UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington D.C. 20549

FORM 20-F

ANNUAL REPORT PURSUANT TO SECTIONS 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended March 31, 20042005

Commission file number 1 - 6784

MATSUSHITA DENKI SANGYO KABUSHIKI KAISHA

(Exact name of Registrant as specified in its charter)

MATSUSHITA ELECTRIC INDUSTRIAL CO., LTD.

(Translation of Registrant’s name into English)

Japan

(Jurisdiction of incorporation or organization)

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

(Address of principal executive offices)

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

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

None

(Title of Class)

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

None

(Title of Class)

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

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

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

Item 17.  ¨    Item 18.  x.

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

This form contains 154172 pages.

CONTENTS

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All information contained in this Report is as of March 31, 20042005 or for the year ended March 31, 20042005 (fiscal 2004)2005) unless the context otherwise indicates.

The noon buying rate for yen in New York City as certified for customs purposes by the Federal Reserve Bank of New York on August 25, 200423, 2005 was 110.38109.83 yen = U.S.$1.

Cautionary Statement Regarding Forward-Looking Statements

This annual report includes forward–lookingforward-looking statements (within the meaning of Section 27A of the U.S. Securities Act of 1933 and Section 21E of the U.S. Securities Exchange Act of 1934) about Matsushita and its Group companies (the Matsushita Group). To the extent that statements in this annual report do not relate to historical or current facts, they constitute forward-looking statements. These forward-looking statements are based on the current assumptions and beliefs of the Matsushita Group in light of the information currently available to it, and involve known and unknown risks, uncertainties and other factors. Such risks, uncertainties and other factors may cause the Matsushita Group’s actual results, performance, achievements or financial position to be materially different from any future results, performance, achievements or financial position expressed or implied by these forward-looking statements. Matsushita undertakes no obligation to publicly update any forward-looking statements after the date of this annual report (September 2004)2005). Investors are advised to consult any further disclosures by Matsushita in its subsequent filings with the U.S. Securities and Exchange Commission pursuant to the Securities Exchange Act of 1934 and its other filings.

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

About the Company

Matsushita Electric Industrial Co., Ltd. (hereinafter, unless the context otherwise requires, “Matsushita” or the “Company” refers to Matsushita Electric Industrial Co., Ltd. and its consolidated subsidiaries as a group), best known for its “Panasonic” brand name, is one of the world’s leading manufacturers of electronic and electric products for a wide range of consumer, business and industrial uses, as well as a wide variety of components. Based in Osaka, Japan, the Company recorded consolidated net sales of approximately 7,4808,714 billion yen for fiscal 2004.2005. Over the past eight decades, the Company has grown from a small domestic household electrical equipment manufacturer into a comprehensive electronic and electric equipment, systems and components manufacturer operating internationally. Of the fiscal 20042005 net sales, nearly one-half was represented by sales in Japan, with the rest by overseas sales.

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PART I

Not applicable

Not applicable

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Not applicable

Not applicable

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

Risks Related to Economic Conditions

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

Demand for Matsushita’s products and services may be affected by general economic trends in the countries or regions in which Matsushita’s products and services are sold. Economic downturns and resulting declines in demand in Matsushita’s major markets worldwide may thus adversely affect the Company’s business results and financial condition. Although Matsushita continued to achieve improvements in its business performance in fiscal 2004,2005, it currently does not foresee a rapid turnaroundforesees severe conditions, such as ever-intensifying price declines for the Company’s products and rising raw materials prices, including crude oil prices, as well as uncertainty regarding economic conditions in the Japanese or global economy in the near term given the limited recovery in consumer spending.United States, Europe and China. These conditions may continue in the short- to mid-term, thereby further negatively affecting Matsushita’s businesses. Furthermore, if Japanese and global economies fall into stagnation, resulting decreased demand and slowdown in capital investment may adversely affect Matsushita’s overall business.

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

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

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Interest rate fluctuations may adversely affect Matsushita’s financial results

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

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

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

Risks Related to Matsushita’s Business

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

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

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

Matsushita’s business is subject to intense price competition worldwide, which makes it difficult for the Company to decide product prices so that it can obtain adequate profits. Such intensified price competition may adversely affect Matsushita’s profits, especially whenin terms of decreases in demand decreases.or oversupply in the market. For the year ending March 31, 2005,2006, Matsushita expects prices in many product areas in which it deals to decline at the same rate as, or more rapidly than, in recent fiscal years. Matsushita also expects fierce price competition in digital products with shortened product life cycles. Matsushita believes that this trend will affect its businesses, especially those in the area of its AVC Networks category and its Components and Devices category.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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Risks Related to Matsushita’s Management Plans

Matsushita has implemented its new mid-term management plan, “Leap Ahead 21,” (announced on January 9, 2004) for the three-year term ending March 2007. Matsushita’s business vision focuses on “realizing a ubiquitous networking society” and “contributing to coexistence with the global environment” through leading-edge technologies. Based on this vision, Matsushita aims to become a company that creates more value for customers. Due mainly to the various risk factors described in this section, Matsushita may not be successful in achieving all the goals set out in its mid-term business plan. Furthermore, in fiscal 2004, Matsushita introduced an autonomous business domain-based organizational structure, along with a new management system that places a top priority on improving its global consolidated results and cash flows. With the objective of further enhancing profitability, Matsushita will speed up its structural reforms in several of its business domain companies.structure. Under the management structure, Matsushita seeks to conduct its consolidated Groupwide businesses speedilycompleted large-scale business restructuring, and efficiently, and to achieveimplemented new growth strategies through the synergies expected from such business restructuring. Matsushita may not, however, be able to improve efficiency, reduce costs or realize growth through these measures due to unexpected additional reorganization or restructuring, expenses (for restructuring expenses expected in fiscal 2005, see Section D of Item 5), improper allocation of operational resources or other unpredictable factors. Also, Matsushita has implemented its annual forecast and major initiatives (announced on April 28, 2004)2005) for the year ending March 31, 2005.2006. Matsushita may not be successful in achieving all the targets or in realizing the benefits expected because of external and internal factors.

