                                                                 |  | (66,427        | ) |  | (75,844   | ) |  | (67,615   | )
|                                                                                           |  |                |   |  |           |   |  |           |  
|Total segment profit                                                                       |  | 308,494        |   |  | 195,492   |   |  | 126,571   |  
|                                                                                           |  |                |   |  |           |   |  |           |  
|Interest income                                                                            |  | 19,490         |   |  | 19,564    |   |  | 22,267    |  
|Dividends received                                                                         |  | 5,383          |   |  | 5,475     |   |  | 4,506     |  
|Gain from the transfer of the substitutional portion of Japanese Welfare Pension Insurance |  | 31,509         |   |  | 72,228    |   |  |          |  
|Other income                                                                               |  | 82,819         |   |  | 59,544    |   |  | 64,677    |  
|Interest expense                                                                           |  | (22,827        | ) |  | (27,744   | ) |  | (32,805   | )
|Other deductions                                                                           |  | (177,955       | ) |  | (153,737  | ) |  | (116,300  | )
|                                                                                           |  |                |   |  |           |   |  |           |  
|Consolidated income before income taxes                                                    |  | 246,913        |   |  | 170,822   |   |  | 68,916    |  
|                                                                                           |  |                |   |  |           |   |  |           |  
|                                                                                           |  |                |  
|Identifiable assets:                                                                       |  |                |   |  |           |   |  |           |  
|AVC Networks                                                                               |  | 2,205,663      |   |  | 2,090,130 |   |  | 2,355,671 |  
|Home Appliances                                                                            |  | 660,841        |   |  | 701,143   |   |  | 805,437   |  
|Components and Devices                                                                     |  | 930,315        |   |  | 1,157,984 |   |  | 1,317,882 |  
|MEW and PanaHome                                                                           |  | 1,346,029      |   |  |          |   |  |          |  
|JVC                                                                                        |  | 483,867        |   |  | 503,943   |   |  | 488,595   |  
|Other                                                                                      |  | 883,706        |   |  | 754,117   |   |  | 795,103   |  
|Corporate and eliminations                                                                 |  | 1,546,460      |   |  | 2,230,695 |   |  | 2,072,005 |  
|                                                                                           |  |                |   |  |           |   |  |           |  
|Consolidated total                                                                         |  | 8,056,881      |   |  | 7,438,012 |   |  | 7,834,693 |  
|                                                                                           |  |                |   |  |           |   |  |           |  
|Depreciation (including intangibles other than goodwill):                                  |  |                |   |  |           |   |  |           |  
|AVC Networks                                                                               |  | 88,550         |   |  | 85,085    |   |  | 81,332    |  
|Home Appliances                                                                            |  | 32,098         |   |  | 31,674    |   |  | 39,367    |  
|Components and Devices                                                                     |  | 96,659         |   |  | 103,898   |   |  | 133,113   |  
|MEW and PanaHome                                                                           |  | 50,269         |   |  |          |   |  |          |  
|JVC                                                                                        |  | 15,985         |   |  | 16,339    |   |  | 16,596    |  
|Other                                                                                      |  | 30,329         |   |  | 28,954    |   |  | 20,570    |  
|Corporate and eliminations                                                                 |  | 11,079         |   |  | 11,601    |   |  | 9,955     |  
|                                                                                           |  |                |   |  |           |   |  |           |  
|Consolidated total                                                                         |  | 324,969        |   |  | 277,551   |   |  | 300,933   |  
|                                                                                           |  |                |   |  |           |   |  |           |  



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MATSUSHITA ELECTRIC INDUSTRIAL CO., LTD.

