annual report 2010 · annual report 2010 for the year ended march 31, 2010 panasonic electric works...

Annual Report 2010For the Year Ended March 31, 2010

Panasonic Electric Works Information Systems Co., Ltd.

Corporate Profile

The former Panasonic Electric Works’ information systems

division was established as an independent company, Panasonic

Electric Works Information Systems Co., Ltd., in 1999. For nearly

50 years, based on our technical expertise, we have offered total

solutions for information systems from planning and designing to

development, operation and maintenance.

Our strength lies in our on-site capabilities cultivated by staying

closely in tune with site needs, solving problems through trial and

error. We strive to deliver useful solutions from the customer’s

perspective.

Contents

01 Consolidated Financial Highlights02 To Our Shareholders03 Top Interview06 Special Feature: New Medium-Term Management Plan “Move to Delight—Aiming to Create Delight, not merely Satisfaction”

09 Review of Operations12 Corporate Governance13 CSR14 Financial Section 14 Management’s Discussion and Analysis 18 Consolidated Balance Sheets 20 Consolidated Statements of Income 21 Consolidated Statements of Changes in Equity 22 Consolidated Statements of Cash Flows 23 Notes to Consolidated Financial Statements 32 Independent Auditors’ Report33 Corporate Data/ Board of Directors, Corporate Auditors and Corporate Officers/ Stock Information

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

01

Millions of YenThousands of U.S.

Dollars (Note 1)

2010 2009 2008 2007 2006 2010

Net sales ¥36,650 ¥37,320 ¥39,066 ¥40,226 ¥41,385 $394,086

Operating income 4,371 4,632 4,877 5,014 4,610 47,000

Net income 2,563 2,783 2,842 3,001 2,800 27,559

Net cash provided by operating activities ¥ 4,483 ¥ 3,864 ¥ 2,848 ¥ 3,742 ¥ 2,468 $ 48,204

Net cash used in investing activities (2,829) (3,866) (1,921) (3,337) (576) (30,419)

Net cash used in financing activities (863) (710) (639) (639) (347) (9,280)

Cash and cash equivalents 4,759 3,968 4,679 4,391 4,625 51,172

Total assets ¥25,146 ¥23,211 ¥21,185 ¥21,307 ¥18,610 $270,387

Equity 19,659 17,604 15,552 13,346 10,985 211,387

Yen U.S. Dollars (Note 1)

Basic net income (Note 2) ¥240.51 ¥261.13 ¥266.78 ¥281.65 ¥260.42 $ 2.59

Cash dividends 65.00 75.00 65.00 55.00 55.00 0.70

Operating income to net sales 11.9% 12.4% 12.5% 12.5% 11.1%

Return on equity 13.8 16.8 19.7 24.7 28.7

Equity ratio 78.2 75.7 73.3 62.5 59.0

Notes: 1. Amounts expressed in U.S. dollars are calculated using the exchange rate prevailing on March 31, 2010 of ¥93 to US$1.00. 2. Diluted net income per share is not indicated here, because there are no potentially dilutive shares.

Consolidated Financial Highlights

10,000

20,000

30,000

40,000

50,000

700

1,400

2,100

2,800

3,500

60

120

180

240

300(Millions of Yen)

2,400

3,600

4,800

6,000

Net Sales

’06 ’07 ’08 ’09 ’10

41,385

(Millions of Yen)

40,226 39,066 37,32036,650

0

Net Income Basic Net Income per Share

’06 ’07 ’08 ’09 ’10

2,800

(Millions of Yen)

3,0012,842 2,783

2,563

0

’06 ’07 ’08 ’09 ’10

260.42

(Yen)

281.65

266.78 261.13240.51

0

’06 ’07 ’08 ’09 ’10

4,610

11.1

12.5 12.512.4

11.9

5,014 4,8774,632

4,371

0

(%)

0

Operating IncomeOperating Income to Net Sales

1,200 11

12

13

14

15

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

02

In the fiscal year ended March 31, 2010, the Japanese economy showed some signs of recovery, though some question remains about the sustainability of this rebound. This was a particularly tough year for the information services industry, with companies curtailing capital expenditures and adopting a cautious stance toward IT investments.

During the year, the Panasonic Electric Works Information Systems Group focused on system operation services, which are relatively impervious to economic fluctuations. We also worked to offer products, services and solutions that the Group is particularly well equipped to provide, given its solid understanding of on-site business requirements. The severe market environment resulted in a fall in sales and profits, but sales to companies outside Panasonic Electric Works Co., Ltd. and its group companies expanded compared with the preceding period. We believe this will play a major role in the future growth and development of the Group.

Our social mission statement attempts to summarize the management philosophy of Panasonic’s founder, Konosuke Matsushita: “We will devote ourselves to the progress and development of society and the well-being of people through our business activities, thereby enhancing the quality of life throughout the world.” The Panasonic Group shares an outlook of operations not confined to manufacturing, and we at Panasonic Electric Works Information Systems Group, catering to the IT field, embrace this sentiment. We are committed to this mission through information technology and as an IT service company.

We are now seeing dramatic changes in the business environment. Under these circumstances, firms expect no less than a revolution in terms of improved efficiency and productivity, and changes that give their businesses a competitive advantage. The current environment certainly does not mean that our customers are looking simply for IT software and hardware products. As an IT service company, to realize this “revolution” from a customer viewpoint, we will utilize our expertise and experience garnered through our work on-site. We believe we can achieve this with speed, and in the process augment Group growth.

Putting form to our conviction, we recently initiated our new medium-term management plan. Looking to its success, we defined our management vision for 2012 as “Move to Delight—Aiming to Create Delight, not merely Satisfaction.” We explain the concept in more detail in the following pages.

To Our Shareholders

Kazuhiro MaegawaPresident

03

Conditions remained harsh in the year to March 31, 2010, as companies curbed their capital investment and postponed IT investments. Usually, cutbacks in IT investment have a major impact on areas such as large-scale system development and machinery and equipment sales. However, system operations are essential for business continuity, and this business is thus more stable and less susceptible to swings in the economic climate. Accordingly, in the year to March 31, 2010, we developed our business

focusing on system operation services and worked to secure stable earnings through increased efficiency. Additionally, the Group rolled out products, services and solutions that are backed by a wealth

of on-site experience.Despite the hard work of all employees

united as one throughout the year, with our efforts focused on these areas, we were greatly affected by intense competition amid tough economic conditions and falling service prices, and the Group recorded a year-on-year decline in sales and profits. But it was not all bad; we can also discuss some areas of progress.

One is the favorable trend in expanding sales outside the Panasonic Electric Works Group, utilizing our own experience to

propose integrated operations and servers, another is efforts to improve management constitution through thorough rationalization, thus ensuring a certain level of profits.

We consider these to be significant footholds for our future progress.

The rapid onset of economic recession in the wake of the financial turmoil of autumn 2008 prompted many companies to cancel or postpone system development projects in 2009, and the price of services declined. We expect negative growth in the IT industry to continue in 2010. Since early spring, we have seen some signs of improvement in domestic business conditions, but with the anxiety over Europe starting with the Greek economic crisis, we are again experiencing instability in the domestic economy.

On the other hand, we can view this sluggish phase as experience, and seek to offer corporate IT the prospect of a major change from “biggest, highest” to “best, optimal.” In other words, nowadays clients are not looking to have better systems than anyone else. Rather, they simply want systems that produce the desired result. In the context of cloud computing, a recent buzzword, we believe such changes are already upon us.

“A system that produces the desired result” needs an example. In fact, the Group has earned high marks from customers for its own experience in integrated server solutions, and

Please tell us about the Company’s efforts and performance in the fiscal year ended March 31, 2010.

Top Interview

I consider our ability to maintain profitability in a harsh environment impressive.

Question: 1

Due to upheavals in the global economy, overall IT investment has changed dramatically. How is Panasonic Electric Works Information Systems dealing with this business environment?

Question: 2

04

we are steadily building on this track record. We believe in enhancing such solutions, in line with market needs.

The business outlook is unstable in many respects, but in recent communications with customers and suppliers we strongly feel that

the Japanese economy is recovering. We believe this implies positive changes ahead.

Moreover, we have realized that what really counts is speed (the pace of change). The keyword in

our strategy for the year to March 31, 2011 is “Q-C-S,” where “Q” means quality, “C” means cost and “S” means speed.

This phrase is more often seen as “Q-C-D,” where “D” stands for delivery. But the pace of change in our customers’ business is faster than ever. To be of use to our customers, the speed of our business advancement needs to remain a step ahead of their needs. This is why we emphasize “S” rather than “D.” There may be a trade-off between quality, cost and speed, but we want to overcome this, and impress our customers by surpassing their “satisfaction.”

The words of the founder of the Panasonic Group, Konosuke Matsushita, ”We will devote ourselves to the progress and development of society and the well-being of people through our business activities, thereby enhancing the quality of life throughout the world,” set the tone for our company’s social mission. Through IT, the Group strives to fulfill its social mission as an IT services company. We must not forget that “service” is at the root of the business.

We expect to see such challenges as continued upheaval in the IT industry, the shift toward larger-scale operations, the shakeout of firms and intensification of competition. To remain the company of choice with customers, we aim to develop business from a customer perspective. The customer’s

By maintaining a customer-oriented perspective as a service-oriented IT company, we aim to impress customers by exceeding their expectations.

QQuality

SSpeedCCost

Sustainability

Realization of Quality (Q)-Cost (C)-Speed (S)

A company with strong “on-site capabilities”

Top Interview

Please tell us how you plan to take on the business environment in the year to March 31, 2011.

Question: 3

What are your thoughts on the new-medium-term management plan (from the year to March 31, 2011 through the year to March 31, 2013) that began in April?

Question: 4

05

needs are the starting point. We also seek to build on a solid foundation as an IT service company. Based on such thinking, we drew up our new medium-term management plan and defined our management vision for 2012, “Move to Delight—Aiming to Create Delight, not merely Satisfaction.” This vision underlines our determination to truly become an IT service company.

The word “delight” evokes the sense of happiness, joy and being moved. In response, one obvious question might be, “Who do you aim to delight?” The answer is: our shareholders, investors, customers, and employees and their families—we are working toward the happiness of all our stakeholders.

