##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 20-F

[    ] REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g)
OF THE SECURITIES EXCHANGE ACT OF 1934
OR
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended March 31, 2001

Commission file number 1-7616

PIONEER KABUSHIKI KAISHA
(Exact name of Registrant as specified in its charter)

PIONEER CORPORATION
(Translation of Registrants name into English)

JAPAN
(Jurisdiction of incorporation or organization)

4-1, MEGURO 1-CHOME, MEGURO-KU, TOKYO 153-8654, JAPAN
(Address of principal executive offices)

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

|                                                                                            |  |                                          
|------------------------------------------------------------------------------------------- |  | -----------------------------------------
|Title of each class                                                                         |  | Name of each exchange on which registered
|                                                                                            |  |                                          
|Common Stock, par value 50 yen
per share, each represented by
one American Depositary Share |  | New York Stock Exchange                  





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##### Table of Contents



Securities 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 of each of the issuers classes of
capital or common stock as of the close of the period covered by the annual
report.

|               |  |                                 
|-------------- |  | --------------------------------
|               |  | Outstanding as of March 31, 2001
|Title of class |  | (Japan time)                    
|               |  |                                 
|Common Stock   |  | 179,894,370                     

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant 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 registrant has
elected to follow.

|        |  |   |  |         |  | 
|------- |  | - |  | ------- |  | 
|Item 17 |  | X |  | Item 18 |  | 
|        |  |   |  |         |  | 

2



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TABLE OF CONTENTS



|                                                                                       |                                                                                       |  |  |  |  |  |  | 
|-------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------- |  |  |  |  |  |  | 
|                                                                                       | Certain Defined Terms                                                                
|                                                                                       | Cautionary Statement with Respect to Forward-Looking Statements                      
|PART I                                                                                
|                                                                                       | Item 1. Identity of Directors, Senior Management and Advisers                        
|                                                                                       | Item 2. Offer Statistics and Expected Timetable                                      
|                                                                                       | Item 3. Key Information                                                              
|                                                                                       | Item 4. Information on the Company                                                   
|                                                                                       | Item 5. Operating and Financial Review and Prospects                                 
|                                                                                       | Item 6. Directors, Senior Management and Employees                                   
|                                                                                       | Item 7. Major Shareholders and Related Party Transactions                            
|                                                                                       | Item 8. Financial Information                                                        
|                                                                                       | Item 9. The Offer and Listing                                                        
|                                                                                       | Item 10. Additional Information                                                      
|                                                                                       | Item 11. Quantitative and Qualitative Disclosures About Market Risk                  
|                                                                                       | Item 12. Description of Securities Other than Equity Securities                      
|PART II                                                                               
|                                                                                       | Item 13. Defaults, Dividend Arrearages and Delinquencies                             
|                                                                                       | Item 14. Material Modifications to the Rights of Security Holders and Use of Proceeds
|                                                                                       | Item 15. [Reserved]                                                                  
|                                                                                       | Item 16. [Reserved]                                                                  
|PART III                                                                              
|                                                                                       | Item 17. Financial Statements                                                        
|                                                                                       | Item 18. Financial Statements                                                        
|                                                                                       | Item 19. Exhibits                                                                    
|Index to Consolidated Financial Statements and Schedules                              
|Independent Auditors Report                                                          
|Consolidated Balance Sheets                                                           
|Consolidated Statements of Income                                                     
|Consolidated Statements of Shareholders Equity                                       
|Consolidated Statements of Cash Flows                                                 
|Notes to Consolidated Financial Statements                                            
|Independent Auditors Report on Supplemental
Information                              
|Supplemental Notes to Consolidated Financial Statements to Conform with Regulation S-X
|Valuation and Qualifying Accounts                                                     
|Articles of Incorporation                                                             
|MPEG-2 Patent Portfolio License                                                       



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##### Table of Contents



TABLE OF CONTENTS

|                                                                                      |  |      |    | 
|------------------------------------------------------------------------------------- |  | ---- | -- | 
|                                                                                      |  | Page
|Certain Defined Terms                                                                 |  |      | 4  | 
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                     
|Cautionary Statement with Respect to Forward-Looking Statements                       |  |      | 4  | 
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                     
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|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                     
|PART I                                                                                |  |      |    | 
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                     
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|                                                                                     
|                                                                                     
|Item 1. Identity of Directors, Senior Management and Advisers                         |  |      | 4  | 
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                     
|Item 2. Offer Statistics and Expected Timetable                                       |  |      | 4  | 
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                     
|Item 3. Key Information                                                               |  |      | 5  | 
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                     
|Item 4. Information on the Company                                                    |  |      | 13 | 
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                     
|Item 5. Operating and Financial Review and Prospects                                  |  |      | 31 | 
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                     
|Item 6. Directors, Senior Management and Employees                                    |  |      | 48 | 
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                     
|Item 7. Major Shareholders and Related Party Transactions                             |  |      | 56 | 
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                     
|Item 8. Financial Information                                                         |  |      | 57 | 
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                     
|Item 9. The Offer and Listing                                                         |  |      | 59 | 
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                     
|Item 10. Additional Information                                                       |  |      | 60 | 
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                     
|Item 11. Quantitative and Qualitative Disclosures About Market Risk                   |  |      | 74 | 
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                     
|Item 12. Description of Securities Other than Equity Securities                       |  |      | 79 | 
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                     
|PART II                                                                               |  |      |    | 
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                     
|Item 13. Defaults, Dividend Arrearages and Delinquencies                              |  |      | 89 | 
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                     
|Item 14. Material Modifications to the Rights of Security Holders and Use of Proceeds |  |      | 89 | 
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                     
|Item 15. [Reserved]                                                                   |  |      |    | 
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                     
|Item 16. [Reserved]                                                                   |  |      |    | 
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                     
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|                                                                                     
|                                                                                     
|PART III                                                                              |  |      |    | 
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                     
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|                                                                                     
|                                                                                     
|                                                                                     
|Item 17. Financial Statements                                                         |  |      | 90 | 
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                     
|Item 18. Financial Statements                                                         |  |      | 90 | 
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                     
|Item 19. Exhibits                                                                     |  |      | 90 | 

3



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##### Table of Contents






Certain Defined Terms

As used herein, the term Pioneer refers to Pioneer Corporation, the
registrant, and we and our refer to Pioneer and its consolidated
subsidiaries as a group, unless the context otherwise indicates.

References in this annual report to fiscal years refer to the 12-month
periods ended March 31 of each calendar year.

Billion is used in the American sense of one thousand million.




Cautionary Statement with Respect
to Forward-Looking Statements

Statements made in this annual report with respect to our current plans,
estimates, strategies and beliefs and other statements that are not historical
facts are forward-looking statements about our future performance.
Forward-looking statements include but are not limited to those using words
such as believe, expect, plans, strategy, prospects, forecast,
estimate, project, anticipate, may or might and words of similar
meaning in connection with a discussion of future operations or financial
performance. From time to time, oral or written forward-looking statements may
also be included in other materials released to the public. These statements
are based on managements assumptions and beliefs in light of the information
currently available to it. We caution you that a number of important risks and
uncertainties could cause actual results to differ materially from those
discussed in the forward-looking statements, and therefore you should not place
undue reliance on them. You also should not rely on any obligation of ours to
update or revise any forward-looking statements, whether as a result of new
information, future events or otherwise. We disclaim any such obligation.
Risks and uncertainties that might affect us include, but are not limited to,
(i) general economic conditions in our markets, particularly levels of consumer
spending; (ii) exchange rates, particularly between the yen and the U.S.
dollar, euro, and other currencies in which we make significant sales or in
which our assets and liabilities are denominated; (iii) our ability to continue
to design and develop and win acceptance of our products and services, which
are offered in highly competitive markets characterized by continual new
product introductions, rapid development in technology and subjective and
changing consumer preferences; (iv) our ability to implement successfully our
business strategies; (v) our ability to compete and develop and implement
successful sales and distribution strategies in light of technological
developments in and affecting our businesses; (vi) our continued ability to
devote sufficient resources to research and development and capital
expenditures; (vii) the success of our joint ventures and alliances; and (viii)
the outcome of contingencies.




PART I




Item 1. Identity of Directors, Senior Management and Advisers

Not applicable




Item 2. Offer Statistics and Expected Timetable

Not applicable

4



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##### Table of Contents






Item 3. Key Information

A. Selected financial data

The following table presents selected financial information for us at the dates
and for each of the years indicated, and has been derived from our financial
statements included elsewhere herein, which are prepared in accordance with
accounting principles generally accepted in the United States of America (U.S.
GAAP), except for segment data which is prepared in accordance with the
regulations under the Securities and Exchange Law of Japan.

|                                                                                  |                           |         |          |                                             |       |      |          |         |       |      |          |         |      |  |          |         |       |  |          |         |        | 
|--------------------------------------------------------------------------------- | ------------------------- | ------- | -------- | ------------------------------------------- | ----- | ---- | -------- | ------- | ----- | ---- | -------- | ------- | ---- |  | -------- | ------- | ----- |  | -------- | ------- | ------ | 
|                                                                                  |                           |         |          | (In millions of yen, except per share data)
|                                                                                  |                           |         |          |                                            
|                                                                                  |                           |         |          | Year ended March 31                        
|                                                                                  |                           |         |          |                                            
|                                                                                  |                           |         |          | 1997 (4)                                    |       | 1998 |          | 1999    |       | 2000 |          | 2001   
|                                                                                  |                           |         |          |                                             |       |      |          |         |       |      |          |        
|Consolidated Statement of Income Data:                                            |                           |         |          |                                             |       |      |          |         |       |      |          |         |      |  |          |         |       |  |          |        
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|Operating revenue (1)                                                             |                           |         | ¥568,521 |                                             |       |      | ¥579,435 |         |       |      | ¥589,065 |         |      |  | ¥615,871 |         |       |  | ¥647,069 |        
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|Gross profit (2)                                                                  |                           |         | 187,629  |                                             |       |      | 193,122  |         |       |      | 190,118  |         |      |  | 187,296  |         |       |  | 199,680  |        
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|Operating income (1)                                                              |                           |         | 8,137    |                                             |       |      | 28,872   |         |       |      | 20,116   |         |      |  | 23,593   |         |       |  | 33,819   |        
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|Income before income taxes and extraordinary items                                |                           |         | 1,581    |                                             |       |      | 18,836   |         |       |      | 12,533   |         |      |  | 27,808   |         |       |  | 34,193   |        
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|Net income                                                                        |                           |         | 2,512    |                                             |       |      | 6,163    |         |       |      | 1,159    |         |      |  | 13,075   |         |       |  | 18,298   |        
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|Net
income per share of common stock and
per American Depositary Share (ADS) (3): |                           |         |          |                                             |       |      |          |         |       |      |          |         |      |  |          |         |       |  |          |        
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                  |                           | Basic   |          |                                             | 13.99 |      |          |         | 34.32 |      |          |         | 6.45 |  |          |         | 72.81 |  |          |         | 101.76 | 
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                  |                           | Diluted |          |                                             | 13.99 |      |          |         | 34.32 |      |          |         | 6.45 |  |          |         | 72.80 |  |          |         | 101.70 | 
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|Operating revenue from unaffiliated customers by
business segment (1):            |                           |         |          |                                             |       |      |          |         |       |      |          |         |      |  |          |         |       |  |          |        
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                  | Electronics               |         |          | 509,820                                     |       |      |          | 522,254 |       |      |          | 535,487 |      |  |          | 548,737 |       |  |          | 586,629 |       
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                  | AV Software               |         |          | 42,757                                      |       |      |          | 37,587  |       |      |          | 33,370  |      |  |          | 47,674  |       |  |          | 39,910  |       
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                  | Patent Licensing          |         |          | 15,944                                      |       |      |          | 19,594  |       |      |          | 20,208  |      |  |          | 19,460  |       |  |          | 20,530  |       
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|Operating income by business segment (1):                                         |                           |         |          |                                             |       |      |          |         |       |      |          |         |      |  |          |         |       |  |          |        
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                  | Electronics               |         |          | (6,926                                      | )     |      |          | 16,872  |       |      |          | 8,541   |      |  |          | 4,731   |       |  |          | 13,831  |       
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                  | AV Software               |         |          | 1,283                                       |       |      |          | (3,163  | )     |      |          | (5,422  | )    |  |          | 196     |       |  |          | 125     |       
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                  | Patent Licensing          |         |          | 12,859                                      |       |      |          | 14,553  |       |      |          | 16,588  |      |  |          | 18,426  |       |  |          | 19,734  |       
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                  | Corporate and elimination |         |          | 921                                         |       |      |          | 610     |       |      |          | 409     |      |  |          | 240     |       |  |          | 129     |       
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|Consolidated Balance Sheet Data:                                                  |                           |         |          |                                             |       |      |          |         |       |      |          |         |      |  |          |         |       |  |          |        
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|Total assets                                                                      |                           |         | ¥566,666 |                                             |       |      | ¥595,553 |         |       |      | ¥592,407 |         |      |  | ¥601,137 |         |       |  | ¥605,156 |        
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|Short-term borrowings                                                             |                           |         | 54,125   |                                             |       |      | 54,899   |         |       |      | 46,153   |         |      |  | 41,318   |         |       |  | 37,571   |        
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|Current portion of long-term debt                                                 |                           |         | 8,630    |                                             |       |      | 8,835    |         |       |      | 6,455    |         |      |  | 37,235   |         |       |  | 7,996    |        
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|Long-term debt, less current portion                                              |                           |         | 62,404   |                                             |       |      | 58,097   |         |       |      | 82,958   |         |      |  | 47,060   |         |       |  | 38,304   |        
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|Shareholders equity                                                              |                           |         | 325,885  |                                             |       |      | 330,098  |         |       |      | 313,244  |         |      |  | 312,460  |         |       |  | 336,995  |        
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|Number of shares outstanding (in thousands)                                       |                           |         | 179,573  |                                             |       |      | 179,573  |         |       |      | 179,573  |         |      |  | 179,588  |         |       |  | 179,894  |        

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|                                                                    |                       |                   |         |                                            |      |      |         |      |      |      |         |      |      |  |         |      |      |  |         |      |      | 
|------------------------------------------------------------------- | --------------------- | ----------------- | ------- | ------------------------------------------ | ---- | ---- | ------- | ---- | ---- | ---- | ------- | ---- | ---- |  | ------- | ---- | ---- |  | ------- | ---- | ---- | 
|                                                                    |                       |                   |         | (In millions of yen, except per share data
|                                                                    |                       |                   |         | and percentage amounts)                   
|                                                                    |                       |                   |         |                                           
|                                                                    |                       |                   |         | Year ended March 31                       
|                                                                    |                       |                   |         |                                           
|                                                                    |                       |                   |         | 1997 (4)                                   |      | 1998 |         | 1999 |      | 2000 |         | 2001
|                                                                    |                       |                   |         |                                            |      |      |         |      |      |      |         |     
|Other Data:                                                         |                       |                   |         |                                            |      |      |         |      |      |      |         |      |      |  |         |      |      |  |         |     
|                                                                   
|                                                                   
|                                                                   
|                                                                   
|Capital expenditures                                                |                       |                   | ¥35,085 |                                            |      |      | ¥26,898 |      |      |      | ¥33,070 |      |      |  | ¥25,458 |      |      |  | ¥42,183 |     
|                                                                   
|                                                                   
|                                                                   
|                                                                   
|Research and development (R&D) expenses                             |                       |                   | 30,323  |                                            |      |      | 31,042  |      |      |      | 31,131  |      |      |  | 33,265  |      |      |  | 37,105  |     
|                                                                   
|                                                                   
|                                                                   
|                                                                   
|EBITDA, as defined (5)                                              |                       |                   | 33,379  |                                            |      |      | 49,231  |      |      |      | 46,165  |      |      |  | 62,267  |      |      |  | 65,979  |     
|                                                                   
|                                                                   
|                                                                   
|                                                                   
|Cash flows from operating activities                                |                       |                   | 34,657  |                                            |      |      | 36,015  |      |      |      | 37,904  |      |      |  | 45,390  |      |      |  | 51,241  |     
|                                                                   
|                                                                   
|                                                                   
|                                                                   
|Cash flows from investing activities                                |                       |                   | (32,881 | )                                          |      |      | (31,836 | )    |      |      | (38,157 | )    |      |  | 11,984  |      |      |  | (41,581 | )   
|                                                                   
|                                                                   
|                                                                   
|                                                                   
|Cash flows from financing activities                                |                       |                   | (5,288  | )                                          |      |      | (744    | )    |      |      | 13,112  |      |      |  | (4,139  | )    |      |  | (46,567 | )   
|                                                                   
|                                                                   
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|                                                                   
|                                                                   
|EBITDA, as defined, margin (6)                                      |                       |                   | 5.87    | %                                          |      |      | 8.50    | %    |      |      | 7.84    | %    |      |  | 10.11   | %    |      |  | 10.20   | %   
|                                                                   
|                                                                   
|                                                                   
|                                                                   
|Operating margin (7)                                                |                       |                   | 1.43    | %                                          |      |      | 4.98    | %    |      |      | 3.41    | %    |      |  | 3.83    | %    |      |  | 5.23    | %   
|                                                                   
|                                                                   
|                                                                   
|                                                                   
|Net income margin (8)                                               |                       |                   | 0.44    | %                                          |      |      | 1.06    | %    |      |      | 0.20    | %    |      |  | 2.12    | %    |      |  | 2.83    | %   
|                                                                   
|                                                                   
|                                                                   
|                                                                   
|Return on equity (9)                                                |                       |                   | 0.79    | %                                          |      |      | 1.88    | %    |      |      | 0.36    | %    |      |  | 4.18    | %    |      |  | 5.63    | %   
|                                                                   
|                                                                   
|                                                                   
|                                                                   
|Return on assets (10)                                               |                       |                   | 0.45    | %                                          |      |      | 1.06    | %    |      |      | 0.20    | %    |      |  | 2.19    | %    |      |  | 3.03    | %   
|                                                                   
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|Cash dividends declared per share of common stock
and per ADS (11): |                       |                   |         |                                            |      |      |         |      |      |      |         |      |      |  |         |      |      |  |         |     
|                                                                   
|                                                                   
|                                                                   
|                                                                   
|                                                                    | Interim
     (in yen) |                   |         |                                           |      |      |         | 2.50 |      |      |         | 5.00 |      |  |         | 5.00 |      |  |         | 7.50 |     
|                                                                   
|                                                                   
|                                                                   
|                                                                   
|                                                                    |                       | (in U.S. dollars) |         |                                            |     |      |         |      | 0.02 |      |         |      | 0.04 |  |         |      | 0.05 |  |         |      | 0.07 | 
|                                                                   
|                                                                   
|                                                                   
|                                                                   
|                                                                    | Year-end
  (in yen)   |                   |         | 5.00                                       |      |      |         | 5.00 |      |      |         | 5.00 |      |  |         | 5.00 |      |  |         | 7.50 |     
|                                                                   
|                                                                   
|                                                                   
|                                                                   
|                                                                    |                       | (in U.S. dollars) |         |                                            | 0.04 |      |         |      | 0.04 |      |         |      | 0.04 |  |         |      | 0.05 |  |         |      | 0.06 | 

Notes:



| | (1) |  | In fiscal 2000, we changed the reporting of income from patents and
related expenses, which had been previously presented in Other income
(expenses). The gross patent revenue is presented as Royalty revenue
and the related expenses are included in Selling, general and
administrative expenses. Previously reported amounts have been
reclassified to conform to this presentation.                                                                                                                                                                                                                                                                           
| | --- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | (2) |  | Gross profit represents operating revenue minus cost of sales.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|
| | (3) |  | Basic net income per share of common stock and per ADS has been computed
based on the weighted average number of shares outstanding during each year.
Diluted net income per share of common stock and ADS has been computed on the
basis that all dilutive warrants and stock options were exercised. One ADS
represents one share of common stock.                                                                                                                                                                                                                                                                                                                      
|
| | (4) |  | Employee-related restructuring charges in fiscal 1997, which had been
previously reported as non-operating other expenses, have been classified as
operating expenses.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|
| | (5) |  | EBITDA represents net income plus minority interests, equity in earnings,
interest expense (net), income taxes, depreciation and amortization. EBITDA
is provided because it is a measure commonly used by investors to analyze and
compare companies on the basis of operating performance. EBITDA is not a
measurement of financial performance under U.S. GAAP and should not be
construed as a substitute for operating income, net income or cash flows from
operating activities for purposes of analyzing our operating performance,
financial position and cash flows. Our EBITDA is not necessarily comparable
with similarly titled measures of other companies.

6



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##### Table of Contents





| | (6)  |  | EBITDA as a percentage of operating revenue.                                                                                                                                                                               
| | ---- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | (7)  |  | Operating income as a percentage of operating revenue.                                                                                                                                                                     
|
| | (8)  |  | Net income as a percentage of operating revenue.                                                                                                                                                                           
|
| | (9)  |  | Net income as a percentage of average shareholders equity.                                                                                                                                                                
|
| | (10) |  | Net income as a percentage of average total assets.                                                                                                                                                                        
|
| | (11) |  | Cash dividends in U.S. dollars are based on the noon buying rate in yen
for cable transfers in New York City as certified for customs purposes by the
Federal Reserve Bank of New York on the date of the dividend payment.

