annual report 2014 · profile financial highlights message from ... 12.5% 24.7% 15.0% 62.5%...

Annual Report

2014

Aiming to Be a

True Business Partner

Providing Optimal Solutions

For the Year Ended March 31, 2014

Panasonic Information Systems Co., Ltd.

02Panasonic Information Systems Co., Ltd. Annual Report 2014

Profile Financial Highlights Message from the President

Topics 2014 Business Overview CSR Efforts Corporate Governance Financial Section Stock Information/Corporate History

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This annual report contains forward-looking statements that reflect the Panasonic 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.

Cautionary Statement with Respect to Forward-Looking Statements

Profile

Financial Highlights

Business Overview

CSR Efforts

Corporate Governance

Message from the PresidentCloud services for clients outside the Panasonic Group as well as for small and medium-sized companies are trending favorably.

Financial Section

Stock Information

02

Nine-Year Summary of Key Financial Indicators Financial Highlights in Graphs03 04

09

11

12

Outline of System Solutions Outline of System Services13 14

03

05

09

13

15

17

20

40

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Corporate History41

Strengthening Our Market Outside the Panasonic Group (General Market)Easy to Use for Small and Medium-Sized Enterprises—Expanding the Range of Nextructure Server ServicesFor Abeno Harukas Operated by Kintetsu Corporation—Introduction of Ticketing System at Observatory and Art Museum

Reinforcing Partnerships with the Panasonic GroupM2M Technology: Raising the Bar for Disaster Preparedness—Adopted for the Panasonic Lithium-Ion Battery Storage System

Strengthening Management PracticesSales and System Engineering Departments Working Together—Improving Customer SatisfactionProviding Displays That Are Closer to Reality—Changing the Business Categories

02

Topics 2014

Panasonic Information Systems Co., Ltd. Annual Report 2014


Topics 2014 Business Overview




Strong in the Cloud

Company Name: Panasonic Information Systems Co., Ltd.

Headquarters: 19-19, Chayamachi, Kita-ku, Osaka 530-0013, Japan

Established: February 22, 1999

Capital: ¥1,040 million

Fiscal Year-End: March 31

Employees: 687 (consolidated)

Our Business:

Corporate Data

For some 50 years, since the time of Matsushita Electric Works, Panasonic Information Systems has been achieving results in systems construction and operation. By linking the cloud technology we offer on our own data center platforms, we can provide solutions to even more clientele.

Development CapabilityBroad Range of

As a Multi-Vendor

Profile

Offering Optimal Solutions for the Array of Problems Faced by Small- to Medium-Sized Businesses

61.2%

Breakdown of Net Salesby Business

Breakdown of Net Salesby Market

SystemServices

PanasonicGroup

Outsidethe Panasonic Group(generalmarket)

SystemSystemServicesServices

38.8%

21.5%

78.5%

System operation services at data centersCloud servicesNetwork services

SystemSystemSolutionsSolutions

SystemSolutions

Core system architecture solutionsIT infrastructure architecture solutionsCommissioned system developmentDevelopment and provision of package software

Sales of computers, servers, and communications equipmentNetwork and facility construction

Necessary functions and cost reduction

ACompany

BCompany

CCompany

Choose optimal components and build system

Equipment Electric andelectronics

Medicine

Data

Housing Logistics

Semi-conductorsParts

Communi-cations

Environ-ment

Business of the Panasonic Group

companies

(as of March 31, 2014)

ThinClient

Virtualserver

High-qualitysupport

A wide variety of technologies and know-how has been cultivated within the Panasonic Group through our response to client needs.

We choose and integrate the optimal hardware and

software as a user system integrator.

We have an indispensable cloud infrastructure =

a data center.

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2006 2007 2008 2009 2010 2011 2012

Net sales

Operating income

Net income

Research and development costs

Capital investment

Cash and cash equivalents

Total assets

Equity

Net cash provided by operating activities

Net cash (used in) provided by investing activities

Free cash flow

Net cash used in financing activities

Basic net income per share*2

Full-year dividends per share

Operating margin

Return on equity (ROE)

Return on assets (ROA)

Equity ratio

2014

¥ 41,385

4,610

2,800

13

574

4,625

18,610

10,985

2,468

(576)

1,892

(347)

¥ 260.42

55.00

11.1%

28.7%

16.1%

59.0%

¥ 40,226

5,014

3,001

75

363

4,391

21,307

13,346

3,742

(3,337)

406

(639)

¥ 281.65

55.00

12.5%

24.7%

15.0%

62.5%

Millions of Yen Thousands ofU.S. Dollars*1

¥ 39,066

4,877

2,842

39

1,066

4,679

21,185

15,552

2,848

(1,921)

927

(639)

¥ 266.78

65.00

12.5%

19.7%

13.4%

73.3%

¥ 37,320

4,632

2,783

21

2,581

3,968

23,211

17,604

3,864

(3,866)

(1)

(710)

¥ 261.13

75.00

12.4%

16.8%

12.5%

75.7%

¥ 36,650

4,371

2,563

1

2,015

4,759

25,146

19,659

4,483

(2,829)

1,654

(863)

¥ 240.51

65.00

11.9%

13.8%

10.6%

78.2%

¥ 34,221

4,205

2,581

76

2,560

4,230

27,317

21,359

3,154

(2,862)

292

(821)

¥ 242.25

65.00

12.3%

12.6%

9.8%

78.2%

¥ 35,179

4,425

2,702

135

893

5,500

31,355

24,838

4,670

(12,299)

(7,628)

(940)

¥ 253.56

65.00

12.6%

11.3%

9.0%

79.2%

2014

¥ 36,334

4,465

2,685

121

1,623

4,261

33,283

25,885

4,133

(4,480)

(347)

(892)

¥ 252.01

65.00

12.3%

10.6%

8.3%

77.8%

$ 352,757

43,350

26,068

1,175

15,757

41,369

323,136

251,311

40,126

(43,495)

(3,369)

(8,660)

$ 2.45

0.63

*1. Amounts expressed in U.S. dollars are calculated using the exchange rate prevailing on March 31, 2014 of ¥103 to US $1.00.*2. Diluted net income per share is not indicated here, because there are no potentially dilutive shares.

¥ 36,373

4,255

2,227

129

2,046

14,069

29,012

22,859

3,834

6,908

10,742

(903)

¥ 209.02

65.00

11.7%

10.1%

7.9%

78.8%

Yen

%

U.S. Dollars

2013

Panasonic Information Systems Co., Ltd. and consolidated subsidiariesYears Ended March 31Nine-Year Summary of Key Financial Indicators For the latest information click here (IR Library)

http://is-c.panasonic.co.jp/en/ir/library/




20142012 201320112010

36,37334,221

36,650 35,179

(Millions of Yen)50,000

40,000

30,000

20,000

10,000

0

Millions of Yen36,334

20142012 201320112010

4,255

11.7

4,205

12.3

4,371

11.9

4,425

12.6

(Millions of Yen) (%)6,000

5,000

4,000

3,000

2,000

1,000

0

60.0

50.0

40.0

30.0

20.0

10.0

0

4,465

20142012 201320112010

2,227

2,5812,563 2,702


3,000

2,000

1,000

0


20142012 201320112010

129

76

1

135

(Millions of Yen)200

150

100

50

0

Millions of Yen121

20142012 201320112010

2,560

2,015


2,500

2,000

1,500

1,000

500

0


20142012 201320112010

209.02

242.25240.51253.56

(Yen)400.00

300.00

200.00

100.00

0

252.01

20142012 201320112010

10.1

12.613.8

11.3

(%)20.0

15.0

10.0

5.0

0

%Yen 10.6

20142012 201320112010

7.9

9.810.6

9.0

(%)15.0

10.0

5.0

0

%8.3

Net Sales Net Income Research and Development Costs

Capital Investment Basic Net Income per Share Return on Equity (ROE) Return on Assets (ROA)

Millions of Yen

12.3%

2,046

Operating MarginOperating Income

893

Operating Income/ Operating Margin

Panasonic Information Systems Co., Ltd. and consolidated subsidiariesYears Ended March 31Financial Highlights in Graphs For the latest information click here (IR Library)





We have responded to the market trends that form the backdrop of the above results. These include expanded use of cloud services in response to changes in corporate IT needs, as well as business use of smart devices beginning to reach full effect.

The result has been an increase in orders for our cloud services. In addition, we have created a variety of new cloud

Message from the President

Cloud services for clients outside the Panasonic Group as well as for small and medium-sized companies are trending favorably.

Responded to the Market Trends

The fiscal year ended March 31, 2014, was the first year of our new Medium-Term Management Plan, during which we pursued our targets of net sales of ¥36,000 million and operating income of ¥4,450 million. Our efforts resulted in net sales of ¥36,334 million (up 3.3% year on year) and operating income of ¥4,465 million (up 0.9% year on year), hitting both the sales and income targets.

Review of the Fiscal Year Ended March 31, 2014

Market Trends Panasonic IS Solutions

Company-owned Cloud • Fine-tuned response to niche needs of small and medium-sized companies

• Reasonable pricing• Maintenance and operation

at our data center• Reliable support and technical

expertise

Companies had theirown core systems

and servers.

Transition tothe cloud to reduce

operational laborand costs.

services that capture the needs of our clients. During the fiscal year ended March 31, 2014, we made a particular effort to create cloud services that are within a reasonable price range of small and medium-sized companies, adding to our high-quality menu that takes advantage of our experience and know-how.

These efforts serve to build relationships of trust with our clients, which are important to maintaining long-term relationships with our company and are

in turn vital to establishing a solid revenue base.

President

Kazuhiro Maegawa




Medium- to Long-Term Strategy

Results of the previous Medium-Term Management Plan

We launched the new Medium-Term Management Plan in the fiscal year ended March 31, 2014, with the policies proceeding in accordance with those of the previous Medium-Term Management Plan. Panasonic Information Systems, which began as the information system department of our parent company, became independent 15 years ago. Since then while we have continued to support our parent company’s business, we have also applied the

Medium-Term Management Plan Progress

Current Medium-Term Management Plan

Strengthening our market outside the Panasonic Group (general market)

1 Reinforcing partnerships with the Panasonic Group2

Strengthening management practices3

Deepening and broadening efforts made up to now

2014 (plan) 2015 (plan) 2016 (plan)

38,0004,600

12.1

37,0004,500

12.2

36,0004,450

12.4201320122011

2,128 2,427 2,714

Successively commenced business with major manufacturers and financial institutions. Expanded cloud service orders and increased system services sales.

Contributed to rationalization of quality improvement efforts through acquisition of ISO 20000 and introduction of the Project Management Office (PMO).

Support for systems revisions in accordance with the Group restructuring, and creation of a new business platform through fusion of Panasonic products with IT.

14.0% up

We aim to realize “IT as a service” and become “a true business partner” that contributes to the business of our clients.

We have responded to the market trends that form the backdrop of the above results. These include expanded use of cloud services in response to changes in corporate IT needs, as well as business use of smart devices beginning to reach full effect.

The result has been an increase in orders for our cloud services. In addition, we have created a variety of new cloud

services that capture the needs of our clients. During the fiscal year ended March 31, 2014, we made a particular effort to create cloud services that are within a reasonable price range of small and medium-sized companies, adding to our high-quality menu that takes advantage of our experience and know-how.

These efforts serve to build relationships of trust with our clients, which are important to maintaining long-term relationships with our company and are

experience we have cultivated to expand business by challenging markets outside the Panasonic Group (general market). The key phrase in the previous Medium-Term Management Plan was “proceed with business based on our own experience and know-how gained as a user.” The emphasis here is the activation of our perspective as a user in proposing solutions to clients. While we have achieved a certain result through such efforts, we have made “IT as a service” the key phrase describing what will be required of us over the next three years.

There currently exists a wide variety of so-called “cloud services,” and the number of these continues to expand.

Nevertheless, the question remains as to which of these services will have value to users and which can fulfill a truly necessary role. We get feedback from users that the providers’ logic in regard to the so-called “cloud” gives them a sense of “being forced” and that “something is lacking.” That being the case, it seems that we must use our own perspective as IT users, bringing our experience as well as the technology and know-how we have cultivated to come up with new IT services that will be valuable from the user’s standpoint.

To this end, while we of course will provide our safe, reliable core cloud services, one of our goals over the next

three years is to offer a flexible response to the client’s fixed needs, so as to provide new “outside the box” IT services.

By repeating such efforts and going beyond customer satisfaction to offer “delight,” we can aim to be more than simply a partner of system operation and development by evolving into “a true business partner” that contributes to the client’s business and management. Also, as called for in the previous Medium-Term Management Plan, as a member of the Panasonic Group our efforts to develop further collaborations between Panasonic products and IT are important. This will be a platform for steady new business growth by our company following on infrastructure

11.8% up

in turn vital to establishing a solid revenue base.

applications, and is aimed at increasing overall Group value.