The Company considers the return of profits to shareholders a priority. While keeping in mind the need to replenish internal reserves, reinforcing our management foundation for long-term growth, our aim is to ensure steady dividends, taking a proactive stance in linking dividends to financial performance.

Our Articles of Incorporation state that dividends from surplus with record dates of March 31, September 30 and other dates determined by resolution of the Board of Directors, a decision-making body for dividends from surplus. For the foreseeable future we plan to pay stable annual dividends of ¥55 per share. While taking into overall consideration the fund-raising environment, financial conditions and the payout ratio, we aim to also reflect our consolidated operating

performance in dividends. In the year to March 31,

2010, based on our policy of a stable dividend of ¥55 plus a performance-linked dividend, we set total dividends per share at ¥65. For the year to March 31, 2011, we plan to pay interim and year-end dividends of ¥27.5 per share, plus a performance-linked dividend of ¥5, bringing total dividends to ¥65 per share.

We aim to expand earnings opportunities through investment and provide stable

dividends.

15

0

30

45

60

75

(Yen)

6

0

12

18

24

30

(%)

’06

55.0

21.1

’07

55.0

19.5

’08

65.0

24.4

’09

75.0

28.7

’10

65.027.0

Consolidated Payout Ratio

Dividends

Please tell us your thoughts on returns to shareholders.

Question: 5

06

Special Feature: New Medium-Term Management Plan

The fiscal year ending March 31, 2011 is the first year of the Group’s new three-year medium-term management plan. Based on our on-site capabilities gained from working assiduously to resolve issues at customers’ place of business as a user ourselves, we are strengthening our foundations through both selection and concentration of new and priority businesses. By achieving the plan’s objectives, we seek to pave the way to becoming an IT service company that goes well beyond merely satisfying the customer through the full deployment of our strengths.

Under the plan, we will promote the initiatives set out below to achieve the following results for the year ending March 31, 2013: consolidated net sales of ¥40 billion and consolidated operating income of ¥4.9 billion (consolidated operating margin of 12.3%).

Move to DelightAiming to Create Delight, not merely Satisfaction

Expand sales outside the

Panasonic Electric Works Group

Strengthen management

practices (Active investment while maintaining profit levels)

Reinforce partnerships with

key customers

【Sales promotion】Approach large and medium-sized firms with IT rationalization proposals【New business】Selection and concentration of new/priority business【Overseas】Bui ld infrastructure for overseas development

【 IT infrastructure】Initiatives to accelerate reform of IT structure【Engineering IT】Cultivate engineering IT

【Structural reform】Combine capabilities and enhance human resources training through reorganization【Rationalization】Thoroughly pursue further rationalization【Quality】Nurturing a “quality-first” mindset

2,5000

0

30,000

35,000

40,000

45,000

(Millions of Yen)

4,000

0

4,500

5,000

11.0

12.5

(%)

(Millions of Yen)

’10Results

36,650

11.9

’11Plan

36,000

12.2

’12Plan

37,500

12.1

’13Plan

40,000

12.3

4,371

4,400 4,500

4,900

Operating Income to Net Sales

Net Sales Operating Income

Reinforce Partnerships with Key Customers

The Group has many customers, including its largest client, Panasonic Electric Works Co., Ltd. Our relationship with these important customers has helped us to strengthen on-site capabilities in such areas as data center operations and solutions for server ingegrations. The Group will further enhance its on-site capabilities to offer

more advanced products, servers and solutions the next level up and to build strong, trust-based partnerships. We believe that by strengthening the bonds with our customers, the Group can preserve a stable and strong management foundation.

07

Expand Sales Outside the Panasonic Electric Works Group by 30% to Achieve an External Sales Ratio of Over 35%

First of all, we plan to expand our client base to large and medium-sized businesses, schools and manufacturing wholesalers. Our aim is to double our customer base in three years. Next, we plan to focus on the selection and concentration of new/priority businesses. We must fully leverage our strengths and pursue new technologies and product strategies that lead to the creation of a new market to achieve our goals of 30% sales growth and an external sales ratio of over 35%. We are therefore putting every effort into our five key objectives: infrastructure optimization, design process reform, system integration for core functions, IT operations service and cooperation with Panasonic Electric Works. In all of these areas, the Group will make the best use of its hands-on and on-site operating experience.

We believe our future depends on making a full-fledged advance into overseas markets. As an IT support company, we will promote the building of infrastructure for overseas development.

In April 2010, we appointed international business representatives to support companies accelerating their overseas development. We plan to absorb technologies and expertise in this manner during the upcoming three years.

Themes Description

Infrastructure optimizationDrastically reform IT infrastructure with low visibility to managers

Server/storage/network optimization solutionsVirtualization, integration, BCP implementation

Design process reformSupport development in response to globalization/offshoring

Solutions to support acceleration and better efficiency of product development in response to global expansion

System integration for core functionsOrder/sales management, production management, accounting

Build integrated system for core functionsSupport seamless integration of information on supply chain

IT operations serviceFrom management with ownership to management without ownership

Make business from structural reforms in IT, such as revision of IT operations Deploy cloud computing business

Cooperation with Panasonic Electric WorksCreate new added value by utilizing IT in Panasonic Electric Works products

Solutions through new integration of system equipment of Panasonic Electric Works Group and IT

Selection and Concentration of New/Priority Businesses


08

Strengthen Management Practices (Active Investment While Maintaining Profit Levels)

The new medium-term management plan regards research and development activities for the creation of new businesses and technologies as important measures, and we plan to invest a total of ¥300 million in these areas over a three-year period. Nevertheless, we aim to maintain a consolidated operating margin of around 12%. For this reason, a variety of effective measures is important. The table on the right outlines these measures.

Furthermore, since we are an IT service company, enhancing the quality of human resources is inextricably linked with improving customer

satisfaction. It goes without saying, therefore, that nurturing human resources is key to the thorough provision of top-flight services.

Make Continuous “Reductions” and Constructive “Expansions”

(̶) Reductions

Simple organization adapted to the market environment

(+) Expansions

Year to March 31, 20106 headquarters

10 business departments

Year to March 31, 20113 headquarters

4 business departments

First global year

Strengthen global HR/build global organizationYear to March 31, 2010

10 people 100 people

Further reduce operational/development costs

Applications (400 systems)

Servers(1,800)

Half

Vitalize organization with new people

30 new hires in April 2010

Reduce costs by relocating the Tokyo of�ce Enhance sales force in the Tokyo metro area

Large personnel shift Expand the Tokyo of�ce 1.5 times

Move completed in June 2010Greatly reduced costs (rent)

Absolute amount: –¥90 million/3 years


We made a new start in the Tokyo metropolitan area by relocating our office from Chuo Ward to Minato Ward. We consider an office a place to store and showcase our expertise, as well as the command center from which we seek to master new technology and products. From our new base, we will strive to expand solutions that satisfy our customers.

VideoconferencingtofurtherenhanceexpertiseDrawing on our own rich experience with video conferencing systems, we have installed such systems in all of our meeting rooms. We hope that our customers can also take advantage of our thorough mastery to enhance their experience in this area.

NewsecurityNon-stressful palm vein authentication

NewimagetechnologyPrecision range image sensors

High-speedwirelessHigh-speed, noiseless wireless LAN

NeweducationsystemsContent-production solutions for smart phones

ImmediateImplementationthroughtheTokyoOffice

ThoroughMasteryandApplicationofExpertise TechnologyasaSeedofSuccess

09

Review of Operations

SystemandCommunicationsEquipmentBusinessWhen offering solutions to our customers, the Group also proposes the most suitable system equipment for the customer.

We call this a “multi-vendor” approach. We leverage a track record we have cultivated over our long history of operations in Japan and overseas, by testing every device available on the market for adoption. Based on our own experience, we confidently propose flexible combinations not tied to specific manufacturers.

SystemSolutionsWe are seeing significant changes in the operating environment, and customers are looking for nothing short of a revolution in productivity and efficiency enhancements, as well as renovating their businesses to boost their competitive advantage. We look to deliver solution strategies applying IT to assist our customers toward this end.

SystemServicesInformation systems have become indispensible for corporate management. All kinds of business systems are being put in place to enable companies to operate 24 hours a day, 365 days a year. These operations are playing a crucial role in business continuity.

From two data center locations, the Osaka IDC and Osaka Central Data Center, the Group is caring for the safety and security of customers’ systems while providing operation services that match customers’ needs.

System and Communications Equipment Business

18.1%

System Solutions

19.0%

System Services

62.9%

10,000

0

20,000

30,000

40,000

50,000

(Millions of Yen)

System Services

’06

6,301

22,672

12,411

’07

7,827

23,519

8,878

’08

8,349

23,664

7,051

’09

7,580

23,788

5,951

’10

6,958

23,045

6,647

System SolutionsSystem and Communications Equipment Business

Breakdown of Net Sales(FY 3/2010)

Net Sales by Sales Category

10

Performance in the Year to March 31, 2010Amid the challenging economic conditions and clear trend of lower prices for services provided, earnings fell in the year to March 31, 2010.

Nevertheless, the gross margin (the ratio of gross profits to net sales) improved on the back of cost-cutting efforts.

Future StrategyAmid growing interest in such areas as cloud computing, companies’ attitudes toward their IT assets are changing from “ownership” to “application.” To this end, we anticipate an increasing desire to get the maximum possible use out of IT at an appropriate cost. The Group continues to respond to the needs of its customers by focusing on such services as its virtualized infrastructure, which it began in February 2010.

Performance in the Year to March 31, 2010In this segment, web system architecture for major communications companies and infrastructure architecture for leading securities companies, as well as data retrieval tools, sales management software and workflow packages, contributed to increased sales. Sales to the Panasonic Electric Works Group in this category were sluggish throughout the period.

Despite our continued effort to achieve cost reductions, profits from some projects decreased due to severer competition to win orders, which resulted in a lower gross margin than the previous year.