Exchange rates (yen per U.S.
dollar)

The exchange rate between the yen and the U.S. dollar, based upon the noon
buying rate for cable transfers in New York City as certified for customs
purposes by the Federal Reserve Bank of New York, was ¥117.32 = US $1.00 on
September 18, 2001.

|                    |        |  |         |         |      |  |     |         |            |  |  |         |  |  |  |         | 
|------------------- | ------ |  | ------- | ------- | ---- |  | --- | ------- | ---------- |  |  | ------- |  |  |  | ------- | 
|                    |        |  | Average |         | High |  | Low |         | Period-end
|                    |        |  |         |         |      |  |     |         |           
|Year ended March 31 |        |  |         |         |      |  |     |         |            |  |  |         |  |  |  |        
|                   
|                   
|                   
|                   
|                    | 1997   |  |         | ¥113.21 |      |  |     | ¥104.49 |            |  |  | ¥124.54 |  |  |  | ¥123.72 | 
|                   
|                   
|                   
|                   
|                    | 1998   |  |         | 123.57  |      |  |     | 111.42  |            |  |  | 133.99  |  |  |  | 133.29  | 
|                   
|                   
|                   
|                   
|                    | 1999   |  |         | 128.10  |      |  |     | 108.83  |            |  |  | 147.14  |  |  |  | 118.43  | 
|                   
|                   
|                   
|                   
|                    | 2000   |  |         | 110.02  |      |  |     | 101.53  |            |  |  | 124.45  |  |  |  | 102.73  | 
|                   
|                   
|                   
|                   
|                    | 2001   |  |         | 111.65  |      |  |     | 104.19  |            |  |  | 125.54  |  |  |  | 125.54  | 
|                   
|2001                |        |  |         |         |      |  |     |         |            |  |  |         |  |  |  |        
|                   
|                   
|                   
|                   
|                    | March  |  |         |         |      |  |     | 117.33  |            |  |  | 125.54  |  |  |  | 125.54  | 
|                   
|                   
|                   
|                   
|                    | April  |  |         |         |      |  |     | 121.68  |            |  |  | 126.75  |  |  |  | 123.57  | 
|                   
|                   
|                   
|                   
|                    | May    |  |         |         |      |  |     | 118.88  |            |  |  | 123.67  |  |  |  | 118.88  | 
|                   
|                   
|                   
|                   
|                    | June   |  |         |         |      |  |     | 119.13  |            |  |  | 124.73  |  |  |  | 124.73  | 
|                   
|                   
|                   
|                   
|                    | July   |  |         |         |      |  |     | 122.85  |            |  |  | 125.85  |  |  |  | 125.00  | 
|                   
|                   
|                   
|                   
|                    | August |  |         |         |      |  |     | 118.75  |            |  |  | 124.87  |  |  |  | 118.75  | 

For purposes of preparing our financial statements, we use rates obtained from
the Tokyo foreign exchange market, which differ from the rates listed above.

B. Capitalization and indebtedness

Not applicable

C. Reasons for the offer and use of proceeds

Not applicable

D. Risk factors

This section describes some of the risks that could affect our business. The
factors listed below should be considered in connection with any
forward-looking statements given in this annual report and should be read in
conjunction with Item 5. Operating and Financial Review and Prospects. They
are subject to the Cautionary Statement with Respect to Forward-Looking
Statements appearing elsewhere. This list is necessarily incomplete, as some
risks may be as yet unknown to us. Any risk factor has the potential to
adversely affect our business results, share price and financial condition.

7



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Economic conditions may adversely affect our business results and
financial condition

Demand for consumer electronics products, which account for a significant
proportion of our worldwide operating revenue, may be affected by general
economic trends in the countries or regions in which our products are sold.
Purchases of our products are, to a significant extent, discretionary.
Similarly, demand for our business use products and for components we
manufacture that go into products of third parties is affected by general
economic trends in the various markets in which we sell our products. Economic
downturns and resulting declines of demand in our major markets, including
Japan, North America, Europe and Asia, may thus adversely affect our business
results and financial condition.

Additionally, our operations may be indirectly affected by the economic
conditions of regions where our competitors manufacture their products. For
example, if a competitor enjoys lower local labor costs, it may be able to
offer similar products at a lower price. As a result, our sales may be
adversely affected. Also, a decrease in the value of the local currency in a
region that produces parts and raw materials may lead to a decrease in
production costs (on a yen or a U.S. dollar basis) not only to us but to other
manufacturers, as well. Such a trend may in turn bring about vigorous export
competition and price-cutting, both of which could adversely affect our
business results and financial condition.

Fluctuations in foreign currency
exchange rates may adversely affect our business results and
financial condition

Our operations involve the global production and distribution of products.
Revenue and expense items that are denominated in local currency, such as
sales, expenses and assets in each region, are translated into yen in preparing
our consolidated financial statements. Depending on the rate of exchange at
the time of currency translation, the values of such items in yen may be
affected, even if their value has not changed in their original currency.
Therefore, fluctuations in foreign currency exchange rates, particularly the
yen against the U.S. dollar and the euro, in which we make significant sales,
may adversely affect our financial condition and business results.

An increase in the value of currencies in regions where we operate and produce
may lead to an increase in the costs of manufacturing and procurement in those
regions. Such an increase could accordingly adversely affect our profit
margins and reduce our price competitiveness, thereby adversely affecting our
business results. We engage in currency hedging transactions to attempt to
minimize the negative effects of short-term fluctuations of foreign exchange
rates among major currencies such as the U.S. dollar, euro and yen. However,
as a result of mid-to-long-term exchange rate volatility, we cannot execute
planned procurement, production, logistics, and sales activities with any
certainty and, consequently, fluctuations in exchange rates may adversely
affect our business results and financial condition.

If we are unable to innovate and to
develop attractive new products, our future growth and profitability
may be affected

We derive a substantial portion of our revenues from sales of innovative new
products. We expect that sales of our new products  currently including
DVD-related products, plasma displays and car navigation systems  will
continue to account for a substantial portion of our revenues, and we expect
our future growth to rely primarily on the development and sale of innovative
new products.

8



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While we believe that we are capable of continuing to develop innovative and
attractive new products, the industry in which we operate is characterized by
rapid changes, including technological changes. The process of developing and
marketing new products is inherently complex and uncertain, and there are a
number of risks, including the following:



| |  | We cannot assure you that we will have adequate funding and resources
necessary for investments in new products and technologies.                                                                                                                                                                                                                                   
|- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| 
| |  | We cannot assure you that our long-term investments and commitment of
significant resources will result in successful new products or
technologies. For example, we have invested substantial resources in
the expansion of our production capacity at our Shizuoka plant to meet
anticipated demand for plasma display panels, but such demand may not
materialize.
| 
| |  | We cannot assure you that we can anticipate successfully the new
products and technologies which will gain market acceptance and that
such products can be successfully marketed.                                                                                                                                                                                   
| 
| |  | We cannot assure you that our newly developed products or technologies
can be successfully protected as proprietary intellectual property
rights.                                                                                                                                                                                                                   
| 
| |  | Our products may become obsolete due to rapid advancements in
technology and changes in consumer preferences.                                                                                                                                                                                                                                                       

Our failure to anticipate adequately changes in the industry and the market,
and to develop attractive new products, including any of the risks described
above, may reduce our future growth and profitability and may adversely affect
our business results and financial condition.

Competition generally, and especially on price and standardization of products, may adversely affect our business results and financial condition

The electronics industry, including the audio, video and car electronics
industry, is intensely competitive. We expect to face increased competition in
the various product and geographic markets in which we operate. Our
competitors include manufacturers and distributors, some of which have greater
capital resources available for research, development, production and
marketing. In addition, as new technology develops and as new electronics
products gain increased market acceptance, it is possible that new competitors
or alliances among existing competitors may emerge and rapidly acquire
significant market share. While we believe we are a leading global
manufacturer of advanced, high-quality and value-added electronics products, we
cannot assure you that we will be able to compete effectively in the future.
Pricing pressures or loss of potential customers resulting from our failure to
compete effectively may adversely affect our business results and financial
condition.

For example, competitors in the plasma display market may introduce alternative
products at a lower price and in advance of our products. Moreover, due to
standardization and the relative ease of imitation of products, competition
from manufacturers in emerging markets may continue to intensify. Our research
into the development of new products requires large costs that competitive
imitators may not need to incur. In an aggressive price-cutting environment we
may find it difficult to maintain or increase our market share or remain
profitable against low-cost and low-budget competitors.

9



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Failure of our DVD-recorder format to gain broad market acceptance may adversely affect our business results and financial condition

Currently, there are a number of competing recording formats for digital
versatile discs (DVDs): the DVD-RW format commercialized by us, Sony, Sharp and
others, the DVD-RAM format commercialized by Matsushita, Hitachi and Toshiba
and the DVD+RW format commercialized by Philips. Each of the recording disc
formats makes use of its own distinct technology and is generally incompatible
with other formats.

The question of which format will prevail as the industry standard is not yet
settled. Should the DVD-RW format fail to be accepted as the de facto
industry standard, or otherwise to gain wide acceptance, our business results
and financial condition would be adversely affected.

As a result of the expiration of patents relating to laser optical disc technologies, our royalty revenue is expected to decline substantially, starting in fiscal 2003

Our patent, license and other intellectual property rights make a significant
contribution to our net income. Although less than five percent of our revenue
is generated by our worldwide patents relating to laser optical disc
technologies, these rights were responsible for between approximately 60%-80%
of our operating income in the last three fiscal years. The legal protections
afforded these rights have a limited duration under applicable laws, and the
length of protection varies from country to country or region. In addition,
such patents will expire in Europe and Japan starting in fiscal 2003. As a
result, our royalty revenue is expected to decline substantially. While we are
trying to develop new patents and acquire third party patent rights, we do not
expect that the revenue, if any, from such new patents will be sufficient to
offset the decrease in royalty revenue resulting from the expiration of our
existing patents. Royalty revenue from patent licensing also depends to a
material degree on the sales of patented products by our licensees, making it
hard for us to predict actual royalty revenue amounts. For a discussion of our
patent licensing business, see Item 4.B. Business
overviewNature of
operations.

If we are unable to manage successfully the risks inherent in our international activities and our overseas expansion, our business results and financial condition could be adversely affected

A substantial portion of our manufacturing and marketing activity is conducted
outside Japan, including in the United States, Europe, and in developing and
emerging markets in Asia. There are a number of risks inherent in doing
business in such overseas markets, including the following:



| |  | unexpected legal or regulatory changes;                                                                                                                                  
|- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| 
| |  | unfavorable political or economic factors;                                                                                                                               
| 
| |  | difficulties in recruiting and retaining personnel;                                                                                                                      
| 
| |  | less developed technological infrastructure, which can affect our
production or other activities or result in lower customer acceptance
of our products and services; and
| 
| |  | potentially adverse tax consequences.                                                                                                                                    

10



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In order to produce our products competitively and to reduce costs, we are in
the process of establishing new production facilities in the Peoples Republic
of China (China). We plan to invest a total of ¥10 billion by fiscal 2003
to build production capacities for various products, including DVD-related
components and car stereo products, in the Shanghai and Dongguan areas. In
addition, we intend to rely significantly on electronics manufacturing services
(EMS) arrangements in China to help minimize our plant investments and parts
inventories. In opening a new manufacturing facility, however, it typically
takes time to achieve success in production. Therefore, there is no guarantee
that cost savings will be realized in the immediate term, if at all.
Furthermore, we may experience difficulties in managing a production facility
and entering into business arrangements in China in light of unexpected events,
including political or legal change, labor shortages or strikes or changes in
economic conditions in China. Accordingly, such incidents could have an
adverse impact on our business results and financial condition. For more
information on our China plants, see Item 4.B. Business
overviewProduction.

Our dependence on certain third-party manufacturers and suppliers for parts and components could adversely affect our business results and financial condition

While we strive to produce key components and parts internally, we are
dependent on a number of outside manufacturers and suppliers. Third parties
manufacture some of our most important components and parts, including
semiconductors. Our arrangements with third-party manufacturers and suppliers
are generally on a renewable short-term basis. While we have sought to assure
supply where necessary through strategic alliances and other measures, we
cannot assure you that we will not face shortages of key components from time
to time. See Item 4.B. Business overviewRaw materials and sources of supply
for a discussion of our outside manufacturers and suppliers. If we are forced
to change contract manufacturers and suppliers, this could result in a
reduction in the availability of components and parts essential to us or in an
increase of our costs. In addition, in periods of high demand for consumer
electronics products and as components such as semiconductors are improved,
producers of components and parts may not be able to produce enough components
to satisfy our demand on a timely basis. Shortages of key components could
result in increases in their prices, insufficient supply and quality control
problems, and could adversely affect our business results and financial
condition, as well as lead to strained relationships with our original
equipment manufacturing (OEM) customers.

Our performance in the OEM business is substantially dependent on the performance of our customers business

We cater our OEM business to automobile manufacturers, electronics
manufacturers, personal computer (PC) makers, the broadcasting industry and
other large-scale businesses worldwide. The products we supply include car
stereo products, DVD-R/RW drives, settop boxes for cable TV and digital
satellite broadcast and organic electroluminescent (OEL) displays for cellular
phones. Sales to business customers in these areas are significantly affected
by the respective customers business results and by factors that are beyond
our control. Further, price cutting to meet customer demands may cause a
reduction in our profit margin. The under-performance of a customers
business, the unexpected termination of contracts, changes in the purchasing
practices of our OEM customers or aggressive price cutting to satisfy a large
business customers demands may adversely affect our business results and
financial condition.

11



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Because our products and
technologies are dependent on the service of capable engineers and
other key personnel, difficulty in recruiting and developing key personnel could have an adverse impact on our future growth, business results and financial condition

Our products and technologies are complex, and our future growth and success
depend to a significant extent on the service of capable engineers and other
key personnel, and hiring and training additional highly-skilled engineers and
other competent personnel are important for our success.

Failure to recruit and develop key personnel may adversely affect our future
growth, business results and financial condition. On the other hand,
aggressive hiring of, among others, capable engineers who are experienced with
the latest technology, may increase, sometimes substantially, both recruiting
and actual labor costs. In addition, continued re-training of currently
employed personnel, which may introduce higher costs, might also be necessary
to maintain a superior level of innovation and technological advance. Such
increased costs could have an adverse impact on our business results and
financial condition.

Limits on intellectual property protection may make us vulnerable to competition from third parties that use our technology and expertise

While we have developed technology and expertise which differentiate our
products from those of our competitors, some of our unique technology and
expertise is either not fully capable of being protected by intellectual
property rights or protected only to a limited extent pursuant to legal
limitations in certain jurisdictions. Accordingly, we may be unable
effectively to prevent third parties from using our intellectual property
rights to produce products similar to ours. In addition, we may be unable to
prevent third parties from developing technologies that are similar or superior
to our technology, or from designing around or reverse engineering our patents
and trade secrets. Moreover, our future products and technology might later be
found to infringe upon a third partys intellectual property rights.

Product defects resulting in a large-scale product recall or successful products liability claim against us, could result in a significant cost or impact on our reputation and adversely affect our business results and financial condition

We manufacture various products at our plants worldwide, in accordance with
internationally accepted quality control standards. We cannot be certain,
however, that all of our products are defect-free and may not be recalled at
some later date. Furthermore, although we maintain insurance against product
liability claims, we cannot be certain that such insurance can adequately
satisfy the liabilities ultimately incurred. In addition, insurance may not
continue to be available on terms acceptable to us. A large-scale product
recall, or a successful products liability claim against us, could result in a
significant cost or have a negative impact on our reputation, which may in turn
lead to a decrease in sales, adversely affecting our business results and
financial condition.

Governmental regulation may limit our activities or increase our costs of operations

Various regulations by governments in countries in which we do business, such
as required business/investment approvals, export regulations based on national
security or other reasons and other export/import regulations, such as tariffs,
apply to us. In addition, commercial, antitrust, patent, consumer, taxation,
exchange control and environment/recycling laws and regulations also apply. If
we are unable to comply with these regulations, they can serve to limit our
activities. In addition, even if we are able to comply, these regulations
could result in increased costs. Accordingly, these regulations could
adversely affect our business results and financial condition. See Item 4.B.
Business overviewGovernmental regulation for a discussion of certain
government regulations applicable to us.

12



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Damages to our Shizuoka plant as a
result of disasters, outages or similar events may significantly
reduce our production capacity, and adversely affect our business
results and financial condition

Our plasma display products are currently manufactured at our Shizuoka plant,
and we are in the process of further expanding our manufacturing lines at
Shizuoka. We expect to continue to manufacture our plasma display panels
there. Accordingly, our plasma display panel production capacity could be
significantly reduced in the event of a major earthquake or other disruption of
operations at the Shizuoka plant. We periodically carry out disaster
prevention checks and facility maintenance at all of our facilities to minimize
potential negative impact caused by disruptions at the manufacturing lines. We
cannot assure you, however, that we can completely prevent or mitigate the
effect of a disaster, outage or other disruption at our major facilities,
including the Shizuoka plant.






Item 4. Information on the Company

A. History and development of the Company

Overview

We develop, manufacture and sell electronics products such as audio, video and
car electronics on a global scale, as well as plan, produce and distribute
audio/video (AV) software. We are one of the leading manufacturers of
advanced, high-quality and value-added electronics products and one of the
leading innovators of differentiated DVD products and plasma displays. We also
have the largest worldwide market share of car electronics products and are the
leading producer of OEL displays. Our primary markets are Japan, North
America, Europe and Asia.

We classify our business groups into three segments: Electronics, AV
Software and Patent Licensing.

History

Pioneer was incorporated under the Japanese Commercial Code as a joint stock
company (Kabushiki Kaisha) in May 1947, with the name Fukuin Denki Kabushiki
Kaisha, succeeding to the business founded in January 1938 by the late Mr.
Nozomu Matsumoto. The present name, Pioneer Kabushiki Kaisha, was adopted in
June 1961. Its English name was changed from Pioneer Electronic Corporation
to Pioneer Corporation in June 1999.

Our business dates from January 1938 when we began the manufacture of audio
speakers. In June 1955 we commenced the manufacture of audio amplifiers.
During the 1960s, we expanded our line of products to include hi-fi stereo sets
and components, hi-fi car stereos, as well as telephone-related equipment.
Since the early 1960s we have established business offices and subsidiaries in
and outside Japan to support our expanding manufacturing and sales activities.
During the 1970s we further expanded our business to include equipment related
to cable-TV systems. Pioneers shares of common stock were listed on the Tokyo
Stock Exchange and Osaka Securities Exchange in October 1961 and April 1968,
respectively. In addition, Pioneers ADSs were listed on the New York Stock
Exchange in December 1976.

13



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##### Table of Contents



In the 1980s, we began to expand our business base to include AV equipment. We
started marketing laser disc (LD) players and LDs, and commenced our own music
and video software business in Japan. Also, we introduced the worlds first
car compact disc (CD) players. We also broadened our business base in
commercial and industrial markets with such products as optical memory disc
drives for use in computers, laser karaoke (sing-along) systems and multiscreen
video systems.

In the 1990s, we released to the Japanese consumer market the worlds first car
navigation system incorporating the Global Positioning System (GPS). In
addition, we further built on our technology and expertise in optical disc
products, and introduced DVD players and thin-profile color plasma displays and
began supplying digital direct-broadcast satellite (DBS) decoders to a European
pay-TV company. Our other recent industry firsts include four-color OEL
displays and DVD recorders.

In fiscal 2001, we started supplying to PC makers DVD-R/RW drives that can
record up to seven times as much data as conventional CD-R/RW drives.

Registered office

Pioneers registered office is located at 4-1, Meguro 1-chome, Meguro-ku,
Tokyo 153-8654, Japan. Its telephone number is 81-3-3494-1111.

Principal capital expenditures,
investments and divestitures

In fiscal 1999, 2000 and 2001, our capital expenditures consisted principally
of facilities for production and molds for production and totaled ¥33,070
million, ¥25,458 million and ¥42,183 million, respectively. Capital
expenditures were paid for principally out of our internally generated working
capital. The facilities for production comprised those for OEL displays and
DVD pickups, and plants and machinery for plasma displays.

In fiscal 2001, we commenced installation of a second manufacturing line at our
plant in Shizuoka, Japan, to respond to potential increased demand for plasma
displays. The Shizuoka plant is expected to begin production in October 2001.
When completed, capacity is expected to be increased from 50,000 at present to
up to 150,000 units per year.

To further improve cost competitiveness and to reallocate a major portion of
production to China, Pioneer established two production subsidiaries in China
in fiscal 2001. These plants are expected to be operational in the fall of
2001, and are mainly for DVD pickups, DVD-R/RW drives and car electronics
products. See Item 4.B. Business
overviewProduction. In addition, Pioneer
established a holding company in the first half of fiscal 2002, which
coordinates the activities of Pioneers local subsidiaries and affiliates in
China to raise their operating efficiency.

In fiscal 2001, Tohoku Pioneer Corporation, Pioneers majority-owned
subsidiary, started a joint venture company with Semiconductor Energy
Laboratory Co., Ltd. and Sharp Corporation. The joint venture plans to start
manufacturing and marketing continuous grain (CG) silicon thin-film transistor
(TFT) substrates for use in active-matrix full-color OEL displays in the fall
of 2002.

In fiscal 2000, we recorded an impairment loss of ¥2,100 million on real
property of an LD plant in Japan closed during the year. The expected net
realizable value and, thus, the carrying amount of the facility at the end of
fiscal 2000 was ¥2,341 million.