Risks Related to Legal Restrictions and Litigations

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

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

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

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

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

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

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

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

Leak of confidential information may adversely affect Matsushita’s business

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

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

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

Other Risks

External economic conditions may adversely affect Matsushita’s pension plans

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

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Some long-lived assets may not produce adequate returns

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

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

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

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

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

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

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

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

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

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GENERAL

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

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

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

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

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

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

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

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

“VALUE CREATION 21” PLAN

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

During fiscal 2002, the Company implemented a series of structural reforms under this Value Creation 21 plan, including the restructuring of its domestic consumer sales and distribution structure,structures, management initiatives through the use of information technology (IT) such as supply chain management (SCM), the selective integration of businesses and manufacturing locations, manufacturing reforms such as the introduction of cell-style production, the reform of the Companywide research, development and design (R&DD) structurestructures to concentrate development resources into strategic product or core technology areas, and employment restructuring initiatives including the regional-based employee remuneration system and early retirement programs. Expenses related to the implementation of these restructuring initiatives, combined with adverse economic conditions, caused a sharp decline in the Company’s earnings results in fiscal 2002.

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In April 2001, the Company absorbed Matsushita Electronics Corporation (MEC), its wholly-owned subsidiary, by merger to implement unified operational management in such key device areas as semiconductors and display devices. By establishing new internal divisional companies directly under the control of the parent company, namely the Semiconductor, Display Devices and Lighting companies, the development, manufacturing and sales functions that were previously disbursed between Matsushita and MEC for each of these strategic businesses have been integrated.

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In April 2002, Matsushita and Toshiba Corporation (Toshiba) separated their respective liquid crystal display (LCD) panel operations and established a joint venture company, Toshiba Matsushita Display Technology Co., Ltd., for the development, manufacture and sale of LCD panels and next-generation display devices. The joint venture aims at becoming one of the world’s leading LCD panel manufactures, combining Matsushita’s fast-response LCD image processing technology, Toshiba’s technology in low-temperature polysilicon LCD panel manufacturing and both companies’ expertise in consumer products, personal computers and communications devices. Of the new company’s initial stated capital of 10 billion yen, 60% was invested by Toshiba and 40% by Matsushita.

As a drastic structural reform aimed at achieving new growth under the Value Creation 21 plan, Matsushita implemented share exchanges on October 1, 2002 with five of its majority-owned subsidiaries (Matsushita Communication Industrial Co., Ltd., Kyushu Matsushita Electric Co., Ltd., Matsushita Seiko Co., Ltd., Matsushita Kotobuki Electronics Industries, Ltd. and Matsushita Graphic Communication Systems, Inc.) and transformed them into wholly-owned subsidiaries of Matsushita. Following the completion of the share exchanges, Matsushita implemented a comprehensive Groupwide business reorganization on January 1, 2003 via company splits, business combinations and business transfers among several Group companies, including the parent company’s internal divisional companies, whereby businesses of most of the Matsushita Group were reorganized into 14 new business domains as strategic units. This major reorganization was implemented with a focus on the elimination of duplicated business lines and counterproductive competition amongst the Group companies, the unification and concentration of R&D resources, and the establishment of a totally integrated operational structure from development and manufacturing to sales in each domain for full customer satisfaction.

domains.

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

Also on April 1, 2003, Matsushita launched another joint venture company with Toshiba, upon separating their respective cathode ray tube (CRT) businesses with the exception of domestic CRT manufacturing operations. The new company, Matsushita Toshiba Picture Display Co., Ltd., now positioned as the third largest TV-use CRT operation in the world, aims to maintain a competitive position in the global CRT market by integrating Matsushita and Toshiba’s advanced CRT technologies, as well as both companies’ product development and manufacturing capabilities. OfMatsushita has a 64.5% equity ownership in the new joint venture company’s stated capitalcompany, but this is accounted for under the equity method of 10 billion yen, 64.5% was invested by Matsushita and 35.5% by Toshiba.

- 13 -accounting as Toshiba has a substantive participating right.

Upon the aforementioned Groupwide restructurings, in April 2003, to prepare a framework that enables each business domain company to implement autonomously responsible management, Matsushita established a new global consolidated management system that focuses on cash flows. Under this new management system, each business domain company aims to maximize not only growth, but also capital efficiency and cash flows through efforts to achieve a leaner balance sheet, attaining speedy management with accelerated asset turnover on a consolidated basis.flows.

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

Since fiscal 2003, Matsushita has been gradually shifting its focus from restructuring to growth, implementing the following initiatives:

To bring about a swift recovery in business results,growth. Matsushita launched 88 “V-products” in fiscal 2003 as a driving force that canmade concerted efforts to enhance product competitiveness. V-products, which aim to capture the top shareleading shares in high-volume markets, and contributemade a significant contribution to the Company’s overall performance. business results.

- 13 -

As a result of a Groupwide commitment to this initiative, sales of V-products reached approximately 1 trillion yen in fiscal 2003, allowing Matsushita to achieve increased market share in many product categories.categories in fiscal 2003. In markets with shortened product lifecycles, particularly digital audiovisual (AV)AV equipment, the gradual launch of products into global marketmarkets results in lost sales and profit opportunities. Matsushita therefore utilizes “simultaneouscame to utilize simultaneous global product introductions”introductions aimed at increasing both sales and profits. In fiscal 2004, Matsushita selected 90 new V-products and increased sales through global simultaneous product introductions, particularly in digital AV equipment, such as DVD recorders. As a result, overall sales of V-products reached approximately 1.24 trillion yen on a global basis in fiscal 2004.

The Company is taking various initiatives to strengthen overseas operations as an engine for overall corporate growth. For the mid-term, Matsushita is aiming at achieving over 60% of total operating profit from its overseas operations. Specifically, the Company plans to accelerate operational expansion in China, aiming for a 1 trillion yen business size on a Groupwide basis in fiscal 2006.

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

- 14 -

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

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

COLLABORATION WITH MEW

In December 2003, Matsushita reached a basic agreement regarding a comprehensive business collaboration with anits affiliate, Matsushita Electric Works, Ltd. (MEW), after which Matsushita initiated a tender offer for additional shares of MEW. As a result of the tender offer in which the Company purchased an additional 140,550 thousand shares of common stock of MEW at the total cost of 147 billion yen, MEW, PanaHome Corporation and their respective group companiessubsidiaries became consolidated subsidiaries of the Company in April 2004. Through collaboration, Matsushita and MEW aim for global excellence by maximizing synergy effects between the two companies to create new growth and increase productivity.growth. The two companies have also agreed to integrateintegrated their brand strategies, whereby, from October 2004, the “NAIS” and “National” brands currently used by MEW will bewere unified under the “National” brand for products sold in Japan, and the “Panasonic” brand for those sold in overseas markets. Regarding business operations initiatives,Furthermore, Matsushita and MEW unified product designs, opened joint showrooms and introduced a series of Collaboration V-products that incorporate black-box technologies of both companies, such as modular furniture systems, tank-less toilets, bathroom systems, high efficiency lighting systems and Integrated IP Network Platforms for building and area security management systems. For fiscal 2005, Matsushita and MEW also integrated overlapping businesses in the two companies will strive to achieve further growth in such areas asarea of electrical supplies, building materials and equipment, home appliances householdand industrial equipment, and construction materials, electric equipment, lighting, home and building networks, environment-related systems and healthcare and medical equipment, thereby solidifying the Matsushita Group’s position as a global leader in these fields.reformed distribution channels to establish an optimized, customer-oriented operational structure.