SystemServices

SystemSolutions

5,000

0

10,000

15,000

20,000

25,000

(Millions of Yen)

Net Sales

’06

22,672

’07

23,519

’08

23,664

’09

23,788

’10

23,045

2,000

0

4,000

6,000

8,000

10,000

(Millions of Yen)

Net Sales

’06

6,301

’07

7,827

’08

8,349

’09

7,580

’10

6,958

3,000

0

6,000

9,000

12,000

15,000

(Millions of Yen)

Net Sales

’06

12,411

’07

8,878

’08

7,051

’09

5,951

’10

6,647




62.9% ¥23,045 million

($248 million)

19.0% ¥6,958 million

($75 million)

18.1% ¥6,647 million

($71 million)

Gross Margin Gross Margin Gross Margin

50

40

30

20

10

(%)

0

50

40

30

20

10

(%)

0

50

40

30

20

10

(%)

0

6.1

9.4

16.4 15.0

17.2

24.022.6

21.5 20.3 20.7

13.7

18.0

15.4

20.2

18.4

5,000

0

10,000

15,000

20,000

25,000

(Millions of Yen)

Net Sales

’06

22,672

’07

23,519

’08

23,664

’09

23,788

’10

23,045

2,000

0

4,000

6,000

8,000

10,000

(Millions of Yen)

Net Sales

’06

6,301

’07

7,827

’08

8,349

’09

7,580

’10

6,958

3,000

0

6,000

9,000

12,000

15,000

(Millions of Yen)

Net Sales

’06

12,411

’07

8,878

’08

7,051

’09

5,951

’10

6,647




62.9% ¥23,045 million

($248 million)

19.0% ¥6,958 million

($75 million)

18.1% ¥6,647 million

($71 million)


50

40

30

20

10

(%)

0

50

40

30

20

10

(%)

0

50

40

30

20

10

(%)

0

6.1

9.4

16.4 15.0

17.2

24.022.6

21.5 20.3 20.7

13.7

18.0

15.4

20.2

18.4

Review of Operations

11

Future StrategyWhat customers are after is not systems or applications per se, but a corporation reform that utilizes them. Also, to speedily realize such a transformation, the keywords for customer systems are no longer “biggest, highest,” but “best, optimal.” The Group strives to propose solutions that address demands for “best, optimal” systems that offer “speed.”

Performance in the Year to March 31, 2010The sales category saw steady sales throughout the fiscal year, owing to efforts to respond to clients’ rationalization requirements by offering Egenera® BladeFrame® blade server and video conferencing systems. A large project to introduce thin client also contributed to the increased revenue.

The gross margin remained at a high level during the fiscal year.

Future StrategyAmid the challenging economic conditions, businesses continued to curtail capital investments, but their requirements for more efficient and streamlined operations have been growing. We aim to further increase sales by consistently addressing these customer requirements, leveraging our own experience as a user.

SystemandCommunicationsEquipmentBusiness

5,000

0

10,000

15,000

20,000

25,000

(Millions of Yen)

Net Sales

’06

22,672

’07

23,519

’08

23,664

’09

23,788

’10

23,045

2,000

0

4,000

6,000

8,000

10,000

(Millions of Yen)

Net Sales

’06

6,301

’07

7,827

’08

8,349

’09

7,580

’10

6,958

3,000

0

6,000

9,000

12,000

15,000

(Millions of Yen)

Net Sales

’06

12,411

’07

8,878

’08

7,051

’09

5,951

’10

6,647




62.9% ¥23,045 million

($248 million)

19.0% ¥6,958 million

($75 million)

18.1% ¥6,647 million

($71 million)


50

40

30

20

10

(%)

0

50

40

30

20

10

(%)

0

50

40

30

20

10

(%)

0

6.1

9.4

16.4 15.0

17.2

24.022.6

21.5 20.3 20.7

13.7

18.0

15.4

20.2

18.4

5,000

0

10,000

15,000

20,000

25,000

(Millions of Yen)

Net Sales

’06

22,672

’07

23,519

’08

23,664

’09

23,788

’10

23,045

2,000

0

4,000

6,000

8,000

10,000

(Millions of Yen)

Net Sales

’06

6,301

’07

7,827

’08

8,349

’09

7,580

’10

6,958

3,000

0

6,000

9,000

12,000

15,000

(Millions of Yen)

Net Sales

’06

12,411

’07

8,878

’08

7,051

’09

5,951

’10

6,647




62.9% ¥23,045 million

($248 million)

19.0% ¥6,958 million

($75 million)

18.1% ¥6,647 million

($71 million)


50

40

30

20

10

(%)

0

50

40

30

20

10

(%)

0

50

40

30

20

10

(%)

0

6.1

9.4

16.4 15.0

17.2

24.022.6

21.5 20.3 20.7

13.7

18.0

15.4

20.2

18.4

12

Corporate Governance

With regard to the execution of business, to achieve both swift and appropriate decision making and supervisory and auditing functions, as well as business controls, we have adopted the following corporate governance structure.

BusinessExecutionandSupervisionThe Board of Directors meeting is held regularly once a month and irregularly as required to report on significant operating policies, decisions on substantive matters, and the execution of business and duties, as well as statutory matters. Also, to provide neutral and impartial supervision, two of the seven directors are outside directors.

Actual business is executed by executive directors and executives under the leadership of the president in accordance with policies that have been decided by the Board of Directors to clarify the responsibility and to sufficiently demonstrate supervisory functions. Also, for the purpose of uniting the whole Company as one through the discussion and sharing of information necessary for the smooth and rational execution of business, we have established business strategy meetings and management study groups.

AuditingThe Company’s auditing system is made up of auditors and the Board of Auditors, an internal audit unit as well as an accounting auditor, and is conducted as follows: to implement a varied and effective audit, each carries out the management audit from a different point of view together with appropriate coordination.Board of Auditors and the Auditors’ InspectionThe Board of Auditors is comprised of auditors, audit plans, methods and so forth, and reports on the implementation status

of the audit. The audit is mostly taken from the point of view of legality and is conducted on operations and the financial condition by auditors based on plans determined by the Board of Auditors. Auditors also attend important meetings such as that of the Board of Directors and give recommendations and advice from an independent standpoint. To strengthen the functions of the auditors, we also established an audit office to support the auditors’ professional duties, and we consult with auditors regarding the assessment of the office and its personnel changes.Internal AuditThe Company established the division with the aim to execute fair and efficient business and maintenance of an internal check system to preempt and prevent any irregularities. The division conducts its audit in line with the annual plan, and the results are reported to the Board of Directors.Accounting AuditorConcerning the audit under the Companies Act and Financial Instruments and Exchange Law, the Company is entered into an audit contract with Deloitte Touche Tohmatsu LLC.

ControlsWe believe developing a sound business and maintaining customers’ trust in our business are indispensible to the growth of the Company, so with the goal of establishing a regulated business environment, we have assigned a board member to take charge of internal controls (CSRM*). We have also established such groups as corporate ethics and information security management committees that will deploy concrete measures companywide based on the content of discussions.

*CSRM: Combining CSR (Corporate Social Responsibility) and Risk Management.

Audit

Accounting Audit

Control

Control

Internal Audit

Appointment and Dismissal

Appointment and DismissalAppointment and Dismissal

Appointment and Dismissal

AssistanceCooperation

Supervision / Instruction

Instruction

Cooperation

General Meeting of Shareholders

Board of Directors

Board of Corporate Auditors

Auditors Room

Accounting Auditors

PresidentInternal Audit Division (Auditing)

Business Strategy Meeting

Business Review Meeting

Director in Charge of CSRM and Internal Control

Company-wide CommitteeCorporate Ethics Committee

Information Security Management CommitteeOther Committee

Executive Directors Executive Of cers

Executive Division

13

CSR

AsaPublicBody

For approximately 50 years since the days of its

predecessor, the information systems division of

Panasonic Electric Works, we have worked with the

spirit of the words of the founder of the Panasonic

Group, Konosuke Matsushita: “The company is a

public body” and “All for the customer.”

“A company’s mission is not just commercial

pursuits. Aim to improve and develop social life and

contribute to the progress of global culture.” This is the

basis of our corporate social responsibility

(CSR) activity.

ActivitiesforFairness

Based on the Panasonic Group management philoso-

phy, we try to look beyond just complying with laws,

ordinances and rules to conduct fair and honest

business activities according to conscience and good

sense.

To thoroughly strengthen compliance, we introduced

and are developing a corporate ethics program.

AllfortheCustomer

Contributing to our customers’ business leads to

contributing to society.

“To be useful to the customer,” we always offer

dedication in our work through IT.

CoexistencewiththeGlobalEnvironment

In parallel with the development of IT, power

consumption is increasing, and this is becoming a

major problem for the whole of society.

We use data centers that can operate with lower

power consumption than before, and integrated

servers that use virtualization technology; we are

carrying out business operations that consider the

global environment at the same time as utilizing our

experience with the latest IT. In such ways, we are

supporting our customers’ environmental mitigation

measures.

