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Annual Report 2007

For the year ended March 31, 2007

Global
On the Road to

Excellence
Shareholders

Environment

Employees

Global
Excellence Business
Partners

Communities Investors

Customers

Since its establishment in 1918, Matsushita Electric Industrial


Co., Ltd. has been guided by its basic management philosophy,
which states that the mission of an enterprise is to contribute to
the progress and development of society and the wellbeing of
people worldwide through its business activities.
Matsushita is aiming to achieve global excellence. For us,
that means earning and retaining the support of stakeholders
worldwide by sustaining growth through continued innovation
and ensuring sound business activities on a global basis.
In line with its twin corporate vision of contributing to
realizing a ubiquitous networking society and
coexistence with the global environment, Matsushita
will strive for global excellence by working to drive a
sustained increase in corporate value.
Contents
2 Financial Highlights

4 To Our Stakeholders

6 Interview with the President

Special Feature — Overview of the New Mid-term Management Plan: GP3


13
Generate Steady Growth with Profitability

22 Business at a Glance

24 Business Review and Strategies

24 32 38 43 45 45
AVC Home Components MEW and JVC Other
Networks Appliances and Devices PanaHome

46 R&D and Intellectual Property


48 Corporate Governance
55 Corporate Social Responsibility
58 Directors, Corporate Auditors and Executive Officers
59 Risk Factors
63 Financial Section

118 Principal Production Divisions and Subsidiaries


118 Investor Information

Disclaimer Regarding Forward-Looking Statements


This Annual Report includes forward-looking statements (within the meaning of Section rate fluctuations, notably between the yen, the U.S. dollar, the euro, the Chinese yuan,
27A of the U.S. Securities Act of 1933 and Section 21E of the U.S. Securities Exchange Asian currencies and other currencies in which the Matsushita Group operates businesses,
Act of 1934) about Matsushita and its Group companies (the Matsushita Group). To the or in which assets and liabilities of the Matsushita Group are denominated; the ability of the
extent that statements in this Annual Report do not relate to historical or current facts, they Matsushita Group to respond to rapid technological changes and changing consumer
constitute forward-looking statements. These forward-looking statements are based on preferences with timely and cost-effective introductions of new products in markets that
the current assumptions and beliefs of the Matsushita Group in light of the information are highly competitive in terms of both price and technology; the ability of the Matsushita
currently available to it, and involve known and unknown risks, uncertainties and other Group to achieve its business objectives through joint ventures and other collaborative
factors. Such risks, uncertainties and other factors may cause the Matsushita Group’s agreements with other companies; the ability of the Matsushita Group to maintain
actual results, performance, achievements or financial position to be materially different competitive strength in many product and geographical areas; the possibility of incurring
from any future results, performance, achievements or financial position expressed or expenses resulting from any defects in products or services of the Matsushita Group; the
implied by these forward-looking statements. Matsushita undertakes no obligation to possibility that the Matsushita Group may face intellectual property infringement claims by
publicly update any forward-looking statements after the date of this Annual Report. third parties; current and potential, direct and indirect restrictions imposed by other
Investors are advised to consult any further disclosures by Matsushita in its subsequent countries over trade, manufacturing, labor and operations; fluctuations in market prices of
filings with the U.S. Securities and Exchange Commission pursuant to the Securities securities and other assets in which the Matsushita Group has holdings or changes in
Exchange Act of 1934. valuation of long-lived assets, including property, plant and equipment and goodwill, and
The risks, uncertainties and other factors referred to above include, but are not limited deferred tax assets; future changes or revisions to accounting policies or accounting rules;
to, economic conditions, particularly consumer spending and corporate capital as well as natural disasters including earthquakes and other events that may negatively
expenditures in the United States, Europe, Japan, China and other Asian countries; impact business activities of the Matsushita Group. The factors listed above are not all-
volatility in demand for electronic equipment and components from business and industrial inclusive and further information is contained in Matsushita’s latest Annual Report on Form
customers, as well as consumers in many product and geographical markets; currency 20-F, which is on file with the U.S. Securities and Exchange Commission.

Matsushita Electric Industrial Co., Ltd. 2007 1


Financial Highlights
Matsushita Electric Industrial Co., Ltd. and Subsidiaries
Years ended March 31, 2007, 2006 and 2005

Millions of
U.S. dollars,
Millions of yen, Percentage of except per share
except per share information previous year information
2007 2006 2005 2007/2006 2007

Net sales .............................................. ¥9,108,170 ¥8,894,329 ¥8,713,636 102.4% $77,188

Income before income taxes ................ ¥ 439,144 ¥ 371,312 ¥ 246,913 118.3% 3,722

Net income .......................................... ¥ 217,185 ¥ 154,410 ¥ 58,481 140.7% 1,841

Net income per share:

Basic ................................................ ¥ 99.50 ¥ 69.48 ¥ 25.49 143.2% $ 0.84


Diluted .............................................. 99.50 69.48 25.49 143.2 0.84
Cash dividends per share ..................... 25.00 17.50 15.25 142.9 0.21

Total assets (at year-end) ..................... ¥7,896,958 ¥7,964,640 ¥8,056,881 99.2% $66,923

Stockholders’ equity ............................ 3,916,741 3,787,621 3,544,252 103.4 33,193

Capital investment ................................ ¥ 418,334 ¥ 345,819 ¥ 374,253 121.0% $ 3,545


R&D expenditures ................................ 578,087 564,781 615,524 102.4 4,899

Total employees (at year-end) .............. 328,645 334,402 334,752 98.3%

ROE ..................................................... 5.6% 4.2% 1.7%

Notes:
1. See Note 1 (n) to the consolidated financial statements with respect to the calculation of net income per share amounts.
2. Cash dividends per share reflect those paid during each fiscal year.
3. The figures for capital investment are for purchases of property, plant and equipment on an accrual basis, which reflects the effects of timing differences
between acquisition dates and payment dates.
4. U.S. dollar amounts are translated from yen at the rate of ¥118=U.S.$1, the approximate rate on the Tokyo Foreign Exchange Market on March 31, 2007.
5. Matsushita’s consolidated financial statements as of March 31, 2007 comprise the accounts of 653 consolidated companies, with 71 companies reflected by
the equity method.

2 Matsushita Electric Industrial Co., Ltd. 2007


Net Sales Income before Income Taxes & Net Income (Loss) &
Income before Income Taxes/ Net Income (Loss)/Sales Ratio
Sales Ratio

Billions of yen Billions of yen % Billions of yen %


10,000 500 5.0 240 2.4

200 2.0
8,000 400 4.0

160 1.6

6,000 300 3.0


120 1.2

80 0.8
4,000 200 2.0

40 0.4

2,000 100 1.0


0 0

0 0 0 –40 –0.4
2003 2004 2005 2006 2007 2003 2004 2005 2006 2007 2003 2004 2005 2006 2007
Income before Income Taxes Net Income (Loss)
Income before Income Taxes/Sales Ratio Net Income (Loss)/Sales Ratio

Stockholders’ Equity and ROE Capital Investment R&D Expenditures

Billions of yen % Billions of yen Billions of yen


4,000 8.0 500 800

3,000 6.0 400


600

2,000 4.0 300

400

1,000 2.0 200

200
0 0 100

–1,000 –2.0 0 0
2003 2004 2005 2006 2007 2003 2004 2005 2006 2007 2003 2004 2005 2006 2007
Stockholders’ Equity
ROE

Matsushita Electric Industrial Co., Ltd. 2007 3


To Our Stakeholders

The fiscal year, ended March 31, 2007 (fiscal 2007), was a key year that brought our three-year
management plan Leap Ahead 21, launched in fiscal 2005, to a close. Amid a challenging operating
environment characterized by surging raw materials prices and intensifying global competition, we
worked to reinforce our manufacturing capabilities in plasma TVs and other product categories. And we
actively invested in growth fields to cultivate new businesses that will drive future earnings. In parallel, we
focused on strengthening the Company’s operations by raising management efficiency in a range of
areas and by pursuing further cost reductions. As a result of these efforts, we achieved our Leap Ahead
21 goals for fiscal 2007—operating profit*1 to sales ratio of 5% or more and a positive Capital Cost
Management (CCM*2) index on a consolidated basis.

Fiscal 2008 is the first year of our new three-year management plan, GP3*3. The plan incorporates a
host of measures to accelerate the Company’s growth. In terms of V-products, which are the core of
our growth strategies, we are targeting sales of approximately ¥2 trillion across a total of 73 product
categories. In overseas businesses, we aim to grow sales in emerging markets as well as the U.S. and
Europe. We are already building a framework to increase sales in Russia, Brazil and India, and our strategy
is to put greater emphasis on cutting-edge products in these markets. Another goal of the GP3 plan is to
use Groupwide innovation activities to transform Matsushita into a manufacturing-oriented company—
one that combines all the business activities of the Group toward the launch of products, thereby con-
tributing to the creation of customer value. To achieve this, we will extend our most successful initiatives
to every corner of the Company to generate even greater benefits. At the same time, we will promote
wider collaboration across business fields and operating regions in order to reinforce product design
and quality, procurement, logistics, overseas sales and other areas of our operations.
Supported by these initiatives, we will launch Matsushita into a new phase of growth, aiming to
achieve sales of ¥10 trillion and ROE of 10% in fiscal 2010 by achieving steady growth with profitability.
We will also continue our ongoing initiatives to achieve global excellence.
In addition, Matsushita will take further steps to realize shareholder-oriented management in the
years ahead. Through the GP3 plan, we will increase corporate value, and at the same time, actively
return profits generated by the plan’s initiatives to all shareholders.
We will also continue to take all possible measures to ensure the quality and safety of our products.
Matsushita is committed to the idea that safety and quality, as the cornerstones of a manufacturing-
oriented company, must begin from the product design stage. We will thus strengthen ongoing efforts in
areas such as the analysis of product age-related degradation and user environments.

Thank you for your continued support.

June 2007

*1 For information about operating profit, see Note 4 on page 64.


*2 CCM is an indicator created by Matsushita to evaluate return on capital. A positive CCM indicates that the return on invested capital meets
the minimum return expected by capital markets.
*3 For more details on the GP3 plan, see pages 13 to 21.

4 Matsushita Electric Industrial Co., Ltd. 2007


Kunio Nakamura, Chairman Fumio Ohtsubo, President

Matsushita Electric Industrial Co., Ltd. 2007 5


Interview with the President

Question 1 ..........................
Fiscal 2007 was the final year of the mid-term manage-
ment plan Leap Ahead 21. What did Matsushita achieve
with this plan and what issues remain?

Answer..................................... During the term of the Leap Ahead 21 plan, we applied the finishing touches to
Matsushita’s business reorganization and restructuring. As a result, we achieved
our fiscal 2007 goals of an operating profit to sales ratio of 5% or more and a
positive Capital Cost Management (CCM) index on a consolidated basis.
In addition to these results, there were three major achievements of the Leap
Ahead 21 plan. First, we are now a leaner, more agile company. During the course
of the mid-term plan, we reduced total assets, used the Next Cell Production
System to cut factory inventories, and took advantage of IT innovations to reduce
product development and manufacturing lead times. We also implemented the
Cost Busters Project, a wide-ranging cost review that reduced Companywide
costs by more than ¥220 billion over the three years of the plan. The result of
these accomplishments is a more robust operating structure.

6 Matsushita Electric Industrial Co., Ltd. 2007


Second, we built strong business pillars to support the Company’s operations.
Here, we focused on reinforcing product competitiveness and especially V-
products—new products aimed at capturing the leading share in their respective
market categories. V-products include both finished products and devices, and
our new lineup in both these areas received strong market support, significantly
helping to boost Matsushita’s profitability.
Third, we promoted greater collaboration with Matsushita Electric Works, Ltd.
(MEW). By integrating sales and manufacturing functions, implementing a shared
brand strategy, and working together to enhance product lineups, we generated
synergies with MEW that resulted in a sales increase of more than ¥130 billion
over the two years from fiscal 2006 to fiscal 2007.
However, there are still issues we need to tackle. These include sustaining
growth, increasing the profitability of overseas businesses, raising the marginal
profit ratio, and eliminating major quality problems such as that experienced with
defects in certain FF (Forced-Flue)-type kerosene fan heaters. Realizing steady
growth in markets worldwide is also an important issue.

Question 2 .......................
Matsushita aims to achieve global excellence.
What does this mean in concrete terms?

Answer..................................... Matsushita aims to earn the support of all its stakeholders worldwide by sustain-
ing growth through continued innovation and ensuring sound business activities
on a global basis. This is what global excellence means at Matsushita. We have
set several specific targets to realize this vision: achieve at least ¥10 trillion in net
sales, with 60% or more of this figure generated overseas, an operating profit to
sales ratio of 10% or more, and return on equity (ROE), which enables a clear
comparison with companies worldwide, of at least 10%. We are also aiming to
ensure at least 30% of our products capture the top market share worldwide, as
well as gain a leading global reputation in terms of corporate social responsibility
(CSR) and a trusted brand.

Matsushita Electric Industrial Co., Ltd. 2007 7


Question 3 .......................
In January 2007, Matsushita announced its new three-
year management plan, GP3, starting in fiscal 2008.
Please summarize the plan and your own views about it.

Answer..................................... Through the GP3 plan, Matsushita will strengthen measures to accelerate growth.
The plan’s name is made up of three elements: Global Progress, evolving through
global sales expansion; Global Profit, enhancing profitability worldwide; and Global
Panasonic, building a globally trusted brand. These will be our overarching goals
during the course of the plan. We do not plan to achieve our objectives through
particularly ingenious means, rather we aim to generate steady growth with profit-
ability to put us in a position to challenge for global excellence by fiscal 2010. We
have set final-year targets for the plan of ¥10 trillion in sales and ROE of 10%.
The GP3 plan has three priority themes—double-digit growth in overseas
sales; four strategic businesses; and continuous selection and concentration.
First, we will aim for growth averaging at least 10% annually in overseas sales of
consumer products. In particular, we will reinforce initiatives in emerging markets.
Second, with regard to four strategic businesses, we will focus on our digital AV
business, automotive electronics business, businesses providing comfortable
living, and semiconductors and other devices businesses. Through collaboration
and vertical integration between these businesses, we will strive to maximize
Groupwide synergies, while making every effort to drive steady growth in each
business. Finally, under the third theme, we will concentrate management re-
sources on competitive and profitable business areas. Over the three years of the
plan, we intend to make capital investments of ¥1.5 trillion in projects such as a
fifth plasma display panel (PDP) plant in Japan. We have also earmarked ¥1.8
trillion for R&D investments, which will be focused on prioritized R&D themes and
the development of key devices such as semiconductors.
Moreover, in order to accelerate Groupwide innovation activities aimed at trans-
forming Matsushita into a manufacturing-oriented company, we established a
Corporate Division for Promoting “Manufacturing-oriented” Innovation on April 1,
2007, headed by myself. Matsushita defines a manufacturing-oriented company as
one that combines all the business activities of the Group toward the launch of prod-
ucts, thereby contributing to the creation of customer value. For example, in terms of
cost-cutting, a perennial theme for manufacturers, we have achieved varying levels of
success throughout the Group depending on the initiatives implemented at each
operating site. Going forward, by unifying these initiatives more effectively and draw-
ing on best practice, we expect to achieve substantial overall cost reductions. In order
to realize our growth strategies, it is essential that we implement qualitative manage-
ment reforms in pursuit of this vision of becoming a manufacturing-oriented company.

8 Matsushita Electric Industrial Co., Ltd. 2007


The GP3 plan sets targets of ¥10 trillion in sales and

Question 4 .......................
ROE of 10% for fiscal 2010. Why have you adopted
ROE instead of the operating profit to sales ratio used
in the past?

Answer..................................... During the Leap Ahead 21 plan, we put priority on the operating profit to sales
ratio as an indicator that shows how profitable a company is, excluding the
impact of business restructuring costs. Now, as we move into a new growth
phase with the GP3 plan, we have decided to use sales to measure growth, and
ROE to measure capital efficiency. ROE is an international performance bench-
mark used widely in capital markets. Under the GP3 plan, we aim to improve net
income, which is the final word in measuring performance, and further enhance
shareholder-oriented management.

Competition in the flat-panel TV market is increasingly

Question 5 .......................
intense. How then does Matsushita intend to grow its
business? Also, what is your outlook for prices and how
do you plan to raise profitability?

Answer..................................... In fiscal 2007, global demand for 37-inch or larger flat-panel TVs totaled approxi-
mately 20 million units. In fiscal 2010, this figure is expected to reach around 50
million units, split equally between plasma display and LCD models. Based on this
forecast, we are aiming to capture a 25% share of the global market for 37-inch
or larger flat-panel TVs in fiscal 2010. Matsushita plans to offer both plasma and
LCD models by using their respective advantages. However, in larger screen
models, we believe plasma TVs have the competitive edge in terms of cost and
other factors.
Matsushita is already one of the world’s biggest producers of PDPs. But we
plan to add to existing capacity with the construction of our fifth PDP plant in
Japan through total investment of ¥280 billion. We will begin construction in
November 2007 with mass production scheduled to start in May 2009. When
operating at full capacity, the plant will have a monthly output of 1 million units
based on 42-inch panels. Efficiency will also be improved with a manufacturing
process that yields more than ten 42-inch panels from a single sheet of glass,
the world’s highest yield.
In 42-inch flat-panel TVs, where competition with LCD TVs is the most
intense, prices in fiscal 2007 fell by around 30%. Although the pace of decline

Matsushita Electric Industrial Co., Ltd. 2007 9


should slow, we are projecting continuing price declines. In response, Matsushita
will strive to reduce costs at an even greater rate than the fall in prices to further
boost profitability. By accelerating the shift to larger-screen, full HD* models, and
creating a more user-friendly experience with products such as the VIERA Link,
which allows users to also control their DVD recorders, home theater systems,
and other equipment using a single remote control, we aim to offer more distinct,
high-value-added products that will stand firm against falling prices.

* Full HD: 2.07 million pixels (1,920 horizontal x 1,080 vertical pixels)

Question 6 .......................
Overseas sales growth is a priority theme in the GP3
plan. What are the main points of your overseas
growth strategy?

Answer..................................... The U.S. and Europe will remain significant overseas markets for Matsushita.
However, we also plan to focus on emerging markets like BRICs*, where further
expansion is forecast. I have toured the BRICs countries and other similar markets.
What struck me in particular was the rapid rise in the number of wealthier con-
sumers, who I believe offer the potential for explosive growth in demand at any
time. Not only that, many of these consumers want the latest products, so we
need to implement marketing strategies that target this demand by actively
launching cutting-edge products. In this context, we established a Russia Division,
India Coordination Department and Brazil Coordination Department in April 2007 to
boost sales in these markets. Instead of waiting for demand to materialize, we
plan to steal a march on our rivals by taking active steps to generate demand
with new products in new markets. We believe that this approach will ultimately
boost sales.

* BRICs stands for Brazil, Russia, India and China.

10 Matsushita Electric Industrial Co., Ltd. 2007


Collaboration between component and device and

Question 7 .......................
finished product divisions is one of Matsushita’s strengths.
What measures are you planning to implement in your
components and devices divisions in this regard?

Answer..................................... Matsushita has adopted a vertically integrated business model designed to


generate maximum synergies between component and device and finished product
divisions. Components and devices are the key to adding value to finished
products. It is vital therefore that these components incorporate more advanced
functions and are distinct. Leveraging the inherent advantage of having in-house
component and device divisions, we will strive to create products with high-
added-value by fusing a whole host of technologies covering materials, compo-
nents, devices and equipment. In particular, one of our greatest strengths is our
proprietary capability to develop and produce system LSIs, which are the deter-
mining factor in the competitiveness of digital products. For example, in the semi-
conductor business, we are incorporating our state-of-the-art technologies in
finished Matsushita products, thereby helping to create a more distinct product
lineup and contributing to growth. This approach, in parallel with efforts to boost
sales to external customers, is aimed at further raising profitability. In other com-
ponent and device divisions outside semiconductors, we are focusing on profit-
able business fields where we can capture high market shares and profitability.
In all these areas, we are targeting the leading global market share.

Question 8 .......................
Matsushita currently has net cash reserves of more than
¥1.4 trillion. How do you plan to use these funds and
what is your policy on returning profits to shareholders?

Answer..................................... Holding net cash allows us to make rapid decisions in response to changes in the
operating environment. While maintaining a certain level of funds, we plan to use
this cash as effectively as possible. In particular, in order to sustain Matsushita’s
continued development, it is essential that we actively invest in R&D and facilities.
We must also look at investments that will generate greater returns than in the
past. We intend to invest in strengthening core businesses such as PDPs and
semiconductors, and in acquiring intellectual property and other assets to support
our operations.

Matsushita Electric Industrial Co., Ltd. 2007 11


Higher return on capital and proactive return to shareholders Through execution of the GP3 plan, we will
through dividends and share repurchases seek to increase corporate value, and at the
same time, actively return profits generated by
Aim at stable and continuous dividend growth targeting
the plan’s initiatives to all shareholders as part
Dividends a consolidated dividend payout of approx. 30–40%
a Improvement of dividends on equity of our efforts to realize shareholder-oriented
management. Matsushita aims to pay stable

Continue agile share repurchasing in line with


and continuous increases in cash dividends.
Share
repurchases
growth strategy The Company plans to raise cash dividends per
a Improvement of shareholder value per share share for fiscal 2008 to ¥35, up from ¥30 per
share in fiscal 2007. The Company will also
continue to actively buy back its own shares. Matsushita plans to repurchase
from the market a maximum of 50 million shares, up to ¥100 billion, from May
2007 to late March 2008.
The ESV* Plan, which sets out rules to allow shareholders to decide whether
large-scale purchases of the Company’s shares should be accepted or not, will
also remain in place in fiscal 2008.

*ESV stands for Enhancement of Shareholder Value.

Question 9 .......................
Corporate social responsibility (CSR) is increasingly
important. What is your basic approach to CSR?

Answer..................................... Matsushita’s unwavering management philosophy of contributing to society as a


public entity has guided its business activities since the Company’s founding.
Matsushita considers implementing this management philosophy to be the core
essence of CSR. In this context, we put particular emphasis on promoting
environmental management, enforcing compliance and reinforcing information
security. Building on this, I want to ensure all stakeholders feel and believe in our
corporate conscience. Simply adhering to rules and regulations is not enough—
we need to demonstrate that Matsushita is a company that can make careful
judgments on how it should act based on how beneficial those actions are to
society as a whole.

12 Matsushita Electric Industrial Co., Ltd. 2007


Special Feature
Overview of the New Mid-term Management Plan: GP3

Global
Generate Steady Growth With Profitability
With Leap Ahead 21, Global running until fiscal 2010, the

a
Matsushita’s previous mid-term
Global Profit Company will strive to generate
management plan completed steady growth with profitability
Progress
in fiscal 2007, the Company to put Matsushita in a position
put in place the foundations to
support sustained growth. GP3 Plan to challenge for global excel-
lence. In this feature section,
Now, through the GP3 Plan, we highlight the plan’s core
initiated on April 1, 2007 and mid-term growth strategies.
a

Global
Panasonic

Global Excellence

Put Matsushita in a position


to challenge for global excellence
Fiscal
2010
Fiscal 2010 Targets
Net sales of ¥10 trillion, ROE of 10%
Mid-term growth strategies

Double-digit growth in overseas sales GP3 Plan


Four strategic businesses
Continuous selection and concentration
Fiscal
2007
Under the Leap Ahead 21 plan, the Matsushita Group set minimum targets of an
operating profit to sales ratio of 5% or more and a positive CCM index to stay
competitive globally. By implementing a whole range of initiatives, the Company
achieved these goals.

Matsushita Electric Industrial Co., Ltd. 2007 13


Double-digit Growth in Overseas Sales
Accelerating business development in emerging markets
Aiming to achieve growth averaging at least 10% annually in overseas sales of consumer products,
Matsushita will conduct local-oriented marketing tailored to regional characteristics, improve product
competitiveness through collaboration between production and sales divisions, and strengthen brands
based on product competitiveness. Based on these approaches, Matsushita will accelerate business
development overseas, particularly in emerging markets.

Marketing tailored to regional characteristics to grow its digital AV products business, which includes flat-
In North America and Europe, markets where there is strong panel TVs and digital cameras, by targeting the growing
interest in the latest technologies and products, Matsushita number of wealthier consumers.
aims to raise sales by ¥310 billion during the 3 years of the In the BRICs countries, Vietnam and other emerging
plan. Matsushita will strengthen ties with leading volume markets, which Matsushita has positioned as strategic
retailers to boost sales, mainly of flat-panel TVs and other markets to boost overseas sales, the Company is targeting an
digital AV products. Specifically, the Company will expand and increase in sales of consumer products of ¥200 billion over 3
strengthen XCS* activities in North America and reinforce its years by actively developing its business.
sales framework in Eastern Europe.
In growth markets like China and other parts of Asia, the
* Extreme Customer Satisfaction: high-quality services designed to
world’s most populous region, the Company plans to increase
make Matsushita products stand out in the marketplace. For ex-
sales by ¥340 billion during the plan. Concrete steps will ample, operators at our plasma TV call center in Virginia, U.S. (photo)
include continuing to actively target key markets for washing not only provide after-sales services, but also offer advice and re-
spond to queries from potential customers.
machines, refrigerators and other white goods, and beauty
and health-related home appliances. The Company also aims

Initiatives in Emerging Markets

Russia and Other CIS Countries


• Expand sales to volume retailers
• Focus on flat panel TVs and
digital cameras

China
• Overhaul sales framework and
strengthen product lineup
• Develop V-products that
reflect feedback from Chinese
consumers

India Vietnam Brazil


• Target wealthier customers • Roll out a strategy targeting • Increase sales of digital AV
with an initial focus on flat- six main urban centers products in line with expan-
panel TVs and air conditioners • Launch products tailored to sion in local production
the local market
• Strengthen brand power

14 Matsushita Electric Industrial Co., Ltd. 2007


The Global Plasma Roadshow (Left: Florida, U.S.; Right: Singapore)

Improving product competitiveness through


collaboration between production and sales
Manufacturing That Draws on Customer Feedback
divisions
To continue to grow our business on a global scale, it is vital
that we supply products with local added-value designed for the Sales divisions
living environments and lifestyles of each region. In products like
washing machines and refrigerators that play important every- North Latin
America America Europe Asia China CIS •••

day roles in the home, Matsushita will leverage energy- and


water-saving technologies developed for the domestic market AVC
and reflect feedback from local customers in new products to
Manufacturing divisions

significantly boost sales. Fixed-line


communications
Reflect customer feedback
Automotive from each country and region
Strengthening brands based on product electronics
competitiveness
Home
The Company plans to expand its Global Plasma Roadshow, appliances
which is a product display event held over a few days in major Refrigeration,
cities in shopping malls, stations and other sites that attract air conditioning
and heating Strengthen
large numbers of people. Highlighting Matsushita’s digital AV product lineup
Components
products centered on plasma TVs, the event allows ordinary and devices
customers to touch and experience its products first-hand.
• • •

The roadshow has already toured the U.S. and France, and
we plan to take it to the world’s main urban centers, including
around 80 cities in fiscal 2008. This will allow Matsushita to
highlight the advanced capabilities of its digital AV products Reinforce business infrastructure
and reinforce its brands.
Additionally, with an eye on a potential surge in demand in
the BRICs countries, Vietnam and other emerging markets, the
Company plans to aggressively lead the development of new
markets to strengthen its brands in the years ahead.

Matsushita Electric Industrial Co., Ltd. 2007 15


Four Strategic Businesses
Maximizing Group synergies to drive growth
Matsushita has selected four strategic businesses to drive growth for the entire Matsushita Group. The
Company has named them the ABCD Quartet: Digital AV Networks, Car Electronics, Appliance Solutions and
Black Box Devices. Through collaboration and vertical integration among these businesses, Matsushita will
strive to maximize Groupwide synergies, while making every effort to drive steady growth with profitability in
each business.

Digital AV Networks
Collaboration between Digital AV business Collaboration between
products and solutions Focus on five strategic products, products and solutions
including flat-panel TVs, to drive growth

Appliance Solutions More distinct products


Car Electronics
Businesses providing with black box devices Automotive electronics business
comfortable living Contribute to the creation of
Offer total solutions for homes automobiles and a motoring society
and other buildings that are both safe and inspiring

Increasing sales of
More distinct products components and devices
with black box devices Black Box Devices Improving quality of
automotive electronics
Semiconductors/components
and devices business
Increase the sales ratio of
globally leading devices

16 Matsushita Electric Industrial Co., Ltd. 2007


Digital AV Networks
Digital AV business
Focus on five strategic products,
including flat-panel TVs, to drive growth

Matsushita has selected five strategic product categories in its global market in fiscal 2010 to establish Matsushita as a major
digital AV business: plasma TVs, LCD TVs, digital cameras, camera manufacturer. To achieve this, the Company will ex-
Blu-ray (BD) recorders and drives, and HD camcorders. pand its product lineups, including SLR cameras, and leverage
Demand for flat-panel TVs is expanding worldwide. The its black box technologies to reinforce its key components and
Company plans to tap into this demand by highlighting the devices manufactured in-house.
strengths of its plasma TVs—superior moving image response Matsushita’s HD camcorders are compact, lightweight and
and picture contrast—while working to significantly improve sturdy, and also offer excellent picture quality, while its BD re-
power consumption and other areas of performance. By corders and drives incorporate advanced technologies and are
enhancing cost competitiveness and image resolution, cost-competitive. Using these strengths, the Company plans to
Matsushita will offer a wider range of full HD products. Our capture global market shares for these products in fiscal 2010
goal is to capture 25% of the global market for 37-inch or of at least 40% and 35%, respectively, as it looks to grow these
larger flat-panel TVs in fiscal 2010. products into the third and fourth key businesses after flat-panel
In digital cameras, the Company aims to win 15% of the TVs and digital cameras in its digital AV business.

Five Strategic Products to Drive Growth


Matsushita provides networkable products Sales Target
centered on VIERA flat-panel TVs
¥1.7 trillion

¥1 trillion

Flat-panel
TVs

Plasma TVs +¥700 billion

LCD TVs
Fiscal Fiscal
Digital cameras 2007 2010
HD camcorders
BD recorders/drives
Digital cameras
LCD TVs
BD recorders/drives Plasma TVs
HD camcorders

Matsushita Electric Industrial Co., Ltd. 2007 17


Car Electronics
Automotive electronics business
Contribute to the creation of automobiles and a motoring society
that are both safe and inspiring

Drawing on the Matsushita Group’s wide range of advanced The environment and energy
technologies from digital AV equipment to key devices, and By providing Electronic Toll Collection (ETC) systems, the
focusing on the themes of automotive multimedia, the environ- Company helps to relieve congestion at toll booths, thereby
ment and energy, and safety and security, Matsushita will reducing vehicular emissions of CO2 and NOX. And by devel-
continue to contribute to the creation of automobiles and a oping fuel cells and electric double layer capacitors for hybrid
motoring society that are both safe and inspiring through its vehicles and providing more compact and lightweight devices,
outstanding technologies and meticulous approach to the Company will help to boost fuel efficiency. In these and
manufacturing. other ways, Matsushita will contribute to the realization of a
Automotive multimedia motoring society that can coexist with the global environment.
By leveraging Group-wide digital AV technologies, the Company Safety and security
will develop comfortable, convenient and easy-to-use prod- The Company will play a key role in making motoring more
ucts such as car audio equipment, car navigation systems and comfortable for customers. For example, Matsushita’s com-
rear-seat entertainment systems. Matsushita’s aim is to offer pact rear-view cameras give drivers better visibility when
more comfortable car interior spaces. reversing, while its automotive sensors support trouble-free
driving. The Company will also actively participate in efforts to
realize a society with Intelligent Transport Systems (ITS).

Three Business Fields


Sales Target

Automotive multimedia
Leverage Group-wide strengths ¥950 billion

¥750 billion

+¥200 billion

Environment and energy Safety and security


Use ETC and compact, lightweight Utilize sensor and camera technologies
technologies

Fiscal Fiscal
2007 2010
Automotive multimedia
Safety and security
Environment and energy

18 Matsushita Electric Industrial Co., Ltd. 2007


Appliance Solutions
Businesses providing comfortable living
Offer total solutions for homes and other buildings

By marshalling the collective strengths of the entire Matsushita lighting. In security for homes and offices, an area expected to
Group, the Company aims to propose more comfortable life- see growth, Matsushita will reinforce product and cost com-
styles by supplying various new equipment and systems tai- petitiveness. To develop this total solutions approach, the
lored to living environments. Company has set up a cross-Group project that will reinforce
In addition to the functional value of individual products, businesses providing comfortable living. This project will prima-
Matsushita will add value to lifestyles and living spaces based on rily focus on encouraging greater cooperation between pro-
collaboration between a wide range of products. Specifically, duction and sales divisions, combining technology assets, and
the Company will offer total solutions for homes and other boosting solution proposal capabilities.
buildings by bringing together equipment from diverse fields Through these initiatives, the Company aims to achieve
such as home appliances, air conditioning and purification, sales of approximately ¥3 trillion in fiscal 2010 in businesses
beauty and health, security, household facilities, AVC and providing comfortable living.

Add Value to Functions, Lifestyles and Living Spaces


Sales Target

Sales increase
through synergies ¥3 trillion
+¥180 billion
¥2.6 trillion

Add value
Competitive to functions
individual products

Each business field


+¥240 billion

Add value to
living spaces

New value creation


through product Fiscal Fiscal
combinations 2007 2010

Sales increase through synergies


Add value to Each business field
lifestyles

Matsushita Electric Industrial Co., Ltd. 2007 19


Black Box Devices
Semiconductors/components and devices business
Increase the sales ratio of globally leading devices

In the semiconductor business, Matsushita will incorporate key In addition, Matsushita will reinforce its solution capabilities
devices founded on cutting-edge technologies into its finished to increase sales to customers outside the Matsushita Group
products to enhance distinctiveness and drive growth in its in order to ensure growth and boost profits in the semiconduc-
finished product divisions. tor business.
In October 2005, Matsushita became the first company In other device businesses, the Company will focus on
in the industry to begin full-scale mass production of 65- areas where it already has high market shares and margins,
nanometer process system LSIs using 300mm wafers. Now aiming to capture the leading global market positions in indi-
the Company plans to enhance its ability to respond to the vidual device fields.
increasing functionality and cost competitiveness of system Based on these initiatives, Matsushita is targeting a com-
LSIs by, among other steps, accelerating the shift to 45- bined increase in sales of around ¥240 billion in the semicon-
nanometer processes and raising the performance of its Inte- ductor and other device businesses over the next 3 years.
grated Platform, which is designed to meet needs for more
networked products.

A Strong Lineup of Components and Devices to Drive Growth


Sales Target

Supply cutting-edge system


LSIs for finished products
¥1.92 trillion

¥1.68 trillion

ALIVH*

Chip tuners Gyrosensors

Specialty polymer aluminum


electrolytic capacitors Light touch switches
+¥240 billion
Focus on industries and
Capacitors for businesses where Matsushita
hybrid vehicles Car speakers
has a competitive edge
Fiscal 2010 Target:
Sales ratio of 50% for devices Fiscal Fiscal
Lithium-ion Polygon mirror-scanner 2007 2010
batteries with No. 1 market shares motors
Fan motors for compact
Narrow pitch connectors Semiconductors
air conditioners
Other devices
Electronic ballast
* Any Layer Inner Via Hole;
high-density printed circuit boards

20 Matsushita Electric Industrial Co., Ltd. 2007


Continuous Selection and Concentration
Concentrate resources on competitive and profitable business areas
Matsushita engages in a wide range of businesses. In order to achieve global excellence, the Company has
to realize steady growth with profitability in each of these businesses. To do this, Matsushita will better
allocate its management resources such as personnel, funds and facilities to businesses where it is com-
petitive and can generate profits.
As strategic investments to drive growth, Matsushita will invest in facilities and equipment, and research
and development (R&D). The Company will also invest to save time in business development.

Sustained capital investment Sustained investment in R&D Investment to save time in


business development
¥1.5 trillion over 3 years ¥1.8 trillion over 3 years
Where necessary, Matsushita plans
Matsushita will aggressively invest in Over the next 3 years, Matsushita
to invest in acquiring technology and
high-growth businesses and in plans to invest approximately ¥1.8
intellectual property from outside the
improving productivity. For example, trillion in advanced priority themes,
Group, and in some cases, M&As to
to further upgrade the plasma TV key devices centered on semicon-
complement existing businesses.
production framework, the Company ductors, and other areas. Going
These investments will save the
will build its fifth domestic PDP plant, forward, the Company intends to
Company time in developing busi-
which will be the world’s largest. This step up R&D activities as part of its
nesses, thereby accelerating growth.
will be part of an overall capital efforts to maintain growth.
investment program totaling approxi-
mately ¥1.5 trillion over 3 years.

Matsushita’s Fifth Domestic PDP Plant


To respond to rapidly rising global demand for large-screen flat-
panel TVs, Matsushita plans to construct its fifth domestic PDP Third domestic
plant in Amagasaki City, Hyogo Prefecture. The new plant will be PDP plant
located on land adjacent to the existing third and fourth domestic
PDP plants. With investment of approximately ¥280 billion, con-
struction will begin in November 2007 and the plant is scheduled
to become operational in May 2009. The plant will be capable of
producing 1 million units (based on 42-inch panels) a month when
fully operational. This will make it the largest facility of its type
anywhere in the world.
The plant will also boast higher productivity: by further improv-
ing Matsushita’s unique PDP processing technologies and manu-
Fourth domestic
facturing systems, and adopting the latest production equipment,
PDP plant
the plant will be capable of producing more than ten PDP panels
(based on 42-inch panels) from one sheet of glass, the world’s
largest number of panels per sheet.