14



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B. Business overview

Industry overview

The electronics industry is currently experiencing a major shift from analog
technology to digital technology in many communications and consumer
entertainment applications. Digital technology is a means of transmitting,
processing and storing data by converting it into binary code, as opposed to
the conventional analog method, which uses a direct and variable electrical
current. Digital technology is generally more resistant to interference or
loss of quality, providing enhanced sound and clearer and sharper pictures (for
example, music and video on CDs and DVDs). Together with its
compression/decompression technologies, digitalization speeds data transmission
and allows networks to handle far greater amounts of data efficiently. The
proliferation of digital technologies in telecommunications has been a key
element in the convergence of communications and computing technologies.

Digital technologies have led to a revolution in consumer electronics, with
analog LPs being replaced by digital CDs, analog prerecorded video cassettes
and LDs being replaced by DVDs, and analog TV broadcast signals likely being
replaced by digital TV broadcast signals.

Product standardization and intense competition among leading manufacturers has
led to declining product prices and shorter product life. Digitalization and
the convergence of consumer electronics, telecommunications and computing
technologies provide those companies with technological expertise in the
storage, transmission and display of digital data with the opportunity to introduce
innovative and differentiated applications and products.

We believe we have always been at the forefront of digital technology. Our
expertise in digital storage and retrieval has led to developments in some of
the digital products, including car CD players and DVD recorders, both of which
were the first to be mass-marketed.

Strategy

We aim to be a leading provider of advanced, high quality, value-added AV
electronics products worldwide for consumer and business use. Our corporate
philosophy is to Move the Heart and Touch the Soul, with products that are
designed to bring joy and entertainment to everyday life.

To achieve our goals, we are pursuing the following strategies:



| |  |  | Develop innovative technologically-advanced products that meet and
stimulate market demand                        
| | - |  | ------------------------------------------------------------------------------------------------------------------
|
| |  |  | Enhance our brand equity and customer satisfaction                                                                
|
| |  |  | Leverage our leadership position in the car electronics business                                                  
|
| |  |  | Focus on our strategic products targeting global markets                                                          
|
| |  |  | Adopt optimal production methods to maximize profitability and
streamline our administrative and service functions

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Develop innovative technologically-advanced products that meet and stimulate market demand

We believe our core strength is our ability to innovate. Throughout our
history, we have focused on the development of unique products, and have
attempted to be the front-runner and market leader in our product areas. Such
areas have included dynamic speakers, car audio, LD and car navigation systems.
We intend to continue to take advantage of such strategy and gain consumer
confidence by introducing differentiated products into the market ahead of our
competitors.

Consistent with our strategy, we have recently introduced into the market
several new products, such as plasma displays and digital broadcast settop
boxes. In the DVD market, we were the first to commercialize a DVD recorder.
We were also the first to introduce a four-color OEL display to the market.

Enhance our brand equity and customer satisfaction

The cornerstone of our business foundation lies in the quality of our products
and consumers confidence in our products. Accordingly, we focus on the
enhancement of our brand image and customer satisfaction. In addition to the
extensive quality control and assurance measures on the production side, we
invest in various marketing campaigns to maintain and enhance the value of our
brand. Combined with our new worldwide brand slogan of Sound. Vision. Soul,
we aim to establish Pioneer as a brand driven by innovation and clearly
differentiating ourselves from our competitors. We believe customer
satisfaction is based not only on reliability and technology, but also on the
impact of the sound or vision delivered by our products.

Leverage our leadership position in the car electronics business

We believe one of our strengths lies in our core business segment, the car
electronics business. We lead the world market for car audio products. We
were the first in the industry to introduce car navigation systems to the
Japanese consumer market in fiscal 1991 and have been maintaining a leading
position by offering DVD-ROM type models. To further strengthen this product
line, we introduced in Japan in June 2001 a new car navigation system
incorporating a hard disk drive (HDD), which has substantially faster access
times than those of the existing DVD-ROM drive models.

Sales in this category are gradually shifting from the consumer market to the
OEM market as automobile manufacturers place greater emphasis on
differentiation of their cars, and we intend to further expand our market share
by increasing OEM sales.

Focus on our strategic products targeting global markets

We focus on our strategic products where we can secure the first-mover
advantage or leadership. As part of our efforts to secure these positions, we
play a major role in setting product standards. For example, we are currently
promoting the DVD-RW format used for DVD recorders and DVD-R/RW drives. This
format has already gained support from other major consumer electronics
companies such as Sony and Sharp. We also differentiate ourselves by
introducing to targeted markets innovative plasma displays, OEL displays and
HDD car navigation systems. We market these strategic products on a global
basis. Although certain technological customization is required, most of our
key products are currently sold in virtually all major economies in the world.

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Adopt optimal production methods to maximize profitability and streamline our administrative and service functions

We strive to adopt ideal production methods catered to each type of product and
market demand. While we focus on reducing manufacturing and operating costs,
our goal is to achieve overall efficiency in production by, for example, taking
into account the proximity of the end-market, production facilities and labor
costs. Consequently, among our strategic products we are in the process of
establishing production facilities in China for certain DVD products, and we
plan to produce an increased volume of plasma displays in our expanded facility
in Shizuoka, Japan. Moreover, we plan to make use of electronics manufacturing
services (EMS) in China for outsourcing to help reduce further capital
investment and investment in inventories. To enhance cost competitiveness and
achieve economies of scale, we sell our key products on an OEM basis to other
manufacturers. We are also streamlining our administrative and service
functions to promote efficiency and cut costs. Accounting, payroll, inventory
management and other administrative functions which were previously undertaken
by our local offices in Japan, were consolidated in fiscal 2001 and are now
carried out by Pioneer Shared Services Japan Corporation, a wholly-owned
Pioneer subsidiary. Similarly, we have established an internal shared services
company in the U.S. in order to economize our corporate support system. We
believe that reducing overall costs is imperative to maintain our
competitiveness and increase product penetration in the markets.

Strategic FocusVision 2005

Consistent with the strategies described above, in fiscal 1999 we announced
Vision 2005, a medium-term initiative. As part of Vision 2005, we set
business targets of ¥1,200 billion of consolidated operating revenue and return
on equity (ROE) of 10% by fiscal 2006 (corresponding figures for fiscal 2001
were ¥647 billion and 5.63%, respectively), and established the following business-related
objectives:

(i) to become a leader in the DVD industry

We believe the DVD format will become the dominant high-density, high-capacity
medium for sound, video and data recording, storage and playback. As a leader
in the LD format, the precursor to the DVD, we have been well-positioned as a
result of our accumulated expertise through development of LDs to help
establish the standardization of the DVD format and innovate new products such
as DVD recorders based on the DVD-RW format for consumer use and DVD-R/RW
drives for PC use. With the introduction of the DVD recorder in December 1999
in Japan and our plan to introduce it by the end of 2001 in the United States,
we expect our DVD business to undergo further expansion.

(ii) to establish a foundation for plasma and OEL displays

We believe large-screen plasma displays offer significant advantages over
cathode ray tubes (CRTs). Among other advantages, plasma displays are thinner
and lighter than CRTs. Thus, we expect plasma display panels in the future
will capture a substantial portion of the larger-screen TV market, in which
currently CRTs and projection TVs are dominant. Since introducing the first
plasma displays in fiscal 1998, we have established a solid presence both in
consumer and commercial markets worldwide as a result of our high reputation
for the large-screen high-resolution images of our plasma displays. To meet
the expected rising demand, we will expand our production capacity in October
2001 through the establishment of a second line at our Shizuoka plant in Japan.

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OEL display is another type of display which we have been promoting
aggressively. In fiscal 1998, we became the first in the world to market car
electronics products equipped with an OEL display, and in fiscal 2000 the first
and currently the only company to mass-produce four-color OEL displays. OELs
are particularly well-suited for small size displays, and in fiscal 2001 we
commenced deliveries of OEL displays for use in cellular phones of a major U.S.
cellular phone maker. To further strengthen our market position, Tohoku
Pioneer Corporation, Pioneers majority-owned subsidiary, established a joint
venture company, ELDis, Inc., in fiscal 2001 with Semiconductor Energy
Laboratory Co., Ltd. and Sharp Corporation to manufacture continuous
grain (CG) silicon TFT substrates for active-matrix full-color OEL displays.

(iii) to develop and strengthen lines of network-related products

Our current approach is to develop network-related products drawing upon our
strength as an AV manufacturer. We believe we have a competitive advantage in
the interface function, where information is delivered to users. We believe we
have an excellent brand image, as well as many years of experience in
analog/digital cable-TV and digital broadcast markets through the sale of our
settop boxes. We are strengthening the synergy of digital home network-linkage
of entertainment/information systems, such as AV components, DVD players, DVD
recorders, plasma displays and settop boxes.

(iv) to expand our key device business and develop our key technologies

To keep up with the accelerated pace of change in the electronics industry, it
is important for us to promote key technologies and key devices, collaborating
with third parties when beneficial. We believe such collaboration generates
synergies that can create new advances in our key technologies and optimizes
the use of our resources.

We believe that a producer of key devices is better able to develop and offer
broader product differentiation, and to influence the direction of market
trends, than a company that assembles products. Our strategically important
key devices are DVD pickups, plasma display panel modules, speaker units, CD
mechanisms for car manufacturers and OEL display panels for mobile phone
companies.

Nature of operations

We develop, manufacture and sell electronics products such as audio, video and
car electronics on a global scale, as well as plan, produce and distribute AV
software. We are one of the leading innovators of differentiated DVD products
and plasma displays. We also have the largest worldwide market share of car
electronics products, such as car navigation systems, and are the leading
producer of OEL displays.

Our principal production activities are carried out in Japan and Asia. Our
products are generally sold under our own brand names, principally Pioneer.
Our primary markets are Japan, North America, Europe and Asia. We sell our
products to customers in consumer and business markets through sales offices in
Japan, and through sales subsidiaries of Pioneer and independent distributors
outside of Japan. In addition, on an OEM basis, we market certain products,
such as car electronics products, DVD-R/RW drives and broadcast settop boxes,
to other companies.

18



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##### Table of Contents



We classify our business groups into three segments: Electronics, AV
Software and Patent Licensing. We further break down our Electronics
segment into three product groups: Audio/Video, Car Electronics and
Others. Operating revenue consists of net sales for both Electronics and
AV Software, plus royalty revenue from Patent Licensing. (The consolidated
financial statements included in this annual report and the financial
information below are prepared in accordance with U.S. GAAP, except for segment
data which is prepared in accordance with the regulations under the Securities
and Exchange Law of Japan.)

The profit margins in the Patent Licensing segment are substantially higher
than those in the other two segments, since costs related to patent licensing
are limited principally to amortization of patent rights and expenses for
licensing activities.

The following table sets forth our operating revenue from unaffiliated
customers by business segment for the respective periods indicated:

Operating Revenue from
Unaffiliated Customers by Business Segment
(In millions of yen, except for percentage amounts)

|                        |       |                 |          |         |                     |         |       |      |      |      |         |         |         |         |       |      |      |      |         |         |         |         |       |      |      |      |  
|----------------------- | ----- | --------------- | -------- | ------- | ------------------- | ------- | ----- | ---- | ---- | ---- | ------- | ------- | ------- | ------- | ----- | ---- | ---- | ---- | ------- | ------- | ------- | ------- | ----- | ---- | ---- | ---- | -
|                        |       |                 |          |         | Year ended March 31
|                        |       |                 |          |         |                    
|                        |       |                 |          |         | 1999                |         | 2000  |      | 2001
|                        |       |                 |          |         |                     |         |       |      |     
|Electronics             |       |                 |          |         |                     |         |       |      |      |      |         |         |         |         |       |      |      |      |         |         |         |         |       |     
|                       
|                       
|                       
|                       
|                        |       | Audio/Video     |          |         |                     |         |       |      |      |      |         |         |         |         |       |      |      |      |         |         |         |         |       |      |      |     
|                       
|                       
|                       
|                       
|                        |       |                 | Domestic |         | ¥                   | 49,515  |       |      |      | 8.4  | %       |         | ¥       | 56,482  |       |      |      | 9.2  | %       |         | ¥       | 50,566  |       |      |      | 7.8  | %
|                       
|                       
|                       
|                       
|                        |       |                 | Overseas |         |                     | 137,524 |       |      |      | 23.3 |         |         |         | 133,547 |       |      |      | 21.7 |         |         |         | 140,583 |       |      |      | 21.7 |  
|                        |       |                 |          |         |                     |         |       |      |      |      |         |         |         |         |       |      |      |      |         |         |         |         |       |      |      |      |  
|                        |       |                 | 187,039  |         |                     |         | 31.7  |      |      |      | 190,029 |         |         |         | 30.9  |      |      |      | 191,139 |         |         |         | 29.5  |     
|                       
|                       
|                       
|                       
|                        |       | Car Electronics |          |         |                     |         |       |      |      |      |         |         |         |         |       |      |      |      |         |         |         |         |       |      |      |     
|                       
|                       
|                       
|                       
|                        |       |                 | Domestic |         |                     | 79,294  |       |      |      | 13.5 |         |         |         | 82,353  |       |      |      | 13.3 |         |         |         | 89,891  |       |      |      | 13.9 |  
|                       
|                       
|                       
|                       
|                        |       |                 | Overseas |         |                     | 181,590 |       |      |      | 30.8 |         |         |         | 163,520 |       |      |      | 26.6 |         |         |         | 154,987 |       |      |      | 23.9 |  
|                        |       |                 |          |         |                     |         |       |      |      |      |         |         |         |         |       |      |      |      |         |         |         |         |       |      |      |      |  
|                        |       |                 | 260,884  |         |                     |         | 44.3  |      |      |      | 245,873 |         |         |         | 39.9  |      |      |      | 244,878 |         |         |         | 37.8  |     
|                       
|                       
|                       
|                       
|                        |       | Others          |          |         |                     |         |       |      |      |      |         |         |         |         |       |      |      |      |         |         |         |         |       |      |      |     
|                       
|                       
|                       
|                       
|                        |       |                 | Domestic |         |                     | 42,635  |       |      |      | 7.2  |         |         |         | 45,492  |       |      |      | 7.4  |         |         |         | 62,846  |       |      |      | 9.7  |  
|                       
|                       
|                       
|                       
|                        |       |                 | Overseas |         |                     | 44,929  |       |      |      | 7.7  |         |         |         | 67,343  |       |      |      | 10.9 |         |         |         | 87,766  |       |      |      | 13.6 |  
|                        |       |                 |          |         |                     |         |       |      |      |      |         |         |         |         |       |      |      |      |         |         |         |         |       |      |      |      |  
|                        |       |                 | 87,564   |         |                     |         | 14.9  |      |      |      | 112,835 |         |         |         | 18.3  |      |      |      | 150,612 |         |         |         | 23.3  |     
|                        |       |                 |          |         |                     |         |       |      |      |      |         |         |         |         |       |      |      |      |         |         |         |         |       |      |      |      |  
|                       
|                       
|                       
|                       
|                        |       | Domestic        |          |         | 171,444             |         |       |      | 29.1 |      |         |         | 184,327 |         |       |      | 29.9 |      |         |         | 203,293 |         |       |      | 31.4 |     
|                       
|                       
|                       
|                       
|                        |       | Overseas        |          |         | 364,043             |         |       |      | 61.8 |      |         |         | 364,410 |         |       |      | 59.2 |      |         |         | 383,336 |         |       |      | 59.2 |     
|                        |       |                 |          |         |                     |         |       |      |      |      |         |         |         |         |       |      |      |      |         |         |         |         |       |      |      |      |  
|                        | Total |                 | ¥        | 535,487 |                     |         |       | 90.9 | %    |      | ¥       | 548,737 |         |         |       | 89.1 | %    |      | ¥       | 586,629 |         |         |       | 90.6 | %   
|                        |       |                 |          |         |                     |         |       |      |      |      |         |         |         |         |       |      |      |      |         |         |         |         |       |      |      |      |  
|AV Software             |       |                 |          |         |                     |         |       |      |      |      |         |         |         |         |       |      |      |      |         |         |         |         |       |     
|                       
|                       
|                       
|                       
|                        |       | Domestic        |          | ¥       | 23,392              |         |       |      | 4.0  | %    |         | ¥       | 23,788  |         |       |      | 3.8  | %    |         | ¥       | 27,690  |         |       |      | 4.3  | %   
|                       
|                       
|                       
|                       
|                        |       | Overseas        |          |         | 9,978               |         |       |      | 1.7  |      |         |         | 23,886  |         |       |      | 3.9  |      |         |         | 12,220  |         |       |      | 1.9  |     
|                        |       |                 |          |         |                     |         |       |      |      |      |         |         |         |         |       |      |      |      |         |         |         |         |       |      |      |      |  
|                        | Total |                 | ¥        | 33,370  |                     |         |       | 5.7  | %    |      | ¥       | 47,674  |         |         |       | 7.7  | %    |      | ¥       | 39,910  |         |         |       | 6.2  | %   
|                        |       |                 |          |         |                     |         |       |      |      |      |         |         |         |         |       |      |      |      |         |         |         |         |       |      |      |      |  
|Patent Licensing        |       | ¥               | 20,208   |         |                     |         | 3.4   | %    |      | ¥    | 19,460  |         |         |         | 3.2   | %    |      | ¥    | 20,530  |         |         |         | 3.2   | %   
|                        |       |                 |          |         |                     |         |       |      |      |      |         |         |         |         |       |      |      |      |         |         |         |         |       |      |      |      |  
|Total Operating Revenue |       | ¥               | 589,065  |         |                     |         | 100.0 | %    |      | ¥    | 615,871 |         |         |         | 100.0 | %    |      | ¥    | 647,069 |         |         |         | 100.0 | %   
|                        |       |                 |          |         |                     |         |       |      |      |      |         |         |         |         |       |      |      |      |         |         |         |         |       |      |      |      |  

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Electronics

Audio/Video:

This group includes stereo systems, receivers, amplifiers, tuners, CD players,
CD recorders, minidisc (MD) systems, cassette tape decks, speaker systems, DVD
players, DVD recorders, LD players, online karaoke systems, plasma displays,
projection TVs and multiscreen video systems.

Sales by product for fiscal 2001 in the Audio/Video group is as follows: DVD
players, which were initially introduced in fiscal 1997, have grown to account
for the largest sales in this group. Stereo systems also accounted for a
significant portion of sales. Sales of our plasma displays, which were first
introduced in fiscal 1998, mainly for business use, are rapidly growing for
both business and (in the form of TV screens) household purchases, contributing
substantially to sales in this group. In North America, both projection TVs
and AV receivers accounted for a material portion of sales in this group.

We believe the traditional home audio markets of Japan, North America and
Europe have matured and accordingly, price competition in these markets is
strong. We do not expect the traditional home audio markets in these regions
to grow substantially. We believe growth will come from new products, such as
DVD home theater systems which merge audio and video technologies, and plasma
displays.

DVD is a unified format for high density digital storage media of audio and
video such as movies/video clips/concerts, as well as of computer data. The
market for DVD players has been expanding dramatically worldwide. JEITA (Japan
Electronics and Information Technology Industry Association) forecasts an
approximately 50% increase in consumer DVD player sales worldwide, from 16
million units in 2000 to 25 million in 2001. In the DVD player market, we have
introduced unique value-added products, such as DVD home theater systems and
slim design (2.2 inch in height) DVD players. The DVD recorder based on the
DVD-RW format that we are vigorously promoting can record high-quality
audio/video content from a variety of sources, such as TV and
direct-broadcasting satellite programs, repeatedly about 1,000 times onto a
rewritable DVD. In fiscal 2000, we began marketing the DVD recorder as video
recording/editing equipment for household consumers, for the first time in the
industry. The recorder introduced subsequently in fiscal 2001 can also record
onto more affordable write-once DVD-R discs with DVD-R format. In July 2001,
we further launched a new model with lower prices in Japan, and plan to do so
in North America and Europe in fiscal 2002. We have begun mass-producing DVD
recorders using the DVD-RW format, thereby striving to further lower retail
prices and seeking to set the de facto industry standard.

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Plasma displays are another product that we believe to have commercial
potential. In comparison with conventional CRTs and projection TVs, plasma
displays feature a screen which is larger yet very slim, only about 4.9 inches
in depth. These displays are lighter than CRTs and projection TVs and have
wider viewing angles than projection TVs. We expect that these characteristics
will help plasma displays capture a substantial portion of the larger-screen TV
market in the near future, in which CRTs and projection TVs currently are
dominant. Our plasma displays have achieved a high reputation both in the
consumer and business markets for their high-resolution, high-quality pictures
since the introduction of the first model to the market in fiscal 1998. Our
plasma displays are currently used mainly at shopping malls, airports, train
stations, and other public and commercial venues. They also increasingly meet
household demand for large-screen enjoyment of high-quality pictures from DVDs
and other sources. We introduced new plasma displays for business use to the
Japanese market in August 2001. Our 50-inch XGA plasma display has improved
peak brightness by 60% and bright area contrast by 80% compared with our
previous models, realized sharper high-definition images even when viewed under
bright light conditions, and achieved a 20% decrease in power consumption
compared with its predecessor model. We will introduce these new models for
both consumer and business markets outside Japan at the end of 2001. We also
plan to launch 43-inch plasma displays worldwide in fiscal 2002.

Car Electronics:

This group includes car stereos, car CD players, car MD players, car DVD
players, car speakers and car navigation systems.