AND SUBSIDIARIES



Notes to Consolidated Financial Statements



|                                                                |  |                |  |         |  |        
|--------------------------------------------------------------- |  | -------------- |  | ------- |  | -------
|                                                                |  | Yen (millions)
|                                                                |  | 2005           |  | 2004    |  | 2003   
|Capital investment (including intangibles other than goodwill): |  |                |  |         |  |        
|AVC Networks                                                    |  | 103,340        |  | 80,543  |  | 77,008 
|Home Appliances                                                 |  | 36,512         |  | 26,268  |  | 34,720 
|Components and Devices                                          |  | 126,826        |  | 142,540 |  | 119,639
|MEW and PanaHome                                                |  | 32,518         |  |        |  |       
|JVC                                                             |  | 23,045         |  | 17,735  |  | 14,709 
|Other                                                           |  | 74,570         |  | 28,298  |  | 20,525 
|Corporate and eliminations                                      |  | 14,286         |  | 21,376  |  | 21,213 
|                                                                |  |                |  |         |  |        
|Consolidated total                                              |  | 411,097        |  | 316,760 |  | 287,814
|                                                                |  |                |  |         |  |        



Corporate expenses
include certain corporate R&D expenditures and general corporate expenses.



Corporate assets consist of cash and cash equivalents, time deposits, marketable securities in short-term investments, investments and advances and other assets related to unallocated expenses.



Intangibles mainly represent patents and software.



By Geographical Area:



Sales attributed to countries based upon the customers location and
long-lived assets are as follows:



|                                                             |  |                |  |           |  |          
|------------------------------------------------------------ |  | -------------- |  | --------- |  | ---------
|                                                             |  | Yen (millions)
|                                                             |  | 2005           |  | 2004      |  | 2003     
|Sales:                                                       |  |                |  |           |  |          
|Japan                                                        |  | 4,580,555      |  | 3,477,492 |  | 3,453,836
|North and South America                                      |  | 1,282,956      |  | 1,326,940 |  | 1,420,802
|Europe                                                       |  | 1,122,493      |  | 1,080,143 |  | 999,637  
|Asia and Others                                              |  | 1,727,632      |  | 1,595,169 |  | 1,527,439
|                                                             |  |                |  |           |  |          
|Consolidated total                                           |  | 8,713,636      |  | 7,479,744 |  | 7,401,714
|                                                             |  |                |  |           |  |          
|United States of America included in North and South America |  | 1,127,412      |  | 1,184,446 |  | 1,282,861



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MATSUSHITA ELECTRIC INDUSTRIAL CO., LTD.

AND SUBSIDIARIES



Notes to Consolidated Financial Statements



|                                                             |  |                |  |           |  |          
|------------------------------------------------------------ |  | -------------- |  | --------- |  | ---------
|                                                             |  | Yen (millions)
|                                                             |  | 2005           |  | 2004      |  | 2003     
|Long-lived assets:                                           |  |                |  |           |  |          
|Japan                                                        |  | 1,808,813      |  | 1,359,677 |  | 1,412,415
|North and South America                                      |  | 66,233         |  | 64,955    |  | 80,104   
|Europe                                                       |  | 71,868         |  | 54,456    |  | 68,216   
|Asia and Others                                              |  | 274,663        |  | 222,420   |  | 223,597  
|                                                             |  |                |  |           |  |          
|Consolidated total                                           |  | 2,221,577      |  | 1,701,508 |  | 1,784,332
|                                                             |  |                |  |           |  |          
|United States of America included in North and South America |  | 58,679         |  | 58,297    |  | 71,554   



There are no
individually material countries of which sales and long-lived assets should be separately disclosed in North and South America, Europe and Asia and Others, except for the United States of America.



Transfers between business segments or geographic segments are made at
arms-length prices. There are no sales to a single external major customer for the three years ended March 31, 2005.



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MATSUSHITA ELECTRIC INDUSTRIAL CO., LTD.