Matsushita Electric Industrial Co., Ltd. 2007 21


Business at a Glance

AVC HOME COMPONENTS


NETWORKS APPLIANCES 12% AND DEVICES 13%

38%

Percentage of Percentage of Percentage of


Fiscal 2007 Sales Fiscal 2007 Sales Fiscal 2007 Sales

Business Domain Companies and Business Domain Companies and Business Domain Companies and
Group Companies (as of March 31, 2007) Group Companies (as of March 31, 2007) Group Companies (as of March 31, 2007)

Panasonic AVC Networks Company Home Appliances Group Semiconductor Company


Panasonic Communications Co., Ltd. Matsushita Home Appliances Company Panasonic Electronic Devices Co., Ltd.
Panasonic Mobile Communications Co., Ltd. Matsushita Refrigeration Company Matsushita Battery Industrial Co., Ltd.
Panasonic Automotive Systems Company Healthcare Business Company Motor Company
Panasonic System Solutions Company Lighting Company Others
Panasonic Shikoku Electronics Co., Ltd. Matsushita Ecology Systems Co., Ltd.

Main Products Main Products Main Products


Plasma, LCD and CRT TVs, DVD recorders/players, Refrigerators, room air conditioners, washing Semiconductors, general components (capacitors,
VCRs, camcorders, digital cameras, compact disc machines, clothes dryers, vacuum cleaners, modules, circuit boards, power supply and
(CD), Mini Disc (MD) and Secure Digital (SD) players, electric irons, microwave ovens, rice cookers, inductive products, circuit components, electro-
other personal and home audio equipment, SD other cooking appliances, dish washer/dryers, mechanical components, speakers, etc.) electric
Memory Cards and other recordable media, optical electric fans, air purifiers, electric heating motors, batteries, etc.
pickup and other electro-optic devices, PCs, optical equipment, electric hot water supply equipment,
disc drives, copiers, printers, telephones, mobile sanitary equipment, healthcare equipment, electric
phones, facsimile equipment, broadcast- and lamps, ventilation and air-conditioning equipment,
business-use AV equipment, communications car air conditioners, compressors, vending
network-related equipment, traffic-related systems, machines, medical equipment, etc.
car AVC equipment, etc.

(Years ended March 31)


Sales Sales Sales
Trillions of yen Trillions of yen Trillions of yen
4 4 4

3 3 3

2 2 2

1 1 1

0 0 0
2003 2004 2005 2006 2007 2003 2004 2005 2006 2007 2003 2004 2005 2006 2007

Segment Profit Segment Profit Segment Profit


Billions of yen % Billions of yen % Billions of yen %
210 Profit/sales ratio 9 210 Profit/sales ratio 9 210 Profit/sales ratio 9

140 6 140 6 140 6

70 3 70 3 70 3

0 0 0 0 0 0

–70 –3 –70 –3 –70 –3


2003 2004 2005 2006 2007 2003 2004 2005 2006 2007 2003 2004 2005 2006 2007

Notes 1. Under the collaboration with MEW, the Company reorganized business and sales channels in such areas as electrical construction materials, building equipment and home appliances. Accordingly sales
results for fiscal 2005 for the Home Appliances and MEW and PanaHome categories have been reclassified to conform with fiscal 2006 sales results for those product categories.
2. Sales composition for each segment includes intersegment transactions.
3. The Healthcare Business Company was integrated with Panasonic Shikoku Electronics Co., Ltd. on April 1, 2007.

22 Matsushita Electric Industrial Co., Ltd. 2007


MEW AND JVC OTHER
PANAHOME 6%
14%
17%

Percentage of Percentage of Percentage of


Fiscal 2007 Sales Fiscal 2007 Sales Fiscal 2007 Sales

Business Domain Companies and Business Domain Companies and Business Domain Companies and
Group Companies (as of March 31, 2007) Group Companies (as of March 31, 2007) Group Companies (as of March 31, 2007)

Matsushita Electric Works, Ltd. Victor Company of Japan, Ltd. Panasonic Factory Solutions Co., Ltd.
PanaHome Corporation Matsushita Welding Systems Co., Ltd.
Others

Main Products Main Products Main Products


Lighting fixtures, wiring devices, distribution LCD, rear projection and CRT TVs, VCRs, Electronic-components-mounting machines,
panelboards, personal-care products, health camcorders, DVD recorders/players, CD/DVD/MD industrial robots, welding equipment, bicycles,
enhancing products, water-related products, audio systems and other audio equipment, car AV imported materials and components, etc.
modular kitchen systems, interior furnishing equipment, business-use AV systems, motors and
materials, exterior finishing materials, electronic other components for precision equipment,
and plastic materials, automation controls, recordable media, AV software for DVD, CD and
detached housing, rental apartment housing, video tapes, AV furniture, etc.
medical and nursing care facilities, home
remodeling, residential real estate, etc.

Sales Sales Sales


Trillions of yen Trillions of yen Trillions of yen
4 4 4

3 3 3

2 2 2

1 1 1

0 0 0
2003 2004 2005 2006 2007 2003 2004 2005 2006 2007 2003 2004 2005 2006 2007

Segment Profit Segment Profit (Loss) Segment Profit


Billions of yen % Billions of yen % Billions of yen %
210 Profit/sales ratio 9 210 Profit/sales ratio 9 210 Profit/sales ratio 9

140 6 140 6 140 6

70 3 70 3 70 3

0 0 0 0 0 0

–70 –3 –70 –3 –70 –3


2003 2004 2005 2006 2007 2003 2004 2005 2006 2007 2003 2004 2005 2006 2007

Matsushita Electric Industrial Co., Ltd. 2007 23


Business Review and Strategies

AVC NETWORKS
Incorporating Matsushita’s cutting-edge technologies, AVC Networks provides products, software, ser-
vices and solutions that contribute to the realization of a ubiquitous networking society. In fiscal 2007,
sales of digital AV products such as plasma TVs and digital cameras increased significantly thanks to a
vertical integrated business model that enhances product and cost competitiveness through the in-house
manufacturing of key components and devices. In information and communications equipment, although
sales of mobile phones remained sluggish, increased sales were recorded in automotive electronics. The
Company also implemented initiatives to strengthen its home networks business and security-related
systems business.
For the future, Matsushita will leverage core strengths in digital AV technologies to pursue enhanced
functionality, convenience and ease of use, with the goal of delivering products, services and systems that
contribute to the realization of a ubiquitous networking society.

24 Matsushita Electric Industrial Co., Ltd. 2007


VIERA Link*
Matsushita has launched the VIERA Link, which
allows users to control a variety of AV equipment,
based around flat-panel VIERA TVs, with a single
remote control. With the VIERA Link, the Company
offers solutions that enable people to enjoy
audiovisual experiences more easily.

* In the U.S., Canada and some other regions, this


function is sometimes called EZ-Sync.

Matsushita Electric Industrial Co., Ltd. 2007 25


A full HD plasma TV that realizes excellent
picture quality and is easy to use

AVC Business
In the AVC business, Matsushita is
currently promoting its “3D” value chain
strategy, which encompasses digital TV
(DTV), DVD and SD Memory Card
businesses. Based on this strategy, the
Company is working to expand its AVC
business globally by generating synergies
in technologies and products.
In fiscal 2007, Matsushita strengthened its lineup of plant came fully on stream in June 2006, realizing a global
products and led the industry in making AV equipment monthly production capacity of 460,000 units (based on 42-
easier to use with a function called the VIERA Link, centered inch panels). In order to meet rapidly expanding worldwide
on flat-panel VIERA TVs. In addition to using its existing SD demand for PDPs, Matsushita started operation of its fourth
Memory Card as a bridge media for music as well as still domestic PDP plant in June 2007, ahead of schedule. The
and moving images, Matsushita is proposing new ways of Company plans to begin construction of its fifth plant the
using AV equipment and providing new value by promoting following November. As a result, Matsushita will further
enhanced networking of equipment. increase its PDP production capacity, already one of the
Regarding flat-panel TVs, where the trend is toward largest in the world.
larger and higher-definition screens amid a global shift to In liquid crystal display (LCD) TVs, products which
digital broadcasting, the Company recorded a significant feature IPS*2 technology to realize vivid color even from a
increase in sales, particularly of plasma TVs. With the launch wide angle, have been well received in markets worldwide
of its 103-inch model, the world’s largest*1, and other full due to their high picture quality and performance. This
HD compatible products in Japan and overseas, Matsushita helped the Company to capture around 20% of the domes-
created a more extensive lineup. In addition, the Company tic market for LCD TVs in the 26- to 32-inch range.
offered more distinct high-value-added functions creating a Looking forward, the Company plans to expand its flat-
more user-friendly experience with products such as the panel TV business further with the aim of achieving a global
VIERA Link. These initiatives helped Matsushita to maintain market share of 25% in 37-inch or larger flat-panel TVs in
the leading market share in plasma TVs in Japan, the United fiscal 2010.
States and Europe in fiscal 2007. In terms of plasma display
panel (PDP) production, the Company’s third domestic PDP *1 As of July 19, 2006; Matsushita estimate.
*2 In-Plane-Switching mode system utilizes horizontally oriented liquid crystal
molecules to provide for wider viewing angles.

26 Matsushita Electric Industrial Co., Ltd. 2007


The LUMIX series of digital cameras including
compact models with a 28mm wide angle lens
and a wide range of functions

An HD LCD TV featuring IPS technology

An HD BD recorder with an internal HDD

The LUMIX series of digital cameras steadily increased Sales of the DIGA series of DVD recorders, particularly
market share. This reflected the introduction, ahead of other HD-compatible models in the domestic market, were strong
companies, of models featuring an Optical Image Stabilizer, amid rising demand for high-quality video recording due to
and the effective use of Matsushita’s in-house key device the spread of digital HD broadcasting. The Company
manufacturing strengths to create more compact cameras introduced Blu-ray disc (BD) players in the U.S., Europe
with even higher picture quality. In fiscal 2007, cameras and other markets in September 2006, and BD recorders
featuring a 28mm wide-angle lens and compact models with in Japan in November 2006. In addition, Matsushita put
10x zoom capability were particularly well received in the particular emphasis on making AV equipment more user-
market. Moreover, with the launch of the Company’s first friendly with VIERA Link and other innovations. As a result
digital SLR camera, Matsushita has a stronger lineup to meet of these initiatives, Matsushita maintained its leading
a wider range of customer needs. As a result, the Company global share in the DVD recorder market. Looking forward,
recorded much higher sales of digital cameras in fiscal the Company will focus on accelerating compatibility with
2007, particularly in the U.S. and Europe. Going forward, HD formats and further pursuing user-friendliness.
Matsushita will continue to launch a steady stream of
attractive cameras worldwide by drawing on its unique
technologies to enhance picture quality and features.

Matsushita Electric Industrial Co., Ltd. 2007 27


A compact notebook PC with vastly improved
shock and water resistance

An SD Memory Card camcorder 4GB SDHC Memory Card


capable of HD recording

In digital video cameras, Matsushita Growing demand for


launched new products in December 2006 bridge media led to
that can record HD video. SD Memory Card increased sales of
camcorders in particular were popular due to SD Memory Cards in
their high picture quality, compact and rugged fiscal 2007, particularly for use
design, and dust-resistance, leading to strong sales. in products such as flat-panel TVs, digital
Amid growing global demand for high picture quality in cameras and mobile phones. In fiscal 2007, Matsushita
recording, Matsushita plans to offer a wider lineup of HD launched a new 4GB SDHC Memory Card* to meet rising
video cameras. consumer needs related to the recording and storage of
Amid rising demand, especially overseas, sales of large volumes of data such as HD video. This product
notebook PCs continued to grow in fiscal 2007 as light- enables Matsushita to respond to demands for high-speed,
weight products featuring extended battery life and rugged reliable recording and large data storage capacity, which
designs were well received in major markets including the are required for HD movies and other applications.
U.S., Europe and Japan. In March 2007, Matsushita Matsushita will therefore continue to focus on enhancing the
launched new notebook PCs that weighed less than storage capacity of SD Memory Cards.
previous models, were significantly better at withstanding Looking ahead in the AVC business, Matsushita will
shocks when dropped, and incorporated drip-proof key- promote more HD-compatible products and universal
boards, a feature currently in high demand from customers. design (UD) as it seeks to further develop its “3D” value
These kinds of features were well received, helping the chain strategy. Based on this approach, the Company will
Company to maintain its leading share in the domestic accelerate the development of products that make it easier
mobile PC market in 2006. Matsushita will continue to work and more convenient for people to enjoy exciting audio-
to respond quickly to customer needs. visual experiences. Furthermore, Matsushita will actively
develop its AVC business globally, aiming to ensure
sustainable growth and improve profitability.

* SDHC (SD High-Capacity) Memory Cards are based on the new SD


Memory Card Specifications (Version 2.00) which enable the development
of SDHC Memory Cards with capacities up to 32GB.

28 Matsushita Electric Industrial Co., Ltd. 2007


Power Outlets—Gateways to the Network

Camera
PLC adapters readily allow the creation of
convenient communication networks

PC

WWW

Router
Fixed-line
Communications PLC adapter

In fixed-line communications, Matsushita is PLC adapter


Receiver (STB)
focusing business strategies on home networks,
encompassing in-home communications equip-
ment, TV door intercom systems and other
products; office networks, including communica-
tions equipment, digital color multifunction
products (MFPs) and other office products; and optical manufacturing framework with the launch of PBX handset
devices such as optical disc drives. production in Vietnam in October 2006.
In fiscal 2007, in home networks, TV door intercom In fixed-line communications, Matsushita will continue to
systems with wireless color monitor handsets continued to supply products based on cutting-edge technologies,
be well received by Japanese consumers. In addition, aiming to create modes of communication focused on key
Matsushita launched its HD-PLC* adapter in Europe and concepts such as ease-of-use, convenience, peace of mind
Japan following an initial release in the U.S. in the previous and security.
fiscal year. This product enables high-speed data transmis-
sion over existing power lines by simply plugging the * HD-PLC: High Definition Power Line Communication

adapter into an electrical outlet. In office networks,


Matsushita maintained one of the leading market shares for
private branch exchange (PBX) products. This reflected
strong sales, particularly overseas, of models that boast
greater functionality and user-friendliness. Sales of new full-
color digital MFPs were also favorable. In the optical
devices field, Matsushita launched Blu-ray Disc Drives and
continued to lead the industry in developing slimmer, lighter
disc drives by building on its success with the DVD Super
Multi Drive, the industry’s thinnest at just 9.5mm. Overseas,
Matsushita worked to further develop its optimal global

Matsushita Electric Industrial Co., Ltd. 2007 29


P903iTV for NTT DoCoMo
Striking TV images thanks to a mobile
PEAKS processor realizing high
picture quality, and excellent
reception with a diversity antenna

P703iµ for NTT DoCoMo


A simple and uncluttered ultra-thin
body at just 11.4mm, presented in
stainless steel to give a refreshingly
new, high-quality feel

Mobile Communications
In mobile communications, Matsushita offers a wide range
of products, from mobile phones, where the Company has
advanced technologies, to base stations and other commu-
nications infrastructure equipment.
In fiscal 2007, mobile number portability (MNP) was
introduced in Japan in October 2006, triggering more
intense competition among mobile phone handset manu-
facturers. In this environment, Matsushita resumed ship-
ments of handsets to SOFTBANK MOBILE Corporation and
KDDI CORPORATION. The Company also launched new 705P for Softbank Mobile W52P for KDDI
mobile phone handsets for NTT DoCoMo, Inc. such as the Thin but easy to open A polished metal body
thanks to a one-push with bright colors used for
P903iTV handset compatible with “one-segment” terrestrial
mechanism, packaged in a the inside and exchange-
digital TV broadcasts that combines Matsushita’s high smart, easy-to-carry body able covers that allow
picture quality, high reception and energy-saving technolo- users to customize
designs to their own taste
gies, and the P703iµ, the world’s thinnest handset at just
11.4mm*1.
Meanwhile, aiming to reduce the lead time and cost of
development, Matsushita formed a joint venture called Through these initiatives, Matsushita plans to boost the
ESTEEMO Co., Ltd. with NEC Corporation, and another efficiency of product development and enhance cost
joint venture called Adcore-Tech Co., Ltd. with NEC, NEC competitiveness by utilizing the Linux® OS platform and
Electronics Corporation and Texas Instruments Incorporated. sharing core technologies such as high-speed image and
Matsushita will use both of these new companies to voice transfer methods—one of the Company’s strengths.
accelerate the development of common software and Matsushita also aims to lead the industry in responding to
hardware platforms for mobile phone handsets. In another advances in more sophisticated, higher-speed communi-
move, Matsushita teamed up with companies such as NTT cations infrastructure and mobile services.
DoCoMo, the Vodafone Group, NEC and Motorola, Inc. to
set up the LiMo Foundation, which will work on developing *1 As of February 2007; clamshell-type 3G (W-CDMA) phones
*2 Linux® is a registered trademark of Linus Torvalds in the United States and
a Linux®*2-based OS for mobile phones. other regions.

30 Matsushita Electric Industrial Co., Ltd. 2007


The Strada Car Navi Station F Class with 4 tuners
and 4 antennas that receive “full-segment”
terrestrial digital broadcasts

A dome network security camera from


the i-pro series delivering high picture
quality over IP Networks

Automotive Electronics System Solutions


Matsushita’s automotive electronics business encompasses In the system solutions business, Matsushita conducts
two priority areas: automotive multimedia equipment such business in a variety of fields including security systems,
as car AV and car navigation systems, and components broadcasting systems and business solutions. The Company
and devices that promote safety, environmental preserva- draws on its advanced technologies and R&D resources to
tion and energy efficiency. deliver optimized solutions for customers.
In automotive multimedia, Matsushita recorded strong Seeking to capture rising demand in the security field in
sales of the Strada series of car navigation systems with fiscal 2007, Matsushita launched new security system
digital tuners that allow viewing of high-quality terrestrial products compatible with an integrated IP network platform*,
digital TV broadcasts in Japan, leading to a higher share in and a series of security products. Megapixel network
both the automaker and consumer markets. Meanwhile, cameras that realize high picture quality sold particularly
with the growing popularity of Electronic Toll Collection well in fiscal 2007. Meanwhile, amid the spread of terrestrial
(ETC) systems, Matsushita’s ETC terminals continued to be digital broadcasting in Japan, Matsushita maintained its
well received in the Japanese market. This was illustrated in high market share in digital set-top boxes for cable TV. It
February 2007 when Matsushita became the first company also continued to win strong support for its HD cameras
in the industry to reach the total production mark of 5 million from TV broadcasters. Furthermore, the Company recorded
units. Overseas, sales of car audio equipment to higher sales of IC card verification and settlement systems,
automakers were strong, as were sales of rear-seat payment terminals for logistics industries, and wireless
entertainment systems in North America. systems for business users.
In components and devices, the Company increased Going forward, Matsushita will expand its solutions
sales of a variety of products that improve environmental business by focusing on developing and providing opera-
performance, safety and security. tional support and related services in three main areas:
These included devices for hybrid vehicles and lighter Security for the ubiquitous networking society; Cross-media
more compact components that enhance fuel efficiency, as to support the growing trend toward broadcasting and
well as car-mounted cameras and smart entry systems that communications integration; and Mobility, including IC card
contribute to safety and security. electronic settlement and other systems that support a wide
Leveraging the Group’s extensive advanced technologies range of businesses.
and meticulous, quality-focused manufacturing approach,
Matsushita will continue to contribute to the creation of * This industry-first platform promotes increased functionality and efficiency
by combining AV/information systems for video security and access control
automobiles and a motorized society that are both safe with equipment systems.
and inspiring.

Matsushita Electric Industrial Co., Ltd. 2007 31


HOME APPLIANCES
In home appliances, Matsushita supplies a range of products related to food, clothing and housing in the fields
of household appliances, refrigeration, air conditioning, heating, healthcare systems, lighting and environmental
systems. In all these fields, Matsushita proposes new lifestyles by developing value-added products that meet
growing interest in healthy living and rising needs in environmental preservation and energy conservation.
In fiscal 2007, hit products that take advantage of the Company’s unique technologies won a strong market
response. These included tilted-drum washer/dryers that utilize a heat-pump drying system, and air condition-
ers with an automatic airflow control mechanism and a built-in automatic air filter cleaning system. Moreover,
with the spread of all-electric homes, sales of induction heating (IH) cooking equipment and natural-refrigerant
water heating systems grew, helping to drive an overall increase in sales in home appliances.
Going forward, by working to generate synergies through enhanced cooperation among different busi-
ness fields, Matsushita will offer new value for living that raises the quality of life while minimizing environ-
mental impact.

32 Matsushita Electric Industrial Co., Ltd. 2007


Matsushita has developed a range of air conditioners with anti-bacterial heat
exchangers and new deodorizing filters that require no cleaning or replacement for
10 years* thanks to built-in automatic cleaning technology created by the vacuum
cleaner business. These air conditioners have also attracted attention in the
Japanese market for their automatic airflow control mechanism that makes air
currents more comfortable for users.
* The Company’s anti-bacterial heat exchangers have been certified as effective for a period
equivalent to 10 years based on air conditioner annual usage time in compliance with the JIS
C9612-2005 standard. The new deodorizing filters have been certified as effective for a
period equivalent to more than 10 years in a room where 10 cigarettes are smoked every
day (Matsushita estimates).

Matsushita Electric Industrial Co., Ltd. 2007 33


Matsushita’s NA-VR1100 series of Comparison of Power and Water Required for
tilted-drum washer/dryers utilize a Washing and Drying (Annual)
heat-pump drying system that kwh L

requires no electric heater or water 2,000 60,000


54,750
for the drying process Water
1,460 consumption

22,995
Electricity
consumption
529.25

0 NA-V81 NA-VR1100 0
(Previous (Heat-pump drying
Matsushita model) system model)
*Based on a load of 6kg washed and dried everyday for one year.

Household Appliances/
Refrigeration,
Air Conditioning and Heating
In household appliances, Matsushita’s main business were strong. Matsushita’s IH cooking equipment that can
areas include washing machines, dishwasher/dryers, be used with aluminum pots remained popular in the
vacuum cleaners, IH cooking equipment, microwave market. The Company’s integrated production system
ovens, rice cookers and other products related to house- including IH coils realized high quality, helping Matsushita to
work and food preparation, as well as sanitary equipment maintain its dominant share in the Japanese market. Sales
and various key devices such as power supply inverters of steamer/microwave ovens also grew in Japan on the
for microwave ovens. back of popular products that offer new cooking methods
In fiscal 2007, Matsushita further upgraded its tilted-drum by combining three heat sources: microwave, super-heated
washer/dryers to respond to needs for greater speed, less steam, and a conventional heater.
energy usage and lower noise during washing and drying Overseas, Matsushita worked to expand its business in
cycles. By incorporating a high-speed, energy-saving heat- China, where demand for washing machines continues to
pump based on technologies developed for its air condi- grow, by starting full-scale local production and sales of
tioners and a new stainless steel drum, Matsushita achieved tilted-drum washing machines. In other Asian markets such
a significant reduction in water consumption and drying as Thailand, Malaysia and Indonesia, the Company
times. In addition, the Company’s tilted-drum washer/dryers launched the Aquabeat series of fully automatic washing
now lead the industry in terms of energy economy*. machines. Aquabeat realizes a significant improvement in
In dishwasher/dryers, where Matsushita has led the washing capability with a new powerful wash cycle that
market since it produced Japan’s first model 46 years ago, rapidly converts detergent into foam. Sales of this model
the Company’s aggregate production reached 5 million were particularly strong in Malaysia where Aquabeat
units in May 2006. This illustrated Matsushita’s consistent captured the leading market share. In cooking equipment,
efforts to help reduce housework time and offer more user- sales of microwave ovens increased in Europe, South
friendly products. Built-in dishwasher/dryer models sold America and Russia.
particularly well during the year under review, thereby
maintaining an approximate 60% share of the Japanese * As of September 28, 2006, for drum washer/dryer models.

market (Matsushita estimates). In cooking equipment, sales


of IH cooking equipment and steamer/microwave ovens

34 Matsushita Electric Industrial Co., Ltd. 2007


Comparison of Insulation Material Thermal
Conductivity (W/mK)*1
(W/mK)
0.05 0.0450

0.0240

0.0080
0.0050
0.0012
0
Glass Toughened Silica- A-Vacua U-Vacua*2
wool polyurethane Vacua
foam

*1 Heat-flow method (in compliance


with JIS-A1412, ASTM-C518A and U-Vacua high-performance vacuum insulation, which
ISO 830 standards), assuming a boasts excellent insulation properties, has contributed
temperature of 24°C to an increase in refrigerator storage space
*2 U-Vacua (Ver. IV)

In refrigeration, air conditioning and heating, Matsushita direct and indirect refrigeration methods separately solved
manufactures a wide range of consumer- and industry-use the problems of drying and frosting, and also showed an
products. These include air conditioners and refrigerators, increase in sales in China.
vending machines, and natural-refrigerant water heating Looking forward, responding to growing demand for
systems, as well as compressors and other key devices used products used in all-electric homes such as IH cooking
in refrigeration and air conditioning products. equipment and natural-refrigerant water heating systems,
In fiscal 2007, sales of air conditioners, large-capacity Matsushita plans to enhance its product lineup and sales
refrigerators and natural-refrigerant water heating systems capabilities, and strengthen collaborative efforts with MEW.
remained strong. In particular, air conditioners that require Through these initiatives, Matsushita will continue develop-
less cleaning successfully tapped market needs. In this ing high-value-added products underpinned by environ-
area, Matsushita launched air conditioners featuring built-in mental technologies and universal design that customers
automatic cleaning technology used in its vacuum cleaners. can use easily and with confidence.
With this technology, internal filters and anti-bacterial and In 2005, Matsushita established the China Lifestyle
deodorizing filters do not require cleaning or changing for Research Center at Panasonic Corporation of China to
10 years. The product’s automatic airflow control mechanism identify the needs of Chinese consumers related to food,
that optimizes air currents for heating and cooling was also clothing and housing. Based on the data collected through
well received. As a result, air conditioners overall captured the center’s activities, the Company will continue to develop
the leading share in the domestic market. Meanwhile, products tailored to local needs and lifestyles centered on
leveraging its many years of experience in insulation and China and other Asian countries. In terms of manufacturing,
refrigeration technology, Matsushita developed the U- Matsushita will reorganize its production bases from the
Vacua series of high-performance vacuum insulation perspective of creating an optimal manufacturing framework
boasting the world’s highest level of thermal insulation. to further enhance the cost-competitiveness and attractive-
This material was used to develop new refrigerator models ness of its products. And by integrating research and
with thinner casings to boost storage space. This innova- development divisions and enhancing its ability to conduct
tion helped the Company’s refrigerators to secure the front-loaded product development, Matsushita aims to
leading market share in Japan. Overseas, models that use secure global growth and enhance profitability.

Matsushita Electric Industrial Co., Ltd. 2007 35


AYA PASSION order-made digital hearing aids
fit snuggly in the wearer’s ear canal

Comparison of Lamp Electricity


Consumption and Rated Lifetime
W Hours
60 54w 15,000
Pa-look Ball Premier fluorescent
10,000 lamps have long product lifetimes
Electricity and high energy efficiency
consumption
Rated lifetime

1,000 10w

0 0
Matsushita Silica Pa-look Ball
60 light bulb Premier D15 E26
socket-model

Healthcare Systems/
Lighting/
Environmental Systems
Matsushita’s healthcare systems business supplies health- The lighting business consists of general lighting products
care and medical equipment ranging from blood glucose including fluorescent and incandescent lamps, industrial-
monitoring systems and ultrasound diagnostic equipment, use light sources such as LCD backlights, electronic flash
to laser devices and hearing aids. units for cameras and related equipment.
In fiscal 2007, mainstay blood glucose monitoring In the year under review, amid rapidly rising demand for
systems maintained their leading share in the domestic light bulbs and lamps that save energy and need replacing
market with increased sales. A new in-the-ear, tailor-made less, Matsushita further enhanced its Premier series of
hearing aid, which can be adjusted with a maximum of 32 extended-life fluorescent lamps. In Japan, demand is
audio channels, also sold well after its launch in June 2006. continuing to grow for energy-saving ball-type fluorescent
The hearing aid fits comfortably into the user’s ear canal lamps that can be used in conventional light bulb sockets.
owing to a high level of technical craftsmanship, while audio Against this backdrop, in October 2006, Matsushita launched
quality can be optimized to the surrounding environment. its Pa-look Ball Premier series, which reduces electricity
Matsushita will continue to target growth in blood consumption by approximately 80%* and compares with
glucose monitoring systems and hearing aids, products that the best in the industry in terms of energy efficiency and
contribute to a better quality of life. At the same time, the product lifetime.
Company will strengthen its lineup of ultrasound diagnostic Looking forward, with an increasing number of elderly
devices, digital X-ray equipment and other products for people in Japanese society, Matsushita will focus on
medical institutions and specialists, ultimately aiming to developing light bulbs and lamps that require replacing less,
contribute to the realization of a society where patients can as well as products that help save energy and resources.
access reliable, high-quality healthcare services at reason- By striving to boost sales of its Premier series of fluorescent
able cost. lamps for home use, Matsushita aims to continue driving
growth in the lighting business.

* Comparison of Pa-look Ball Premier D15 E26 socket-model and Matsushita


Silica 60 light bulb (54W)

36 Matsushita Electric Industrial Co., Ltd. 2007


Matsushita’s dehumidifier with
intelligent hybrid control realizes
optimal levels of humidity for
any season

Image of a road tunnel electronic dust collection system


for a highway extension project in Madrid, Spain

The environmental systems business provides ventilating environmental engineering business, Matsushita’s strong
fans, air purifiers and other products, and operates an domestic track record and technologies enabled it to win an
environmental engineering business supplying dust collec- order for an electronic dust collection system for a road
tion and other systems, aiming to help create comfortable tunnel in Madrid, Spain. This order, as part of a highway
lifestyles that are in harmony with the environment and extension project, drove sales in the environmental engi-
realize a recycling-oriented society. neering business. Meanwhile, responding to growing
In fiscal 2007, in ventilation systems, micro-mist saunas demand for mobile phone base station cooling units, the
that employ nanometer-size water particles recorded strong Company completed construction of a new factory in
sales. In addition to its conventional model that relies on a Beijing, China, in January 2007.
boiler to create hot water that warms up the mist, Going forward, to enhance cost-competitiveness in
Matsushita launched a new model that warms up the mist global markets, Matsushita intends to actively utilize its
directly with an electrical heater in February 2007. In home overseas operating sites.
environment systems, the Company rolled out the industry’s
first dehumidifier with intelligent hybrid control, which
realizes optimal levels of humidity for any season. In the

Matsushita Electric Industrial Co., Ltd. 2007 37


COMPONENTS AND DEVICES
Matsushita develops and supplies components and devices used in various products ranging from AV
equipment and information and communication devices to home appliances and industrial equipment.
Responding to growing demands for the rapid supply of devices and solutions tailored to specific markets
and businesses, Matsushita is facilitating even closer cooperation between component and device divi-
sions and finished product divisions right from the development phase. This approach is helping the
Company to rapidly launch high-value-added products that meet customer needs.
In fiscal 2007, Matsushita accelerated efforts to use its Integrated Platform system LSIs in products in
the semiconductor business. In the electronic devices and electric motors businesses, the Company
introduced new cutting-edge devices to enhance equipment performance. Meanwhile, in batteries, the
focus was on developing safety technology and further improving battery capacity and lifetime.
Matsushita will continue to develop and strengthen its competitive products, while also contributing to
the high-value-added products in the finished product divisions. Furthermore, the Company will strive to
expand sales to external manufacturing customers to achieve growth and increased earnings.

38 Matsushita Electric Industrial Co., Ltd. 2007


Today, digital home appliances need vast amounts of software due
to rising performance and increasingly integrated functions.
Matsushita’s Integrated Platform system LSIs dramatically improve
the efficiency of software development, reduce development lead
times and cost, and ensure higher levels of reliability through the
reuse of tried and tested software resources. The Integrated
Platform is making a significant contribution to the faster develop-
ment and launch of new digital equipment.

Matsushita Electric Industrial Co., Ltd. 2007 39


A mass-produced 300mm silicon wafer,
the world’s largest, manufactured at
Matsushita’s Uozu Plant

The Integrated Platform


used in mobile phones

The Integrated Platform used


in home AV equipment
Semiconductors
In the semiconductor business, Matsushita primarily
focuses on products for digital TVs, optical discs, mobile
communications equipment, image sensor application
products and automotive devices. The Company provides
total solutions for a wide range of semiconductor products
such as system LSIs, image sensors, analog LSIs and
discrete devices. Moreover, Matsushita supplies key production of 65-nanometer process system LSIs using
devices founded on cutting-edge technologies to finished 300mm wafers at its new Uozu plant. Distinct products in
product divisions across the Group, and actively works to the discrete device, analog LSI and image sensor fields also
tap demand from external clients. supported operations in the semiconductor business during
In fiscal 2007, sales of semiconductor devices for digital the year under review.
AV equipment such as plasma TVs and digital cameras Going forward, Matsushita will accelerate the develop-
were strong. However, products for mobile phones and PC ment of lower-cost products with more features based on
optical disc drives declined compared to the previous fiscal finer design rules by adopting system LSIs manufactured
year. In fiscal 2006, Matsushita began incorporating its using 45-nanometer processes. Other goals in the semi-
Integrated Platform, which combines software and hard- conductor business will be to enhance the capabilities of
ware resources across differing product categories, into SD the Integrated Platform in the area of network compatibility;
camcorders and other products. In fiscal 2007, this platform promote the full-scale use of chipsets for multilayer, high-
was fully extended to digital product categories such as speed Blu-ray disc products; and introduce chipsets with
plasma TVs, DVD recorders and mobile phones. The wider image sensors for digital SLR cameras and a variety of
use of the Integrated Platform is allowing Matsushita to other products. In back-end production processes,
dramatically increase product development speeds and Matsushita will shift the majority of production for discrete
reduce development costs. It is also playing a major role in general-purpose devices overseas, and further increase the
realizing a high level of reliability thanks to the reuse of tried volume of analog LSI and system LSI manufacturing at
and tested software. overseas plants as it works to create an optimal global
The Company is taking steps to use its overseas manufacturing framework.
software development resources more extensively, includ-
ing upgrading its development site in China. In terms of
manufacturing, Matsushita began the full-scale mass

40 Matsushita Electric Industrial Co., Ltd. 2007


Film capacitor for hybrid vehicle Electric double layer Specialty polymer aluminum Chip tuner
capacitor assist module for electrolytic capacitor “SP-Cap”
hybrid vehicle

Angular rate sensor Light touch switch Bamboo-fiber speaker


High-density printed
circuit boards “ALIVH”

Electronic Devices
The electronic devices business operates globally with a cameras. Furthermore, sales of electronic devices for
focus on seven priority areas: capacitors, tuners, printed mobile phones designed for “one-segment” terrestrial digital
circuit boards, power supply products, circuit components, TV broadcast function were strong during the year under
electromechanical components, and speakers. Aiming to review. Examples of products that recorded higher sales
meet customer needs for higher performance AV equipment, included high-frequency components, high-density printed
and more compact and thinner information devices, circuit boards (ALIVH: Any Layer Inner Via Hole), and chip
Matsushita strives to develop high-value-added compo- tuners that feature receiver sensitivity and low electricity
nents. The Company is also strengthening its position in the consumption. Favorable sales were also recorded in film
automotive electronics field which continues to grow as capacitors and electrical double layer capacitors used in
cars are fitted with more electronic components. hybrid vehicles.
In fiscal 2007, Matsushita continued to grow sales of Going forward, Matsushita will leverage its black-box
digital TV tuners that enable exceptional picture quality, and technologies to raise quality, increase the number of prod-
specialty polymer aluminum electrolytic capacitors that are ucts with leading global shares, and reinforce its position in
compact and have a high noise reduction function. The the automotive electronics field. Aiming to secure growth
Company’s angular rate sensors, which sustained a high and enhance profitability, the Company will also start up
market share as components that improve the accuracy of new overseas sites in Vietnam and other countries and
car navigation systems, were also incorporated in digital further implement rationalization in manufacturing.