14

Management’s Discussion and Analysis

SalesDuring the fiscal year ended March 31, 2010 (April 1, 2009 to March 31, 2010), the Japanese economy continued to show signs of recovery owing to such factors as a rebound in exports and progress in inventory adjustments. However, the continuing issues of overemployment and overcapacity, concerns over rapid appreciation of the yen and deflation created some uncertainty over the attainment of a sustainable economic recovery. The IT service industry also suffered from continued severe conditions in which IT investments were postponed due to curtailed capital expenditure by companies.Under such tough circumstances, the Group aimed to increase sales to companies outside the Panasonic Electric Works Group by focusing on providing system operation services, which are relatively impervious to fluctuations in the economy, and by striving to offer products, services and solutions that only the Group, with its solid experience in on-site proposals, can provide. These efforts resulted in favorable trends in operation and server integration projects and workflow packages. On the other hand, owing to our completion of a long-term project to rebuild backbone systems for Panasonic Electric Works and sluggish sales to the Group companies during the year, net sales fell 1.8% from the previous year, to ¥36,650 million.Gross Profit; Selling, General and Administrative ExpensesIn the year ended March 31, 2010, as a result of improved management practices with the help of thorough rationalization efforts such as reducing outsourcing costs, we again saw a decline in cost of sales, by 2.1% compared with the previous fiscal year, to ¥29,445 million. Gross profit fell ¥38 million, or 0.5%, to ¥7,205 million. The cost of sales ratio improved 0.3 percentage point, from 80.6% to 80.3%. Selling, general and administrative (SG&A) expenses rose 8.6%, to ¥2,834 million. The ratio of SG&A expenses to net sales was up 0.7 percentage point from the previous year, to 7.7%. This rise reflected our medium- to long-term stance on investing in the development of our human resources.Operating Income, Non-Operating IncomeConsolidated operating income fell 5.6% versus the previous period, to ¥4,371 million, while the operating margin was down 0.5 percentage point, at 11.9%. Other income fell 71.6%, or ¥72 million, to ¥30 million. This was largely due to additional losses on the disposal of fixed assets. The interest coverage ratio fell from the previous year’s 641.7 times to 460.4 times.Net IncomeThe fiscal year ended March 31, 2010, saw a fall in net income, which dropped 7.9%, to ¥2,563 million. We sought to improve our management practices via thorough rationalization efforts. We also worked toward the reduction of outsourcing costs by making such costs more visible, but these efforts were

AssetsAs of March 31, 2010, total assets were up 8.3%, to ¥25,146 million, from one year earlier. In current assets, cash and deposits fell ¥127 million, and accounts receivable–trade fell ¥856 million, while accounts receivable increased ¥544 million on construction contracts, and deposits paid rose ¥1,720 million. In fixed assets, equipment increased by ¥453 million, while construction in progress rose ¥101 million, investment securities ¥539 million and prepaid pension cost ¥247 million. LiabilitiesAs of March 31, 2010, total liabilities stood at ¥5,487 million, down 2.1% from the end of the preceding fiscal year, mainly as a result of a ¥133 million increase in accounts payable–trade and a ¥497 million decrease in accounts payable–other.Net AssetsOver the same period, net assets increased 11.7%, to ¥19,659 million as a result of a ¥1,764 million rise in retained earnings and a net increase of ¥321 million in unrealized gain on available-for-sale securities.

Cash and cash equivalents at the end of the year ended March 31, 2010 were up ¥791 million from a year earlier, at ¥4,759 million.

overshadowed by higher costs arising from harsher competition and lower prices on services provided in the face of the severe economic environment. The opening of a new data center and the expansion in facilities such as servers, as well as other factors, compounded this situation.

Financial Position

Assets, Liabilities and Net Assets

Business Results by Product Segment

Sales Gross Margin Overview(¥ million) (%)

System Services23,045

(down 3.1% year on year)

20.7(up 0.4

percentage point year on year)

Despite a price decline in operation services, gross profit improved

System Solutions6,958

(down 8.2% year on year)

18.4(down 1.8 percentage

points year on year)

Maintained a high gross margin

System and Communications Equipment Business

6,647(up 11.7% year

on year)

17.2 (up 2.2

percentage points year on

year)

Increased gross margin with expanded sales of high-value-added services

Cash Flows

Financial Section

15

Cash Flows from Operating ActivitiesNet cash provided by operating activities was ¥4,483 million, ¥619 million more than in the previous year. Accounts receivable decreased by ¥723 million from the previous year to ¥312 million. Decrease in inventories amounted to ¥472 million, compared with a ¥51 million increase in the previous year, up ¥523 million in cash flow. Accounts payable showed a year-on-year increase of ¥242 million to ¥133 million. Income tax paid fell by ¥123 million to ¥1,715 million. These changes were the main causes of the increased income.Cash Flows from Investing ActivitiesNet cash used in investing activities was ¥2,829 million, ¥1,037 million less than in the preceding year. Principal causes of the decrease included an increase in deposits paid in of ¥7,500 million, up ¥800 million, and an increase in deposits paid out of ¥1,600 million from the preceding term, to ¥6,700 million.Cash Flows from Financing ActivitiesNet cash used in financing activities amounted to ¥863 million, ¥152 million more than that used for these activities in the fiscal year ended March 31, 2009. This change was mainly a result of a ¥106 million increase in dividends paid, which amounted to ¥799 million.Free Cash FlowsThe aforementioned operating and investing activities resulted in positive free cash flows of ¥1,654 million, compared with ¥2 million in negative free cash flow in the preceding term.

The Japanese economy appears to have bottomed out and be on a path to recovery. However, the pace of resurgence is moderate, and we expect it to be some time before we see a

full-fledged economic recovery. Corporate capital investment is exhibiting some signs that the decline is coming to an end, but businesses remain cautious about IT investments.

The business environment is likely to remain tight for some time, but the Group is striving to provide products, services and solutions that meet evolving corporate needs by capitalizing on its on-site capabilities.

Our consolidated forecasts for the fiscal year ending March 31, 2011, are as follows: net sales of ¥36,000 million (down 1.8% year on year); operating income of ¥4,400 million (up 0.7%); and net income of ¥2,600 million (up 1.4%).

The Group’s research and development activities are mainly conducted at its R&D Center. During the fiscal year ended March 31, 2010, R&D expenditures amounted to ¥1 million, largely for verifying the functionality of new technologies and commercial licenses. The new medium-term management plan regards R&D activities for the creation of new businesses and technologies as important measures, and we plan to invest a total of ¥300 million in these areas over a three-year period.

Capital investment in the year to March 31, 2010, amounted to ¥2,015 million. Investments were mainly made in additional facilities related to the server integration environment and in constructing systems to prevent unauthorized network connections, as well as for development of the e-Learning system “actbrain.”

Forecast for the Fiscal Year Ending March 31, 2011

Research and Development

Capital Investment

10,000

20,000

30,000

40,000

50,000

10

11

12

13

14

40

50

60

70

80

0

500

1,000

1,500

2,000

Net Sales

Operating Income to Net SalesOperating Income

’08

(Millions of Yen)

39,066

0

(%)

0

’07

40,226

’06

41,385

’09

37,320

’10

36,650

4,8775,0144,610 4,632 4,371

Equity Ratio

’08

(%)

0

’07’06 ’09 ’10

Free Cash Flow

’08

(Millions of Yen)

927

–500

’07

405

’06

1,892

’09

–2

’10

1,654

11.1

12.5 12.512.4

11.9 59.0

62.5

73.375.7

78.2

16

Items in this annual report concerning business conditions and financial conditions that may strongly affect investor decisions include the following risks. However, these do not cover all risks with respect to the Group and there may be other hard-to-predict risks not detailed in the material. The Group's business, performance and financial status may be adversely affected by various significant risk factors. Items regarding the future were determined by the Group as of the financial statement filing date (June 17, 2010).

Risks Related to Economic ConditionsFluctuations in the Economic EnvironmentDemand for the Group’s products and services may be affected by general economic trends mainly in Japan. Economic downturns and resulting declines in demand in the Japanese market may thus adversely affect the Group’s financial condition, operating results and cash flows.Interest Rate FluctuationsInterest rate fluctuations may affect operating expense, interest expense and interest income, as well as the value of financial assets and liabilities, and may have an adverse impact on the Group’s business, performance and financial position.Stock Price FallsThe Group holds Japanese stocks as investment securities, and decreases in their market value may necessitate the recognition of valuation losses. Furthermore, a decline in the valuation difference on available-for-sale securities may reduce net assets.

Risks Related to the Group’s Business ActivitiesCompetitive EnvironmentThe Group faces different types of competitors in the information services industry, ranging from large international companies to relatively small, rapidly growing companies. The Group actively makes investments and takes initiatives in strategic products and services. However, investments or sales initiatives for a particular product or service may fail in comparison to competitors in terms of quantity, quality, and speed. Furthermore, competitors may have greater financial, technological and marketing resources than the Group.Price CompetitionThe Group is subject to intense price competition in the information services industry, and this may make it difficult for the Group to determine prices for products and services to secure adequate profits. This downward pressure on prices may have a serious effect on securing the Group’s profits, and becomes especially noticeable when demand for products and services decreases. Prices of many of the Group’s products and services are expected to continue declining in the fiscal year ending March 31, 2011.Competition in New TechnologiesThe Group may lose the ability to compete in new markets if it fails to correctly predict and develop the new technologies, products and services to meet future market needs.

Securing Capable Human ResourcesThe Group’s future success depends largely on its ability to retain skilled employees in the technical and management fields. The Group expects that it will be necessary to hire more personnel in the information services business field, but industry demand for skilled employees exceeds the supply, making competition for attracting and retaining these employees intense. Because of this severe competition for skilled employees, the Group may be unable to retain existing personnel or attract new talent. If this should happen, the Group’s business, performance and financial position could be adversely affected.Business Alliances with Other Companies, etc.The Group develops its business by forming alliances with or strategic investments in other companies, and the strategic importance of partnering with third parties is increasing. In some cases, such partnerships are crucial to achieving the Group’s goal of introducing new products and services, but the Group may not be able to successfully collaborate or achieve expected synergies with its partners. In addition, these partners may change their business strategies and it may become difficult for the Group to maintain these business partnerships. If any of the foregoing should happen, the Group’s businesses, performance and financial status could be adversely affected.Procurement of Raw Materials, etc., and Purchase Price SurgesThe Group’s operations depend on obtaining high-quality products and services in a timely manner and in the necessary quantities, and we therefore select reliable suppliers. However, it may be difficult to change or increase suppliers, or switch to other products and services if the supply is interrupted or industry demand increases. This may adversely affect the Group’s businesses. Moreover, although the Group and suppliers decide purchase prices by contract, purchase prices may increase significantly due to changes in demand or for other reasons. Furthermore, some products and services are only available from a limited number of suppliers. If the Group is unable to procure such products and services, its businesses, performance and financial status may be adversely affected.Capital Status and Financial Conditions of CustomersSome of the Group’s customers purchase products and services from the Group on payment terms that do not provide for immediate payment. If customers for whom the Group has substantial accounts receivable encounter financial difficulties and are unable to make payments on time, the Group’s businesses, performance and financial status may be adversely affected.Risks Related to Future Plans, etc.The Group has announced its earnings forecasts and details of key measures for the fiscal year ending March 31, 2011. However, the Group may fail to achieve all of the goals announced and/or the expected results.