AND SUBSIDIARIES



Notes to Consolidated Financial Statements



The following information shows sales, geographical profit and identifiable assets which are attributed to geographic areas based on the country location of the Company or its subsidiaries for the three years ended
March 31, 2005. In addition to the disclosure requirements under SFAS No. 131, the Company discloses this information as supplemental information in light of the disclosure requirements of the Japanese Securities and Exchange Law, which a Japanese
public company is subject to:



|                           |  |                |   |  |            |   |  |            |  
|-------------------------- |  | -------------- | - |  | ---------- | - |  | ---------- | -
|                           |  | Yen (millions) |  
|                           |  | 2005           |   |  | 2004       |   |  | 2003       |  
|Sales:                     |  |                |   |  |            |   |  |            |  
|Japan:                     |  |                |   |  |            |   |  |            |  
|Customers                  |  | 5,033,645      |   |  | 3,989,576  |   |  | 4,032,432  |  
|Intersegment               |  | 1,586,407      |   |  | 1,521,459  |   |  | 1,107,962  |  
|                           |  |                |   |  |            |   |  |            |  
|Total                      |  | 6,620,052      |   |  | 5,511,035  |   |  | 5,140,394  |  
|North and South America:   |  |                |   |  |            |   |  |            |  
|Customers                  |  | 1,248,012      |   |  | 1,271,914  |   |  | 1,364,283  |  
|Intersegment               |  | 23,605         |   |  | 25,269     |   |  | 26,116     |  
|                           |  |                |   |  |            |   |  |            |  
|Total                      |  | 1,271,617      |   |  | 1,297,183  |   |  | 1,390,399  |  
|Europe:                    |  |                |   |  |            |   |  |            |  
|Customers                  |  | 1,046,159      |   |  | 1,014,687  |   |  | 922,312    |  
|Intersegment               |  | 26,405         |   |  | 12,648     |   |  | 16,938     |  
|                           |  |                |   |  |            |   |  |            |  
|Total                      |  | 1,072,564      |   |  | 1,027,335  |   |  | 939,250    |  
|Asia and Others:           |  |                |   |  |            |   |  |            |  
|Customers                  |  | 1,385,820      |   |  | 1,203,567  |   |  | 1,082,687  |  
|Intersegment               |  | 1,059,178      |   |  | 972,843    |   |  | 754,725    |  
|                           |  |                |   |  |            |   |  |            |  
|Total                      |  | 2,444,998      |   |  | 2,176,410  |   |  | 1,837,412  |  
|Eliminations               |  | (2,695,595     | ) |  | (2,532,219 | ) |  | (1,905,741 | )
|                           |  |                |   |  |            |   |  |            |  
|Consolidated total         |  | 8,713,636      |   |  | 7,479,744  |   |  | 7,401,714  |  
|                           |  |                |   |  |            |   |  |            |  
|                           |  |                |  
|Geographical profit:       |  |                |   |  |            |   |  |            |  
|Japan                      |  | 262,063        |   |  | 131,796    |   |  | 88,152     |  
|North and South America    |  | 20,834         |   |  | 23,258     |   |  | 22,449     |  
|Europe                     |  | 7,393          |   |  | 16,325     |   |  | 21,741     |  
|Asia and Others            |  | 75,324         |   |  | 89,706     |   |  | 71,016     |  
|Corporate and eliminations |  | (57,120        | ) |  | (65,593    | ) |  | (76,787    | )
|                           |  |                |   |  |            |   |  |            |  
|Consolidated total         |  | 308,494        |   |  | 195,492    |   |  | 126,571    |  
|                           |  |                |   |  |            |   |  |            |  



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MATSUSHITA ELECTRIC INDUSTRIAL CO., LTD.

AND SUBSIDIARIES



Notes to Consolidated Financial Statements



|                           |  |                |  |           |  |          
|-------------------------- |  | -------------- |  | --------- |  | ---------
|                           |  | Yen (millions)
|                           |  | 2005           |  | 2004      |  | 2003     
|Identifiable assets:       |  |                |  |           |  |          
|Japan                      |  | 5,055,700      |  | 3,887,504 |  | 4,445,983
|North and South America    |  | 402,155        |  | 411,615   |  | 526,918  
|Europe                     |  | 379,571        |  | 308,687   |  | 335,813  
|Asia and Others            |  | 995,785        |  | 858,238   |  | 831,289  
|Corporate and eliminations |  | 1,223,670      |  | 1,971,968 |  | 1,694,690
|                           |  |                |  |           |  |          
|Consolidated total         |  | 8,056,881      |  | 7,438,012 |  | 7,834,693
|                           |  |                |  |           |  |          