Based upon the above thoughts, our efforts in the new Medium-Term Management Plan will be in line with the following three themes:

General market system services sales (Millions of yen) Three-year

performance goalsNet sales (Millions of yen)

Operating income (Millions of yen)

Operating margin (%)




During the fiscal year ended March 31, 2014, we strengthened three aspects of management practices: quality improvement; rationalization and efficiency; and human resource

We launched the new Medium-Term Management Plan in the fiscal year ended March 31, 2014, with the policies proceeding in accordance with those of the previous Medium-Term Management Plan. Panasonic Information Systems, which began as the information system department of our parent company, became independent 15 years ago. Since then while we have continued to support our parent company’s business, we have also applied the

Strengthening the development of business outside the Panasonic Group (general market) is critical to our company’s growth. In addition to the key businesses that served as drivers of growth in the previous Medium-Term Management Plan, which are IT

Key businesses outside the Panasonic Group (general market)

Strengthening Our Market Outside the Panasonic Group (General Market)

Client Orientation

Product Orientation

Companies outside the Panasonic GroupPanasonic Group

IT infrastructure building/operationERP system buildingCollaboration between the Panasonic Group and ITNew products and services

Key b

usinesses

ICT infrastructure service

System integration of core functions

Collaboration with the Panasonic Group

Creation of something new

1Progress of Four Key Businesses

experience we have cultivated to expand business by challenging markets outside the Panasonic Group (general market). The key phrase in the previous Medium-Term Management Plan was “proceed with business based on our own experience and know-how gained as a user.” The emphasis here is the activation of our perspective as a user in proposing solutions to clients. While we have achieved a certain result through such efforts, we have made “IT as a service” the key phrase describing what will be required of us over the next three years.

There currently exists a wide variety of so-called “cloud services,” and the number of these continues to expand.

Nevertheless, the question remains as to which of these services will have value to users and which can fulfill a truly necessary role. We get feedback from users that the providers’ logic in regard to the so-called “cloud” gives them a sense of “being forced” and that “something is lacking.” That being the case, it seems that we must use our own perspective as IT users, bringing our experience as well as the technology and know-how we have cultivated to come up with new IT services that will be valuable from the user’s standpoint.

To this end, while we of course will provide our safe, reliable core cloud services, one of our goals over the next

three years is to offer a flexible response to the client’s fixed needs, so as to provide new “outside the box” IT services.

By repeating such efforts and going beyond customer satisfaction to offer “delight,” we can aim to be more than simply a partner of system operation and development by evolving into “a true business partner” that contributes to the client’s business and management. Also, as called for in the previous Medium-Term Management Plan, as a member of the Panasonic Group our efforts to develop further collaborations between Panasonic products and IT are important. This will be a platform for steady new business growth by our company following on infrastructure

infrastructure construction/operation (ICT infrastructure service) and core system construction (system integration of core functions), we have added the creation of solutions that combine the products and services of the Panasonic Group with our company’s IT services (collaboration with the Panasonic Group) and the development of technology and product strategies that will lead to the creation of new markets (creation of something new). In the fiscal year ended March 31, 2014, we posted net sales of ¥4,760 million for the four key businesses, achieving 95.2% of our target of ¥5,000 million. We broadly exceeded our target for “ICT infrastructure service” through

increased orders for large-scale infrastructure projects and cloud services. In the category of “system integration of core functions,” we launched the cloud version of the MetaForce sales management control system for the distribution and wholesale sector and offered it to small and medium-sized companies, resulting in a steady increase of orders. Nonetheless, new projects involving our mainstay solution, the ERP package GRANDIT, decreased.

In the “collaboration with the Panasonic Group” category, video surveillance solutions combining network cameras with IT, along with new lesson-delivery systems for the education market applied in tandem with them, trended favorably. Although sales of ticketing systems temporarily decreased due to the shift from one-time package installation to monthly subscription services, we continued steadily to build a platform for stable revenue production. ( For details see page 10.)

In the category of “creation of something new,” we launched database integration solutions and developed an indirect materials purchasing service. These two solutions were only at the budding stage during the fiscal year ended March 31, 2014. While they

applications, and is aimed at increasing overall Group value.

Based upon the above thoughts, our efforts in the new Medium-Term Management Plan will be in line with the following three themes:

contributed very little to sales, we believe that these businesses have the potential to expand and grow stronger through the application of the experience, know-how and strengths we have cultivated.

development. Our efforts to improve quality focused on improving our scored on CMMI®*, an international standard for the software development process, to level four. We are preparing to step up to that level in 2014.

During the fiscal year ended March 31, 2014, we contributed to improving work efficiency with a focus on building work systems for Panasonic Corporation Eco Solutions Company. In addition, we supported the launch of the VA Solutions Catalog, an IT tool for sales partners, such as representative offices, builders and construction companies, and launched services to promote its use. We also speeded up collaborations of Panasonic products and IT through the adoption of our company’s technologies in Panasonic Corporation Eco Solutions Company’s lithium-ion battery storage system. ( See page 11 for details.)

Reinforcing Partnerships with the Panasonic Group2

Strengthening Management Practices3




July 2014

President

During the fiscal year ended March 31, 2014, we strengthened three aspects of management practices: quality improvement; rationalization and efficiency; and human resource

There is currently a shift in the IT concept from “possession” to “use,” as well as from “improving efficiency” to “contributing to management and

We believe that providing returns to shareholders is one of the management’s most important priorities. We have adopted a policy to actively and stably distribute surplus funds based on financial performance while keeping in mind the need to increase internal reserves to reinforce our management foundations and ensure long-term growth.

For the fiscal year ended March 31, 2014, we paid dividends of ¥65 per share, for a consolidated payout ratio of 25.8%.

For the fiscal year ending March 31, 2015, we plan to pay dividends from surplus funds twice, with record dates of March 31 and September 30, each amounting to a regular dividend of ¥32.50 per share. This figure results in an annual dividend of ¥65 per share and a consolidated payout ratio of 25.2%.

Forecast for the Fiscal Year Ending March 31, 2015

Shareholder Returns

business.” IT-related needs become more complex day by day. We are taking “IT as a Service” as our key phrase in our approach to these changes as we aim to evolve into a true business partner that contributes to the management and business of our clients. We believe that to do so consists solely in creating new IT services from the standpoint of the user.

In the fiscal year ended March 31, 2014, we launched a high-quality and reasonably priced cloud infrastructure. We went further to use that infrastructure to create a new service model by which we offer not only systems, but also control of all on-site equipment as a cloud service.

During the fiscal year ending March 31, 2015, it will be important to establish that new service model and increase the number of clients using it. We also must steadily meet the challenge of new services in the ever-progressing IT industry. We must also continue to provide solid IT for the mutual support of work and business within the Panasonic Group.

The upcoming three years will be a period of transition, as we deepen and broaden our business with a view toward the future. Accordingly, we have established goals for the fiscal year ending March 31, 2015, of net sales of ¥37,000 million and operating income of ¥4,500 million. The steady

development. Our efforts to improve quality focused on improving our scored on CMMI®*, an international standard for the software development process, to level four. We are preparing to step up to that level in 2014.

Increasingly Complex Needs The Ideal Future Form of Panasonic IS

Past From now onWe aim to evolve into a true business partner, with our key phrase being “IT as a Service.”• Rather than our business being over once we have

delivered the systems and equipment, we will work consistently to contribute to our clients by uncovering potential needs.

• We will continue to provide services until business issues are resolved.

A partner of systemdevelopment and operationfor greater work efficiency

was required.

A partner thatcontributes to actual

management andbusiness is required.

* Capability Maturity Model Integration (CMMI®) is a process improvement model for software and system development that was developed by the Software Engineering Institute (SEI) at Carnegie Mellon University in the United States.

advancement of our policies and certain fulfillment of our performance goals are of the utmost importance.




Strengthening Our Market Outside the Panasonic Group (General Market) (1) Topics 2014

Expanding the Range of Nextructure Server Services

Expanding the Market by IntroducingNextructure Server Services

Our new Nextructure server services are high-quality

ITIL®*1-compliant operating services that are highly capable

of a 99.95% rate of operation*2. Nextructure can perform

important systems functions, including as a core system,

just like an owner-operated system.

We anticipate total net sales of ¥500 million by the end of

fiscal 2015 by expanding these services.

*1 Information Technology Infrastructure Library (ITIL) is a set of the best practices for IT service management.

*2 Service availability period: Period in which the virtual server is operating. Down time: During maintenance after prior notice. This excludes stoppage due to OS damage.

Easy to Use for Small and Medium-Sized Enterprises

Gaining new customers for high-quality, reasonably

priced cloud services

Offering Necessary Functions to Small and Medium-Sized Enterprises at Optimal Prices

Generalcloud

Panasonic IS’srange of services

up to now

Panasonic IS’sexpanded range

of services

Forlarge companies

Formedium companies

Forsmall companies

Joint use of general-purpose cloudby large number of unspecified users

Offering a cloud platform combiningthe good aspects of both dedicatedand general cloud services

Benefits of implementation

Meeting the Needs of Small and Medium-Sized Enterprises

Other Topics

We are meeting the needs

of small and medium-sized

enterprises, which make

up 90% of the distribution

and wholesale sector, for

the use of a full-scale sales

management control

system suitable to limited

budgets.

Launch of MetaForce Cloud Version

Broadly Improved Warehouse and Inventory Management Efficiency

Launch of Handy Wireless Terminal ConnectionOption for GRANDIT

Dedicated cloud

Nextructure server services are cloud platform services born

of the experience and know-how gained through the

provision of services to our parent company. Our services

are characterized by our ability to build a dedicated cloud

service platform matching client needs. Our reputation for

high quality and safety has resulted in the adoption of our

services as core systems for major companies.

At the same time, recently there has been an expansion

of cloud services implemented for shared use by many and

unspecified users, mainly small and medium-sized

enterprises. While major customization is not possible,

economies of scale mean that these services can be offered

cheaply. At the same time, concerns about quality and

continuity make companies hesitant to use these as core

systems. We saw a need for reasonably priced, high-quality

cloud services that could function as core systems, so we

built a cloud platform that offers high-quality operations and

security, as well as cost performance. We are using this

platform to expand the range of Nextructure server services.

High-quality ITIL®-compliant services

Published service specifications and performance index

Achievement of a 99.95% rate of operation

Adoption as a de facto standard and multicarrier selection

More than90%

Bigcompanies

Distributionand

Wholesaling 90

Cloud ServicesTarget Market

are small and medium-sized enterprises




Strengthening Our Market Outside the Panasonic Group (General Market) (2)

Introduction of Ticketing System at Observatory and Art Museum

For Abeno Harukas Operated by Kintetsu Corporation

We provide a cloud-based ticketing system for the Harukas

300 (Observatory) and the Abeno Harukas Art Museum

(operated by Kintetsu Corporation), which opened in March

2014 in Abeno Harukas, Japan’s tallest skyscraper.

The Harukas 300 (Observatory) has a glass corridor and

outstanding views of the city as well as a garden, while the

Abeno Harukas Art Museum is an urban art museum at the

train terminal.

We not only built and provided the systems and servers,

but also created and implemented a new cloud-based

model for the onsite hardware, such as the various ticket

terminals and entry gates.

In Addition to Building and Offering Systems and Servers, Installing Entry Gates and Other Hardware

Substantially Reducing Initial Investment and Making the Control and Operation of Many Kindsof Equipment and Systems Unnecessary

Topics 2014

Implementation of this new service model broadly reduces

the client’s initial investment. In addition, after the system

goes online no labor is required for managing or operating

the hardware or systems. The system helps management

resources focus on the planning and operation of the

attractive facilities.

This flexible system can handle a broad variety of tickets,

and features speedy ticket issuance. It has been adopted

for use at 16 locations throughout Japan, including theme

parks, art museums, and aquariums. We will continue to

expand our service menu and develop the model.

Other Topics

Some 324 companies in 12 industrial groups*2 have installed the ASKUL

Corporation’s SOLOEL solution that optimizes procurement of indirect

materials. This service makes use of our know-how and experience.