Matsushita Electric Industrial Co., Ltd. 2007 41


Features of Oxyride Dry Batteries

More Power!
Power output

Higher output and longer


1.7V duration of use than
1.6V alkaline dry batteries

FA servo motor

High-power, long-lasting
Oxyride dry Oxyride dry batteries
batteries
Alkaline dry
batteries

1.0V
Polygon mirror-scannermotor
Duration

Lithium-ion batteries with high


energy output

Batteries Electric Motors


The battery business consists of primary batteries, including In electric motors, Matsushita supplies products that meet
dry batteries, and rechargeable batteries, such as lithium- growing market needs in terms of efficiency, noise reduction
ion batteries. Batteries are key devices that aid the develop- and compact design. These motors are incorporated into
ment of a wide variety of more compact, thinner and lighter various products, including home appliances, AV equipment
products. In addition to larger capacity and longer life, and industrial equipment.
batteries today have to be even safer and more reliable. In the year under review, sales of FA servo motors,
In fiscal 2007, in primary batteries, Matsushita’s Oxyride motors for vacuum cleaners and compact brushless
dry battery, which boasts increased power output and motors used in game consoles were strong. The electric
extended life, proved popular with customers, particularly motors business also enhanced cooperation with finished
for use in digital cameras and other digital AV equipment. In product divisions, leading to the use of motors produced
rechargeable batteries, the Company focused on boosting in-house in tilted-drum washer/dryers, optical disc drives
capacity and developing new safety technology in response and other new products.
to customer needs for more compact notebook PCs, For the future, Matsushita will promote the wider use of
mobile phones and other mobile equipment that can be its brushless DC motors, which leverage the Company’s
used for extended periods. strengths in control technology, in home appliances.
Looking ahead, Matsushita will continue to work on Steps will also be taken to accelerate the launch of high-
creating longer-lasting Oxyride and alkaline dry batteries, value-added products such as newly developed FA servo
and step up the development of next-generation recharge- motors. And the Company will develop core technologies
able batteries that balance larger capacity with safety. The and products in order to create extended-life motors with
Company will also establish black-box technologies in minimum environmental impact by using less energy and
battery materials, production processes and equipment, resources.
systems and other areas, to develop batteries that lead the
industry in terms of quality, reliability, safety and cost.

42 Matsushita Electric Industrial Co., Ltd. 2007


Facial ion steamer nanocare
Esthe Jeune

High-output, high-color
rendering LED unit for lighting

The JOBA horseback-riding


fitness machine

MEW AND PANAHOME


MEW
MEW manufactures, sells, installs and provides services encapsulation materials and multilayer printed circuit board
related to a wide variety of products. These include electrical materials in the electronic and plastic materials business, and
construction materials, home appliances, building products, factory automation-related products and automotive devices
electronic and plastic materials and automation controls. in the automation controls business.
In fiscal 2007, MEW recorded sales gains for a number Going forward, MEW will cultivate and strengthen
of products in electrical construction materials. In addition demand-creating products in response to social trends
to a substantial increase in sales of home fire alarms, MEW such as those relating to environmental protection, energy
saw strong sales of security equipment such as room conservation, security and health as it works to provide total
access control systems, as well as atmospheric lighting and solutions that realize comfortable living for its customers.
highly efficient lighting fixtures. In building products, sales of Centered on electronic and plastic materials, automation
all-electric homes and interior furnishings such as modular controls, and lighting devices, MEW will reinforce its
furniture were robust, as were those of exterior finishing overseas strategy with a particular emphasis on China and
materials such as photocatalytic self-cleaning cladding. The other countries in Asia.
A La Uno toilet, featuring a fully automatic cleaning system Specifically, in April 2007, in its electrical construction
based on new materials and a new washing method, also materials business, MEW acquired Anchor Electricals
proved popular with customers. In home appliances, amid Private Ltd. (AEPL), one of the largest suppliers of electrical
rising public interest in health and beauty, MEW reported construction materials in India. MEW plans to use AEPL’s
particularly strong sales increases for the JOBA horseback- powerful brand and extensive sales network to expand its
riding fitness machine and aesthetic products. MEW also business in India.
posted higher sales of environmentally friendly semiconductor

Matsushita Electric Industrial Co., Ltd. 2007 43


The Eco-life home “SOLANA
Bianca” is designed on the
concepts of health and comfort

PanaHome
PanaHome’s operations are primarily focused on detached This was part of overall efforts to strengthen its rental
housing, asset and property management, and home property management support system. In the home
remodeling. In all these businesses, to provide living spaces remodeling business, the company offered living spaces
that are friendly to both people and the environment, the designed around its “Eco-life Reform” concept and took
company’s product strategies are guided by the basic other steps to enhance its consulting-based sales approach.
“Eco-life Home” concept, which emphasizes safety, security, Looking ahead, PanaHome will continue seeking to
health, comfort and high energy efficiency. offer homes that are kind to people and the planet by
In fiscal 2007 in the detached housing business, embracing technologies in harmony with the environment,
PanaHome enhanced its lineup of EL SOLANA homes, as well as comfortable living environments and spaces
aiming to realize environments where residents can live in tailored to the life stages of customers, thereby ensuring
health and comfort by offering a wider choice of equipment sustainable growth.
and fittings such as solar power generation systems and
photocatalytic external wall tiles. The company also
launched PanaHome Aging Home, a new type of residence
designed for at-home nursing care that emphasizes comfort
and makes caring for the elderly easier. In the asset and
property management business, PanaHome became the
first company in the industry to offer all-electric rental
apartment homes, which help to lower maintenance costs.

44 Matsushita Electric Industrial Co., Ltd. 2007


Everio series of full HD HDD camcorders

High-speed modular mounter

JVC OTHER
JVC Factory Automation
Victor Company of Japan, Ltd. (JVC) is involved in both In the factory automation (FA) business, Matsushita pro-
hardware and entertainment software businesses. Using its vides optimal solutions in electronic component mounting,
high-quality audio and visual technologies, JVC aims to semiconductor mounting and manufacturing processes with
deliver truly moving experiences and customer satisfaction. the aim of contributing to the development of client busi-
In fiscal 2007, a number of products saw higher sales, nesses through innovative manufacturing processes in
including the Everio series of compact HDD camcorders, circuit manufacturing technology.
which are capable of approximately five hours of full-HD In fiscal 2007, Matsushita enhanced its product lineup in
recording—a world first. However, overall sales at JVC the electronic component mounting business. This included
declined due to a reduction in the lineup of DVD recorders upgrading its high-speed modular placement machines,
and weak sales of such products as audio equipment in introducing new ultra-high-speed models and providing more
Japan, as well as CRT TVs overseas. products for small- and medium-scale manufacturing. In the
Looking ahead, JVC will strive to increase sales by semiconductor mounting business, the Company launched
supplying products incorporating its renowned technologies high-speed die bonders and other products that feature both
that deliver high-quality picture and sound. high precision and high productivity.
In the future, the Company aims to maintain its leading
share in the global electronic component mounting field,
as well as accelerate growth in the FA business overall by
supplying superior hardware, advanced manufacturing
process technologies and a wide range of solutions that
lead the industry.

Matsushita Electric Industrial Co., Ltd. 2007 45


R&D and Intellectual Property

In order to contribute to a ubiquitous networking society and coexistence with the global environment,
Matsushita engages in a broad range of R&D activities, including nanotechnologies and other advanced research;
digital network software technologies for AV equipment and next-generation mobile communications; component
and device technologies such as plasma displays and system LSIs; environmental technologies such as fuel cell
cogeneration systems; and various manufacturing technologies.
By coordinating business, technology and intellectual property strategies, the Company works to develop
distinct technologies—the source of Matsushita’s competitiveness—and secure intellectual property rights for
those technologies to ensure the strength and stability of its businesses. In this way, Matsushita is aiming to drive
further growth and become a manufacturing-oriented company.

through in-house production, but also through a sophisti-


cated network of cooperation between materials, compo-
nents and devices, and finished product divisions. For
example, in full HD plasma TVs, this approach helped
Matsushita to successfully develop large-screen models,
from the world’s largest at 103 inches to 50-inch models,
which boast sharp, detailed picture quality.
Matsushita has also promoted a platform strategy to link
an array of different product categories. With the creation of
its Integrated Platform, the Company has been able to
combine and utilize software and hardware assets across
digital consumer product lines to enhance the efficiency of
software development and boost design quality. In fiscal
2007, the Integrated Platform was incorporated into plasma
TVs, BD recorders, SD Memory Card camcorders, and
mobile phones compatible with “one-segment” terrestrial
digital TV broadcasts.
Aiming to realize more comfortable living for customers,
Matsushita also focuses its R&D efforts on developing
products that are easier to use. Through research into
universal design that makes highly-functional consumer
products more user-friendly, the Company has developed
refrigerators with top-unit compressors that are easier to fill
and unload, and a new function called the VIERA Link.
Meanwhile, research that seeks to better understand human
physical and sensory characteristics has aided the develop-
R&D Strategy ment of nanoe hair dryers and full-body mist showers.
Matsushita recorded ¥578.1 billion in R&D expenditures in At the same time, the Company aims to efficiently use
fiscal 2007. This investment was used to strengthen R&D in technology resources by prioritizing R&D projects based on
priority areas including full HD PDPs, Blu-ray disc recorders, a medium- to long-term vision. Matsushita actively uses
the Integrated Platform, High Definition Power Line Commu- external R&D resources as part of its strategy. One approach
nications (HD-PLC), large-capacity lithium-ion batteries, and is collaborative efforts with academic institutions, illustrated
household fuel cell cogeneration systems. by Matsushita’s support for advanced joint innovation
Matsushita’s R&D activities aim to generate added value centers at the University of Tokyo and Osaka University.
by maximizing synergies in a wide range of business fields. Matsushita will maintain its focus on a number of key
Matsushita promotes a high level of cooperation, not only R&D areas in fiscal 2008: higher-resolution PDPs that use

46 Matsushita Electric Industrial Co., Ltd. 2007


Matsushita Develops 103-inch Full HD Plasma TV—
the World’s Largest*
Shinji Masuda
Leader, Development Team for 103-inch
VIERA Plasma TV Panels
less electricity; network-compatible digital TVs and other
networkable products; next-generation mobile phones; fuel “To develop the new 103-inch panels
cell cogeneration systems that contribute to environmental we pursued improvements not just in
preservation; healthcare infrastructure and products for size, but also in picture quality. This
could not be realized with our existing
the home; and robots designed to provide support in
technologies, so all departments
everyday situations.
involved in the project were required
During the course of the GP3 plan, the three years from to raise themselves to a higher level in
fiscal 2008 to fiscal 2010, Matsushita plans to invest ¥1.8 the same period. Each department had to overcome major hurdles
trillion in R&D, centered on advanced priority themes and in areas ranging from materials selection and panel development,
key devices such as semiconductors. Matsushita aims to to product design, production equipment and manufacturing
processes. Everyone worked passionately to overcome these
further enhance R&D to support its sustainable growth.
challenges, motivated by the goal of creating the world’s largest
plasma display panel. Our hard work paid off with the development
Intellectual Property Strategy of a panel as large as a semidouble bed comprising around 6
Because the results of Matsushita’s R&D initiatives are million illuminant cells and micron-level control that realizes uniform
evaluated in the form of intellectual property rights, they light discharge. We plan to use the high-precision technology
represent valuable management assets that will generate created for the 103-inch plasma TV in the development of panels in
other sizes to achieve further improvements in picture quality across
earnings in the future. The Company places a high priority
our entire range of plasma TVs.
on these intellectual property rights, which help to secure
* As of July 19, 2007; Matsushita research
and maintain Matsushita’s competitive edge in a wide range
of businesses. For this reason, Matsushita is pursuing an
intellectual property strategy that will consistently contribute Global Patents Held
to improved business results by securing high-quality Number of patents held in Japan Number of patents held overseas
intellectual property rights and effectively utilizing them as a 60,000 60,000

management resource. 52,835

48,020 48,061 47,166 48,444


Matsushita maintained its No. 1 patent application 46,040
44,137 43,660

position in Japan in 2006. The Company actively applied for 38,358


40,000 40,000
international patents under the Patent Cooperation Treaty 32,932

(PCT) to support the development of its business worldwide.


As a result, Matsushita ranked high in terms of overseas
20,000 20,000
patent applications. The Company also effectively utilized its
previously patented assets in a variety of ways—including
protecting proprietary technologies distinct from competi-
0 0
tors’ products and acquiring technologies from external 2003 2004 2005 2006 2007 2003 2004 2005 2006 2007

groups in cross-licensing agreements—in order to reinforce Note: Each graph depicts the number of patents held by Matsushita and its principal
subsidiaries (excluding MEW, PanaHome and JVC) as of March 31 for each year.
competitiveness. Moreover, Matsushita took steps to
enhance the efficiency of its patent asset portfolio by
assessing the usability of patents in its portfolio and aban- Going forward, the Company’s intellectual property
doning unused patents. strategy must achieve the dual goals of securing quality
In addition to using patents, Matsushita also comprehen- intellectual property assets more efficiently and realizing an
sively utilizes a vast portfolio of designs and trademarks to even higher level of intellectual property management to
secure and maintain its competitive edge. Accordingly, the utilize these assets directly in business strategies. Based on
Company actively pursues the global patenting of designs these perspectives, in fiscal 2008, Matsushita will further
and the registration of trademarks, and has enhanced intensify efforts to enhance earnings by actively securing
initiatives to prevent counterfeiting. In China in particular, patent, design and trademark rights on a global basis, while
where around 70% of the world’s imitation products are improving the quality and promoting the strategic use of
made, Matsushita has accelerated local initiatives to intellectual property rights.
eliminate counterfeit products.

Matsushita Electric Industrial Co., Ltd. 2007 47


Corporate Governance

Basic Concept of Corporate Governance


Matsushita’s corporate governance system is based on the Board of Directors, which is responsible for deciding
important operational matters for the whole Group and monitoring the execution of business by Directors, and
the Board of Corporate Auditors, which is independent from the Board of Directors. The Corporate Auditors and
the Board of Corporate Auditors are responsible for auditing the performance of duties by Directors. Matsushita
has established the following management system based on the implementation of autonomous management in
each business domain and the Company’s corporate governance system.

Corporate Governance Structure Corporate Auditors and the Board of Corporate Auditors
The Board of Directors and Executive Officer System Pursuant to the Company Law, Matsushita has appointed
Matsushita’s Board of Directors is composed of 19 directors, Corporate Auditors and established a Board of Corporate
two of whom are Outside Directors, as of June 27, 2007. In Auditors, made up of Corporate Auditors. The Corporate
accordance with the Company Law and relevant laws and Auditors and Board of Corporate Auditors monitor the
ordinances (collectively, the “Company Law”), the Board of status of corporate governance and keep abreast of the
Directors has ultimate responsibility for administration of the day-to-day activities of management, including the Board of
Company’s affairs and monitoring of the execution of busi- Directors. As of June 27, 2007, the Board of Corporate
ness by Directors. Under its basic philosophy of contributing Auditors comprised five members, including three Outside
to society as a public entity, Matsushita has long been com- Corporate Auditors.
mitted to enhancing corporate governance, and was one of Corporate Auditors participate in shareholder meetings
the first Japanese companies to invite Outside Directors to and Board of Directors meetings, and have legal authority to
serve on its Board of Directors. receive reports from Directors, employees and accounting
In fiscal 2004, Matsushita implemented reforms to estab- auditors. Full-time Senior Auditors also attend important
lish an optimum management and governance structure meetings and conduct checks in order to ensure effective
tailored to the Group’s business domain-based organiza- monitoring. To augment internal auditing functions in business
tional structure. Under this structure, Matsushita has em- domain companies, Matsushita has assigned seven non-
powered each of its business domain companies through statutory full-time senior auditors at each internal divisional
delegation of authority. At the same time, the Company company to assist in audits by Corporate Auditors. Matsushita
employs an Executive Officer System to provide for the also inaugurated regular Group Auditor Meetings (comprising
execution of business at various domestic and overseas 18 full-time senior auditors and non-statutory full-time senior
Matsushita Group companies. This system facilitates the auditors from 15 Matsushita Group companies including
development of optimum corporate strategies that integrate internal divisional companies) chaired by the Chairman of
the Group’s comprehensive strengths. the Board of Corporate Auditors of the Company to en-
In addition, Matsushita realigned the role and structure of hance collaboration between the Company’s Corporate
the Board of Directors to ensure swift and strategic decision- Auditors, non-statutory full-time senior auditors of internal
making, as well as the optimum monitoring of Groupwide divisional companies and Corporate Auditors of the
matters. Specifically, the Board of Directors concentrates on Company’s subsidiaries. In addition, as part of their audit
corporate strategies and the supervision of business domain duties, Corporate Auditors maintain a close working relation-
companies, while Executive Officers handle responsibilities ship with the Internal Audit Group to ensure effective audits.
relating to day-to-day operations. Taking into consideration Moreover, in order to enhance the effectiveness of audits
the diversified scope of its business operations, Matsushita conducted by Corporate Auditors and ensure the smooth
has opted to maintain a system where Executive Officers, implementation of audits, Matsushita has established a
who are most familiar with the specifics of their respective Corporate Auditor’s Office with a full-time staff of five under
operations, take an active part in the Board of Directors. the direct control of the Board of Corporate Auditors.
Furthermore, to clarify the responsibilities of Directors and
create a more dynamic organization, the Company has
limited the term of each Director to one year.

48 Matsushita Electric Industrial Co., Ltd. 2007


Corporate Governance Structure <Functions of the Board of Directors, Executive Officers and the Board of Corporate Auditors>

Board of Directors Executive Officers

Supervisory Functions Empowerment & Execution Functions


Shareholders Meeting

Supervision

Appointment
Corporate Strategy Decision-making Functions Subsidiaries (Business Domain Companies)
Integration of
Group’s Overseas Companies
Audit Comprehensive
Strengths Internal Divisional Companies (Business Domain Companies)
Board of Corporate Auditors
Sales Divisions
Appointment Auditing Functions Audit
Overseas Divisions

Other Business Divisions, R&D, etc.


Accounting Auditor
Appointment Accounting Audit
Note: Certain Directors concurrently serve as Executive Officers.

Remuneration Policy Internal Control Systems


The maximum total amounts of remuneration for Directors Compliance
and Corporate Auditors of Matsushita are determined by a The Company has formulated the Matsushita Group Code
resolution at a general meeting of shareholders. The remu- of Conduct to clearly explain in easy-to-understand terms
neration amount for each Director is determined by how its management philosophy should be implemented.
Matsushita’s Representative Directors who are delegated to As a unified global standard, the code applies to all the
make such determination by the Board of Directors, and the Matsushita Group’s Directors, Executive Officers, and
amount of remuneration for each Corporate Auditor is deter- employees. Matsushita has also formulated a Code of
mined upon discussions amongst the Corporate Auditors. Ethics for Directors and Executive Officers stating the fun-
Since the fiscal year ended March 31, 2004, the amounts damental ethics required of the Company’s top managers.
of the remuneration and bonuses of Directors have reflected In addition, the Company has created a Corporate
each individual’s performance based on CCM* and cash Compliance Committee, which is chaired by the President
flows. From the fiscal year ending March 31, 2008, in order and made up of relevant Directors, Executive Officers and
to promote steady growth with profitability, Matsushita has Corporate Auditors. Meeting twice yearly, this committee
adopted CCM and sales as indicators which represent has a Companywide remit and is responsible for discussing
profitability and growth, respectively. By implementing this and sharing information concerning compliance issues and
new performance evaluation criteria based on shareholder communicating compliance action policy.
interests, Matsushita will promote continuous growth and Matsushita also works to ensure compliance in its global
enhance profitability on a long-term basis for the Matsushita business activities. Specifically, the Company has appointed
Group as a whole. legal affairs managers at business domain companies,
In order to realize a remuneration system with a high level overseas regional headquarters and other entities, and has
of transparency and acceptability, Matsushita terminated its also appointed Directors and Executive Officers in charge of
retirement benefits for Directors and Corporate Auditors in ensuring compliance with the code, as well as personnel
June 2006. responsible for fair trade and export controls. Based on
cooperation with all relevant parties, Matsushita works to
* Capital Cost Management: an indicator created by Matsushita to evaluate enforce Companywide compliance policy, as well as provide
return on capital.
training and promote awareness, in all the countries and
regions where it operates.

Matsushita Electric Industrial Co., Ltd. 2007 49


In Japan, from 2006, Matsushita launched “Enhancing Information Security
Compliance Month” (implemented every October). During With the advent of the information society, the value of infor-
this period, the Company runs an intensive program to raise mation in business has grown enormously. This prompted
awareness about compliance, including the distribution of a Matsushita to take a pioneering step with the establishment
Compliance Guidebook to employees as a tool to put the of a Corporate Information Security Division in January
Matsushita Group Code of Conduct into practice, and the 2004. This division was created to achieve the three aims
implementation of a related test to assess understanding. listed below. Specifically, the Company will implement initia-
From fiscal 2008, the Company plans to extend these tives to attain a world-class level of information security by
activities to business sites worldwide to create a corporate setting and working toward common global targets and
culture that is more attuned to compliance issues. training information security personnel.
In addition, in July 2005, Matsushita set up a Global 1. Ensure a high degree of trust in the Company by
Corporate Business Ethics Hotline, enabling all employees achieving the same level of information security for
in Japan and overseas to receive advice about possible each business site and employee worldwide, and by
violations of laws related to their duties or corporate ethics. managing customer and business partner information
The Company also established a system whereby the in an appropriate manner.
Board of Corporate Auditors can directly receive concerns 2. Boost management efficiency and enhance corporate
from employees and other individuals with regard to value by ensuring trade secrets, personal information,
accounting or auditing irregularities, thereby helping to technical data and other information held by the
improve financial soundness. Company are used and shared safely.
3. Formulate common global rules, build a global imple-
Risk Management mentation framework and conduct regular training
In addition to centralized collection and analysis of informa- programs for all Matsushita employees to raise aware-
tion, Matsushita maintains a management cycle that links ness of information security among all employees and
risk management activities with other business manage- create a culture of information management.
ment initiatives. In April 2005, Matsushita established the
Global and Group (G&G) Risk Management Committee, Internal Control Over Financial Reporting
consisting of Directors and Executive Officers from various Matsushita has documented its internal control system,
departments of the Corporate Headquarters. Matsushita designed to ensure reliability in financial reporting of the
also established similar functional committees at business Matsushita Group including its subsidiaries, ranging from the
domain companies and subsidiaries to formulate appro- control infrastructure to actual internal control activities. The
priate countermeasures on a global and Group basis. Company has reinforced its internal controls by implement-
Specifically, all business domain companies and sub- ing self-checks and self-assessment programs, in addition
sidiaries of the Matsushita Group assess risks once a year, to regular internal auditing at each business domain com-
coinciding with the creation of annual business plans. pany. Matsushita has also appointed an Internal Auditing
Using the results of these surveys, the G&G Risk Manage- Manager at each business domain company who audits the
ment Committee then evaluates risks according to priority, compliance status and effectiveness of internal controls.
and directs each business domain company on appropri- The Corporate Internal Auditing Group supervises these
ate countermeasures. Progress in implementing these activities in order to ensure the reliability of each company’s
countermeasures is also monitored. financial reporting. With the aim of further enhancing the
Matsushita will make comprehensive efforts in risk man- Group’s internal control system, Matsushita has appointed
agement to recognize business risks through the above- approximately 300 personnel to conduct internal audits,
mentioned process and take countermeasures that protect including 26 people in the Corporate Internal Auditing Group.
the interests of all stakeholders, while helping the Company
achieve its business goals.

50 Matsushita Electric Industrial Co., Ltd. 2007


Information Disclosure Structure and Execution of capital efficiency. In terms of concrete measures, Matsushita
Accountability will concentrate management resources on its strategic
To enhance transparency and ensure accountability, the businesses, while actively pursuing manufacturing of more
Company established the Disclosure Committee, consisting competitive products based on its unique technologies.
of general or executive managers from departments that Moreover, in order to reinforce management structures, the
handle relevant information. The Committee checks the Company will reduce costs and curb total assets by reduc-
propriety of statements and descriptions in the Company’s ing inventories. Matsushita also strives to maximize its cor-
annual securities reports submitted to the Japanese regula- porate value by utilizing cash flows generated by business
tory authorities and its filings with the U.S. Securities and activities for actively distributing profits to shareholders
Exchange Commission, including its annual reports on Form through its own share repurchases and the payment of cash
20-F, while confirming the appropriateness and effective- dividends, as well as for acquiring intellectual property rights
ness of its disclosure controls and procedures. or conducting M&As.

Policy on Control of Matsushita Electric Industrial 2) Measures based on the basic policy to prevent
Co., Ltd. control by inappropriate parties
Basic Policy On April 28, 2005, the Board of Directors resolved to adopt
Since its establishment, Matsushita has operated its busi- a policy related to a Large-scale Purchase of the
nesses under its basic management philosophy, which sets Company’s shares called the Enhancement of Shareholder
forth that the mission of a business enterprise is to contrib- Value (ESV) Plan. With respect to a Large-scale Purchaser
ute to the progress and development of society and the who intends to acquire 20% or more of all voting rights of
wellbeing of people through its business activities, thereby the Company, this policy requires that (i) a Large-scale
enhancing the quality of life throughout the world. Aiming for Purchaser provides sufficient information, such as its outline,
further growth to become a global excellent company, purposes or conditions, the basis for determination of the
Matsushita will work to deliver sustained growth in corporate purchase price and funds for purchase, and management
value to satisfy its shareholders, investors, customers, busi- policies and business plans which the Large-scale Purchaser
ness partners, employees and all other stakeholders. intends to adopt after the completion of the Large-scale
Matsushita has a basic policy that shareholders should Purchase, to the Board of Directors before a Large-scale
make final decisions in the event of a Large-scale Purchase Purchase is to be conducted and (ii) after all required
of the Company’s shares, regarding whether or not the information is provided, the Board of Directors should be
Large-scale Purchase should be accepted. However, there allowed a sufficient period of time (a sixty-day period or a
is the possibility that such Large-scale Purchaser may not ninety-day period) for consideration. The Board of Directors
provide shareholders with sufficient information for making intends to assess and examine any proposed Large-scale
appropriate decisions. There is also concern that any Purchase after the information on such purchase is provided,
Large-scale Purchase may damage corporate value and and subsequently to disclose the opinion of the Board of
shareholder interest. In this event, the Company may take Directors in order to assist shareholders in making their
countermeasures in order to protect the interests of all decisions. The Board of Directors may negotiate with the
shareholders. Large-scale Purchaser or suggest alternative plans to
shareholders, if it is deemed necessary.
Measures to Realize Basic Policy If a Large-scale Purchaser does not comply with the rules
1) Specific measures to realize basic policy laid out in the ESV Plan, Matsushita’s Board of Directors
Matsushita has announced a mid-term management plan may take countermeasures against the Large-scale
called GP3, which will run from fiscal 2008 to fiscal 2010. Purchaser to protect the interests of all shareholders.
Based on the plan’s fundamental concept of delivering Countermeasures include the implementation of stock splits,
steady growth with profitability, the Company will implement issuance of stock acquisition rights or any other measures
a range of measures to achieve the targets of ¥10 trillion in that the Board of Directors is permitted to take under the
sales, representing growth, and ROE of 10%, measuring Company Law in Japan, other laws and the Company’s

Matsushita Electric Industrial Co., Ltd. 2007 51


Articles of Incorporation. If a Large-scale Purchaser com- On April 28, 2006, the Board of Directors resolved to
plies with the Large-scale Purchase rules, the Board of continue the ESV Plan. The Board of Directors also resolved
Directors does not intend to prevent the Large-scale to continue this ESV Plan on April 27, 2007. For further
Purchase at its own discretion, unless it is clear that such details, please see the press release issued on April 27,
Large-scale Purchase will cause irreparable damage or loss 2007 at the Company’s Web site:
to Matsushita. The Board of Directors will make decisions http://panasonic.co.jp/corp/news/official.data/data.dir/
relating to countermeasures by referring to advice from en070427-9/en070427-9.html
outside professionals, such as lawyers and financial advisers,
and fully respecting the opinions of outside directors and Evaluation of measures by the Board of Directors and
statutory corporate auditors. rationale for evaluation
The Board of Directors will adopt specific countermea- Matsushita’s current mid-term management plan was for-
sures which it deems appropriate at that time. If the Board of mulated as a specific measure to increase the Company’s
Directors elects to make a stock split for shareholders as of a corporate value in a sustained manner. The ESV Plan was
certain record date, the maximum ratio of the stock split shall formulated from the perspective of protecting shareholder
be five-for-one. If the Board of Directors elects to issue value, and is aimed at ensuring shareholders receive
stock acquisition rights in a rights offering, the Company will sufficient information to make decisions on share purchase
issue one stock acquisition right for every share held by proposals by allowing those responsible for the manage-
shareholders on a specified record date. One share shall be ment of the Company, the Board of Directors, to provide
issued on the exercise of each stock acquisition right. If the their evaluation of any proposal, and providing the
Board of Directors elects to issue stock acquisition rights as a opportunity for alternative proposals to be submitted.
countermeasure, it may determine the exercise period and Consequently, these measures, in accordance with
exercise conditions of the stock acquisition rights in consider- Basic Policy, are intended to protect the interests of all the
ation of the effectiveness thereof as a countermeasure, such Company’s shareholders.
as the condition that shareholders do not belong to a spe-
cific group of shareholders including a Large-scale Purchaser.
The Company recognizes that the aforementioned
countermeasures may cause damage or loss, economic or
otherwise, to a prospective Large-scale Purchaser who
does not comply with the Large-scale Purchase Rules.
Matsushita does not anticipate that taking such counter-
measures will cause shareholders, other than the Large-
scale Purchaser, economic damage or loss of any rights.
However, in the event that the Board of Directors deter-
mines to take a specific countermeasure, the Board of
Directors will disclose such countermeasure in a timely and
appropriate manner, pursuant to relevant laws and stock
exchange regulations.
The term of office of directors is one year, and they are
elected at the annual general meeting of shareholders in
June. Matsushita’s Board of Directors intends to review the
Large-scale Purchase Rules, as necessary, for reasons
including amendments to applicable legislation. Any such
review would be conducted strictly in the interests of all
shareholders.

52 Matsushita Electric Industrial Co., Ltd. 2007


Significant Differences in Corporate Governance Practices Between Matsushita and U.S. Companies Listed
on the NYSE
Companies listed on the NYSE must comply with certain standards regarding corporate governance under Section 303A of
the NYSE Listed Company Manual. However, listed companies that are foreign private issuers, such as Matsushita, are
permitted to follow home country practice in lieu of certain provisions of Section 303A.
The following table shows the significant differences between the corporate governance practices followed by U.S. listed
companies under Section 303A of the NYSE Listed Company Manual and those followed by Matsushita.

Corporate Governance Practices


Corporate Governance Practices Followed by Matsushita
Followed by NYSE-listed U.S. companies

A NYSE-listed U.S. company must The Company Law does not require Japanese joint stock corporations with corporate auditors such
have a majority of directors meeting
as Matsushita to have any independent directors on its board of directors. The Company Law has
the independence requirements under
Section 303A of the NYSE Listed provisions for an “outside director,” whose definition is similar to, but not the same as, an indepen-
Company Manual. dent director under the NYSE Listed Company Manual. An “outside director” is defined as a director
of the company who does not engage or has not engaged in the execution of business of the com-
pany or its subsidiaries as a director of any of these corporations, and who does not serve or has
not served as an executive officer, manager or in any other capacity as an employee of the company
or its subsidiaries. A Japanese joint stock corporation with corporate auditors, such as Matsushita,
is not obliged under the Company Law to have any outside directors on its board of directors.
However, Matsushita had two (2) outside directors as of June 27, 2007. The tasks of supervising
the administration of the company’s affairs are assigned not only to the board of directors but also to
corporate auditors, as more fully described below.

A NYSE-listed U.S. company must A Japanese joint stock corporation is not required to have any audit, nominating and compensation
have an audit committee with responsi-
committees, except for a “joint stock corporation with specified committees,” which is a corporate
bilities described under Section 303A
of the NYSE Listed Company Manual, governance system that started in April 2003 and which may be adopted by Japanese joint stock
including those imposed by Rule 10A-3 corporations meeting certain criteria.
under the U.S. Securities Exchange Act
Most Japanese joint stock corporations, including Matsushita, employ a corporate governance
of 1934. The audit committee must be
composed entirely of independent system based on corporate auditors. With this system, the tasks of supervising the administration of
directors, and the audit committee the company’s affairs conducted by directors are assigned not only to the board of directors but
must have at least three members and
also to corporate auditors who are appointed at a general meeting of shareholders, and who are
satisfy the requirements of Rule 10A-3
under the U.S. Securities Exchange Act separate and independent from the board of directors. Under the Company Law, Matsushita is
of 1934. required to appoint at least three (3) corporate auditors, and at least half of Matsushita’s corporate
auditors are required to be “outside corporate auditors” who must meet additional independence
requirements. An “outside corporate auditor” is defined as a corporate auditor who does not serve
or has not served as a director, accounting counselor, executive officer, manager or in any other
capacity as an employee of the company or any of its subsidiaries prior to the appointment. Under
the Company Law, Matsushita is required to establish a board of corporate auditors, comprising all
the company’s corporate auditors.
As of June 27, 2007, Matsushita had five (5) corporate auditors, of which three (3) were outside
corporate auditors. Each Corporate Auditor of Matsushita has a four-year term. In contrast, the term
of each Director of Matsushita is one year. Corporate auditors are obliged to attend the meetings of
the board of directors and express their opinion at the meetings if necessary. The board of corporate
auditors and corporate auditors have a statutory duty to supervise the administration of the company’s
affairs by directors. Each corporate auditor is required to prepare respectively their audit report of
Matsushita each fiscal year and submit the reports to the directors. Copies of the audit reports are
included in the appendix to the convocation notice of the ordinary general meeting of shareholders.

Matsushita Electric Industrial Co., Ltd. 2007 53


Corporate Governance Practices
Corporate Governance Practices Followed by Matsushita
Followed by NYSE-listed U.S. companies

A corporate auditor also has a statutory duty to examine the financial statements of Matsushita,
and receives auditors’ reports from an accounting auditor (a certified public accountant or an account-
ing firm). The board of corporate auditors has the power to request that Matsushita’s directors
submit a proposal for dismissal of an accounting auditor to a general meeting of shareholders. The
board of corporate auditors also has the power to directly dismiss an accounting auditor under
certain conditions. Matsushita’s directors must obtain the consent of its board of corporate auditors
in order to submit a proposal for election, dismissal and/or non-reelection of an accounting auditor
to a general meeting of shareholders.
With respect to the requirements of Rule 10A-3 under the U.S. Securities Exchange Act of 1934
relating to listed company audit committees, Matsushita relies on an exemption under that rule which is
available to foreign private issuers with a board of corporate auditors meeting certain requirements.

A NYSE-listed U.S. company must Under the Company Law, Matsushita’s directors must be elected and/or dismissed at a general
have a nominating/corporate gover-
meeting of shareholders. The board of directors nominates director candidates and submits a pro-
nance committee with responsibilities
described under Section 303A of the posal for election of directors to a general meeting of shareholders. The board of directors does not
NYSE Listed Company Manual. The have the power to fill vacancies thereon.
nominating/corporate governance
Matsushita’s corporate auditors must also be elected and/or dismissed at a general meeting of
committee must be composed entirely
of independent directors. shareholders. Matsushita’s directors must obtain the consent of the board of corporate auditors in
order to submit a proposal for election and/or dismissal of a corporate auditor to a general meeting
of shareholders. Each of the corporate auditors has the right to state his/her opinion concerning the
election, dismissal and/or resignation of any corporate auditor, including himself/herself, at a general
meeting of shareholders. The board of corporate auditors is also empowered to request directors to
submit a proposal for election of a specific person as a corporate auditor to a general meeting of
shareholders.

A NYSE-listed U.S. company must Under the Company Law, the maximum amounts of remunerations, including equity compensation
have a compensation committee with such as stock options, bonuses, and other financial benefits given in consideration of performance of
responsibilities described under
Section 303A of the NYSE Listed duties (collectively, the “remunerations”) of directors and corporate auditors of Japanese joint stock
Company Manual. The compensation corporations, except for a “joint stock corporation with specified committees,” must be approved at
committee must be composed entirely a general meeting of shareholders. Companies must also obtain the approval at a general meeting of
of independent directors.
shareholders to change such maximum amounts. Therefore, the remunerations of the directors and
corporate auditors are subject to the approval of shareholders.
The maximum total amounts of remunerations for Directors and Corporate Auditors of Matsushita
is therefore determined by a resolution at a general meeting of shareholders, and thus remunerations
of the Directors and Corporate Auditors of Matsushita are under the oversight of shareholders. The
remuneration amount for each Director is determined by Matsushita’s Representative Directors who
are delegated to make such determination by the Board of Directors, and the amount of remunera-
tion for each Corporate Auditor is determined upon discussions amongst the Corporate Auditors.

A NYSE-listed U.S. company must Pursuant to the Company Law, if a Japanese joint stock corporation, such as Matsushita, desires
generally obtain shareholder approval
to adopt an equity compensation plan under which stock acquisition rights are granted on spe-
with respect to any equity compensa-
tion plan. cially favorable conditions (except where such rights are granted to all shareholders on a pro rata
basis), such plan must be approved by a “special resolution” of a general meeting of shareholders
that satisfies the prescribed quorum. (In the case of Matsushita, such quorum is one-third of the
total number of voting rights and the approval of at least two-thirds of the voting rights repre-
sented at the meeting is required as provided by Matsushita’s Articles of Incorporation pursuant to
the Company Law.)

54 Matsushita Electric Industrial Co., Ltd. 2007


Corporate Social Responsibility

Matsushita Management Philosophy

Basic Management Objective


“Recognizing our responsibilities as industrialists, we will devote ourselves to the
progress and development of society and the well-being of people through our
business activities, thereby enhancing the quality of life throughout the world.”