|(21) | Subsequent Event
|---- | ----------------



On April 1, 2005, the Company sold approximately 2,707 thousand shares of Matsushita Leasing & Credit Co., Ltd. (MLC) to The Sumitomo Trust &
Banking Co., Ltd. (STB) for cash proceeds of 27,756 million yen and recorded a gain of 10,313 million yen, pursuant to a basic agreement regarding the equity ownership of MLC concluded between the Company and STB. As a result of the sale, the
Company now owns 34% of MLCs total issued shares. MLC (renamed Sumishin Matsushita Financial Services Co., Ltd. on May 1, 2005) was changed from a consolidated subsidiary to an equity method investee of the Company as of April 1, 2005.



With the aim of maximizing shareholder value, on April 28,
2005, the Board of Directors approved plans to proactively provide returns to shareholders and adopted a policy toward large-scale purchases of the Companys shares.



For fiscal 2006, the Company plans to increase total dividends per share to 20.00 yen, as compared with the planned 15.00
yen for fiscal 2005. The Company will continue to repurchase the Companys own shares, up to 120 million shares for a maximum of 150 billion yen in fiscal 2006, to enhance shareholder value per share.



Under the basic philosophy that shareholders should make final decisions
regarding large-scale purchases of the Companys shares, sufficient information should be provided through the Board of Directors to shareholders if a large-scale purchase is to be conducted. Under the above-mentioned basic philosophy, the
Board of Directors decided to adopt a new rule applicable to large-scale purchasers who intend to acquire 20% or more of all voting rights of the Company. The new rule requires that (i) a large-scale purchaser provides sufficient information to the
Board of Directors before a large-scale purchase is to be conducted and (ii) after all required information is provided, the Board of Directors should be allowed a sufficient period of time during which it will assess, examine, negotiate, form an
opinion and seek alternatives. In the event of non-compliance with such rules by a prospective large-scale purchaser, the Board of Directors may take countermeasures to protect the interest of all shareholders.



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MATSUSHITA ELECTRIC INDUSTRIAL CO., LTD.

AND SUBSIDIARIES



Notes to Consolidated Financial Statements



The Company announced the details of this policy on April 28, 2005 as the policy toward large-scale purchases of the Companys shares (ESV plan). (For further details, see No. 15.1 of Item 19.)



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Schedule II



MATSUSHITA
ELECTRIC INDUSTRIAL CO., LTD.

AND SUBSIDIARIES



Valuation and Qualifying Accounts and Reserves

(In millions of yen)



Years ended March 31, 2005, 2004 and 2003







|                                               |  |                               |  |                  |  |                       |  |                                                |  |        |                          |        |   |  |       
|---------------------------------------------- |  | ----------------------------- |  | ---------------- |  | --------------------- |  | ---------------------------------------------- |  | ------ | ------------------------ | ------ | - |  | ------
|                                               |  | Balance atbeginning of period |  | Add              |  | Deduct                |  | Add (deduct) -cumulativetranslationadjustments |  |        | Balance at end of period
|                                               |  | Due toacquisition             |  | Chargedto income |  | Bad debts written off |  | Reversal                                       |  |       
|Allowance for doubtful trade receivables:      |  |                               |  |                  |  |                       |  |                                                |  |        |                          |        |   |  |       
|2005                                           |  | 47,873                        |  | 7,278            |  | 4,963                 |  | 6,384                                          |  | 10,364 |                          | 470    |   |  | 43,836
|2004                                           |  | 53,043                        |  |                 |  | 3,154                 |  | 3,088                                          |  | 3,662  |                          | (1,574 | ) |  | 47,873
|2003                                           |  | 43,265                        |  |                 |  | 17,621                |  | 2,919                                          |  | 3,011  |                          | (1,913 | ) |  | 53,043
|Allowance for doubtful noncurrent receivables: |  |                               |  |                  |  |                       |  |                                                |  |        |                          |        |   |  |       
|2005                                           |  |                              |  |                 |  |                      |  |                                               |  |       |                          |       |   |  |      
|2004                                           |  |                              |  |                 |  |                      |  |                                               |  |       |                          |       |   |  |      
|2003                                           |  | 50                            |  |                 |  |                      |  |                                               |  | 50     |                          |       |   |  |      