*1 General materials used in but not directly linked to the production process*2 As of September 30, 2013

Launch of SOLOEL Indirect Materials*1

Purchasing Service

Maximizing Multi-Vendor Functions

Offering Oracle Database Machine Solutions

Stronger Sales Promotionthrough Collaboration

Soloel Corporation Panasonic IS

Promoting serviceoperation anddevelopment

Collaboration with an ASKUL Corporation Subsidiary

Data centerStrengthening the proposal and introduction of services and promoting their useConstruction,

ownership, management and operation of the ticketing system servers, storage and network

Onsiteequipment

POS terminals, receipt printers, ticketing printers, entry gate, control PC

Previous cloud service

The Panasonic ISTicketing System

(cloud service)


Profile Financial Highlights Message fromthe President

Topics 2014 Business Overview CSR Efforts CCoroororporporatete GoGoooGooverververeverev nannannannannccecece FinFinancancialial SeSectictionon StoStock ck InfInformormatiation/on/CorCorporporateate HiHistostoryry

Adopted for the Panasonic Lithium-Ion Battery Storage System

M2M Technology: Raising the Bar for Disaster Preparedness

Other Topics

For Group Sales Partners

Collaboration with KDDI in Providing Services toPromote Use of IT Tools

Panasonic Information Systems’s M2M technology has

been adopted for the Panasonic Corporation Eco Solutions

Company lithium-ion battery storage system. In addition to

being rechargeable using solar cells, it is good in both

low-temperature and outdoor environments. In addition to

during disasters, the system can be used to shift peak

energy requirements during normal operational periods.

The need for emergency-use power systems at schools

and other public facilities that serve as evacuation sites has

been growing since the Great East Japan Earthquake. This

system is being delivered to disaster preparedness bases,

especially in northeastern Japan. Our M2M technology can

be monitored remotely and has an error reporting function,

so it helps provide reliable and stable storage system

operation.

M2M is a network-based technology by which devices may

exchange information and implement controls. It is used in

fields in which human intervention may be difficult, such as

the energy, security, and mobile sectors. We anticipate

expanded uses of M2M and broad market growth

for this product.

M2M Technology, Which Is Expected to SeeRapid Market Growth

M2M technology is Used in the OperatingSystem of Panasonic EV Charging Stand

Support for Stable Storage System Operation

Reinforcing Partnerships with the Panasonic Group Topics 2014

We offer an EV stand operational support system that

enables automatic fee charging depending on charging

measurement data and makes the status of charging stand

use “visible.” If the owner of the stand runs a retail shop, the

stand can be connected to the shop’s point card system,

and can also record shop visit trends and

allow users to redeem points.

EV stand operational support system that makes use status visible

Reducing Instructor and Clerical Staff Man-Hours to 1/4

Implementation of Lesson Delivery System toKanagawa Dental University

Lithium-ion batterystorage system

Internet

Datacollection

3G network

ClientsTelephone notification /Email transmission

Repair service response

Warningsystem

Remotemonitoring

Ongoing delivery to disasterpreparedness bases, especially in northeastern Japan

Anomaly




Combination of System and Communications Equipmentinto System Solutions

System Services

System Solutions

System andCommunicationsEquipment

20122013

(Points out of 12)

Sales and System Engineering Departments Working Together

Strengthening Management PracticesTopics 2014

One way in which we are working to “delight” our customers is

through the customer satisfaction surveys we have conducted

since 2010.

This survey was conducted for the fourth time in 2013, and

the overall score has improved for the fourth consecutive year.

At the same time, we found that improvement is needed in the

“degree of usefulness,” or whether a proposal is made from the

customer’s perspective, and “sense of reliability and security,”

with respect to service quality and our coordinators. Panasonic

Information Systems aims to be a true business partner, and

the sales and system engineering departments will work

together to make progress in shoring up our structure.

Until recently, our company’s products were separated into

three categories: “System Services,” “System Solutions,” and

“System and Communications Equipment.” Nevertheless,

there are many cases in which we propose and supply

solutions that combine both systems and equipment. Also, in

recent years we have been reducing the weight in our

strategy of our sales of the equipment by itself, which often

results in little added value.

Therefore, from April 2013 we combined System Solutions

and System and Communications Equipment into a single

category, System Solutions, to achieve a more realistic

categorization.

Changing theBusiness Categories

Improving Customer Satisfaction

Providing Displays That Are Closer to Reality

61.2%

38.8%

62.6%

Breakdown of net sales by business categories

15.3%

22.1%

20142013

Other Topics

Designation of Palo Alto Networks as a Gold Partner

012013

Usefulness

9.92 pts

Reliability and security

10.06 pts

(of 12)

(of 12)

Manners

Prompt response

Flexibility

Usefulness

Reliabilityand security

Accuracy

11.01 pts

10.30 pts

10.44 pts

9.92 pts

10.06 pts

10.37 pts

6

8

10

12

Issues

Strengthening Network Security

Overall score up for the fourth consecutive year



Topics 2014 Business Ovverview CSSSSRSRRRRRR EfEfEfEfEfffEfffofofoooorororfooooooooo tststs CorC porporaaaatatatatatttttteteeaatettteattttatt GoGoGoGoGoGoGovvvveeerveveevvevve nance Financial Secttttttttttitittttttt ononoonnononn Stock Inforrrrmrmmmmmmrmmrrmrmmmmr aaaaaatiatatiaaaaaaaaaaaa on/on/oCorporate HHHHiHiHiHiHH ssssstoststostsssssssssss ryry

Business Overview

The Year in Review

Outline of System SolutionsBusiness Model

Industry Position

Data centerservice provision

Systems construction(on-premises)

Packagedevelopment

Software andhardware sales

Clients

• Core system architecture solutions

• IT infrastructure architecture solutions

• Commissioned system development

• Development and provision of package software

• Sales of computers, servers, and communications equipment

• Network and facility construction

System Solutions System Services

• System operation services at data centers

• Cloud services

• Network services

Solutionproposal

Systemproposal

Independent

User Trading company

IT equipmentmanufacturer

Panasonic ISOur business strength lies in activatingthe experience and systems know-how

we have accumulated as a user.

61.2%Breakdownof net salesby business

38.8%

Currently, IT demand exists not only for greater work efficiency but also for contribution to management.

The Group meets this need by proposing solutions that employ IT to address corporate transformation and structural reform and configurations of equipment irrespective of the equipment manufacturer.

The Group maintains the safety and security of customer systems from two data center locations, the Osaka IDC and Osaka Central Data Center. Also we provide operation services that meet customer needs through cloud and other services.

We have made great progress in developing

our system solutions by providing solutions

to a number of clients at their bases of

operations.

In the market outside the Panasonic Group

(the general market), in IT we have moved

forward in developing a cloud service model

that connects directly to client businesses,

which contributes to the client’s management.

In concrete terms, this has meant providing

revenue-sharing-type cloud services for

leisure facilities. In this model, our company

shares in the visitor behavior risk concerning,

for example, use fees dependent upon visitor

numbers and seasonally adjusted charges.

In addition, our work for the Panasonic

Group put us on the frontlines of marketing

strategy systems construction support that

gets the most out of tablet use and

differentiates Panasonic from its competitors.

Outlook for the Upcoming Fiscal YearThe development capability we have honed

within the Panasonic Group will continue to be

put to use in the general market, while we will

propose the solutions know-how created in the

general market to our Panasonic Group clients.

We will contribute to the further growth of

our clients’ business by offering our new

complex cloud services in the general market.

For example, we will offer new services tied to

leisure facility-oriented businesses, such as

coupon distribution for facilities in neighboring

areas and big data analysis services. This will

support expanding businesses with multiple

facilities by increasing the number of visitors

to the overall region.

We will also support the building of strategic

IT systems in the Panasonic Group with the

goal of achieving ¥2 trillion in housing and

¥2.5 trillion in B2B. By using a variety of big

data, we can expand distribution networks,

strengthen SCM and ECM, and also shore up

the business management platform.

20142012 201320112010

(Millions of Yen) (%)

16,000

12,000

8,000

4,000

0

100.0

75.0

50.0

25.0

0

Net Sales/Gross Margin

5

2

17.7%

Gross Margin

Net Sales

10

7

14,082Millions of Yen

13,60412,066

14,129 13,169

17.921.617.8 17.2

Senior Managing Director

Akira Hisano




Outline of System Services

Group Business Structure

Developing Information Services Business with Two Consolidated Subsidiaries

Panasonic Net Solutions Co., Ltd.

Clients

• Software leasing• Office space leasing• Systems equipment sales

• Systems operation services

• Systems equipment sales

• Security systems development

• Groupware development

• Systems operation services

• Systems equipment sales

• Systems operation services• Systems maintenance services• Systems development• System solutions• Sales of our own software• Systems equipment sales• Communications

equipment sales

Panasonic Net Solutions V-Internet Operations

The company applies its strong package

development and system solution provision

experience and know-how in the implementation,

use, and establishment of the information

technologies necessary to client work reform.

Its MajorFlow work flow package is characterized

by a broad lineup, covering expense

reimbursement and attendance management.

V-Internet Operations, Inc.

Established in 1996 through the then-Matsushita

Electric Works venture system, the

company’s strength lies in network camera

and IT-linking businesses, such as

lesson-delivering systems for the education

market, which center on its ArgosView video

surveillance solution.

Panasonic

The Year in ReviewCompanies are moving strongly toward the use

of cloud services for disaster countermeasure,

as a way to reduce operations outsourcing

costs and to make use of advanced functions

in diverse system domains.

In the market outside the Panasonic

Group (general market), we began

targeting small and medium-sized

enterprises in addition to large companies

in developing private cloud services

centering on our mainstay IT infrastructure

service, Nextructure, and our “IT operations

service.” We also began offering high

added-value services, such as remote

operation services and new vertical

integration service for databases.

In our Panasonic Group business, in

addition to improving the efficiency of IT

infrastructure operation, as a business

growth strategy we launched infrastructure

platform services to revolutionize workstyles

through the use of tablets.

Outlook for the Upcoming Fiscal YearWhile we expect the cloud services market

to continue to expand, in addition to

diversifying client needs we expect

intensifying competition among providers

due to service commodification and the

expansion of public clouds. This requires us

to enhance our competitiveness.

We will continue to work in the next fiscal

year to expand cloud services with

a guaranteed level of service within

Nextructure for core corporate networks.

In addition, we will work to offer upstream

consulting, as well as proposing total IT

operations, such as cloud and remote

operation services, in our IT operations

service.

In our Panasonic Group business, we will

work to reform workstyles through unified

communications services and strengthening

of the IT platform.

y q p y q p

Panasonic Information Systems

20142012 201320112010

(Millions of Yen) (%)

30,000

22,500

15,000

7,500

0

100.0

75.0

50.0

25.0

0

Net Sales/Gross Margin

10

7

22,250Millions of Yen

5

2

22.1%

Gross Margin

Net Sales

23,045 22,24422,155 22,009

20.719.920.7 23.2

Director

Takashi MaedaOur corporate group comprises Panasonic Information Systems Co., Ltd., and two consolidated subsidiaries that conduct IT business, Panasonic Net Solutions Co., Ltd., and V-Internet Operations, Inc. Each subsidiary possesses a high level of technological expertise and has a well-established position in the specialized solutions market.

We collaborate in developing business with these companies, providing mutual support through complementary experience and know-how.




CSR Efforts

Fundamental Perspective on CSR

Strengthening Quality as an IT Service Company

We have implemented the CMMI model

with the goal of strengthening quality in our

systems construction processes.

Our goal this year is to achieve CMMI

Level 4, “Quantitative Project Management.”

We are proceeding not only with the

standardization and documentation of

system configuration but also quantification.

We have also for the first time established a

quality policy for “Post-servicing quality

improvement.” We are continuing with

operational quality improvement based on

ISO 20000. In addition, we are engaging in

new third-party product inspection. Our aim

is to continue offering higher-quality system

solutions and services.

As a member of the Panasonic Group, we

have worked with the spirit of the words of

its founder, Konosuke Matsushita: “An

enterprise is a public institution” and “All for

the customer.” This spirit serves as the

origin of our corporate social responsibility

(CSR) activities.

Based on the Panasonic Group

management philosophy, we look beyond

just complying with laws, ordinances and

rules to conduct fair and honest business

activities according to conscience and good

sense. In addition, throughout our business

activities we consistently strive for our

customers advantages through IT.

Quality Improvement

Our company is engaged in improving quality

from every perspective in system development

and operations.

In system development our fundamental

approach emphasizes process in ensuring

Risk Management

We define risk as “factors that could impair

efforts to achieve our business plans” and

“the gap between social expectations and

corporate reality,” and we conduct risk

management initiatives accordingly. Central

to these activities is the Risk Management

Committee, which is chaired by the president

and conducts risk assessments and monitoring

of each division and related function

semi-annually.

Also, we have implemented a business

continuity plan (BCP). We are equipped

for disaster by maintaining all servers in

a fortified data center capable of withstanding

an earthquake measuring 6-upper on the

Japanese seismic intensity scale, as well as

by installing seismic isolation devices in blade

server storage, etc. In addition, backup data

is transmitted via the network to separate

locations for storage.

Compliance

We hone our corporate sense of ethics,

and have introduced and are developing a

corporate ethics program to conduct our work

on the basis of a shared conscientiousness,

common sense and a spirit of fairness and

sincerity (corporate ethics management).

