Consolidated Settlement of Accounts for Fiscal Year Ended March 31, 2006 Listed Company Name: Alpine Electronics, Inc.

Securities Code:

URL: Representative: Inquiries:

http://www.alpine.com/ Seizo Ishiguro, President & CEO Touji Tanaka, Director—Accounting Date of Board Meeting for Settlement of Accounts: Parent Company: Securities Code: Percentage of Shares with Voting Rights: U.S. GAAP:

6816

(First Section, Tokyo Stock Exchange)

TEL:

+81-3-3494-1101

May 9, 2006 Alps Electric Co., Ltd. 6770 40.7% Not Applied

1. Performance in Fiscal Year Ended March 31, 2006 (1) Consolidated Results (Millions of yen rounded down, %) Net Sales (% change)

Operating Income (% change)

Ordinary Income (% change)

March 31, 2006

253,983 (+14.0)

9,671 (-4.7)

10,355 (-6.4)

March 31, 2005

222,779 (+4.6)

10,148 (-10.4)

11,060 (+5.6)

Fiscal Year Ended:

(Millions of yen rounded down, except per share figures) Fiscal Year Ended:

Net Income (% change)

Net Income per Share (Yen)

Fully Diluted Net Income per Share (Yen)

Return on Stockholders’ Equity (%)

Ordinary Income to Total Assets (%)

Ordinary Income to Net Sales (%)

March 31, 2006

6,175 (-22.2)

91.71

—

6.2

6.4

4.1

March 31, 2005

7,932 ( +9.4)

128.97

112.58

9.4

7.3

5.0

Notes: 1. Equity in earnings of subsidiaries and affiliates accounted for by the equity method during the term: Fiscal year ended March 31, 2006: ¥459 million Fiscal year ended March 31, 2005: ¥852 million 2. Average number of shares outstanding during the term (consolidated): Fiscal year ended March 31, 2006: 66,684,022 shares Fiscal year ended March 31, 2005: 60,887,392 shares 3. Changes in accounting methods: None 4. Numbers in parentheses accompanying net sales, operating income, ordinary income and net income indicate percentage increase/decrease over the previous corresponding term. (2) Financial Position

(Millions of yen rounded down, except as noted) Total Assets

Stockholders’ Equity

Equity Ratio (%)

Per Share (Yen)

March 31, 2006

169,553

110,782

65.3

1,587.05

March 31, 2005

156,506

88,829

56.7

1,446.99

1

Notes: 1. Number of shares issued as of end of term (consolidated): March 31, 2006: 69,766,046 shares March 31, 2005: 61,333,718 shares 2. Net income ratio to total capital: Fiscal year ended March 31, 2006: 3.8% Fiscal year ended March 31, 2005: 5.3% (3) Cash Flows

(Millions of yen rounded down) Cash Flow from Operating Activities

Cash Flow from Investing Activities

Cash Flow from Financing Activities

Cash and Cash Equivalents, End of Period

March 31, 2006

12,887

-9,854

-1,537

33,206

March 31, 2005

12,472

-9,243

-1,615

30,476

Fiscal Year Ended:

(4) Scope of Consolidation and Application of Equity Method Number of consolidated companies: 27 Number of non-consolidated subsidiaries to which equity method applies: 0 Number of affiliates to which equity method applies: 1 (5) Changes in Scope of Consolidation and Application of Equity Method 1. Newly consolidated companies: 2 2. Excluded consolidated companies: 0 3. Newly included under equity method: 0 4. Excluded under equity method: 0 2. Projections for Fiscal Year Ending March 31, 2007 (April 1, 2006 to March 31, 2007) (Millions of yen) Period

Net Sales

Ordinary Income

Net Income

Six-Month Period Ending September 30, 2006

125,000

5,000

3,000

Fiscal Year Ending March 31, 2007

250,000

10,000

6,000

Reference: Projected consolidated net income per share: ¥86.00 Notes: 1. Projected operating income: ¥9,500 million 2. All projected results assume an exchange rate of US$1.00=¥115.00 and €1.00=¥140.00 3. The figures above are assumptions based on information available at the time of publication. Actual results may vary due to a variety of factors. The figures for these financial statements are prepared in accordance with Japanese laws and accounting principles generally accepted in Japan. Accordingly, they do not necessarily match the figures in the Annual Report, which presents the same statements in a form that is more familiar to foreign readers, through reclassifications or summarization of accounts.