Since its establishment, Matsushita has sought to contribute reasoned that the true mission of a manufacturer was to
to society through its business activities. This is based on supply basic necessities at a price anybody could afford to
the idea that customers and the public at large are stake- help eliminate poverty worldwide. This idea that companies
holders in corporations, not just certain individuals and can contribute to the prosperity and well-being of mankind
shareholders. The Company’s founder, Konosuke remains an integral part of the Matsushita Group’s business
Matsushita, believed that raising both material and spiritual activities today.
wealth was the key to human happiness. Accordingly, he

Practicing CSR Management


Matsushita believes that implementing this management Based on these three areas, the Matsushita Group’s
philosophy in all its business activities is the core essence of CSR activities focus on global procurement, human rights,
corporate social responsibility (CSR). occupational health and safety, product quality, customer
In terms of CSR, the Company recognizes the impor- satisfaction, universal design, and corporate citizenship
tance of three areas—promoting environmental manage- activities. In this framework, Matsushita is implementing
ment, enforcing compliance, and reinforcing information CSR initiatives linked to its business activities and actively
security—as the main minimum standards for groupwide promoting its own corporate citizenship activities in Japan
CSR management. and overseas.

Realizing a Sustainable Society

Environment Society
Coexistence with the global environment Realizing a ubiquitous networking society

Create useful
Customers products and
services Government/Local
communities
NPOs/NGOs
Coexist Achieve GP3 plan targets and Contribute to
Business partners with the global the creation of
practice CSR management
environment a sound society
Employees
Realize
Shareholders/ better working
Other investors environments

Quality/
Global procurement Human rights/Occupational Customer satisfaction/ Corporate citizenship
health and safety Universal design activities

Promote environmental management


Enforce compliance
Clearer Strengthen information security Open communication
accountability with society
Corporate governance/Internal control/Risk management

“A company is a public entity of society”

Matsushita Electric Industrial Co., Ltd. 2007 55


Working to Retain the Trust of Stakeholders

■ Global compliance initiatives: compliance activities tailored to the characteristics of


each overseas operating region.
■ Enhancing Compliance Month: activities such as sending messages from the
president and distributing guidebooks to employees designed to raise awareness of
compliance throughout the Company.
■ Ensuring information security: measures to protect information about customers,
business partners and third-party assets, as well as personal information, and steps
to reinforce related systems.
Matsushita employees involved in activities
to locate remaining FF-type kerosene fan ■ Reports by the Company concerning its response to issues with FF-type kerosene
heaters in cold regions of Japan fan heaters: ongoing and rigorous steps to deal with remaining issues through the
Corporate FF Customer Support & Management Division.

Protecting the Environment

Basic Environmental Policy


Coexistence with the global environment is one of Matsushita’s corporate visions for the 21st century. Matsushita strives to
create “new value for living” by minimizing environmental impact while improving customer quality of life with its products. The
Company is thus promoting environmental management based on its Green Plan 2010, a global environmental action plan with
targets to be achieved by 2010. And under a new symbol called “eco ideas,” representing Matsushita’s commitment to
achieving environmental global excellence, the Company will roll out a number of groundbreaking environmental initiatives.

Initiatives Balancing Business Activities With Environmental Preservation


■ Matsushita Eco Technology Center (METEC) conducts research into making home
appliances more recyclable, while collecting resources from end-of-life products. All
parts of the Matsushita Group receive feedback from the R&D programs conducted
by METEC into designing easy-to-dismantle products, disassembly technologies and
related work on materials. The results filter down into a wide range of products. In
fiscal 2007, METEC recycled a total of around 2,220,000 appliances.
■ Matsushita has developed the world’s first lead-free PDP. Although the creation of
Matsushita’s energy-saving activities in
Malaysia have won approval as CDM lead-free substitute materials presented significant difficulties, the Company overcame
projects from the United Nations these challenges with the development of new materials featuring unique additives that
have characteristics similar to lead. Lead-free products were then realized by optimiz-
ing heating processes during manufacturing.
■ The Company is actively implementing activities to reduce CO2 emissions at its
plants in China. In fiscal 2007, the Company ran an internal energy conservation
competition featuring 213 energy use-reduction projects from 35 companies. By
implementing best practices across its manufacturing sites in China, CO2 emissions
were cut by 53,000 tons compared with the previous fiscal year.
■ At its factories in Malaysia, Matsushita applied for clean development mechanism
A practical test bed for product recycling
(CDM)* registration for 26 projects such as the replacement of compressors, boilers
and other equipment with high-efficiency versions. Approval was received from the
Japanese government in February 2006 and the Malaysian government the following
July. Subsequently, after gaining approval from the United Nations in March 2007,
Matsushita became the first company in Japan to gain CDM accreditation for
Dow Jones FTSE4 Ethibel
Sustainability GOOD Global Sustainability energy-conservation projects.
Index 100 Index Index
* A system whereby industrialized nations work with developing countries to reduce emissions of
greenhouse gases through projects in developing countries. In return, the industrialized nation receives
credits towards its own emissions in proportion to the total emissions reduced through the project.

56 Matsushita Electric Industrial Co., Ltd. 2007


Examples of Matsushita’s Corporate Citizenship Activities

Supporting the development of future generations


■ RiSuPia: a fun, hands-on science and mathematics museum opened in the
Panasonic Center Tokyo in August 2006.
■ Kid Witness News: a program launched worldwide with the aim of boosting the
creativity and communication skills of children through video production.
■ Shakespeare for Children Series: a tour in Japan sponsored under the Panasonic brand.
■ Book donations: Matsushita teamed up with a bank in Brazil to gift 2,000 library
books to local children aged 3 to 12. RiSuPia in the Panasonic Center Tokyo

■ Support for schools in Thailand: Over the years, Matsushita has endowed the
construction of 75 elementary schools in Thailand. Every year, the Company
donates educational materials and AV products such as TVs and DVD recorders to
the schools.
■ Disabled person support group in Indonesia: 40 local Matsushita employees helped
with cleaning and the installation of signs, while the Company provided support in
the form of donations of electronic equipment, food and medicines.
■ Mobile phone recycling: Matsushita called on employees and local residents in North
America to return their old mobile phones, which the Company then gave to an NPO Use of the Astro Vision screen was
called Phones for Life*. donated to Gallaudet University to air
a public service announcement
* An NPO that collects old mobile phones, reconditions them as new, and then donates them to people
on lower incomes for communication during disasters and other emergencies.

■ Dreams Come to School ACADEMIC: Matsushita participated in this program run by


Numbers and percentages of
women in positions of responsibility
Japan’s Ministry of Economy, Trade and Industry designed to help children plan
Number %
their future careers. 2,500 Number of women in positions of responsibility 25
Percentage of female employees in positions of
responsibility among total female employees
Working to realize a fully inclusive society 2,000 1,751 20
1,647
1,575
■ Okayama Kibikogen Wheelchair “Fureai” Road Race: support for a race that allows 1,476
16
1,500 1,268 15
runners and wheelchair participants to compete over the same course. 14
12 12
■ Kids Project: Matsushita volunteers participated in this project in Tokyo that helps 1,000
11
10
to build bonds with disabled children. The Company also provided donations and
event venues. 500 5

■ Video equipment donation: Matsushita donated a video production studio to Gallaudet


0 0
University in the United States, the world’s only liberal arts college for the deaf and 2003 2004 2005 2006 2007
hard of hearing. The Company also aired a public service announcement made by the * Total for Matsushita Electric Industrial and major Group
companies
university on its giant Astro Vision screen in Times Square, New York, in 2006. People in positions of responsibility: employees that
have been appointed to positions such as coordinator
■ Donations for the disabled: Matsushita employees in Singapore give monthly donations or councilor

to a group that supports disabled people. The Company then doubles the amount.
For more information about CSR
Creating Better Workplaces activities, please refer to the
following websites:
■ Corporate Diversity Promotion Division established: In April 2006, Matsushita set up
a Corporate Diversity Promotion Division headed by the Company’s president. The Corporate Social Responsibility (CSR)
http://panasonic.net/csr/
council’s aims are to promote greater participation by women in management, and
Environmental Activities
encourage the creation of a more diverse workforce regardless of age or nationality.
http://panasonic.net/eco/
■ Promoting e-work: leveraging the advantages of ICT, Matsushita is promoting more Corporate Citizenship Activities
flexible working styles unrestricted by time or place, and creating more diverse, http://panasonic.net/citizenship/
comfortable workplaces.

Matsushita Electric Industrial Co., Ltd. 2007 57


Directors, Corporate Auditors and Executive Officers (As of June 27, 2007)
Directors
■ Chairman of the Board ■ Vice Chairman of the Board ■ President

Kunio Nakamura Masayuki Matsushita Fumio Ohtsubo


■ Executive Vice Presidents ■ Senior Managing Directors

Takami Sano Susumu Koike Shunzo Ushimaru Koshi Kitadai Toshihiro Sakamoto
Representative in Tokyo/in charge of In charge of Technology and In charge of Domestic Consumer Marketing/ President, Panasonic Automotive Systems President, Panasonic AVC Networks
Automotive Electronics Business/Panasonic EV Semiconductor Company Electrical Supplies Sales, Project Sales and Company/in charge of Industrial Sales Company
Energy Co., Ltd./Panasonic System Solutions Building Products Sales/Advertising and
Company/Panasonic Mobile Communications Design/Chairman, Corporate Brand
Co., Ltd./Corporate eNet Business Division/ Committee
Corporate Construction Business Promotion
Division

■ Managing Directors

Yasuo Katsura Takahiro Mori Shinichi Fukushima Junji Esaka Hitoshi Otsuki Ikusaburo Kashima
Director, Tokyo Branch In charge of Corporate Planning/Associate In charge of Personnel, General Affairs and In charge of Home Appliances Business/ In charge of Overseas Operations In charge of Legal Affairs/Corporate Risk
Director, Corporate IT Innovation Division/ Social Relations/in charge of e-Work President of Matsushita Home Appliances Management, Corporate Information Security,
in charge of Panasonic Start-up Fund/ Promotion Office Company/in charge of Lighting Company and and Corporate Business Ethics/
Vice Chairman, Corporate Brand Committee Matsushita Refrigeration Company Legal Consultation & Solutions Center/
Corporate International Affairs
■ Directors ■ Honorary Chairman
of the Board and
Executive Advisor,
Member of the Board

Ikuo Uno Yoshifumi Nishikawa Hidetsugu Otsuru Makoto Uenoyama Masaharu Matsushita
In charge of Facility Management/Quality In charge of Accounting and Finance
Administration/Corporate FF Customer
Support & Management Division/Environmental
Affairs/Recycling Business Promotion
Corporate Auditors
■ Senior Corporate Auditors ■ Corporate Auditors

Yukio Furuta Kenichi Hamada Yasuo Yoshino Ikuo Hata Hiroyuki Takahashi
Chairman, Matsushita Group Auditors
Meeting

Executive Officers
■ Managing Executive Officers Fujio Nakajima Hideo Kawasaki Naoto Noguchi
Nobutane Yamamoto Senior Vice President, Panasonic AVC Networks Company/Director, President, Semiconductor Company Director, Corporate Environmental Affairs Division/in charge of
Technology Planning & Development Center, Panasonic AVC Corporate Quality Administration Division
In charge of Global Procurement/Global Logistics/Director, Corporate Shigeru Omori
Networks Company/General Manager, Digital Broadcasting Business
Procurement Division
Promotion Office Director, Corporate Industrial Marketing & Sales Division Osamu Waki
Yoshinobu Sato President, Panasonic Mobile Communications Co., Ltd.
Takae Makita Takumi Kajisha
Director, Corporate Marketing Division for Consumer Products/
In charge of Information Systems/Associate Director, Corporate IT In charge of Corporate Communications Division/Director, Corporate Toshiaki Kobayashi
in charge of Corporate CS Division and Showroom Strategic Planning
Innovation Division Communications Division/in charge of CSR Office, Corporate President, Panasonic Electronic Devices Co., Ltd.
Office/Chairman, Showroom Strategic Committee
Advertising Group, and Corporate Citizenship Group/Vice Chairman,
Yoshihiko Yamada Masashi Makino Showroom Strategic Committee Joseph Taylor
Director, Corporate Division for Promoting “Manufacturing-oriented” COO, Panasonic Corporation of North America
Director, Corporate Management Division for North America/
Innovation Masaaki Fujita
Chairman, Panasonic Corporation of North America Yoshiiku Miyata
Senior Vice President, Panasonic AVC Networks Company/Director,
Ken Morita Joachim Reinhart Visual Products and Display Devices Business Group, PDP TV Director, Corporate Management Division for Europe/
COO, Panasonic Europe Ltd. Business Unit, Panasonic AVC Networks Company CEO, Panasonic Europe Ltd.
Senior Vice President, Panasonic AVC Networks Company/Director,
Visual Products and Display Devices Business Group, Panasonic AVC Yutaka Mizuno Kazunori Takami Takashi Toyama
Networks Company
Vice President, Panasonic Automotive Systems Company/ In charge of Corporate Marketing Division for National Brand Home President, Panasonic System Solutions Company/Director,
in charge of Sales, Panasonic Automotive Systems Company Appliances and Corporate Marketing Division for National Brand Corporate Construction Business Promotion Division
■ Executive Officers Wellness Products/Director, Corporate Marketing Division for
Mikio Ito National Brand Home Appliances Jun Ishii
Yoshitaka Hayashi In charge of Public and Private Institutions Associate Director, Corporate Marketing Division for Consumer
Director, Corporate Management Division for China and Yoshihisa Fukushima Products
Northeast Asia/Chairman, Panasonic Corporation of China Kazuhiro Tsuga In charge of Intellectual Property/Director, Corporate Intellectual
In charge of Digital Network & Software Technology/Overseas R&D Property Division/ President, Intellectual Property Rights Operations Toshiro Kisaka
Centers/Digital Network Strategic Planning Office Company Director, Corporate Management Division for Asia and Oceania/
President, Panasonic Asia Pacific Pte. Ltd.
Ikuo Miyamoto Masatsugu Kondo
President, Motor Company President, Matsushita Battery Industrial Co., Ltd./President,
Rechargeable Battery Company, Matsushita Battery Industrial Co., Ltd.
58 Matsushita Electric Industrial Co., Ltd. 2007
Risk Factors

Once a year, Matsushita implements a Groupwide risk assessment survey to identify potential risks in an
integrated and comprehensive manner. By identifying, assessing and evaluating risks according to priority,
Matsushita specifies risks related to the Corporate Headquarters, business domain companies and Group
affiliates, takes countermeasures that correspond to the materiality of each risk, and seeks continuous improve-
ments through the monitoring of the progress of such countermeasures.
Primarily because of the business areas and geographical areas where it operates, and the highly competitive
nature of the industry to which it belongs, Matsushita is exposed to a variety of risks and uncertainties in con-
ducting its businesses, including, but not limited to, the following. These risks may adversely affect Matsushita’s
business, operating results and financial condition. This section includes forward-looking statements and future
expectations as of the date of this annual report.

Risks Related to Economic Conditions losses from valuation declines of investment securities. Such
decreases in the value of stocks may occur, causing adverse
Weakness in Japanese and global economies may cause effects to Matsushita’s operating results and financial condition.
reduced demand for Matsushita’s products The decrease in the value of Japanese stocks may also reduce
Demand for Matsushita’s products and services may be affected stockholders’ equity on the balance sheet, as unrealized hold-
by general economic trends in the countries or regions in which ing gains (losses) of available-for-sale securities are included as
Matsushita’s products and services are sold. Economic down- part of accumulated other comprehensive income (loss).
turns and resulting declines in demand in Matsushita’s major
markets worldwide may thus adversely affect the Company’s Risks Related to Matsushita’s Business
business, operating results and financial condition.
Competition in the industry may adversely affect
Currency exchange rate fluctuations could adversely affect Matsushita’s ability to maintain profitability
Matsushita’s operating results Matsushita develops, produces and sells a broad range of prod-
Foreign exchange rate fluctuations may adversely affect ucts and therefore faces many different types of competitors,
Matsushita’s business, operating results and financial condition, from large international companies to relatively small, rapidly
because its international business transactions and costs and growing, and highly specialized organizations. Matsushita may
prices of Matsushita’s products and services in overseas countries choose not to fund or invest in one or more of its businesses to
are affected by foreign exchange rate changes. In addition, the same degree as its competitors in those businesses do, or it
foreign exchange rate changes can also affect the yen value of may not be able to do so in a timely manner or even at all. These
Matsushita’s investments in overseas assets and liabilities because competitors may have greater financial, technological, and
Matsushita’s consolidated financial statements are presented in marketing resources than Matsushita in the respective busi-
Japanese yen. Generally, an appreciation of the yen against other nesses in which they compete.
major currencies such as the U.S. dollar and the euro may ad-
versely affect Matsushita’s operating results. Meanwhile, a depre- Rapid declines in product prices may adversely affect
ciation of the yen against the aforementioned major currencies Matsushita’s financial condition
may have a favorable impact on Matsushita’s operating results. Matsushita’s business is subject to intense price competition
worldwide, which makes it difficult for the Company to determine
Interest rate fluctuations may adversely affect Matsushita’s product prices and maintain adequate profits. Such intensified
financial condition, etc. price competition may adversely affect Matsushita’s profits,
Matsushita is exposed to interest rate fluctuation risks which especially in terms of possible decreases in demand. For the year
may affect the Company’s operational costs, interest expenses, ending March 31, 2008, Matsushita expects that its product prices
interest income and the value of financial assets and liabilities. in consumer digital electronics and many other business areas will
Accordingly, interest rate fluctuations may adversely affect the continue to decline, as has been the case in recent years.
Company’s business, operating results and financial condition.
Matsushita’s business is, and will continue to be, subject
Decreases in the value of Japanese stocks may adversely to risks generally associated with international business
affect Matsushita’s financial results operations
Matsushita holds mostly Japanese stocks as part of its invest- One of Matsushita’s business strategies is business expansion in
ment securities. The value of these stocks may drop substan- overseas markets. In many of these markets, Matsushita may
tially due to economic conditions or other factors, resulting in face risks generally associated with international manufacturing

Matsushita Electric Industrial Co., Ltd. 2007 59


and other business operations, such as political instability, cul- technical and management professionals. Matsushita anticipates
tural and religious differences, the spread of infectious diseases that it will need to hire additional skilled personnel in all areas of
and labor relations, as well as economic uncertainty and foreign its business. Industry demand for such employees, however,
currency exchange risks. Matsushita may also face barriers in exceeds the number of personnel available, and the competition
commercial and business customs in foreign countries, including for attracting and retaining these employees is intense. Because
difficulties in timely collection of accounts receivable or in building of this intense competition for skilled employees, Matsushita may
and expanding relationships with customers, subcontractors or be unable to retain its existing personnel or attract additional
parts suppliers. Matsushita may also experience various political, qualified employees to keep up with future business needs. If this
legal or other restrictions in investment, trade, manufacturing, should happen, Matsushita’s business, operating results and
labor or other aspects of operations, including restrictions on financial condition could be adversely affected.
foreign investment or the repatriation of profits on invested capi-
tal, nationalization of local industry, changes in export or import Alliances with, and strategic investments in, third parties
restrictions or foreign exchange controls, and changes in the tax undertaken by Matsushita may not produce positive results
system or rate of taxation in countries where Matsushita operates Matsushita develops its business by forming alliances or joint
businesses. With respect to products exported overseas, tariffs, ventures with, and making strategic investments in, other com-
other barriers or shipping costs may make Matsushita’s products panies, including investments in venture companies. Further-
less competitive in terms of price. Expanding its overseas busi- more, the strategic importance of partnering with third parties is
ness may require significant investments long before Matsushita increasing. In some cases, such partnerships are crucial to
realizes returns on such investments, and increased investments Matsushita’s goal of introducing new products and services,
may result in expenses growing at a faster rate than revenues. but Matsushita may not be able to successfully collaborate or
achieve expected synergies with its partners. Matsushita does
Matsushita may not be able to keep pace with technological not, however, control these partners, who may make decisions
changes and develop new products and services in a regarding their business undertakings with Matsushita that may
timely manner to remain competitive be contrary to Matsushita’s interests. In addition, if these part-
Matsushita may fail to introduce new products and services in ners change their business strategies, Matsushita may fail to
response to technological changes in a timely manner. Some of maintain these partnerships.
Matsushita’s core businesses, such as consumer digital elec-
tronics and key components and devices, are concentrated in Matsushita is dependent on the ability of third parties to
industries where technological innovation is the central competi- deliver parts, components and services in adequate quality
tive factor. Matsushita continuously faces the challenge of de- and quantity in a timely manner, and at a reasonable price
veloping and introducing viable and innovative new products. Matsushita’s manufacturing operations depend on obtaining
Matsushita must predict with reasonable accuracy both future raw materials, parts and components, equipment and other
demand and new technologies that will be available to meet supplies including services from reliable suppliers in adequate
such demand. If Matsushita fails to do so, it will not be able to quality and quantity in a timely manner. It may be difficult for
compete in new markets. Matsushita to substitute one supplier for another, increase the
number of suppliers or change one component for another in a
Matsushita may not be able to develop product formats timely manner or at all due to the interruption of supply or in-
that can prevail as de facto standards creased industry demand. This may adversely affect the
Matsushita has been forming alliances and partnerships with Matsushita Group’s operations. Although Matsushita decides
other major manufacturers to strengthen technologies and the purchase prices by contract, the prices of raw materials includ-
development of product formats, such as next-generation home ing oil, parts and components, may increase due to changes in
and mobile networking products, data storage devices, and supply and demand. Some components are only available from
software systems. Despite these efforts, Matsushita’s competi- a limited number of suppliers, which also may adversely affect
tors may succeed in developing de facto standards for future Matsushita’s business, operating results and financial condition.
products before Matsushita. In such cases, the Company’s
competitive position, business, operating results and financial Matsushita is exposed to the risk that its customers may
condition could be adversely affected. encounter financial difficulties
Many of Matsushita’s customers purchase products and services
Matsushita may not be able to successfully recruit and from Matsushita on payment terms that do not provide for imme-
retain skilled employees, particularly scientific, technical diate payment. If customers from whom Matsushita has substan-
and management professionals tial accounts receivable encounter financial difficulties and are
Matsushita’s future success depends largely on its ability to unable to make payments on time, Matsushita’s business, oper-
attract and retain certain key personnel, including scientific, ating results and financial condition could be adversely affected.

60 Matsushita Electric Industrial Co., Ltd. 2007


Risks Related to Matsushita’s Management Plans brought against Matsushita by third parties. In such cases,
Matsushita may incur significant expenses for such lawsuits.
Matsushita is implementing its new mid-term management plan, Furthermore, Matsushita may be prohibited from using certain
called the “GP3 plan” (announced on January 10, 2007) for the important technologies or liable for damages in cases of
three-year term ending March 2010. In line with its twin corporate admitted violations of intellectual property rights of others.
visions of “contributing to realizing a ubiquitous networking society”
and “coexistence with the global environment,” Matsushita aims Changes in accounting standards and tax systems may
to earn the support of all its stakeholders worldwide by sustaining adversely affect Matsushita’s financial results and condition
growth through continued innovation and ensuring sound busi- Introduction of new accounting standards or tax systems, or
ness activities on a global basis. Due mainly to the various risk changes thereof, which Matsushita cannot predict, may have a
factors described in this section, Matsushita may not be material adverse effect on the Company’s operating results and
successful in achieving all the goals set out in its mid-term financial condition. In addition, if tax authorities have different
management plan. In addition, Matsushita may not be able to opinions from Matsushita on the Company’s tax declarations,
improve efficiency or realize growth through these measures Matsushita may need to make larger tax payments than estimated.
due to the increased costs arising from unexpected additional
reorganization or restructuring, improper allocation of operational Payments or compensation related to environmental
resources or other unpredictable factors. Also, Matsushita regulations or issues may adversely affect Matsushita’s
announced on April 27, 2007, its annual forecast and major business, operating results and financial condition
initiatives for the year ending March 31, 2008. However, Matsushita is subject to environmental regulations such as
Matsushita may not be successful in achieving all the targets or those relating to air pollution, water pollution, elimination of
in realizing the expected benefits because of various external hazardous substances, waste management, product recycling,
and internal factors. and soil and groundwater contamination, and may be held
responsible for certain related payments or compensation.
Risks Related to Legal Restrictions and Litigations Furthermore, if these regulations become stricter and an addi-
tional duty of eliminating the use of environmentally hazardous
Matsushita may be subject to product liability or warranty materials is imposed, or if the Company determines that it is
claims that could result in significant direct or indirect costs necessary and appropriate, from the viewpoint of corporate
The occurrence of defects in Matsushita products could make social responsibility, to respond to environmental issues, the
Matsushita liable for damages not covered by product and payment of penalties for the violation of these regulations or
completed operation liability insurance, whereby the Company voluntary payment of compensation for consolation to parties
could incur significant expenses. Due to negative publicity affected by such issues may adversely affect Matsushita’s
concerning these problems, Matsushita’s business, operating business, operating results and financial condition.
results and financial condition may be adversely affected.
Leaks of confidential information may adversely affect
Matsushita may fail to protect its proprietary intellectual Matsushita’s business
properties, or face claims of intellectual property infringement In the normal course of business, Matsushita holds confidential
by a third party, and may lose its intellectual property rights information mainly about customers regarding credit worthiness
on key technologies or be liable for significant damages and other information, as well as confidential information about
Matsushita’s success depends on its ability to obtain intellectual companies and other third parties. Such information may be
property rights covering its products and product design. Patents leaked due to an accident or other inevitable cause, and any
may not be granted or may not be of sufficient scope or force to material leakage of confidential information may result in
provide Matsushita with adequate protection or commercial significant expense for related lawsuits and adversely affect
advantage. In addition, effective copyright and trade secret pro- Matsushita’s business and image. Moreover, there is a risk that
tections may be unavailable or limited in some countries in which Matsushita’s trade secrets may be leaked by illegal conduct or
Matsushita operates. Competitors or other third parties may also by mere negligence of external parties, etc. If such is the case,
develop technologies that are protected by patents and other Matsushita’s business, operating results and financial condition
intellectual property rights, which make such technologies may be adversely affected.
unavailable or available only on terms unfavorable to Matsushita.
The Company obtains licenses for intellectual property rights Governmental laws and regulations may limit Matsushita’s
from other parties; however, such licenses may not be available activities or increase its operating costs
at all or on acceptable terms in the future. Litigation may also be Matsushita is subject to governmental regulations in Japan and
necessary to enforce Matsushita’s intellectual property rights or other countries in which it conducts its business, including
to defend against intellectual property infringement claims governmental approvals required for conducting business and

Matsushita Electric Industrial Co., Ltd. 2007 61


investments, laws and regulations governing the telecommunica- recorded asset values. If these long-lived assets do not gener-
tions businesses and electric product safety, national security- ate sufficient cash flows, impairment losses will have to be
related laws and regulations and export/import laws and recognized, adversely affecting Matsushita’s results of opera-
regulations, as well as commercial, antitrust, patent, product tions and financial condition.
liability, environmental laws and regulations, consumer protection,
financial and business taxation laws and regulations, and internal Realizability of deferred tax assets may increase
controls regulations due to the implementation of stricter laws Matsushita’s provision for income tax
and regulations and stricter interpretations. In assessing the realizability of deferred tax assets based on the
However, to the extent that Matsushita cannot comply with expected future generation of taxable income, Matsushita con-
these laws and regulations from technical and economic per- siders whether it is more likely than not that any portion or all of
spectives, or if they become stricter and Matsushita determines the deferred tax assets will not be realized. If Matsushita deter-
that it would not be economical to continue to comply with mines that temporary differences and loss carryforwards cannot
them, Matsushita would need to limit its activities in the affected be realized upon the generation of future taxable income during
business areas. In addition, these laws and regulations could the deductible periods due to deteriorating business conditions,
increase Matsushita’s operating costs. valuation allowance against deferred tax assets could be recog-
nized and Matsushita’s provision for income tax may increase.
Risks Related to Disasters or Unpredictable Events
Financial results and condition of associated companies
Matsushita’s facilities and information systems could be dam- may adversely affect Matsushita’s operating results and
aged as a result of disasters or unpredictable events, which financial condition
could have an adverse effect on its business operations Matsushita holds equities of several associated companies.
Matsushita’s headquarters and major facilities including manu- Matsushita can exercise influence over operating and financ-
facturing plants, sales offices and research and development ing policies of these companies. However, Matsushita does
centers are located in Japan. Matsushita also operates procure- not have the right to make decisions for them since the com-
ment, manufacturing, logistics, sales and research and develop- panies operate independently. Some companies may record
ment facilities all over the world. If major disasters such as losses. If these associated companies do not generate profits,
earthquakes, fires, floods, wars, terrorist attacks, computer Matsushita’s business results and financial condition may be
viruses or other events occur, or Matsushita’s information adversely affected.
system or communications network breaks down or operates
improperly as a result of such events, Matsushita’s facilities may American Depositary Share (ADS) holders have fewer rights
be seriously damaged, or the Company may have to stop or than shareholders and may not be able to enforce judg-
delay production and shipment. Matsushita may incur expenses ments based on U.S. securities laws
relating to such damages. The rights of shareholders under Japanese law to take actions,
including exercising their voting rights, receiving dividends and
Other Risks distributions, bringing derivative actions, examining Matsushita’s
accounting books and records, and exercising appraisal rights
External economic conditions may adversely affect are available only to shareholders of record. Because the de-
Matsushita’s pension plans positary, through its nominee, is the record holder of the shares
Matsushita has contributory, funded benefit pension plans underlying the ADSs, only the depositary can exercise those
covering substantially all employees in Japan who meet eligibility rights in connection with the deposited shares. The depositary
requirements. A decline in interest rates may cause a decrease in will make efforts to exercise their voting rights underlying ADSs
the discount rate on benefit obligations. A decrease in the value in accordance with the instructions of ADS holders and will pay
of stocks may also affect the return on plan assets. As a result, the dividends and distributions collected from Matsushita.
the unrecognized portion of actuarial loss may increase, leading However, ADS holders will not be able to bring a derivative
to a future recognized actuarial loss on an increase in future net action, examine Matsushita’s accounting books and records, or
periodic benefit costs of these pension plans. exercise appraisal rights through the depositary.

Some long-lived assets may not produce adequate returns


Matsushita has many long-lived assets, such as plant, property
and equipment, and goodwill, that generate returns. The
Company periodically reviews the recorded value of its long-
lived assets to determine if the future cash flows to be derived
from these properties will be sufficient to recover the remaining

62 Matsushita Electric Industrial Co., Ltd. 2007


Financial Section

Contents

Five-Year Summary ............................................................................ 64


Financial Review ................................................................................. 65
Consolidated Balance Sheets ............................................................ 72
Consolidated Statements of Income ................................................... 74
Consolidated Statements of Stockholders’ Equity .............................. 75
Consolidated Statements of Cash Flows ............................................ 76
Notes to Consolidated Financial Statements ...................................... 77
Management’s Report on Internal Control Over Financial Reporting ... 115
Report of Independent Registered Public Accounting Firm ................. 116

Matsushita Electric Industrial Co., Ltd. 2007 63


Five-Year Summary
Years ended March 31

Thousands of
U.S. dollars,
Millions of yen, except per share
except per share information information
2007 2006 2005 2004 2003 2007
For the year
Net sales ............................................ ¥9,108,170 ¥8,894,329 ¥8,713,636 ¥7,479,744 ¥7,401,714 $77,187,881
Operating profit .................................. 459,541 414,273 308,494 195,492 126,571 3,894,415
Income before income taxes .............. 439,144 371,312 246,913 170,822 68,916 3,721,559
Net income (loss) ............................... 217,185 154,410 58,481 42,145 (19,453) 1,840,551
Capital investment* ............................ ¥ 418,334 ¥ 345,819 ¥ 374,253 ¥ 271,291 ¥ 251,470 $ 3,545,203
Depreciation* ..................................... 280,177 275,213 287,400 253,762 283,434 2,374,381
R&D expenditures .............................. 578,087 564,781 615,524 579,230 551,019 4,899,042

At year-end
Long-term debt .................................. ¥ 226,780 ¥ 264,070 ¥ 477,143 ¥ 460,639 ¥ 588,202 $ 1,921,864
Total assets ........................................ 7,896,958 7,964,640 8,056,881 7,438,012 7,834,693 66,923,373
Stockholders’ equity .......................... 3,916,741 3,787,621 3,544,252 3,451,576 3,178,400 33,192,720
Number of shares issued
at year-end (thousands) .................... 2,453,053 2,453,053 2,453,053 2,453,053 2,447,923
Number of shareholders ..................... 250,858 252,239 275,413 282,190 275,266
Number of employees:
Domestic ........................................ 145,418 144,871 150,642 119,528 121,451
Overseas ........................................ 183,227 189,531 184,110 170,965 166,873
Total ............................................... 328,645 334,402 334,752 290,493 288,324

Per share data (Yen)


Net income (loss) per share:
Basic .............................................. ¥ 99.50 ¥ 69.48 ¥ 25.49 ¥ 18.15 ¥ (8.70) $ 0.84
Diluted ............................................ 99.50 69.48 25.49 18.00 (8.70) 0.84
Cash dividends per share ................... 25.00 17.50 15.25 12.50 10.00 0.21
Stockholders’ equity per share ........... ¥ 1,824.89 ¥ 1,714.22 ¥ 1,569.39 ¥ 1,488.77 ¥ 1,347.17 $ 15.47

Ratios (%)
Operating profit/sales ......................... 5.0% 4.7% 3.5% 2.6% 1.7%
Income before income taxes/sales ..... 4.8 4.2 2.8 2.3 0.9
Net income (loss)/sales ...................... 2.4 1.7 0.7 0.6 (0.3)
Stockholders’ equity/total assets ........ 49.6 47.6 44.0 46.4 40.6

Notes: 1. See Note 1 (n) to the consolidated financial statements in respect to the calculation of net income (loss) per share amounts.
In computing cash dividends per share, the number of shares at the end of the applicable period has been used.
2. Cash dividends per share reflect those paid during each fiscal year.
3. U.S. dollar amounts are translated from yen at the rate of ¥118=U.S.$1, the approximate rate on the Tokyo Foreign Exchange Market on
March 31, 2007.
4. In order to be consistent with financial reporting practices generally accepted in Japan, operating profit is presented as net sales less cost of
sales and selling, general and administrative expenses. Under U.S. generally accepted accounting principles, certain additional charges (such
as impairment losses and restructuring charges) are included as part of operating profit in the consolidated statements of income. See the
consolidated statements of income on pages 71 and 74, and Notes 8, 9 and 16 to the consolidated financial statements.
* Excluding intangibles

64 Matsushita Electric Industrial Co., Ltd. 2007


Financial Review

Consolidated Sales and Earnings Results


Sales Company endeavored to integrate sales and manufactur-
Matsushita’s consolidated net sales for fiscal 2007 ing functions with MEW, and implement common brand
ended March 31, 2007 increased 2% to ¥9,108.2 billion strategies, as well as reinforce product competitiveness,
($77,188 million), from ¥8,894.3 billion in the previous thereby contributing to increased sales by generating
fiscal year. The electronics industry in the fiscal year synergies between both companies.
under review faced severe business conditions in Japan Through these efforts, the Company cited sales gains
and overseas, due mainly to rising prices for crude oil due mainly to an increase in sales of digital products
and other raw materials and continued price declines such as flat-panel TVs in Japan and overseas.
caused by ever-intensified global competition, mainly in
digital products. Cost of Sales and Selling, General and
Under these circumstances, during fiscal 2007, the Administrative Expenses
final year of the mid-term management plan Leap Ahead In fiscal 2007, cost of sales amounted to ¥6,394.4 billion
21, ending March 31, 2007, Matsushita implemented ($54,190 million), up 4% from the previous year mainly as
initiatives to accelerate growth strategies and further a result of an increase in net sales. Selling, general and
strengthen management structures. First, Matsushita administrative expenses were down 3% to ¥2,254.3
made all-out efforts to enhance product competitiveness billion ($19,104 million) compared to the previous year.
centering on V-products, which were well received by
the market and made a significant contribution to an Operating Profit*
increase in market share. Regarding plasma TVs in par- Consolidated operating profit for this fiscal year increased
ticular, the Company expanded its operations to meet a 11%, to ¥459.5 billion ($3,894 million), compared with
rapid increase in demand both in Japan and overseas, ¥414.3 billion in the previous year. Negative factors such
and succeeded in securing a high market share. In addi- as increased raw materials prices and ever-intensified
tion, the Company also endeavored to reduce fixed global price competition were more than offset by com-
costs by implementing its Companywide cost reduction prehensive cost rationalization efforts which were centered
activities. Furthermore, the collaboration with Matsushita on reducing materials costs and fixed costs, as well as the
Electric Works, Ltd. (MEW) proved to be successful. The effects of a weaker yen.