Risks Related to Legal Restrictions and LitigationDirect or Indirect Costs Related to Product Liability or Warranty Claims Due to Defects in Products or Services The Group pays due attention to ensuring the quality of its products and services. However, the occurrence of defects in products or

Risk Factors

17

services could make the Group liable for damages, including indirect damages, that are not completely covered by liability insurance and the Group could incur significant expenses. Moreover, negative publicity concerning these problems could impair the Group’s corporate image, and the Group’s businesses, performance and financial status may be adversely affected.Intellectual Property Right ProtectionThe Group works to secure a competitive edge for its businesses by protecting intellectual property rights (IPRs) related to the technologies, products, and services it develops. However, rights may not be granted to provide adequate protection based on IPRs.

Furthermore, the Group may be unable to use or be forced to use on disadvantageous terms the technologies, products and services of third parties protected by IPRs when needed. As of March 31, 2010, the Group was using the IPRs of third parties under license from third parties for some of its products and services. However, in the future the Group may not be able to obtain the necessary licenses from third parties or may be able to obtain licenses only under disadvantageous terms.

Litigation may also be necessary to defend the Group against IPR infringement claims brought by third parties or to enforce the Group’s IPRs. The Group may incur significant expenses and use significant management resources for such lawsuits. Furthermore, if third-party claims that the Group infringed on IPRs are upheld, the Group may cease to be able to use specific technologies, products and/or services, or be able to supply specific technologies, products and/or services, and may be liable for significant damages.

Changes in Account Standards and Tax SystemsThe Group’s business, performance and financial status may be adversely affected by the unforeseen application of new accounting standards and tax systems. Furthermore, differences in views with tax authorities on the Group’s tax returns could result in the Group being liable for more taxes than expected.Information LeaksIn the normal course of business, the Group obtains information (including personal information) about customers and the like relating to privacy and creditworthiness. The Group pays due attention to safeguarding the confidentiality of this information and has implemented the greatest possible measures to prevent information leaks. However, the Group cannot rule out the possibility that such information may be leaked due to an accident or other inevitable cause. Such a leakage of information may result in the Group being held liable for damages to affected parties and may impair the Group’s corporate image. Moreover, there is a risk that the Group’s trade secrets may be misused by external parties. In such a case, the Group’s businesses, performance and financial status may be adversely affected.Losses Due to Other Legal Restrictions, etcThe Group is subject to governmental regulations in Japan and other countries and regions in which it conducts its business. These include government approvals required for conducting business and investments, laws and regulations governing national security, and export/import laws and regulations, as well as commercial, antitrust, intellectual property, financial transactions, worker protection,

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

Risks Related to Disasters or Unpredictable EventsEffects of Disasters or Unpredictable EventsThe headquarters and major bases of the Group are located in Japan. The occurrence of a natural disaster such as an earthquake, flood or other unexpected event such as a fire, war or terrorist attack, infectious disease outbreak, industrial accident, malicious computer virus, breakdown or malfunction in the Group’s information system or communications network as a result of such events may result in serious damage to Group facilities, and the Group may have to stop operations at certain facilities and delay the provision of products and services.

The Group may incur considerable expenses for restoring damaged facilities, which could adversely affect the Group’s businesses, performance and financial position.

Other RisksPension LiabilitiesThe Group has contributory, funded benefit pension plans covering substantially all employees in Japan who meet eligibility requirements. Revisions to experience assumptions and pension asset performance could result in an increase in unrecognized actuarial losses, leading to an increase in future net periodic benefit costs of these pension plans.Fixed Asset ImpairmentThe Group has many fixed assets, such as property and equipment. All Group companies periodically review the recorded value of fixed assets on the balance sheet to determine if future cash flows to be derived from these assets will be sufficient to recover the residual values in accordance with accounting standards governing the impairment of fixed assets. If these assets cannot generate sufficient cash flows, impairment losses may have to be recognized.Recognizing Uncertainties in Deferred Tax Assets and Income Taxes, Etc.The Group evaluates the likelihood of recognizing the tax benefits of deferred tax assets, based on taxable income forecasts and the evaluation of uncertainty, in considering the recoverability of deferred tax assets and evaluation of income tax uncertainties. However, deteriorating economic conditions, tax audits and other factors may result in temporary variances and net losses being carried forward beyond the period during which tax benefits can be recognized. In such a case, the Group would be required to recognize greater taxable income than had been anticipated, resulting in the possibility of higher corporate taxes.

18

Consolidated Balance SheetsPanasonic Electric Works Information Systems Co., Ltd. and SubsidiariesMarch 31, 2010 and 2009


Dollars (Note 1)

ASSETS 2010 2009 2010

CURRENT ASSETS:

Cash and deposits (Notes 3 and 13) ¥ 389 ¥ 516 $ 4,183

Accounts receivable – Trade (Notes 13 and 14) 6,456 6,769 69,419

Inventories (Note 4) 143 619 1,538

Deposits paid (Notes 3, 13 and 14) 11,885 10,165 127,796

Deferred tax assets (Note 10) 265 272 2,849

Other current assets (Note 14) 287 295 3,086

Allowance for doubtful receivables (1) (1) (11)

Total current assets 19,424 18,635 208,860

PROPERTY AND EQUIPMENT:

Buildings 885 888 9,516

Tools, furniture and fixtures 3,934 2,711 42,301

Lease assets (Note 12) 237 132 2,548

Construction in progress 565 465 6,076

Total 5,621 4,196 60,441

Accumulated depreciation (2,444) (1,553) (26,280)

Net property and equipment 3,177 2,643 34,161

INVESTMENTS AND OTHER ASSETS:

Investment securities (Notes 5 and 13) 791 251 8,505

Goodwill (Note 6) 61 77 656

Software (Note 12) 422 501 4,538

Long-term deposits paid 246 221 2,645

Prepaid pension cost (Note 8) 606 358 6,516

Deferred tax assets (Note 10) 44 345 473

Other assets 402 207 4,323

Allowance for doubtful receivables (27) (27) (290)

Total investments and other assets 2,545 1,933 27,366

TOTAL ¥25,146 ¥23,211 $270,387

See notes to consolidated financial statements.

19


Dollars (Note 1)

LIABILITIES AND EQUITY 2010 2009 2010

CURRENT LIABILITIES:

Accounts payable – Trade (Notes 13 and 14) ¥ 2,224 ¥ 2,091 $ 23,914

Accounts payable – Other (Notes 13 and 14) 1,320 1,818 14,194

Income taxes payable (Note 13) 791 842 8,505

Consumption taxes payable 118 21 1,269

Deposits received (Note 7) 3 2 32

Other current liabilities 739 696 7,946

Total current liabilities 5,195 5,470 55,860

LONG-TERM LIABILITIES:

Deposits received (Note 7) 48 50 516

Deferred tax liabilities (Note 10) 67 — 721

Other 177 87 1,903

Total long-term liabilities 292 137 3,140

EQUITY (Notes 9 and 14):

Common stock – authorized 40,000,000 shares; issued 10,656,000 shares 1,040 1,040 11,183

Capital surplus 871 871 9,366

Retained earnings 17,468 15,704 187,827

Unrealized gain (loss) on available-for-sale securities 280 (42) 3,011

Treasury stock – at cost 127 shares in 2010 and 63 shares in 2009 (0) (0) (0)

Total 19,659 17,573 211,387

Minority interests — 31 —

Total equity 19,659 17,604 211,387

TOTAL ¥25,146 ¥23,211 $270,387

20

Consolidated Statements of IncomePanasonic Electric Works Information Systems Co., Ltd. and SubsidiariesYears Ended March 31, 2010 and 2009


Dollars (Note 1)

2010 2009 2010

NET SALES (Note 14) ¥36,650 ¥37,320 $394,086

COST OF SALES (Notes 11 and 14) 29,445 30,077 316,613

Gross profit 7,205 7,243 77,473

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES (Notes 11 and 14) 2,834 2,611 30,473

Operating income 4,371 4,632 47,000

OTHER INCOME (EXPENSES):

Interest income 79 93 849

Interest expense (10) (6) (108)

Other - net (39) 15 (418)

Other income (expense) - net 30 102 323

INCOME BEFORE INCOME TAXES AND MINORITY INTERESTS 4,401 4,734 47,323

INCOME TAXES (Note 10):

Current 1,677 1,755 18,032

Deferred 158 195 1,699

Total income taxes 1,835 1,950 19,731

MINORITY INTERESTS IN NET INCOME 3 1 33

NET INCOME ¥ 2,563 ¥ 2,783 $ 27,559

Yen U.S. Dollars

PER SHARE OF COMMON STOCK (Notes 2.n and 15):

Basic net income ¥240.51 ¥261.13 $2.59

Cash dividends appricable to the year 65.00 75.00 0.70


21

Consolidated Statements of Changes in EquityPanasonic Electric Works Information Systems Co., Ltd. and SubsidiariesYears Ended March 31, 2010 and 2009

Millions of Yen

Number of Shares of

Common Stock Issued

Common Stock

Capital Surplus

Retained Earnings

Unrealized Gain (Loss) Available-for-sale

Securities

Treasury Stock Total Minority

Interests Total Equity

BALANCE, APRIL 1, 2008 10,656,000 ¥1,040 ¥871 ¥13,614 ¥(3) ¥(0) ¥15,522 ¥ 30 ¥15,552

Net income — — — 2,783 — — 2,783 — 2,783

Cash dividends, ¥65 per share — — — (693) — — (693) — (693)

Net changes in the year — — — — (39) — (39) 1 (38)

BALANCE, MARCH 31, 2009 10,656,000 1,040 871 15,704 (42) (0) 17,573 31 17,604

Net income — — — 2,563 — — 2,563 — 2,563

Cash dividends, ¥75 per share — — — (799) — — (799) — (799)

Purchase of treasury stock — — — — — (0) (0) — (0)

Net changes in the year — — — — 322 — 322 (31) 291

BALANCE, MARCH 31, 2010 10,656,000 ¥1,040 ¥871 ¥17,468 ¥280 ¥(0) ¥19,659 ¥ — ¥19,659

Thousands of U.S. Dollars (Note 1)