- 14 -

“LEAP AHEAD 21” PLAN

Matsushita’s business vision focuses on “realizing a ubiquitous networking society” and “contributing to coexistence with the global environment” through leading-edge technologies. Based on this vision, Matsushita will make efforts to beachieve global excellence in 2010, or in other words, to become a leading company in all aspects of management and a company which creates more value forthat is supported by its customers all over the world by 2010.worldwide. As the midpoint toward achieving this goal, Matsushita established its new mid-term management plan “Leap Ahead 21,” for the three-year term from fiscal 2005 through 2007, and commenced initiatives for sustainable growth. The Leap Ahead 21 will mainly implement following two initiatives.

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

Accelerating Growth BusinessBusinesses

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

Matsushita continued to investments into strategic business and promoted business alliances primarily for flat-panel TVs which global demand is positioning selected V-products as the main vehicle of future growth. During fiscal 2005, the initial year of the Leap Ahead 21, Matsushita plansexpected to introduce 71 new V-products based in three core concepts: unique and advanced “black-box technologies” that cannot be easily imitated by competitors; “universal design” to make products easier to use for everyone; and, “environmental consideration,” such as saving energy and resources. The Company will develop V-products into “strong business pillars” that result in global market expansion and earning maximum profits at an early stage in product lifecycles.increase significantly.

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

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

The Company is also taking various initiatives to strengthen overseas operations as an engine for overall corporate growth. For the mid-term, Matsushita aims to achieve over 60% of total operating profit from its overseas operation. Specifically, the Company plans to accelerate operational expansion in China, aiming for sales of approximately 1 trillion yen in fiscal 2005, through which the Company aims to establish an optimum operating structure from the customer’s point of view and maximize value for the new Matsushita Group.

- 15 -2007.

Reinforcing Management Structures

With the objective of further enhancing profitability, Matsushita will increase the speed up structural reformswith which it recovers invested capital by reducing assets and further implementing the selection of priority businesses and concentration of management resources into such businesses. Furthermore, in several business domain companies. Also,addition to drastically reducing materials procurement costs, Matsushita will further strengthen its management structures through other aggressive cost reduction projects to enhance profitability.

- 15 -

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

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

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

R&D Strategy

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

New Initiatives to Maximize Shareholder Value

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

- 16 -

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

* ESV stands for Enhancement of Shareholder Value.

CAPITAL INVESTMENT

Total capital investment (excluding intangibles) amounted to 320 billion yen, 251 billion yen, 271 billion yen and 271374 billion yen for fiscal 2002, 2003, 2004 and 2004,2005, respectively. The increase of capital investment during fiscal 2005 from the previous year is attributed partly to the consolidation of MEW and PanaHome and their respective subsidiaries. (For a reconciliation of capital investment to the most directly comparable U.S. GAAP financial measures, see “Overview—Key performance indicators” in Section A of Item 5.) In these years, Matsushita curbed capital investment in a number of business areas, in line with an increased management emphasis on cash flows and capital efficiency, as seen in an increased adoption of cell-style production, which allowed the use of smaller scale facilities. Matsushita did, however, selectively invest in facilities for those product areas that are expected to drive future growth, including such key areas as semiconductors, plasma display panels (PDPs)particularly advanced system LSIs, PDPs and other strategic products.

For the current fiscal year ending March 31, 2005 (fiscal 2005), Matsushita expects its capital investment to increase to approximately 340 billion yen. This investment will be funded primarily through internal sources.

SALES BY PRODUCT CATEGORY

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

- 1617 -

AVC Networks

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

Video and Audio Equipment

Principal products in this sector include TVs, VCRs, camcorders, digital still cameras (DSCs), DVD players and recorders, VCRs, camcorders, digital cameras, and personal and home audio equipment. Matsushita maintains a leading share in the domestic and overseas markets for a number of major products in this field. During the three-year period ended March 31, 2004,2005, Matsushita expanded sales in this category by takingaggressively introducing a lead in the introductionseries of attractive digital and networkable products,competitive V-products, despite the negative effects of slow consumer spending, especially in Japan, and intensified global price competition. A series of competitive V-products thatFrom fiscal 2004, Matsushita focused its management resources in the Company has introduced since fiscal 2003 has been a major factor in this growth. Matsushita’s current focus is to strengthen its “3D” value chain—consisting of digital TVs (DTVs), DVDs and secure digital memory cards (SD Memory Cards) and compatible products, DVDs and digital TVs—which contributed greatly to create new demand in the digital networking era.sales growth.

In TVs, Matsushita produces a broad range of models to meet all segments of demand in domestic and international markets, ranging from cathode ray tube (CRT) models to flat-panel TVs, such as plasma display panel (PDP)TVs and liquid crystal display (LCD) TVs. The Company’s CRTFor large-screen plasma TVs include both analogin sizes above 37-inches, the global demand for which is rapidly expanding, Matsushita maintains a vertically integrated manufacturing structure, which includes everything from key components and digital models, while all of its flat-panel TVs are digital.devices to finished products. Matsushita introduced three new 9.9cm-thick PDPplasma TVs in 37-, 42- and 50-inch models in fiscal 2003, which were the world’s first to integrate digital tuners for broadcast satellite (BS), communications satellite and terrestrial broadcasting. In fiscal 2004, Matsushita introduced new high-definition PDPplasma TVs in 37-, 42- and 50-inch models with built-in slots for compact SD Memory Cards and thea picture enhancement accelerator with kinetic system (PEAKS) for outstanding picture quality. Meanwhile, Matsushita has also reinforced its lineup of LCD TVs. Building on its LCD TV range of 14- to 22-inch models,In fiscal 2005, Matsushita introduced a 32-inch model in fiscal 2003 and new 14-, 17- and 20-inch models with PEAKS for outstandingdigital high-definition plasma TVs, which realized the highest level of picture quality in fiscal 2004.the industry, featuring an advanced PEAKS system, as well as enhanced media networking functions that can record video on SD Memory Cards. The Company also introduced the industry’s first 65-inch high-definition plasma display. To promote the advantage of digitalmaintain top market shares in plasma TVs, in the networking era, Matsushita has recently begun offering various digital TV models with Internet connection capability called T-Navi in the Japanese market. As flat-panel TVs have entered a rapid growth phase in Japan and overseas, the Company has been expanding its PDP manufacturing facilities aimingand strengthening its production capabilities. From June 2001, the Company started manufacturing of plasma TVs at maintaining its top shareNo. 1 domestic plant in Osaka, Japan. At the No. 2 domestic plant in Osaka, Japan, which began operations in February 2004, the facility was reinforced to realize a production capacity of 1.2 million units per year in December 2004. Overseas, the worldwide PDPCompany began integrated manufacturing of PDPs at its plasma TV market. (See related descriptionassembly plant in Shanghai, China in December 2002, thus expediting total annual production to 1.8 million units of PDP facility expansionthese three factories in December 2004. In response to anticipated sharp growth in plasma TV demand, a No. 3 domestic plant is currently under “Componentsconstruction in Hyogo, Japan, and Devices” below.)will commence operation in the Fall of 2005.