This program stipulates the Panasonic

Code of Conduct, which clearly delineates

“Our Core Values.” Furthermore, the program

is promoted through a system centering on

the Corporate Ethics Committee that is led

by the president, and Corporate Ethics

Leaders are established at each workplace

to strengthen compliance laterally throughout

the Company. The Compliance Guidebook

has been composed and distributed to

employees to promote thorough compliance

familiarity and awareness activities, and ethics

training is conducted through e-learning.

In addition, each employee is required to

submit a statement of commitment to

corporate ethics.

In addition, we have put in place a

Corporate Ethics Reporting Line for internal

reporting and consultation concerning the

scope of ethical behavior. The Corporate

Ethics Reporting Line creates an environment

conducive to consultation, and is available

twenty-four seven.

quality, with our goal being to raise our

CMMI® score. CMMI® is a process

improvement model for software and

system development that was developed

by the Software Engineering Institute (SEI)

at Carnegie Mellon University in the United

States, with processes rated according to

five “maturity” levels. We achieved Level 3 in

2008 (renewed in 2011) and we are

preparing to step up to Level 4 in 2014.

Our fundamental approach in the sphere

of system operation is to ensure quality

through operational process standards

based on ITIL®. In

2011, our IDC unit

acquired ISO 20000

certification.

Senior Managing Director

Akira Hisano




Information Security

The Company maintains a particular focus on

the appropriate management of information,

which is an important corporate social

responsibility. One of our early efforts to

improve the safety, reliability and quality of our

data center services was the adoption in 2005

of an Information Security Management System

(ISMS) (we changed to ISO 27001 in 2007).

In 2013 the authentication registration coverage

was expanded from the IDC units to the

Efforts for the Environment

Energy conservation at our data center is

one aspect of our environmental efforts. We

pursue operational efficiency through efforts

such as internal design that considers heat

exhaust efficiency, lighting controls that employ

Panasonic’s advanced sensor technologies,

and the installation of energy-efficient servers,

so as to realize energy conservation.

For the market, we are also developing

eneview, our environmental monitoring

software. This software supports the

formulation of energy conservation measures

at companies through efficient data gathering

and energy visualization.

Corporate Citizenship Activities

We encourage all our employees to take part

in voluntary corporate citizenship activities.

Activities in 2013 included recycling (PET

bottle cap gathering), fundraising, blood

and bone marrow bank registration, etc.

Our employees also participated in the

Clean Osaka regional cleanup campaign at

the request of the Osaka

city government, with

most of our employees

taking part in cleanup

efforts in the vicinity of

our offices.

entire company.

Our efforts to prevent leaks and other

information security problems include

establishing a dedicated information security

unit and extending security controls to each

unit via the committee. Our particular efforts

in the area of personal information protection

include acquisition of the Privacy Mark in 2002

and the establishment of a personal information

security program. We are continuing to

strengthen the system.

Accumulation of Small Efforts Important in Environmental Conservation

Even small environmental efforts engaged in

one by one mount up and result in significant

progress. For example, 60% of the energy

consumed at data centers goes into running

the servers, which constitutes a serious

energy conservation issue. We succeeded

in reducing the amount of electricity used

through a configuration that employs the

fine-tuning of state-of-the-art technologies.

We are also sharing with our employees

the importance of environmental conservation

through reducing energy use at the workplace

in aspects other than business. We will

continue to carefully develop that mindset

at our company.

Director

Tatsuo Yoshikawa

Maintaining and Improving Information Security and Aiming for Full Penetration

Information security efforts are in these

times a corporate social responsibility.

We strive to gain customer confidence

through appropriate information controls

and efficient use of information, so we have

acquired third-party institution certification,

such as ISO 27001 and the Privacy Mark.

We are engaged in continuous efforts to

support and improve information security

and ensure its full penetration throughout

the Company.

We will continue to be united in our efforts

as a company to strengthen security so as to

deliver safety and security to our customers

through our products and services.

Managing Director

Hisashi Kurono




Innovation is required to promote the growth of IT vendors in an IT industry marked by rapid changes in the operating environment and progress in technology. While the Panasonic Group has established solid processes and a control system for Panasonic Information Systems’ management, the Company’s management encourages a sense of promptness in its work execution compared to other IT expert companies. I have delivered a broad range of third-party advice, based on my own experiences during my long tenure at the system integration section in FUJITSU LIMITED, concerning operations planning, execution of cost controls, link-ups with partners, and human resources development, especially from the perspectives of “people” and “services.”

Panasonic Information Systems can leverage the work know-how accumulated within the Panasonic Group to increase activation of that driving force, meeting the challenge of expanding business outside the Panasonic Group (general market). For example, Japan’s service industries and medium-enterprise markets still have potential for IT growth, so new business models such as cloud and revenue sharing are being developed. I would like to see the company use its Group experience to contribute to growth strategies for the sector and risk hedging.

Comments from an Outside Director

Governance Structure

Corporate Governance

Audit

Accounting Audit

Control

Control

Internal Audit

Appointment

and Dismissal

Appointment and DismissalAppointment and Dismissal

Appointment and Dismissal

AssistanceCooperation

Supervision/Instruction

Supervision/InstructionInstruction

Cooperation

General Meeting of Shareholders

Board of Directors(decision-making, supervision)

Nine Directors(of whom two are outside directors)

Board of Auditors (auditing)

Three Auditors (of whom two are outside auditors)

Auditors Office

Accounting Auditors

President Internal 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 Committee, Other Committee

Executive Directors Executive Officers

Executive Division

mpany use its Group experience to ute to growth strategies for the sector k hedging.

* CSRM: Combining CSR (corporate social responsibility)

and risk management

Business Execution and Supervision

The Board of Directors meeting is held

regularly once a month and irregularly as

required to report on significant operating

policies, decisions on substantive matters,

and the execution of business and duties,

as well as statutory matters. Also, to provide

neutral and impartial supervision, two of the

nine 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.

Controls

We believe developing a sound business

and maintaining customers’ trust in our

business are indispensible to the growth of

the Company. 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.

Auditing

The Company’s auditing system is made up

of auditors and the Board of Auditors, an

internal audit division 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.

The Board of Auditors is comprised of

auditors, audit plans, methods and so forth,

and reports on the implementation status of

the audit. The audit 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 auditors office to support

the auditors’ professional duties. We consult

with auditors regarding the assessment of

the office and its personnel changes.

The 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 fraudulences.

The division conducts its audit in line with

the annual plan, and the results are reported

to the Board of Directors.

Concerning the audit under the Companies

Act and Financial Instruments and Exchange

Law, the Company has entered into an audit

contract with Deloitte Touche Tohmatsu LLC.

Board of Auditors and the Auditors’ Inspection

Internal Audit

Accounting Auditor

Outside Director

Hidenori Furuta




Apr. 1978:

Oct. 2005:

Apr. 2008:

June 2008:

Apr. 2009:

Apr. 2010:

June 2014:

Joined Matsushita Electric Works, Ltd. (at present, Panasonic Corporation)

Director, the AGE-FREE Products Promotion Department, Matsushita Electric Works, Ltd.

Representative Director, Matsushita Electric Works AGE FREE Care Service Co., Ltd. (at present, Panasonic AGE-FREE Services Co., Ltd.)

Representative Director, Matsushita Electric Works AGE FREE Lifetec Co., Ltd. (at present, Panasonic AGE-FREE Life Tech Co., Ltd.)

Representative Director, Matsushita Electric Works AGE FREE Shops Co., Ltd. (at present, Panasonic AGE-FREE Shops Co., Ltd.)

Representative Director, Matsushita Electric Works AGE FREE Service Co., Ltd. (at present, Panasonic AGE-FREE Services Co., Ltd.)

Advisor of the Company

Executive Vice President, Member of the Board of Directors, In charge of Corporate Sales and Corporate Planning

In charge of Corporate Sales and Human Resources and Labor Relations

President and Representative Director (to date)

Director, Japan Information Technology Services Industry Association (to date)

(As of July 1, 2014)

Officers of the Company

Kazuhiro MaegawaPresident and Representative Director,

Member of the Board of Directors

Mar. 1974:

June 2004:

June 2006:

Apr. 2007:

June 2008:

Apr. 2009:

Apr. 2010:

Jan. 2012:

June 2014:


Director, e-Office Solution Division of the Company

Director, Distribution Solution Division

Executive Officer, Director, Distribution Business Unit

Director, Member of the Board of Directors, In charge of Corporate Development

In charge of Development (to date)

Managing Director, Member of the Board of Directors, In charge of Global Operations Promotion (to date), Director, Solution Business Unit

Director, Eco Solutions Support Unit (to date)

Senior Managing Director, Member of the Board of Directors (to date), In charge of Quality (to date)

Akira HisanoSenior Managing Director,

Member of the Board of DirectorsIn charge of Development, Global Operations Promotion and QualityDirector, Eco Solutions Support Unit Apr. 1978:

Dec. 2001:

Feb. 2003:

May 2011:

June 2011:

Apr. 2013:


Director, Member of the Board of Directors, Director, General Affairs Department, Yamanashi Matsushita Electric Works, Ltd. (at present, Panasonic Industrial Devices Yamanashi Co., Ltd.)

Director, Financial Management Department, Electronic & Plastic Materials Company, Matsushita Electric Works, Ltd. (at present, Panasonic Corporation)


Director, Member of the Board of Directors (to date), In charge of Financial, Legal Affairs, General Affairs, CSRM, Internal Control, and Corporate Ethics (to date), Director, Financial Management Department

Director, Financial Management Department (to date)

Tatsuo YoshikawaDirector, Member of the Board of DirectorsIn charge of Financial, Legal Affairs, General Affairs, CSRM, Internal Control, and Corporate Ethics, Director, Financial Management Department

Apr. 1982:

Apr. 2005:

Oct. 2007:

Apr. 2010:

May 2012:

June 2012:

Joined Matsushita Electric Industrial Co., Ltd. (at present, Panasonic Corporation)

Director, IT Infrastructure Center, Corporate Information Systems Company, Matsushita Electric Industrial Co., Ltd.

Director, Marketing Logistics Solution Business Unit, Corporate Information Systems Company, Matsushita Electric Industrial Co., Ltd.

Director, Global Business Division, Corporate Information Systems Company, Panasonic Corporation


Executive Vice President and Representative Director (to date), In charge of Corporate Planning (to date)

Maki OkajimaExecutive Vice President and Representative Director,

Member of the Board of DirectorsIn charge of Corporate Planning

Apr. 1978:

June 2002:

Dec. 2003:

Apr. 2006:

Apr. 2007:

Apr. 2008:

June 2008:

Apr. 2009:

Apr. 2010:

June 2014:


Director, e-Procurement Solution Division of the Company

Director, Distribution Solution Division

Director, Housing Solution Division

Executive Officer, Director, Corporate Business Unit

Director, Solution Business Unit

Director, Member of the Board of Directors, In charge of New Business and Promotion of New Products

In charge of Technology, Quality and Management, In charge of CIO (to date)

Managing Director, Member of the Board of Directors (to date), In charge of Human Resources and Labor Relations (to date),Director, Service Business Unit

In charge of Tokyo Branch and Engineering (to date)

Hisashi KuronoManaging Director, Member of the Board of DirectorsIn charge of Tokyo Branch, CIO, Human Resources and Labor Relations and Engineering

Apr. 1982:

Dec. 2003:

Apr. 2007:

Dec. 2007:

Apr. 2008:

Apr. 2009:

Apr. 2010:

Apr. 2013:

Apr. 2014:

June 2014:


Director, B2B Solution Division of the Company

Director, EAI and CRM Solution Division

Director, Eastern Region Solution Sales Division

Executive Officer, In charge of Tokyo Branch, Director, Solution Sales Business Unit

Director, Sales Business Unit

In charge of Engineering, Director, Market Development Sales Division

Vice Director, Solution Business Unit (In charge of System Solution), Vice Director, Service Business Unit (In charge of IDC Solution)

Director, Solution Business Unit (to date)

Director, Member of the Board of Directors (to date)

Hajime OnishiDirector, Member of the Board of DirectorsDirector, Solution Business Unit




Apr. 1980:

Oct. 2010:

Jan. 2012:

June 2013:


Director, Human Resources and Labor Relations Department, Electrical Construction Materials Business, Panasonic Electric Works, Ltd. (at present, Panasonic Corporation)

General Manager, Tokyo General Affairs Group, Eco Solutions Company, Panasonic Corporation

Corporate Auditor of the Company (to date)

Yuji NakabayashiCorporate Auditor

* Makoto Iwahashi is an independent officer who is not likely to experience any conflict of interest with general shareholders for which Tokyo Stock Exchange Group, Inc. requires specification.