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2. MANAGEMENT POLICY (1) Basic Business Concept Alpine formulated a 10-year corporate vision in 2005. Under this vision, Alpine strives to be a mobile media solutions company that creates future value based on its corporate philosophy of respecting individuality, creating value and contributing to society. With car audio and IT devices as its mainstay businesses, Alpine is working to enhance corporate value by boldly taking up the challenge of creating new value with its accumulated core technologies. (2) Dividend Policy Alpine has positioned the return of profits to shareholders as a primary management issue. The Company strives to provide stable and improved dividends to its shareholders based on its fundamental policy of determining cash dividends from a balanced consideration of returning value to shareholders, investing in R&D and facilities to strengthen competitiveness, and retaining earnings for future business expansion on a consolidated basis. Alpine acknowledges enforcement of the new Corporation Law and removal of restrictions relating to the payment of dividends. At this stage, the Company does not anticipate a change in its dividend policy. (3) Reduction of Investment Units From the standpoint of increasing liquidity in the market and encouraging participation by a wider range of investors, beginning April 1, 2002, the number of shares per unit was reduced from 1,000 to 100. (4) Benchmarks and Quantitative Targets With an emphasis on the consolidated performance of Group companies both in Japan and overseas, the Company aims to increase consolidated profit and pursue cash flow management. Alpine also aims to improve return on assets (ROA) to more than 5% by improving its net profit ratio and asset turnover, and taking measures to cut inventory assets and interest-bearing debt. (5) Mid-Term Management Strategy and Issues Facing the Company In the car electronics industry, demand is increasing for audio equipment that connects with the latest digital devices, adding intensity to price competition among rival companies. In information communications equipment, a growing percentage of new automobiles are incorporating integrated audio, visual and information equipment as a standard feature. Moreover, automakers are becoming more demanding in terms of product quality, prices and delivery schedules as global competition heats up. In an effort to address these conditions and become a mobile media solutions company that creates future value through the next decade to 2015, Alpine is formulating mid-term management policies that emphasize creativity, passion and challenge in the manufacturing process, and strive to create industry-leading products under a low cost structure. To achieve these mid-term management policies, Alpine is promoting measures based on the following strategies in order to expand corporate value, cultivate new business fields, strengthen operations and enhance earnings. 1) Alpine aims to establish a business foundation by promoting the development of advanced technologies and large-scale system products while further polishing its core technologies through aggressive R&D investment in the information communications equipment market, which is expanding in scale.

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2) Alpine aims to strengthen price competitiveness by promoting a fully integrated production structure from local component procurement to component processing and finished product at its global manufacturing bases, while striving to reform its product design systems to secure unrivalled product quality in response to intensifying price competition. 3) Alpine is making every effort to reform its earnings and cost structure as well as improve customer satisfaction by expanding its four-point global business structure in Japan, the U.S., Europe and Asia in terms of sales, procurement, production and development. (6) Matters Relating to the Parent and Group Companies 1) Parent company Parent company

Affiliation

Alps Electric Co., Ltd.

Parent company

Voting right percentage of parent company (%) 40.7 (0.2)

Stock exchange where parent company shares are listed First Section of the Tokyo Stock Exchange

Note: The figure in parenthesis in the voting rights percentage column shows the level of indirect shareholdings.

2) Relationship with Alps Electric Co., Ltd. Alpine’s parent company is Alps Electric Co., Ltd. (Alps Electric), the principal shareholder with a 40.7% stake including subsidiary ownership of shares in Alpine. Alpine purchases a portion of its parts and materials from Alps Electric, and engages in personnel exchanges and cooperative R&D within the Group. Alpine intends to use this relationship to further strengthen its product development capabilities. In addition, Alpine and Alps Electric are jointly promoting sales to automobile manufacturers. The Alps Electric group is engaged in the manufacture and sale of electronic parts, audio equipment, information and communication equipment and IT devices, logistics and other businesses. Alpine recognizes the need to maintain a close relationship with Alps Electric group companies in the execution of its business activities. To this end, and to ensure the quality exchange of management information and technical expertise, an Alps Electric director holds the concurrent position of director on the Company’s board. While ensuring close ties, each company also maintains clearly defined policies with regard to product segregation and a deep respect for each party’s autonomy and independence in assuming responsibilities and making decisions with regard to business operations and transactions. On this basis, Alpine remains confident that Alps Electric will not place restrictions or impediments on the Company’s business. (Status of concurrent directors) Title

Name

Non-executive director

Masataka Kataoka

Auditor

Koji Hotta

Positions held at Parent and Group Companies President, Alps Electric Co., Ltd., Director of fellow subsidiary Alps Logistics Co., Ltd. Standing Auditor of Alps Electric Co., Ltd., Auditor of fellow subsidiary Alps Logistics Co., Ltd.

Purpose of Appointment To ensure the exchange of management information and technical expertise To reinforce group governance

Note: Of the Company’s 12-member board of directors and four-member board of auditors, concurrent positions are limited to two members of Alps Electric’s Board of Directors.