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|Item 19. | Exhibits
|-------- | --------



Documents filed as exhibits to this annual report are as follows:



|     |  |                                                                                                                                                                                                                                                                                                                                                                                                                 
|---- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|1.1  |  | Articles of Incorporation of the Registrant (English translation) [incorporated by reference to the Annual Report on Form 20-F (File No. 1-06784) filed on September 13, 2004]                                                                                                                                                                                                                                  
|     | 
|1.2  |  | Share Handling Regulations of the Registrant (English translation) [incorporated by reference to the Annual Report on Form 20-F (File No. 1-06784) filed on September 13,
2004]                                                                                                                                                                                                                                 
|     | 
|1.3  |  | Regulations of the Board of Directors of the Registrant (English translation) [incorporated by reference to the Annual Report on Form 20-F (File No. 1-06784) filed on September 10,
2003]                                                                                                                                                                                                                      
|     | 
|1.4  |  | Regulations of the Board of Corporate Auditors of the Registrant (English translation)                                                                                                                                                                                                                                                                                                                          
|     | 
|2.1  |  | Specimen common stock certificates of the Registrant (English translation) [incorporated by reference to the Annual Report on Form 20-F (File No. 1-06784) filed on September 10,
2003]                                                                                                                                                                                                                         
|     | 
|2.2  |  | Form of Amended and Restated Deposit Agreement among the Registrant, Morgan Guaranty Trust Company of New York (now JPMorgan Chase Bank, N.A.) as Depositary and all owners and holders from
time to time of American Depositary Receipts, including the form of American Depositary Receipt [incorporated by reference to the Registration Statement on Form F-6 (File No. 333-12694) filed on October 4, 2000]
|     | 
|4.1  |  | Liability Limitation Agreement (English translation) [Matsushita and each of Ikuo Uno and Yoshifumi Nishikawa, entered into a Liability Limitation Agreement, each dated June 29, 2005, in the
form of this Exhibit.]                                                                                                                                                                                           
|     | 
|8.1  |  | Subsidiaries of the Registrant [List of significant subsidiaries (see Section C of Item 4)]                                                                                                                                                                                                                                                                                                                     
|     | 
|11.1 |  | Code of Ethics for Directors and Executive Officers (English translation) [incorporated by reference to the Annual Report on Form 20-F (File No. 1-06784) filed on September 13,
2004]                                                                                                                                                                                                                          
|     | 
|12.1 |  | Certification of the principal executive officer of the Company required by Rule 13a-14(a)                                                                                                                                                                                                                                                                                                                      
|     | 
|12.2 |  | Certification of the principal financial officer of the Company required by Rule 13a-14(a)                                                                                                                                                                                                                                                                                                                      
|     | 
|13.1 |  | Certification required by Rule 13a-14(a) and Section 1350 of Chapter 63 of Title 18 of the United States Code                                                                                                                                                                                                                                                                                                   
|     | 
|15.1 |  | Policy toward Large-scale Purchases of Matsushita Shares (ESV Plan)                                                                                                                                                                                                                                                                                                                                             



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The Company has not included as exhibits certain instruments with respect to its long-term debt, the amount of debt
authorized under each of which does not exceed 10% of its total assets, and it agrees to furnish a copy of any such instrument to the Securities and Exchange Commission upon request.