Apr. 1967:

June 1997:

June 2000:

June 2003:

June 2004:

June 2007:

June 2010:

June 2012:

Joined Kawasaki Steel Corporation

Director, Member of the Board of Directors, Kawasaki Steel Corporation

Managing Director, Member of the Board of Directors, Kawasaki Steel Corporation

President and Representative Director, Kawatetsu Systems, Inc. (at present, JFE Systems, Inc.)

Director, Japan Information Technology Services Industry Association

Executive Director, Japan Information Technology Services Industry Association

Corporate Auditor of the Company (to date), Corporate Senior Adviser of JFE Systems, Inc.

Senior Adviser of JFE Systems, Inc. (to date)

Makoto Iwahashi*Outside Corporate Auditor

Apr. 1985:

June 2005:

Apr. 2009:

Jan. 2012:

June 2013:


Director, Member of the Board of Directors of Matsushita Electric Works Bathroom Ware Systems & Life, Ltd. (at present, Panasonic Eco Solutions Housing Equipment Co., Ltd.)

Director, Member of the Board of Directors of Panasonic Electric Works Business Life Support Co., Ltd.

General Manager, Accounting Group Financial Management Center, Eco Solutions Company, Panasonic Corporation (to date)

Corporate Auditor of the Company (to date)

Eiji FurusawaOutside Corporate Auditor

Apr. 1982:

June 2004:

Apr. 2007:

Apr. 2009:

Apr. 2010:

Apr. 2013:

June 2014:


Director, Network Division of the Company

Director, Network Solution Division

Executive Officer, Director, IDC Business Unit, Director, IDC Solution Division

Vice Director, Service Business Unit (In charge of IDC)

Vice Director, Service Business Unit (In charge of IDC Service), Director, IDC Service Division

Director, Member of the Board of Directors (to date)

Director, Service Business Unit (to date)

Takashi MaedaDirector, Member of the Board of DirectorsDirector, Service Business Unit

Apr. 1986:

Apr. 2010:

June 2010:

Jan. 2012:


Director, Corporate Information Systems Planning Department, Matsushita Electric Works, Ltd.

Director, Member of the Board of Directors of the Company (to date)

General Manager, Information Systems Planning Group, Supply Chain Management Center, Eco Solutions Company, Panasonic Corporation (to date)

Takahiro NakagawaOutside Director, Member of the Board of Directors

Apr. 1982:

Oct. 2009:

Apr. 2012:

June 2013:

Apr. 2014:

Joined FUJITSU LIMITED

Corporate Vice President, Fujitsu System Solutions Limited (at present, Fujitsu Systems East Limited)

Corporate Vice President, FUJITSU LIMITED

Director, Member of the Board of Directors of the Company (to date)

Corporate Senior Vice President, FUJITSU LIMITED (to date)

Hidenori FurutaOutside Director, Member of the Board of Directors

Keisuke TanakaExecutive Officer

Mitsuru MaekawaExecutive Officer

Hiroyoshi MaruyamaExecutive Officer

Kazuhiko NambuExecutive Officer

Tomoyuki SakaiExecutive Officer

The market environment in Japan has been swept into the vortex of globalization, which is itself picking up speed. Will the Company make the efforts necessary to increase its enterprise value as a member of the Panasonic Group to maintain its listing? How will the Company maintain its market value? Will the Company aim even higher? Future actions and results will be called into question as it faces an era of huge competition.

During my career I have been the director of a listed company, the CEO of an IT company, and the outside director of an NYSE-listed company. I will continue to apply my experience to add to the objectivity of the corporate governance structure the Company has already built, and I will work to make it stronger. I have formed a relationship of trust with the existing executive team and all of the managers. This relationship creates the basis for my full efforts toward deep, frank debate at the Board of Directors and the Board of Auditors meetings. I also hope to have other opportunities to interact directly with management. I will put my all into building and strengthening the Company’s platform that will take it into the coming era.

Comments from an Outside Auditor

Outside Corporate Auditor

Makoto Iwahashi




2013

2014

2013

2014

Operating Income Analysis Diagram (Millions of Yen)

4,425

Inventories

Deposits paid

Asset Analysis Diagram (Millions of Yen)

31,355(183)

(319)

60104

33,283

Current assets

2,083 up

Noncurrent assets

155 down

Other current assets(124)(38)

(49)

(44)(6)

1,944127

20

13104

4,465

20 down

Selling and administrative expenses

UP1,928YoY change

UP40YoY change

Property and equipment

Intangible assets

Cash and depositsGross profit

Salaries and allowances

Decrease in provision for directors’ bonuses

319

2013

2014

Liabilities / Net Assets Analysis Diagram (Millions of Yen)

31,355106

(141)

27(973)

923

68

33,283

171Liabilities

881 up

Net assets

1,047 upOther net assets

(246)

Other liabilities

Accounts payable Accrued expenses

Long-term lease obligations

Net defined benefit liabilityConsumption taxes payable

UP1,928YoY change

Defined retirement benefit plan

Investments and other assets

Decrease in retirement benefit plan cost

Increase in outside personnel expenses

Other selling, general and administrative expenses

1,993

Construction deferred payment

Retained earnings

Increase in provisions for bonuses

Management’s Discussion and Analysis

1. Financial Position

During the fiscal year ended March 31, 2014, the Company concentrated on increasing sales to customers outside the Panasonic Group (general market), as well as efforts to create and fortify its partnership with the Panasonic Group with the aim of receiving orders for systems.

Due to an increase in cloud service orders from customers outside the Panasonic Group (general market) and the Panasonic Group’s strengthening and expansion of its IT systems in accordance with its growth strategy, net sales rose 3.3% year on year, to ¥36,334 million. Meanwhile, we pushed forward on rationalization activities centered on system operation, but the need for personnel increased in conjunction with the increase in new operational projects. Therefore, cost of sales increased 4.1%, to ¥28,940 million, and gross profit rose 0.3%, to ¥7,394 million.

Net Sales and Gross Profit

Selling, General and Administrative Expenses

Operating Income and Income before Income Taxes and Minority Interests

While we strengthened our sales engineer force to increase future order generation, we continued to control costs and improve work efficiency. As a result, selling, general and administrative (SG&A) expenses decreased 0.7%, to ¥2,929 million. The ratio of SG&A expenses to net sales fell from 8.4% in the preceding term to 8.1% during the year under review.

Operating income expanded 0.9%, to ¥4,465 million. The operating margin amounted to 12.3%. This figure stemmed from income before income taxes and minority interests of ¥4,499 million, after adding interest income (of ¥37 million) and subtracting interest expense (of ¥8 million) and other items.

Net income declined 0.6%, to ¥2,685 million, after subtracting total income taxes (of ¥1,814

2. Assets, Liabilities and Equity

Current assets amounted to ¥27,813 million as of March 31, 2014, up ¥2,083 million, or 8.1%, from a year earlier, due mainly to an increase of ¥1,944 million in deposits paid to Panasonic Corporation and others.

Noncurrent assets decreased ¥155 million, or 2.8%, from the end of the previous year, to ¥5,470 million, mainly due to the depreciation of hardware and other noncurrent assets as well as a reduction in net property and equipment and amendments to retirement benefit accounting.

As a result, as of the end of the fiscal year ended March 31, 2014, total assets were up ¥1,928 million, or 6.1%, from the end of the previous year, to ¥33,283 million.

Assets

Current liabilities increased ¥112 million, or 1.8%, from the end of the previous year, to ¥6,407 million, due to an increase of ¥106 million in accounts payable-other because of an increase in outsource development in March 2014.

Mainly due to amendments to retirement benefit accounting, noncurrent liabilities rose ¥769 million, or 347.2%, from the end of the previous year, to ¥991 million.

Net assets expanded ¥1,047 million, or 4.2%, from the end of the previous year, to ¥25,885 million as net income of ¥2,685 million was posted, and a year-end dividend of the previous year and an interim dividend of ¥693 million in total were paid, in addition to the effects of revisions to retirement benefit accounting.

Net assets

Liabilitiesmillion) from income before income taxes and minority interests of ¥4,499 million. The net margin was 7.4%.

Net Income




36,334

Millions of Yen %Year-on-Year

Increase2014 2015

Net sales 37,000 1.8

4,465Operatingincome 4,500 0.8

2,685Net income 2,750 2.4

Income taxes paid

Income before income taxes and minority interests

Operating Cash Flow Analysis Diagram (Millions of Yen)

Depreciation and amortization

Decrease in prepaid pension costCash dividends paid

Decrease in liabilities associated with retirement funds

Finance Cash Flow Analysis Diagram (Millions of Yen)

Return on equity (ROE) for the year was 10.6%, in comparison to 11.3% for the previous fiscal year, due to the fall in net income. Return on assets (ROA), however, amounted to 8.3%, compared to 9.0% for the previous fiscal year, owing to the increase in total assets.

ROE/ROA

5. Order Backlog

4. Forecast for the Fiscal Year Ending March 31, 2015The Company’s forecast of consolidated operating performance for the fiscal year ending March 31, 2015 is shown below.

As of March 31, 2014, our order backlog stood at ¥3,122 million, up 20.2% from a year earlier. This rise stemmed from an increase in orders for system development projects related to the growth strategy of the Panasonic Corporation Eco Solutions Company.

7. Capital InvestmentCapital investment in the year to March 31, 2014, amounted to ¥1,623 million. Principal investments were for the acquisition of large servers and various other hardware, and for the development of cloud systems for clients outside the Panasonic Group (general market).

6. Research and DevelopmentThe Group’s research and development activities are mainly conducted at its R&D Center. During the fiscal year ended March 31, 2014, research and development costs

3. Cash Flows

Net cash provided by operating activities was ¥537 million less than in the preceding fiscal year, at ¥4,133 million. The main factors were as follows: income before income taxes and minority interests of ¥4,499 million; depreciation and amortization of ¥1,833 million; and income taxes paid of ¥1,782 million.

Net cash used in investing activities was down ¥7,819 million, to ¥4,480 million. This was mainly due to deposits paid to

Cash Flows from Operating Activities

Cash Flows from Investing Activities

Panasonic Corporation of ¥3,000 million and purchase of property, plant and equipment of ¥1,067 million.

Net cash used in financing activities decreased ¥48 million, to ¥892 million. This outcome was attributable to cash dividends paid of ¥692 million and repayments of finance lease obligations of ¥200 million.

Due to the aforementioned operating and investing activities, free cash flows resulted in a cash outlay of ¥347 million, compared with ¥7,629 million in the previous year.

Cash Flows from Financing Activities

Free Cash Flows

amounted to ¥121 million, largely for verifying the functionality of new technologies and commercial licenses related to smart devices, etc.

Other

Investment Cash Flow Analysis Diagram (Millions of Yen)

+4,133

(219)680(594)

(284)

Other current assets increase

Other

Repayment of lease obligations (200)

(692)

(892)

(3,000)

Purchases of property and equipment

(1,067)

Purchases of software

(408)

(5)

Increase in deposits paid

(4,480)

4,4991,833

(1,782)




Risk Factors

Fluctuations 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 Economic Conditions

The Group has announced its new medium-term management plan, which covers the period from April 1, 2013, through March 31, 2016, and an earnings forecast for the fiscal year ending March 31, 2015. However, the Group may fail to achieve all of the goals announced and/or the expected results.

Risks Related to Future Plans

Competitive 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 in and undertakes initiatives involving strategic products and services. However, investments or sales initiatives for a particular product or service may fall short of competitors’ efforts 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 the Group’s profits, and becomes especially noticeable when demand for products and services decreases.

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.

Risks Related to the Group’s Business Activities

Items in this annual report concerning business 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 19, 2014).

Securing Capable Human ResourcesThe Group’s future success depends largely on its ability to retain skilled employees in 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 CompaniesThe 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, 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 to 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 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.




Risk Factors

Effects 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.

Risks Related to Disasters or Unpredictable Events

Pension 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 sheets 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 TaxesThe 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.

Other Risks

Direct or Indirect Costs Related to Product Liability or Warranty Claims Due to Defects in Products or ServicesThe Group pays due attention to ensuring the quality of its products and services. However, the occurrence of defects in products or 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, 2014, the Group was using the IPRs of third parties under license 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 RestrictionsThe 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

Risks Related to Legal Restrictions and Litigationinvestments, 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.