4

3. BUSINESS RESULTS AND FINANCIAL POSITION Business Results In the fiscal year ended March 31, 2006, the North American economy remained firm. Despite the impact of hurricane Katrina and persistently high crude oil prices, the high level of residential housing investment as well as robust personal consumption supported positive conditions. In Europe, Germany exhibited signs of economic growth. Overall conditions in euro-based economies, however, remained weak, with little evidence of a recovery in employment and consumer spending. Healthy growth continued in Asia, and particularly in China. ASEAN economies also expanded on the back of strong exports, buoyed by the significant inflow of overseas investment. In Japan, the implementation of structural reforms in the corporate sector came to an end. Signs of improved earnings emerged, particularly from companies in the consumer electronics and components industries that focus primarily on new technologies for digital products as well as material-related fields. In general terms, the economy continued along a recovery path, underpinned by capital investment growth and increased employment. Conditions in the automobile industry were mixed with increased polarization between successful and slumping companies. Sales by automobile manufacturers in North America stalled impacting the viability of many related parts makers. In Europe, manufacturers continued to face difficult conditions resulting in an increase in restructuring measures. Despite these circumstances, however, sales of energy-conscious vehicles were robust as manufacturers strove to address the high price of crude oil. In the car electronics industry, Alpine’s principal field of operations, market scale expanded, driven by the release of new media such as iPod and equipment compatible with terrestrial digital broadcasting. Positive conditions were also fueled by integrated information and communications equipment that combine car audio, visual and navigation features and increases in the installation rate of integrated units as standard features in new vehicles. In the after-market, however, sales were slow as price competition intensified in a market already contracting in scale due to the aforementioned increased pre-installation. Against this backdrop, Alpine took part in exhibitions both in Japan and overseas showcasing its technologies to principal customers in an effort to secure new orders. By participating in the Consumer Electronics Show, held in Las Vegas, Tokyo Auto Salon 2005 and a variety of other events, Alpine is working to increase brand awareness and expand sales. In response to heightened price competition, Alpine bolstered the manufacturing structure of Taicang Alpine Electronics Co., Ltd. At the same time, Alpine undertook capital investment to expand production bases in Thailand and Hungary in response to growing demand from customers for local component procurement. In addition, Alpine actively invested in the development of new products, targeting the mobile multimedia market, where significant growth is expected. Complementing these efforts, Alpine implemented Group-wide initiatives with the aim of reforming its earnings and cost structure. As a result of these factors, consolidated net sales for the fiscal year ended March 31, 2006 amounted to ¥253.9 billion, up 14.0% compared with the previous fiscal year, and supported by a strong performance in information and communication equipment. On the earnings front, anticipatory research and development expenditure impacted profits. Accordingly, operating income declined 4.7% year on year to ¥9.6 billion. Ordinary income fell 6.4% to ¥10.3 billion, while net income contracted 22.2% to ¥6.1 billion reflecting the drop in extraordinary income, specifically gain on return of pension assets previously managed on behalf of the government.

5

Performance by Segment Audio Products In the Audio Products segment, sales were supported by a strong performance in Alpine’s iPod-compatible automotive CD players, renowned for their quality sound and operability in the after-market. In addition, sales volumes of DD linear speakers and digital amplifiers increased reflecting the growing shift toward DVD audio players and demands for digital sound quality. In North America, the Company began to reap the benefits of efforts to rebuild its large-scale volume-retailer network and sales promotion through a variety of tie-ups. Despite a shrinking after-market, overall sales increased. In the European market, sales to automobile manufacturers of 1-DIN in-dash CD changers and CD players were strong. Robust results were also reported in Japan for CD car audio systems as part of the simultaneous global launch of new vehicles. During the fiscal period under review, the integration of car audio equipment with car navigation and car AV systems gathered pace. This trend was reflected in the Company’s decision to shift a portion of Audio Products sales to Information and Communication Equipment. As a result, the increase in sales in this segment was held to 5.0% year on year. Information and Communication Equipment In the Information and Communication Equipment segment, Alpine strove to expand sales in the domestic after-sales market by launching a new in-dash navigation system featuring audiovisual functions and rear-seat large-screen entertainment systems compatible with terrestrial digital broadcasting. Overseas, Alpine released an in-dash car navigation and AV system featuring pulse-touch controls. Taking full advantage of growing demand for portable navigation systems in North America, Alpine introduced “Black Bird,” an innovative system offering original design and superior operability, in February 2006. In addition to the rising installation rate of integrated systems and other products, sales of new cars by Alpine’s principal automobile manufacturing customer were strong. Furthermore, Alpine commenced delivery of locally developed and produced navigation systems to principal clients during the second half of the fiscal year. As a result of these factors, sales in this segment surged 25.1% year on year. Financial Position (a) Assets, Liabilities and Stockholders’ Equity Total assets stood at ¥169.5 billion as of March 31, 2006, an increase of ¥13.0 billion as of the end of the previous fiscal year. Stockholders’ equity climbed ¥21.9 billion to ¥110.7 billion as of the fiscal year-end. As a result, the equity ratio rose 8.6 percentage points to 65.3%. Within total assets, current assets rose ¥4.5 billion mainly reflecting increases in cash and time deposits and notes and accounts receivable. Fixed assets increased ¥8.5 billion and mainly comprised tangible fixed assets of machinery and equipment and furniture and fittings, which climbed ¥2.1 billion and investment in securities, which rose ¥3.7 billion. Current liabilities grew ¥1.3 billion. Major components were accrued expenses and provision for product warranties, which climbed ¥1.6 billion and ¥1.1 billion respectively. Income taxes payable declined ¥1.8 billion. Long-term liabilities on the other hand fell ¥10.8 billion. This was mainly attributed to decreases in convertible bonds and accrued retirement benefits. Total stockholders’ equity increased ¥21.9 billion. This was the result of the continued conversion of bonds, which swelled both capital stock and legal capital surplus by ¥5.5 billion, and the increase in retained earnings after accounting for net income of ¥6.1 billion.