Other Income (deductions)


Net Sales In fiscal 2007, interest income increased 8% to ¥30.6
Billions of yen
billion ($259 million), and dividends received increased
10,000 16% to ¥7.6 billion ($64 million). In other income, in
addition to gains on sales of tangible fixed assets, the
Company recorded a ¥27.3 billion ($231 million) gain on
8,000
the sale of the investments regarding cable broadcast-
ing business.
Interest expense decreased 4% to ¥20.9 billion ($177
6,000
million), owing primarily to a reduction in short-term and
long-term borrowings. In other deductions, compared
4,000 with ¥49.0 billion of restructuring charges in fiscal 2006,
the Company recorded ¥19.6 billion ($166 million) includ-
ing ¥14.2 billion ($120 million) associated with the imple-
2,000
mentation of early retirement programs, and ¥49.2 billion
($417 million) as impairment losses on long-lived assets
0 compared with ¥66.4 billion a year ago.
2003 2004 2005 2006 2007

Domestic Sales
Overseas Sales

Matsushita Electric Industrial Co., Ltd. 2007 65


Operating Profit* Equity in Earnings (Losses) of Associated Companies
Billions of yen In fiscal 2007, equity in earnings of associated companies
500
amounted to ¥1.0 billion ($9 million), from the previous
year’s losses of ¥50.8 billion, mainly as a result of the
consolidation of CRT TV-related associated companies on
400 March 1, 2006, which incurred losses associated with the
implementation of large-scale restructuring initiatives a
year ago.
300

Net Income
200 As a result of all the factors stated in the preceding
paragraphs, the Company recorded a net income of
¥217.2 billion ($1,841 million) for fiscal 2007, an increase
100 of 41% from ¥154.4 billion in the previous year. Net
income per common share for the fiscal year was ¥99.50
($0.84), versus a net income per common share of
0
2003 2004 2005 2006 2007
¥69.48 a year ago.
* In order to be consistent with financial reporting practices generally
accepted in Japan, operating profit is presented as net sales less cost R&D Expenditures
of sales and selling, general and administrative expenses. Under U.S. R&D expenditures for fiscal 2007 increased 2% to
generally accepted accounting principles, certain additional charges ¥578.1 billion ($4,899 million), representing 6.3% of
(such as impairment losses and restructuring charges) are included as
part of operating profit in the consolidated statements of income. See
Matsushita’s consolidated net sales, as compared with
the consolidated statements of income on pages 71 and 74, and ¥564.8 billion in fiscal 2006.
Notes 8, 9 and 16 to the consolidated financial statements. In fiscal 2007, Matsushita executed initiatives to
accelerate R&D focused on key development themes,
Income before Income Taxes and to enhance R&D efficiency mainly by creating a
As a result of the afore-mentioned factors, as well as common platform for technologies in different product
increased operating profit, income before income taxes segments and categories. The key development themes
for fiscal 2007 increased 18% to ¥439.1 billion ($3,722 during the fiscal year were as follows:
million), compared with ¥371.3 billion in fiscal 2006, while (1) Full HD 42-inch plasma display panels
the ratio to net sales increased 0.6% to 4.8%, compared Matsushita realized a picture quality with definition over
with 4.2% in the previous year. 2.6 times as high as existing models while maintaining
the current high level of brightness, by miniaturizing the
Provision for Income Taxes partitions between illuminant cells to enlarge the illumi-
Provision for income taxes for fiscal 2007 amounted to nated area and utilizing a 1080p HD high-speed pixel
¥191.8 billion ($1,626 million), compared with ¥167.1 billion drive to ensure stable light emission from all pixels.
in the previous year. The effective tax rate to income before (2) World’s first dual-layer Blu-ray disc and recorder
income taxes declined to 43.7%, from 45.0% a year ago. Using a high-density recording technique of creating
This is due mainly to a decrease in valuation allowance to dual layers on each side of the disc, Matsushita realized
deferred tax assets compared with fiscal 2006. a large recording capacity of up to 6 hours of HD
digital terrestrial broadcasting and a high transfer
Minority Interests speed of approximately twice that of existing products.
Minority interests (earnings) amounted to ¥31.1 billion (3) Second-generation Integrated Platform
($264 million) for fiscal 2007, compared with minority Matsushita developed AV processing technology with
interests (losses) of ¥1.0 billion in fiscal 2006. This result low power consumption in a single system LSI,
was due mainly to increased profits in MEW and thereby realizing over 50 hours of music playback and
PanaHome, and the effect of a one-time charge incurred over 5 hours viewing of “One Segment” broadcasting
in fiscal 2006 at certain subsidiaries. on a mobile phone.

66 Matsushita Electric Industrial Co., Ltd. 2007


(4) New “Compact BiG” series of refrigerators featuring (6) Unique high picture quality technology PEAKS
top-unit compressors Matsushita incorporated high picture quality platform
By downsizing the compressor installed in the upper technology PEAKS into terrestrial digital tuners for
part of the refrigerator and the vapor generating unit in Strada car navigation systems and the P903iTV
the bottom part, Matsushita realized a storage capac- mobile phone compatible with “One Segment”
ity of 525 liters in the same dimensions as its existing broadcasting, thereby realizing crisp picture quality
450-liter model. and contributing to R&D efficiency.
(5) Industry’s first high-capacity lithium-ion battery
The Company has significantly improved the safety of Results of Operations by Business Segment
lithium-ion batteries with technology that prevents an The Company’s business segments are classified into six
increase in energy that could cause the battery to segments: AVC Networks, Home Appliances, Components
overheat or catch fire in the case of short-circuit. The and Devices, MEW and PanaHome, JVC, and Other.
Company has established a lithium-ion battery mass- Results of sales and profits by business segment for
production system with the industry’s highest capacity, fiscal 2007, as compared with the previous fiscal year,
while incorporating the above-mentioned technology were as follows:
to ensure safety. AVC Networks sales increased 2% to ¥4,047.2 billion
($34,298 million), compared with ¥3,986.1 billion in the
previous year. Within this segment, sales of video and
audio equipment increased, due mainly to strong sales of
R&D Expenditures
Billions of yen
digital AV products, such as flat-panel TVs and digital
cameras. Sales of information and communications
800 equipment decreased as a result of sluggish sales in
mobile phones, although sales of automotive electronics
equipment were quite favorable.
600 With respect to this segment, profit improved 15%
from ¥190.9 billion in fiscal 2006, to ¥219.7 billion
($1,861 million) for fiscal 2007, which is equivalent to
5.4% against sales. This increase was attributable mainly
400
to expanded sales in flat-panel TVs, digital cameras, PCs
and automotive electronics equipment, as well as cost
rationalization effects. Particularly in plasma TVs, despite
200
price declines under ever-intensified global competition,
the Company accelerated the introduction of large-sized,
full HD models and comprehensive cost reduction efforts
0
2003 2004 2005 2006 2007 including curbing materials costs, thereby achieving a
profit growth.

Earnings
Thousands of
Millions of yen U.S. dollars
2007 2006 2005 2004 2003 2007
Operating profit* ................................................. ¥459,541 ¥414,273 ¥308,494 ¥195,492 ¥126,571 $3,894,415
Income before income taxes .............................. 439,144 371,312 246,913 170,822 68,916 3,721,559
Net income (loss) ............................................... 217,185 154,410 58,481 42,145 (19,453) 1,840,551
R&D expenditures .............................................. 578,087 564,781 615,524 579,230 551,019 4,899,042

* In order to be consistent with financial reporting practices generally accepted in Japan, operating profit is presented as net sales less cost of sales
and selling, general and administrative expenses. Under U.S. generally accepted accounting principles, certain additional charges (such as impair-
ment losses and restructuring charges) are included as part of operating profit in the consolidated statements of income. See the consolidated
statements of income on pages 71 and 74, and Notes 8, 9 and 16 to the consolidated financial statements.

Matsushita Electric Industrial Co., Ltd. 2007 67


Sales of Home Appliances increased 5% to ¥1,303.4 With respect to this segment, profit increased 23%
billion ($11,046 million), compared with ¥1,241.2 billion from ¥81.1 billion in fiscal 2006, to ¥99.9 billion ($846
in the previous year. Within Home Appliances, sales million) for fiscal 2007. Despite the negative effects from
gains were recorded mainly in air conditioners and rising prices for raw materials including coppers and
compressors. aluminum, profit against sales for this segment rose to
Profit in this segment rose 8% from ¥77.1 billion in 7.2% for fiscal 2007, due mainly to sales gains and cost
fiscal 2006, to ¥83.5 billion ($708 million) for fiscal 2007, rationalization efforts. In particular, a significant profit
or 6.4% of sales. Despite the adverse effects from rising growth was recorded in electronic components and de-
costs for raw materials including plastic materials, the vices, mainly as a result of strong sales in components for
successful introduction of unique products, such as digital AV products and automotive electronics equipment.
tilted-drum washer/dryers and air conditioners equipped Sales of MEW and PanaHome increased 6% to
with automatic filter cleaning and dust removal functions, ¥1,858.7 billion ($15,752 million), compared with
and the effects of various cost rationalization activities, ¥1,747.2 billion a year ago. Sales at MEW and its subsid-
led to increased earnings in this segment. iaries increased from the previous year with favorable
Sales of Components and Devices increased 1% to sales in electrical construction materials such as home
¥1,377.8 billion ($11,676 million), from the previous fire alarms and high energy-efficient lighting fixtures, and
year’s ¥1,368.3 billion. Although sales in semiconduc- electronic and plastic materials such as semiconductor
tors decreased in fiscal 2007, strong sales in electronic encapsulation materials. At PanaHome Corporation and
components and devices led to overall sales growth in its subsidiaries, sales gains were recorded in detached
this segment. housing, contributing to increased sales overall.

Information by Business Segment


Thousands of
Millions of yen U.S. dollars
2007 2006 2005 2004 2003 2007
Sales:
AVC Networks ................................ ¥4,047,171 ¥3,986,088 ¥3,858,781 ¥3,840,268 ¥3,668,195 $34,298,059
Home Appliances ........................... 1,303,414 1,241,202 1,229,768 1,223,190 1,197,481 11,045,881
Components and Devices .............. 1,377,757 1,368,258 1,469,007 1,659,672 1,709,732 11,675,907
MEW and PanaHome ..................... 1,858,713 1,747,207 1,686,257 — — 15,751,805
JVC ................................................ 646,579 703,116 730,209 818,999 851,509 5,479,483
Other .............................................. 1,483,976 1,315,292 1,027,123 948,728 819,055 12,576,068
Eliminations .................................... (1,609,440) (1,466,834) (1,287,509) (1,011,113) (844,258) (13,639,322)
Consolidation total ...................... ¥9,108,170 ¥8,894,329 ¥8,713,636 ¥7,479,744 ¥7,401,714 $77,187,881
Segment profit:
AVC Networks ................................ ¥ 219,654 ¥ 190,885 ¥ 127,366 ¥ 129,102 ¥ 82,828 $ 1,861,475
Home Appliances ........................... 83,510 77,135 74,794 52,759 45,240 707,712
Components and Devices .............. 99,884 81,111 57,761 50,099 31,213 846,474
MEW and PanaHome ..................... 78,889 72,694 66,761 — — 668,551
JVC ................................................ (5,659) (5,782) 9,887 24,675 21,863 (47,958)
Other .............................................. 60,500 62,225 38,352 14,701 13,042 512,712
Corporate and eliminations ............. (77,237) (63,995) (66,427) (75,844) (67,615) (654,551)
Total segment profit (loss) ........... ¥ 459,541 ¥ 414,273 ¥ 308,494 ¥ 195,492 ¥ 126,571 $ 3,894,415

Note: MEW, PanaHome and their respective subsidiaries became consolidated subsidiaries of the Company on April 1, 2004. Accordingly, a new
business segment, “MEW and PanaHome,” has been added from fiscal 2005.

68 Matsushita Electric Industrial Co., Ltd. 2007


With respect to this segment, despite the adverse JVC, sales gains were recorded mainly in automotive
effects of rising prices for raw materials including coppers electronics equipment and digital AV products such as
and nickels, profit increased 9% to ¥78.9 billion ($669 flat-panel TVs, whereby maintaining the same level from
million), which is equal to 4.2% of sales, from ¥72.7 a year ago.
billion in the previous year, as a result of the aforemen- Overseas sales were up by 5%, to ¥4,491.7 billion
tioned sales gains and cost rationalization efforts. ($38,065 million), from ¥4,282.9 billion in the previous
Sales of JVC were ¥646.6 billion ($5,479 million), fiscal year.
down 8% from ¥703.1 billion in the previous year. This By region, sales in the Americas amounted to
result was due mainly to sales downturns in DVD record- ¥1,381.1 billion ($11,704 million), mostly unchanged from
ers and audio equipment in Japan, as well as sluggish ¥1,387.4 billion in fiscal 2006. Although sales decreased
overseas sales of rear-projection TVs, resulting in overall in automotive electronics equipment, a significant year-
decreased sales compared with a year ago. on-year growth was shown in home appliances, flat-
With respect to this segment, losses amounted to panel TVs, digital cameras, PCs and video broadcasting
¥5.7 billion ($48 million), mostly unchanged from losses systems. Accordingly, sales for this region resulted in the
of ¥5.8 billion in fiscal 2006. In the JVC segment, there same level as the previous year.
has been a recent negative trend in segment profit. Sales in Europe increased 9% to ¥1,218.0 billion
Although JVC has implemented measures to strengthen ($10,322 million), from the previous year’s ¥1,113.6
operational reforms and reinforce product strategies, billion. Despite decreased sales of audio equipment and
JVC incurred losses in fiscal 2007, as a result of the mobile phones, sales gains were recorded in flat-panel
aforementioned sales downturns and sharp price TVs, digital cameras, as well as microwave ovens, result-
declines of digital AV products. ing in an overall increase in sales for this region.
Sales in the Other segment amounted to ¥1,484.0 In the Asia and Others region, sales increased 6% to
billion ($12,576 million), up 13% from the previous year. ¥1,892.6 billion ($16,039 million), from the previous year’s
With respect to this segment, profit was down 3% ¥1,781.9 billion. In Asia (excluding China), strong sales
from ¥62.2 billion for fiscal 2006, to ¥60.5 billion ($513 were recorded in flat-panel TVs and digital cameras, as
million), which were equivalent to 4.1% against sales in well as air-conditioners, compressors, lighting equipment,
fiscal 2007. general electronic components and batteries, sufficient to
offset decreased sales in semiconductors, JVC and other
Sales by Region products, resulting in overall sales gains. Meanwhile, in
Sales in Japan amounted to ¥4,616.5 billion ($39,123 China, sales gains were recorded mainly for flat-panel TVs,
million), mostly unchanged from ¥4,611.4 billion in fiscal air-conditioners, semiconductors and electronic compo-
2006. Despite sales downturns in mobile phones and nents and devices, resulting in overall increased sales.

Sales by Region
Thousands of
Millions of yen U.S. dollars
2007 2006 2005 2004 2003 2007
Domestic sales ................................... ¥4,616,520 ¥4,611,440 ¥4,580,555 ¥3,477,492 ¥3,453,836 $39,123,051
Overseas sales:
North and South America ............... 1,381,104 1,387,424 1,282,956 1,326,940 1,420,802 11,704,271
Europe ........................................... 1,217,931 1,113,556 1,122,493 1,080,143 999,637 10,321,449
Asia and Others .............................. 1,892,615 1,781,909 1,727,632 1,595,169 1,527,439 16,039,110
Total ........................................... 4,491,650 4,282,889 4,133,081 4,002,252 3,947,878 38,064,830
Total ................................................... ¥9,108,170 ¥8,894,329 ¥8,713,636 ¥7,479,744 ¥7,401,714 $77,187,881

Matsushita Electric Industrial Co., Ltd. 2007 69


Financial Position and Liquidity
Total Assets, Liabilities, Minority Interests and Profit Distribution
Shareholders’ Equity During fiscal 2007, the Company distributed an interim
The Company’s consolidated total assets as of March (semiannual) cash dividend of ¥15 per common share.
31, 2007 decreased ¥67.6 billion to ¥7,897.0 billion As for the year-end dividend for fiscal 2007, upon the
($66,923 million), as compared to ¥7,964.6 billion at the resolution of the Board of Directors’ Meeting, the Com-
end of the last fiscal year. pany also distributed ¥15 per common share. Accord-
The Company’s consolidated total liabilities as of ingly, total dividends for fiscal 2007, including the interim
March 31, 2007 also decreased ¥246.3 billion to ¥3,429.1 cash dividend, amounted to ¥30 per common share.
billion ($29,060 million), attributable to a decrease in retire-
ment and severance benefits as well as repayments of Capital Investment and Depreciation**
borrowings and bonds in certain subsidiaries. Capital investment (excluding intangibles) during fiscal
Minority interests increased ¥49.6 billion to ¥551.2 2007 totaled ¥418.3 billion ($3,545 million), up 21% from
billion ($4,670 million). the previous fiscal year’s total of ¥345.8 billion. The
Stockholders’ equity increased ¥129.1 billion to Company implemented capital investment primarily to
¥3,916.7 billion ($33,193 million), from the previous increase production capacity in strategic business areas
year’s ¥3,787.6 billion. Although stockholders’ equity such as semiconductors and digital AV equipment, par-
decreased by ¥153.0 billion due to the repurchase of the ticularly plasma TVs, while curbing capital investment in a
Company’s own shares as part of Matsushita’s strategy number of business areas, in line with increasing manage-
to enhance shareholder value, total stockholders’ equity ment emphasis on capital efficiency. Principal capital in-
increased due mainly to an increase of ¥161.1 billion in vestment consisted of PDP manufacturing facilities for
retained earnings and an increase of ¥133.2 billion in Plant No. 3 and No. 4 of Matsushita Plasma Display Panel
accumulated other comprehensive income, which Company Ltd. located in Amagasaki, Japan, and semi-
reflects improvements in cumulative translation adjust- conductor manufacturing facilities for the Uozu Factory of
ments, unrealized holding gains of available-for-sale the Semiconductor Company located in Uozu, Japan.
securities, and pension liability adjustments of ¥61.1 Depreciation (excluding intangibles) during the fiscal
billion, as a result of adoption of SFAS No. 158. year amounted to ¥280.2 billion ($2,374 million), up 2%
compared with ¥275.2 billion in the previous fiscal year.

Total Assets and Stockholders’ Equity Capital Investment and Depreciation


Billions of yen Billions of yen

10,000 500

8,000 400

6,000 300

4,000 200

2,000 100

0 0
2003 2004 2005 2006 2007 2003 2004 2005 2006 2007

Total Assets Capital Investment


Stockholders’ Equity Depreciation

70 Matsushita Electric Industrial Co., Ltd. 2007


Financial Position and Liquidity
Thousands of
Millions of yen U.S. dollars
2007 2006 2005 2004 2003 2007
Total assets (at year-end) ................... ¥7,896,958 ¥7,964,640 ¥8,056,881 ¥7,438,012 ¥7,834,693 $66,923,373
Stockholders’ equity (at year-end) ...... 3,916,741 3,787,621 3,544,252 3,451,576 3,178,400 33,192,720
Capital investment* **:
Purchases of property, plant and
equipment shown as capital
expenditures in the consolidated
statements of cash flows .............. 411,309 356,751 352,203 275,544 246,603 3,485,669
Effect of timing difference between
acquisition dates and
payment dates .............................. 7,025 (10,932) 22,050 (4,253) 4,867 59,534
418,334 345,819 374,253 271,291 251,470 3,545,203
Depreciation* ..................................... 280,177 275,213 287,400 253,762 283,434 2,374,381
* Excluding intangibles
** Reconciliation of Non U.S. GAAP capital investment figures
The Company defines capital investment as purchases of property, plant and equipment on an accrual basis which reflects the effects of timing
differences between acquisition dates and payment dates. The Company has included the information concerning capital investment because its
management uses this indicator to manage its capital expenditures and it believes that such indicator is useful to investors to present accrual
basis capital investments in addition to the cash basis information in the consolidated statements of cash flows.
The above table shows a reconciliation of capital investment to purchases of property, plant and equipment shown as capital expenditures in the
consolidated statements of cash flows.

Cash Flows Net cash used in financing activities was ¥427.7


Net cash provided by operating activities in fiscal 2007 billion ($3,625 million), compared with ¥524.6 billion in
amounted to ¥532.6 billion ($4,513 million), compared fiscal 2006. This was mainly attributable to a decrease in
with ¥575.4 billion in the previous fiscal year. This de- repayments of long-term debt.
crease, despite a decrease in trade receivables and All these activities, compounded by the effect of
improvement in net income, was attributable mainly to a exchange rate fluctuations, resulted in a net decrease of
decrease in trade payables, and accrued expenses and ¥430.8 billion ($3,650 million) in cash and cash equiva-
other current liabilities. lents during fiscal 2007. Cash and cash equivalents at
Net cash used in investing activities amounted to ¥567.8 the end of fiscal 2007 totaled ¥1,236.6 billion ($10,480
billion ($4,812 million), compared with net cash provided by million), compared with ¥1,667.4 billion a year ago.
investing activities of ¥407.1 billion in fiscal 2006, due mainly
to an increase in time deposits and a decrease in proceeds
from disposition of investments and advances.

Reference: Consolidated Statements of Income


For reconciliation of operating profit to income before income taxes, see the following financial information, which has been derived from the consoli-
dated statements of operations for fiscal 2004 and 2003.
(For the fiscal years 2007, 2006 and 2005, see the consolidated statements of income on page 74.)
Millions of yen
2004 2003
Revenues, costs and expenses:
Net sales ................................................................................................................................................... ¥7,479,744 ¥7,401,714
Cost of sales ............................................................................................................................................. (5,313,065) (5,323,605)
Selling, general and administrative expenses ............................................................................................. (1,971,187) (1,951,538)
Interest income .......................................................................................................................................... 19,564 22,267
Dividends received .................................................................................................................................... 5,475 4,506
Gain from the transfer of the substitutional portion of Japanese Welfare Pension Insurance ....................... 72,228 —
Other income ............................................................................................................................................ 59,544 64,677
Interest expense ........................................................................................................................................ (27,744) (32,805)
Other deductions ....................................................................................................................................... (153,737) (116,300)
Income before income taxes .................................................................................................................. ¥ 170,822 ¥ 68,916

Matsushita Electric Industrial Co., Ltd. 2007 71


Consolidated Balance Sheets
Matsushita Electric Industrial Co., Ltd. and Subsidiaries
March 31, 2007 and 2006
Thousands of
U.S. dollars
Millions of yen (Note 2)
Assets 2007 2006 2007
Current assets:
Cash and cash equivalents (Note 10) ...................................... ¥1,236,639 ¥1,667,396 $10,479,992
Time deposits (Note 10) .......................................................... 225,458 11,001 1,910,661
Short-term investments (Notes 6 and 19) ............................... 93,179 56,753 789,653
Trade receivables (Notes 5 and 17):
Notes .................................................................................. 68,522 66,707 580,695
Accounts ............................................................................ 1,101,549 1,117,508 9,335,161
Allowance for doubtful receivables ...................................... (29,061) (37,400) (246,280)
Net trade receivables ....................................................... 1,141,010 1,146,815 9,669,576
Inventories (Note 4) ................................................................. 949,399 915,262 8,045,754
Other current assets (Notes 8, 12 and 19) .............................. 553,164 609,326 4,687,830
Total current assets ......................................................... 4,198,849 4,406,553 35,583,466

Investments and advances (Notes 5, 6, 11 and 19) ................ 1,206,082 1,100,035 10,221,034

Property, plant and equipment (Notes 7, 8 and 10):


Land ....................................................................................... 371,154 374,989 3,145,373
Buildings ................................................................................ 1,633,747 1,667,764 13,845,313
Machinery and equipment ...................................................... 3,126,397 3,142,607 26,494,890
Construction in progress ........................................................ 105,487 71,037 893,958
5,236,785 5,256,397 44,379,534
Less accumulated depreciation .............................................. 3,594,492 3,624,058 30,461,797
Net property, plant and equipment .................................. 1,642,293 1,632,339 13,917,737

Other assets:
Goodwill (Notes 3 and 9) ........................................................ 379,324 413,137 3,214,610
Intangible assets (Notes 3 and 9) ............................................ 115,631 104,158 979,924
Other assets (Notes 11 and 12) .............................................. 354,779 308,418 3,006,602
Total other assets ............................................................ 849,734 825,713 7,201,136

¥7,896,958 ¥7,964,640 $66,923,373


See accompanying Notes to Consolidated Financial Statements.

72 Matsushita Electric Industrial Co., Ltd. 2007


Thousands of
U.S. dollars
Millions of yen (Note 2)
Liabilities, Minority Interests and Stockholders’ Equity 2007 2006 2007
Current liabilities:
Short-term borrowings, including current portion of
long-term debt (Notes 7, 10 and 19) ..................................... ¥ 223,190 ¥ 339,845 $ 1,891,441
Trade payables (Note 5):
Notes .................................................................................. 51,602 66,316 437,305
Accounts ............................................................................ 883,375 914,963 7,486,229
Total trade payables ........................................................ 934,977 981,279 7,923,534
Accrued income taxes (Note 12) ............................................. 61,524 51,128 521,390
Accrued payroll ...................................................................... 139,719 142,594 1,184,059
Other accrued expenses (Note 20) ......................................... 863,428 842,467 7,317,186
Deposits and advances from customers ................................. 83,676 90,600 709,119
Employees’ deposits .............................................................. 406 14,065 3,441
Other current liabilities (Notes 11, 12 and 19) .......................... 434,947 423,090 3,685,991
Total current liabilities ...................................................... 2,741,867 2,885,068 23,236,161

Noncurrent liabilities:
Long-term debt (Notes 7, 10 and 19) ..................................... 226,780 264,070 1,921,864
Retirement and severance benefits (Note 11) .......................... 280,958 414,266 2,381,000
Other liabilities (Note 12) ......................................................... 179,458 112,024 1,520,831
Total noncurrent liabilities ................................................ 687,196 790,360 5,823,695

Minority interests .................................................................... 551,154 501,591 4,670,797

Stockholders’ equity:
Common stock (Note 13):
Authorized—4,950,000,000 shares
Issued—2,453,053,497 shares
(2,453,053,497 shares in 2006) ......................................... 258,740 258,740 2,192,712
Capital surplus (Note 13) ........................................................ 1,220,967 1,234,289 10,347,178
Legal reserve (Note 13) ........................................................... 88,588 87,526 750,746
Retained earnings (Note 13) ................................................... 2,737,024 2,575,890 23,195,118
Accumulated other comprehensive income (loss)
(Notes 6, 11, 14 and 18):
Cumulative translation adjustments ..................................... (99,538) (162,331) (843,542)
Unrealized holding gains of available-for-sale securities ....... 160,831 145,306 1,362,975
Unrealized gains of derivative instruments ........................... 862 1,326 7,305
Minimum pension liability adjustments ................................. — (10,420) —
Pension liability adjustments ................................................ 44,942 — 380,864
Total accumulated other comprehensive income (loss) .... 107,097 (26,119) 907,602
Treasury stock, at cost (Note 13):
306,769,039 shares (243,521,506 shares in 2006) ............. (495,675) (342,705) (4,200,636)
Total stockholders’ equity ................................................ 3,916,741 3,787,621 33,192,720

Commitments and contingent liabilities (Note 20)

¥7,896,958 ¥7,964,640 $66,923,373

Matsushita Electric Industrial Co., Ltd. 2007 73


Consolidated Statements of Income
Matsushita Electric Industrial Co., Ltd. and Subsidiaries
Years ended March 31, 2007, 2006 and 2005
Thousands of
U.S. dollars
Millions of yen (Note 2)
2007 2006 2005 2007
Revenues, costs and expenses:
Net sales (Note 5) ................................................. ¥9,108,170 ¥8,894,329 ¥8,713,636 $77,187,881
Cost of sales (Notes 5 and 17) .............................. (6,394,418) (6,155,297) (6,176,046) (54,189,983)
Selling, general and administrative expenses
(Note 17) ............................................................. (2,254,211) (2,324,759) (2,229,096) (19,103,483)
Interest income ..................................................... 30,553 28,216 19,490 258,924
Dividends received ............................................... 7,597 6,567 5,383 64,381
Gain from the transfer of the substitutional portion
of Japanese Welfare Pension Insurance
(Note 11) ............................................................. — — 31,509 —
Other income (Notes 6, 7, 17 and 18) ................... 114,545 147,399 82,819 970,720
Interest expense ................................................... (20,906) (21,686) (22,827) (177,169)
Goodwill impairment (Note 9) ................................ (30,496) (50,050) (3,559) (258,441)
Other deductions (Notes 5, 6, 8, 9, 16, 17 and 18) .. (121,690) (153,407) (174,396) (1,031,271)
Income before income taxes ................................. 439,144 371,312 246,913 3,721,559

Provision for income taxes (Note 12):


Current ................................................................. 119,465 96,341 96,529 1,012,415
Deferred ............................................................... 72,398 70,748 56,805 613,542
191,863 167,089 153,334 1,625,957

Income before minority interests and equity


in earnings (losses) of associated companies ...... 247,281 204,223 93,579 2,095,602

Minority interests .................................................. 31,131 (987) 27,719 263,822

Equity in earnings (losses) of


associated companies (Note 5) ........................... 1,035 (50,800) (7,379) 8,771
Net income ........................................................... ¥ 217,185 ¥ 154,410 ¥ 58,481 $ 1,840,551

U.S. dollars
Yen (Note 2)
Net income per share of common stock
(Note 15):
Basic .................................................................... ¥ 99.50 ¥ 69.48 ¥ 25.49 $ 0.84
Diluted .................................................................. 99.50 69.48 25.49 0.84
See accompanying Notes to Consolidated Financial Statements.

74 Matsushita Electric Industrial Co., Ltd. 2007


Consolidated Statements of Stockholders’ Equity
Matsushita Electric Industrial Co., Ltd. and Subsidiaries
Years ended March 31, 2007, 2006 and 2005
Thousands of
U.S. dollars
Millions of yen (Note 2)
2007 2006 2005 2007
Common stock (Note 13):
Balance at beginning of year .................................................. ¥ 258,740 ¥ 258,740 ¥ 258,740 $ 2,192,712
Balance at end of year ........................................................... ¥ 258,740 ¥ 258,740 ¥ 258,740 $ 2,192,712
Capital surplus (Note 13):
Balance at beginning of year .................................................. ¥1,234,289 ¥1,230,701 ¥1,230,476 $10,460,076
Transfer from legal reserve and retained earnings
due to merger of a subsidiary .............................................. — 798 — —
Sale of treasury stock ............................................................ 96 62 225 814
Increase in capital surplus and transfer to minority interests
arising on conversion of bonds by a subsidiary .................... — 2,728 — —
Other ..................................................................................... (13,418) — — (113,712)
Balance at end of year ........................................................... ¥1,220,967 ¥1,234,289 ¥1,230,701 $10,347,178
Legal reserve (Note 13):
Balance at beginning of year .................................................. ¥ 87,526 ¥ 87,838 ¥ 83,175 $ 741,746
Transfer from retained earnings ............................................. 1,062 438 4,663 9,000
Transfer to capital surplus due to merger of a subsidiary ....... — (750) — —
Balance at end of year ........................................................... ¥ 88,588 ¥ 87,526 ¥ 87,838 $ 750,746
Retained earnings (Note 13):
Balance at beginning of year .................................................. ¥2,575,890 ¥2,461,071 ¥2,442,504 $21,829,576
Net income ............................................................................ 217,185 154,410 58,481 1,840,551
Cash dividends ...................................................................... (54,989) (39,105) (35,251) (466,009)
Transfer to legal reserve ......................................................... (1,062) (438) (4,663) (9,000)
Transfer to capital surplus due to merger of a subsidiary ....... — (48) — —
Balance at end of year ........................................................... ¥2,737,024 ¥2,575,890 ¥2,461,071 $23,195,118
Accumulated other comprehensive income (loss) (Note 14):
Balance at beginning of year .................................................. ¥ (26,119) ¥ (238,377) ¥ (399,502) $ (221,347)
Other comprehensive income, net of tax ............................... 72,085 212,258 161,125 610,890
Adjustment to initially apply SFAS No. 158, net of tax
(Note 11) .............................................................................. 61,131 — — 518,059
Balance at end of year ........................................................... ¥ 107,097 ¥ (26,119) ¥ (238,377) $ 907,602
Treasury stock (Note 13):
Balance at beginning of year .................................................. ¥ (342,705) ¥ (255,721) ¥ (163,817) $ (2,904,280)
Treasury stock acquired due to acquisition of additional
shares of newly consolidated subsidiaries (Note 3) ............... — — (124) —
Repurchase of common stock ............................................... (153,179) (87,150) (92,879) (1,298,127)
Sale of treasury stock ............................................................ 209 166 1,099 1,771
Balance at end of year ........................................................... ¥ (495,675) ¥ (342,705) ¥ (255,721) $ (4,200,636)
Disclosure of comprehensive income (loss) (Note 14):
Net income ............................................................................ ¥ 217,185 ¥ 154,410 ¥ 58,481 $ 1,840,551
Other comprehensive income (loss), net of tax:
Translation adjustments ..................................................... 62,793 83,311 36,645 532,144
Unrealized holding gains (losses) of
available-for-sale securities ............................................... 15,525 72,698 (15,496) 131,568
Unrealized gains (losses) of derivative instruments .............. (464) (5,077) (273) (3,932)
Minimum pension liability adjustments ................................ (5,769) 61,326 140,249 (48,890)
Total comprehensive income ................................................. ¥ 289,270 ¥ 366,668 ¥ 219,606 $ 2,451,441

See accompanying Notes to Consolidated Financial Statements.

Matsushita Electric Industrial Co., Ltd. 2007 75


Consolidated Statements of Cash Flows
Matsushita Electric Industrial Co., Ltd. and Subsidiaries
Years ended March 31, 2007, 2006 and 2005
Thousands of
U.S. dollars
Millions of yen (Note 2)
2007 2006 2005 2007
Cash flows from operating activities (Note 17):
Net income ............................................................................. ¥ 217,185 ¥ 154,410 ¥ 58,481 $ 1,840,551
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization ............................................. 317,685 309,399 325,465 2,692,246
Net gain on sale of investments .......................................... (40,154) (47,449) (31,399) (340,288)
Provision for doubtful receivables ........................................ 3,203 8,409 4,963 27,144
Deferred income taxes ........................................................ 72,398 70,748 56,805 613,542
Write-down of investment securities (Notes 5 and 6) ........... 3,148 35,292 16,186 26,678
Impairment loss on long-lived assets (Notes 8 and 9) .......... 49,175 66,378 33,078 416,737
Minority interests ................................................................. 31,131 (987) 27,719 263,822
(Increase) decrease in trade receivables .............................. 50,012 (31,042) 61,207 423,831
(Increase) decrease in inventories ........................................ 474 36,498 84,405 4,017
(Increase) decrease in other current assets ......................... 64,074 (57,990) 14,649 543,000
Increase (decrease) in trade payables ................................. (61,630) 112,340 (74,276) (522,288)
Increase (decrease) in accrued income taxes ...................... 9,773 3,872 (3,422) 82,822
Increase (decrease) in accrued expenses
and other current liabilities ................................................. (39,774) 37,108 (10,736) (337,068)
Increase (decrease) in retirement and severance benefits .... (108,559) (73,180) (99,499) (919,992)
Increase (decrease) in deposits and advances
from customers ................................................................. (12,223) (13,304) (13,873) (103,585)
Other .................................................................................. (23,361) (35,084) 14,809 (197,974)
Net cash provided by operating activities ............................ 532,557 575,418 464,562 4,513,195
Cash flows from investing activities (Note 17):
Proceeds from sale of short-term investments ........................ 31,014 41,867 6,117 262,831
Purchase of short-term investments ....................................... (4,509) (54,967) (9,001) (38,212)
Proceeds from disposition of investments and advances ........ 142,074 849,409 101,374 1,204,017
Increase in investments and advances .................................... (290,046) (385,865) (133,636) (2,458,017)
Capital expenditures ............................................................... (411,309) (356,751) (352,203) (3,485,669)
Proceeds from disposals of property, plant and equipment .... 182,892 168,631 78,131 1,549,932
(Increase) decrease in finance receivables ............................... — — 26,823 —
(Increase) decrease in time deposits ....................................... (223,801) 141,289 27,748 (1,896,619)
Inflows due to acquisition of additional shares of
newly consolidated subsidiaries, net of cash paid ................. — — 82,208 —
Proceeds from sale of shares of subsidiaries
and dividends received ......................................................... 40,548 63,083 — 343,627
Other ...................................................................................... (34,671) (59,605) (5,857) (293,822)
Net cash provided by (used in) investing activities ............... (567,808) 407,091 (178,296) (4,811,932)
Cash flows from financing activities (Note 17):
Increase (decrease) in short-term borrowings ......................... (5,826) 15,037 (8,009) (49,373)
Increase (decrease) in employees’ deposits ............................ (13,951) (104,835) (125,261) (118,229)
Proceeds from long-term debt ................................................ 33,636 30,653 119,422 285,051
Repayments of long-term debt ............................................... (217,414) (328,243) (251,554) (1,842,492)
Dividends paid ........................................................................ (54,989) (39,105) (35,251) (466,009)
Dividends paid to minority interests ........................................ (16,285) (16,281) (14,765) (138,008)
Repurchase of common stock (Note 13) ................................ (153,179) (87,150) (92,879) (1,298,127)
Sale of treasury stock (Note 13) .............................................. 305 228 1,324 2,585
Other ...................................................................................... — 5,128 1,395 —
Net cash used in financing activities .................................... (427,703) (524,568) (405,578) (3,624,602)
Effect of exchange rate changes on cash
and cash equivalents ............................................................ 32,197 39,699 14,054 272,856
Net increase (decrease) in cash and cash equivalents ....... (430,757) 497,640 (105,258) (3,650,483)
Cash and cash equivalents at beginning of year ................. 1,667,396 1,169,756 1,275,014 14,130,475
Cash and cash equivalents at end of year ............................ ¥1,236,639 ¥1,667,396 ¥1,169,756 $10,479,992

See accompanying Notes to Consolidated Financial Statements.