- 1718 -

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

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

In the VCRdigital camera and video cameracamcorder area, Matsushita has been expanding its range of digital camcorderscameras and DSCdigital camcorders that incorporate SD Memory Card slots for data storage and enhanced networking convenience. Of these,In fiscal 2004, new models of DSC that benefit from the world-renowned optical technology of Leica Camera AG achieved notable market success in fiscal 2003. In fiscal 2004, Matsushita introduced new models of DSCdigital cameras that leverage unique and advanced technologies, such as aspherical lenses and optical image stabilizers (OIS). A, enjoyed notable market success. In fiscal 2005, a new model featuring OIS and a large 2.5-inch LCD in a slim 24.2mm body achieved one of the top shares in the domestic market and contributed to sales growth. For camcorders, Matsushita introduced a new line of compact easy-to-use SD Multi AV Recorder capable of recordingmodels featuring outstanding picture quality for both video and playback of digital video, still images, audio and other content on an SD Memory Card was also introduced during fiscal 2003.pictures. The Company added the world’s slimmest model3 CCD camera system which uses a separate CCD to this product line in fiscal 2004.

As for DVDs, Matsushita offers a wide range of DVD players and DVD recorders. Since its introductionprocess each of the first DVD recorderthree primary components of light (Red/Green/Blue) boasts one of the highest levels of picture quality in 2000, the Company has been the market forerunner in this product line. The Company continued its lead by launching a series of competitive models with built-in hard disk drives (HDDs) for extended recording time and SD Memory Card slots. In fiscal 2004, Matsushita began simultaneous global introductions for its latest DVD recorders, and reinforced product range with VCR combination models with dual tuners for simultaneous recording of two channels.industry.

In the area of audio equipment, Matsushita produces a variety of products, including compact disc (CD) players, CD radio cassette recorders and Mini Disc players, as well as radio receivers,radios, tape recorders, portable headphone players stereo hi-fi equipment and electronic musical instruments. Matsushita expanded its range of newgeneral audio products. The demand for audio equipment in recent years with the launch of DVD-Audio players and a series of products using the SD Memory Card, such as an ultra-compact “wearable” headphone player.is shifting rapidly from analog to digital products. In response to this trend, Matsushita has been greatly expandinglaunched portable audio products with improved performance in terms of compact design, power efficiency and extended recording time. Regarding hi-fi audio component systems, the Company enhanced product design in the areas of multiple CD changers and MP3 functions.

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

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Information and Communications Equipment

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

With respect to PCs, Matsushita continued to upgrade its notebook models over the last several years, centeredconcentrating on slim, lightweight notebook PCs and ruggedized notebook PCs built to resist shock. In fiscal 2002, Matsushita introduced the world’s lightest (960 grams) B5-sized notebook PC in Japan, followed by even smaller and lighter models during fiscal 2003.PCs. In fiscal 2004, Matsushita introduced the world’s lightest (1,299 grams) B5-sized notebook PC with a 12.1-inch LCD screen and a built-in DVD-ROM and CD-R/RW combination drive.

- 18 - In fiscal 2005, Matsushita introduced the world’s lightest (1,290 grams) B5-sized notebook PC with a 12.1-inch LCD screen and a built-in DVD Super Multi Drive that is compatible with the DVD-RAM, DVD-R, DVD-RW, +R and +RW formats.

In the area of PC peripherals, Matsushita has been focusing on upgrading its diskoptical disc drive lineups. InTo meet the demand for slimmer, lighter-weight optical diskdisc drives for notebook PCs, in fiscal 2004, the Company introduced the industry’s thinnest and lightest DVD multi drives compatible with DVD-RAM, DVD-R and DVD-RW formats informats. In fiscal 2002. To meet demand related to slim notebook PCs,2005, Matsushita developedreleased the industry’s slimmestthinnest and lightest DVD multi drives in fiscal 2004. As for HDDs, the Company has become more selective in its product lineup during the past few years, focusing on upgraded models using hydro dynamic bearing spindle motors, and 1.8-inch small-form-factor HDDs for use in notebook PCs and mobile AV equipment, while substantially reducing production of conventional 3.5-inch HDDs.Super Multi Drive.

In the area of mobile communications equipment, in recent years Matsushita has developed and introduced a number of new cellular phones, including third generation (3G) format products with a focus on advanced functions,function, stylish designsdesign and ease-of-use. Sales of cellular phones experienced a setback in fiscal 2002 due to both a sharp decline in demand, especially in Japan and Europe, and glitches that were found in certain models. Early in fiscal 2003, the Company launched new thin cellular phones for NTT DoCoMo, Inc. that are mobile Internet-compatible and havewith high picture quality and,quality. Then, in the second half of that fiscal year,2003, in response to the rapid developmentincreases in demand, the Company introduced new models with built-in cameras. These new models were well received and helped to boost the Company’s reputation in the Japanese cellular phone market. Meanwhile, the Company has been expandingMatsushita expanded its business in overseas markets, especiallyand in Europe and China, centered onfiscal 2004, GSM standard cellular models including most recently, clamshell design camera-equipped handsets and ultra-compact, stylish models.models received favorable acclaim in Europe and China, thereby improving the Company’s brand image. However, in fiscal 2005, performance of cellular phones on the whole was unfavorable, due to such factors as increased inventory in the Chinese market and intensified price competition in Europe and Asia. Regarding 3G cellular phones, correspondingwhose demand is expected to NTT DoCoMo’s commencement ofincrease rapidly overseas, Matsushita has accumulated significant know-how in both wideband base code division multiple access (W-CDMA) services in Japan during fiscal 2002, Matsushita began shipments of W-CDMA base stations and terminals. The Company was the firstterminals since NTT DoCoMo commenced W-CDMA services in the world to develop and supply W-CDMA cellular phones that provide a TV-phone function through transmission of moving images and large volumes of data.Japan. In fiscal 2003, a new W-CDMA cellular phone was launched that boasts a rotating LCD screen for camcorder-style recording of video and still images followed by the introduction inwas introduced. In fiscal 2004, ofMatsushita introduced a new model with a built-in auto-focus 1.28 megapixel CCD camera and interchangeable decorative jackets.jackets with which users may enjoy their favorite designs. Moreover, in fiscal 2005, new models with interchangeable decorative jackets and SD memory card-compatibility, aimed at strengthening coordination with AV equipment, were introduced. The Company intends to solidify its competitive position as a leader in the 3G mobile communications market.