6

(b) Cash Flows For the fiscal year under review, cash and cash equivalents at the end of the period totaled ¥33.2 billion, an increase of ¥2.7 billion, or 9.0%, compared with the previous fiscal year-end. Cash Flow from Operating Activities Net cash provided by operating activities amounted to ¥12.8 billion, an increase of 3.3%. This was mainly the result of inflows provided by net income before tax and other adjustments of ¥10.1 billion and depreciation and amortization of ¥8.6 billion, and outflows of ¥5.9 billion from the payment of income and other taxes. Cash Flow from Investing Activities Net cash used in investing activities was ¥9.8 billion, up 6.6% compared with the previous fiscal year. Principal components were payments for the acquisition of tangible and intangible fixed assets of ¥8.4 billion and ¥2.4 billion, respectively, and proceeds from the sale of investments in affiliated companies. Cash Flow from Financing Activities Net cash used in financing activities totaled ¥1.5 billion, down 4.8%. The principal component was cash dividends paid of ¥1.2 billion. As a result of these activities, free cash flow amounted to ¥3.0 billion, a decrease of 6.1%. Free cash flow is calculated as the sum total of cash flow from operating activities and cash flow from investing activities. (c) Stockholders’ Equity Indicators of the Alpine Group’s financial position are as follows: Fiscal Year Ended Fiscal Year Ended Fiscal Year Ended Fiscal Year Ended March 31, 2003 March 31, 2004 March 31, 2005 March 31, 2006 Stockholders’ equity ratio (%)

49.8

55.4

56.7

65.3

Stockholders’ equity ratio (market capitalization basis) (%)

53.1

60.8

60.5

71.6

1.2

1.2

0.9

0.0

50.5

54.1

70.6

95.5

Years to repay liabilities (years) Interest coverage ratio (times)

Notes: Stockholders' equity ratio: Stockholders' equity / total assets Stockholders’ equity ratio (%) (market capitalization basis): Market capitalization / total assets Years to repay liabilities (years): Interest-bearing debt / operating cash flow Interest coverage ratio (times): Operating cash flow / interest payments Note: These indicators are calculated using the consolidated financial statements. Market capitalization is calculated by multiplying the closing share price by the number of outstanding shares at the fiscal year-end. Operating cash flow uses net cash provided by operating activities on the consolidated cash flow statements. Interest-bearing debt covers all liabilities with interest payments under the liabilities section of the consolidated balance sheets. Interest payments equal the amount of interest paid on the consolidated cash flow statements.

7

Outlook Japan’s economy moving forward looks to be entering a period of sustained growth. This can be attributed to continued improvement in corporate earnings, the positive flow on to employment markets and active private-sector capital expenditure. This positive outlook, however, is tempered by concerns surrounding the growing disparity among companies, the global high level of crude oil prices and the impact on the economy of an upswing in long-term interest rates. Overseas, conditions also warrant a cautious approach. In North America, the residential housing investment market is expected to enter a correctional phase after a prolonged period of high activity. The U.S. economy is also forecast to feel the effects of rebuilding efforts following the war in Iraq. Europe is also anticipated to confront a number of issues including the growing disparity among euro-based countries. Despite continued expansion in China, concerns are emerging over the nation’s ability to manage stable growth. In the automobile industry, the market is expected to increase its focus on environmentally friendly and safe vehicles. At the same time, global competition is forecast to intensify as demands for simultaneous production and quality increase. In its principal operating market, the automobile electronics industry, Alpine is expected to confront a number of issues including technology development, price competition and globalization. In order to address the demands of automobile manufacturers, Alpine management must enhance its capabilities in each of the aforementioned areas. Under these circumstances, Alpine will continue to pursue active research and development expenditure in growth fields including navigation equipment and information and communication equipment. At the same time, the Company will expand its software development base in China and work to enhance development efficiency. Furthermore, Alpine is committed to delivering unrivalled customer satisfaction and to reinforce its business platform through reform of its earnings and cost structure. Alpine is currently projecting the following figures for the fiscal year ending March 31, 2007, assuming a conversion rate of ¥115 to the U.S. dollar and ¥140 to the euro. 1. Consolidated earnings estimates Net sales Audio Products sales Information and Communication Equipment sales Operating income Ordinary income Net income

¥250.0 ¥120.0 ¥130.0 ¥9.5 ¥10.0 ¥6.0

billion billion billion billion billion billion

-1.6% -7.0% +4.0% -1.8% -3.4% -2.8%

year year year year year year

on on on on on on

year year year year year year

¥190.0 ¥4.8 ¥6.0 ¥3.8

billion billion billion billion

+0.4% +113.8% +45.6% +32.3%

year year year year

on on on on

year year year year

2. Non-consolidated earnings estimates Net sales Operating income Ordinary income Net income

(Cautionary Statement) The performance forecast figures are assumptions based on information available to management at the time of publication and include a variety of unconfirmed elements.