Common Stock

Capital Surplus

Retained Earnings

Unrealized Gain (Loss)

on Available-for-sale

Securities

Treasury Stock Total Minority

Interests Total Equity

BALANCE, MARCH 31, 2009 $11,183 $9,366 $168,859 $(451) $(0) $188,957 $ 333 $189,290

Net income — — 27,559 — — 27,559 — 27,559

Cash dividends, $0.81 per share — — (8,591) — — (8,591) — (8,591)

Purchase of treasury stock — — — — (0) (0) — (0)

Net changes in the year — — — 3,462 — 3,462 (333) 3,129

BALANCE, MARCH 31, 2010 $11,183 $9,366 $187,827 $3,011 $(0) $211,387 $ — $211,387


22

Consolidated Statements of Cash FlowsPanasonic Electric Works Information Systems Co., Ltd. and SubsidiariesYears Ended March 31, 2010 and 2009


Dollars (Note 1)

2010 2009 2010

OPERATING ACTIVITIES:

Income before income taxes and minority interests ¥4,401 ¥ 4,734 $ 47,323

Adjustments for:

Depreciation and amortization 1,247 889 13,409

Increase in allowance for doubtful receivables 1 7 11

Interest and dividend income (84) (96) (903)

Interest expense 10 6 108

Changes in assets and liabilities:

Decrease in accounts receivable 312 1,035 3,354

Decrease (increase) in inventories 472 (51) 5,075

Decrease (increase) in other current assets 2 (8) 22

Increase in prepaid pension cost (247) (233) (2,656)

Increase (decrease) in accounts payable 133 (109) 1,430

Decrease in other current liabilities (168) (563) (1,807)

Decrease in other long-term liabilities (5) (32) (54)

Other - net 44 23 473

Subtotal 6,118 5,602 65,785

Interest and dividends received 90 106 968

Interest paid (10) (6) (108)

Income taxes paid (1,715) (1,838) (18,441)

Net cash provided by operating activities 4,483 3,864 48,204

INVESTING ACTIVITIES:

Increase in deposits paid (7,500) (6,700) (80,645)

Decrease in deposits paid 6,700 5,100 72,043

Purchases of property and equipment (1,687) (1,577) (18,140)

Purchases of software (284) (277) (3,054)

Purchases of investment securities — (121) —

Payment for business acquisition — (215) —

Other - net (58) (76) (623)

Net cash used in investing activities (2,829) (3,866) (30,419)

FINANCING ACTIVITIES:

Repayment of lease obligations (64) (17) (689)

Dividends paid (799) (693) (8,591)

Net cash used in financing activities (863) (710) (9,280)

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 791 (712) 8,505

CASH AND CASH EQUIVALENTS OF NEWLY CONSOLIDATED SUBSIDIARY, BEGINNING OF YEAR — 1 —

CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 3,968 4,679 42,667

CASH AND CASH EQUIVALENTS, END OF YEAR (Note 3) ¥4,759 ¥ 3,968 $(51,172

ADDITIONAL CASH FLOW INFORMATION:

Assets acquired and liabilities assumed in acquisition:

Assets acquired — 137 —

Liabilities assumed — 51 —


23

1. BASIS OF PRESENTING CONSOLIDATED FINANCIAL STATEMENTS

Panasonic Electric Works Information Systems Co., Ltd. (the “Company”) was incorporated on February 22, 1999 as a subsidiary of Panasonic Electric Works Co., Ltd. (the “Parent”). The Company is 64% owned by the Parent at March 31, 2010 and 2009, respectively. The principal business of the Company is to provide integration service for information systems; maintenance of computer systems; design, development, sales, lease, rental of computer software; information network service and sales of related equipment.

The accompanying consolidated financial statements have been prepared in accordance with the provisions set forth in the Japanese Financial Instruments and Exchange Act and its related accounting regulations, and in conformity with accounting principles generally accepted in Japan (“Japanese GAAP”), which are different in certain respects as to application and disclosure requirements of International Financial Reporting Standards.

In preparing these consolidated financial statements, certain reclassifications and rearrangements have been made to the consolidated financial statements issued domestically in order to present them in a form which is more familiar to readers outside Japan. In addition, certain reclassifications have been made in the 2009 financial statements of conform to the classifications used in 2010.

The consolidated financial statements are stated in Japanese yen, the currency of the country in which the Company is incorporated and operates. The translations of Japanese yen amounts into U.S. dollar amounts are included solely for the convenience of readers outside Japan and have been made at the rate of ¥93 to $1, the approximate rate of exchange at March 31, 2010. Such translations should not be construed as representations that the Japanese yen amounts could be converted into U.S. dollars at that or any other rate.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

a. ConsolidationThe consolidated financial statements as of March 31, 2010 include the accounts of the Company and its 2 subsidiaries (3 subsidiaries in 2009) (together, the “Group”).

Under the control or influence concept, the Company consolidates entities that it, directly or indirectly, is able to exercise control over operations.

Goodwill represents the excess of the cost of an acquisition over the fair value of the net assets of the acquired subsidiary at the date of acquisition and is amortized on a straight-line basis over five years.

All significant intercompany balances and transactions are eliminated in consolidation. All material unrealized profit included in assets resulting from transactions within the Group is eliminated.

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

c. InventoriesMerchandise and supplies are stated at the lower of cost, determined by the moving-average method, or net selling value. Work in process inventories are stated at the lower of cost, determined by the specific identification method, or net selling value.

d. Investment SecuritiesAvailable-for-sale securities, which are not classified as either trading securities or held-to-maturity debt securities, are reported at fair value, with unrealized gains and losses, net of applicable taxes, reported in a separate component of equity.

e. Property and EquipmentProperty and equipment are stated at cost. Depreciation of property and equipment of the Group is computed substantially by the declining-balance method at rates based on the estimated useful lives of the assets, while the straight-line method is applied to buildings and lease assets. The range of useful lives is from 8 to 15 years for buildings and from 3 to 10 years for tools, furniture and fixtures.

f. Long-lived AssetsThe Group reviews its long-lived assets for impairment whenever events or changes in circumstance indicate the carrying amount of an asset or asset group may not be recoverable. An impairment loss would be recognized if the carrying amount of an asset or asset group exceeds the sum of the undiscounted future cash flows expected to result from the continued use and eventual disposition of the asset or asset group. The impairment loss would be measured as the amount by which the carrying amount of the asset exceeds its recoverable amount, which is the higher of the discounted cash flows from the continued use and eventual disposition of the asset or the net selling price at disposition.

g. SoftwareSoftware to be sold is amortized by the straight-line method over the estimated economic life of the software, 3 years. Software for internal use is amortized by the straight-line method over its useful life, 5 years.

Notes to Consolidated Financial StatementsPanasonic Electric Works Information Systems Co., Ltd. and Subsidiaries Years Ended March 31, 2010 and 2009

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h. Retirement BenefitsThe Company has a non-contributory, funded pension plan together with the Parent and certain other domestic consolidated subsidiaries of the Parent covering substantially all of their employees. The liability for retirement benefits is accounted for based on projected benefit obligations and plan assets at the balance sheet date.

i. LeasesIn March 2007, the Accounting Standards Boards of Japan (the “ASBJ”) issued ASBJ Statement No. 13, “Accounting Standard for Lease Transactions”, which revised the previous accounting standard for lease transactions issued in June 1993. The revised accounting standard for lease transactions is effective for fiscal years beginning on or after April 1, 2008 with early adoption permitted for fiscal years beginning on or after April 1, 2007.

Under the previous accounting standard, finance leases that deem to transfer ownership of the leased property to the lessee were to be capitalized. However, other finance leases were permitted to be accounted for as operating lease transactions if certain “as if capitalized” information is disclosed in the note to the lessee’s financial statements. The revised accounting standard requires that all finance lease transactions should be capitalized to recognize lease assets and lease obligations in the balance sheet. In addition, the revised accounting standard permits leases which existed at the transition date and do not transfer ownership of the leased property to the lessee to be accounted for as operating lease transactions with certain “as if capitalized” information disclosed in the notes to the lessee's financial statements.

The Company applied the revised accounting standard effective April 1, 2008. In addition, the Company accounted for leases which existed at the transition date and do not transfer ownership of the leased property to the lessee as operating lease transactions.

All other leases are accounted for as operating leases.

j. Bonuses to Directors and Corporate AuditorsBonuses to directors and corporate auditors are accrued at the year end to which such bonuses are attributable.

k. Software Revenue Recognition On March 30, 2006, the ASBJ issued Practical Issues Task Force (“PITF”) No. 17, “Practical Solution on Revenue Recognition of Software”. The Group adopted this task force in the year ended March 31, 2007.

l. Construction ContractsIn December 2007, the ASBJ issued ASBJ Statement No. 15 “Accounting Standard for Construction Contracts” and ASBJ Guidance No. 18 “Guidance on Accounting Standard for Construction Contracts”. Under the previous Japanese GAAP, either the completed-contract method or the percentage-of-completion method was permitted to account for construction contracts. Under this new accounting standard, the construction revenue and construction costs should be recognized by the percentage-of-completion method, if the outcome of a construction contract can be estimated reliably. When total construction revenue, total construction costs and the stage of completion of the contract at the balance sheet date can be reliably measured, the outcome of a construction contract can be estimated reliably. If the outcome of a construction contract cannot be reliably estimated, the completed-contract method should be applied. When it is probable that the total construction costs will exceed total construction revenue, an estimated loss on the contract should be immediately recognized by providing for a loss on construction contracts. This standard is applicable to construction contracts and software development contracts and effective for fiscal years beginning on or after April 1, 2009. The Company applied the new accounting standard effective April 1, 2009. The effect of this change was to increase operating income by ¥120 million ($1,290 thousand) and income before income taxes and minority interests by ¥120 million ($1,290 thousand), for the year ended March 31, 2010.

m. Income TaxesThe provision for income taxes is computed based on the pretax income included in the consolidated statements of income. The asset and liability approach is used to recognize deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the carrying amounts and the tax bases of assets and liabilities. Deferred taxes are measured by applying currently enacted tax laws to the temporary differences.

n. Per Share InformationBasic net income per share is computed by dividing net income available to common shareholders by the weighted-average number of common shares outstanding for the year.