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In the area of fixed-line communications, Matsushita over the years has developed businessesintegrated its communications and digital imaging technologies through a merger of two major subsidiaries in early 2003. As a result, in addition to its lineup of telecom products such products as facsimile equipment, cordless telephones, copiers and printers, primarily as stand-alone products. Beginning with the introduction of a multifunction modelCompany has, in recent years, developed multi-function digital equipment that providesintegrate facsimile, copier, printer, scanner and telephone functions ininto a single unit, however, theunit. The Company has been placing an increased focus on integration ofalso introduced network cameras which are compatible with IPv6, the next-generation communications standard, and digital imaging technologies. This move was further accelerated by the merger in early 2003 of two major subsidiaries operating in this area. Matsushita also has been developing Internet-protocol (IP)other network-related products such as IPv6 technology-based telephones and facsimile machines, using the synergies of the merger and the advantage of possessing both imaging and communications technologies.

- 19 -TV door intercom systems with wireless color-monitor-equipped handsets.

In the area of car AV equipment,automotive electronics, Matsushita supplies advanced car navigation systems for the domestic market, while further promoting global expansion in car audio equipment. Through joint efforts with automakers, Matsushita in fiscal 2002 launched a new car navigation model that can receive various mobile information services, followed by another model with a built-in HDD capable of processing a large volume of data in an instant. In fiscal 2003, the Company began supplying an upgraded model as an in-car multimedia terminal to a leading automobile company in Japan. Demand has beengrown steadily growing for DVD-equipped car multimedia systems. In response, in fiscal 2004, the Company introduced a new car navigation system series in Japan that incorporates DVD and other AV entertainment features. The Company continued to launch new products in this series in fiscal 2005. Favorable sales of these car navigation systems, featuring improved AV functions such as outstanding picture quality and high-resolution wide-screen monitors, improved Matsushita’s domestic market share. Overseas, in recent years, the Company launched new car audio equipment in the North American market, including a rear-seat entertainment system that features a flat-panel, large-screen LCD display with a built-in DVD player, and a digital surround sound car audio systemsystems compatible with high-quality DVD audio. Meanwhile, to address the recent expansion of electronic toll collection (ETC) services in Japan, the Company has been increasingrecorded increased sales of in-car terminals, as well as related infrastructure equipment.

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

Home Appliances

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

Building upon its position asAs the leading manufacturer in the Japanese home appliance industry, Matsushita strives to further develop value-addedprovides value added products that addressmeet rapidly changing customer needs and diversifying customer lifestyles, the trend toward an aging population and rapidly growing interest inheightened consumer awareness about health and environmental issues through advanced technologies and synergies achieved between companies in the environment.Matsushita Group.

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In the area of electric home appliances and householdrefrigeration and air conditioning equipment, Matsushita in fiscal 2002 was one of the first manufacturers to develop2003 introduced new products such as a refrigerator using hydrocarbon refrigerant, which eliminateswasher/dryer with a foam washing system, a combination steamer/microwave oven that preserves moisture in food without the use of ozone layer depletive refrigerants. Furthermore, Matsushita introduced an eco-friendlyplastic wrap, and energy-efficient water heating systema vacuum cleaner that employsis comparable to a natural refrigerant heat pump and boasts an ozone-depleting coefficientmop in the cleaning of zero in April 2002. Duringhard surfaced flooring, thanks to a new minus-ion technology. In fiscal 2003,2004, Matsushita introduced a fully automatic clothes washer/dryer, featuring a unique “foam washing” system; a combination steamer/microwave oven; a new series of hydrofluorocarbon (HFC)-free, large inner-capacity refrigerators;energy-saving refrigerator that preserves food while removing odors and eliminating bacteria, and an air conditioner that features ventilating functions and a unique air conditioner that offers the same oxygen concentration indoors as that foundcharging technology. Also in the natural environment. In fiscal 2004, the Company successfully increasedannounced a tilted-drum washer/dryer incorporating universal design concepts and environmentally friendly features. In fiscal 2005, the Company expanded its domestic marketlineup, and these washer/dryers seized the top share in majordomestic unit sales by model type. Also in fiscal 2005, Matsushita launched a dishwasher/dryer that utilizes a highly concentrated detergent mist to lift and remove stains, air conditioners with automatic filter cleaning and dust removal functions, refrigerators with full-open food drawers that allow easy access to hard-to-reach areas, and other unique products. Furthermore, in global markets, the Company expanded sales of high-value-added home appliances as it introduced a user-friendlyin China and Asia, while at the same time enhancing brand image. Products for these markets include tilted-drum washer/dryerdryers, HFC-free refrigerators and air conditioners with a 30-degree tilted drum featuring lower water consumption, an air conditioner incorporating a ventilating function in addition tooxygen enrichment functions.

In the above-mentioned unique oxygen charging technology,area of household equipment, safe, energy efficient built-in 200V flameless induction-heating (IH) cooking equipment that is compatible with cooking ware made of any metal, andmarked favorable sales in the domestic market. In fiscal 2004, a new water heating system thatwas launched. This product uses CO₂ as a natural refrigerant and boasts the industry’s highest energy efficiency. Several of these new high-value added products, such as HFC-free refrigerators and air conditioners featuring the oxygen charging technology were also introduced into the Asian market, including China.