76 Matsushita Electric Industrial Co., Ltd. 2007


Notes to Consolidated Financial Statements

1. Summary of Significant Accounting Policies


(a) Description of Business (d) Revenue Recognition
Matsushita Electric Industrial Co., Ltd. (hereinafter, the The Company generates revenue principally through the
“Company,” including consolidated subsidiaries, unless sale of consumer and industrial products, equipment, and
the context otherwise requires) is one of the world’s supplies. The Company recognizes revenue when persua-
leading producers of electronic and electric products. sive evidence of an arrangement exists, delivery has oc-
The Company currently offers a comprehensive range of curred, and title and risk of loss have been transferred to
products, systems and components for consumer, busi- the customer or services have been rendered, the sales
ness and industrial use based on sophisticated electron- price is fixed or determinable, and collectibility is reason-
ics and precision technology, expanding to building ably assured.
materials and equipment, and housing business. Most of Revenue from sales of products is generally recognized
the Company’s products are marketed under when the products are received by customers. Revenue
“Panasonic” and several other trade names, including from sales of certain products with customer acceptance
“National,” “Technics,” “Quasar,” “Victor,” “JVC” and provisions related to their functionality is recognized when
“PanaHome.” the product is received by the customer and the specific
Sales by product category in fiscal 2007 were as criteria of the product functionality are successfully tested
follows: AVC Networks—41%, Home Appliances—14%, and demonstrated.
Components and Devices—12%, MEW and The Company enters into arrangements with multiple
PanaHome*—19%, JVC—7%, and Other—7%. A sales elements, which may include any combination of prod-
breakdown in fiscal 2007 by geographical market was as ucts, equipment, installment and maintenance. The
follows: Japan—51%, North and South America—15%, Company allocates revenue to each element based on
Europe—13%, and Asia and Others—21%. its relative fair value if such element meets the criteria for
The Company is not dependent on a single supplier, treatment as a separate unit of accounting as prescribed
and has no significant difficulty in obtaining raw materials in the Emerging Issues Task Force (EITF) Issue 00-21,
from suppliers. “Revenue Arrangements with Multiple Deliverables.”
* MEW stands for Matsushita Electric Works, Ltd. and PanaHome stands
The Company’s policy is to accept product returns
for PanaHome Corporation. only in the case that the products are defective. The
Company issues contractual product warranties under
(b) Basis of Presentation of Consolidated Financial which it guarantees the performance of products deliv-
Statements ered and services rendered for a certain period of time.
The Company and its domestic subsidiaries maintain A liability for the estimated product warranty related cost
their books of account in conformity with financial ac- is established at the time revenue is recognized, and is
counting standards of Japan, and its foreign subsidiaries included in “Other accrued expenses.” Estimates for
in conformity with those of the countries of their domicile. accrued warranty cost are primarily based on historical
The consolidated financial statements presented experience and current information on repair cost.
herein have been prepared in a manner and reflect ad- Historically, the Company has made certain allowances
justments which are necessary to conform with U.S. related to sales to its consumer business distributors.
generally accepted accounting principles. Such allowances are generally provided to compensate
the distributors for a decline in the product’s value, and
(c) Principles of Consolidation are classified as a reduction of revenue on the consoli-
The consolidated financial statements include the dated statements of income. Estimated price adjustments
accounts of the Company and its majority-owned, are accrued when the related sales are recognized. The
controlled subsidiaries. The Company also consolidates estimate is made based primarily on the historical experi-
entities in which controlling interest exists through vari- ence or specific arrangements made with the distributors.
able interests in accordance with Financial Accounting
Standards Board (FASB) Interpretation No. 46 (revised
December 2003), “Consolidation of Variable Interest
Entities” (FIN 46R).

Matsushita Electric Industrial Co., Ltd. 2007 77


The Company also occasionally offers incentive pro- over their respective estimated useful lives to their esti-
grams to its distributors in the form of rebates. These mated residual values, and reviewed for impairment
rebates are accrued at the later of the date at which the based on an assessment of the undiscounted cash flows
related revenue is recognized or the date at which the expected by the asset. An impairment charge is recog-
incentive is offered, and are recorded as reductions of nized for the amount by which the carrying amount of
sales in accordance with EITF 01-09, “Accounting for the asset exceeds the fair value of the asset.
Consideration Given by a Vendor to a Customer (Includ-
ing a Reseller of the Vendor’s Products).” (j) Investments and Advances (See Notes 5, 6 and 14)
Investments and advances primarily consist of invest-
(e) Leases (See Note 7) ments in and advances to associated companies, cost
The Company accounts for leases in accordance with method investments, available-for-sale securities, and
Statement of Financial Accounting Standards (SFAS) long-term deposits. Cost method investments and long-
No. 13, “Accounting for Leases.” Leases of the assets term deposits are recorded at historical cost.
under certain conditions are recorded as capital leases The equity method is used to account for investments
in property, plant and equipment in the consolidated in associated companies in which the Company exerts
balance sheets. significant influence, generally having a 20% to 50%
ownership interest, and corporate joint ventures. The
(f) Inventories (See Note 4) Company also uses the equity method for some subsid-
Finished goods and work in process are stated at the iaries if the minority shareholders have substantive par-
lower of cost (average) or market. Raw materials are ticipating rights. Under the equity method of accounting,
stated at cost, principally on a first-in, first-out basis, not investments are stated at their underlying net equity
in excess of current replacement cost. value after elimination of intercompany profits. The cost
method is used when the Company does not have sig-
(g) Foreign Currency Translation (See Note 14) nificant influence.
Foreign currency financial statements are translated in The excess of cost of the stock of the associated
accordance with SFAS No. 52, “Foreign Currency Trans- companies over the Company’s share of their net assets
lation,” under which all assets and liabilities are translated at the acquisition date, included in the equity investment
into yen at year-end rates and income and expense ac- balance, is recognized as equity method goodwill. Such
counts are translated at weighted-average rates. Adjust- equity method goodwill is not being amortized and is
ments resulting from the translation of financial statements instead tested for impairment as part of the equity
are reflected under the caption, “Accumulated other com- method investment.
prehensive income (loss),” a separate component of The Company accounts for debt and equity securities
stockholders’ equity. in accordance with SFAS No. 115, “Accounting for
Certain Investments in Debt and Equity Securities.”
(h) Property, Plant and Equipment SFAS No. 115 requires that certain investments in debt
Property, plant and equipment is stated at cost. Depre- and equity securities be classified as held-to-maturity,
ciation is computed primarily using the declining balance trading, or available-for-sale securities. The Company
method based on the following estimated useful lives: classifies its existing marketable equity securities other
Buildings ............................................... 5 to 50 years than investments in associated companies and all debt
Machinery and equipment ..................... 2 to 10 years securities as available-for-sale. Available-for-sale securities
are carried at fair value with unrealized holding gains or
( i ) Goodwill and Other Intangible Assets (See Note 9) losses included as a component of accumulated other
Goodwill represents the excess of costs over the fair value comprehensive income (loss), net of applicable taxes.
of net assets of businesses acquired. The Company Realized gains and losses are determined on the
adopted the provisions of SFAS No. 142, “Goodwill and average cost method and reflected in earnings.
Other Intangible Assets.” Goodwill and intangible assets On a continuous basis, but no less frequently than at
acquired in a purchase business combination and deter- the end of each semi-annual period, the Company evalu-
mined to have an indefinite useful life are not amortized, ates the carrying amount of each of the investments in
and are instead tested for impairment at least annually associated companies, cost method investments and
based on assessment of current estimated fair value of available-for-sale securities for possible other-than-
the intangible asset. SFAS No. 142 also requires that temporary impairment. Factors considered in assessing
intangible assets with estimable useful lives be amortized whether an indication of other-than-temporary impairment

78 Matsushita Electric Industrial Co., Ltd. 2007


exists include the period of time the fair value has been could occur if securities or other contracts to issue com-
below the carrying amount or cost basis of investment, mon stock were exercised or converted into common
financial condition and prospects of each investee, and stock or resulted in the issuance of common stock.
other relevant factors.
Investments in associated companies, cost method (o) Cash Equivalents
investments and available-for-sale securities are reduced Cash equivalents include all highly liquid debt instruments
to fair value by a charge to earnings when impairment is purchased with a maturity of three months or less.
considered to be other than temporary. Impairment is
measured based on the amount by which the carrying (p) Derivative Financial Instruments (See Notes 14, 18
amount or cost basis of the investment exceeds its fair and 19)
value. Fair value is determined based on quoted market Derivative financial instruments utilized by the Company
prices, discounted cash flows or other valuation tech- are comprised principally of foreign exchange contracts,
niques as appropriate. interest rate swaps, cross currency swaps and com-
modity futures used to hedge currency risk, interest rate
(k) Allowance for Doubtful Receivables risk and commodity price risk.
An allowance for doubtful trade receivables and advances The Company accounts for derivative instruments in
is provided at an amount calculated based on historical accordance with SFAS No. 133, “Accounting for Derivative
experience, while specific allowances for doubtful trade Instruments and Hedging Activities,” as amended. The
receivables and advances are provided for the estimated Company recognizes derivatives in the consolidated
amounts considered to be uncollectible after reviewing balance sheets at their fair value in “Other current assets,”
individual collectibility. “Other assets,” “Other current liabilities” or “Other liabilities.”
On the date the derivative contract is entered into, the
( l ) Income Taxes (See Note 12) Company ordinarily designates the derivative as either a
Income taxes are accounted for under the asset and liability hedge of the fair value of a recognized asset or liability or
method. Deferred tax assets and liabilities are recognized of an unrecognized firm commitment (“fair-value” hedge),
for the future tax consequences attributable to differences a hedge of a forecasted transaction or of the variability of
between the financial statement carrying amounts of exist- cash flows to be received or paid related to a recognized
ing assets and liabilities and their respective tax bases, and asset or liability (“cash-flow” hedge), or a foreign-currency
operating loss and tax credit carryforwards. fair-value or cash-flow hedge (“foreign-currency” hedge).
Deferred tax assets and liabilities are measured The Company formally documents all relationships
using enacted tax rates expected to apply to taxable between hedging instruments and hedged items, as well
income in the years in which those temporary differ- as its risk-management objective and strategy for under-
ences are expected to be recovered or settled. The taking various hedge transactions. The Company also
effect on deferred tax assets and liabilities of a change formally assesses, both at the hedge’s inception and on
in tax rates is recognized in income in the period that an ongoing basis, whether the derivatives that are used in
includes the enactment date. hedging transactions are highly effective in offsetting
changes in fair values or cash flows of hedged items.
(m) Advertising (See Note 17) Changes in the fair value of a derivative that is highly
Advertising costs are expensed as incurred. effective and that is designated and qualifies as a fair-
value hedge, along with the loss or gain on the hedged
(n) Net Income per Share (See Notes 13 and 15) asset or liability or unrecognized firm commitment of the
The Company accounts for net income per share in hedged item that is attributable to the hedged risk, are
accordance with SFAS No. 128, “Earnings per Share.” recorded in earnings. Changes in the fair value of a
This Statement establishes standards for computing net derivative that is highly effective and that is designated
income per share and requires dual presentation of basic and qualifies as a cash-flow hedge are recorded in other
and diluted net income per share on the face of the comprehensive income (loss), until earnings are affected
statements of income for all entities with complex capital by the variability in cash flows of the designated hedged
structures. item. Changes in the fair value of derivatives that are
Under SFAS No. 128, basic net income per share is highly effective as hedges and that are designated and
computed based on the weighted-average number of qualify as foreign-currency hedges are recorded in either
common shares outstanding during each period, and earnings or other comprehensive income (loss), depend-
diluted net income per share assumes the dilution that ing on whether the hedge transaction is a fair-value

Matsushita Electric Industrial Co., Ltd. 2007 79


hedge or a cash-flow hedge. The ineffective portion of The effect of adopting SFAS No. 123R using the modi-
the change in fair value of a derivative instrument that fied prospective method for the years ended March 31,
qualifies as either a fair-value hedge or a cash-flow 2007 was not material.
hedge is reported in earnings.
(t) Segment Information (See Note 21)
(q) Impairment of Long-Lived Assets (See Note 8) The Company accounts for segment information in accor-
The Company accounts for impairment or disposition of dance with SFAS No. 131, “Disclosures about Segments
long-lived assets in accordance with SFAS No. 144, of an Enterprise and Related Information.”
“Accounting for Impairment or Disposal of Long-Lived
Assets.” In accordance with SFAS No. 144, long-lived (u) Use of Estimates
assets, such as property, plant and equipment, and pur- Management of the Company has made a number of
chased intangibles subject to amortization, are reviewed estimates and assumptions relating to the reporting of
for impairment whenever events or changes in circum- assets and liabilities and the disclosure of contingent
stances indicate that the carrying amount of an asset may assets and liabilities to prepare these financial statements
not be recoverable. Recoverability of assets to be held in conformity with generally accepted accounting prin-
and used is measured by a comparison of the carrying ciples. Actual results could differ from those estimates.
amount of an asset to estimated undiscounted future cash
flows expected to be generated by the asset. If the carry- (v) New Accounting Pronouncements
ing amount of an asset exceeds its estimated future cash In June 2006, FASB issued FASB interpretation No. 48
flows, an impairment charge is recognized for the amount (FIN 48), “Accounting for Uncertainty in Income Taxes, an
by which the carrying amount of the asset exceeds the fair interpretation of SFAS No. 109.” FIN 48 clarifies the
value of the asset. accounting for uncertainty in income taxes by prescribing
the recognition threshold a tax position is required to meet
(r) Restructuring Charges (See Note 16) before being recognized in the financial statements. It also
The Company accounts for costs associated with exit or provides guidance on derecognition, classification, interest
disposal activities in accordance with SFAS No. 146, and penalties, accounting in interim periods, disclosure
“Accounting for Costs Associated with Exit or Disposal and transition. FIN 48 will be effective for the Company as
Activities.” Pursuant to SFAS No. 146, liabilities for restruc- of April 1, 2007. The application of FIN 48 is not expected
turing costs are recognized when the liability is incurred, to have a material effect on the Company’s consolidated
which may be subsequent to the date when the Company financial statements.
has committed to a restructuring plan. In September 2006, FASB issued SFAS No. 158,
“Employers’ Accounting for Defined Benefit Pension and
(s) Stock-Based Compensation (See Note 13) Other Postretirement Plans, an amendment of FASB
SFAS No. 123 (revised 2004), “Share-Based Payment” Statements No. 87, 88, 106, and 132(R).” SFAS No. 158’s
(SFAS No. 123R) addresses accounting and disclosure provisions regarding the change in the measurement
requirements with measurement of the cost of employee date of postretirement benefit plans require the fair value
service using a fair-value-based method of accounting of plan assets and benefit obligations to be measured as
for stock-based employee compensation plans. of the date of the fiscal year-end consolidated balance
The Company had continuously applied the intrinsic- sheet and will be effective for the Company as of April 1,
based-method of accounting prescribed by Accounting 2008. The Company is currently in the process of assess-
Principles Board Opinion No. 25, “Accounting for Stock ing the impact of the adoption of SFAS No. 158’s provi-
Issued to Employees,” and related interpretations to sions regarding the change in the measurement date of
account for its stock option plans until fiscal 2006. The postretirement benefit plans on the Company’s consoli-
Company accounted for the disclosure in accordance dated financial statements.
with SFAS No. 123, “Accounting for Stock-Based In September 2006, FASB issued SFAS No. 157,
Compensation,” and SFAS No. 148, “Accounting for “Fair Value Measurements.” SFAS No. 157 defines fair
Stock-Based Compensation—Transition and Disclosure, value, establishes a framework for measuring fair value,
an amendment of SFAS No. 123” until fiscal 2006. The and expands disclosures about fair value measurements.
Company adopted SFAS No. 123R for the year ended SFAS No. 157 will be effective for the Company as of
March 31, 2007. April 1, 2008. The Company is currently in the process of
assessing the impact of the adoption of SFAS No. 157.

80 Matsushita Electric Industrial Co., Ltd. 2007


In February 2007, FASB issued SFAS No. 159, “The Effects of Prior Year Misstatements when Quantifying
Fair Value Option for Financial Assets and Financial Misstatements in Current Year Financial Statements.”
Liabilities—Including an amendment of SFAS No. 115.” SAB No. 108 provides guidance on the consideration of
SFAS No. 159 provides companies with an option to the effects of prior year misstatements in quantifying cur-
report selected financial assets and liabilities at fair value. rent year misstatements for the purpose of a materiality
Unrealized gains and losses on items for which the fair assessment. SAB No. 108 requires quantification of the
value option has been elected will be recognized in earn- effects of financial statement errors on each of the bal-
ings. SFAS No. 159 will be effective for the Company as of ance sheets and statements of income and the related
April 1, 2008. The Company is currently in the process of financial statement disclosures. On March 31, 2007, the
assessing the impact of the adoption of SFAS No. 159. Company applied SAB No. 108. The adoption of SAB
In September 2006, Securities and Exchange No. 108 did not have a material effect on the Company’s
Commission (SEC) staff published Staff Accounting consolidated financial statements.
Bulletin No. 108 (SAB No. 108), “Considering the

2. Basis of Translating Financial Statements


The consolidated financial statements are expressed in approximate exchange rate on the Tokyo Foreign
yen. However, solely for the convenience of the reader, Exchange Market on March 31, 2007. This translation
the consolidated financial statements as of and for the should not be construed as a representation that all the
year ended March 31, 2007 have been translated into amounts shown could be converted into U.S. dollars.
United States dollars at the rate of ¥118=U.S.$1, the

3. Acquisition
On April 1, 2004, the Company acquired 19.2% of the based in Osaka, Japan. As a result of the acquisition, the
issued common shares of Matsushita Electric Works, Company is expected to provide a comprehensive range
Ltd. (MEW) through a tender offer to obtain its controlling of home electric and household equipment and systems
interest. Until then, the Company had a 31.8% equity in Japan. It also expects to reduce costs through econo-
ownership. mies of scale and sharing of research and development
This acquisition also resulted in another acquisition of resources and marketing channels. The aggregate pur-
a controlling interest of PanaHome Corporation chase cost of additional MEW shares was ¥147,187
(PanaHome) because both the Company and MEW had million and was paid in cash. The carrying value of the
27% equity ownerships, respectively. Company’s common shares of MEW immediately before
The results of operations of MEW and PanaHome are the acquisition was ¥200,174 million. The carrying value
included in the consolidated financial statements since of the Company’s existing common shares of PanaHome
that date. MEW is a manufacturer of household electric at April 1, 2004 was ¥22,861 million.
equipment, building products and related materials

Matsushita Electric Industrial Co., Ltd. 2007 81


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

Cash and cash equivalents ...................................................................................................... ¥ 226,911


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

In-process research and development represents the ¥20,005 million was assigned to assets subject to am-
estimated value of in-process research and development ortization, which have a weighted-average useful life of
projects that had not yet reached technical feasibility. approximately seven years and include technologies of
The related technology had no alternative use and ¥9,592 million with a 10-year weighted-average useful
required substantial additional development by the life, and software of ¥8,892 million with a 5-year
Company. In-process research and development was weighted-average useful life.
charged to operations during the year ended March 31, The total amount of goodwill is included in “MEW
2005 and included in selling, general and administrative and PanaHome” segment, and is not deductible for
expenses in the consolidated statements of income. tax purposes.
Of the ¥25,533 million of acquired intangible assets,

4. Inventories
Inventories at March 31, 2007 and 2006 are summarized as follows:
Thousands of
Millions of yen U.S. dollars
2007 2006 2007
Finished goods .......................................................................... ¥576,401 ¥534,766 $4,884,754
Work in process ......................................................................... 126,134 126,152 1,068,932
Raw materials ............................................................................ 246,864 254,344 2,092,068
¥949,399 ¥915,262 $8,045,754

82 Matsushita Electric Industrial Co., Ltd. 2007


5. Investments in and Advances to, and Transactions with Associated Companies
Certain financial information in respect of associated 2007, the Company acquired 35.5% equity of MTPD from
companies in aggregate at March 31, 2007 and 2006, Toshiba Corporation and as a result, has a 100% equity in
and for the three years ended March 31, 2007 is shown MTPD. MTPD is engaged in manufacturing and distribut-
below. The most significant of these associated compa- ing cathode ray tubes. The impact of consolidating MTPD
nies are Toshiba Matsushita Display Technology Co., Ltd. is not material to the Company’s consolidated financial
(TMD) and Sumishin Matsushita Financial Services Co., statements. Financial information associated with MTPD
Ltd. (SMFC). At March 31, 2007, the Company has a through February 28, 2006 is included in the aggregate
40% equity ownership in TMD and a 34% equity owner- information below, however, financial information as of and
ship in SMFC. for the one month ended March 31, 2006, and as of and
The Company formerly accounted for the investment in for the year ended March 31, 2007 is not included.
MT Picture Display Co., Ltd. (MTPD) and its subsidiaries Financial information associated with SMFC for fiscal
under the equity method, and began to consolidate MTPD 2005 is not included below, as it was a subsidiary
on March 1, 2006 in accordance with FIN 46R, as a result through fiscal 2005.
of certain restructuring activities of MTPD. At March 30,
Thousands of
Millions of yen U.S. dollars
2007 2006 2007
Current assets ........................................................................ ¥ 918,573 ¥ 842,766 $ 7,784,517
Other assets ........................................................................... 632,511 578,082 5,360,263
1,551,084 1,420,848 13,144,780

Current liabilities ...................................................................... 765,051 633,909 6,483,483


Other liabilities ......................................................................... 345,855 397,313 2,930,975
Net assets ........................................................................... ¥ 440,178 ¥ 389,626 $ 3,730,322

Company’s equity in net assets ............................................... ¥ 165,778 ¥ 153,590 $ 1,404,898


Investments in and advances to associated companies .......... 143,201 133,608 1,213,568

Thousands of
Millions of yen U.S. dollars
2007 2006 2005 2007
Net sales ........................................................... ¥1,352,107 ¥1,227,057 ¥1,187,975 $11,458,534
Gross profit ....................................................... 216,002 195,141 176,765 1,830,525
Net loss ............................................................ (7,595) (70,381) (11,178) (64,364)

Matsushita Electric Industrial Co., Ltd. 2007 83


Trade receivables and payables include the following balances with associated companies at March 31, 2007
and 2006:
Thousands of
Millions of yen U.S. dollars
2007 2006 2007
Due from ...................................................................................... ¥29,114 ¥22,101 $246,729
Due to .......................................................................................... 86,799 76,485 735,585

Purchases and sales include the following transactions with associated companies for the three years ended
March 31, 2007:
Thousands of
Millions of yen U.S. dollars
2007 2006 2005 2007
Purchases from ................................................... ¥301,859 ¥261,458 ¥260,745 $2,558,127
Sales to ............................................................... 250,863 204,740 192,489 2,125,958

Dividends received from associated companies for the three years ended March 31, 2007 are as follows:
Thousands of
Millions of yen U.S. dollars
2007 2006 2005 2007
Dividends received .................................................. ¥3,365 ¥1,496 ¥1,480 $28,517

Retained earnings include undistributed earnings of the Company incurred a write-down of ¥30,681 million
associated companies in the amount of ¥30,557 million and ¥2,833 million, respectively, for other-than-temporary
($258,958 thousand) and ¥28,299 million, as of March impairment of investments and advances in associated
31, 2007 and 2006, respectively. companies. The write-down is included in other deduc-
During the years ended March 31, 2006 and 2005, tions in the consolidated statements of income.

Investments in associated companies include equity securities which have quoted market values at March 31,
2007 and 2006 compared with related carrying amounts as follows:
Thousands of
Millions of yen U.S. dollars
2007 2006 2007
Carrying amount ........................................................................... ¥3,311 ¥3,054 $28,059
Market value ................................................................................. 6,129 5,088 51,941

84 Matsushita Electric Industrial Co., Ltd. 2007


6. Investments in Securities
The Company classifies its existing marketable equity and gross unrealized holding losses of available-for-sale
securities other than investments in associated compa- securities included in short-term investments, and in-
nies and all debt securities as available-for-sale. vestments and advances at March 31, 2007 and 2006
The cost, fair value, gross unrealized holding gains are as follows:
2007
Millions of yen Thousands of U.S. dollars
Gross Gross Gross Gross
unrealized unrealized unrealized unrealized
Fair holding holding Fair holding holding
Cost value gains losses Cost value gains losses
Current:
Japanese and foreign
government bonds .... ¥ 64,836 ¥ 64,882 ¥ 46 ¥ — $ 549,458 $ 549,848 $ 390 $ —
Convertible and
straight bonds ........... 18,004 18,048 44 — 152,576 152,949 373 —
Other debt securities ... 10,249 10,249 — — 86,856 86,856 — —
¥ 93,089 ¥ 93,179 ¥ 90 ¥ — $ 788,890 $ 789,653 $ 763 $ —
Noncurrent:
Equity securities .......... ¥293,314 ¥607,271 ¥314,488 ¥531 $2,485,712 $5,146,364 $2,665,152 $4,500
Japanese and foreign
government bonds .... 64,614 64,904 296 6 547,576 550,034 2,509 51
Convertible and
straight bonds ........... 15,392 15,464 85 13 130,441 131,051 720 110
Other debt securities ... 6,715 6,852 137 — 56,907 58,068 1,161 —
¥380,035 ¥694,491 ¥315,006 ¥550 $3,220,636 $5,885,517 $2,669,542 $4,661

2006
Millions of yen
Gross Gross
unrealized unrealized
Fair holding holding
Cost value gains losses

Current:
Japanese and foreign
government bonds .... ¥ 30,028 ¥ 30,012 ¥ 3 ¥ 19
Convertible and
straight bonds ........... 1,500 1,500 — —
Other debt securities ... 25,241 25,241 — —
¥ 56,769 ¥ 56,753 ¥ 3 ¥ 19
Noncurrent:
Equity securities .......... ¥230,400 ¥527,705 ¥297,371 ¥ 66
Japanese and foreign
government bonds .... 90,214 89,678 — 536
Convertible and
straight bonds ........... 32,866 32,702 13 177
Other debt securities ... 18,580 18,654 104 30
¥372,060 ¥668,739 ¥297,488 ¥809

Matsushita Electric Industrial Co., Ltd. 2007 85


Maturities of investments in available-for-sale securities at March 31, 2007 and 2006 are as follows:
Millions of yen Thousands of U.S. dollars
2007 2006 2007
Cost Fair value Cost Fair value Cost Fair value
Due within one year ...................... ¥ 93,089 ¥ 93,179 ¥ 56,769 ¥ 56,753 $ 788,890 $ 789,653
Due after one year
through five years ....................... 82,799 83,226 137,184 136,681 701,687 705,305
Due after five years
through ten years ....................... 3,922 3,994 4,476 4,353 33,237 33,848
Equity securities ........................... 293,314 607,271 230,400 527,705 2,485,712 5,146,364
¥473,124 ¥787,670 ¥428,829 ¥725,492 $4,009,526 $6,675,170

Proceeds from sale of available-for-sale securities for computing gross realized gains and losses is determined
the years ended March 31, 2007, 2006 and 2005 were by the average cost method.
¥84,806 million ($718,695 thousand), ¥135,907 million During the years ended March 31, 2007, 2006 and
and ¥74,719 million, respectively. The gross realized 2005, the Company incurred a write-down of ¥939
gains for the years ended March 31, 2007, 2006 and million ($7,958 thousand), ¥458 million and ¥2,661 million,
2005 were ¥12,452 million ($105,525 thousand), respectively, for other-than-temporary impairment of
¥63,757 million and ¥31,655 million, respectively. The available-for-sale securities, mainly reflecting the aggra-
gross realized losses on sale of available-for-sale securi- vated market condition of certain industries in Japan.
ties for the years ended March 31, 2007, 2006 and 2005 The write-down is included in other deductions in the
were ¥313 million ($2,653 thousand), ¥199 million and consolidated statements of income.
¥256 million, respectively. The cost of securities sold in

Gross unrealized holding losses on investment securities and the fair value of the related securities, aggregated by
investment category and length of time that individual securities have been in a continuous unrealized loss position, at
March 31, 2007 and 2006, are as follows:
2007
Millions of yen
Less than 12 months 12 months or more Total
Fair Unrealized Fair Unrealized Fair Unrealized
value losses value losses value losses
Equity securities ............................................ ¥ 9,229 ¥ 531 ¥ — ¥ — ¥ 9,229 ¥ 531
Japanese and foreign government bonds ..... 19,977 6 — — 19,977 6
Convertible and straight bonds ..................... 1,839 13 — — 1,839 13
¥ 31,045 ¥ 550 ¥ — ¥ — ¥ 31,045 ¥ 550

2006
Millions of yen
Less than 12 months 12 months or more Total
Fair Unrealized Fair Unrealized Fair Unrealized
value losses value losses value losses
Equity securities ............................................ ¥ 1,474 ¥ 66 ¥ — ¥ — ¥ 1,474 ¥ 66
Japanese and foreign government bonds ..... 114,558 555 — — 114,558 555
Convertible and straight bonds ..................... 30,623 177 — — 30,623 177
Other debt securities ..................................... 1,822 30 — — 1,822 30
¥148,477 ¥ 828 ¥ — ¥ — ¥148,477 ¥ 828

86 Matsushita Electric Industrial Co., Ltd. 2007


2007
Thousands of U.S. dollars
Less than 12 months 12 months or more Total
Fair Unrealized Fair Unrealized Fair Unrealized
value losses value losses value losses
Equity securities ........................................... $ 78,212 $4,500 $ — $ — $ 78,212 $4,500
Japanese and foreign government bonds .... 169,296 51 — — 169,296 51
Convertible and straight bonds .................... 15,585 110 — — 15,585 110
$263,093 $4,661 $ — $ — $263,093 $4,661

The gross unrealized loss position has been continuing for a relatively short period of time. Based on this and
other relevant factors, management has determined that these investments are not considered other-than-temporarily
impaired. The Company has not held unrealized losses for twelve months or more at March 31, 2007 and 2006.

The aggregate cost of the Company’s cost method 2006, respectively, the Company estimated that the fair
investments totaled ¥31,465 million ($266,653 thousand) value exceeded the cost of investments (that is, the
and ¥35,211 million at March 31, 2007 and 2006. The investments were not impaired). For the years ended
Company recognized the gross realized losses of ¥31,264 March 31, 2007, 2006 and 2005, the remaining invest-
million associated with the sale of a certain investment ments were considered other-than-temporarily impaired,
for the year ended March 31, 2006. For investments resulting in a write-down of ¥2,209 million ($18,720 thou-
with an aggregate cost of ¥29,639 million ($251,178 sand), ¥4,153 million and ¥10,692 million, respectively.
thousand) and ¥32,621 million at March 31, 2007 and

7. Leases
The Company has capital and operating leases for cer- resulting leases are being accounted for as operating
tain machinery and equipment with SMFC and other third leases. The resulting gains of these transactions, in-
parties. At March 31, 2007 and 2006, the gross book cluded in other income in the consolidated statements
value of machinery and equipment under capital leases of income, were not significant. The Company has
was ¥151,920 million ($1,287,458 thousand) and options to purchase the leased assets, or to terminate
¥168,374 million, and the related accumulated deprecia- the leases and guarantee a specified value of the leased
tion recorded was ¥93,488 million ($792,271 thousand) assets thereof, subject to certain conditions, during or at
and ¥101,025 million, respectively. the end of the lease term.
During the years ended March 31, 2007, 2006 and Rental expenses for operating leases, including the
2005, the Company sold and leased back certain above-mentioned sale-leaseback transactions were
machinery and equipment for ¥73,578 million ($623,542 ¥47,094 million ($399,102 thousand), ¥41,302 million
thousand), ¥115,326 million and ¥49,574 million, and ¥34,800 million for the years ended March 31, 2007,
respectively. The base lease term is 2 to 5 years. The 2006 and 2005, respectively.

Matsushita Electric Industrial Co., Ltd. 2007 87


Future minimum lease payments under non-cancelable capital leases and operating leases at March 31, 2007 are
as follows:
Millions of yen Thousands of U.S. dollars
Capital Operating Capital Operating
Year ending March 31 leases leases leases leases
2008 ............................................................................... ¥28,635 ¥ 66,262 $242,670 $ 561,542
2009 ............................................................................... 19,042 41,288 161,373 349,898
2010 ............................................................................... 11,756 34,040 99,627 288,475
2011 ............................................................................... 5,365 41,811 45,466 354,331
2012 ............................................................................... 1,959 18,895 16,602 160,127
Thereafter ....................................................................... 1,261 1,850 10,686 15,678
Total minimum lease payments ....................................... 68,018 ¥204,146 576,424 $1,730,051
Less amount representing interest .................................. 2,416 20,475
Present value of net minimum lease payments ................ 65,602 555,949
Less current portion ........................................................ 27,474 232,831
Long-term capital lease obligations ................................. ¥38,128 $323,118

8. Long-Lived Assets
The Company periodically reviews the recorded value of its “Home Appliances,” “Components and Devices,”
long-lived assets to determine if the future cash flows to “MEW and PanaHome,” “Other” and the remaining
be derived from these assets will be sufficient to recover segments, respectively.
the remaining recorded asset values. As discussed in The Company recognized impairment losses in the
Note 1 (q), the Company accounts for impairment of aggregate of ¥16,230 million of property, plant and
long-lived assets in accordance with SFAS No. 144. equipment during fiscal 2006.
Impairment losses are included in other deductions in the The Company decided to sell certain land and build-
consolidated statements of income, and are not charged ings, and classified those land and buildings as assets
to segment profit. held for sale. These assets are included in other current
The Company recognized impairment losses in the assets in the consolidated balance sheet and the
aggregate of ¥18,324 million ($155,288 thousand) of Company recognized an impairment loss. The fair value
property, plant and equipment during fiscal 2007. of the land and buildings was determined by using a
The Company closed a domestic factory that manufac- purchase price offered by a third party.
tured air conditioner devices and recorded an impairment The Company also recorded impairment losses
loss related to buildings, and machinery and equipment, related to write-down of land and buildings used in con-
as the Company estimated that the carrying amounts nection with the manufacture of certain information and
would not be recovered by the discounted estimated communications equipment at a domestic subsidiary. As
future cash flows expected to result from their eventual a result of plans to carry out selection and concentration
disposition. of businesses, the Company estimated the carrying
The Company also recorded impairment losses amounts would not be recovered by the future cash
related to buildings, and machinery and equipment used flows. The fair value of land was determined by specific
in building equipment, and electronic and plastic materi- appraisal. The fair value of buildings was determined
als of some domestic and overseas subsidiaries. The based on the discounted estimated future cash flows
profitability of each subsidiary was expected to be low in expected to result from the use of the buildings and their
the future and the Company estimated the carrying eventual disposition.
amounts would not be recovered by the future cash flows. Impairment losses of ¥4,260 million, ¥2,771 million,
Impairment losses of ¥1,416 million ($12,000 thou- ¥2,488 million, ¥2,754 million and ¥3,957 million were
sand), ¥3,901 million ($33,059 thousand), ¥10,163 million related to “AVC Networks,” “Components and Devices,”
($86,127 thousand), ¥1,571 million ($13,314 thousand) “MEW and PanaHome,” “Other” and the remaining
and ¥1,273 million ($10,788 thousand) were related to segments, respectively.

88 Matsushita Electric Industrial Co., Ltd. 2007


The Company recognized impairment losses in the related to the write-down of land and buildings used in
aggregate of ¥28,265 million of property, plant and connection with the manufacture of certain information
equipment during fiscal 2005. and communications equipment at a domestic subsidiary.
Due to severe competition primarily in the domestic As a result of plans to reduce production of these prod-
audio and visual industry, the Company was in the ucts, the Company estimated the carrying amounts would
process of realigning various branches of a certain not be recovered by the future cash flows. The fair value of
domestic sales subsidiary. Consequently the Company land was determined by specific appraisal. The fair value
decided to sell the land and buildings of the subsidiary of buildings was determined based on the discounted
near the end of fiscal 2005. As a result, the Company estimated future cash flows expected to result from the
recognized an impairment loss. The fair value of the use of the buildings and their eventual disposition.
land and buildings was determined by using a purchase Impairment losses of ¥13,393 million, ¥8,555 million and
price offered by a third party. ¥6,317 million were related to “AVC Networks,” “Home
The Company also recorded an impairment loss Appliances” and the remaining segments, respectively.