Diluted net income per share is not presented as no securities with a dilutive effect have been issued. Cash dividends per share presented in the accompanying consolidated statements of income are dividends applicable to the respective years

including dividends to be paid after the end of the year.The weighted-average number of common shares used in the basis net income per share computation was 10,655,909 shares and

10,655,937 shares for 2010 and 2009, respectively.

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o. New Accounting PronouncementsAsset Retirement Obligations - In March 2008, the ASBJ published a new accounting standard for asset retirement obligations, ASBJ Statement No. 18 “Accounting Standard for Asset Retirement Obligations” and ASBJ Guidance No. 21 “Guidance on Accounting Standard for Asset Retirement Obligations”. Under this accounting standard, an asset retirement obligation is defined as a legal obligation imposed either by law or contract that results from the acquisition, construction, development and the normal operation of a tangible fixed asset and is associated with the retirement of such tangible fixed asset.

The asset retirement obligation is recognized as the sum of the discounted cash flows required for the future asset retirement and is recorded in the period in which the obligation is incurred if a reasonable estimate can be made. If a reasonable estimate of the asset retirement obligation cannot be made in the period the asset retirement obligation is incurred, the liability should be recognized when a reasonable estimate of asset retirement obligation can be made. Upon initial recognition of a liability for an asset retirement obligation, an asset retirement cost is capitalized by increasing the carrying amount of the related fixed asset by the amount of the liability. The asset retirement cost is subsequently allocated to expense through depreciation over the remaining useful life of the asset. Over time, the liability is accreted to its present value each period. Any subsequent revisions to the timing or the amount of the original estimate of undiscounted cash flows are reflected as an increase or a decrease in the carrying amount of the liability and the capitalized amount of the related asset retirement cost. This standard is effective for fiscal years beginning on or after April 1, 2010 with early adoption permitted for fiscal years beginning on or before March 31, 2010.

3. RECONCILIATION TO CASH AND CASH EQUIVALENTS

The reconciliation of cash and deposits in the consolidated balance sheets to cash and cash equivalents in the consolidated statements of cash flows at March 31, 2010 and 2009 were as follows:

Millions of YenThousands of U.S. Dollars

2010 2009 2010Cash and deposits ¥ 389 ¥ 516 $ 4,183Deposits paid with original maturities of within 3 months 4,380 3,462 47,097Time deposits over 3 months (10) (10) (108)Cash and cash equivalents ¥4,759 ¥3,968 $51,172

4. INVENTORIES

Inventories at March 31, 2010 and 2009 consisted of the following:


Dollars

2010 2009 2010Merchandise ¥ 69 ¥160 $ 742Work in process 68 457 731Supplies 6 2 65Total ¥143 ¥619 $1,538

5. INVESTMENT SECURITIES

Investment securities as of March 31, 2010 and 2009 consisted of the following:


Dollars

2010 2009 2010Non-current:Marketable equity securities ¥791 ¥251 $8,505

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The costs and aggregate fair values of investment securities at March 31, 2010 and 2009 were as follows:Millions of Yen Thousands of U.S. Dollars

CostUnrealized

GainUnrealized

Losses Fair Value CostUnrealized

GainUnrealized

Losses Fair Value

March 31, 2010Securities classified as:

Available-for-sale:Equity securities ¥321 ¥474 ¥(4) ¥791 $3,452 $5,096 $(43) $8,505

March 31, 2009Securities classified as:Available-for-sale:

Equity securities ¥321 ¥(70) ¥251

6. GOODWILL

Goodwill at March 31, 2010 and 2009 consisted of the following:

Millions of YenThousands of U.S. Dollars

2010 2009 2010Goodwill on business acquisition ¥59 ¥74 $634Consolidation goodwill 2 3 22Total ¥61 ¥77 $656

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

7. DEPOSITS RECEIVED

Deposits received at March 31, 2010 and 2009 consisted of the following:


Dollars

2010 2009 2010Welfare pension ¥48 ¥50 $516Other 3 2 32Total 51 52 548Less current portion (3) (2) (32)Long-term debt, less current portion ¥48 ¥50 $516

Interest rates applicable to the welfare pension were 6.8% and 6.7% at March 31, 2010 and 2009, respectively. Annual maturities of deposits received at March 31, 2010, were as follows:

Year Ending March 31 Millions of YenThousands of U.S.

Dollars

2011 ¥ 3 $ 322012 2 222013 2 222014 2 222015 3 322016 and thereafter 39 418Total ¥51 $548

8. RETIREMENT BENEFITS

The Company has severance payment plans for employees.Under most circumstances, employees terminating their employment are entitled to retirement benefits determined based on principally

accumulated points allocated to them each year according to their age and job evaluation and interest points over the accumulated points. Such

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retirement benefits are made in the form of annuity payments from the non-contributory funded defined benefit pension plan. Employees are entitled to larger payments if the termination is involuntary, by retirement at the mandatory retirement age, by death, or by voluntary retirement at certain specific ages prior to the mandatory retirement age.

The liability (asset) for employees' retirement benefits at March 31, 2010 and 2009 consisted of the following:


Dollars

2010 2009 2010Projected benefit obligation ¥ 3,576 ¥ 3,379 $(38,452Fair value of plan assets (2,828) (2,336) (30,409)Unfunded benefit obligations 748 1,043 8,043Unrecognized actuarial loss (1,446) (1,568) (15,548)

Unrecognized prior service cost 92 167 989

Net liability (asset) ¥ 606 ¥ (358) $3(6,516)

The components of net periodic benefit costs for the years ended March 31, 2010 and 2009 are as follows:


Dollars

2010 2009 2010Service cost ¥207 ¥197 $2,226Interest cost 84 81 903Expected return on plan assets (70) (77) (753)Amortization of prior service cost (74) (18) (796)Recognized actuarial loss 126 85 1,355Net periodic benefit costs ¥273 ¥268 $2,935

Assumptions used for the years ended March 31, 2010 and 2009 are set forth as follows:

2010 2009Discount rate 2.5% 2.5%Expected rate of return on plan assets 3.0% 3.0%Amortization period of prior service cost 7years 7yearsRecognition period of actuarial gain/loss 15years 15years

9. EQUITY

Japanese companies are subject to the Companies Act of Japan (the “Companies Act”). The significant provisions in the Companies Act that affect financial and accounting matters are summarized below:

(a) DividendsUnder the Companies Act, companies can pay dividends at any time during the fiscal year in addition to the year-end dividend upon resolution at the shareholders meeting. For companies that meet certain criteria such as; (1) having the Board of Directors, (2) having independent auditors, (3) having the Board of Corporate Auditors, and (4) the term of service of the directors is prescribed as one year rather than two years of normal term by its articles of incorporation, the Board of Directors may declare dividends (except for dividends in kind) at any time during the fiscal year if the company has prescribed so in its articles of incorporation. The Company meets all above criteria.

The Companies Act permits companies to distribute dividends-in-kind (non-cash assets) to shareholders subject to a certain limitation and additional requirements.

Semiannual interim dividends may also be paid once a year upon resolution by the Board of Directors if the articles of incorporation of the company so stipulate. The Companies Act provides certain limitations on the amounts available for dividends or the purchase of treasury stock. The limitation is defined as the amount available for distribution to the shareholders, but the amount of net assets after dividends must be maintained at no less than ¥3 million.

(b) Increases/decreases and transfer of common stock, reserve and surplusThe Companies Act requires that an amount equal to 10% of dividends must be appropriated as a legal reserve (a component of retained earnings) or as additional paid-in capital (a component of capital surplus) depending on the equity account charged upon the payment of such dividends until the total of aggregate amount of legal reserve and additional paid-in capital equals 25% of the common stock. Under the Companies Act, the total amount of additional paid-in capital and legal reserve may be reversed without limitation. The Companies Act also provides that common stock, legal reserve, additional paid-in capital, other capital surplus and retained earnings can be transferred among the accounts under certain conditions upon resolution of the shareholders.

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

10. INCOME TAXES

The Company and subsidiaries are subject to Japanese national and local income taxes which, in the aggregate, resulted in normal effective statutory tax rates of approximately 40.4% for the years ended March 31, 2010 and 2009.

The tax effects of significant temporary differences, which resulted in deferred tax assets and liabilities at March 31, 2010 and 2009, are as follows:


Dollars

2010 2009 2010Deferred tax assets:Accrued enterprise taxes ¥ 64 ¥ 64 $ 688Depreciation 291 333 3,129Accrued bonus to employees 81 83 871Others 240 282 2,580

Total ¥676 ¥762 $7,268Deferred tax liabilities:Prepaid pension cost ¥244 ¥145 $2,624Unrealized gains on available-for-sale securities 190 — 2,043

Total ¥434 ¥145 $4,667Net deferred tax assets ¥242 ¥617 $2,601

Because the differences between the normal effective statutory tax rates and the actual effective tax rates for the years ended March 31, 2010 and 2009 are not material, the tax reconciliations are not disclosed.

11. RESEARCH AND DEVELOPMENT COSTS

Research and development costs included in cost of sales and selling, general and administrative expenses were ¥1 million ($11 thousand) and ¥21 million for the years ended March 31, 2010 and 2009, respectively.