Matsushita’s efforts have also been extended to the development of home appliance business using digital networking technologies that will provide customers with solutions for safe, convenient and comfortable living. In fiscal 2004,2005, Matsushita, launchedtogether with Tokyo Gas Co., Ltd., introduced a new networked home appliancefuel cell co-generation system that enables customers to control home appliances such as air conditioners, refrigerators, washing machines and microwave ovens through wireless control functions, includingfor the ability to report irregularities or emergencies detected through various sensors.home.

In the healthcare systems business, in fiscal 2002 Matsushita introduced a Web-based tele-healthcare system that allows patients to measure their vital signs and doctors to remotely access the patient’s information. The Ministry of Health, Labour and Welfare of Japan officially recognized the system to be introduced for medical use. In fiscal 2004, a newMatsushita’s blood glucose monitoring system that measures the glucose level quickly and accurately with just a small amount of blood contributed to the Company’s sales increase. In fiscal 2005, Matsushita expanded product lines of ultrasonic diagnostic equipment.

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

In the environment-relatedenvironment systems business, Matsushita began construction of ventilation facilitiesand air purification systems for the Hai Van Tunnel in Vietnam in fiscal 2003. In Japan, ventilation systemsfiscal 2004, Matsushita enjoyed favorable domestic sales of a new product that simultaneously supplies and equipment that comply with the revised construction standards law to combat “sick house” syndrome contributed to Matsushita’s sales increase in this product category in fiscal 2004. Meanwhile, theventilates air. The Company also supplied asolar and wind power generation systemsystems to the 2004 Athens Olympics. The Company also introduced the world’s first air purifier with a filter to neutralize allergensOlympics in fiscal 2004.2004, and the Aichi World Expo in fiscal 2005.

Components and Devices

Major products included in this category are semiconductors, general components, display devices, batteries and electric motors, some of whichmotors. Components and devices are incorporated intoused in Matsushita’s finished products and some of which are for salesold to other manufacturers.

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Matsushita is strengthening businessesimplements various initiatives to develop and supply competitive products in the components and devices category by concentrating efforts on “black-box,” or proprietary technologies, particularly in the area of semiconductors such as system LSIs, the key to Matsushita’s competitive edgedifferentiation in digital AV and information/communications equipment. The Company is enhancing cooperation between components and devices divisions and finished product divisions from the product development stage to create effective value chains around them.chains. Matsushita is also strives to expand externalexpanding sales of components and devices to accelerateexternal customers to enhance sales growth and strengthen the earnings base.profitability.

Matsushita’s semiconductor business is primarily made up of integrated circuits (ICs), such as metal oxide semiconductor large-scale integration (LSI) circuitssystem LSIs and bipolar ICs, discrete devices and image sensorsensors including charge coupled devices (CCDs). Through high speed, low-power consumption, and ultra fine process technologies, Matsushita has been focusingfocused its efforts on five main growth businesses, comprisingincluding the four system LSI fields namely those forof optical disk-relateddisc-related products, digital TVs, mobile communications, and networks and networks/SD, Memory Cards, andin addition to image sensors. These operations support innovative and competitive products at the Company’s finished product divisions and, as a value chain, the success of these finished products support sales of system LSIs for external customers. In particular, Matsushita has been strengthening development of multifunctional system LSI circuits, which form the basis of digital network-related equipment. Successful results in recent years include system LSI chip sets for DVD players and recorders, MPEG-2 encoder chips and 32-bit microcontrollers with embedded dynamic RAM.

In fiscal 2003, Matsushita developed a power-efficient multi-codec system LSI, enabling extended continuous operating time for cellular phones that provide video phone and other video content capabilities, and a new system LSI for digital high-definition television (HDTV) broadcast receivers that accomplishes all back-end processing functions on a single chip. In fiscal 2004, Matsushita began mass production of 0.18-micron FeRAM (ferroelectric random-access memory)-embedded system-on-a chipsystem-on-a-chip (SoC), a system LSI for mobile network applications. Meanwhile,Furthermore, in fiscal 2005, to address the challenge of shortened product lifecycles, Matsushita has also been strivingdeveloped an Integrated Platform that combines software and hardware resources across differing product categories to achieve higher levels of manufacturing process technologies. In April 2002, the Company commenced production of highly integrated 0.13-micron system LSIs primarily for digital AV equipment. Furthermore, Matsushita began construction of a new semiconductor production facility in Japan, installing the cutting-edge 90-nanometer production process for 300mm wafers in May 2004. improve R&D efficiency and design quality.

In the area of image sensors, in October 2003, Matsushita integrated its CCD and camera module businesses, thereby achieving a more effective organizational structure. In Februaryfiscal 2004, the Company developed the industry’s smallesta MOS image sensor, featuring high pictureimage quality and low power consumptionconsumption. In fiscal 2005, the Company expanded product lines, and began mass-producing and shipping the industry’s smallest camera modules featuring this MOS image sensor.

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

Matsushita manufactures a variety of general components and devices, including capacitors, modules, printed circuit boards, power supply and inductive products, circuit components, electromechanical components and speakers for digital AV equipment,products, automotive electronics and information/ communications.communications equipment. In fiscal 2002, Matsushita augmented its range of specialty polymer aluminum electrolytic capacitors, while also developing cutting-edge ultracompact, high-capacitance products in the field of multi-layer ceramic chip capacitors and film capacitors. Furthermore, in fiscal 2003, Matsushita developed three-dimensional integrated circuit modules that help downsize and enhance functionalities of mobile electronic devices and networked appliances.products. In fiscal 2004, Matsushita expanded sales ofwith a focus on priority areas including high-fidelity speakers for flat-panel TVs, weight sensors for protective airbags and multilayer printed circuit boards. In an effortfiscal 2005, the Company concentrated efforts in the development of ALIVH multilayer printed circuit boards for compact design and DTV tuners that enable exceptional picture quality. Matsushita will continue to achievepursue further growth and enhanced profitability in these businesses, working together with the general components business, the Company has continuedCompany’s finished product and semiconductor divisions to implement selection and concentration of management resources, especially in capacitor operations.create value-added products for customers.