8

4. BUSINESS AND OTHER RISKS Alpine views the following points as potential risk factors that may affect business development. Alpine bases any forward-looking statements on data current as of this report. (1) Economic Change Alpine develops operations globally centered on the mobile multimedia business. Alpine’s products are sold on various markets around the world directly to end users and indirectly through automakers. Accordingly, economic slowdowns in the Company’s primary markets of Japan, North America, Europe and Asia could adversely affect performance and financial position. (2) Foreign Currency Exchange Rate Fluctuations Alpine derives approximately 80% of its net sales from overseas markets and the financial statements of its overseas subsidiaries are prepared using local currencies. As a result, Alpine is exposed to fluctuations in foreign currency exchange rates. An appreciation of the yen against other currencies, especially the US dollar and the euro, have an adverse impact on Alpine’s consolidated performance. Alpine engages in foreign currency hedge transactions such as forward-exchange contracts, but sharp changes in foreign exchange rates could adversely affect the Company’s performance and financial position. (3) New Product Development Alpine aggressively invests in R&D to develop attractive new products. In the event that new product development falls behind rapid advances in technology and changes in customer needs, however, future growth and earnings potential would decline and could adversely affect the Company’s performance and financial position. (4) Price Competition Price competition is becoming more intense in the mobile multimedia industry in which Alpine operates. In the after-sales market, stand-alone car audio products are susceptible to price competition. Moreover, prices are likely to continue declining as automakers demand cost reductions and rival companies enter the market. Alpine is striving to improve its earnings and cost structure from a global viewpoint. Nevertheless, a decline in sales prices could adversely affect the Company’s performance and financial position. (5) Risks Inherent to Advancing Overseas Alpine engages in production and sales activities in the US, Europe, China and other Asian countries. On conducting business in these overseas markets, Alpine is susceptible to risks including 1) unforeseen changes in laws and tax codes, 2) restrictive political and economic factors, 3) terrorism, war and other social unrest. The occurrence of any of these events could adversely affect the Company’s performance and financial position. (6) Supply of Specific Components Alpine internally produces many of its crucial components, but some critical components are procured from outside the Group. In the event that Alpine is unable to procure the necessary volume of components as scheduled due to natural disasters or other reasons at the supplier company, production would be delayed and sales opportunities would be lost, which could adversely affect the Company’s performance and financial position. (7) Demands of Corporate Customers Alpine’s OEM business serves automakers from around the world. Alpine aims to expand sales by reforming the order-receiving process over the medium term. Automakers’ demands

9

for better quality, lower prices and shorter delivery times are increasing in response to intense global competition. Sales to corporate customers in this field are affected significantly by changes in the corporate customers’ performance and procurement policies. In addition, customer requests for lower prices could adversely affect the Company’s performance and financial position. (8) Intellectual Property Alpine strives to protect its technologies and R&D results through patents, trademarks and other intellectual property rights. However, intellectual property rights are not fully protected in some regions, and Alpine may not be able to effectively prevent third parties from manufacturing similar products that use Alpine’s intellectual property. Moreover, Alpine’s products and technologies may inadvertently infringe on the intellectual property rights of other companies in the future. (9) Product Defects Alpine manufactures various products under stringent quality management processes. However, not all products are free from defects, so there is the possibility of a product recall in the future. Although Alpine is insured against damages from product liability, there are no assurances that this insurance will cover all damages. Product defects that lead to a major recall or product liability damages would incur considerable costs and adversely affect the Company’s reputation. As a result, the Company’s performance and financial position could be adversely affected. (10) Public Laws and Regulations Alpine is subject to various government laws and regulations in countries where it conducts business, including business and investment permits as well as customs duties and other import/export regulations. In the event that the Company was unable to strictly follow these laws and regulations, Alpine’s business activities could be restricted, leading to an increase in costs. Accordingly, these laws and regulations could adversely affect the Company’s performance and financial position. (11) Risk of Natural Disaster Alpine takes thorough measures to prevent damage from natural disasters such as earthquakes, and in the past the company has been able to minimize the impact of natural disasters on its operations. However, in the event of a major natural disaster that is more severe than predicted, there are no assurances that Alpine will be able to completely prevent or lessen the impact of power outages or other interruptions on operations. (12) Lawsuits On January 21, 2003, a lawsuit was brought against Alpine in the Tokyo District Court. The plaintiff of the lawsuit is seeking damages for infringement on the plaintiff’s patents by Alpine’s navigation equipment. On March 30, 2005, the Tokyo District Court dismissed the plaintiff’s lawsuit for damages. Following an appeal by the plaintiff, the lawsuit for damages was again dismissed on December 5, 2005 by the Intellectual Property High Court. The matter is currently before the Supreme Court of Japan. While the court has yet to reach a decision, on the basis of proceeding to date, the lawsuit is unlikely to have a material effect on the Company’s performance or financial position.

10

5-1. CONSOLIDATED BALANCE SHEETS (Millions of yen, %) March 31, 2006 ASSETS Current Assets: Cash and time deposits Notes and accounts receivable Merchandise Raw materials Goods in process Inventories Deferred tax assets Other current assets Allowance for doubtful receivables Fixed Assets Tangible Fixed Assets: Buildings and structures Less: accumulated depreciation Machinery and equipment Less: accumulated depreciation Fixtures and fittings Less: accumulated depreciation Land Construction in progress Intangible Fixed Assets Investments and Other Assets: Investments in securities Deferred tax assets Other investments Allowance for doubtful receivables Total Assets

109,910 33,410 39,957 21,141 5,617 1,399 391 3,057 5,779

Share of Share March 31, Total of Total 2005 (%) (%) 64.8

-845 35.2 16.3

5,502 26,493 17,034 182 9,332

4,538 2,845 4,848 -1,922 -17 -175 -34 -514 -335 -156

51,135 25,543 20,277 11,306 8,971 11,688 5,995 5,692 39,860 33,887 5,972 4,812 95