Panasonic Information Systems Co., Ltd. and Subsidiaries March 31, 2014 Consolidated Balance Sheet

ASSETS

¥ 86

7,799

259

18,180

508

981

27,813

983

8,734

743

199

10,659

(7,672)

2,987

272

—

328

290

272

725

—

596

0

(0)

2,483¥ 33,283

2014Millions of Yen

Thousands of U.S.Dollars (Note 1)

2014 2013 2014Millions of Yen


2014 2013CURRENT ASSETS:

Cash and deposits (Notes 3 and 13)

Accounts receivable - trade (Notes 13 and 15)

Inventories (Note 4)

Deposits paid (Notes 3, 13, and 15)

Deferred tax assets (Note 10)

Other current assets (Note 15)

Total current assets

PROPERTY AND EQUIPMENT:

Buildings

Tools, furniture, and fixtures

Lease assets (Note 12)

Construction in progress

Total

Accumulated depreciation

Net property and equipment

INVESTMENTS AND OTHER ASSETS:

Investment securities (Notes 5 and 13)

Goodwill (Note 6)

Software

Development cost of software in progress

Long-term deposits paid

Long-term prepaid expenses

Prepaid pension cost (Note 8)

Deferred tax assets (Note 10)

Other assets

Allowance for doubtful receivables

Total investments and other assets

TOTAL

$ 83575,718

2,515176,505

4,9329,524

270,029

9,54484,796

7,2141,931

103,485(74,485)29,000

2,641—

3,1842,8162,6417,039

—5,786

0(0)

24,107$ 323,136

¥ 269

7,582

383

16,236

498

762

25,730

969

7,766

712

143

9,590

(6,284)

3,306

231

13

435

52

252

600

680

42

14

(0)

2,319

¥31,355

LIABILITIES AND EQUITY

¥ 2,168

1,765

1,023

13

16

1,116

306

6,407

33

35

923

991

1,040

871

24,893

(1)

55

(973)

25,885

¥ 33,283

CURRENT LIABILITIES:

Accounts payable - trade (Notes 13 and 15)

Accounts payable - other (Notes 13 and 15)

Income taxes payable (Note 13)

Consumption taxes payable

Deposits received (Note 7)

Accrued expenses

Other current liabilities (Note 12)

Total current liabilities

LONG-TERM LIABILITIES:

Long-term deposits received (Note 7)

Long-term lease obligations (Notes 12 and 13)

Liability for retirement benefits (Note 8)

Total long-term liabilities

COMMITMENTS LIABILITIES (Note 12)

EQUITY (Notes 9 and 16):

Common stock -

authorized, 40,000,000 shares; issued, 10,656,000 shares

Capital surplus

Retained earnings

Treasury stock - at cost

372 shares in 2014 and 372 shares in 2013

Accumulated other comprehensive income:

Unrealized gain on available-for-sale securities

Defined retirement benefit plan

Total equity

TOTAL

¥ 2,253

1,659

948

259

18

858

300

6,295

35

176

11

222

1,040

871

22,900

(1)

28

—

24,838

¥31,355

$ 21,04917,136

9,932126155

10,8352,971

62,204

320340

8,9619,621

10,0978,456

241,681

(10)

534(9,447)

251,311

$ 323,136See notes to consolidated financial statements.

For the latest information click here (IR Library)http://is-c.panasonic.co.jp/en/ir/library/




Panasonic Information Systems Co., Ltd. and Subsidiaries Year Ended March 31, 2014Consolidated Statement of Income and Comprehensive Income

2014Millions of Yen Thousands of U.S. Dollars (Note 1)

Yen U.S. Dollars

2014 2013NET SALES (Note 15)

COST OF SALES (Notes 11 and 15)

Gross profit

SELLING, GENERAL, AND ADMINISTRATIVE EXPENSES (Notes 11 and 15)

Operating income

OTHER INCOME (EXPENSES):

Interest income (Note 15)

Interest expense

Other - net

Other expense - net

INCOME BEFORE INCOME TAXES AND MINORITY INTERESTS

INCOME TAXES (Note 10):

Current

Deferred

Total income taxes

NET INCOME BEFORE MINORITY INTERESTS

NET INCOME

NET INCOME BEFORE MINORITY INTERESTS

OTHER COMPREHENSIVE INCOME (Note 14) -

Unrealized gain on available-for-sale securities

COMPREHENSIVE INCOME (Note 14)

TOTAL COMPREHENSIVE INCOME ATTRIBUTABLE TO (Note 14):

Owners of the parent

PER SHARE OF COMMON STOCK (Notes 2.o and 16):

Basic net income

Cash dividends applicable to the year

¥ 36,33428,940

7,3942,9294,465

37(8)5

344,499

1,856(42)

1,814

2,6852,685

2,685

27¥ 2,712

¥ 2,712

¥ 252.0165.00

¥ 35,17927,805

7,374

2,9494,425

29

(13)

(30)

(14)4,411

1,823

(114)

1,709

2,7022,702

2,702

(30)

¥ 2,672

¥ 2,672

¥ 253.56

65.00

$ 352,757280,971

71,78628,43643,350

359(78)49

33043,680

18,019(407)

17,612

26,06826,068

26,068

262$ 26,330

$ 26,330

$ 2.450.63

See notes to consolidated financial statements.





Panasonic Information Systems Co., Ltd. and SubsidiariesYear Ended March 31, 2014Consolidated Statement of Changes in Equity

Millions of Yen

Accumulated Other ComprehensiveIncome

Unrealized Gainon Available-for-Sale Securities

TreasuryStock

RetainedEarnings

CapitalSurplus

CommonStock

Number ofShares ofCommon

Stock Issued

DefinedRetirementBenefit Plan Total Equity

Thousands of U.S. Dollars (Note 1)

Accumulated Other ComprehensiveIncome

Unrealized Gainon Available-for-Sale Securities

TreasuryStock

RetainedEarnings

CapitalSurplus

CommonStock

DefinedRetirementBenefit Plan Total Equity

BALANCE, APRIL 1, 2012

Net income

Cash dividends, ¥65 per share

Purchase of treasury stock

Net changes in the year

BALANCE, MARCH 31, 2013

Net income

Cash dividends, ¥65 per share



10,656,000

—

—

—

—

10,656,000

—

—

—

10,656,000

¥ 1,040

—

—

—

—

1,040

—

—

—

¥ 1,040

¥ 871

—

—

—

—

871

—

—

—

¥ 871

¥ 20,891

2,702

(693)

—

—

22,900

2,685

(692)

—

¥ 24,893

¥ (1)

—

—

(0)

—

(1)

—

—

—

¥ (1)

¥ 58

—

—

—

(30)

28

—

—

27

¥ 55

—

—

—

—

—

—

—

—

¥ (973)

¥ (973)

¥ 22,859

2,702

(693)

(0)

(30)

24,838

2,685

(692)

(946)

¥ 25,885


Net income

Cash dividends, $0.63 per share



$ 10,097

—

—

—

$ 10,097

$ 8,456

—

—

—

$ 8,456

$ 222,331

26,068

(6,718)

—

$ 241,681

$ (10)

—

—

—

$ (10)

$ 272

—

—

262

$ 534

—

—

—

$ (9,447)

$ (9,447)

¥ (973)

¥ (973)

$ 241,146

26,068

(6,718)

(9,185)

$ 251,311






Panasonic Information Systems Co., Ltd. and SubsidiariesYear Ended March 31, 2014Consolidated Statement of Cash Flows

¥ 4,499

1,833

(0)

(42)

8

(217)

124

(219)

680

(594)

(85)

32

(2)

(136)

5,881

42

(8)

(1,782)

¥ 4,133

2014Millions of Yen


2014 2013

OPERATING ACTIVITIES:

Income before income taxes and minority interests

Adjustments for:

Depreciation and amortization

Decrease in allowance for doubtful receivables

Interest and dividend income

Interest expense

Changes in assets and liabilities:

Increase in accounts receivable - trade

Decrease (increase) in inventories

Increase in other current assets

Decrease in prepaid pension cost

Increase (decrease) in liability for retirement benefits

Increase (decrease) in accounts payable - trade

Increase in other current liabilities

Decrease in other long-term liabilities

Other - net

Subtotal

Interest and dividends received

Interest paid

Income taxes paid

Net cash provided by operating activities

$ 43,680

17,796

(0)

(408)

78

(2,107)

1,204

(2,126)

6,602

(5,767)

(825)

311

(19)

(1,322)

57,097

408

(78)

(17,301)

$ 40,126

¥ 4,411

1,817

(6)

(34)

13

(707)

(231)

(67)

164

4

406

810

(9)

(34)

6,537

34

(13)

(1,888)

¥ 4,670

¥ (3,000)

—

(1,067)

—

(408)

(5)

(4,480)

(200)

(692)

(892)

(1,239)

5,500

¥ 4,261

2014Millions of Yen


2014 2013

INVESTING ACTIVITIES:

Increase in deposits paid

Decrease in deposits paid

Purchases of property and equipment

Sales of property and equipment

Purchases of software

Other - net

Net cash (used in) provided by investing activities

FINANCING ACTIVITIES:

Repayment of lease obligations

Dividends paid

Net cash used in financing activities

NET DECREASE IN CASH AND CASH EQUIVALENTS

CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR

CASH AND CASH EQUIVALENTS, END OF YEAR (Note 3)

$ (29,126)

0

(10,359)

0

(3,961)

(49)

(43,495)

(1,942)

(6,718)

(8,660)

(12,029)

53,398

$ 41,369

¥ (19,100)

8,100

(1,232)

2

(172)

103

(12,299)

(247)

(693)

(940)

(8,569)

14,069

¥ 5,500






Notes to Consolidated Financial Statements

Panasonic Information Systems Co., Ltd. (the “Company”), was incorporated on February 22, 1999, as a subsidiary of Panasonic Electric Works Co., Ltd. (the “Parent” (a)). The Company is 64% owned by the Parent at both March 31, 2014 and 2013. The principal business of the Company is to provide integration service for information systems; maintenance of computer systems; design, development, sales, lease, and 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 accordance with accounting principles generally accepted in Japan (“Japanese GAAP”), which are different in certain respects as to the 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 2013 consolidated financial statements to conform to the classifications used in 2014.

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 ¥103 to $1, the approximate rate of exchange at March 31, 2014. 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.

(a) The Parent was merged with Panasonic Corporation by an absorption-type merger in January 2012.

a. ConsolidationThe consolidated financial statements as of March 31, 2014 include the accounts of the Company and its 2 subsidiaries (2 subsidiaries in 2013) (together, the “Group”).

Under the control 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 have been eliminated in consolidation. All material unrealized profit included in assets resulting from transactions within the Group is also 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. The straight-line depreciation method is applied to all property and equipment for 2014 and 2013. The range of useful lives is from 8 to 15 years for buildings and from 3 to 10 years for tools, furniture, and fixtures. The useful lives for lease assets are the terms of the respective leases.

f. Long-Lived AssetsThe Group reviews its long-lived assets for impairment whenever events or changes in circumstances indicate the carrying amount of an asset or asset group may not be recoverable. An impairment loss is 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.

h. Retirement BenefitsThe Company has a noncontributory 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. The simplified method is used for computing retirement benefit obligation of one of the subsidiaries.

Effective April 1, 2000, the Company adopted a new accounting standard for retirement benefits and accounted for the liability for retirement benefits based on the projected benefit obligations and plan assets at the balance sheet date. The projected benefit obligations are attributed to periods on a straight-line basis. Actuarial gains and losses are amortized on a straight-line basis over 15 years within the average remaining service period. Past service costs are amortized on a straight-line basis over 7 years within the average remaining service period.

In May 2012, the Accounting Standards Board of Japan (the “ASBJ”) issued ASBJ Statement No. 26, “Accounting Standard for Retirement Benefits” and ASBJ Guidance No. 25, “Guidance on Accounting Standard for Retirement Benefits,” which replaced the accounting standard for retirement benefits that had been issued by the Business Accounting Council in 1998 with an effective date of April 1, 2000, and the other related practical guidance, and were followed by partial amendments from time to time through 2009.

(a) Under the revised accounting standard, actuarial gains and losses and past service costs that are yet to be recognized in profit or loss are recognized within equity (accumulated other comprehensive income), after adjusting for tax effects, and any resulting deficit or surplus is recognized as a liability (liability for retirement benefits) or asset (asset for retirement benefits).

(b) The revised accounting standard does not change how to recognize actuarial gains and losses and past service costs in profit or loss. Those amounts are recognized in profit or loss over a certain period no longer than the expected average remaining service period of the employees. However, actuarial gains and losses and past service costs that arose in the current period and have not yet been recognized in profit or loss are included in other comprehensive income and actuarial gains and losses and past service costs that were recognized in other comprehensive income in prior periods and then recognized in profit or loss in the current period shall be treated as reclassification adjustments.

(c) The revised accounting standard also made certain amendments relating to the method of attributing expected benefit to periods and relating to the discount rate and expected future salary increases.

This accounting standard and the guidance for (a) and (b) above are effective for the end of annual periods beginning on or after April 1, 2013, and for (c) above are effective for the beginning of annual periods beginning on or after April 1, 2014, or for the beginning of annual periods beginning on or after April 1, 2015, subject to certain disclosure in March 2015, both with earlier application being permitted from the beginning of annual periods beginning on or after April 1, 2013. However, no retrospective application of this accounting standard to consolidated financial statements in prior periods is required.