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In the areaThe battery business consists of display devices, Matsushita manufactures PDPsprimary batteries, including dry batteries, and CRTs, while production of LCDs has been shiftedrechargeable batteries, such as lithium-ion batteries. Responding to a joint venture company created with Toshiba Corporation (Toshiba). Regarding PDPs, Matsushita has boosted its product lineup with the marketing of competitively-priced 37-, 42- and 50-inch units. In fiscal 2004, Matsushita introduced new 37-, 42- and 50-inch high definition PDPsincreased performance requirements for outstanding picture quality. Matsushita has been strengthening its PDP manufacturing structure through a number of initiatives,digital equipment, including the commencement of panel production at its PDP assembly plant in China in December 2002 and at its new manufacturing facility in Japan in April 2004. Regarding LCD devices, Matsushita and Toshiba combined their respective LCD operations and jointly established Toshiba Matsushita Display Technology Co., Ltd. in April 2002. The joint venture company has added new cutting-edge products, including low-temperature polysilicon LCD panels, to the existing product lineups of LCDs for PCs,digital cameras, cellular phones and TVs. Regarding CRTs, in order to strengthen competitiveness,notebook PCs, Matsushita develops and Toshiba integrated their global CRT operationssupplies compact and launched a new company, Matsushita Toshiba Picture Display Co., Ltd., in April 2003. The new CRT joint venture seeks synergies from the combination of Matsushita and Toshiba’s advanced TV-use CRT product development capabilities and manufacturing technologies. (For additional information on the LCD and CRT joint ventures, see Section A of this Item 4.)

Matsushita is an industry leader in primary batteries, especially dry batteries, and is also expanding its line of rechargeable batteries. Matsushita has increased production of compact, high-performance batteries, such as long-life alkaline batteries and lithium-ion rechargeable batteries, as these products are increasingly used in compact electronic equipment such as DSCs, cellular phones and notebook PCs. In addition, the Company introduced such new long-life compact batteries as nickel manganese batteries in fiscal 2003, and another new high-performance dry battery, that boasts approximately 1.5 times the life and performance of ordinary alkaline batteries in fiscal 2004, for a wide variety of applications, including DSC and portable audio players.batteries. To strengthen its competitive position in compact rechargeable batteries, the Company further expanded its lithium-ion battery plant in Osaka in fiscal 2003, and started manufacturing these batteries in China from April 2004 to meet increasing demand from cellular phone manufacturers.manufacturers, in fiscal 2003, Matsushita further expanded its production capacity of lithium-ion batteries in Osaka, and in April 2004 the Company began manufacturing these batteries in China. Meanwhile, in fiscal 2005, Matsushita launched Oxyride, a revolutionary dry battery that provides increased output, and approximately 1.5 times longer battery life, compared with ordinary alkaline batteries in Japan.

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

MEW and PanaHome

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

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

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

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

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

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

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

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

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

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

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

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

JVC

The JVC category representsconsists of businesses of Victor Company of Japan, Ltd. and its group companies (JVC).companies. Major products in this category include consumer electronic equipment (suchsuch as VCRs,TVs, camcorders, TVs, stereo hi-fi equipment, DVD productsrecorders and players, audio systems, car AV, and other AV products),products, professional electronic equipment, and systems, components, and prerecorded audio and video software and recordable media. These products are sold under the “Victor” or “JVC” brand names primarily through JVC’s own sales and distribution networks in Japan and overseas.

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Over the last three fiscal years, JVC has placed priority on creating original, high quality products,developing its “Only One” productsproduct series that incorporateincorporates JVC’s original market-leading audio and visual technology. TheseAs a result of these efforts, helpedin fiscal 2005 JVC to achieve solid sales results in its consumer electronics business in these years.introduced an HD-ILA rear projection TV employing JVC’s unique high-definition micro display device and the industry’s first palm-sized hard disk camcorder “Everio.”

In the consumer electronics field, JVC’s technological achievements in recent years have included high-definition displays incorporating Digital Image Scaling Technology (D.I.S.T.) and digital high-density storage systems such as D-VHS and DVD recorders/players. Building upon such technological strength, JVC has further workedplaced principal emphasis on enhancing the network connectivity ofdisplay and optical disc products. JVC aims to achieve its mainstaymid-term management plan through these and other key businesses, including camcorders, car electronics equipment, and AV products. In fiscal 2002, part of these efforts resulted in market success in such products as a new VHS/DVD- combination deck, DVD players, car AV systems and digital video cameras.systems. In fiscal 2003, continued sales success was achieved in new growthAV products such as high definitionhigh-definition TVs and PDP TVs. During fiscal 2004,TVs, while the company launched the world’s first consumer-use digital technology became more widespread in the consumer electronics industry, and JVC expanded its range of PDP TVs and DVD recorders, and also introduced LCD TVs. During these years,high-definition camcorder. Meanwhile, as part of a global realignment of its manufacturing base realigning program,bases, JVC positioned its YokohamaYokosuka Plant as the “core mother base” of all worldwidemain location for consumer electronics production. JVC also implemented other restructuring initiativesbusiness structural reforms to ready itself for the next phase of growth.

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

In the professional electronics field, JVC has focused on two categories, the security and presentation systems. As a result, overOver the last three fiscal years, sales of security systems, that include JVC’s high performanceincluding surveillance cameras, recorded consistent growth. During these years, businessesAlthough presentation systems grew at a sluggish pace, JVC intends to expand this area by enhancing sales of otherits newly-developed professional electronics systems experienced setbacks, with an exceptionHDV camera recorder.

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

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

JVC’s software business has been operated mainly in Japan. DuringIn Japan, the last three fiscal years, sales innumber of million-seller songs have decreased, and the Japanese music software business fell due to themarket has fallen into an industry-wide slump. However,In such an environment, JVC conducted structural reforms and laid the foundation for a profitable business structure during fiscal 2003. In fiscal 2004, JVC released hit records continuously, including CDsalbums from such artists as Keisuke Kuwata and Dragon Ash in fiscal 2002, CDs and DVDs of Keisuke Kuwata and SMAP in fiscal 2003, and albums of the Southern All Stars and SMAPSMAP. To reinforce its content rights business, JVC established JEN (JVC Entertainment Networks Inc.). Fiscal 2005 was also characterized by severe business circumstances, due to postponement of major releases by popular artists, and decrease in fiscal 2004. Meanwhile, JVC has been expanding its rangesales of recordablemusic software stemming from the expiration of sales consignment contracts with key industry players. As for the media business includingoperating worldwide, JVC strengthened sales of such digital media as DVD-RW and Mini DV tapes. Market conditions in fiscal 2005 were tough for recording tapes due to rapid fall in sales prices of Mini DV tapes and declining demand in VHS recording tapes. However, recordable DVD discs grew strongly with the popularization of DVD recorders, mainly in Japan.

In its new mid-term plan (Leap Ahead 21 plan), JVC positions the consumer electronics business to play a central role in accelerating the company’s growth. Specifically, JVC will focus on display and optical disk products.- 26 -

Other

Matsushita’s otherOther category includes factory automation (FA) equipment, industrial robots, welding machines, power distribution equipment and other industrial equipment. Matsushita aimsstrives to enhance serviceservices provided to its customers through innovative manufacturing processes centered onin circuit manufacturing technology. Specifically, respondingResponding to trends in more compact digital products,various needs of customers at the factory, the Company provides optimumoptimal solutions in electronic component mounting, fine devices,semiconductor mounting, manufacturing processes, welding machines and robots.