32.7 16.3

3.3

4,812

3.1

690

15.6

20,779 13,275 364 7,278

13.3

5,713 3,759 -182 2,053

-55

11

67.3

-689

59,642 27,647 20,746 11,598 9,147 15,027 7,650 7,377 42,548 36,482 6,066 4,939 115

169,553

105,371 30,565 35,108 23,063 5,634 1,574 426 3,571 6,114

Increase/ Decrease

176

1,684

94 127 20

-138 100.0

156,506

8,507 2,103

82 100.0

13,046

(Millions of yen, %) Share Share March 31, March 31, of Total of Total 2005 2006 (%) (%)

Increase/ Decrease

LIABILITIES Current Liabilities: Notes and accounts payable Bank loans Income taxes payable Accrued expenses Deferred taxes Allowance for employee bonuses Provision for product warranties Provision for facility use cancellation Other current liabilities

52,172 29,226 270 1,290 9,357 174

30.8

50,825 30,188 417 3,094 7,684 132

32.5

1,347 -961 -147 -1,804 1,673 42

1,757

1,659

98

4,645

3,506

1,139

43

—

43

5,406

4,143

1,263

Long-Term Liabilities: Convertible bonds Long-term debt due after 1 year Deferred taxes Accrued retirement benefits Directors’ severance and retirement benefits Other long-term liabilities

5,003 — — 2,700 588

2.9

15,807 11,136 6 1,628 2,284

10.1

-10,803 -11,136 -6 1,071 -1,696

Total Liabilities

57,176

33.7

66,633

42.6

-9,456

MINORITY INTERESTS Minority Interests

1,594

1.0

1,044

0.7

550

614

561

52

1,100

189

911

12

(Millions of yen, %)

STOCKHOLDERS’ EQUITY Capital stock Additional paid-in capital Retained earnings Land revaluation adjustment Valuation adjustment, other marketable securities Foreign currency translation adjustment Treasury stock Total Stockholders’ Equity Total Liabilities, Minority Interests and Stockholder’s Equity

March 31, 2006

Share of Total (%)

March 31, 2005

Share of Total (%)

Increase/ Decrease

25,920 24,905 52,213

15.3 14.7 30.8

20,360 19,345 47,274

13.0 12.4 30.2

5,560 5,560 4,938

-1,394

-0.9

-1,394

-0.9

—

7,124

4.2

4,612

2.9

2,512

2,039

1.2

-1,350

-0.9

3,390

-27 110,782

-0.0 65.3

-18 88,829

-0.0 56.7

-8 21,952

169,553

100.0

156,506

100.0

13,046

13

5-2. CONSOLIDATED STATEMENTS OF INCOME (Millions of yen)

Net Sales Cost of Sales Gross Profit Selling, General and Administrative Expenses Operating Income Other Income: Interest income Dividend income Foreign exchange gain Equity in earnings of affiliated companies Reinvestment incentives Other non-operating income Other Expenses: Interest expense Sales discounts Loss on adjustment of customer molds Loss on closure of development consignment Royalties paid Other non-operating expenses

Fiscal Year Fiscal Year Share of Share of Ended Ended Total Total March 31, March 31, (%) (%) 2006 2005 253,983 100.0 222,779 100.0 203,174 80.0 171,987 77.2 50,808 20.0 50,792 22.8

Increase/ Decrease 31,203 31,186 16

41,137

16.2

40,643

18.2

493

9,671 1,701 119 197

3.8 0.7

10,148 2,314 70 225

4.6 1.0

-477 -612

0.6

-384

322

354

459

852

—

295

602

515

1,016 130 424

0.4

1,401 181 279

122

241

—

181

—

150

339

367

14

(Millions of yen)

Ordinary Income Extraordinary Income: Gain on sale of investment in securities Gain on sale of investment in affiliated companies Gain on return of pension assets previously managed on behalf of the government Disaster insurance payment received Other extraordinary gains Extraordinary Losses: Loss on sale of fixed assets Loss on revaluation of investment in securities Loss on liquidation of affiliated companies Asbestos initiative expenses Transfer to provision for facility use cancellation Directors’ severance bonus Loss on closing retirement pension system Other extraordinary losses Income Before Income Taxes: Income taxes Additional taxes Deferred taxes Minority Interests in Net Income of Consolidated Subsidiaries Net Income

Fiscal Year Ended March 31, 2006 10,355 479

Fiscal Year Share Ended of Total March 31, (%) 2005 11,060 4.1 1,615 0.2

45

—

294

—

9

1,091

108

499

20 683 315

25 392 171

0.3

Share of Total (%)

Increase/ Decrease

5.0 0.7

-704 -1,136

0.2

291

158

4

85

—

79

—

43

—

—

16

—

199

— 10,151 3,880 236 62 3,705

5.5

-2,132

1.5

0 12,284 4,444 350 161 4,255

1.9

-550

270

0.1

95

0.0

174

6,175

2.4

7,932

3.6

-1,757

15

4.0

5-3. CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY Fiscal Year Ended March 31, 2006 Stockholders’ Equity Balance at the beginning of the period Increases in stockholders’ equity Conversion of convertible bonds Balance at the end of the period Retained Earnings Balance at the beginning of the period Increases in retained earnings Increase attributed to change in the scope of consolidation Net income Decreases in retained earnings Dividends Directors’ bonuses Employee welfare fund Balance at the end of the period