9. Goodwill and Other Intangible Assets


The changes in the carrying amount of goodwill by business segment for the years ended March 31, 2007 and 2006
are as follows:
Millions of yen
AVC Home Components MEW and
Networks Appliances and Devices PanaHome JVC Other Total
Balance at March 31, 2005 ............. ¥312,025 ¥22,488 ¥70,907 ¥43,113 ¥3,197 ¥10,182 ¥461,912
Goodwill acquired during the year .... — 47 216 402 — 714 1,379
Goodwill written off related to
disposals during the year .............. (104) — — — — — (104)
Goodwill impaired during the year .... (50,050) — — — — — (50,050)
Balance at March 31, 2006 ............. ¥261,871 ¥22,535 ¥71,123 ¥43,515 ¥3,197 ¥10,896 ¥413,137
Goodwill acquired during the year .... 40 — 116 2,443 — 4,202 6,801
Goodwill written off related to
disposals during the year .............. (8) (8) — — — (2,137) (2,153)
Goodwill impaired during the year ...... (27,299) — — — (3,197) — (30,496)
Other .............................................. 289 (8,254) — — — — (7,965)
Balance at March 31, 2007 ............. ¥234,893 ¥14,273 ¥71,239 ¥45,958 ¥ — ¥12,961 ¥379,324

Thousands of U.S. dollars


AVC Home Components MEW and
Networks Appliances and Devices PanaHome JVC Other Total
Balance at March 31, 2006 ........... $2,219,246 $190,975 $602,737 $368,771 $27,093 $ 92,339 $3,501,161
Goodwill acquired during the year ... 339 — 983 20,704 — 35,610 57,636
Goodwill written off related to
disposals during the year ............ (68) (68) — — — (18,110) (18,246)
Goodwill impaired during the year .... (231,348) — — — (27,093) — (258,441)
Other ............................................ 2,449 (69,949) — — — — (67,500)
Balance at March 31, 2007 ........... $1,990,618 $120,958 $603,720 $389,475 $ — $109,839 $3,214,610

The Company recognized an impairment loss of value of the reporting unit caused by decreased profit
¥27,299 million ($231,348 thousand) during fiscal 2007 expectation and the intensification of competition in a
related to goodwill of a mobile communication subsidiary. domestic market which was unforeseeable in the prior year.
This impairment is due to a decrease in the estimated fair

Matsushita Electric Industrial Co., Ltd. 2007 89


The Company recognized an impairment loss of mobile communication subsidiary. This impairment is due
¥3,197 million ($27,093 thousand) during fiscal 2007 to a decrease in the estimated fair value of the reporting
related to goodwill of JVC due primarily to profit perfor- unit caused by decreased profit expectation and the
mance in JVC’s consumer electronics business being closure of certain businesses in Europe and Asia.
lower than the Company’s expectation. The fair value was determined by using the esti-
The Company recognized an impairment loss of mated present fair value of future cash flows or quoted
¥50,050 million during fiscal 2006 related to goodwill of a market prices.

Acquired intangible assets, excluding goodwill, at March 31, 2007 and 2006 are as follows:
Millions of yen Thousands of U.S. dollars
2007 2006 2007
Average
Gross carrying Accumulated Gross carrying Accumulated amortization Gross carrying Accumulated
amount amortization amount amortization period amount amortization
Amortizing intangible assets:
Patents ..................................... ¥ 53,339 ¥ 33,447 ¥ 39,245 ¥ 30,620 8 years $ 452,026 $ 283,449
Software ................................... 221,023 148,537 187,336 117,821 4 years 1,873,076 1,258,788
Other ........................................ 37,705 15,394 37,516 12,806 39 years 319,534 130,458
¥312,067 ¥197,378 ¥264,097 ¥161,247 $2,644,636 $1,672,695

Thousands of
Millions of yen U.S. dollars
2007 2006 2007
Non-amortizing intangible assets ................................................................... ¥942 ¥1,308 $7,983

Aggregate amortization expense for amortizing intangible assets for the years ended March 31, 2007, 2006 and 2005
was ¥37,337 million ($316,416 thousand), ¥33,918 million and ¥37,569 million, respectively. Estimated amortization
expense for the next five years is as follows:
Thousands of
Year ending March 31 Millions of yen U.S. dollars
2008 ................................................................................................................. ¥32,711 $277,212
2009 ................................................................................................................. 23,724 201,051
2010 ................................................................................................................. 14,172 120,102
2011 ................................................................................................................. 9,125 77,331
2012 ................................................................................................................. 6,003 50,873

The Company recorded an impairment loss of ¥116 million ($983 thousand) and ¥349 million of amortizing intangible
assets in fiscal 2007 and 2005, respectively. The Company estimated the carrying amount would not be recovered by the
future cash flows, due to severe competition in the domestic market. The Company also recognized an impairment loss of
¥239 million ($2,025 thousand), ¥98 million and ¥905 million of non-amortizing intangible assets, in connection with the
decline of their market value during fiscal 2007, 2006 and 2005, respectively. The impairment loss is included in other
deductions in the consolidated statements of income.

90 Matsushita Electric Industrial Co., Ltd. 2007


10. Long-Term Debt and Short-Term Borrowings
Long-term debt at March 31, 2007 and 2006 is set forth below:
Thousands of
Millions of yen U.S. dollars
2007 2006 2007
Straight bonds, due 2007, interest 0.87% .................................................. ¥ — ¥100,014 $ —
Straight bonds, due 2011, interest 1.64% .................................................. 100,000 100,000 847,458
Straight bonds issued by subsidiaries, due 2006–2013,
interest 0.6%–2.0% .................................................................................. 80,000 80,000 677,966
Unsecured yen loans from banks and insurance companies,
due 2006–2013, effective interest 1.2% in 2007 and
0.4% in 2006 ............................................................................................ 30,580 84,983 259,153
Secured yen loans from banks and Development Bank of Japan
by subsidiaries, due 2006–2027, effective interest 2.16% in 2007
and 0.24% in 2006 ................................................................................... 4,681 3,495 39,669
Capital lease obligations ............................................................................. 65,602 70,631 555,949
280,863 439,123 2,380,195
Less current portion ................................................................................... 54,083 175,053 458,331
¥226,780 ¥264,070 $1,921,864

The aggregate annual maturities of long-term debt after March 31, 2007 are as follows:
Thousands of
Year ending March 31 Millions of yen U.S. dollars
2008 ................................................................................................................. ¥ 54,083 $458,331
2009 ................................................................................................................. 60,226 510,390
2010 ................................................................................................................. 34,279 290,500
2011 ................................................................................................................. 5,537 46,924
2012 ................................................................................................................. 102,155 865,720

As is customary in Japan, short-term and long-term loans from banks. At March 31, 2006, property, plant
bank loans are made under general agreements which and equipment with a book value of ¥6,645 million was
provide that security and guarantees for future and pledged as collateral by subsidiaries for secured yen
present indebtedness will be given upon request of the loans mainly from Development Bank of Japan. At March
bank, and that the bank shall have the right, as the obliga- 31, 2007 and 2006, short-term loans subject to such
tions become due, or in the event of their default, to offset general agreements amounted to ¥39,876 million
cash deposits against such obligations due to the bank. ($337,932 thousand) and ¥33,951 million, respectively.
Each of the loan agreements grants the lender the The balance of short-term loans also includes borrow-
right to request additional security or mortgages on ings under acceptances and short-term loans of foreign
certain assets. At March 31, 2007, investments and subsidiaries. The weighted-average interest rate on short-
advances, and property, plant and equipment with a term borrowings outstanding at March 31, 2007 and
book value of ¥6,061 million ($51,364 thousand) was 2006 was 5.1% and 4.4%, respectively.
pledged as collateral by subsidiaries for secured yen

Matsushita Electric Industrial Co., Ltd. 2007 91


11. Retirement and Severance Benefits
The Company and certain subsidiaries have contributory, of substitutional portion which is related to past employee
funded benefit pension plans covering substantially all services and returned the remaining benefit obligation
employees who meet eligibility requirements. Benefits along with the plan assets calculated pursuant to the
under the plans are primarily based on the combination Government formula by March 31, 2004.
of years of service and compensation. In fiscal 2005, certain other subsidiary of the Company
Effective April 1, 2002, the Company and certain of its transferred the substitutional portion of Japanese Welfare
subsidiaries amended their benefit pension plans by Pension Insurance to the Government. The Company
introducing a “point-based benefits system,” under recognized a gain of ¥31,509 million in accordance with
which benefits are calculated based on accumulated EITF 03-2, “Accounting for the Transfer to the Japanese
points allocated to employees each year according to Government of the Substitutional Portion of Employee
their job classification and years of service. Pension Fund Liabilities.” This consists of ¥165,266 mil-
The contributory, funded benefit pension plans in- lion of a subsidy from the Government, ¥22,660 million of
cluded those under Employees Pension Funds (EPF) as derecognition of previously accrued salary progression
is stipulated by the Welfare Pension Insurance Law (the and ¥156,417 million of recognition of related unrecog-
Law). The pension plans under the EPF were composed nized actuarial loss.
of the substitutional portion of Japanese Welfare Pension The Company uses a December 31 measurement
Insurance that the Company and certain of its subsidiar- date for the majority of its benefit plans.
ies operated on behalf of the Japanese Government, and On March 31, 2007, the Company adopted the
the corporate portion which was the contributory defined recognition and disclosure provisions of SFAS No. 158.
benefit pension plan covering substantially all of their SFAS No. 158 required the Company to recognize the
employees and provided benefits in addition to the sub- funded status (i.e., the difference between the fair value
stitutional portion. of plan assets and the projected benefit obligations) of its
In addition to the plans described above, upon retire- pension plans in the March 31, 2007, consolidated bal-
ment or termination of employment for reasons other ance sheet, with a corresponding adjustment to accu-
than dismissal, employees are entitled to lump-sum pay- mulated other comprehensive income (loss), net of tax.
ments based on the current rate of pay and length of The adjustment to accumulated other comprehensive
service. If the termination is involuntary or caused by income (loss) at adoption represents the unrecognized
death, the severance payment is greater than in the case prior service benefit and unrecognized actuarial loss, both
of voluntary termination. The lump-sum payment plans of which were previously netted against the plans’ funded
are not funded. status in the consolidated balance sheet pursuant to the
Effective April 1, 2002, the Company and certain of its provisions of SFAS No. 87. These amounts will be subse-
subsidiaries amended their lump-sum payment plans to quently recognized as net periodic benefit cost pursuant
cash balance pension plans. Under the cash balance to the Company’s historical accounting policy for amortiz-
pension plans, each participant has an account which is ing such amounts. Further, actuarial gains and losses that
credited yearly based on the current rate of pay and arise in subsequent periods and that are not recognized
market-related interest rate. as net periodic benefit cost in the same periods will be
Following the enactment of changes to the Law, the recognized as a component of other comprehensive
Company and certain of its subsidiaries obtained income (loss). Those amounts will be subsequently recog-
Government’s approval for exemption from the benefit nized as a component of net periodic benefit cost on the
obligation related to future employee services under the same basis as the amounts recognized in accumulated
substitutional portion in fiscal 2003. After obtaining the other comprehensive income (loss) at adoption of SFAS
approval, some of these companies obtained another No. 158.
approval for separation of the remaining benefit obligation

92 Matsushita Electric Industrial Co., Ltd. 2007


The incremental effects of adopting the provisions of effect on the consolidated statement of income for the
SFAS No. 158 on the accompanying consolidated year ended March 31, 2007, or for any prior period pre-
balance sheet at March 31, 2007, are presented in the sented, and it will not affect the Company’s operating
following table. The adoption of SFAS No. 158 had no results in future periods.

Millions of yen
Before After
Application of Application of
SFAS No. 158 Adjustments SFAS No. 158
Investments and advances ..................................................... ¥1,206,704 ¥ (622) ¥1,206,082
Other assets .......................................................................... 325,895 28,884 354,779
Total other assets ............................................................... 820,850 28,884 849,734
Other current liabilities ............................................................ (426,298) (8,649) (434,947)
Total current liabilities ......................................................... (2,733,218) (8,649) (2,741,867)
Retirement and severance benefits ........................................ (324,124) 43,166 (280,958)
Total noncurrent liabilities ................................................... (730,362) 43,166 (687,196)
Minority interests .................................................................... (549,506) (1,648) (551,154)
Minimum pension liability adjustments .................................... 16,189 (16,189) —
Pension liability adjustments ................................................... — (44,942) (44,942)
Total accumulated other comprehensive income (loss) ....... (45,966) (61,131) (107,097)
Total stockholders’ equity ................................................... (3,855,610) (61,131) (3,916,741)

Thousands of U.S. dollars


Before After
Application of Application of
SFAS No. 158 Adjustments SFAS No. 158
Investments and advances ..................................................... $10,226,305 $ (5,271) $10,221,034
Other assets .......................................................................... 2,761,822 244,780 3,006,602
Total other assets ............................................................... 6,956,356 244,780 7,201,136
Other current liabilities ............................................................ (3,612,694) (73,297) (3,685,991)
Total current liabilities ......................................................... (23,162,864) (73,297) (23,236,161)
Retirement and severance benefits ........................................ (2,746,814) 365,814 (2,381,000)
Total noncurrent liabilities ................................................... (6,189,509) 365,814 (5,823,695)
Minority interests .................................................................... (4,656,831) (13,966) (4,670,797)
Minimum pension liability adjustments .................................... 137,195 (137,195) —
Pension liability adjustments ................................................... — (380,864) (380,864)
Total accumulated other comprehensive income (loss) ....... (389,543) (518,059) (907,602)
Total stockholders’ equity ................................................... (32,674,661) (518,059) (33,192,720)

Matsushita Electric Industrial Co., Ltd. 2007 93


Reconciliation of beginning and ending balances of the benefit obligations of the contributory, funded benefit pen-
sion plans, the unfunded lump-sum payment plans, and the cash balance pension plans, and the fair value of the plan
assets at March 31, 2007 and 2006 are as follows:
Thousands of
Millions of yen U.S. dollars
2007 2006 2007
Change in benefit obligations:
Benefit obligations at beginning of year ................................ ¥1,930,073 ¥1,885,228 $16,356,551
Service cost ........................................................................ 59,415 63,787 503,517
Interest cost ........................................................................ 52,659 51,131 446,263
Prior service benefit ............................................................. (3,269) (5,850) (27,704)
Actuarial loss ....................................................................... 9,013 38,388 76,381
Benefits paid ....................................................................... (96,278) (93,642) (815,915)
Sale of majority shares of Matsushita Leasing & Credit
Co., Ltd. ............................................................................ — (12,867) —
Foreign currency exchange impact ...................................... 3,394 3,898 28,763
Benefit obligations at end of year ......................................... 1,955,007 1,930,073 16,567,856
Change in plan assets:
Fair value of plan assets at beginning of year ....................... 1,612,410 1,294,306 13,664,492
Actual return on plan assets ................................................ 119,382 242,056 1,011,712
Employer contributions ........................................................ 155,986 159,885 1,321,915
Benefits paid ....................................................................... (76,744) (79,374) (650,373)
Sale of majority shares of Matsushita Leasing & Credit
Co., Ltd. ............................................................................ — (6,772) —
Foreign currency exchange impact ...................................... 2,582 2,309 21,881
Fair value of plan assets at end of year ................................ 1,813,616 1,612,410 15,369,627
Funded status ......................................................................... ¥ (141,391) ¥ (317,663) $ (1,198,229)

The accumulated benefit obligation for the pension plans was ¥1,945,020 million ($16,483,220 thousand) and
¥1,905,395 million at March 31, 2007 and 2006, respectively.

The projected benefit obligations and the fair value of plan assets for the pension plans with projected benefit obliga-
tions in excess of plan assets, and the accumulated benefit obligations and the fair value of plan assets for the pension
plans with accumulated benefit obligations in excess of plan assets at March 31, 2007 and 2006 are as follows:
Thousands of
Millions of yen U.S. dollars
2007 2006 2007
Plans with projected benefit obligations in excess of
plan assets:
Projected benefit obligations ................................................ ¥823,421 ¥972,446 $6,978,144
Fair value of plan assets ...................................................... 533,814 598,355 4,523,847
Plans with accumulated benefit obligations in excess of
plan assets:
Accumulated benefit obligations .......................................... 817,849 842,315 6,930,924
Fair value of plan assets ...................................................... 533,814 485,099 4,523,847

94 Matsushita Electric Industrial Co., Ltd. 2007


Accounts recognized in the consolidated balance sheet at March 31, 2007 consist of:
Thousands of
Millions of yen U.S. dollars
Other assets ................................................................................................... ¥ 148,216 $ 1,256,068
Other current liabilities ..................................................................................... (8,649) (73,297)
Retirement and severance benefits ................................................................. (280,958) (2,381,000)
¥(141,391) $(1,198,229)

Amounts recognized in accumulated other comprehensive income (loss) at March 31, 2007 consist of:
Thousands of
Millions of yen U.S. dollars
Prior service cost ............................................................................................ ¥(295,419) $(2,503,551)
Actuarial loss ................................................................................................... 206,106 1,746,661
¥ (89,313) $ (756,890)

The funded status at March 31, 2006, reconciled to the net amount recognized in the consolidated balance sheet
at that date, is summarized as follows:
Millions of yen

Funded status ........................................................................................................................... ¥(317,663)


Unrecognized prior service benefit ............................................................................................ (317,103)
Unrecognized actuarial loss ...................................................................................................... 285,548
Net amount recognized ............................................................................................................. ¥(349,218)

Amounts recognized in the consolidated balance sheet at March 31, 2006 consist of:
Millions of yen

Retirement and severance benefits ........................................................................................... ¥(414,266)


Other assets ............................................................................................................................. 49,103
Accumulated other comprehensive income, gross of tax .......................................................... 15,945
Net amount recognized ............................................................................................................. ¥(349,218)

Net periodic benefit cost for the contributory, funded benefit pension plans, the unfunded lump-sum payment
plans, and the cash balance pension plans of the Company for the three years ended March 31, 2007 consisted of
the following components:
Thousands of
Millions of yen U.S. dollars
2007 2006 2005 2007
Service cost—benefits earned during the year ..... ¥59,415 ¥ 63,787 ¥ 71,081 $503,517
Interest cost on projected benefit obligation ......... 52,659 51,131 54,417 446,263
Expected return on plan assets ............................ (50,069) (37,088) (35,101) (424,314)
Amortization of prior service benefit ...................... (25,201) (26,376) (23,533) (213,568)
Recognized actuarial loss ..................................... 18,407 43,145 48,641 155,992
Net periodic benefit cost ...................................... ¥55,211 ¥ 94,599 ¥115,505 $467,890

The estimated prior service cost and actuarial loss for the defined benefit pension plan that will be amortized from
accumulated other comprehensive income (loss) into net periodic cost for the year ended March 31, 2008 are gain of
¥26,994 million ($228,763 thousand) and loss of ¥19,187 million ($162,602 thousand), respectively.

Matsushita Electric Industrial Co., Ltd. 2007 95


Weighted-average assumptions used to determine benefit obligations at March 31, 2007 and 2006 are as follows:
2007 2006

Discount rate .................................................................................. 2.7% 2.7%


Rate of compensation increase ....................................................... 1.6% 1.6%

Weighted-average assumptions used to determine net cost for the three years ended March 31, 2007 are as follows:
2007 2006 2005

Discount rate .................................................................................. 2.7% 2.7% 2.7%


Expected return on plan assets ....................................................... 3.3% 3.0% 3.0%
Rate of compensation increase ....................................................... 1.6% 1.8% 1.8%

The expected return on plan assets is determined based on the portfolio as a whole and not on the sum of the
returns on individual asset categories, considering long-term historical returns, asset allocation, and future estimates
of long-term investment returns.

The weighted-average asset allocations of the Company’s pension plans at March 31, 2007 and 2006 are as follows:
2007 2006

Asset category:
Equity securities .............................................................................. 45% 47%
Debt securities ................................................................................ 43 37
Life insurance company general accounts ....................................... 7 9
Other .............................................................................................. 5 7
Total ............................................................................................ 100% 100%

Each plan of the Company has a different investment considered necessary to achieve the expected long-term
policy, which is designed to ensure sufficient plan assets rate of return on plan assets.
are available to provide future payments of pension The Company expects to contribute ¥154,049 million
benefits to the eligible plan participants and is individually ($1,305,500 thousand) to its defined benefit plans in the
monitored for compliance and appropriateness on an year ending March 31, 2008.
on-going basis. Considering the expected long-term The benefits expected to be paid from the defined
rate of return on plan assets, each plan of the Company pension plans in each fiscal year 2008–2012 are
establishes a “basic” portfolio comprised of the optimal ¥85,914 million ($728,085 thousand), ¥90,352 million
combination of equity securities and debt securities. Plan ($765,695 thousand), ¥94,678 million ($802,356
assets are invested in individual equity and debt securities thousand), ¥99,030 million ($839,237 thousand), and
using the guidelines of the “basic” portfolio in order to ¥104,342 million ($884,254 thousand), respectively. The
generate a total return that will satisfy the expected aggregate benefits expected to be paid in the five years
return on a mid-term to long-term basis. The Company from fiscal 2013–2017 are ¥544,850 million ($4,617,373
evaluates the difference between expected return and thousand). The expected benefits are based on the
actual return of invested plan assets on an annual basis same assumptions used to measure the Company’s
to determine if such differences necessitate a revision in benefit obligation at December 31 and include estimated
the formulation of the “basic” portfolio. The Company future employee service.
revises the “basic” portfolio when and to the extent

96 Matsushita Electric Industrial Co., Ltd. 2007


12. Income Taxes
Income before income taxes and income taxes for the three years ended March 31, 2007 are summarized as follows:
Millions of yen
Domestic Foreign Total

For the year ended March 31, 2007


Income before income taxes .................................................. ¥317,007 ¥122,137 ¥439,144
Income taxes:
Current ............................................................................... 84,012 35,453 119,465
Deferred ............................................................................. 67,984 4,414 72,398
Total income taxes .......................................................... ¥151,996 ¥ 39,867 ¥191,863

For the year ended March 31, 2006


Income before income taxes .................................................. ¥292,083 ¥ 79,229 ¥371,312
Income taxes:
Current ............................................................................... 63,966 32,375 96,341
Deferred ............................................................................. 66,377 4,371 70,748
Total income taxes .......................................................... ¥130,343 ¥ 36,746 ¥167,089

For the year ended March 31, 2005


Income before income taxes .................................................. ¥140,464 ¥106,449 ¥246,913
Income taxes:
Current ............................................................................... 63,710 32,819 96,529
Deferred ............................................................................. 64,229 (7,424) 56,805
Total income taxes .......................................................... ¥127,939 ¥ 25,395 ¥153,334

Thousands of U.S. dollars


Domestic Foreign Total

For the year ended March 31, 2007


Income before income taxes ............................................... $2,686,500 $1,035,059 $3,721,559
Income taxes:
Current ............................................................................ 711,966 300,449 1,012,415
Deferred .......................................................................... 576,135 37,407 613,542
Total income taxes ....................................................... $1,288,101 $ 337,856 $1,625,957

Matsushita Electric Industrial Co., Ltd. 2007 97


The Company and its subsidiaries in Japan are subject Japan of approximately 40.5% for the three years ended
to a National tax of 30%, an Inhabitant tax of approxi- March 31, 2007.
mately 20.5%, and a deductible Enterprise tax of approxi- The effective tax rates for the years differ from the
mately 7.4% varying by local jurisdiction, which, in combined statutory tax rates for the following reasons:
aggregate, resulted in a combined statutory tax rate in
2007 2006 2005

Combined statutory tax rate ..................................................................... 40.5% 40.5% 40.5%


Tax credit related to research expenses ............................................... (2.2) (1.5) (2.4)
Lower tax rates of overseas subsidiaries ............................................... (4.2) (3.7) (5.9)
Expenses not deductible for tax purposes ............................................ 0.8 3.6 2.8
Change in valuation allowance allocated to income tax expenses ......... 9.8 15.7 25.7
Tax effects attributable to investments in subsidiaries ........................... 0.5 (12.0) 4.4
Other .................................................................................................... (1.5) 2.4 (3.0)
Effective tax rate ...................................................................................... 43.7% 45.0% 62.1%

The significant components of deferred income tax expenses for the three years ended March 31, 2007 are as follows:
Thousands of
Millions of yen U.S. dollars
2007 2006 2005 2007
Deferred tax expense (exclusive of the effects
of other components listed below) ...................... ¥114,132 ¥89,824 ¥78,649 $967,220
Benefits of net operating loss carryforwards ......... (41,734) (19,076) (21,844) (353,678)
¥ 72,398 ¥70,748 ¥56,805 $613,542

The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred
tax liabilities at March 31, 2007 and 2006 are presented below:
Thousands of
Millions of yen U.S. dollars
2007 2006 2007
Deferred tax assets:
Inventory valuation .................................................................. ¥ 94,489 ¥ 76,463 $ 800,754
Expenses accrued for financial statement purposes
but not currently included in taxable income ......................... 251,194 294,984 2,128,763
Property, plant and equipment ............................................... 167,089 179,114 1,416,009
Retirement and severance benefits ......................................... 76,604 151,742 649,186
Tax loss carryforwards ........................................................... 249,356 242,180 2,113,186
Other ...................................................................................... 150,306 185,551 1,273,780
Total gross deferred tax assets ........................................... 989,038 1,130,034 8,381,678
Less valuation allowance .................................................... 438,837 464,100 3,718,958
Net deferred tax assets ....................................................... 550,201 665,934 4,662,720

Deferred tax liabilities:


Net unrealized holding gains of available-for-sale securities ...... (127,588) (124,751) (1,081,254)
Other ...................................................................................... (50,067) (34,111) (424,297)
Total gross deferred tax liabilities ........................................ (177,655) (158,862) (1,505,551)
Net deferred tax assets ....................................................... ¥372,546 ¥ 507,072 $3,157,169

98 Matsushita Electric Industrial Co., Ltd. 2007


In assessing the realizability of deferred tax assets, existing valuation allowances at March 31, 2007.
management considers whether it is more likely than not The net change in total valuation allowance for the
that some portion or all of the deferred tax assets will not years ended March 31, 2007, 2006 and 2005 was a
be realized. The ultimate realization of deferred tax assets decrease of ¥25,263 million ($214,093 thousand), an
is dependent upon the generation of future taxable income increase of ¥152,947 million and an increase of ¥65,127
during the periods in which those temporary differences million, respectively.
and loss carryforwards become deductible. Management At March 31, 2007, the Company had, for income tax
considers the scheduled reversal of deferred tax liabilities, purposes, net operating loss carryforwards of approxi-
projected future taxable income, and tax planning strate- mately ¥704,631 million ($5,971,449 thousand), of which
gies in making this assessment. Based upon the level of ¥519,809 million ($4,405,161 thousand) expire from
historical taxable income and projections for future taxable fiscal 2009 through 2014 and the substantial majority of
income over the periods in which the deferred tax assets the remaining balance expire thereafter or do not expire.
are deductible, management believes it is more likely than Net deferred tax assets and liabilities at March 31,
not that the Company will realize the benefits of these 2007 and 2006 are reflected in the accompanying con-
deductible differences and loss carryforwards, net of the solidated balance sheets under the following captions:
Thousands of
Millions of yen U.S. dollars
2007 2006 2007
Other current assets .................................................................. ¥298,878 ¥320,914 $2,532,864
Other assets .............................................................................. 154,467 201,429 1,309,042
Other current liabilities ................................................................ (1,413) (1,306) (11,974)
Other liabilities ............................................................................ (79,386) (13,965) (672,763)
Net deferred tax assets .............................................................. ¥372,546 ¥507,072 $3,157,169

The Company has not recognized a deferred tax taxable to the Company in the foreseeable future. A de-
liability for the undistributed earnings of its foreign ferred tax liability will be recognized when the Company
subsidiaries and foreign corporate joint ventures of no longer plans to permanently reinvest undistributed
¥770,701 million ($6,531,364 thousand) as of March 31, earnings. Calculation of related unrecognized deferred
2007, because the Company currently does not expect tax liability is not practicable.
those unremitted earnings to reverse and become

Matsushita Electric Industrial Co., Ltd. 2007 99


13. Stockholders’ Equity
The Company may repurchase its common stock from Cash dividends and transfers to the legal reserve
the market pursuant to the former Japanese Commercial charged to retained earnings during the three years
Code and the Company Law of Japan. For the years ended March 31, 2007 represent dividends paid out
ended March 31, 2007, 2006 and 2005, respectively, during the periods and related appropriation to the legal
63,385,266, 48,945,141 and 60,363,663 shares were reserve. Cash dividends per share paid during the three
repurchased for the aggregate cost of approximately years ended March 31, 2007 amounted to ¥25.00 ($0.21),
¥153,179 million ($1,298,127 thousand), ¥87,150 ¥17.50 and ¥15.25, respectively. The accompanying
million and ¥92,879 million, respectively, primarily with consolidated financial statements do not include any
the intension to hold as treasury stock to improve provisions for the year-end dividend of ¥15.00 ($0.13) per
capital efficiency. share, totaling approximately ¥32,194 million ($272,831
For the year ended March 31, 2005, the Company thousand) in respect of the year ended March 31, 2007,
recognized 574,922 shares of its common stock held approved by the board of directors in April 2007.
by a newly consolidated subsidiary as treasury stock. In accordance with the Company Law of Japan, there
The Company sold 137,733, 119,422 and 888,683 are certain restrictions on payment of dividends in con-
shares of its treasury stock for the years ended March nection with the treasury stock repurchased. As a result
31, 2007, 2006 and 2005, respectively. The difference of restrictions on the treasury stock repurchased, re-
between sales price and book value was charged to tained earnings of ¥496,568 million ($4,208,203 thou-
capital surplus in the consolidated balance sheets. sand) at March 31, 2007 were restricted as to the
The Company Law of Japan provides that an payment of cash dividends.
amount equal to 10% of appropriations be appropriated The Company’s directors and certain senior executives
as a capital reserve or legal reserve until the aggregated were granted options to purchase the Company’s com-
amount of capital reserve and legal reserve equals 25% mon stock. All stock options become fully exercisable two
of stated capital. The capital reserve and legal reserve years from the date of grant and have a four-year term.
are not available for dividends but may be transferred to Information with respect to stock options is as follows:
capital surplus or retained earnings or stated capital
upon approval of the shareholders’ meeting.
Weighted-average
Number of exercise price
shares Yen U.S. dollars
Balance at March 31, 2004 ....................................................................... 414,000 ¥2,223
Forfeited ................................................................................................ (95,000) 2,285
Balance at March 31, 2005 ....................................................................... 319,000 2,204
Exercised .............................................................................................. (54,000) 2,001
Forfeited ................................................................................................ (97,000) 2,186
Balance at March 31, 2006 ....................................................................... 168,000 2,280 $19.32
Exercised .............................................................................................. (48,000) 1,922 16.29
Forfeited ................................................................................................ (73,000) 2,690 22.80
Balance at March 31, 2007,
weighted-average remaining life—0.61 years .......................................... 47,000 ¥2,008 $17.02

Treasury stock reserved for options at March 31, 2007 and 2006 was 30,000 shares and 86,000 shares, respectively.

100 Matsushita Electric Industrial Co., Ltd. 2007


14. Other Comprehensive Income (Loss)
Components of other comprehensive income (loss) for the three years ended March 31, 2007 are as follows:
Millions of yen
Pre-tax Tax Net-of-tax
amount expense amount
For the year ended March 31, 2007
Translation adjustments:
Translation adjustments arising during the period ............................... ¥ 57,312 ¥ — ¥ 57,312
Less: Reclassification adjustment for losses included in net income ... 5,481 — 5,481
Net translation adjustments ................................................................ 62,793 — 62,793
Unrealized holding gains of available-for-sale securities:
Unrealized holding gains (losses) arising during the period ................. 36,467 (12,232) 24,235
Less: Reclassification adjustment for gains included in net income ..... (11,200) 2,490 (8,710)
Net unrealized gains (losses) .............................................................. 25,267 (9,742) 15,525
Unrealized holding gains of derivative instruments:
Unrealized holding gains (losses) arising during the period ................. (19,778) 7,900 (11,878)
Less: Reclassification adjustment for losses included in net income ..... 19,183 (7,769) 11,414
Net unrealized gains (losses) .............................................................. (595) 131 (464)
Minimum pension liability adjustments ................................................... (5,722) (47) (5,769)
Other comprehensive income (loss) ................................................... ¥ 81,743 ¥ (9,658) ¥ 72,085

For the year ended March 31, 2006


Translation adjustments:
Translation adjustments arising during the period ............................... ¥134,943 ¥ — ¥134,943
Less: Reclassification adjustment for gains included in net income ..... (51,632) — (51,632)
Net translation adjustments ................................................................ 83,311 — 83,311
Unrealized holding gains of available-for-sale securities:
Unrealized holding gains (losses) arising during the period ................. 188,915 (78,609) 110,306
Less: Reclassification adjustment for gains included in net income ..... (63,100) 25,492 (37,608)
Net unrealized gains (losses) .............................................................. 125,815 (53,117) 72,698
Unrealized holding gains of derivative instruments:
Unrealized holding gains (losses) arising during the period ................. (25,581) 10,412 (15,169)
Less: Reclassification adjustment for losses included in net income ..... 16,961 (6,869) 10,092
Net unrealized gains (losses) .............................................................. (8,620) 3,543 (5,077)
Minimum pension liability adjustments ................................................... 101,805 (40,479) 61,326
Other comprehensive income (loss) ................................................... ¥302,311 ¥(90,053) ¥212,258

For the year ended March 31, 2005


Translation adjustments:
Translation adjustments arising during the period ............................... ¥ 35,172 ¥ — ¥ 35,172
Less: Reclassification adjustment for losses included in net income ..... 1,473 — 1,473
Net translation adjustments ................................................................ 36,645 — 36,645
Unrealized holding gains of available-for-sale securities:
Unrealized holding gains (losses) arising during the period ................. 8,768 (7,669) 1,099
Less: Reclassification adjustment for gains included in net income ..... (27,611) 11,016 (16,595)
Net unrealized gains (losses) .............................................................. (18,843) 3,347 (15,496)
Unrealized holding gains of derivative instruments:
Unrealized holding gains (losses) arising during the period ................. (8,156) 3,409 (4,747)
Less: Reclassification adjustment for losses included in net income ... 7,520 (3,046) 4,474
Net unrealized gains (losses) .............................................................. (636) 363 (273)
Minimum pension liability adjustments ................................................... 189,519 (49,270) 140,249
Other comprehensive income (loss) ................................................... ¥206,685 ¥(45,560) ¥161,125

Matsushita Electric Industrial Co., Ltd. 2007 101


Thousands of U.S. dollars
Pre-tax Tax Net-of-tax
amount expense amount
For the year ended March 31, 2007
Translation adjustments:
Translation adjustments arising during the period ................................ $485,695 $ — $485,695
Less: Reclassification adjustment for losses included in net income ...... 46,449 — 46,449
Net translation adjustments ................................................................. 532,144 — 532,144
Unrealized holding gains of available-for-sale securities:
Unrealized holding gains (losses) arising during the period .................. 309,042 (103,661) 205,381
Less: Reclassification adjustment for gains included in net income ...... (94,915) 21,102 (73,813)
Net unrealized gains (losses) ............................................................... 214,127 (82,559) 131,568
Unrealized holding gains of derivative instruments:
Unrealized holding gains (losses) arising during the period .................. (167,610) 66,949 (100,661)
Less: Reclassification adjustment for losses included in net income ...... 162,568 (65,839) 96,729
Net unrealized gains (losses) ............................................................... (5,042) 1,110 (3,932)
Minimum pension liability adjustments .................................................... (48,492) (398) (48,890)
Other comprehensive income (loss) .................................................... $692,737 $ (81,847) $610,890

15. Net Income per Share


A reconciliation of the numerators and denominators of the basic and diluted net income per share computation for
the three years ended March 31, 2007 is as follows:
Thousands of
Millions of yen U.S. dollars
2007 2006 2005 2007
Net income ....................................................... ¥217,185 ¥154,410 ¥58,481 $1,840,551

Number of shares
Average common shares outstanding ............... 2,182,791,138 2,222,376,333 2,294,607,915
Dilutive effect:
Stock options ................................................ 13,858 11,909 —
Diluted common shares outstanding ................. 2,182,804,996 2,222,388,242 2,294,607,915

Yen U.S. dollars


Net income per share:
Basic ............................................................. ¥99.50 ¥69.48 ¥25.49 $0.84
Diluted ........................................................... 99.50 69.48 25.49 0.84

Stock options were outstanding for the year ended March 31, 2005, but were not included in the calculation of
diluted net income per share because the stock options’ effect would be antidilutive (see Note 13).

102 Matsushita Electric Industrial Co., Ltd. 2007


16. Restructuring Charges
In connection with the reorganization of the Company’s operations, the Company has incurred certain restructuring
charges. Components and related amounts of the restructuring charges, before the related tax effects, for the years
ended March 31, 2007, 2006 and 2005 are as follows:
Thousands of
Millions of yen U.S. dollars
2007 2006 2005 2007
Expenses associated with the implementation
of early retirement programs:
Domestic ........................................................... ¥ 8,733 ¥31,446 ¥ 93,170 $ 74,008
Overseas ........................................................... 5,465 5,573 7,966 46,314
Total .............................................................. 14,198 37,019 101,136 120,322
Expenses associated with the closure and
integration of locations ........................................ 5,376 11,956 9,432 45,559
Total restructuring charges ................................ ¥19,574 ¥48,975 ¥110,568 $165,881

These restructuring charges are included in other deductions in the consolidated statements of income.

The Company has provided early retirement programs to those employees voluntarily leaving the Company. The
accrued early retirement programs are recognized when the employees accept the offer and the amount can be rea-
sonably estimated. Expenses associated with the closure and integration of locations include amounts such as mov-
ing expense of facilities and costs to terminate leasing contracts incurred at domestic and overseas manufacturing
plants and sales offices. An analysis of the accrued restructuring charges for the year ended March 31, 2007, 2006
and 2005 is as follows:
Thousands of
Millions of yen U.S. dollars
2007 2006 2005 2007
Balance at beginning of the year ........................... ¥ 1,335 ¥ 3,407 ¥ — $ 11,314
New charges ......................................................... 19,574 48,975 110,568 165,881
Cash payments ..................................................... (10,889) (51,047) (107,161) (92,280)
Balance at end of the year .................................... ¥10,020 ¥ 1,335 ¥ 3,407 $ 84,915

Matsushita Electric Industrial Co., Ltd. 2007 103


The following represent significant restructuring activities for the year ended March 31, 2007 by business segment:

AVC Networks Components and Devices


AVC Networks segment restructured mainly to acceler- Components and Devices segment restructured mainly
ate selection and concentration of its businesses for to enhance cost competitiveness as well as to address
strengthening its management structure. The restructur- continuous price declines. The restructuring activities
ing activities mainly consisted of the implementation of mainly consisted of the implementation of early retire-
early retirement programs in Japan and Europe. ment program in Asia for electronic devices business.
Total restructuring charges amounted to ¥11,909 Total restructuring charges amounted to ¥3,468
million ($100,924 thousand), including expenses associ- million ($29,390 thousand).
ated with the implementation of early retirement pro-
grams of ¥10,440 million ($88,475 thousand). MEW and PanaHome
MEW and PanaHome segment incurred restructuring
Home Appliances charges in the amount of ¥328 million ($2,780 thousand)
Home Appliances segment restructured its operations. mainly in Japan.
The restructuring activities mainly consisted of closure
and integrations in Japan. JVC
Total restructuring charges amounted to ¥3,113 mil- JVC segment incurred restructuring charges in the
lion ($26,381 thousand). amount of ¥531 million ($4,500 thousand) mainly in Asia.