Sales by product for fiscal 2001 in the Car Electronics group is as follows:
Car CD players accounted for the largest sales in this group. Of these, our
car stereos equipped with OEL displays were well received by consumers due to
clear images from a wide viewing angle range. Also, cassette car stereos
accounted for a significant portion of sales in this group. In Japan, our car
navigation systems accounted for a significant portion of sales in this group.

Both in Japan and outside Japan, sales in this group are generally made in the
consumer market and to automobile manufacturers on an OEM basis for
installation in new cars on production lines or as optional parts. Sales in
this category are gradually shifting from the consumer market to the OEM
market, as automobile manufacturers place greater emphasis on differentiation
of their cars. Our strong brand recognition in both markets is helping us
maintain our leading market share of car electronics products on a global
basis. We plan to shift manufacturing of car electronics products to China in
order to meet price competition.

We were the first in the industry to introduce car navigation systems to the
Japanese consumer market, in fiscal 1991. We have substantial expertise in car
navigation systems and have been one of the market leaders. Car navigation
systems show the current position of the car they are installed in, by
receiving and processing signals from GPS orbiting satellites controlled by the
United States Department of Defense. The information is given on maps
displayed on a small in-car TV, as well as through voice guidance. Map
information is generally stored on CD-ROMs or DVD-ROMs. The system also
provides hotel, restaurant guide and other valuable information, and displays
possible routes the driver could take. Currently, most of the market for our
car navigation systems is in Japan.

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In June 2001 we introduced in Japan a new car navigation system incorporating a
HDD, which has substantially faster access times than those of the existing
DVD-ROM drive model. The new model is receiving favorable acceptance from our
customers for its attractive and convenient features, such as its quicker
search and display of routes to designated destinations, and its music server
function with a storage capacity of approximately 20 audio CDs.

Others:

This group includes products primarily for business use, such as OEL display
panels, equipment for cable-TV systems, DVD-ROM drives, DVD-R/RW drives,
factory automation systems, digital broadcast settop boxes, and telephones for
consumer use.

Sales by product for fiscal 2001 in this group is as follows: Settop boxes of
cable-TV systems and digital broadcast accounted for the largest sales in this
group. DVD-ROM drives also accounted for a significant portion of sales in
this group. In Japan, telephones accounted for a significant portion of sales
in this product group and factory automation systems, such as for car-related
systems like air bags, fuel ignition devices and fuel supply devices, also
contributed to sales.

We began shipment of OEL display panels in North America in fiscal 2001 on an
OEM basis to a major U.S. cellular phone maker. OEL display panels offer many
advantages over alternative display panels: self-lighting emission, an
ultra-thin profile, low-power consumption, and clear images throughout a wide
viewing angle range. We were the first in the world to market an OEL display
in fiscal 1998 and the first and only company to start mass-producing
four-color (blue, green, yellow and red) OEL displays in fiscal 2000. In
addition, we expect to start manufacturing in the fall of 2002, through a joint
venture company, continuous grain (CG) silicon TFT substrates for a
higher-resolution active-matrix full-color OEL display.

In fiscal 2001, we began supplying DVD-R/RW drives to PC makers on an OEM
basis. The DVD-R/RW drives can record both on a write-once blank DVD-R disc
and a rewritable blank DVD-RW disc up to seven times as much data as that of a
CD-R or CD-RW disc. In fiscal 2002, we launched a Pioneer-brand DVD-R/RW
drive, the worlds first model that reads and writes data on all DVD-R, DVD-RW,
CD-R and CD-RW discs.

Terrestrial broadcasting, cable TV and digital-broadcast satellite (DBS) are
rapidly shifting into digital technology. We have been providing digital DBS
settop boxes to a pay TV company in Europe since fiscal 1998. In fiscal 2000
we shipped digital cable-TV settop boxes to U.S. operators. In fiscal 2001 we
started distributing digital DBS settop boxes in Japan and digital terrestrial
broadcast settop boxes to a broadcast company in the United Kingdom.

AV Software

This segment includes the production, manufacture and sale of prerecorded DVDs,
LDs, videocassettes, CDs and optical disc manufacturing systems.

Sales in this segment are substantially smaller than those of the Electronics
segment. Characteristically, they show much volatility year to year, depending
upon the presence or absence of hit movie and music titles. The main markets
of this segment are Japan and North America. Sales analysis by product for
fiscal 2001 in this segment is as follows: DVDs accounted for the largest
sales in this category, due mainly to the expansion of the DVD player market,
especially in Japan. In North America, prerecorded videocassettes of the hit
animation title Pokémoncontributed to sales in this segment.

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Patent Licensing

This segment includes the licensing of patents related primarily to laser
optical disc technologies.

Most of the royalty revenue from this segment is obtained from patent, license
and other intellectual property rights that are held by Discovision Associates,
our wholly-owned U.S. partnership. These intellectual property rights expire
over time, although the periods involved depend on the country or region.
While continuing to research and develop new technologies, we also acquire
patents held by third parties.

Royalty revenue from patent licensing of digital playback equipment, such as
CD-ROM drives, accounted for a substantial portion of revenue in this segment
in fiscal 2001. In addition, patent licensing of digital discs contributed
significantly to royalty revenue.

Revenue from the Patent Licensing segment is substantially less than from our
other segments, constituting less than 5% of operating revenue for fiscal 2001.
However, contribution of this segment to our operating income is substantial
compared to its contribution to our operating revenue, constituting between
approximately 60%-80% of our operating income in each of the last three fiscal
years. A number of these patents will expire starting in fiscal 2003, which
will result in a substantial decrease in royalty revenue.

Principal markets

The following table sets forth our operating
revenue from unaffiliated customers
by geographic market for the respective periods indicated:

Operating Revenue by Geographic
Market
(In millions of yen, except for percentage amounts)

|              |  |                     |          |      |  |      |       |   |  |  |          |  |  |  |       |   |  |  |          |  |  |  |       |  
|------------- |  | ------------------- | -------- | ---- |  | ---- | ----- | - |  |  | -------- |  |  |  | ----- | - |  |  | -------- |  |  |  | ----- | -
|              |  | Year ended March 31
|              |  |                    
|              |  | 1999                |          | 2000 |  | 2001
|              |  |                     |          |      |  |     
|Japan         |  |                     | ¥194,836 |      |  |      | 33.1  | % |  |  | ¥208,115 |  |  |  | 33.8  | % |  |  | ¥230,983 |  |  |  | 35.7  | %
|             
|             
|             
|             
|North America |  |                     | 176,611  |      |  |      | 30.0  |   |  |  | 200,930  |  |  |  | 32.6  |   |  |  | 213,592  |  |  |  | 33.0  |  
|             
|             
|             
|             
|Europe        |  |                     | 141,013  |      |  |      | 23.9  |   |  |  | 135,728  |  |  |  | 22.0  |   |  |  | 126,019  |  |  |  | 19.5  |  
|             
|             
|             
|             
|Other Regions |  |                     | 76,605   |      |  |      | 13.0  |   |  |  | 71,098   |  |  |  | 11.6  |   |  |  | 76,475   |  |  |  | 11.8  |  
|              |  |                     |          |      |  |      |       |   |  |  |          |  |  |  |       |   |  |  |          |  |  |  |       |  
|Total         |  |                     | ¥589,065 |      |  |      | 100.0 | % |  |  | ¥615,871 |  |  |  | 100.0 | % |  |  | ¥647,069 |  |  |  | 100.0 | %
|              |  |                     |          |      |  |      |       |   |  |  |          |  |  |  |       |   |  |  |          |  |  |  |       |  

Note: Operating revenue by geographic market represents revenue from
unaffiliated customers, based on the geographic location of each
unaffiliated customer.

Seasonality

Global sales in the Electronics segment are seasonal. Sales for the third
quarter (ending December 31) of each fiscal year are generally higher than
those of other quarters of the same fiscal year, due to increased demand during
the year-end holiday season. In Japan, sales of car electronics products
generally increase in the summer months, due to increased car usage for summer
vacations.

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Marketing channels

We sell our products to a large number of retailers and distributors through
our sales offices in Japan and through Pioneers sales subsidiaries and
independent distributors outside Japan. In addition, we market certain
products, such as car electronics products and DVD-R/RW drives, on an OEM basis
to other manufacturers for resale under their own brand names. Our business is
not dependent upon any particular customer or group of customers. Most of our
sales are made from inventory rather than against customer orders. Our
products generally are sold under our own brand names, principally Pioneer.

After-sales service

We maintain a policy of providing repair and other services in the countries
where our products are sold. In Japan, after-sales service is provided through
Pioneers wholly-owned service subsidiary, Pioneer Services Network Corporation
(PSN), and authorized servicing companies. Pioneer established PSN in fiscal
2001 to enhance the efficiency of our operations for after-sales services and
offer such services with higher quality. In countries where Pioneers
subsidiaries are located, such as the United States and certain European
countries, after-sales services are provided by such subsidiaries or through
their authorized independent servicing companies. In other countries, such
services are generally performed by our local distributors.

In line with general industry practice, most of the products we sell to
consumers are provided with a warranty for free repair work, generally for a
period of one year from the date of purchase. Parts are kept available for
after-sales service for a period ranging generally from two to eight years
after discontinuation of production, depending on characteristics of parts.

Production

We manufacture our products globally at our 42 plants. See the table in Item
4.D. Property, plants and equipment, of this annual report for a list of our
principal plants. To enhance cost competitiveness and protect against currency
fluctuations, we are expanding manufacturing and local parts procurement
outside Japan. In line with this strategy, in the fall of 2001, production
will start at two new plants in China (in the Shanghai and Dongguan areas),
mainly for DVD pickups, DVD-R/RW drives and car electronics products. We plan
to invest a total of ¥10 billion in these facilities by fiscal 2003. These
facilities will take advantage of Chinas recently fast-improving production
infrastructure, and expand Chinas role as our worldwide manufacturing site
that will help reduce production costs further and compete better worldwide.
Also, we intend to increase our use of electronics manufacturing services
(EMS), mainly in China, to help minimize our plant investment and parts
inventories, thereby boosting the efficiency of production and assets. Our
goal is to increase Chinas production share (including use of EMS) in our
total production volume in yen to 35% in fiscal 2003. Such share in fiscal
2000 and fiscal 2001 were 3% and 12%, respectively.

In fiscal 2000, we reviewed overall production systems to reduce costs further,
and restructured some production sites. We closed an LD manufacturing plant in
Japan and audio product plants in the United States and France, and sold an
optical disc manufacturing plant in the United States.

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Raw materials and sources of supply

We purchase a variety of raw materials and parts for use in the manufacture of
our products. We generally maintain two or more suppliers to prevent a
shortage of raw materials and parts. In accordance with corporate policy,
however, we develop and manufacture certain key parts internally for our
products, including plasma display panels, laser pickups and certain integrated
circuits (ICs) and large-scale integrations (LSIs). We also purchase certain
completed products, then sell them under our own brand names.

No single unaffiliated source accounted for more than 7% of total supply
purchases in fiscal 2001. We have not experienced any material difficulties in
obtaining raw materials, parts and products and believe that we will continue
to be able to obtain them to meet our needs.

Semiconductors account for the largest percentage of parts purchased in fiscal
2001 (on a yen basis), representing approximately 40% of our total purchases.
We purchase semiconductors from various suppliers, mainly pursuant to the terms
of our basic supply agreement. Our basic supply agreement generally has a term
of one year, with an automatic renewal clause. Where we do not have two or
more suppliers, we seek longer term contracts or bulk purchases and place our
order 3 to 4 months earlier than our usual practice to reduce the risk of being
unable to obtain key parts. We purchase a portion (approximately 10%) of our
semiconductor parts, which are custom made for our needs in accordance with our
designs and specifications, from STMicroelectronics N.V. While we do not
currently have an alternative source for the type of semiconductors supplied by
STMicroelectronics N.V., we have entered into a strategic alliance with
STMicroelectronics N.V. to assure a stable source of supply.

We plan to increase the percentage of raw materials and parts we purchase
through online network systems, including the Internet. We believe this will
contribute to more timely manufacturing and a decrease in production costs.

Patents and licenses

We hold a variety of patents, including those relating to laser optical disc
technology, in Japan and other countries, while we in turn are licensed to use
a number of patents owned by third parties. We consider certain patents
licensed from third parties to be important to our business. Termination of
such license agreements would have a material adverse effect on our business,
although we have no reason to believe that such termination will occur.

Research and Development

Our R&D activities have played a crucial role in the development of our
business. Our R&D program currently centers on optical recording/playback,
flat-panel displays, digital signal processing, information/communications, and
core LSIs. In fiscal 1999, 2000 and 2001, our R&D expenses were ¥31,131
million, ¥33,265 million and ¥37,105 million, respectively, or 5.3%, 5.4% and
5.7% of our operating revenue, respectively. We plan to continue to spend more
than 5% of operating revenue on R&D each year. As at
March 31, 2001, approximately 3,200 employees were engaged worldwide in R&D and
product and production technique improvement.

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Our R&D activities are carried out mainly in Japan at The Corporate Research &
Development Laboratories, as well as the AV & Recording Development Center, the
Information & Communication Development Center and the Optical Technology Center.
We are actively engaged in the development of system software related to
digital TV and of digital network technologies at Pioneer Research Center USA,
Inc., Pioneers wholly-owned subsidiary in the United States. Product
improvement activities are the responsibility of the production engineering
departments at our various manufacturing facilities both in Japan and overseas.

During fiscal 2001, we announced the advent of new improved design and
dimensions for OEL displays. Our innovations in moisture barrier and
low-temperature film-formation technologies enabled use of a plastic substrate.
This development led to the creation of a revolutionary 0.2-mm-thin OEL
display that is flexible enough to bend, is able to display moving pictures,
and is strong enough to resist breakage. These moisture barrier and
low-temperature film-formation technologies are compatible with another
exclusive Pioneer technology that enables selective placement of three organic
materialsthe primary colors of red, green and blue, respectivelyfor optimal
emission of light. We believe these innovations will help us to develop a
full-color OEL film display in the near future. This development, if
achieved, would expand the use of OEL displays for cellular phones, mobile
computers and a growing array of popular new products.

Competition

We believe that we compete successfully and that we have a strong position with
respect to car electronics, plasma displays and DVD-related products. Our
products, however, are exposed to intense competition in Japan and overseas.
Our competitors, which vary in size, area of distribution, range of products
and financial resources, are principally companies based in Japan and Europe,
some of which are large, integrated home electric or electronic appliance
manufacturers having substantially larger capital resources than we do. The
electronics industry in general has been subject to substantial price
competition in light of slower demand. In addition, electronics companies in
Asia, particularly those from Korea and Taiwan, pose a severe threat through
price competition with products possessing simplified functions at lower
prices. To counter the intense competition, we place great emphasis on
extensive marketing to stimulate demand of innovative and value-added products.
Furthermore, we concentrate our efforts on technological research, quality
control, sales promotion and the lowering of production costs by increasing
procurement of parts and products made outside Japan and other measures. See
also Item 3.D. Risk factorsCompetition generally, and especially on price and
standardization of products, may adversely affect our business results and
financial condition and Item 4.B. Business overviewStrategy.

Import restrictions

In certain areas of the world, our products encounter tariff and other import
restrictions. Tariffs applied to our products vary depending upon the
classification of such products and the countries into which such products are
imported. Import restrictions, such as prohibitions on imports of certain
products, vary from nation to nation. To respond to this situation, we
manufacture our products in certain locations outside Japan as well as
commissioning their production to independent manufacturers.

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Governmental regulation

Our business activities are subject to various governmental regulations in
countries in which we operate, including regulations relating to
business/investment approvals, export regulations including those related to
national security considerations, tariffs, antitrust, intellectual property,
consumer and business taxation, exchange controls, an environmental and
recycling requirements.

C. Organizational structure

Our basic corporate structure is shown in the following chart:

(FLOWCHART)



27



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The following table sets forth the principal subsidiaries owned, directly or
indirectly, by Pioneer.

|                                         |  |               |  |                    |        |                    |  |                                                                                                                                        
|---------------------------------------- |  | ------------- |  | ------------------ | ------ | ------------------ |  | ---------------------------------------------------------------------------------------------------------------------------------------
|                                         |  | Country of    |  |                    |        |                    |  |                                                                                                                                        
|Name of subsidiary                       |  | incorporation |  | Ownership interest |        | Principal business
|                                         |  |               |  |                    |        |                   
|Tohoku Pioneer Corporation               |  | Japan         |  |                    | 67.0%  |                    |  | Manufacture of car
electronics
products and OEL
display panels                                                                         
|                                         |  |               |  |                    |        |                   
|Pioneer Video Corporation                |  | Japan         |  |                    | 100.0% |                    |  | Manufacture and
distribution of
optical discs, ICs
and LSIs                                                                            
|                                         |  |               |  |                    |        |                   
|Shizuoka Pioneer
Corporation             |  | Japan         |  |                    | 100.0% |                    |  | Manufacture of
displays and
equipment for cable-TV systems                                                                             
|                                         |  |               |  |                    |        |                   
|Pioneer North America, Inc.              |  | U.S.A.        |  |                    | 100.0% |                    |  | Coordination of the
activities of
Pioneers U.S.
subsidiaries and
affiliates                                                           
|                                         |  |               |  |                    |        |                   
|Pioneer Electronics (USA)
Inc.           |  | U.S.A.        |  |                    | 100.0% |                    |  | Distribution of
electronics
products, and
customer support of
our products and
strategic shared
services of
Pioneers U.S.
subsidiaries
|                                         |  |               |  |                    |        |                   
|Pioneer Electronics
Capital, Inc.        |  | U.S.A.        |  |                    | 100.0% |                    |  | Financing to
Pioneer and its
subsidiaries                                                                                              
|                                         |  |               |  |                    |        |                   
|Discovision Associates*                  |  | U.S.A.        |  |                    | 100.0% |                    |  | Licensing of
worldwide patents
relating to laser
optical disc
technologies                                                             
|                                         |  |               |  |                    |        |                   
|Pioneer Europe NV                        |  | Belgium       |  |                    | 100.0% |                    |  | Coordination of the
activities of
Pioneers European
subsidiaries and
affiliates, and
distribution of
electronics
products             
|                                         |  |               |  |                    |        |                   
|Pioneer Electronics
Asiacentre Pte. Ltd. |  | Singapore     |  |                    | 100.0% |                    |  | Coordination of the
activities of
Pioneers Asian
subsidiaries and
affiliates, and
manufacture and
distribution of
electronics
products



|* Discovision Associates (DVA) is a general partnership organized under the
laws of the State of California, in the United States.
|----------------------------------------------------------------------------------------------------------------------------------

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D. Property, plants and equipment

Our manufacturing operations are conducted principally in Japan, Southeast Asia
and China. Of the total of 42 plants, 20 plants are in Japan and the remaining
22 are outside Japan. The following table sets forth information, as of March
31, 2001, with respect to our principal plants.

|                 |  |                     |  |                         |  |                                                                                               
|---------------- |  | ------------------- |  | ----------------------- |  | ----------------------------------------------------------------------------------------------
|                 |  |                     |  | Floor space             |  |                                                                                               
|                 |  |                     |  | (square feet)           |  |                                                                                               
|Name of plant    |  | Location            |  | [of which leased space] |  | Principal Products                                                                            
|                 |  |                     |  |                         |  |                                                                                               
|(Japan)          |  |                     |  |                         |  |                                                                                               
|                
|                
|                
|                
|Shizuoka Plant   |  | Fukuroi, Shizuoka   |  | 610,000                 |  | Plasma displays, Projection TVs, Equipment for cable-TV systems                               
|                 |  |                     |  |                         |  |                                                                                               
|Tokorozawa Plant |  | Tokorozawa, Saitama |  | 489,000                 |  | Stereo systems, Individual stereo component units, DVD players, DVD-R/RW drives, DVD recorders
|                 |  |                     |  |                         |  |                                                                                               
|Tendo Plant      |  | Tendo, Yamagata     |  | 458,000                 |  | Cassette car stereos, Car CD/MD players, Car speakers, Loudspeakers                           
|                 |  |                     |  |                         |  |                                                                                               
|Kawagoe Plant    |  | Kawagoe, Saitama    |  | 414,000                 |  | Cassette car stereos, Car CD/MD players, Car navigation systems                               
|                 |  |                     |  |                         |  |                                                                                               
|Kofu Plant       |  | Nakakoma, Yamanashi |  | 363,000                 |  | DVDs, DVD-R/RW discs, CDs, Plasma display panels                                              
|                 |  |                     |  |                         |  |                                                                                               
|Kokubo Plant     |  | Kofu, Yamanashi     |  | 191,000 
[77,000]       |  | ICs, LSIs                                                                                     
|                 |  |                     |  |                         |  |                                                                                               
|Towada Plant     |  | Towada, Aomori      |  | 158,000                 |  | DVD players, DVD-R/RW drives, Cassette car stereos, Car CD players                            
|                 |  |                     |  |                         |  |                                                                                               
|Yonezawa Plant   |  | Yonezawa, Yamagata  |  | 151,000                 |  | OEL displays, Car speakers, Car CD players                                                    
|                 |  |                     |  |                         |  |                                                                                               
|Fukuroi Plant    |  | Fukuroi, Shizuoka   |  | 134,000                 |  | Speaker systems, AV racks                                                                     

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|                                                       |  |                                |  |                         |  |                                                                 
|------------------------------------------------------ |  | ------------------------------ |  | ----------------------- |  | ----------------------------------------------------------------
|                                                       |  |                                |  | Floor space             |  |                                                                 
|                                                       |  |                                |  | (square feet)           |  |                                                                 
|Name of plant                                          |  | Location                       |  | [of which leased space] |  | Principal Products                                              
|                                                       |  |                                |  |                         |  |                                                                 
|(Outside Japan)                                        |  |                                |  |                         |  |                                                                 
|                                                      
|                                                      
|                                                      
|                                                      
|Thailand Plant                                         |  | Ayutthaya, Thailand            |  | 300,000                 |  | Cassette car stereos, Car CD players, Stereo systems            
|                                                      
|                                                      
|                                                      
|                                                      
|                                                      
|                                                      
|                                                      
|                                                      
|Taiwan Plant                                           |  | Tao Yuan, Taiwan               |  | 281,000                 |  | Speaker systems                                                 
|                                                      
|                                                      
|                                                      
|                                                      
|                                                      
|                                                      
|                                                      
|                                                      
|Malaysia Plant                                         |  | Johor, Malaysia                |  | 262,000                 |  | Stereo systems, CD players, Cassette car stereos, Car CD players
|                                                      
|                                                      
|                                                      
|                                                      
|                                                      
|                                                      
|                                                      
|                                                      
|Shanghai Plant                                         |  | Shanghai, China                |  | 233,000                 |  | Speaker systems, Laser pickups                                  
|                                                      
|                                                      
|                                                      
|                                                      
|                                                      
|                                                      
|                                                      
|                                                      
|Mexico Plant                                           |  | Baja California, Mexico        |  | 232,000                 |  | Speaker systems                                                 
|                                                      
|                                                      
|                                                      
|                                                      
|                                                      
|                                                      
|                                                      
|                                                      
|Guang Dong Plant                                       |  | Guang Dong, China              |  | 231,000 
[230,000]      |  | Speaker systems                                                 
|                                                      
|                                                      
|                                                      
|                                                      
|                                                      
|                                                      
|                                                      
|                                                      
|California Plant                                       |  | California, U.S.A.             |  | 186,000                 |  | Projection TVs, Speaker systems                                 
|                                                      
|                                                      
|                                                      
|                                                      
|                                                      
|                                                      
|                                                      
|                                                      
|U.K. Plant                                             |  | West Yorkshire,
United Kingdom |  | 184,000                 |  | Stereo systems, CD players, Tuners, Digital DBS decoders,       
|                                                      
|                                                      
|                                                      
|                                                      
|                                                      
|                                                      
|                                                      
|                                                      
|Ohio Plant                                             |  | Ohio, U.S.A.                   |  | 157,000                 |  | Cassette car stereos, Car CD players                            
|                                                      
|                                                      
|                                                      
|                                                      
|                                                      
|                                                      
|                                                      
|                                                      
|Other (11 plants
in Japan and
13 plants
outside Japan) |  | 1,856,000 
[112,000]           |  |                        
|                                                       |  |                                |  |                         |  |                                                                 
|Total                                                  |  |                                |  | 6,890,000 
[419,000]    |  |                                                                 
|                                                       |  |                                |  |                         |  |                                                                 

Most of the buildings of these plants and land on which they are located are
owned by us.