The Company applied the revised accounting standard and guidance for retirement benefits for (a) and (b) above, effective March 31, 2014. As a result, liability for retirement benefits of ¥923 million ($8,961 thousand) was recorded as of March 31, 2014, and accumulated other comprehensive income for the year ended March 31, 2014, decreased by ¥973 million ($9,447 thousand).

i. Asset Retirement ObligationsIn March 2008, the ASBJ published 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 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 adjustment to the carrying amount of the liability and the capitalized amount of the related asset retirement cost.

j. LeasesIn March 2007, the ASBJ issued ASBJ Statement No. 13, “Accounting Standard for Lease Transactions,” which revised the previous accounting standard for lease transactions. The revised accounting standard for lease transactions was effective for fiscal years beginning on or after April 1, 2008.

Under the previous accounting standard, finance leases that were deemed to transfer ownership of the leased property to the lessee were capitalized. However, other finance leases were permitted to be accounted for as operating lease transactions if certain “as if capitalized” information was disclosed in the notes to the lessee’s financial statements. The revised accounting standard requires that all finance lease transactions be capitalized by recognizing lease assets and lease obligations in the balance sheet. In addition, the revised accounting standard permits leases that existed at the transition date and do not transfer ownership of the leased property to the lessee to continue 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 continues to account for leases that existed at the transition date and do not transfer ownership of the leased property to the lessee as operating lease transactions.

All other leases are accounted for as operating leases.

k. Bonuses to Directors and Audit & Supervisory Board MembersBonuses to directors and Audit & Supervisory Board members are accrued at the end of the year to which such bonuses are attributable.

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

m. 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 this accounting standard, 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 is deemed to 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.

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

o. Per Share 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 period.

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 statement of income and comprehensive 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 basic net income per share computation was 10,655,628 shares and 10,655,645 shares for 2014 and 2013, respectively.

p. Accounting Changes and Error CorrectionsIn December 2009, the ASBJ issued ASBJ Statement No. 24, “Accounting Standard for Accounting Changes and Error Corrections,” and ASBJ Guidance No. 24, “Guidance on Accounting Standard for Accounting Changes and Error Corrections.” Accounting treatments under this standard and guidance are as follows: (1) Changes in Accounting Policies - When a new accounting policy is applied following revision of an accounting standard, the new policy is applied retrospectively unless the revised accounting standard includes specific transitional provisions, in which case the entity shall comply with the specific transitional provisions. (2) Changes in Presentation - When the presentation of financial statements is changed, prior-period financial statements are reclassified in accordance with the new presentation. (3) Changes in Accounting Estimates - A change in an accounting estimate is accounted for in the period of the change if the change affects that period only and is accounted for prospectively if the change affects both the period of the change and future periods. (4) Corrections of Prior-Period Errors - When an error in prior-period financial statements is discovered, those statements are restated.

Panasonic Information Systems Co., Ltd. and SubsidiariesYear Ended March 31, 2014

1. BASIS OF PRESENTATION OF CONSOLIDATED FINANCIAL STATEMENTS

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES















Notes to Consolidated Financial Statements Panasonic Information Systems Co., Ltd. and SubsidiariesYear Ended March 31, 2014







































Panasonic Information Systems Co., Ltd. and SubsidiariesYear Ended March 31, 2014Notes to Consolidated Financial Statements






























¥ 86

4,175

¥ 4,261

2014Millions of Yen

Thousands ofU.S. Dollars

2014 2013

Cash and deposits

Deposits paid with original maturities of within three months


$ 835

40,534

$ 41,369

¥ 269

5,231

¥ 5,500

The reconciliation of cash and deposits in the consolidated balance sheet to cash and cash equivalents in the consolidated statement of cash flows as of March 31, 2014 and 2013, was as follows:

—

2014Millions of Yen


2014 2013

Goodwill on business acquisition —¥ 13

Goodwill on business acquisition is amortized on a straight-line basis over five years.

¥ 272

2014Millions of Yen


2014 2013

Non-current:

Marketable equity securities $ 2,641¥ 231

¥ 85

¥ 54

Millions of YenUnrealized

GainsUnrealized

Losses Fair Value

¥ 187

¥ 187

Cost

March 31, 2014

Securities classified as:

Available-for-sale:

Equity securities

March 31, 2013


Available-for-sale:

Equity securities

¥ 272

¥ 231

—

¥ (10)

$ 825

Thousands of U.S. DollarsUnrealized

GainsUnrealized

Losses Fair Value

$ 1,816

Cost

March 31, 2014


Available-for-sale:

Equity securities $ 2,641—

The costs and aggregate fair values of investment securities as of March 31, 2014 and 2013, were as follows:

¥ 168

91

0

¥ 259

2014Millions of Yen


2014 2013

Merchandise

Work in process

Supplies

Total

$ 1,631

883

1

$ 2,515

¥ 290

92

1

¥ 383

3. RECONCILIATION TO CASH AND CASH EQUIVALENTS

Inventories as of March 31, 2014 and 2013, consisted of the following:

4. INVENTORIES

Investment securities as of March 31, 2014 and 2013, consisted of the following:

5. INVESTMENT SECURITIESGoodwill as of March 31, 2014 and 2013, consisted of the following:

6. GOODWILL

Panasonic Information Systems Co., Ltd. and SubsidiariesYear Ended March 31, 2014 For the latest information click here (IR Library)





¥ 4,979

81

72

23

(116)

(486)

(47)

¥ 4,506

$ 48,340

786

699

223

(1,126)

(4,718)

(456)

$ 43,748


¥ 16

2

2

2

2

25

¥ 49

2015

2016

2017

2018

2019

2020 and thereafter

Total

$ 155

19

19

19

19

244

$ 475

¥ 33

16

49

(16)

¥ 33

2014Millions of Yen


2014 2013

Welfare pension

Other

Total

Less current portion

Long-term debt, less current portion

$ 320

155

475

(155)

$ 320

¥ 35

18

53

(18)

¥ 35

Interest rates applicable to the welfare pension were 7.1% at March 31, 2014 and 2013.

Annual maturities of deposits received at March 31, 2014, were as follows:

Millions of YenYear Ending March 31Thousands ofU.S. Dollars

Balance at beginning of year

Current service cost

Interest cost

Actuarial losses

Benefits paid

Past service cost

Others

Balance at end of year

¥ 3,431

106

87

143

(116)

(53)

¥ 3,598

$ 33,311

1,029

845

1,388

(1,126)

(515)

$ 34,932

Millions of YenThousands ofU.S. Dollars

Balance at beginning of year

Expected return on plan assets

Actuarial losses

Contributions from the employer

Benefits paid

Others

Balance at end of year


Deposits received as of March 31, 2014 and 2013, consisted of the following:

7. DEPOSITS RECEIVED

The Company has severance payment plans for employees. Under most circumstances, employees terminating their employment are entitled to retirement benefits determined principally based on accumulated points allocated to them each year according to their age and job evaluation and interest points over the accumulated points. Such retirement benefits are made in the form of annuity payments from the noncontributory 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 Company transferred its retirement benefit plans from defined benefit plans to a defined contribution pension plan effective on July 1, 2013. This new plan is effective for the future from this effective date, and the Company continuously treats funding contribution until June 30, 2013 as within the scope of defined benefit plans.

Year Ended March 31, 2014(1) The changes in defined benefit obligation for the year ended March 31, 2014, were as follows:

8. RETIREMENT BENEFITS

(2) The changes in plan assets for the year ended March 31, 2014, were as follows:






¥ (170)

1,677

¥ 1,507

$ (1,650)

16,282

$ 14,632

¥ 81

72

(106)

(16)

186

5

¥ 222

$ 786

699

(1,029)

(155)

1,806

48

$ 2,155

69%

23

4

4

100%

¥ 923

¥ 923

$ 8,961

$ 8,961


¥ 4,506

(3,598)

908

15

¥ 923

$ 43,748

(34,932)

8,816

145

$ 8,961

Funded defined benefit obligation

Plan assets

Unfunded defined benefit obligation

Net liability arising from defined benefit obligation


Unrecognized past service cost

Unrecognized actuarial losses

Total


¥ 4,989

(3,431)

(300)

(1,927)

¥ (669)

Projected benefit obligation (a)

Fair value of plan assets

Unrecognized prior service cost

Unrecognized actuarial loss

Net liability (asset)

Millions of Yen

Service cost

Interest cost


Amortization of past service cost

Recognized actuarial losses

Amortization of transitional obligation

Net periodic benefit costs


Debt investments

Equity investments


Others

Total

Discount rate

Expected rate of return on plan assets

1.6%

3.0%

¥ 923

¥ 923

Liability for retirement benefits

Net liability arising from defined benefit obligation


b. Method of determining the expected rate of return on plan assetsThe expected rate of return on plan assets is determined considering the long-term rates of return which are expected currently and in the future from the various components of the plan assets.

(7) Assumptions used for the year ended March 31, 2014, were set forth as follows:

Year Ended March 31, 2013The liability (asset) for employees’ retirement benefits at March 31, 2013, consisted of the following:

(a) For one of the consolidated subsidiaries, the simplified method is used for computing retirement benefit obligations.

(5) Accumulated other comprehensive income on defined retirement benefit plans as of March 31, 2014, was as follows:

(6) Plan assets as of March 31, 2014

a. Components of plan assetsPlan assets consisted of the following:

(3) Reconciliation between the liability recorded in the consolidated balance sheet and the balances of defined benefit obligation and plan assets as of March 31, 2014, were as follows:


(4) The components of net periodic benefit costs for the year ended March 31, 2014, were as follows:






¥ 274

95

(99)

54

136

¥ 460

Service cost (a)

Interest cost


Amortization of prior service cost

Recognized actuarial loss

Net periodic benefit costs

Millions of Yen

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 a Board of Directors, (2) having independent auditors, (3) having an Audit & Supervisory Board, 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 the above criteria.

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

9. EQUITY

The components of net periodic benefit costs for the year ended March 31, 2013, were as follows:

(a) Net periodic benefit cost of subsidiary using the simplified method is included.


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 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.

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 a specific formula. Under the Companies Act, stock acquisition rights are presented as a separate component of equity. The Companies Act also provides that companies can purchase both treasury stock acquisition rights and treasury stock. Such treasury stock acquisition rights are presented as a separate component of equity or deducted directly from stock acquisition rights.


Assumptions used for the year ended March 31, 2013, were set forth as follows:

Discount rate

Expected rate of return on plan assets

Amortization period of prior service cost

Recognition period of actuarial gain/loss

1.6%

3.0%

7 years

15 years




Normal effective statutory tax rate

Effect of tax rate reduction

Inhabitant tax on per capita basis

Expenses not deductible for income tax purposes

Other - net

Actual effective tax rate

37.8%

1.2

0.4

0.3

0.6

40.3%


¥ 69

278

312

475

¥ 1,134

—

¥ 30

—

¥ 30

¥ 1,104

2014Millions of Yen


2014 2013

Deferred tax assets:

Accrued enterprise taxes

Depreciation

Accrued bonus to employees

Others

Total

Deferred tax liabilities:

Prepaid pension cost

Unrealized gains on available-for-sale securities

Others

Total

Net deferred tax assets

$ 670

2,699

3,029

4,611

$ 11,009

—

$ 291

—

$ 291

$ 10,718

¥ 76

265

290

163

¥ 794

¥ 237

17

0

¥ 254

¥ 5402014

$ 748

669

$ 1,417

$ 1,660

340

$ 2,000

Millions of Yen Thousands of U.S. DollarsOperating

LeasesFinanceLeases

OperatingLeases

FinanceLeases

Due within one year

Due after one year

Total

¥ 77

69

¥ 146

¥ 171

35

¥ 206

Research and development costs included in cost of sales and selling, general, and administrative expenses were ¥121 million ($1,175 thousand) and ¥135 million for the years ended March 31, 2014 and 2013, respectively.

Because the differences between the normal effective statutory tax rates and the actual effective tax rates for the year ended March 31, 2013 are not material, the tax reconciliations were not disclosed.

On March 31, 2014, a tax reform law was enacted in Japan which changed the normal effective statutory tax rate from approximately 37.8% to 35.4%, effective for years beginning on or after April 1, 2014. The effect of this change on deferred tax assets in the consolidated statements of income for the year ended March 31, 2014, was approximately ¥51 million ($495 thousand).

A reconciliation between the normal effective statutory tax rates and the actual effective tax rates reflected in the accompanying consolidated statement of income for the year ended March 31, 2014, was as follows:

11. RESEARCH AND DEVELOPMENT COSTS

The Group leases certain computer equipment and other assets.Total lease payments under finance leases for the years ended March 31, 2014 and 2013, were

¥209 million ($2,029 thousand) and ¥264 million, respectively.Obligations under finance leases and future minimum payments under noncancelable operating

leases as of March 31, 2014, were as follows:

12. LEASES

The Company and subsidiaries are subject to Japanese national and local income taxes which, in the aggregate, resulted in a normal effective statutory tax rate of approximately 37.8% for the years ended March 31, 2014 and 2013.