(Millions of yen) Fiscal Year Ended Increase/ March 31, 2005 Decrease

19,345 5,560

5,560 24,905

334

47,274 116 6,175 1,270 80 2

16

19,010

334

334 19,345

5,225 5,560

40,500

6,774

8,121

-1,829

1,346 47,274

6 4,938

188 6,291

1,352 52,213

7,932 1,216 80 49

5-4. CONSOLIDATED STATEMENTS OF CASH FLOWS (Millions of yen)

Operating Activities: Net income before tax and other adjustments Depreciation and amortization Increase (decrease) in employees’ severance and retirement benefits Increase in provision for directors’ severance bonus Interest and dividend income Interest expense Equity in earnings of affiliated companies Loss on sale of fixed assets Decrease (increase) in notes and accounts receivable Decrease (increase) in inventories Decrease in notes and accounts payable Decrease (increase) in consumption tax payable Increase in provision for product warranties Directors’ severance bonus Other—net Subtotal Interest and dividends received Interest paid Income and other income taxes Payment for directors’ severance bonus Net cash provided by operating activities

17

Fiscal Year Ended March 31, 2006

Fiscal Year Ended March 31, 2005

10,151

12,284

-2,132

8,615

7,331

1,283

-1,699

455

-2,154

52

82

-29

-316 133 -459 113

-295 181 -852 53

-21 -47 393 60

-2,788

257

-3,045

3,778 -3,356

-2,037 -1,072

5,815 -2,284

-148

164

-312

900

550

350

— 3,459 18,435 511 -135 -5,925 — 12,887

16 -1,773 15,344 374 -176 -2,938 -131 12,472

-16 5,233 3,091 136 41 -2,986 131 415

Increase/ Decrease

(Millions of yen)

Investing Activities: Payment for tangible fixed assets Proceeds from sale of tangible assets Payment for intangible fixed assets Proceeds from sales of investments in securities Payment for increase in capital Proceeds from sales of investments in affiliated companies Payment for loan lending Collection of loan receivable Other—net Net Cash Used in Investing Activities Financing Activities Net decrease in short-term borrowings Repayments of long-term debt Cash dividends paid Cash dividends, paid to minority interest Other—net Net Cash Used in Financing Activities Effect of Exchange Rate Changes on Cash and Cash Equivalents Net Increase in Cash and Cash Equivalents Cash and Cash Equivalents, Beginning of Year Increase in Cash and Cash Equivalents from New Consolidation Cash and Cash Equivalents, End of Year

18

Fiscal Year Ended March 31, 2006

Fiscal Year Ended March 31, 2005

-8,487 566 -2,418

-7,949 72 -1,397

-538 494 -1,021

111

0

110

-131

-209

78

577

―

577

-172 253 -154 -9,854

-279 336 181 -9,243

106 -82 -335 -611

-189 -13 -1,270 -40 -24 -1,537

-329 -10 -1,216 -56 -2 -1,615

139 -2 -53 16 -21 78

1,056

318

738

2,551

1,931

620

30,476

28,359

2,116

179

185

-6

33,206

30,476

2,730

Increase/ Decrease

6. SEGMENT INFORMATION (1) Business Segments Fiscal Year Ended March 31, 2005 (Millions of yen) Audio Products I. Sales and Operating Income Net Sales: Outside customers Within consolidated group Total Costs and Expenses Operating Income II. Assets, Depreciation and Amortization and Capital Expenditures Assets Depreciation and amortization Capital expenditures

Information and Communication Equipment

Total

Elimination and/or Consolidated Corporate

122,964

99,814

222,779

1,566

438

2,004

(2,004)

—

124,530 111,719 12,811

100,253 92,856 7,396

224,784 204,576 20,208

(2,004) 8,054 (10,059)

222,779 212,631 10,148

72,733

52,468

125,202

31,303

156,506

4,573

2,686

7,259

72

7,331

5,991

4,407

10,399

2

10,401

19

—

222,779

Fiscal Year Ended March 31, 2006 (Millions of yen) Audio Products I. Sales and Operating Income Net Sales: Outside customers Within consolidated group Total Costs and Expenses Operating Income II. Assets, Depreciation and Amortization and Capital Expenditures Assets Depreciation and amortization Capital expenditures

Information and Communication Equipment

Total

Elimination and/or Consolidated Corporate

129,075

124,907

253,983

—

253,983

667

1,464

2,131

(2,131)

—

129,742 119,999 9,742

126,371 118,638 7,732

256,114 238,638 17,475

(2,131) 5,673 (7,804)

253,983 244,311 9,671

75,919

62,435

138,355

31,197

169,553

5,119

3,434

8,553

61

8,615

6,354

4,357

10,712

65

10,777

Notes: 1.

Business segments are based on internal administrative segmentation.

2.

The Company’s primary business activities include: (1) Audio Products business: Car audio systems and accessories (2) Information and Communication Equipment business: Car communications, electronic components and imaging unit components

3.