As of March 31, 2001, we owned our headquarters buildings in Tokyo, with an
approximate aggregate floor space of 336,000 square feet. We lease
approximately 34,000 square feet as additional head office space in Tokyo.

We also own an employee training center in Tokyo with an approximate floor
space of 17,000 square feet, and R&D facilities with an approximate aggregate
floor space of 282,000 square feet.

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Our sales office buildings in Japan and outside Japan are mainly leased. The
head office buildings of some distribution subsidiaries outside Japan are owned
by us. Land and buildings for the Fukuroi Plant, the Ohio Plant,
R&D facilities, and one of our headquarters buildings with an aggregate book value of ¥16,416
million were pledged as collateral for certain loans at March 31, 2001.

We are constructing two plants in China to further improve cost
competitiveness. The foregoing table as of March 31, 2001 does not include
them.

We believe that our properties are adequate to carry on our current business,
though additional investment in plant and equipment is being made to ensure
continued growth.




Item 5. Operating and Financial Review and Prospects

You should read the following discussion and analysis of our financial
condition and results of operations together with Item 3.A.
Selected financial data and our audited consolidated financial statements and
notes to such statements appearing elsewhere in this annual report. These
consolidated financial statements have been prepared in accordance with U.S.
GAAP, except for segment data which is prepared in accordance with the
regulations under the Securities and Exchange Law of Japan.

Overview

We classify our business groups into three segments: Electronics, AV
Software and Patent Licensing. We further break down our Electronics
segment into three product groups: Audio/Video, Car Electronics, and Others.
Electronics is our largest segment by revenue, accounting for 90.6% of
operating revenue (net sales plus royalty revenue) in fiscal 2001. In fiscal
2001, Audio/Video group, Car Electronics group and Others accounted for 29.5%,
37.8% and 23.3%, respectively, of operating revenue. The AV Software and
Patent Licensing segments accounted for 6.2% and 3.2%, respectively, of
operating revenue in fiscal 2001. Our primary markets for our products based
on operating revenues from unaffiliated customers for fiscal 2001 were Japan
(36%), North America (33%) and Europe (20%).

Electronics

The electronics industry is characterized by rapid technological changes, and
our ability to introduce attractive new products to the market significantly
affects the operating results of this segment. During the past five years, the
decline of sales of LD hardware and software adversely affected the operating
results of this segment. The decline was due to the shift of the consumer
demand from LDs to DVDs as well as the shift of demand in the karaoke market in
Japan from LD systems to online systems. During the same period, sales of new
products such as DVD players, plasma displays, car navigation systems, digital
broadcast settop boxes and DVD-ROM drives for PC use have grown rapidly.

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The electronics industry is also characterized by continuing sales price
decreases in most product categories, making it important for us to continually
improve the efficiency of our manufacturing, distribution, service and
administrative functions. As an example of our effort, in the past five years,
we have increased the percentage of our manufacturing outside Japan from 35% to
59% in terms of the yen value of cost of goods produced, mainly by expanding
production facilities in Southeast Asia and China. We intend to build or
contract for additional manufacturing capacity outside Japan over the next
several years with particular emphasis on China.

Operating income for this segment for fiscal 1999, 2000 and 2001 were ¥8.5
billion, ¥4.7 billion and ¥13.8 billion, respectively, accounting for 42.5%,
20.1% and 40.9% of total operating income for each of the three years.

AV Software

The AV software industry is very volatile and dependent upon the presence or
absence of hit movie and music titles. Accordingly, its success in any years
is very difficult to predict.

Operating income (loss) for this segment for fiscal 1999, 2000 and 2001 were
(¥5.4 billion), ¥0.2 billion and ¥0.1 billion, respectively.

Patent Licensing

Our royalty revenue from Patent Licensing depends to a material extent on the
amounts of sales of patented products by our licensees, making it difficult for
us to predict actual royalty revenue each year. In addition, a significant
portion of our patents in Japan and Europe relating to laser optical disc
technologies will expire starting in fiscal 2003. Accordingly, we expect a
substantial decrease in operating revenue and operating income from this
segment. We are researching and developing new technologies, and we purchase
patents held by third parties from time to time, which may generate additional
revenue to help offset this expected decline. We do not, however, expect that
the revenue, if any, from such new patents will be sufficient to offset the
decrease in royalty revenue resulting from the expiration of our existing
patents.

Operating income for this segment for fiscal 1999, 2000 and 2001 were ¥16.6
billion, ¥18.4 billion and ¥19.7 billion, respectively, accounting for 82.5%,
78.1% and 58.4% of total operating income for each of the three years. The
profit margins in this segment are substantially higher than those in other
segments, since costs related to this segment are limited principally to
amortization of patent rights and expenses for licensing activities.

Currency fluctuations

We are affected by fluctuations in foreign currency exchange rates,
particularly fluctuations in the value of the yen against the U.S. dollar and
the euro. Generally, a weakening of the yen against other currencies has a
positive effect on our operating income. A strengthening of the yen against
other currencies has the opposite effect. The yen was generally stronger
against the U.S. dollar and the euro during fiscal 2000 and the first half of
fiscal 2001 than in respective corresponding periods in the previous year, but
weakened during the second half of fiscal 2001. During fiscal 2002 to date,
the yen has remained weak against other currencies, particularly the U.S.
dollar.

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Reclassification

In fiscal 2000, we changed the reporting of income from patents, net of
related expenses, which had been previously presented in other income
(expenses). Gross patent revenue is presented as royalty revenue, and the
related expenses are included in selling, general and administrative (SGA)
expenses. The figures for the previous years have been reclassified in order
to conform to this presentation. Operating income originally reported for
fiscal 1999 was ¥5.1 billion, compared with the revised operating income of
¥20.1 billion. This classification change had no effect on income before
income taxes and net income.

Beginning with fiscal 2001, Minority interest in income of subsidiaries,
which had been previously included in Other  net of Other income (expenses),
is reported separately. Previously reported amounts have been reclassified to
conform to this presentation. Income before income taxes originally reported
for fiscal 1999 and 2000 were ¥12.1 billion and ¥27.8 billion, respectively,
compared with revised ¥12.5 billion and ¥27.8 billion for fiscal 1999 and 2000,
respectively. This classification change had no effect on operating income and
net income.

A. Operating results

Fiscal 2001 compared with fiscal 2000

Summary

In the first half of fiscal 2001, economic conditions in the United States and
Europe were generally favorable while conditions in Japan were sluggish to
weak. In the second half of fiscal 2001, the U.S. economy began to weaken and
subsequently conditions in Europe and Japan also deteriorated. As for foreign
exchange markets, the average value of the yen during fiscal 2001 was
substantially unchanged against the U.S. dollar and approximately 15% higher against the
euro, when compared to levels of fiscal 2000. Despite such economic
conditions, we recorded our highest-ever operating revenue at ¥647.1 billion,
up 5.1% from fiscal 2000. Operating income was ¥33.8 billion, a 43.3% increase
over the ¥23.6 billion recorded in fiscal 2000, while net income amounted to
¥18.3 billion compared to ¥13.1 billion posted in fiscal 2000, a 39.9%
increase.

Impact of foreign exchange fluctuations

The stronger yen against the euro had a negative impact on our operating
performance. We estimate that operating revenue and operating income would
have been approximately ¥20.4 billion and ¥6.0 billion higher, respectively, if
exchange rates had remained unchanged from fiscal 2000. Such estimates are
obtained by simply applying the yens average exchange rates in fiscal 2000 to
foreign currency denominated operating revenue, cost of sales and SGA expenses,
and do not include the effect of changes to sales prices implemented to meet
the foreign exchange fluctuations.

Net sales and royalty revenue

Net sales amounted to ¥626.5 billion, a 5.1% increase over fiscal 2000. Net
sales in Japan rose 11.0% to ¥231.0 billion. Overseas net sales, despite the
higher value of the yen against the euro particularly in the first half of
fiscal 2001, increased 1.9% to ¥395.6 billion. On a local currency basis,
overseas sales increased 7.2% from fiscal 2000.

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Electronics segment sales amounted to ¥586.6 billion, up 6.9% from fiscal 2000.



| |  |  | Audio/Video group sales of ¥191.1 billion remained
substantially unchanged from fiscal 2000. Such sales reflect
primarily a worldwide increase in sales of plasma displays,
especially for business markets, and DVD players, offset by reduced
sales of stereo systems. Plasma display sales grew by more than 70%
in terms of both units and revenue. Sales of DVD players by units
increased by more than 40% although revenue growth was more moderate
because of declining sales prices. In Japan, Audio/Video group sales
dropped 10.5% to ¥50.6 billion, mainly due to decreased sales of
compact stereo systems, although sales of plasma displays increased
greatly in both the consumer and business markets. Overseas sales
rose 5.3% to ¥140.6 billion, mainly due to increased sales of DVD
players and plasma displays, though sales in Europe were adversely
affected by the weakness of the euro.                       
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | Car Electronics group sales amounted to ¥244.9 billion,
substantially the same as in fiscal 2000. Although sales to car
manufacturers increased, sales of car audio products to consumer
markets decreased. Sales in Japan increased 9.2% to ¥89.9 billion
primarily due to increased sales of car audio products to car
manufacturers. Sales to the consumer market in Japan slightly
decreased although sales of car MD/CD players and car navigation
systems increased. Overseas sales decreased 5.2% from fiscal 2000 to
¥155.0 billion. While sales of car audio products to car
manufacturers increased, particularly in North America, sales of car
audio products to the consumer market decreased. This decrease
reflected a sharp decline in Europe due to intensified competition
and the influence of the weakened euro. Sales in Asia outside of
Japan and in Central America and South America increased from fiscal
2000.
|
| |  |  | Others sales rose 33.5% over fiscal 2000 to ¥150.6 billion.
The sales growth of digital cable-TV settop boxes, digital broadcast
settop boxes and factory automation systems contributed to the
increase, but sales of CD-ROM drives decreased as we withdrew from
the CD-ROM drive market and shifted to DVD-ROM drives. In Japan,
sales climbed by 38.1% to ¥62.8 billion, reflecting increased sales
of factory automation systems, cable-TV settop boxes and DVD-ROM
drives. Overseas sales were up 30.3% from fiscal 2000 to ¥87.8
billion. Sales of digital cable-TV settop boxes in North America
increased, as did sales of digital broadcast settop boxes in Europe.                                                                                                                                                                                                                                                           

AV Software segment sales fell 16.3% from fiscal 2000 to ¥39.9 billion. Sales
in Japan increased 16.4% over fiscal 2000 to ¥27.7 billion due to good sales of
DVD software such as the hit movie U-571. However, overseas sales declined by
48.8% to ¥12.2 billion. This decline was due to a large decline in sales of
animation videocassettes in North America, caused by a lack of big hits such as
fiscal 2000s Pokémonseries. A decline in sales of optical disc manufacturing
systems in Asia accounted for the decrease, as well.

Royalty revenue from the Patent Licensing segment increased 5.5% to ¥20.5
billion from ¥19.5 billion in fiscal 2000, due mainly to a rise in royalties
related to recording equipment such as CD-R/RW drives. A successful
negotiation with customers for a lump-sum settlement of past period royalties
also contributed to the increase. Without the lump-sum settlement, revenue
would have decreased approximately 6% from fiscal 2000 to ¥18.4 billion.

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Cost of sales and selling, general and administrative expenses

Cost of sales increased to ¥447.4 billion from fiscal 2000s ¥428.6 billion.
However, as a percentage of operating revenue, cost of sales decreased 0.5
percentage points to 69.1%, despite the adverse effect of the stronger yen,
particularly against the euro in the first half of fiscal 2001. The improved
gross profit margin resulted partly from successful cost reductions in
strategic products such as plasma displays and DVD products. Also, the
favorable effects of the measures taken in fiscal 2000 to improve
profitability, such as cost reduction realized through reorganization of
production activity in the software business, shutting down LD plants in fiscal
2000, contributed to the improved gross profit margin.

SGA expenses increased by 1.3% or ¥2.2 billion over fiscal 2000 to ¥165.9
billion. However, the ratio of SGA expenses to operating revenue decreased
1.0 percentage point to 25.6%. Personnel-related expenses and sales promotion
expenses increased, as did royalty expenses relating to DVD technologies. On
the other hand, the stronger yen reduced the expenses of overseas subsidiaries
in yen terms by approximately ¥4.0 billion. We recorded a ¥1.2 billion
impairment loss in certain intangible assets related to the karaoke business,
in addition to a ¥1.9 billion impairment loss recorded in fiscal 2000.

R&D expenditures, which are included in cost of sales and SGA expenses,
increased 11.5% to ¥37.1 billion, representing 5.7% of operating revenue. The
increase primarily reflected increased activity in developing third-generation
plasma displays.

Operating income

Operating income was ¥33.8 billion  a 43.3% increase over the ¥23.6 billion
recorded in fiscal 2000  resulting from increased operating revenue and an
improved gross profit margin. Operating income for the Electronics segment
almost tripled to ¥13.8 billion, reflecting a substantial sales increase and
improved gross profit margin mainly for strategic products such as plasma
displays and DVD products. The AV Software segment posted ¥0.1 billion in
operating income, almost the same as fiscal 2000s ¥0.2 billion. A large
decline in sales of animation videocassettes in North America was offset by
increased sales of DVD software in Japan. Furthermore, in fiscal 2001, we did
not have the expenses incurred in fiscal 2000 in connection with the closing of
an LD plant in Japan. In the Patent Licensing segment, operating income
increased 7.1% to ¥19.7 billion, due mainly to an increase in royalty revenue.

Other income (expenses)

Other income, on a net basis, decreased from ¥4.2 billion to ¥0.4 billion.
This decrease was primarily due to a ¥12.5 billion gain recorded in fiscal 2000
in connection with the initial public offering of Pioneers subsidiary, Tohoku
Pioneer Corporation, in March 2000. Gains on the sale of marketable equity
securities and other investments also decreased to ¥1.6 billion from fiscal
2000s ¥4.8 billion. Foreign exchange losses decreased by ¥3.9 billion, from
¥5.1 billion to ¥1.2 billion, reflecting a decrease, when compared to fiscal
2000, in exchange losses resulting from depreciation of the euro. Losses on
the sale and impairment of fixed assets also decreased by ¥3.8 billion, from
¥4.7 billion to ¥0.9 billion. The losses in fiscal 2000 included losses
recognized on the write-down of the real property for a closed LD plant in
Japan, the sale of a laser optical disc manufacturing plant in the U.S. and
disposal of facilities resulting from the downsizing of the karaoke business.
The balance of interest income, less interest expense (net interest) improved
to an income of ¥0.6 billion from an expense of ¥1.6 billion, mainly due to an
increase in interest income as a result of an increase in the average balance
of cash available for short-term investment.

35



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Income before income taxes

Income before income taxes rose to ¥34.2 billion, a 23.0% increase compared
with ¥27.8 billion for fiscal 2000.

Income taxes

Income tax as a percentage of pre-tax income (the effective tax rate) declined
from 54.7% in fiscal 2000 to 41.9% in fiscal 2001, almost the same level as the
normal statutory tax rate of 42.0% in Japan. This decline was mainly due to
increased profits of subsidiaries in the U.S. and Southeast Asian countries,
where statutory income tax rates are relatively low. Also, the improved
profit-and-loss of certain subsidiaries in Japan and Europe, which had
operating loss carryforwards, helped the effective tax rate to decline. Some
of the subsidiaries were benefited by the utilization of operating loss
carryforwards.

Minority interest in income of subsidiaries

Minority interest in income of subsidiaries for fiscal 2001 primarily consists
of the earnings of Tohoku Pioneer Corporation, attributable to its minority
shareholders, and amounted to ¥1.4 billion, compared with less than ¥0.1
billion in fiscal 2000.

Equity in earnings (losses) of affiliated companies

Equity in earnings (losses) of affiliated companies registered a loss of ¥0.1
billion, compared with a gain of ¥0.5 billion for fiscal 2000.

Net income

Net income was ¥18.3 billion, a 39.9% increase over fiscal 2000s ¥13.1
billion. Basic net income per share of common stock was ¥101.76, compared with
fiscal 2000s ¥72.81. Diluted net income per share was ¥101.70, compared with
fiscal 2000s ¥72.80. Return on assets came to 3.0%, compared with 2.2% in
fiscal 2000. Return on equity was 5.6%, versus 4.2% in fiscal 2000.

Fiscal 2000 compared with fiscal 1999

Summary

In fiscal 2000, the U.S. economy showed strong growth and the European
economies continued to advance. In Asia, excluding Japan, economies continued
to recover. In Japan, although clear signs for economic recovery were not
seen, there were favorable factors such as increases in capital expenditure,
mainly in the area of information technologies. As for foreign exchange
markets, the average value of the yen in fiscal 2000 was approximately 15%
higher against the U.S. dollar and approximately 25% higher against the euro,
when compared to levels of fiscal 1999. Despite such economic
conditions, our operating revenue was ¥615.9 billion, a 4.6% increase over
fiscal 1999. We recorded operating income of ¥23.6 billion compared to ¥20.1
billion in fiscal 1999 and net income of ¥13.1 billion compared to ¥1.2 billion
in fiscal 1999.

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Impact of foreign exchange fluctuations

During fiscal 2000, the yens appreciation against major foreign currencies had
significant effects on our reported revenue and earnings. We estimate that
operating revenue and operating income would have been higher by approximately
¥70.8 billion and ¥30.8 billion, respectively, if the yens exchange rate had
remained unchanged from fiscal 1999. Such estimates are obtained by simply
applying the yens average exchange rates in fiscal 1999 to foreign currency
denominated operating revenue, cost of sales and SGA expenses, and do not
include the effect of changes in selling prices to meet the foreign exchange
fluctuations.

Net sales and royalty revenue

Net sales amounted to ¥596.4 billion, a 4.8% increase over fiscal 1999. Net
sales in Japan rose 6.8% to ¥208.1 billion, and overseas sales increased 3.8%
to ¥388.3 billion despite the appreciation of the yen against the U.S. dollar
and the euro. On a local currency basis, overseas sales increased 22.0% from
fiscal 1999.