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In the area of FA equipment, Matsushita is onea global leader in the electronic components mounting machine business. The Company also supplies products that support the manufacturing infrastructures of the world’s leaders in placement machinesits customers, including fine device bonding systems, and fine process equipment, and also produces industrial robots. Within the mainstay placementelectronic components mounting machine business, while developing and launching machinesproducts with faster processing-speedshigher processing-speed and higher functionality, the Company has been building new core businesses by augmenting its lineups of high-growth device bonding systems in recent years.systems. As part of this strategy, Matsushita launched modular placement machines suitable for flexible production styles, such as cell-style production in fiscal 2002, followed by the introductionintroduced a new type of modular placement machines that were one of the highest levels of productivity in the industrymachine in fiscal 2003. Furthermore, inIn fiscal 2004, the Company enhanced growth by strengthening the electronic-parts mounting system business and fine device bonding system business supported by active FA equipment demand from Euro-American Electronics Manufacturing Services (EMS) in China, Taiwan and Korea, and Taiwanese manufacturers’ Original Design Manufacturing (ODM) as a result of increasing demands ofdemand for digital AV products, such as cellular phones and PCs. Furthermore, in fiscal 2005, the high-speed modular placement machines that boast the industry’s highest productivity recorded solid sales performance. In the semiconductor mounting business, LCD panel bonders, high-speed die bonders and plasma cleaners achieved favorable results with high levels of precision and productivity.

In the area of welding machines, Matsushita introduced a fully digital carbon dioxide/metal active gas automatic welding machine that allows for superior welds over a variety of materials in fiscal 2002, followed by the introduction of a fully digital welding robotrobots in fiscal 2003. In fiscal 2004, Matsushita expanded deliveries of fully digital automatic welding machines and industrial robots to automobile-related industries. In fiscal 2005, as part of business restructuring of the Matsushita Group companies, power distribution equipment and monitoring and control system operations of Matsushita Industrial Information Equipment Co., Ltd. (MIIE) were transferred to MEW, while MIIE’s information machine business was shifted to Panasonic Communications Co., Ltd. Subsequently, MIIE was absorbed by Matsushita in April 2005, and no longer operates as a separate entity.

MARKETING CHANNELS

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

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Sales and Distribution in Japan

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

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

Also,In fiscal 2005, Matsushita and MEW integrated the sales functions of each of the electrical supplies, building materials and equipment, and home appliances businesses as a part of such reorganizations,collaboration between the two companies. Regarding the electrical supplies business, in October 2001,January 2005, the Corporate Electrical Supplies Sales Division of Matsushita consolidated its 22 regional consumerwas integrated into MEW and the Corporate Construction Business Promotion Division was newly established within Matsushita. In April 2005, in the building materials and equipment business, the Corporate Housing Equipment Sales Division of Matsushita, excluding the businesses for city gas companies and OEM sales companies throughout Japan, which handle distribution through local consumer electronicsof equipment and appliance retailers,instruments, and the Matsushita Housing Equipment & Systems Corporation was transferred and integrated to MEW. Furthermore, in the home appliances business, MEW sales functions for beauty and health products were integrated into Matsushita, whereby Matsushita reorganized the integrated MEW’s sales functions and Corporate Marketing Division for National Brand of Matsushita into a single company. Meanwhile, Matsushita’s sales structurenew Corporate Marketing Division for volume retailers through another single sales subsidiaryNational Brand Home Appliances and Corporate Marketing Division for National Brand Wellness Products. The Corporate Marketing Division for National Brand Home Appliances handles such large electric appliances as air conditioners, refrigerators and washing machines, while the Corporate Marketing Division for National Brand Wellness Products is being strengthened by expanding supply chain management (SCM). In addition, alsoresponsible for products in October 2001, Matsushita’s credit sales subsidiaryfields such as beauty, health, batteries and leasing subsidiary were merged into one company, Matsushita Leasing & Credit Co., Ltd. By implementing these reforms and revitalizing its domestic consumer sales and distribution operations, Matsushita aimed at creation of an efficient structure that ensures speedy responses to customer needs and realizes a significant reduction in distribution costs and an increased market share.lamps.

Overseas Operations

Worldwide, Matsushita has 372628 consolidated companies as well as 5966 companies which are reflected by the equity method. International marketing and sales of Matsushita’s products are handled mainly through its sales subsidiaries and affiliates located in respective countries or regions in coordination with business domain companies and regional headquarter companies. In some countries, however, marketing and sales are handled through independent agents or distributors, depending on regional characteristics. Additionally, certain products are also sold on an OEM basis and marketed under the brand names of third parties.

Overseas sales represented approximately 54%47% of the Company’s total consolidated sales in fiscal 2004.2005.

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

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

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

Customers

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

SEASONALITY OF BUSINESS

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

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RAW MATERIALS AND SOURCE OF SUPPLY

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

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

ForIn fiscal 2005, to minimize the adverse effects of global price increases of raw materials, Matsushita will further strengthenstrengthened materials cost reduction initiatives including a reduction in the number of parts through the standardization of design, use of “Value Engineering” techniques, and additional cost reduction activities covering indirect auxiliary materials.

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PATENT LICENSE AGREEMENTS

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

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

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

Most of Matsushita’s license and technical assistance agreements are for three- to ten-year periods, unless the agreements cover specific patents to be licensed therein, in which case they are normally for the life of the patent.

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

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COMPETITION

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

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

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GOVERNMENT REGULATIONS

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

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

In January 2003, the Company announced that disposed electric equipment that contained polychlorinated byphenyls (PCB) might be buried in the ground of its four manufacturing facilities and one former manufacturing facility in Japan. The applicable laws in Japan require that PCB equipment be appropriately maintained and disposed of by July 2016. The Company has accrued estimated the total cost of approximately 817 billion yen at March 31, 2005 for necessary actions, such as investigating whether the PCB equipment is buried at the facilities, including excavations, and maintaining and disposing the PCB equipment that is already discovered, which amount has been accruedand soil remediation, since it represents management’s best estimate or minimum of the cost, but the payments are not considered to be fixed and reliably determinable.

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

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

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

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

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Principal divisional companies and subsidiaries as of March 31, 20042005 are as listed below:

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