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SIGNATURES



Pursuant to the requirements of Section 12 of the Securities Exchange Act of 1934, the Company certifies that it meets all of the
requirements for filing on Form 20-F and has duly caused this annual report to be signed on its behalf by the undersigned, thereunto duly authorized.







|      |  |                   |  |  |  |                                          |  |                                  
|----- |  | ----------------- |  |  |  | ---------------------------------------- |  | ---------------------------------
|      |  |                   |  |  |  | MATSUSHITA ELECTRIC INDUSTRIAL CO., LTD.
|      |  |                   |  |  |  | (Registrant)                            
|      |  |                   |  | 
|Date: |  | September 9, 2005 |  |  |  | By                                       |  | /s/    Yukitoshi Onda            
|      |  |                   |  |  |  |                                          |  | Yukitoshi Onda                   
|      |  |                   |  |  |  |                                          |  | President of                     
|      |  |                   |  |  |  |                                          |  | Panasonic Finance (America), Inc.
|      |  |                   |  |  |  |                                          |  | 1 Rockefeller Plaza, Suite 1001, 
|      |  |                   |  |  |  |                                          |  | New York, N.Y. 10020-2002        



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##### Table of Contents

Index to Exhibits



Documents filed as exhibits to this annual report are as follows:



|     |  |                                                                                                                                                                                                                                                                                                                                                                                                                 
|---- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|1.1  |  | Articles of Incorporation of the Registrant (English translation) [incorporated by reference to the Annual Report on Form 20-F (File No. 1-06784) filed on September 13, 2004]                                                                                                                                                                                                                                  
|     | 
|1.2  |  | Share Handling Regulations of the Registrant (English translation) [incorporated by reference to the Annual Report on Form 20-F (File No. 1-06784) filed on September 13,
2004]                                                                                                                                                                                                                                 
|     | 
|1.3  |  | Regulations of the Board of Directors of the Registrant (English translation) [incorporated by reference to the Annual Report on Form 20-F (File No. 1-06784) filed on September 10,
2003]                                                                                                                                                                                                                      
|     | 
|1.4  |  | Regulations of the Board of Corporate Auditors of the Registrant (English translation)                                                                                                                                                                                                                                                                                                                          
|     | 
|2.1  |  | Specimen common stock certificates of the Registrant (English translation) [incorporated by reference to the Annual Report on Form 20-F (File No. 1-06784) filed on September 10,
2003]                                                                                                                                                                                                                         
|     | 
|2.2  |  | Form of Amended and Restated Deposit Agreement among the Registrant, Morgan Guaranty Trust Company of New York (now JPMorgan Chase Bank, N.A.) as Depositary and all owners and holders from
time to time of American Depositary Receipts, including the form of American Depositary Receipt [incorporated by reference to the Registration Statement on Form F-6 (File No. 333-12694) filed on October 4, 2000]
|     | 
|4.1  |  | Liability Limitation Agreement (English translation) [Matsushita and each of Ikuo Uno and Yoshifumi Nishikawa, entered into a Liability Limitation Agreement, each dated June 29, 2005, in the
form of this Exhibit.]                                                                                                                                                                                           
|     | 
|8.1  |  | Subsidiaries of the Registrant [List of significant subsidiaries (see Section C of Item 4)]                                                                                                                                                                                                                                                                                                                     
|     | 
|11.1 |  | Code of Ethics for Directors and Executive Officers (English translation) [incorporated by reference to the Annual Report on Form 20-F (File No. 1-06784) filed on September 13,
2004]                                                                                                                                                                                                                          
|     | 
|12.1 |  | Certification of the principal executive officer of the Company required by Rule 13a-14(a)                                                                                                                                                                                                                                                                                                                      
|     | 
|12.2 |  | Certification of the principal financial officer of the Company required by Rule 13a-14(a)                                                                                                                                                                                                                                                                                                                      
|     | 
|13.1 |  | Certification required by Rule 13a-14(a) and Section 1350 of Chapter 63 of Title 18 of the United States Code                                                                                                                                                                                                                                                                                                   
|     | 
|15.1 |  | Policy toward Large-scale Purchases of Matsushita Shares (ESV Plan)