Electronics segment sales amounted to ¥548.7 billion, up 2.5% from fiscal 1999.



| |  |  | Audio/Video group sales increased 1.6% from fiscal 1999 to
¥190.0 billion. The increase primarily reflects sales growth of
plasma displays and DVD players worldwide, which was partly offset by
a decline in sales of LD players of ¥6.9 billion or 70.3%. Sales of
plasma displays almost tripled on a unit basis and more than doubled in
revenue. Sales of DVD players on a unit basis more than doubled
although growth in terms of revenue was much more moderate because of
declining sales prices. Sales in Japan rose by 14.1% to ¥56.5
billion, mainly from the DVD recorder introduced in December 1999,
and growth of plasma displays for home and business markets.
Continuing growth of DVD players and compact stereo systems also
contributed. Overseas sales declined by 2.9% to ¥133.5 billion,
mainly due to the yens appreciation and the sales decline of LD
players, although sales of DVD players continued to be strong
worldwide and sales of plasma displays, primarily for business use,
grew in North America and Europe.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | Car Electronics group sales amounted to ¥245.9 billion, a
decrease of 5.8% over fiscal 1999. Overall sales were adversely
affected by the 10.0% decline of overseas sales to ¥163.5 billion.
This decline was due mainly to the stronger yen, which resulted in
decreased sales in yen terms, and sluggish sales in Central America
and South America due to difficult economic conditions in these
regions. Sales of car CD players, including models with OEL
displays, were strong in North America and Europe. In Japan, sales
increased 3.9% to ¥82.4 billion. Car MD/CD stereo products,
including models with OEL displays, enjoyed strong sales as market
demand shifted from cassette car stereo to CD- or MD-equipped models.
Car navigation system sales, especially DVD-ROM equipped models,
increased in the consumer market.                                                                                                                                                                                                            

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| |  |  | Sales of Others increased 28.9% over fiscal 1999 to ¥112.8
billion, mainly reflecting sales growth of DVD-ROM drives and
cable-TV settop boxes, while sales of CD-ROM drives decreased
significantly reflecting the shift of our production from CD-ROM
drives to DVD-ROM drives. Sales increased in Japan by 6.7% to ¥45.5
billion, reflecting good sales results for DVD-ROM drives, factory
automation equipment and cable-TV settop boxes. Overseas sales
increased 49.9% to ¥67.3 billion despite the appreciation of the yen.
This reflected an increase of DVD-ROM drive sales worldwide, as well
as sales growth of digital cable-TV settop boxes in North America.
Growth in device business sales, particularly for speaker units, also
contributed to the increase of overseas sales.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

AV Software segment sales increased 42.9% from fiscal 1999 to ¥47.7 billion.
In Japan, sales increased 1.7% to ¥23.8 billion. DVD sales increased as the
market shifted from LD to DVD. Overseas sales were ¥23.9 billion, 2.4 times
that of fiscal 1999. This was due to successful sales in North America of
animation videocassettes, including the hit Pokémonseries.

Royalty revenue from the Patent Licensing segment decreased 3.7% to ¥19.5
billion due mainly to the yens appreciation. However, on a local currency
basis, royalty revenue increased 10.0%, particularly from patents for recording
products such as CD-R/RW drives and digital discs.

Cost of sales and selling, general and administrative expenses

Cost of sales increased to ¥428.6 billion from fiscal 1999s ¥398.9 billion.
Cost of sales as a percentage of operating revenue increased 1.9 percentage
points to 69.6%. The increase mainly resulted from the yens appreciation,
which was partly offset by favorable effects of our efforts to cut costs.
These efforts included closing of an LD manufacturing plant in Japan, shifting
of production capacity for audio products from the U.S. and the U.K. to
Southeast Asia and China, and centralizing of the part procurement function in
Japan to reduce costs and improve operational efficiency. Company-wide cost
reduction efforts also helped minimize the negative impact of the yens higher
value.

SGA expenses decreased by ¥6.3 billion or 3.7% from fiscal 1999 to ¥163.7
billion. The yens appreciation reduced the expenses of overseas subsidiaries
in terms of yen by approximately ¥11.8 billion. Also, sales promotion expense
decreased, especially in overseas markets. Such decrease was partly offset by
an increase in royalty expense mainly relating to DVD products and a ¥1.9
billion impairment loss recognized on certain intangible assets as a result of
the decision to downsize our karaoke business. The ratio of SGA expenses to
operating revenue decreased 2.3 percentage points to 26.6%.

Expenditures on R&D, which are included in cost of sales and SGA expenses,
increased 6.9% to ¥33.3 billion, representing 5.4% of operating revenue.

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Operating income

Operating income increased 17.3% to ¥23.6 billion. A large increase in
overseas sales on a local currency basis, measures taken to cut costs and
increased profit in the Patent Licensing segment were the main factors for the
rise. The increase was realized despite negative effects of the stronger yen
during fiscal 2000. Operating income for the Electronics segment decreased
44.6% to ¥4.7 billion, reflecting mainly negative effects of the stronger yen
and expenses of reorganizing the audio and karaoke businesses. AV Software
segment posted an operating income of ¥0.2 billion compared with an operating
loss of ¥5.4 billion in fiscal 1999. This turnaround was attributable to a
large sales increase and cost reductions realized as a result of closing an LD
manufacturing plant in Japan in the first half of fiscal 2000. For the Patent
Licensing segment, operating income increased 11.1% to ¥18.4 billion. The
increase resulted from a reduction of expenses related to licensing activities,
although revenue in terms of yen decreased due to the stronger yen.

Other income (expenses)

Other income, on a net basis, increased from an expense of ¥7.6 billion to an
income of ¥4.2 billion. This was primarily due to a ¥12.5 billion gain
recorded in connection with the initial public offering of Pioneers
subsidiary, Tohoku Pioneer Corporation, in March 2000. For a detailed
discussion of the initial public offering, see Note 18 to our Consolidated
Financial Statements included in this annual report. At this moment, we have
no plans for other initial public offerings by subsidiaries. Other income also
included a ¥4.8 billion gain on sale of marketable equity securities and other
investments, while such gain in fiscal 1999 was ¥1.0 billion. Foreign exchange
losses were ¥5.1 billion compared to ¥0.3 billion gains in fiscal 1999. The
difference was mainly due to exchange loss incurred by a European subsidiary,
reflecting the depreciation of the euro against the yen and the U.S. dollar.
Other income also reflected a ¥4.7 billion loss on sale and impairment of fixed
assets, which were recognized in connection with closing of an LD plant in
Japan, sale of an optical disc manufacturing plant in the U.S. and disposal of
facilities resulting from the downsizing of the karaoke business. The net
interest (interest income, less interest expense) was an expense of ¥1.6
billion, substantially unchanged from fiscal 1999s expense of ¥1.5 billion.

Income before income taxes

Income before income taxes rose to ¥27.8 billion from fiscal 1999s ¥12.5
billion.

Income taxes

Income taxes as a percentage of pre-tax income (the effective tax rate) was
54.7% in fiscal 2000, compared with the normal statutory tax rate of
42.0% in Japan. While a gain recognized in connection with the public offering
of Tohoku Pioneer Corporations new stock had an effect of reducing the
effective tax rate, among other things, losses incurred by certain
subsidiaries, mainly in Europe, resulted in a higher effective tax rate. The
effective tax rate for fiscal 2000 decreased substantially from fiscal 1999s
94.3%. The decrease was primarily due to a ¥4.3 billion additional deferred
income tax expense incurred in fiscal 1999 as a result of the recalculation of
year-end net deferred tax assets reflecting a reduction of the Japanese corporate
income tax rate which came into effect on April 1, 1999. In addition, the gain
recognized on the sale and issuance of Tohoku Pioneer Corporations stock in
fiscal 2000 contributed to the decrease of our effective tax rate.

39



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Minority interest in income of subsidiaries

Minority interest in income of subsidiaries was less than ¥0.1 billion,
compared with ¥0.4 billion in fiscal 1999.

Equity in earnings (losses) of affiliated companies

Equity in earnings of affiliated companies was comparable with fiscal 1999 at
¥0.5 billion.

Net income

Net income was ¥13.1 billion, compared with ¥1.2 billion posted in fiscal 1999.
Basic net income per share of common stock was ¥72.81, compared with ¥6.45 for
fiscal 1999. Diluted net income per share was ¥72.80, compared with ¥6.45 for
fiscal 1999. Return on assets for fiscal 2000 was 2.2%, compared with 0.2% in
fiscal 1999. Return on equity was 4.2%, compared with 0.4% in fiscal 1999.

40



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##### Table of Contents



Segment Information

The following segment information is prepared pursuant to the regulations under
the Securities and Exchange Law of Japan and is not in accordance with U.S.
GAAP.

Business Segments

|                                                 |                        |       |          |                           |          |             |         |                  |         |              |         |              |         |  |          |               |         |   |          |          |          | 
|------------------------------------------------ | ---------------------- | ----- | -------- | ------------------------- | -------- | ----------- | ------- | ---------------- | ------- | ------------ | ------- | ------------ | ------- |  | -------- | ------------- | ------- | - | -------- | -------- | -------- | 
|                                                 |                        |       |          | (In millions of yen)     
|                                                 |                        |       |          |                          
|                                                 |                        |       |          | Year ended March 31, 2001
|                                                 |                        |       |          |                          
|                                                 |                        |       |          |                           |          |             |         |                  |         |              |         |              |         |  |          | Corporate and |         |   |          |         
|                                                 |                        |       |          | Electronics               |          | AV software |         | Patent Licensing |         | Eliminations |         | Consolidated
|                                                 |                        |       |          |                           |          |             |         |                  |         |              |         |             
|Operating revenue:                               |                        |       |          |                           |          |             |         |                  |         |              |         |              |         |  |          |               |         |   |          |         
|                                                
|                                                
|                                                
|                                                
|                                                 | Unaffiliated customers |       |          | ¥586,629                  |          |             |         | ¥39,910          |         |              |         | ¥20,530      |         |  |          |              |         |   |          | ¥647,069 |         
|                                                
|                                                
|                                                
|                                                
|                                                 | Inter-segment          |       |          | 723                       |          |             |         | 4,776            |         |              |         | 1,883        |         |  |          | ¥(7,382       | )       |   |          |         |         
|                                                 |                        |       |          |                           |          |             |         |                  |         |              |         |              |         |  |          |               |         |   |          |         
|                                                 |                        | Total |          |                           | ¥587,352 |             |         |                  | ¥44,686 |              |         |              | ¥22,413 |  |          |               | ¥(7,382 | ) |          |          | ¥647,069 | 
|                                                
|                                                
|                                                
|                                                
|Operating income                                 |                        |       | ¥13,831  |                           |          |             | ¥125    |                  |         |              | ¥19,734 |              |         |  | ¥129     |               |         |   | ¥33,819  |         
|                                                
|                                                
|                                                
|                                                
|Identifiable assets                              |                        |       | ¥444,742 |                           |          |             | ¥36,175 |                  |         |              | ¥5,926  |              |         |  | ¥118,313 |               |         |   | ¥605,156 |         
|                                                
|                                                
|                                                
|                                                
|Depreciation and
amortization                    |                        |       | ¥28,867  |                           |          |             | ¥3,002  |                  |         |              | ¥536    |              |         |  |         |               |         |   | ¥32,405  |         
|                                                
|                                                
|                                                
|                                                
|Capital expenditures
(additions to fixed assets) |                        |       | ¥37,720  |                           |          |             | ¥5,125  |                  |         |              | ¥26     |              |         |  |         |               |         |   | ¥42,871  |         

|                                                 |                        |       |          |                           |          |             |         |                  |         |              |         |              |         |  |          |               |         |   |          |          |          | 
|------------------------------------------------ | ---------------------- | ----- | -------- | ------------------------- | -------- | ----------- | ------- | ---------------- | ------- | ------------ | ------- | ------------ | ------- |  | -------- | ------------- | ------- | - | -------- | -------- | -------- | 
|                                                 |                        |       |          | (In millions of yen)     
|                                                 |                        |       |          |                          
|                                                 |                        |       |          | Year ended March 31, 2000
|                                                 |                        |       |          |                          
|                                                 |                        |       |          |                           |          |             |         |                  |         |              |         |              |         |  |          | Corporate and |         |   |          |         
|                                                 |                        |       |          | Electronics               |          | AV software |         | Patent Licensing |         | Eliminations |         | Consolidated
|                                                 |                        |       |          |                           |          |             |         |                  |         |              |         |             
|Operating revenue:                               |                        |       |          |                           |          |             |         |                  |         |              |         |              |         |  |          |               |         |   |          |         
|                                                
|                                                
|                                                
|                                                
|                                                 | Unaffiliated customers |       |          | ¥548,737                  |          |             |         | ¥47,674          |         |              |         | ¥19,460      |         |  |          |              |         |   |          | ¥615,871 |         
|                                                
|                                                
|                                                
|                                                
|                                                 | Inter-segment          |       |          | 926                       |          |             |         | 6,860            |         |              |         | 1,901        |         |  |          | ¥(9,687       | )       |   |          |         |         
|                                                 |                        |       |          |                           |          |             |         |                  |         |              |         |              |         |  |          |               |         |   |          |         
|                                                 |                        | Total |          |                           | ¥549,663 |             |         |                  | ¥54,534 |              |         |              | ¥21,361 |  |          |               | ¥(9,687 | ) |          |          | ¥615,871 | 
|                                                
|                                                
|                                                
|                                                
|Operating income                                 |                        |       | ¥4,731   |                           |          |             | ¥196    |                  |         |              | ¥18,426 |              |         |  | ¥240     |               |         |   | ¥23,593  |         
|                                                
|                                                
|                                                
|                                                
|Identifiable assets                              |                        |       | ¥412,871 |                           |          |             | ¥36,561 |                  |         |              | ¥5,256  |              |         |  | ¥146,449 |               |         |   | ¥601,137 |         
|                                                
|                                                
|                                                
|                                                
|Depreciation and
amortization                    |                        |       | ¥29,428  |                           |          |             | ¥2,419  |                  |         |              | ¥1,005  |              |         |  |         |               |         |   | ¥32,852  |         
|                                                
|                                                
|                                                
|                                                
|Capital expenditures
(additions to fixed assets) |                        |       | ¥29,642  |                           |          |             | ¥1,127  |                  |         |              | ¥741    |              |         |  |         |               |         |   | ¥31,510  |         





|Note: |  | Electronics includes the manufacture and sale of AV equipment for
consumer and commercial use, such as hi-fi stereo component systems, DVD
players, LD players, plasma displays and car audio products.
|----- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|     
|      |  | AV Software includes the production, manufacture and sale of DVDs, LDs, CDs
and other AV media.                                                                                                        
|     
|      |  | Patent Licensing includes the licensing of patents related to laser optical
disc technology.                                                                                                           

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Geographic Segments

|                                                 |                        |       |          |                           |          |               |          |          |          |               |         |              |          |              |         |         |          |  |         |               |           |   |          |          |          | 
|------------------------------------------------ | ---------------------- | ----- | -------- | ------------------------- | -------- | ------------- | -------- | -------- | -------- | ------------- | ------- | ------------ | -------- | ------------ | ------- | ------- | -------- |  | ------- | ------------- | --------- | - | -------- | -------- | -------- | 
|                                                 |                        |       |          | (In millions of yen)     
|                                                 |                        |       |          |                          
|                                                 |                        |       |          | Year ended March 31, 2001
|                                                 |                        |       |          |                          
|                                                 |                        |       |          |                           |          |               |          |          |          |               |         |              |          |              |         |         |          |  |         | Corporate and |           |   |          |         
|                                                 |                        |       |          | Japan                     |          | North America |          | Europe   |          | Other Regions |         | Eliminations |          | Consolidated
|                                                 |                        |       |          |                           |          |               |          |          |          |               |         |              |          |             
|Operating revenue:                               |                        |       |          |                           |          |               |          |          |          |               |         |              |          |              |         |         |          |  |         |               |           |   |          |         
|                                                
|                                                
|                                                
|                                                
|                                                 | Unaffiliated customers |       |          | ¥242,900                  |          |               |          | ¥210,886 |          |               |         | ¥125,806     |          |              |         | ¥67,477 |          |  |         |              |           |   |          | ¥647,069 |         
|                                                
|                                                
|                                                
|                                                
|                                                 | Inter-area             |       |          | 257,733                   |          |               |          | 5,726    |          |               |         | 129          |          |              |         | 130,425 |          |  |         | ¥(394,013     | )         |   |          |         |         
|                                                 |                        |       |          |                           |          |               |          |          |          |               |         |              |          |              |         |         |          |  |         |               |           |   |          |         
|                                                 |                        | Total |          |                           | ¥500,633 |               |          |          | ¥216,612 |               |         |              | ¥125,935 |              |         |         | ¥197,902 |  |         |               | ¥(394,013 | ) |          |          | ¥647,069 | 
|                                                
|                                                
|                                                
|                                                
|Operating income (loss)                          |                        |       | ¥6,551   |                           |          |               | ¥20,285  |          |          |               | ¥(1,626 | )            |          |              | ¥5,644  |         |          |  | ¥2,965  |               |           |   | ¥33,819  |         
|                                                
|                                                
|                                                
|                                                
|Identifiable assets                              |                        |       | ¥271,232 |                           |          |               | ¥118,005 |          |          |               | ¥61,487 |              |          |              | ¥71,808 |         |          |  | ¥82,624 |               |           |   | ¥605,156 |         
|                                                
|                                                
|                                                
|                                                
|Depreciation and
amortization                    |                        |       | ¥22,603  |                           |          |               | ¥2,716   |          |          |               | ¥2,403  |              |          |              | ¥4,683  |         |          |  |        |               |           |   | ¥32,405  |         
|                                                
|                                                
|                                                
|                                                
|Capital expenditures
(additions to fixed assets) |                        |       | ¥29,628  |                           |          |               | ¥3,345   |          |          |               | ¥1,481  |              |          |              | ¥8,417  |         |          |  |        |               |           |   | ¥42,871  |         

|                                                 |                        |       |          |                           |          |               |         |          |          |               |         |              |          |              |         |         |          |  |          |               |           |   |          |          |          | 
|------------------------------------------------ | ---------------------- | ----- | -------- | ------------------------- | -------- | ------------- | ------- | -------- | -------- | ------------- | ------- | ------------ | -------- | ------------ | ------- | ------- | -------- |  | -------- | ------------- | --------- | - | -------- | -------- | -------- | 
|                                                 |                        |       |          | (In millions of yen)     
|                                                 |                        |       |          |                          
|                                                 |                        |       |          | Year ended March 31, 2000
|                                                 |                        |       |          |                          
|                                                 |                        |       |          |                           |          |               |         |          |          |               |         |              |          |              |         |         |          |  |          | Corporate and |           |   |          |         
|                                                 |                        |       |          | Japan                     |          | North America |         | Europe   |          | Other Regions |         | Eliminations |          | Consolidated
|                                                 |                        |       |          |                           |          |               |         |          |          |               |         |              |          |             
|Operating revenue:                               |                        |       |          |                           |          |               |         |          |          |               |         |              |          |              |         |         |          |  |          |               |           |   |          |         
|                                                
|                                                
|                                                
|                                                
|                                                 | Unaffiliated customers |       |          | ¥227,064                  |          |               |         | ¥197,274 |          |               |         | ¥135,599     |          |              |         | ¥55,934 |          |  |          |              |           |   |          | ¥615,871 |         
|                                                
|                                                
|                                                
|                                                
|                                                 | Inter-area             |       |          | 232,035                   |          |               |         | 6,758    |          |               |         | 681          |          |              |         | 89,136  |          |  |          | ¥(328,610     | )         |   |          |         |         
|                                                 |                        |       |          |                           |          |               |         |          |          |               |         |              |          |              |         |         |          |  |          |               |           |   |          |         
|                                                 |                        | Total |          |                           | ¥459,099 |               |         |          | ¥204,032 |               |         |              | ¥136,280 |              |         |         | ¥145,070 |  |          |               | ¥(328,610 | ) |          |          | ¥615,871 | 
|                                                
|                                                
|                                                
|                                                
|Operating income (loss)                          |                        |       | ¥(6,320  | )                         |          |               | ¥18,662 |          |          |               | ¥1,044  |              |          |              | ¥4,948  |         |          |  | ¥5,259   |               |           |   | ¥23,593  |         
|                                                
|                                                
|                                                
|                                                
|Identifiable assets                              |                        |       | ¥272,996 |                           |          |               | ¥96,241 |          |          |               | ¥59,704 |              |          |              | ¥52,996 |         |          |  | ¥119,200 |               |           |   | ¥601,137 |         
|                                                
|                                                
|                                                
|                                                
|Depreciation and
amortization                    |                        |       | ¥22,654  |                           |          |               | ¥3,442  |          |          |               | ¥2,601  |              |          |              | ¥4,155  |         |          |  |         |               |           |   | ¥32,852  |         
|                                                
|                                                
|                                                
|                                                
|Capital expenditures
(additions to fixed assets) |                        |       | ¥20,219  |                           |          |               | ¥2,839  |          |          |               | ¥2,076  |              |          |              | ¥6,376  |         |          |  |         |               |           |   | ¥31,510  |         



|Note: |  | Operating revenue reported in geographic segment information above
represents revenue of the parent company and subsidiaries in Japan, and
each subsidiary in North America, Europe, and Other Regions.
|----- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

42



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B. Liquidity and capital resources

Cash Flows

Fiscal 2001 compared with fiscal 2000

Net cash provided by operating activities was ¥51.2 billion, a ¥5.9 billion
increase compared to fiscal 2000. The increase was principally due to our
overall improved profitability. Net income increased despite the absence of a
¥12.5 billion gain on sale and issuance of subsidiary stock realized in fiscal
2000. Increases in notes and accounts receivable were largely offset by a
decrease in inventories in fiscal 2001. Increase in notes and accounts
receivable reflected strong sales in the last few months of fiscal 2001 in
comparison with the equivalent period of fiscal 2000. The decrease in
inventories was the result of our efforts to control and reduce inventories.