The tax effects of significant temporary differences, which resulted in deferred tax assets and liabilities as of March 31, 2014 and 2013, were as follows:

10. INCOME TAXES







¥ 0

—

¥ 0

2014Millions of Yen


2014 2013

Due within one year

Due after one year

Total

$ 0

—

$ 0

¥ 3

0

¥ 3

$ 184

(184)

$ 0

$ 184

(184)

$ 0

Tools, Furnitureand Fixtures Total

Pro forma Information of Leased Property Whose Lease Inception Was before March 31, 2008Pro forma information of leased property whose lease inception was before March 31, 2008, was as follows:

¥ 19

(16)

¥ 3

Millions of Yen Thousands of U.S. Dollars

2014 20142013

TotalTools, Furnitureand Fixtures

¥ 19

(16)

¥ 3

TotalTools, Furnitureand Fixtures

Acquisition cost

Accumulated depreciation

Net leased property

Obligations under finance leases:

¥ 2

0

¥ 2

¥ 3

2014Millions of Yen


2014 2013

Depreciation expense

Interest expense

Total

Lease payments

$ 19

0

$ 19

$ 29

¥ 4

0

¥ 4

¥ 6

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

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

¥ 19

(19)

¥ 0

¥ 19

(19)

¥ 0

(1) Financial Instruments’ 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.

13. FINANCIAL INSTRUMENTS AND RELATED DISCLOSURES


(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 alliances, and are exposed to market fluctuation risks.

Settlements of most accounts payable - trade which are operating liabilities, are within one year. Some of them are in foreign currency due to exports of products and are subject to exchange-rate fluctuation risks. However, they have little impact because of their small amounts. Lease obligations relating to finance leases are mainly for procuring the required capital investment. Maturities can be up to five years after balance sheet dates.

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

The maximum amount of credit risk as of the end of the fiscal year under review is shown as a balance sheet value of financial assets subject to credit risks.b. Market Risk Management (foreign exchange and interest rate risks)The Company’s operating liabilities in foreign currency have little impact due to their small amounts. The Company checks the trends in exchange rates each time a transaction is made.

The Company regularly assesses the prices of marketable investment securities and financial positions of their issuers (business partners) and constantly reviews the necessity of such holdings in consideration of the relationship with them.c. Funding-Related Liquidity Risk Management (risk of inability to settle by payment dates) The Company’s accounting department formulates and renews funding plans based on reports from each department in a timely manner. The Company also has made the agreement for use of the cash management system with Panasonic Corporation 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 a quoted price in active markets. If a quoted price is not available, other rational valuation techniques are used instead.






CarryingAmount Fair Value

UnrealizedGain/Loss

¥ 86

7,799

18,180

272

¥ 26,337

¥ 2,168

1,765

1,023

35

¥ 4,991

¥ 86

7,799

18,180

272

¥ 26,337

¥ 2,168

1,765

1,023

34

¥ 4,990

—

—

—

—

—

—

—

—

(0)

¥ (0)

Millions of Yen

March 31, 2014

Cash and deposits

Accounts receivable - trade

Deposits paid

Investment securities

Total

Accounts payable - trade

Accounts payable - other

Income taxes payable


Total


UnrealizedGain/Loss

$ 835

75,718

176,505

2,641

$ 255,699

$ 21,049

17,136

9,932

340

$ 48,457

$ 835

75,718

176,505

2,641

$ 255,699

$ 21,049

17,136

9,932

330

$ 48,447

—

—

—

—

—

—

—

—

(10)

$ (10)

Thousands of U.S. Dollars

March 31, 2014

Cash and deposits


Deposits paid


Total





Total


UnrealizedGain/Loss

¥ 269

7,582

16,236

231

¥ 24,318

¥ 2,253

1,659

948

176

¥ 5,036

¥ 269

7,582

16,236

231

¥ 24,318

¥ 2,253

1,659

948

174

¥ 5,034

—

—

—

—

—

—

—

—

(2)

¥ (2)

Millions of Yen

March 31, 2013

Cash and deposits


Deposits paid


Total





Total

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. Fair value information for the investment securities by classification is included in Note 5.

Accounts Receivable and Accounts PayableThe carrying values of accounts receivable and accounts payable approximate fair value because of their short maturities.

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

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

Long-Term Lease ObligationsThe fair values of lease obligations are determined by discounting the cash flows related to the debt at the Group’s assumed lease interest rate.







¥ 40

—

40

(13)

¥ 27

2014Millions of Yen


2014 2013

Unrealized gain on available-for-sale securities:

Gains arising during the year

Reclassification adjustments to profit or loss

Amount before income tax effect

Income tax effect

Total other comprehensive income

$ 388

—

388

(126)

$ 262

¥ (48)

—

(48)

18

¥ (30)

¥ 21,023

894

581

36

¥ 4,338

17,944

—

99

137

2014Millions of Yen


2014 2013

Sales

Purchases

Lease and rental expense

Interest income


Deposits paid

Other current assets

Accounts payable:

Trade

Other

$ 204,107

8,680

5,641

350

$ 42,117

174,214

—

961

1,330

¥ 21,911

611

568

29

¥ 5,034

15,988

10

71

147

¥ 346Year-end cash dividends, ¥32.5 ($0.32) per share $ 3,359


Millions of YenDue after

1 Year through5 Years

Due after 5 Years through

10 Years Due after 10 YearsDue in

1 Year or LessMarch 31, 2014

Cash and deposits


Deposits paid

Total

(5) Maturity Analysis for Financial Assets with Contractual Maturities

Please see Note 12 for obligations under finance lease.

¥ 86

7,799

18,180

¥ 26,065

—

—

—

—

—

—

—

—

—

—

—

—

Thousands of U.S. DollarsDue after

1 Year through5 Years

Due after 5 Years through

10 Years Due after 10 YearsDue in

1 Year or LessMarch 31, 2014

Cash and deposits


Deposits paid

Total

$ 835

75,718

176,505

$ 253,058

—

—

—

—

—

—

—

—

—

—

—

—

The components of other comprehensive income for the years ended March 31, 2014 and 2013, were as follows:

14. COMPREHENSIVE INCOME

Appropriation of Retained EarningsThe following appropriation of retained earnings as of March 31, 2014, was resolved at the Board of Directors’ meeting held on May 19, 2014:

16. SUBSEQUENT EVENT

Balances as of March 31, 2014 and 2013, and transactions for the years ended March 31, 2014 and 2013, with the Parent, its consolidated subsidiaries, and its associated companies were as follows:

15. RELATED PARTY TRANSACTIONS






Independent Auditor’s Report




We have audited the accompanying consolidated balance sheet of Panasonic Information Systems

Co., Ltd. and subsidiaries as of March 31, 2014, and the related consolidated statements of

income and comprehensive income, changes in equity, and cash flows for the year then ended,

and a summary of significant accounting policies and other explanatory information, all expressed in

Japanese yen.

Management's Responsibility for the Consolidated Financial StatementsManagement is responsible for the preparation and fair presentation of these consolidated financial

statements in accordance with accounting principles generally accepted in Japan, and for such

internal control as management determines is necessary to enable the preparation of consolidated

financial statements that are free from material misstatements, whether due to fraud or error.

Auditor’s ResponsibilityOur responsibility is to express an opinion on these consolidated financial statements based on our

audit. We conducted our audit in accordance with auditing standards generally accepted in Japan.

Those standards require that we plan and perform the audit to obtain reasonable assurance about

whether the consolidated financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and

disclosures in the consolidated financial statements. The procedures selected depend on the

auditor's judgment, including the assessment of the risks of material misstatement of the

consolidated financial statements, whether due to fraud or error. In making those risk

assessments, the auditor considers internal control relevant to the entity's preparation and fair

presentation of the consolidated financial statements in order to design audit procedures that are

appropriate in the circumstances, but not for the purpose of expressing an opinion on the

effectiveness of the entity's internal control. An audit also includes evaluating the appropriateness

of accounting policies used and the reasonableness of accounting estimates made by

management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis

for our audit opinion.

OpinionIn our opinion, the consolidated financial statements referred to above present fairly, in all material

respects, the consolidated financial position of Panasonic Information Systems Co., Ltd. and

subsidiaries as of March 31, 2014, and the consolidated results of their operations and their cash

flows for the year then ended in accordance with accounting principles generally accepted in

Japan.

Convenience TranslationOur audit also comprehended the translation of Japanese yen amounts into U.S. dollar amounts

and, in our opinion, such translation has been made in accordance with the basis stated in Note 1

to the consolidated financial statements. Such U.S. dollar amounts are presented solely for the

convenience of readers outside Japan.

To the Board of Directors of Panasonic Information Systems Co., Ltd.:

June 18, 2014

As of March 31, 2014

80

60

40

20

0

Breakdown of Shareholders by Number of Shares Held

Major Shareholders

Stock Price Chart and Volume Trend

Full-Year Dividends per Share

Stock Information

7.12%

6,787

609

62

257

85

61

58

41

41

40

63.69

5.71

0.58

2.41

0.79

0.57

0.54

0.38

0.38

0.38

759,195

ShareholderNumber of

Shares(Thousands)

OwnershipRatio

(%)

1 - 999

7.50% 799,4231,000 - 4,999

2.70% 287,2825,000 - 9,999

10.84% 1,154,70010,000 - 99,999

71.84% 7,655,400More than 100,000

Breakdown of Shareholders by Investor Type

3.94% 419,700 (21 persons)

Financial Institutions

0.56% 59,033 (24 persons)

66.62% 7,099,200 (51 persons)

10.66% 1,136,247 (93 persons)

18.22% 1,941,820 (3,719 persons)

Financial Instruments Firms

Other Corporations

Foreign Corporations, Other

Individuals, Others

BBH FOR FIDELITY LOW-PRICED STOCK FUND(PRINCIPAL ALL SECTOR SUBPORTFOLIO)

CREDIT SUISSE SECURITIES (EUROPE) LIMITEDPB OMNIBUS CLIENT ACCOUNT

Panasonic Corporation

Employees Stock Ownership Association

Japan Trustee Services Bank, Ltd. (Trust Account)

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

JP MORGAN CHASE BANK 385093

Japan Trustee Services Bank, Ltd. (Trust Account 5)



Note: In addition to the above, there are 372 shares of treasury stock. *Four-month irregular accounting year

(Yen)

75.0

65.0 65.065.065.065.065.0

55.055.0

10.0

’05 3*

’06 3

’07 3

’08 3

’09 3

’10 3

’11 3

’12 3

’13 3

’143

(Plan)

600,000

400,000

200,000

0

3,000

2,000

1,000

0

15,000

10,000

5,000

0

(Yen) (Yen)Stock Price (Left)

(Shares)

’09/1 ’10/1 ’11/1 ’12/1 ’13/1 ’14/1

Stock Trading Volume

65.0

’153

Total Shares Authorized

Total Shares Issued

Number of Shareholders

Stock Exchange Listing

Securities Code

Stock Trading Unit

Regular Shareholders’ Meeting

Transfer Agent

40,000,000 Shares

10,656,000 Shares

3,908

Tokyo Stock Exchange, First Section

4283

100 Shares

June of each year

Sumitomo Mitsui Trust Bank, Limited

(% / Number of Shares Held)

(% / Number of Shares Held)

Nikkei Average (Right)




Corporate History

OurPhilosophy

Listen, think andcreate solutions

y

CorporateVision

ActionGuideline

PhCorporate

Slogan

2012 Change in corporate name to

Panasonic Information Systems Co., Ltd.

2009 Establishment of the Osaka Central Data Center

2008 Change in corporate name to

Panasonic Electric Works Information Systems Co., Ltd.

2004

2003 Listing on the Second Section of the Tokyo Stock Exchange

2001 Listing of the stock on the over-the-counter market (JASDAQ)

1999 Establishment of

Matsushita Electric Works Information Systems Co., Ltd.

1961 Establishment of an information system department

at the former Matsushita Electric Works, Ltd.

The Company was established in 1999, when the

information system department of the former

Matsushita Electric Works, Ltd., became

independent. Based on the technical expertise

acquired for over 50 years beginning with our

time as part of Matsushita Electric Works, we

offer total solutions for information systems from

planning and design 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.

For the creation of information systems embedded with computers

to be unnoticed by people

To strive for the creation of new values, by pursuing user-friendliness

and accomplishing high-tech mindset, driven by challenging spirits and full

speed of actions




Listing on the First Section of the Tokyo Stock Exchange

annual report 2014 · profile financial highlights message from ... 12.5% 24.7% 15.0% 62.5%...

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