Unallocated costs and expenses included in Elimination and/or Corporate comprise mainly corporate administrative and research and development costs. These costs totaled: Fiscal year ended March 31, 2005: ¥10,059 million Fiscal year ended March 31, 2006: ¥7,804 million

4.

Company assets included in Elimination and/or Corporate comprise mainly managed surplus (cash and cash equivalents, marketable securities), long-term investments (investments in securities), and assets related to the administrative and management divisions. Assets in Elimination and/or Corporate were: Fiscal year ended March 31, 2005: ¥31,579 million Fiscal year ended March 31, 2006: ¥31,455 million

5.

Depreciation and amortization and capital expenditures include long-term prepaid expenses and service costs.

20

(2) Geographic Areas Fiscal Year Ended March 31, 2005 (Millions of yen)

I. Sales and Operating Income Net Sales: Outside customers Within consolidated group Total Costs and Expenses Operating Income II. Assets

Other Areas

Elimination and/or Corporate

Japan

North America

Europe

52,182

82,692

83,625

4,279

222,779

130,633

1,332

26,053

30,898

188,916

(188,916)

—

182,815

84,024

109,678

35,177

411,696

(188,916)

222,779

167,296

82,079

107,700

34,650

391,727

(179,096)

212,631

15,518

1,944

1,978

526

19,968

(9,820)

10,148

100,433

29,550

33,134

18,004

181,122

(24,616)

156,506

21

Total

—

Consolidated

222,779

Fiscal Year Ended March 31, 2006 (Millions of yen) Japan I. Sales and Operating Income Net Sales: Outside customers Within consolidated group Total Costs and Expenses Operating Income II. Assets

North America

Europe

Asia

Other Areas

Total

Elimination and/or Corporate

Consolidated

48,627

97,655

99,456

7,044

1,198

253,983

─

253,983

147,877

1,769

25,427

42,704

2

217,780

(217,780)

─

196,505

99,425

124,883

49,748

1,200

471,763

(217,780)

253,983

185,854

96,775

122,758

48,411

1,212

455,012

(210,700)

244,311

10,651

2,649

2,125

1,337

-11

16,751

(7,080)

9,671

100,690

31,615

39,130

23,905

441

195,784

(26,230)

169,553

Notes: 1.

Differentiation between countries and regions is based on geographic proximity.

2.

Major countries and regions are: (1) North America: The United States of America and Canada (2) Europe: Germany, France, the United Kingdom, Italy and Spain (3) Asia: Singapore, China, and Thailand (4) Other Areas: Australia

3.

Unallocated costs and expenses included in Elimination and/or Corporate comprise mainly corporate administrative and research and development costs. These costs totaled: Fiscal year ended March 31, 2005: ¥10,059 million Fiscal year ended March 31, 2006: ¥7,804 million

4.

Company assets included in Elimination and/or Corporate comprise mainly managed surplus (cash and cash equivalents, marketable securities), long-term investments (investments in securities), and assets related to the administrative and management divisions. Assets in Elimination and/or Corporate were: Fiscal year ended March 31, 2005: ¥31,579 million Fiscal year ended March 31, 2006: ¥31,455 million

5.

Change in business segment by geographical area Business activities in Asia were reported in Other Areas in the fiscal year ended March 31, 2005. In the fiscal year under review, sales in Asia exceeded 10% of the Company’s total net sales and accordingly were reported as a separate geographic classification. For comparative purposes, net sales for the fiscal year ended March 31, 2005 have been restated according to the current geographic classification as follows.

22

Fiscal Year Ended March 31, 2005 (Millions of yen) Japan I. Sales and Operating Income Net Sales: Outside customers Within consolidated group Total Costs and Expenses Operating Income II. Assets

North America

Europe

Asia

Other Areas

Total

Elimination and/or Corporate

52,182

82,692

83,625

2,986

1,293

222,779

130,633

1,332

26,053

30,894

3

188,916

(188,916)

—

182,815

84,024

109,678

33,880

1,297

411,696

(188,916)

222,779

167,296

82,079

107,700

33,376

1,274

391,727

(179,096)

212,631

15,518

1,944

1,978

504

22

19,968

(9,820)

10,148

100,433

29,550

33,134

17,509

494

181,122

(24,616)

156,506

23

—

Consolidated

222,779

(3) Overseas Sales Fiscal Year Ended March 31, 2005 (Millions of yen)

Overseas sales Consolidated sales Ratio of overseas sales (%)

North America 81,426

Europe

36.6%

Other Areas

87,653

11,747

39.3%

5.3%

Total 180,828 222,779 81.2%

Fiscal Year Ended March 31, 2006 (Millions of yen)

Overseas sales Consolidated sales Ratio of overseas sales (%)

North America 96,230

Europe

37.9

Other Areas

99,649

19,401

39.2

7.6

Total 215,281 253,983 84.8

Notes: 1.

Differentiation between countries and regions is based on geographic proximity.

2.

Major countries and regions are: (1) North America: The United States of America and Canada (2) Europe: Germany, France, the United Kingdom, Italy, Spain and Sweden (3) Other Areas: Australia, China and Thailand

3. Overseas sales are sales of the Company and its consolidated subsidiaries outside Japan.

24