Net cash used in investing activities was ¥41.6 billion in fiscal 2001,
compared to ¥12.0 billion in cash generated in fiscal 2000. A substantial part
of the difference was the receipt in fiscal 2000 of ¥28.8 billion in proceeds
from the sale and issuance of subsidiary stock. Also, payment for purchase of
fixed assets increased, reflecting investment in plasma display production
facilities and expansion of production capacity in China. In addition, payment
for investment securities was ¥5.8 billion, compared with ¥0.5 billion for
fiscal 2000, and primarily consists of investment of ¥4.5 billion in a joint
venture company for manufacturing and marketing thin-film transistor substrates
in active-matrix OEL displays. The result was also affected due to a decrease
of ¥4.4 billion in proceeds from the sale of available-for-sale securities.

Net cash used in financing activities was ¥46.6 billion in fiscal 2001,
compared with ¥4.1 billion cash used in fiscal 2000. Financing activities for
fiscal 2001 included redemption of ¥30.0 billion in unsecured bonds at maturity
and reduction of other short-term and long-term borrowings.

As a result, cash and cash equivalents decreased by ¥30.7 billion to ¥121.1
billion at the end of fiscal 2001 from ¥151.8 billion at the end of fiscal
2000, although the weaker yen increased cash and cash equivalents of overseas
subsidiaries in terms of yen by ¥6.2 billion.

Fiscal 2000 compared with fiscal 1999

Cash flows overall improved compared with fiscal 1999. An increase in net
income and proceeds from sale of a subsidiarys stock were the main causes.
Also, reduced purchase of fixed assets, successful reduction of inventories and
partial sale of investment in securities, reflecting our drive to downsize
assets, contributed to the improvement.

Net cash provided by operating activities amounted to ¥45.4 billion in fiscal
2000, compared to ¥37.9 billion cash provided in fiscal 1999. An increase in
net income, a decrease in inventories and an increase in accounts payable
contributed to the improvement, although accounts receivable increased,
reflecting strong sales in the last few months of fiscal 2000.

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Net cash provided by investing activities was ¥12.0 billion in fiscal 2000,
compared to ¥38.2 billion in cash used in investing activities in fiscal 1999.
This change mainly reflected ¥28.8 billion in proceeds from sale and issuance
of a subsidiarys stock in fiscal 2000. Also, payment for purchase of fixed
assets decreased by ¥7.6 billion from the previous years investments, which
included purchase of facilities for OEL displays and expanded production of DVD
products. In addition, increase in proceeds from sale of assets helped cash
flows to improve in fiscal 2000. Assets sold in fiscal 2000 included
marketable equity securities, other investment securities and laser optical
disc production facilities in the U.S.

Net cash used in financing activities was ¥4.1 billion, compared to ¥13.1
billion cash provided by financing activities in fiscal 1999. In fiscal 2000,
¥4.1 billion was used mainly for repayment of long-term debt, while in fiscal
1999, ¥25.0 billion was raised through the issuance of unsecured bonds in
Japan, though a part of the proceeds was used in reducing short-term borrowings
and repaying long-term debt.

As a result, cash and cash equivalents increased by ¥49.7 billion to ¥151.8
billion at the end of fiscal 2000 from ¥102.1 billion at the end of fiscal
1999, despite a ¥3.5 billion negative effect of the stronger yen on cash
equivalents of overseas.

Capital requirements

Our requirements for operating capital primarily are for the purchase of raw
materials and parts for use in the manufacture of our products. Also,
operating expenses, including manufacturing expenses and SGA expenses, require
a substantial amount of operating capital. Payroll and payroll-benefits
related expenses, and marketing expenses such as advertising and sales
promotion account for a material portion of operating expenses. Our
expenditure for R&D is recorded as a part of various operating expenses, and
payroll for R&D related personnel accounts for a material portion of R&D
expenses.

Purchase commitments outstanding as of March 31, 2001 for property, plant and
equipment and advertising were ¥2.5 billion. This included a part of our ¥51
billion capital expenditure plan in fiscal 2002 primarily for production
facilities and production molds. The fiscal 2002 plan includes investments to
complete expansion of plasma display production facilities and to complete two
new plants in China. Also included in the purchase commitments was a part of
our fiscal 2002 advertisement spending plan of ¥15 billion, which increased
from ¥10 billion spent in fiscal 2001 in order to support the growth of our new
DVD and plasma display products.

Financial Management

At present, funds required for operating capital and capital expenditure are
financed through internally generated cash or debt financing. Short-term debt
financing, with maturity of one year or less, is utilized primarily to fund
operating capital requirements. Therefore, in principle, such short-term
borrowing is arranged locally in the currency in which each consolidated
company carries out its operations. As of March 31, 2001, short-term
borrowings of ¥37.6 billion comprised bank loans in 15 different currencies,
principally yen, euro, Singapore dollars and U.S. dollars. On the other hand,
long-term borrowing to finance long-term funding requirements such as
investment in production facilities is generally arranged in Japan on a fixed
interest rate basis. As of March 31, 2001, substantially all of the long-term
debt of ¥46.3 billion, including the portion due within one year, were fixed
rate yen borrowings and were comprised of ¥19.9 billion loans principally from
banks, ¥15.0 billion unsecured bonds due 2005, ¥10.0 billion unsecured bonds
due 2008, and capital lease obligations and other loans arranged locally.

44



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We believe that our sound financial position and ability to generate positive
operating cash flows, together with an unused credit line of ¥203.1 billion,
provide sufficient resources to fund future requirements for operating capital
and for capital expenditures related to the expansion of production capacity
for strategic products and other projects.

C. Research and development, patents and licenses, etc.

Our R&D activities have played a crucial role in the development of our
business. Our R&D program currently centers on optical recording/playback,
flat-panel displays, digital signal processing, information/communications, and
core LSIs. In fiscal 1999, 2000 and 2001, our R&D expenses were ¥31,131
million, ¥33,265 million and ¥37,105 million, respectively, or 5.3%, 5.4% and
5.7%, respectively, of our operating revenue. We plan to continue to spend more
than 5% of operating revenue on R&D each year.

As at March 31, 2001, approximately 3,200 employees were engaged worldwide in
R&D and product and production technique improvement.

D. Trend information

The following is a description of the most significant recent trends in each of
our business segments.

Electronics business segment

(i) Audio/Video group

Global demand for audio/video products has struggled recently, which we believe
has resulted in downward price pressure and stagnant sales. This, in turn, has
negatively impacted our production levels and our inventory. We have responded
and will continue to respond to such downward pressure in sales and production
through the introduction of new value-added products and models in the
Audio/Video group, including home theater systems, DVD-related products and
plasma displays.

DVD products.As a result of the dramatic expansion of the market for DVD
players, they have become commodity products and suffer from significant price
competition. DVD products was one of our fastest growing product areas during
the past several fiscal years, and we believe we are well-positioned to face
the competition, because of our accumulated expertise through LD development,
our expected reduction of costs as a result of shifting production to China and
introduction of new innovative products. There are, however, a number of
competing digital recording disc formats: the DVD-RW format commercialized by
us, Sony, Sharp and others, the DVD-RAM format commercialized by Matsushita,
Hitachi and Toshiba, and the DVD+RW format commercialized by Philips. We
believe that the DVD-RW format we endorse has an advantageous position because,
among other features, (a) discs recorded by DVD recorders on DVD-RW format are
compatible with a number of DVD players and DVD-ROM drives while the DVD-RAM
discs are not, and (b) the DVD-RW and the DVD-RAM formats are approved by the
DVD Forum that is responsible for the standardization of various DVD formats.

45



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Plasma displays.The large-screen display market for plasma displays has been
expanding in recent years, and several manufacturers have started mass
production of plasma displays that compete with ours. Most plasma display
manufacturers have only been focusing on 40-inch panels and larger because the
30-inch would compete directly with cathode ray tube (CRT) TVs. In order to
retain our competitive position, we introduced in August 2001 new plasma
displays for business use in Japan, which consume less electricity, and provide
higher contrast. We are also increasing production and manufacturing of the
43-inch panels, as well as the 50-inch panels, with a view to maintaining our
position in the plasma display business over the longer term.

(ii) Car Electronics group

Global new car sales appear to be on the decline, which will likely have an
adverse effect on the sale of car electronics products. The worsening business
climate in North America and severe competition in the car electronics business
in Japan has led to strong downward pressure on prices. Furthermore, the weak
euro may continue to hurt the competitiveness of Japanese manufacturers.
However, the popularity of car navigation products, which we believe is a
strong area of ours, continues to increase. In June 2001 we introduced in
Japan a new car navigation system incorporating a hard disk drive (HDD), which
has substantially faster access times than those of the existing DVD-ROM drive
model. The new model is receiving favorable acceptance from our customers for
its attractive and convenient features.

There is also a trend in the car electronics industry of increased OEM sales to
car manufacturers. Pioneer intends to increase its efforts to market itself
towards such car manufacturers and strengthen its foothold in OEM sales, as
well.

(iii) Others group

DVD-R/RW drives.In the computer industry, severe pricing pressure, strong
demand for higher-performance products and short product life are
characteristic, and it is getting more difficult for suppliers of such products
as CD-ROM drives and DVD-ROM drives to remain profitable. To counter these
trends, we are focusing on high-value added products such as DVD-R/RW drives,
both for PC makers and for the consumer market. The DVD-R/RW drives can record
both on a write-once blank DVD-R disc and a rewritable blank DVD-RW disc up to
seven times as much data as that of a CD-R or CD-RW disc.

Settop boxes. The cable-TV industry, to which we began supplying settop boxes
in the late 1970s, is transforming to the use of digital systems which provide
advanced features such as multi-channel capacity and interactive services.
With respect to this trend, we put emphasis on developing and marketing digital
models. In fiscal 2000 we started shipping digital cable-TV settop boxes in
the U.S. A similar trend toward digitalization can be seen in terrestrial
broadcasting and direct-broadcast satellites (DBS). Accordingly, we have been
providing digital DBS settop boxes in Europe since fiscal 1998, and in fiscal
2001 we started distributing digital DBS settop boxes in Japan and digital
terrestrial broadcast settop boxes in the United Kingdom.

46



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OEL displays. There are two major trends in this market. The first trend is
the development of products for full-color display, which encompasses: (i) the
development of organic materials with long life and high luminance efficiency,
(ii) the development of production processes to achieve high yield, and (iii)
the stability of supply of low-temperature poly-silicon TFT substrates. Second
is the formation of alliances, which is likely to substantially accelerate
expansion in the OEL display business. A string of new entrants, including
major electronics companies, has announced technological developments since
1999. To meet the competition, we also have created an alliance with
Semiconductor Energy Laboratory Co., Ltd. and Sharp Corporation for the
development of continuous grain (CG) silicon TFT for active-matrix full-color
OEL displays. Continuous grain (CG) silicon TFT would represent a significant
advance over low-temperature poly-silicon TFT substrates currently in use. We
expect to commercialize, through a joint venture established with alliance
partners, full-color OEL displays using continuous grain (CG) silicon TFT in
the fall of 2002.

AV software business segment

The AV software industry is very volatile and dependent upon the presence or
absence of hit movie and music titles. Accordingly, its success in any year is
very difficult to predict.

Patent licensing segment

We are in a patent business environment where every company follows a policy of
emphasizing patent rights, and patent lawsuits are increasing noticeably. The
value of patents is increasingly recognized, and there is intensive patent
utilization through the transfer or licensing of patent rights. While poor
economic conditions favor purchasers of patent rights, purchase prices
generally are increasing because of the growing importance of such intellectual
property.

We expect that our royalty revenue from the licensing of worldwide patents
relating to laser optical disc technologies will decline substantially, as our
patent rights expire starting in fiscal 2003. We intend to attempt to reduce
the decline in royalty revenue through the acquisition and licensing of third
party patent rights and increased enforcement of our existing patents, while we
continue to research and develop new technologies that could provide us with
future royalties from licensing. We do not, however, expect that the revenue,
if any, from such new patents will be sufficient to offset the decrease in
royalty revenue resulting from the expiration of our existing patents. See
Item 4.B. Business overviewNature of
operationsPatent Licensing for more
information on our patent Licensing business.

47



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Item 6. Directors, Senior Management and Employees

A. Directors and senior management

Pioneers Directors, Executive Officers and Corporate Auditors as of September
1, 2001, and their pertinent information, such as position and business
experience, are as follows:

|                 |  |                                                                                                                                                                                                                          |  |                                                                                                                                                                                                                                         
|---------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Name             |  | Current Position                                                                                                                                                                                                         |  |                                                                                                                                                                                                                                         
|(Date of birth)  |  | (Month of expiration)                                                                                                                                                                                                    |  | Prior Position                                                                                                                                                                                                                          
|                 |  |                                                                                                                                                                                                                          |  |                                                                                                                                                                                                                                         
|Kanya Matsumoto  |  | Chairman and Representative Director of                                                                                                                                                                                  |  | June 1996:                                                                                                                                                                                                                              
|                
|                
|                
|                
|(June 12, 1930)  |  | Pioneer
(June 2002)                                                                                                                                                                                                      |  | Vice Chairman and Representative
Director of Pioneer                                                                                                                                                                                    
|                
|                
|                
|                
|                
|Kaneo Ito        |  | President and Representative Director of                                                                                                                                                                                 |  | June 1991:                                                                                                                                                                                                                              
|                
|                
|                
|                
|(Apr. 30, 1936)  |  | Pioneer
(June 2002)                                                                                                                                                                                                      |  | Senior Managing Director and
Representative Director, and
General Manager of International
Business Group; in charge of
overseas operations and Public
Relations Division of Pioneer                                                    
|                
|                
|                
|                
|                
|Yoshimichi Inada |  | Executive Vice President and                                                                                                                                                                                             |  | June 2000:                                                                                                                                                                                                                              
|                
|                
|                
|                
|(Sept. 8, 1936)  |  | Representative Director of Pioneer; in
charge of technologies, production and
quality control in general; in charge of
Components Business Division, Procurement
Center and Strategic IT Division of
Pioneer
(June 2003) |  | Executive Vice President and
Representative Director; General
Manager of Procurement Center; in
charge of Components Business
Division; in charge of
technologies, production, OEM
business, and export management in
general of Pioneer
|                
|                
|                
|                
|                
|Katsuhiro Abe    |  | Senior Managing Director and                                                                                                                                                                                             |  | June 2000:                                                                                                                                                                                                                              
|                
|                
|                
|                
|(Nov. 16, 1936)  |  | Representative Director of Pioneer; in
charge of administration in general; in
charge of export management in general
and General Manager of Corporate Planning
Division of Pioneer
(June 2003)                          |  | Senior Managing Director and
Representative Director; in charge
of administration in general of
Pioneer                                                                                                                                 

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|                   |  |                                                                                                                                                                                                                                  |  |                                                                                                                                                                                                                                                                  
|------------------ |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Name               |  | Current Position                                                                                                                                                                                                                 |  |                                                                                                                                                                                                                                                                  
|(Date of birth)    |  | (Month of expiration)                                                                                                                                                                                                            |  | Prior Position                                                                                                                                                                                                                                                   
|                   |  |                                                                                                                                                                                                                                  |  |                                                                                                                                                                                                                                                                  
|Takashi Kobayashi  |  | Managing Director of Pioneer; in charge                                                                                                                                                                                          |  | June 1998:                                                                                                                                                                                                                                                       
|                  
|                  
|                  
|                  
|(Sept. 27, 1940)   |  | of Corporate Communications Division,
Customer Satisfaction Planning and
Coordination Division, Intellectual
Property Division, Division of
Environmental Preservation, and Business
Development Division of Pioneer
(June 2003) |  | Managing Director and General
Manager of Subsidiaries Management
and Coordination Division; in
charge of Investor Relations
Division, Public Relations
Division and Customer Satisfaction
Planning and Coordination
Division, and of software business
of Pioneer
|                  
|                  
|                  
|                  
|Shoichi Yamada     |  | Managing Director of Pioneer and                                                                                                                                                                                                 |  | Nov. 1995:                                                                                                                                                                                                                                                       
|                  
|                  
|                  
|                  
|(Nov. 22, 1941)    |  | President of Pioneers Mobile
Entertainment Company
(June 2003)                                                                                                                                                                  |  | Director and General Manager of
International Business Group of
Pioneer                                                                                                                                                                                          
|                  
|                  
|                  
|                  
|Akira Niijima      |  | Managing Director of Pioneer and                                                                                                                                                                                                 |  | June 2000:                                                                                                                                                                                                                                                       
|                  
|                  
|                  
|                  
|(Mar. 9, 1944)     |  | President of Pioneers Home Entertainment
Company
(June 2003)                                                                                                                                                                    |  | Managing Director and General
Manager of Corporate Planning
Division; in charge of Personnel
Division of Pioneer                                                                                                                                                 
|                  
|                  
|                  
|                  
|Hiroshi Aiba       |  | Director of Pioneer and General Manager                                                                                                                                                                                          |  | Apr. 2000:                                                                                                                                                                                                                                                       
|                  
|                  
|                  
|                  
|(Sept. 15, 1940)   |  | of External Relations Division of Pioneer
(June 2003)                                                                                                                                                                            |  | Director and General Manager of
Business Systems Division of
Pioneer                                                                                                                                                                                             
|                  
|                  
|                  
|                  
|Tadahiro Yamaguchi |  | Director of Pioneer and Executive Vice                                                                                                                                                                                           |  | June 1997:                                                                                                                                                                                                                                                       
|                  
|                  
|                  
|                  
|(Mar. 24, 1946)    |  | President of Pioneers Home Entertainment
Company (in charge of technologies)
(June 2003)                                                                                                                                        |  | Director and General Manager of
Home Electronics Business Group of
Pioneer                                                                                                                                                                                       
|                  
|                  
|                  
|                  
|Shinji Yasuda      |  | Director of Pioneer and Managing Director                                                                                                                                                                                        |  | July 2000:                                                                                                                                                                                                                                                       
|                  
|                  
|                  
|                  
|(June 10, 1945)    |  | of Pioneer China Holding Co., Ltd.
(June 2003)                                                                                                                                                                                   |  | Director; in charge of China
Project of Pioneer                                                                                                                                                                                                                  
|                  
|                  
|                  
|                  
|Toshihisa Koga     |  | Director of Pioneer and Executive Vice                                                                                                                                                                                           |  | Apr. 1997:                                                                                                                                                                                                                                                       
|                  
|                  
|                  
|                  
|(Apr. 29, 1940)    |  | President of Pioneers Mobile
Entertainment Company
(June 2002)                                                                                                                                                                  |  | President of Pioneer Automotive
Electronics Sales, Inc.                                                                                                                                                                                                          

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|                  |  |                                                                                                                            |  |                                                                                                                                     
|----------------- |  | -------------------------------------------------------------------------------------------------------------------------- |  | ------------------------------------------------------------------------------------------------------------------------------------
|Name              |  | Current Position                                                                                                           |  |                                                                                                                                     
|(Date of birth)   |  | (Month of expiration)                                                                                                      |  | Prior Position                                                                                                                      
|                  |  |                                                                                                                            |  |                                                                                                                                     
|Satoshi Matsumoto |  | Director of Pioneer and General Manager                                                                                    |  | Nov. 1995:                                                                                                                          
|                 
|                 
|                 
|                 
|(Apr. 15, 1954)   |  | of Division of Environmental Preservation
of Pioneer
(June 2002)                                                           |  | President and Representative
Director of Pioneer Music Works,
Inc.                                                                  
|                 
|                 
|                 
|                 
|                  |  |                                                                                                                            |  |                                                                                                                                     
|Kazunori Yamamoto |  | Senior Executive Officer of Pioneer and                                                                                    |  | June 1999:                                                                                                                          
|                 
|                 
|                 
|                 
|(Oct. 21, 1942)   |  | President of Pioneer North America, Inc.
and President of Pioneer Electronics
(USA) Inc.
(June 2003)                       |  | Executive Officer of Pioneer and
President of Pioneer North America,
Inc.                                                           
|                 
|                 
|                 
|                 
|                  |  |                                                                                                                            |  |                                                                                                                                     
|Shungo Minato     |  | Senior Executive Officer of Pioneer and                                                                                    |  | June 1999:                                                                                                                          
|                 
|                 
|                 
|                 
|(Apr. 11, 1943)   |  | Managing Director of Pioneer Europe NV
(June 2003)                                                                         |  | Executive Officer of Pioneer and
Chairman and Managing Director of
Pioneer Europe NV                                                
|                 
|                 
|                 
|                 
|                  |  |                                                                                                                            |  |                                                                                                                                     
|Koichi Shimizu    |  | Senior Executive Officer of Pioneer and                                                                                    |  | June 1999:                                                                                                                          
|                 
|                 
|                 
|                 
|(Feb. 3, 1944)    |  | Managing Director of Pioneer Electronics
Asiacentre Pte. Ltd.
(June 2003)                                                  |  | Executive Officer of Pioneer and
Vice President of Pioneers Mobile
Entertainment Company (in charge
of technologies and production)
|                 
|                 
|                 
|                 
|                  |  |                                                                                                                            |  |                                                                                                                                     
|Masaru Saotome    |  | Senior Executive Officer of Pioneer and                                                                                    |  | June 1999:                                                                                                                          
|                 
|                 
|                 
|                 
|(Aug. 20, 1944)   |  | Executive Vice President of Pioneers
Home Entertainment Company (in charge of
sales and marketing)
(June 2003)            |  | Executive Officer of Pioneer and
Executive Vice President of
Pioneers Home Entertainment
Company (in charge of sales and
marketing)
|                 
|                 
|                 
|                 
|                  |  |                                                                                                                            |  |                                                                                                                                     
|Haruhiko Tanaka   |  | Executive Officer of Pioneer and                                                                                           |  | Mar. 2000:                                                                                                                          
|                 
|                 
|                 
|                 
|(Mar. 27, 1947)   |  | Executive Vice President of Pioneers
Home Entertainment Company (in charge of
production and quality control)
(June 2003) |  | Executive Vice President of
Pioneers Home Entertainment
Company (in charge of production
and quality control)                      
|                 
|                 
|                 
|                 
|                  |  |                                                                                                                            |  |                                                                                                                                     
|Tamihiko Sudo     |  | Executive Officer of Pioneer and                                                                                           |  | Mar. 2000:                                                                                                                          
|                 
|                 
|                 
|                 
|(Apr. 28, 1947)   |  | Executive Vice President of Pioneers
Mobile Entertainment Company
(June 2003)                                             |  | Executive Vice President of
Pioneers Mobile Entertainment
Company                                                                  