Other
Other segment incurred restructuring charges in the
amount of ¥225 million ($1,906 thousand) mainly in
domestic sales companies.

The following represent significant restructuring activities for the year ended March 31, 2006 by business segment:

AVC Networks
AVC Networks segment restructured mainly to address MEW and PanaHome
price declines in digital AV products. The restructuring MEW and PanaHome segment restructured to strengthen
activities mainly consisted of the implementation of early its management structures by realigning its organization.
retirement programs. The restructuring activities mainly consisted of the imple-
Total restructuring charges amounted to ¥3,447 million. mentation of early retirement programs and closure and
integration of manufacturing plants and sales offices.
Home Appliances Total restructuring charges amounted to ¥9,385 mil-
Home Appliances segment restructured its operations. lion, including expenses associated with the implementa-
The restructuring activities mainly consisted of closure tion of early retirement programs of ¥4,832 million.
and integration of locations in Japan.
Total restructuring charges amounted to ¥2,655 million. JVC
JVC segment restructured to strengthen its company-
Components and Devices wide organizational and employment structure. The
Components and Devices segment restructured mainly restructuring activities mainly consisted of the imple-
to enhance cost competitiveness as well as to address mentation of early retirement programs.
sharp price declines. The restructuring activities mainly Total restructuring charges amounted to ¥8,891 million.
consisted of the implementation of early retirement pro-
grams in Japan for semiconductor business. Other
Total restructuring charges amounted to ¥21,510 Other segment incurred restructuring charges in the
million, including expenses associated with the implemen- amount of ¥3,087 million mainly in overseas sales
tation of early retirement programs of ¥20,183 million. companies.

104 Matsushita Electric Industrial Co., Ltd. 2007


The following represent significant restructuring activities for the year ended March 31, 2005 by business segment:

AVC Networks MEW and PanaHome


AVC Networks segment restructured mainly to cope with MEW and PanaHome segment incurred restructuring
sharp price declines in digital products. The restructuring charges in the amount of ¥1,783 million, mainly related to
activities mainly consisted of the implementation of early a reorganization conducted to eliminate duplication of
retirement programs covering both video and audio product lines and corporate functions with other
equipment business and information and communica- Matsushita companies.
tions equipment business in Japan and Europe, shutting
down of the manufacturing plant in Europe for video and JVC
audio equipment business and closure and integration of JVC segment restructured to enhance competitiveness
manufacturing plants and sales offices in Japan for infor- in global markets. The restructuring activities mainly con-
mation and communications equipment business. sisted of closure and integration of locations in electronic
Total restructuring charges amounted to ¥57,742 components business.
million, including expenses associated with the implemen- Total restructuring charges amounted to ¥9,208 mil-
tation of early retirement programs of ¥52,666 million. lion, mainly representing expenses associated with the
implementation of early retirement programs.
Home Appliances
Home Appliances segment restructured mainly to ad- Other
dress rising raw material costs as well as to enhance Other segment restructured to strengthen competitiveness
cost competitiveness. The restructuring activities mainly of sales companies. The restructuring activities mainly
consisted of the implementation of early retirement pro- consisted of the implementation of early retirement pro-
grams and closure and integration of locations in Japan, grams in domestic and overseas sales companies.
and shutting down of the manufacturing plant in Europe Total restructuring charges amounted to ¥10,561
for home appliances business. million, including expenses associated with the implemen-
Total restructuring charges amounted to ¥8,288 tation of early retirement programs of ¥10,370 million.
million, including expenses associated with the imple-
mentation of early retirement programs of ¥6,970 million.

Components and Devices


Components and Devices segment restructured to ad-
dress the downturn in components and devices indus-
tries, caused in part by price declines. The restructuring
activities mainly consisted of the implementation of early
retirement programs in electronic components business
and batteries business and closure and integration of
manufacturing locations in Japan for electronic compo-
nents business.
Total restructuring charges amounted to ¥22,986 mil-
lion, including expenses associated with the implementa-
tion of early retirement programs of ¥21,979 million.

Matsushita Electric Industrial Co., Ltd. 2007 105


17. Supplementary Information to the Statements of Income and Cash Flows
Research and development costs, advertising costs, shipping and handling costs and depreciation charged to income
for the three years ended March 31, 2007 are as follows:
Thousands of
Millions of yen U.S. dollars
2007 2006 2005 2007
Research and development costs ....................... ¥578,087 ¥564,781 ¥615,524 $4,899,042
Advertising costs ................................................. 199,155 181,235 174,604 1,687,754
Shipping and handling costs ............................... 170,311 170,469 166,404 1,443,314
Depreciation ........................................................ 280,177 275,213 287,400 2,374,381

Foreign exchange gains and losses included in other ¥69,261 million, and recorded losses on the sale of trade
deductions for the years ended March 31, 2007, 2006 and receivables of ¥208 million ($1,763 thousand) and ¥47
2005 are losses of ¥18,950 million ($160,593 thousand), million, respectively. Those losses are included in selling,
¥13,475 million and ¥7,542 million, respectively. general and administrative expenses. The Company is
Shipping and handling costs are included in selling, responsible for servicing the receivables. Included in trade
general and administrative expenses in the consolidated notes receivable and trade accounts receivable at March
statements of income. 31, 2007 are amounts of ¥34,744 million ($294,441 thou-
Included in other deductions for the year ended sand) without recourse and ¥34,382 million ($291,373
March 31, 2006 are claim expenses of ¥34,340 million. thousand) with recourse scheduled to be sold to
In fiscal 2007, 2006 and 2005, the Company sold, independent third parties.
without recourse, trade receivables of ¥315,329 million In fiscal 2005, the Company sold, without recourse,
($2,672,280 thousand), ¥193,974 million and ¥48,578 loans receivable of ¥96,339 million to independent third
million to independent third parties for proceeds of parties for proceeds of ¥106,779 million, and recorded
¥314,265 million ($2,663,263 thousand), ¥193,415 mil- gains on the sale of loans receivable of ¥10,440 million,
lion and ¥48,469 million, and recorded losses on the sale which is included in other income.
of trade receivables of ¥1,064 million ($9,017 thousand), The sale of the receivables was accounted for under
¥559 million and ¥109 million, respectively. In fiscal 2007 SFAS No. 140, “Accounting for Transfer and Servicing of
and 2006, the Company sold, with recourse, trade Financial Assets and Extinguishments of Liabilities.”
receivables of ¥303,769 million ($2,574,314 thousand) Interest expenses and income taxes paid, and non-
and ¥69,308 million to independent third parties for pro- cash investing and financing activities for the three years
ceeds of ¥303,561 million ($2,572,551 thousand) and ended March 31, 2007 are as follows:
Thousands of
Millions of yen U.S. dollars
2007 2006 2005 2007
Cash paid:
Interest ............................................................ ¥ 22,202 ¥21,853 ¥25,513 $188,153
Income taxes ................................................... 109,692 92,469 99,951 929,593

Noncash investing and financing activities:


Conversion of bonds ....................................... — 20,330 — —
Contribution of assets and liabilities to
associated companies ................................... — — 4,302 —

106 Matsushita Electric Industrial Co., Ltd. 2007


18. Derivatives and Hedging Activities
The Company operates internationally, giving rise to assessment of hedge effectiveness is not material for the
significant exposure to market risks arising from three years ended March 31, 2007. Amounts included in
changes in foreign exchange rates, interest rates and accumulated other comprehensive income (loss) at March
commodity prices. The Company assesses these risks 31, 2007 are expected to be recognized in earnings
by continually monitoring changes in these exposures principally over the next twelve months. The maximum
and by evaluating hedging opportunities. Derivative term over which the Company is hedging exposures to
financial instruments utilized by the Company to hedge the variability of cash flows for foreign currency exchange
these risks are comprised principally of foreign ex- risk is approximately five months.
change contracts, interest rate swaps, cross currency The Company is exposed to credit risk in the event of
swaps and commodity derivatives. The Company does non-performance by counterparties to the derivative
not hold or issue derivative financial instruments for any contracts, but such risk is considered mitigated by the
purposes other than hedging. high credit rating of the counterparties.
Gains and losses related to derivative instruments are The contract amounts of foreign exchange contracts,
classified in other income (deductions) in the consoli- interest rate swaps, cross currency swaps and commod-
dated statements of income. The amount of the hedging ity futures at March 31, 2007 and 2006 are as follows:
ineffectiveness and net gain or loss excluded from the
Thousands of
Millions of yen U.S. dollars
2007 2006 2007
Forward:
To sell foreign currencies ........................................................ ¥409,216 ¥404,383 $3,467,932
To buy foreign currencies ....................................................... 323,478 258,335 2,741,339
Options purchased to sell foreign currencies .............................. — 25,885 —
Variable-paying interest rate swaps ............................................ 6,136 15,000 52,000
Cross currency swaps ............................................................... 14,388 4,130 121,932
Commodity futures:
To sell commodity .................................................................. 86,023 36,007 729,008
To buy commodity ................................................................. 210,890 93,061 1,787,203

19. Fair Value of Financial Instruments


The following methods and assumptions were used to Investments and advances
estimate the fair value of each class of financial instru- The fair value of investments and advances is estimated
ments for which it is practicable to estimate that value: based on quoted market prices or the present value of
future cash flows using appropriate current discount rates.
Cash and cash equivalents, Time deposits, Trade receiv-
ables, Short-term borrowings, Trade payables and Long-term debt
Accrued expenses The fair value of long-term debt is estimated based on
The carrying amount approximates fair value because of quoted market prices or the present value of future cash
the short maturity of these instruments. flows using appropriate current discount rates.

Short-term investments Derivative financial instruments


The fair value of short-term investments is estimated The fair value of derivative financial instruments, all of
based on quoted market prices. which are used for hedging purposes, are estimated by
obtaining quotes from brokers.

Matsushita Electric Industrial Co., Ltd. 2007 107


The estimated fair values of financial instruments, all of which are held or issued for purposes other than trading, at
March 31, 2007 and 2006 are as follows:
Millions of yen Thousands of U.S. dollars
2007 2006 2007
Carrying Fair Carrying Fair Carrying Fair
amount value amount value amount value
Non-derivatives:
Assets:
Short-term investments ................... ¥ 93,179 ¥ 93,179 ¥ 56,753 ¥ 56,753 $ 789,653 $ 789,653
Investments and advances .............. 1,056,515 1,056,401 946,153 948,665 8,953,517 8,952,551
Liabilities:
Long-term debt, including
current portion .............................. (280,863) (282,309) (439,123) (437,547) (2,380,195) (2,392,449)
Derivatives:
Other current assets:
Forward:
To sell foreign currencies ............. — — 121 121 — —
To buy foreign currencies ............ — — 2,522 2,522 — —
Options purchased to sell
foreign currencies .......................... — — 132 132 — —
Variable-paying interest rate swaps .. — — 14 14 — —
Commodity futures to
buy commodity ............................. 33,996 33,996 43,674 43,674 288,102 288,102
Other current liabilities:
Forward:
To sell foreign currencies ............. (842) (842) — — (7,136) (7,136)
To buy foreign currencies ............ (706) (706) — — (5,983) (5,983)
Cross currency swaps .................... (159) (159) (35) (35) (1,347) (1,347)
Commodity futures to
sell commodity .............................. (11,243) (11,243) (7,401) (7,401) (95,280) (95,280)

Limitations
Fair value estimates are made at a specific point in time, based on relevant market information and information
about the financial instruments. These estimates are subjective in nature and involve uncertainties and matters of
significant judgements and therefore cannot be determined with precision. Changes in assumptions could signifi-
cantly affect the estimates.

108 Matsushita Electric Industrial Co., Ltd. 2007


20. Commitments and Contingent Liabilities
The Company provides guarantees to third parties on assets. For each guarantee provided, the Company is
bank loans provided to its employees, associated com- required to perform under the guarantee if certain condi-
panies and customers. The guarantees for the employ- tions are met during or at the end of the lease term. At
ees are principally made for their housing loans. The March 31, 2007, the maximum amount of undiscounted
guarantees for associated companies and customers are payments the Company would have to make in the event
made to enhance their credit. For each guarantee pro- that these conditions are met is ¥46,490 million ($393,983
vided, the Company is required to perform under the thousand). The carrying amount of the liabilities recog-
guarantee if the guaranteed party defaults on a payment. nized for the Company’s obligations as guarantors under
At March 31, 2007, the maximum amount of undiscount- those guarantees at March 31, 2007 and 2006 was
ed payments the Company would have to make in the insignificant.
event of default is ¥15,034 million ($127,407 thousand). The Company issues contractual product warranties
The carrying amount of the liabilities recognized for the under which it generally guarantees the performance of
Company’s obligations as a guarantor under those guar- products delivered and services rendered for a certain
antees at March 31, 2007 and 2006 was insignificant. period or term. The change in accrued warranty costs
As discussed in Note 7, in connection with the sale for the years ended March 31, 2007 and 2006 are
and lease back of certain machinery and equipment, the summarized as follows:
Company guarantees a specific value of the leased
Thousands of
Millions of yen U.S. dollars
2007 2006 2007
Balance at beginning of year ....................................................... ¥37,436 ¥35,216 $317,254
Liabilities accrued for warranties issued during the period ........... 48,068 50,206 407,356
Warranty claims paid during the period ....................................... (47,153) (44,199) (399,602)
Changes in liabilities for pre-existing warranties during
the period, including expirations ................................................ (272) (3,787) (2,305)
Balance at end of year ................................................................ ¥38,079 ¥37,436 $322,703

At March 31, 2007, commitments outstanding for the by July 2016. The Company has accrued estimated total
purchase of property, plant and equipment approxi- cost of ¥10,627 million ($90,059 thousand) for necessary
mated ¥105,575 million ($894,703 thousand). actions such as investigating whether the PCB equip-
Contingent liabilities at March 31, 2007 for discounted ment is buried at the facilities, including excavations, main-
export bills of exchange amounted to ¥409 million taining and disposing the PCB equipment that is already
($3,466 thousand). discovered, and soil remediation, since it represents
Liabilities for environmental remediation costs are management’s best estimate or minimum of the cost,
recorded when it is probable that obligations have been but the payments are not considered to be fixed and
incurred and the amounts can be reasonably estimated. reliably determinable.
In January 2003, the Company announced that disposed There are a number of legal actions against the
electric equipment that contained polychlorinated biphe- Company and certain subsidiaries. Management is of
nyls (“PCB equipment”) might be buried in the ground of the opinion that damages, if any, resulting from these
its four manufacturing facilities and one former manufac- actions will not have a material effect on the Company’s
turing facility. The applicable laws require that PCB consolidated financial statements.
equipment be appropriately maintained and disposed of

Matsushita Electric Industrial Co., Ltd. 2007 109


21. Segment Information
In accordance with SFAS No. 131, “Disclosures about “Home Appliances” includes household equipment.
Segments of an Enterprise and Related Information,” the “Components and Devices” includes electronic compo-
segments reported below are the components of the nents, semiconductors, electric motors and batteries.
Company for which separate financial information is “MEW and PanaHome” includes electrical supplies, elec-
available that is evaluated regularly by the chief operating tric products, building materials and equipment, and
decision maker of the Company in deciding how to allo- housing business. “JVC” includes products marketed
cate resources and in assessing performance. under the brand name of JVC or Victor. “Other” includes
Business segments correspond to categories of activ- electronic-parts-mounting machines, industrial robots
ity classified primarily by markets, products and brand and industrial equipment.
names. “AVC Networks” includes video and audio equip- Information by segment for the three years ended
ment, and information and communications equipment. March 31, 2007 is shown in the tables below:

By Business Segment:
Thousands of
Millions of yen U.S. dollars
2007 2006 2005 2007
Sales:
AVC Networks:
Customers ................................................ ¥3,948,720 ¥ 3,894,274 ¥ 3,745,339 $33,463,729
Intersegment ............................................. 98,451 91,814 113,442 834,330
Total ...................................................... 4,047,171 3,986,088 3,858,781 34,298,059
Home Appliances:
Customers ................................................ 1,119,318 1,069,282 1,102,795 9,485,745
Intersegment ............................................. 184,096 171,920 126,973 1,560,136
Total ...................................................... 1,303,414 1,241,202 1,229,768 11,045,881
Components and Devices:
Customers ................................................ 987,933 954,011 1,006,893 8,372,314
Intersegment ............................................. 389,824 414,247 462,114 3,303,593
Total ...................................................... 1,377,757 1,368,258 1,469,007 11,675,907
MEW and PanaHome:
Customers ................................................ 1,809,503 1,695,949 1,628,372 15,334,771
Intersegment ............................................. 49,210 51,258 57,885 417,034
Total ...................................................... 1,858,713 1,747,207 1,686,257 15,751,805
JVC:
Customers ................................................ 640,746 697,150 721,391 5,430,051
Intersegment ............................................. 5,833 5,966 8,818 49,432
Total ...................................................... 646,579 703,116 730,209 5,479,483
Other:
Customers ................................................ 601,950 583,663 508,846 5,101,271
Intersegment ............................................. 882,026 731,629 518,277 7,474,797
Total ...................................................... 1,483,976 1,315,292 1,027,123 12,576,068
Eliminations .................................................. (1,609,440) (1,466,834) (1,287,509) (13,639,322)
Consolidated total ..................................... ¥9,108,170 ¥ 8,894,329 ¥ 8,713,636 $77,187,881

110 Matsushita Electric Industrial Co., Ltd. 2007


Thousands of
Millions of yen U.S. dollars
2007 2006 2005 2007
Segment profit:
AVC Networks .............................................. ¥ 219,654 ¥ 190,885 ¥ 127,366 $ 1,861,475
Home Appliances ......................................... 83,510 77,135 74,794 707,712
Components and Devices ............................ 99,884 81,111 57,761 846,474
MEW and PanaHome ................................... 78,889 72,694 66,761 668,551
JVC .............................................................. (5,659) (5,782) 9,887 (47,958)
Other ............................................................ 60,500 62,225 38,352 512,712
Corporate and eliminations ........................... (77,237) (63,995) (66,427) (654,551)
Total segment profit .................................. ¥ 459,541 ¥ 414,273 ¥ 308,494 $ 3,894,415
Interest income ................................................ 30,553 28,216 19,490 258,924
Dividends received ........................................... 7,597 6,567 5,383 64,381
Gain from the transfer of the
substitutional portion of Japanese
Welfare Pension Insurance ............................. — — 31,509 —
Other income ................................................... 114,545 147,399 82,819 970,720
Interest expense ............................................... (20,906) (21,686) (22,827) (177,169)
Goodwill impairment ........................................ (30,496) (50,050) (3,559) (258,441)
Other deductions ............................................. (121,690) (153,407) (174,396) (1,031,271)
Consolidated income before income taxes .... ¥ 439,144 ¥ 371,312 ¥ 246,913 $ 3,721,559

Identifiable assets:
AVC Networks .............................................. ¥2,333,353 ¥2,276,573 ¥2,205,663 $19,774,178
Home Appliances ......................................... 724,914 637,935 618,156 6,143,339
Components and Devices ............................ 989,293 966,684 930,315 8,383,839
MEW and PanaHome ................................... 1,354,679 1,371,405 1,384,695 11,480,330
JVC .............................................................. 419,980 438,456 483,867 3,559,153
Other ............................................................ 461,884 503,798 883,706 3,914,271
Corporate and eliminations ........................... 1,612,855 1,769,789 1,550,479 13,668,263
Consolidated total ..................................... ¥7,896,958 ¥7,964,640 ¥8,056,881 $66,923,373

Depreciation (including intangibles


other than goodwill):
AVC Networks .............................................. ¥ 79,514 ¥ 76,136 ¥ 88,550 $ 673,848
Home Appliances ......................................... 32,207 29,633 31,785 272,941
Components and Devices ............................ 85,300 88,717 96,659 722,881
MEW and PanaHome ................................... 48,487 46,575 50,582 410,907
JVC .............................................................. 17,844 17,759 15,985 151,220
Other ............................................................ 15,561 38,253 30,329 131,873
Corporate and eliminations ........................... 38,601 12,058 11,079 327,127
Consolidated total ..................................... ¥ 317,514 ¥ 309,131 ¥ 324,969 $ 2,690,797

Capital investment (including intangibles


other than goodwill):
AVC Networks .............................................. ¥ 168,448 ¥ 126,815 ¥ 103,340 $ 1,427,525
Home Appliances ......................................... 49,040 44,869 36,041 415,593
Components and Devices ............................ 138,930 124,219 126,826 1,177,373
MEW and PanaHome ................................... 47,558 44,849 32,989 403,034
JVC .............................................................. 15,478 16,994 23,045 131,170
Other ............................................................ 17,325 12,092 74,570 146,822
Corporate and eliminations ........................... 39,479 16,688 14,286 334,568
Consolidated total ..................................... ¥ 476,258 ¥ 386,526 ¥ 411,097 $ 4,036,085

Matsushita Electric Industrial Co., Ltd. 2007 111


Corporate expenses include certain corporate R&D investments, investments and advances and other
expenditures and general corporate expenses. assets related to unallocated expenses.
Corporate assets consist of cash and cash equiva- Intangibles mainly represent patents and software.
lents, time deposits, marketable securities in short-term

By Geographical Area:

Sales attributed to countries based upon the customer’s location and property, plant and equipment are as follows:
Thousands of
Millions of yen U.S. dollars
2007 2006 2005 2007
Sales:
Japan ............................................................ ¥4,616,520 ¥4,611,440 ¥4,580,555 $39,123,051
North and South America .............................. 1,381,104 1,387,424 1,282,956 11,704,271
Europe .......................................................... 1,217,931 1,113,556 1,122,493 10,321,449
Asia and Others ............................................. 1,892,615 1,781,909 1,727,632 16,039,110
Consolidated total ...................................... ¥9,108,170 ¥8,894,329 ¥8,713,636 $77,187,881
United States of America included in
North and South America ............................ ¥1,213,867 ¥1,206,357 ¥1,127,412 $10,287,008

Property, plant and equipment:


Japan ............................................................ ¥1,171,223 ¥1,201,266 ¥1,272,839 $ 9,925,618
North and South America .............................. 53,317 58,003 59,230 451,839
Europe .......................................................... 71,594 66,084 64,883 606,729
Asia and Others ............................................. 346,159 306,986 261,128 2,933,551
Consolidated total ...................................... ¥1,642,293 ¥1,632,339 ¥1,658,080 $13,917,737

There are no individually material countries which business segments or geographic segments are made
should be separately disclosed in North and South at arms-length prices. There are no sales to a single
America, Europe and Asia and Others, except for the external major customer for the three years ended
United States of America on sales. Transfers between March 31, 2007.

112 Matsushita Electric Industrial Co., Ltd. 2007


The following information shows sales, geographical requirements under SFAS No. 131, the Company dis-
profit and identifiable assets which are attributed to closes this information as supplemental information in
geographic areas based on the country location of the light of the disclosure requirements of the Japanese
Company or its subsidiaries for the three years ended Securities and Exchange Law, which a Japanese public
March 31, 2007. In addition to the disclosure company is subject to:
Thousands of
Millions of yen U.S. dollars
2007 2006 2005 2007
Sales:
Japan:
Customers ................................................ ¥4,941,413 ¥ 4,945,802 ¥ 5,033,645 $41,876,381
Intersegment ............................................. 2,029,589 1,944,537 1,586,407 17,199,907
Total ...................................................... 6,971,002 6,890,339 6,620,052 59,076,288
North and South America:
Customers ................................................ 1,335,631 1,340,352 1,248,012 11,318,907
Intersegment ............................................. 21,654 26,185 23,605 183,508
Total ...................................................... 1,357,285 1,366,537 1,271,617 11,502,415
Europe:
Customers ................................................ 1,162,795 1,067,306 1,046,159 9,854,195
Intersegment ............................................. 47,201 20,361 26,405 400,008
Total ...................................................... 1,209,996 1,087,667 1,072,564 10,254,203
Asia and Others:
Customers ................................................ 1,668,331 1,540,869 1,385,820 14,138,398
Intersegment ............................................. 1,206,340 1,175,492 1,059,178 10,223,221
Total ...................................................... 2,874,671 2,716,361 2,444,998 24,361,619
Eliminations .................................................. (3,304,784) (3,166,575) (2,695,595) (28,006,644)
Consolidated total ..................................... ¥9,108,170 ¥ 8,894,329 ¥ 8,713,636 $77,187,881

Geographical profit:
Japan ........................................................... ¥ 409,395 ¥ 374,129 ¥ 262,063 $ 3,469,449
North and South America ............................. 22,500 16,773 20,834 190,678
Europe ......................................................... 13,903 4,511 7,393 117,822
Asia and Others ............................................ 89,460 81,337 75,324 758,136
Corporate and eliminations ........................... (75,717) (62,477) (57,120) (641,670)
Consolidated total ..................................... ¥ 459,541 ¥ 414,273 ¥ 308,494 $ 3,894,415

Identifiable assets:
Japan ........................................................... ¥4,416,586 ¥ 4,442,776 ¥ 5,055,700 $37,428,695
North and South America ............................. 455,216 443,432 402,155 3,857,763
Europe ......................................................... 452,924 412,948 379,571 3,838,339
Asia and Others ............................................ 1,265,170 1,235,438 995,785 10,721,780
Corporate and eliminations ........................... 1,307,062 1,430,046 1,223,670 11,076,796
Consolidated total ..................................... ¥7,896,958 ¥ 7,964,640 ¥ 8,056,881 $66,923,373

Matsushita Electric Industrial Co., Ltd. 2007 113


114 Matsushita Electric Industrial Co., Ltd. 2007
Management’s Report on Internal Control Over Financial Reporting

The management of Matsushita Electric Industrial Co., Ltd. is responsible for establishing and
maintaining adequate internal control over financial reporting as defined in Rule 13a-15(f) under
the Securities Exchange Act of 1934.

The Company’s management evaluated the effectiveness of internal control over financial reporting
as of March 31, 2007. In making this assessment, management used the criteria set forth by the
Committee of Sponsoring Organizations of the Treadway Commission in Internal Control-
Integrated Framework.

Based on its assessment, management concluded that, as of March 31, 2007, the Company’s
internal control over financial reporting was effective.

The Company’s independent registered public accounting firm, KPMG AZSA & Co. has issued an
audit report on our evaluation of internal control over financial reporting as of March 31, 2007.

June 27, 2007

Fumio Ohtsubo
President

Makoto Uenoyama
Director
(In charge of Accounting and Finance)

Matsushita Electric Industrial Co., Ltd. 2007 115


Report of Independent Registered Public Accounting Firm

The Board of Directors and Stockholders of


Matsushita Electric Industrial Co., Ltd.

We have audited the accompanying consolidated balance sheets of Matsushita Electric Industrial Co., Ltd. and subsidiaries as
of March 31, 2007 and 2006, and the related consolidated statements of income, stockholders’ equity, and cash flows for
each of the years in the three-year period ended March 31, 2007, all expressed in yen. These consolidated financial
statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.

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

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position
of Matsushita Electric Industrial Co., Ltd. and subsidiaries as of March 31, 2007 and 2006, and the results of their operations
and their cash flows for each of the years in the three-year period ended March 31, 2007, in conformity with U.S. generally
accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United
States), the effectiveness of Matsushita Electric Industrial Co., Ltd. and subsidiaries’ internal control over financial
reporting as of March 31, 2007, based on criteria established in Internal Control–Integrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission (the COSO criteria), and our report dated June 27,
2007 expressed an unqualified opinion on management’s assessment of, and the effective operation of, internal control
over financial reporting.

The accompanying consolidated financial statements as of and for the year ended March 31, 2007 have been translated into
United States dollars solely for the convenience of the reader. We have audited the translation and, in our opinion, the
consolidated financial statements expressed in yen have been translated into United States dollars on the basis set forth in
Note 2 of the notes to the consolidated financial statements.

Osaka, Japan
June 27, 2007

116 Matsushita Electric Industrial Co., Ltd. 2007


Report of Independent Registered Public Accounting Firm

The Board of Directors and Stockholders of


Matsushita Electric Industrial Co., Ltd.

We have audited management’s assessment, included in the accompanying Management’s Report on Internal Control over
Financial Reporting, that Matsushita Electric Industrial Co., Ltd. and subsidiaries maintained effective internal control over
financial reporting as of March 31, 2007, based on criteria established in Internal Control–Integrated Framework issued by
the Committee of Sponsoring Organizations of the Treadway Commission (the COSO criteria). The Company’s management
is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of
internal control over financial reporting. Our responsibility is to express an opinion on management’s assessment and an
opinion on the effectiveness of the Company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States).
Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal
control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal
control over financial reporting, evaluating management’s assessment, testing and evaluating the design and operating
effectiveness of internal control, and performing such other procedures as we considered necessary in the circumstances.
We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S.
generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and
procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions
and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary
to permit preparation of financial statements in accordance with U.S. generally accepted accounting principles, and that
receipts and expenditures of the company are being made only in accordance with authorizations of management and
directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, management’s assessment that Matsushita Electric Industrial Co., Ltd. and subsidiaries maintained
effective internal control over financial reporting as of March 31, 2007, is fairly stated, in all material respects, based on
the COSO criteria. Also, in our opinion, Matsushita Electric Industrial Co., Ltd. and subsidiaries maintained, in all material
respects, effective internal control over financial reporting as of March 31, 2007, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States),
the consolidated balance sheets of Matsushita Electric Industrial Co., Ltd. and subsidiaries as of March 31, 2007 and 2006,
and the related consolidated statements of income, stockholders’ equity, and cash flows for each of the years in the three-year
period ended March 31, 2007, all expressed in yen, and our report dated June 27, 2007 expressed an unqualified opinion on
those consolidated financial statements.

Osaka, Japan
June 27, 2007

Matsushita Electric Industrial Co., Ltd. 2007 117


Principal Production Investor Information
Divisions and Subsidiaries (As of April 1, 2007)

(As of April 1, 2007)

Principal Production Divisions Corporate Headquarters


Panasonic AVC Networks Company Investor Relations Office
Panasonic Automotive Systems Company Matsushita Electric Industrial Co., Ltd.
Investor Relations Office
Panasonic System Solutions Company
1006, Oaza Kadoma, Kadoma-shi, Osaka 571-8501, Japan
Matsushita Home Appliances Company
Phone: +81-6-6908-1121
Lighting Company Web sites:
Semiconductor Company English : http://ir-site.panasonic.com/
Motor Company Japanese: http://ir-site.panasonic.com/jp/
Corporate eNet Business Division Tokyo Investor Relations Office
Matsushita Electric Industrial Co., Ltd.
Principal Domestic Subsidiaries
Tokyo Investor Relations Office
Matsushita Electric Works, Ltd. 1-2, 1-chome, Shiba-Koen, Minato-ku, Tokyo 105-8581, Japan
Victor Company of Japan, Ltd. Phone: +81-3-3437-1121
Panasonic Communications Co., Ltd.
U.S. Investor Relations Office
PanaHome Corporation
Panasonic Finance (America), Inc.
Matsushita Plasma Display Panel Co., Ltd. 1 Rockefeller Plaza, Suite 1001,
Panasonic Electronic Devices Co., Ltd. New York, NY 10020-2002, U.S.A.
Panasonic Mobile Communications Co., Ltd. Phone: +1-212-698-1365
Panasonic Factory Solutions Co., Ltd.
European Investor Relations Office
Matsushita Ecology Systems Co., Ltd. Panasonic Finance (Europe) plc
Matsushita Refrigeration Company 10 Finsbury Square, London, EC2A 1AD, U.K.
Matsushita Battery Industrial Co., Ltd. Phone: +44-20-7562-4400
Panasonic Shikoku Electronics Co., Ltd.
Japanese Stock Exchange Listings
Tokyo, Osaka and Nagoya Stock Exchanges
Principal Overseas Subsidiaries
Panasonic Corporation of North America Overseas Stock Exchange Listing
Panasonic Europe Ltd. New York Stock Exchange
Panasonic AVC Networks Czech, s.r.o. Number of Shares Issued (as of March 31, 2007)
Panasonic Asia Pacific Pte. Ltd. 2,453,053,497
Panasonic AVC Networks Singapore Pte. Ltd. (Including 306,769,039 shares held by Matsushita)
Panasonic Communications Philippines Corporation Number of Shareholders (as of March 31, 2007)
Panasonic Taiwan Co., Ltd. 250,858
Panasonic Corporation of China
Transfer Agent for Common Stock
Panasonic Home Appliances Air-Conditioning The Sumitomo Trust & Banking Co., Ltd.
(Guangzhou) Co., Ltd. 5-33, Kitahama, 4-chome, Chuo-ku, Osaka-shi,
Osaka 540-8639, Japan
Phone: +81-6-6220-2121

Depositary and Transfer Agent


for American Depositary Receipts (ADRs)
JPMorgan Chase Bank, N.A.
4 New York Plaza, New York, NY 10004, U.S.A.

Corporate Bonds
1.64% Bonds due December 20, 2011
Fiscal Agent:
Sumitomo Mitsui Banking Corporation
6-5, 4-chome, Kitahama, Chuo-ku, Osaka-shi,
Osaka 541-0041, Japan
Phone: +81-6-6227-2120

118 Matsushita Electric Industrial Co., Ltd. 2007


Selected Billions of yen %
2,500 7.0
Financial Data
(Years ended March 31, 2,400 6.0
2006 and 2007)
2,300 5.0
Net sales
Income before 2,200 4.0
income taxes/Net sales
2,100 3.0

2,000 2.0

1,900 1.0

1,800 0
1st quarter 2nd quarter 3rd quarter 4th quarter 1st quarter 2nd quarter 3rd quarter 4th quarter
2006 2007
(Millions of yen, except per share information)

Net sales ....................................... ¥2,048,161 ¥2,211,052 ¥2,398,420 ¥2,236,696 ¥2,136,934 ¥2,252,560 ¥2,436,828 ¥2,281,848
Income before income taxes ......... 66,194 87,917 126,089 91,112 75,392 157,082 144,394 62,276
Net income ................................... 33,443 30,964 49,269 40,734 35,830 79,293 78,673 23,389
Net income per share, diluted .......... ¥ 14.87 ¥ 13.94 ¥ 22.29 ¥ 18.43 ¥ 16.27 ¥ 36.16 ¥ 36.13 ¥ 10.84
Note: Quarterly financial data is unaudited and has not been reviewed under Statements on Auditing Standards No.100 “Interim Financial Information,” by
Matsushita’s independent registered public accounting firm.

Major Shareholders (As of March 31, 2007) Breakdown of Issued Shares by


Share ownership Percentage of total Type of Shareholders
Name (in thousands of shares) issued shares (%) (As of March 31, 2007)
Moxley & Co. .................................................................. 189,197 .................. 7.71
The Master Trust Bank of Japan, Ltd. (trust account) ...... 125,982 .................. 5.13 ● Japanese
● Treasury
Japan Trustee Services Bank, Ltd. (trust account) ........... 83,905 .................. 3.42 Financial
Stock
Institutions
State Street Bank and Trust Co. ..................................... 68,399 .................. 2.78 12.5% 32.9%
Nippon Life Insurance Co. ............................................... 67,000 .................. 2.73 ● Individuals
Sumitomo Mitsui Banking Corporation ............................ 57,725 .................. 2.35 and Others
Sumitomo Life Insurance Co. .......................................... 35,382 .................. 1.44 19.8%
Mitsui Sumitomo Insurance Co., Ltd. .............................. 35,106 .................. 1.43 ● Other
Corporations
Matsushita Electric Employee Shareholding Association .. 33,827 .................. 1.37
6.3% ● Overseas Investors
Japan Trustee Services Bank, Ltd. (trust account No. 4) ... 32,780 .................. 1.33
28.5%
Notes 1. Percentage of total issued shares is calculated excluding the Company’s own shares
(306,769 thousand shares).
2. Holdings of less than 1,000 shares have been omitted.

Quarterly Common Stock Price Range (Tokyo Stock Exchange)


Yen (Calendar years)

3,000

2,500

2,000

1,500

1,000

500
2002 2003 2004 2005 2006 2007

High ................................ 1,826 ..................... 1,590 ...................... 1,694 ..................... 2,515 ...................... 2,870 .............. 2,495
Low ................................ 1,115 ........................ 860 ...................... 1,372 ..................... 1,485 ...................... 2,080 .............. 2,250

Matsushita Electric Industrial Co., Ltd. 2007 119


Matsushita Electric Industrial Co., Ltd. Annual Report 2007

http://panasonic.net/

Matsushita Electric Industrial Co., Ltd.


This entire report is printed with soy ink on paper which is 50% recycled.
Printed in Japan

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