12. LEASES

The Group leases certain computer equipment and other assets.Total lease payments under finance leases for the years ended March 31, 2010 and 2009 were ¥734 million ($7,892 thousand) and ¥1,280

million, respectively.Future minimum payments under noncancelable operating leases were as follows:


Dollars

2010 2010Due within one year ¥361 $3,882Due after one year 408 4,387Total ¥769 $8,269

Pro forma information of leased property whose lease inception was before March 31, 2008ASBJ Statement No. 13, “Accounting Standard for Lease Transactions” requires that all finance lease transactions should be capitalized to recognize lease assets and lease obligations in the balance sheet. However, the ASBJ Statement No. 13 permits leases without ownership transfer of the leased property to the lessee whose lease inception was before March 31, 2008 to be accounted for as operating lease transactions if certain “as if capitalized” information is disclosed in the note to the financial statements. The Company applied the ASBJ Statement No. 13 effective April 1, 2008 and accounted for such leases as operating lease transactions. Pro forma information of leased property whose

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lease inception was before March 31, 2008 such as acquisition cost, accumulated depreciation, accumulated impairment loss, obligations under finance leases, depreciation expense, interest expense and other information of finance leases that do not transfer ownership of the leased property to the lessee on an “as if capitalized” basis was as follows:

Millions of Yen

2010 2009Tools, Furniture

and Fixtures Software Total Tools, Furniture and Fixtures Software Total

Acquisition cost ¥ 2,185 ¥ 17 ¥ 2,202 ¥ 3,296 ¥ 25 ¥ 3,321Accumulated depreciation (1,693) (15) (1,708) (2,128) (17) (2,145)Net leased property ¥ 492 ¥ 2 ¥ 494 ¥ 1,168 ¥ 8 ¥ 1,176

Thousands of U.S. Dollars

2010Tools, Furniture

and Fixtures Software Total

Acquisition cost $ 23,495 $ 182 $ 23,677Accumulated depreciation (18,205) (160) (18,365)Net leased property $ 5,290 $ 22 $ 5,312

Obligations under finance leases:


Dollars

2010 2009 2010Due within one year ¥461 ¥722 $4,957Due after one year 77 543 828Total ¥538 ¥1,265 $5,785

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


Dollars

2010 2009 2010Depreciation expense ¥674 ¥1,187 $7,247Interest expense 21 44 226Total ¥695 ¥1,231 $7,473Lease payments ¥734 ¥1,280 $7,892

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

13. FINANCIAL INSTRUMENTS AND RELATED DISCLOSURES

On March 10, 2008, the ASBJ revised ASBJ Statement No. 10 “Accounting Standard for Financial Instruments” and issued ASBJ Guidance No. 19 “Guidance on Accounting Standard for Financial Instruments and Related Disclosures”. This accounting standard and the guidance are applicable to financial instruments and related disclosures at the end of the fiscal years ending on or after March 31, 2010 with early adoption permitted from the beginning of the fiscal years ending before March 31, 2010. The Group applied the revised accounting standard and the new guidance effective March 31, 2010.

(1) Financial Instrument PoliciesThe Group raises necessary money from its own fund, in light of capital investment plans for development of software and acquisition of data management facilities and hardware, etc. The Company places surplus funds only in short-term deposits, etc.

(2) Financial Instruments and RisksAccounts receivable - trade which are operating receivables are exposed to customer credit risks. Investment securities are shares in companies with which the Company has business relationships or capital alliance, and exposed to market fluctuation risks.Settlements of most accounts payable - trade which are operating liabilities are within one year. Some of them are in foreign currency due to exports of products, and subject to exchange-rate fluctuation risks. However, they have little impacts because of their small amounts. Lease obligations relating to finance leases are mainly for procuring the required capital investment. Maturities can be up to five years after settlement dates.

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(3) Financial Instrument Risk Management Structure a. Credit Risk Management (including risks of customers breaching contracts)In accordance with the receivables management rules, the Company regularly monitors the statuses of key customers' operating receivables and oversee due dates and balances by customer in cooperation between the accounting department of head office and each business division. Like this, the Company is endeavoring to swiftly identify and ameliorate collection concerns that could stem from deteriorating financial positions or other factors. Its subsidiaries have implemented the same management system in compliance with the Group's receivables management policies.

The maximum amount of credit risk as of the end of the fiscal year under review is shown as a balance sheet value of financial assets subject to credit risks.

b. Market Risk Management (foreign exchange and interest rate risks)The Company's operating liabilities in foreign currency have little impacts due to their small amounts. Each time transactions are made, the Company checks out trends in exchange rates.

The Company regularly assesses the prices of marketable investment securities and financial positions of their issuers (business partners) and constantly reviews the necessity of such holdings in consideration of the relationship with them.

c. Funding-Related Liquidity Risk Management (risk of inability to settle by payment dates) The Company's accounting department formulates and renews funding plans based on reports from each department in a timely manner. The Company also has made the agreement for use of Cash Management System (CMS) with Panasonic Electric Works Finance Co., Ltd. so as to control liquidity risks by managing surplus funds and balances constantly.

(4) Fair values of financial instrumentsFair values of financial instruments are based on quoted price in active markets. If quoted price is not available, other rational valuation techniques are used instead.

Millions of Yen

March 31, 2010 Carrying Amount Fair Value Unrealized Gain/Loss

Cash and deposits ¥ 389 ¥ 389 ¥ –Accounts receivable - Trade 6,456 6,456 –Investment securities 791 791 –Deposits paid 11,885 11,885 –Total ¥19,521 ¥19,521 ¥ –Accounts payable - Trade ¥ 2,224 ¥ 2,224 ¥ –Income taxes payable 791 791 –Accounts payable - Other 1,320 1,320 –Total ¥ 4,335 ¥ 4,335 ¥ –


March 31, 2010 Carrying Amount Fair Value Unrealized Gain/Loss

Cash and deposits $ 4,183 $ 4,183 $ –Accounts receivable - Trade 69,419 69,419 –Investment securities 8,505 8,505 –Deposits paid 127,796 127,796 –Total $209,903 $209,903 $ –Accounts payable - Trade $ 23,914 $ 23,914 $ –Income taxes payable 8,505 8,505 –Accounts payable - Other 14,194 14,194 –Total $ 46,613 $ 46,613 $ –

Cash and depositsThe carrying values of cash and deposits approximate fair value because of their short maturities.

Investment securitiesThe fair values of investment securities are measured at the quoted market price of the stock exchange for the equity instruments. The information of the fair value for the investment securities by classification is included in Note 5.

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Accounts receivables and accounts payablesThe carrying values of accounts receivables and accounts payables approximate fair value because of their short maturities.

Deposits paid

The carrying values of deposits paid approximate fair value because of their short maturities.

Income tax payableThe carrying values of income tax payable approximate fair value because of their short maturities.

(5) Maturity analysis for financial assets and securities with contractual maturitiesMillions of Yen

March 31, 2010 Due in One Year or Less

Due after One Year through Five Years

Due after Five Years through Ten Years Due after Ten Years

Cash and deposits ¥ 389 ¥ – ¥ – ¥ –Accounts receivable - Trade 6,456 – – –Deposits paid 11,885 – – –Total ¥18,730 ¥ – ¥ – ¥ –


March 31, 2010 Due in One Year or Less

Due after One Year through Five Years

Due after Five Years through Ten Years Due after Ten Years

Cash and deposits $ 4,183 $ – $ – $ –Accounts receivable - Trade 69,419 – – –Deposits paid 127,796 – – –Total $201,398 $ – $ – $ –

14. RELATED PARTY TRANSACTIONS

Balances at March 31, 2010 and 2009 and transactions for the years ended March 31, 2010 and 2009 with the Parent, its consolidated subsidiaries and its associated companies were as follows:


Dollars

2010 2009 2010Sales ¥22,643 ¥24,184 $243,473Purchases 103 101 1,108Lease and rental expense 634 641 6,817


Dollars

2010 2009 2010Accounts receivable ¥ 3,678 ¥ 4,102 $ 39,548Other current assets 28 34 301Accounts payable 254 153 2,731Deposits paid 11,736 9,991 126,194

15. SUBSEQUENT EVENT

Appropriation of Retained EarningsThe following appropriation of retained earnings at March 31, 2010 was resolved at the Board of Directors meeting held on May 20, 2010:


Dollars

Year-end cash dividends, ¥32.50 ($0.35) per share ¥346 $3,720

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Corporate Data

Board of Directors,Corporate Auditors and Corporate Officers

Stock Information (As of March 31, 2010)

(As of June 16, 2010)

(As of March 31, 2010)

Headquarters Panasonic Electric Works

Information Systems Co., Ltd.19-19, Chayamachi, Kita-ku, Osaka 530-0013, Japan

Established February 22, 1999

Paid-in Capital ¥1,040 million

Fiscal Year-End March 31

Nature of Business Information services

Number of employees 612 (consolidated)

Total Shares Authorized40,000,000 shares

Total Shares Issued10,656,000 shares

Number of Shareholders5,532

Stock Exchange ListingTokyo Stock Exchange, First Section

Breakdown of Shareholders

Securities Code4283

Stock Trading Unit 100 shares

Regular Shareholders’ Meeting June of each year

Transfer Agent Sumitomo Trust and Banking Corporation

Major Shareholders

ShareholderNumber of

Shares(thousands)

Ownership Ratio

(%)

Panasonic Electric Works, Co., Ltd. 6,787 63.69

BBH FOR FIDELITY LOW-PRICED STOCK FUND 260 2.43

Employees Stock Ownership Association 240 2.25

Japan Trustee Services Bank, Ltd. (Trust Account) 124 1.16The Master Trust Bank of Japan, Ltd. (Trust Account) 107 1.00

FUJITSU LIMITED 36 0.33

IBM Japan, Ltd. 36 0.33

Oki Electric Industry Co., Ltd 36 0.33

Japan Trustee Services Bank, Ltd. (Trust Account 1) 33 0.31The Nomura Trust and Banking Co., Ltd. (Investment Account) 30 0.28

President Kazuhiro Maegawa

Directors Akira HisanoHisashi KuronoHiroyuki MaruokaShuichi TakazakiShinichi HasegawaTakahiro Nakagawa

Auditors Takayuki TakedaTamaki FujimotoMakoto Iwahashi

Executive Officers Keisuke TanakaHajime OnishiTakashi MaedaMitsuru Maekawa

Financial Institutions 4.70%

Individuals, Others 23.40%

Financial Instruments Firms 0.49%

Other Corporations 67.19%

Foreign Corporations, Other 4.22%

Note: Treasury shares (127 shares) are excluded from the above table.

19-19, Chayamachi, Kita-ku, Osaka 530-0013, JapanTelephone : +81-6-6906-2801 Facsimile : +81-6-6377-0833URL http://panasonic-denkois.co.jp/english/

Printed in Japan

Panasonic Electric Works Information Systems Co., Ltd.

annual report 2010 · annual report 2010 for the year ended march 31, 2010 panasonic electric works...

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