50



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|                   |  |                                                                                                     |  |                                                                                          
|------------------ |  | --------------------------------------------------------------------------------------------------- |  | -----------------------------------------------------------------------------------------
|Name               |  | Current Position                                                                                    |  |                                                                                          
|(Date of birth)    |  | (Month of expiration)                                                                               |  | Prior Position                                                                           
|                   |  |                                                                                                     |  |                                                                                          
|Hajime Ishizuka    |  | Executive Officer of Pioneer and General                                                            |  | June 2000:                                                                               
|                  
|                  
|                  
|                  
|(May 3, 1947)      |  | Manager of Components Division; in charge
of International Business Division of
Pioneer
(June 2003) |  | Executive Officer and General
Manager of International Division
of Pioneer               
|                   |  |                                                                                                    
|                  
|                  
|                  
|                  
|Seiichiro Kurihara |  | Executive Officer of Pioneer and General                                                            |  | June 1998:                                                                               
|                  
|                  
|                  
|                  
|(Mar. 15, 1943)    |  | Manager of Intellectual Property Division
of Pioneer                                                |  | General Manager of Intellectual
Property Division of Pioneer                             
|                  
|                  
|                  
|                  
|                   |  | (June 2003)                                                                                        
|                   |  |                                                                                                    
|                  
|                  
|                  
|                  
|Koki Aizawa        |  | Executive Officer of Pioneer and Deputy                                                             |  | Jan. 2001:                                                                               
|                  
|                  
|                  
|                  
|(Dec. 19, 1944)    |  | General Manager of Research and
Development Division of Pioneer                                     |  | Deputy General Manager of Research
and Development Division of Pioneer                   
|                  
|                  
|                  
|                  
|                   |  | (June 2003)                                                                                        
|                   |  |                                                                                                    
|                  
|                  
|                  
|                  
|Toshihiko Norizuki |  | Executive Officer of Pioneer and General                                                            |  | June 2001:                                                                               
|                  
|                  
|                  
|                  
|(May 23, 1945)     |  | Manager of Business Systems Division and
Plant Manager of Ohmori Plant of Pioneer
(June 2003)       |  | General Manager of Business
Systems Division and Plant Manager
of Ohmori Plant of Pioneer
|                   |  |                                                                                                    
|                  
|                  
|                  
|                  
|Buntarou Nishikawa |  | Executive Officer of Pioneer and General                                                            |  | July 1997:                                                                               
|                  
|                  
|                  
|                  
|(Mar. 24, 1946)    |  | Manager of Domestic Sales Division,
Pioneers Mobile Entertainment Company(June 2003)               |  | General Manager of Domestic Sales
Division, Pioneers Mobile
Entertainment Company       
|                   |  |                                                                                                    
|                  
|                  
|                  
|                  
|Osamu Takada       |  | Executive Officer of Pioneer and General                                                            |  | Sept. 1999:                                                                              
|                  
|                  
|                  
|                  
|(July 27, 1948)    |  | Manager of Personnel Division of Pioneer
(June 2003)                                                |  | General Manager of Personnel
Division of Pioneer                                         
|                   |  |                                                                                                    
|                  
|                  
|                  
|                  
|Masao Kawabata     |  | Executive Officer of Pioneer and General                                                            |  | Apr. 2000:                                                                               
|                  
|                  
|                  
|                  
|(Aug. 10, 1948)    |  | Manager of Corporate Communications
Division of Pioneer                                             |  | General Manager of Corporate
Communications Division of Pioneer                          
|                  
|                  
|                  
|                  
|                   |  | (June 2003)                                                                                        
|                   |  |                                                                                                    
|                  
|                  
|                  
|                  
|Sumitaka Matsumura |  | Executive Officer of Pioneer and Deputy                                                             |  | Jan. 2001:                                                                               
|                  
|                  
|                  
|                  
|(Oct. 10, 1948)    |  | General Manager of Research and
Development Division of Pioneer                                     |  | Deputy General Manager of Research
and Development Division of Pioneer                   
|                  
|                  
|                  
|                  
|                   |  | (June 2003)                                                                                        

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|                   |  |                                                       |  |                                                                                              
|------------------ |  | ----------------------------------------------------- |  | ---------------------------------------------------------------------------------------------
|Name               |  | Current Position                                      |  |                                                                                              
|(Date of birth)    |  | (Month of expiration)                                 |  | Prior Position                                                                               
|                   |  |                                                       |  |                                                                                              
|Yoshio Taniyama    |  | Executive Officer of Pioneer and General              |  | Sept. 1999:                                                                                  
|                  
|                  
|                  
|                  
|(Nov. 19, 1948)    |  | Manager of Finance Division of Pioneer
(June 2003)    |  | General Manager of Finance
Division of Pioneer                                               
|                  
|                  
|                  
|                  
|Hideki Okayasu     |  | Executive Officer of Pioneer and General              |  | July 2000:                                                                                   
|                  
|                  
|                  
|                  
|(May 12, 1950)     |  | Manager of Accounting Division of Pioneer
(June 2003) |  | General Manager of Accounting
Division of Pioneer                                            
|                  
|                  
|                  
|                  
|Makoto Koshiba     |  | Corporate Auditor (full time) of Pioneer              |  | Sept. 1999:                                                                                  
|                  
|                  
|                  
|                  
|(Nov. 21, 1943)    |  | (June 2003)                                           |  | Director and General Manager of
Accounting Division; in charge of
Finance Division of Pioneer
|                  
|                  
|                  
|                  
|Makito Baba        |  | Corporate Auditor of Pioneer                          |  | June 1997:                                                                                   
|                  
|                  
|                  
|                  
|(Oct. 9, 1934)     |  | (June 2003)                                           |  | Corporate Auditor (full time) of
Pioneer                                                     
|                  
|                  
|                  
|                  
|Masanori Iijima    |  | Corporate Auditor of Pioneer                          |  | Apr. 1955 to present:                                                                        
|                  
|                  
|                  
|                  
|(Nov. 27, 1928)    |  | (June 2003)                                           |  | Attorney-at-Law                                                                              
|                  
|                  
|                  
|                  
|Terumichi Tsuchida |  | Corporate Auditor of Pioneer                          |  | July 1998 to present:                                                                        
|                  
|                  
|                  
|                  
|(Aug. 22, 1921)    |  | (June 2004)                                           |  | Advisor of Meiji Life Insurance
Company                                                      

All of the above persons, with the exception of Messrs. Masanori Iijima and
Terumichi Tsuchida, devote themselves full time to our business.

There is no arrangement or understanding between any Director, Executive
Officer or Corporate Auditor and any other person pursuant to which he or she
was elected as Director, Executive Officer or Corporate Auditor.

Mr. Kanya Matsumoto is the uncle of Mr. Satoshi Matsumoto. Mr. Kaneo Ito is
married to a first cousin of Mr. Kanya Matsumoto.

52



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##### Table of Contents



B. Compensation

The aggregate amount of compensation (including bonuses and stock-based
compensation) paid by Pioneer to all Directors, Executive Officers and
Corporate Auditors of Pioneer as a group for fiscal 2001 totaled ¥811 million.
Also, as part of Pioneers incentive compensation arrangements for Directors
and Executive Officers, Pioneer has issued in Japan bonds with detachable
warrants. Upon the issuance of detachable warrant bonds by Pioneer, it
distributed the warrants at fair market value to both Directors and Executive
Officers of Pioneer, and certain other executive employees as a part of their
remuneration. See Item 6.E. Share ownership for further information.

The aggregate amount set aside as lump-sum severance indemnities by Pioneer
during fiscal 2001 for Directors, Executive Officers and Corporate Auditors of
Pioneer totaled ¥100 million. The aggregate amount is calculated by the
formula as defined in the regulations of Pioneer concerning the retirement
allowance. Provision is made for lump-sum severance payments for Directors and
Corporate Auditors of Pioneer on a basis considered adequate for such future
payments as may be approved by the shareholders. (See Note 7 in Notes to
Consolidated Financial Statements.)

C. Board practices

Pioneers Articles of Incorporation provide for a Board of Directors of three
or more members and for three or more Corporate Auditors. All Directors and
Corporate Auditors are elected at general meetings of shareholders. In
general, the term of office of Directors expires at the conclusion of the
ordinary general meeting of shareholders held with respect to the last closing
of accounts within two years after their assumption of office, and in the case
of Corporate Auditors, within three years after their assumption of office;
however, Directors and Corporate Auditors may serve any number of consecutive
terms. With respect to each expiration of the term of office of Directors and
Corporate Auditors, see Item 6.A. Directors and senior management.

The Directors constitute the Board of Directors, which has the ultimate
responsibility for administration of our affairs. The Board of Directors may
elect from among its members a Chairman and Director, a Vice Chairman and
Director, a President and Director, one or more Executive Vice Presidents and
Directors, Senior Managing Directors and Managing Directors. From among the
Directors referred to above, the Board of Directors elects one or more
Representative Directors. Each of the Representative Directors has the
authority individually to represent Pioneer in the conduct of its affairs.

Pioneer introduced a Corporate Executive Officer system in June 1999 to improve
management efficiency and speed up decision-making. Executive Officers are
basically elected at the meeting of the Board of Directors held immediately
after the ordinary general meeting of shareholders. In general, the term of
office of Executive Officers expires at the conclusion of the ordinary general
meeting of shareholders held with respect to the last closing of accounts
within two years after their assumption of office. With respect to each
expiration of the term of office of Executive Officers, see Item 6.A.
Directors and senior management. The Board of Directors may elect from among
Executive Officers one or more Senior Executive Officers. Each of the
Executive Officers has the authority individually to operate businesses of
which he or she is in charge under the control of the Board of Directors and
Representative Directors.

53



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The Corporate Auditors of Pioneer are not required to be and are not certified
public accountants. However, at least one of the Corporate Auditors is
required to be a person who has not been a Director, general manager or
employee of Pioneer or any of its subsidiaries during the five-year period
prior to his or her election as a Corporate Auditor. The Corporate Auditors
may not at the same time be Directors, Executive Officers, general managers or
employees of Pioneer or any of its subsidiaries.

Each Corporate Auditor has the statutory duty to supervise the administration
by the Directors of Pioneers affairs and also to examine the financial
statements and business reports to be submitted by the Board of Directors at
the general meeting of shareholders. They are entitled to attend meetings of
the Board of Directors but are not entitled to vote. In addition to Corporate
Auditors, independent certified public accountants or an audit corporation must
be appointed by general meetings of shareholders. Such independent certified
public accountants or audit corporation have, as their primary statutory
duties, the duties to examine the financial statements proposed to be submitted
by the Board of Directors at general meetings of shareholders and to report
their opinion thereon to the Corporate Auditors and the Directors.

The Corporate Auditors constitute the Board of Corporate Auditors. The Board
of Corporate Auditors has a statutory duty to prepare and submit its audit
report to the Board of Directors each year. A Corporate Auditor may note his
or her opinion in the audit report if his or her opinion is different from the
opinion expressed in the audit report. The Board of Corporate Auditors is
empowered to establish audit principles, method of examination by Corporate
Auditors of Pioneers affairs, and financial position and other matters
concerning the performance of the Corporate Auditors duties.

There are no contractual arrangements providing for benefits to Directors upon
termination of service. Also see Item 10.B. Memorandum and articles of
associationDirectors.

D. Employees

The following table sets forth the number of our employees at the end of the
period indicated.

|                    |  |                     |        |      |  |      |        |  |  |  |       
|------------------- |  | ------------------- | ------ | ---- |  | ---- | ------ |  |  |  | ------
|                    |  | Year ended March 31
|                    |  |                    
|                    |  | 1999                |        | 2000 |  | 2001
|                    |  |                     |        |      |  |     
|Number of employees |  |                     | 23,647 |      |  |      | 27,414 |  |  |  | 28,871
|                    |  |                     |        |      |  |     

Pioneer and six of its subsidiaries in Japan have their respective labor unions
for the employees of each company. Each such labor union is affiliated with
the Japanese Electrical Electronic & Information Union. All employees except
management, supervisory and certain other employees must become union members.
We have not been materially affected by any work stoppages or difficulties in
connection with labor negotiations or disputes and consider our labor relations
to be good.

54



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E. Share ownership

The total number of shares of Pioneers common stock owned by our Directors,
Executive Officers and Corporate Auditors as a group as of March 31, 2001 is as
follows:

|               |  |                             |  |                        |  |                  |      |  
|-------------- |  | --------------------------- |  | ---------------------- |  | ---------------- | ---- | -
|Title of class |  | Identity of person or group |  | Number of shares owned |  | Percent of class
|               |  |                             |  |                        |  |                 
|Common Stock   |  | Directors, Executive        |  | 2,742,789 shares*      |  |                  | 1.52 | %
|              
|              
|              
|              
|               |  | Officers and Corporate      |  |                        |  |                  |      |  
|              
|              
|              
|              
|               |  | Auditors as a group         |  |                        |  |                  |      |  



|* | Except for Mr. Kanya Matsumoto, Chairman of Pioneer, who owns 2,616,359
shares of common stock, which constitutes 1.45% of all outstanding shares
as of March 31, 2001, none of Pioneers Directors, Executive Officers and
Corporate Auditors is the owner of more than one percent of Pioneers
common stock.
|- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Pioneer has granted the following warrants to subscribe for shares
of common stock to its Directors, Executive Officers and certain executive
employees, and certain directors/officers of certain of its subsidiaries as
part of their compensation.

|                    |  |                   |     |                 |  |                                         |  |                  |  |  |     | 
|------------------- |  | ----------------- | --- | --------------- |  | --------------------------------------- |  | ---------------- |  |  | --- | 
|                    |  | Total number of   |     |                 |  |                                         |  |                  |  | 
|                    |  | shares covered by |     |                 |  | Current exercise                        |  | Number of shares
|                    |  | warrants          |     |                 |  | price                                   |  | issued          
|Fiscal year granted |  | (in thousands)    |     | Exercise period |  | per share                               |  | (in thousands)  
|                    |  |                   |     |                 |  |                                         |  |                 
|1999                |  |                   | 269 |                 |  | From
July 1, 1999 to June 8, 2001       |  | ¥2,783           |  |  | 269 | 
|                   
|                   
|2000                |  |                   | 320 |                 |  | From
July 3, 2000 to September 12, 2002 |  | ¥2,188           |  |  | 222 | 
|                   
|                   
|2001                |  |                   | 191 |                 |  | From
July 2, 2001 to September 11, 2003 |  | ¥4,674           |  |  |    | 
|                   
|                   
|2001                |  |                   | 93  |                 |  | From
July 2, 2001 to September 25, 2003 |  | ¥4,839           |  |  |    | 
|                   
|                   
|2002                |  |                   | 413 |                 |  | From
July 1, 2002 to August 26, 2004    |  | ¥3,266           |  |  |    | 

55



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Pioneer has also granted the following subscription rights to subscribe for
shares of common stock to certain of its employees:

|                    |  |                   |     |                 |  |                                    |  |                  |  |  
|------------------- |  | ----------------- | --- | --------------- |  | ---------------------------------- |  | ---------------- |  | -
|                    |  | Total number of   |     |                 |  |                                    |  |                 
|                    |  | shares covered by |     |                 |  | Current exercise                   |  | Number of shares
|                    |  | option            |     |                 |  | price                              |  | issued          
|Fiscal year granted |  | (in thousands)    |     | Exercise period |  | per share                          |  | (in thousands)  
|                    |  |                   |     |                 |  |                                    |  |                 
|2001                |  |                   | 191 |                 |  | From
July 1, 2002 to June 30, 2005 |  | ¥4,400           |  | 
|                   
|2002                |  |                   | 191 |                 |  | From
July 1, 2003 to June 30, 2006 |  | ¥3,791           |  | 






Item 7. Major Shareholders and Related Party Transactions

A. Major shareholders

Major shareholders that owned 5% or more of Pioneers voting securities as of
March 31, 2001 on the register of shareholders were as follows:

|               |  |                                                   |  |               |        |                    |  |               |      |   |  | 
|-------------- |  | ------------------------------------------------- |  | ------------- | ------ | ------------------ |  | ------------- | ---- | - |  | 
|               |  |                                                   |  |               |        | Number of shares   |  | Percentage of
|Title of class |  | Name                                              |  | (in thousand) |        | outstanding shares
|               |  |                                                   |  |               |        |                   
|Common Stock   |  | Japan Trustee
Services Bank, Ltd. (Trust Account) |  |               | 15,142 |                    |  |               | 8.41 | %

Japan Trustee Services Bank, Ltd. is a securities processing services company.
We understand that this shareholder is not the beneficial owner of our voting
securities, but we do not have available further information concerning such
beneficial ownership.

To our knowledge, there are no major shareholders that were beneficial owners
of 5% or more of Pioneers voting securities during the past three years.

All shareholders of Pioneer have the same voting rights, subject to the
limitation on exercise as set forth in Item 10.B.
Memorandum and articles of
associationCommon stockVoting rights.

As of March 31, 2001, there were 179,894,370 shares of common stock
outstanding, of which 1,733,430 shares were held in the form of ADRs (0.96%)
and 14,609,959 shares (8.12%) were held of record in the form of common stock
by residents in the United States (based solely on their addresses). The
number of registered ADR holders of record (including DTC) was 86, and the
number of registered holders of record in the United States (based solely on
their addresses) of shares of common stock, including those who held shares
through a Japanese securities clearing system, was 98.

To our knowledge, Pioneer is not directly or indirectly owned or controlled by
any other corporation or by the Japanese or any foreign government.

To our knowledge, there is no arrangement, the operation of which may at a
subsequent date result in a change in control of Pioneer.

56



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##### Table of Contents



B. Related party transactions

None

C. Interests of experts and counsel

Not applicable






Item 8. Financial Information

A. Consolidated statements and other financial information

Consolidated financial statements

See the Consolidated Financial Statements and Schedules beginning on page F-1.

Legal proceedings

In common with other industrial companies conducting a global business, we are
party to various lawsuits and administrative proceedings in the ordinary course
of our business. Based on the advice of counsel in the respective matters,
except as described below, we do not expect such lawsuits or administrative
proceedings, individually or in the aggregate, to have a material effect on our
financial condition and business results.

In fiscal 2001, we received a notice of proposed assessment from the German tax
authorities for approximately DM55 million (¥3,075 million translated at the
foreign exchange rate at March 31, 2001) relating to a tax position taken in
prior years concerning inter-company purchase prices. We officially challenged
the proposed assessment by arbitration procedures, the outcome of which will be
final and binding on both sides when concluded. A decision is expected by
December 2001.

We are also a defendant in a lawsuit in the United States in which the
plaintiff, Gemstar-TV Guide International, Inc., alleges patent infringement.
The plaintiff has not yet specified damages. We have denied the allegations
and have filed a counterclaim against the plaintiff and another company related
to the alleged patent infringement. In addition, the same plaintiff alleges
patent infringement relating to our production and sale of certain products.
The plaintiff has not yet specified damages. This case has been stayed by the
District Court. Also, in February 2001, the plaintiff filed a separate
complaint involving the same patents before the International Trade Commission,
alleging patent infringement relating to our importation to and sale of the
same products in the United States.

57



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##### Table of Contents



Dividend policy

Pioneer normally pays cash dividends twice per year. Pioneers Board of
Directors recommends year-end dividends to be paid following the end of each
fiscal year. This recommended year-end dividend must then be approved by
shareholders at the ordinary general meeting of shareholders usually held in
June of each year. Immediately following approval of the dividend at the
shareholders meeting, Pioneer pays the dividend to holders of record at the
preceding March 31. In addition to these year-end dividends, Pioneer may pay
interim dividends in the form of cash distributions from its retained earnings
to its shareholders of record as of September 30 in each year by resolution of
its Board of Directors and without shareholder approval. Pioneer normally pays
interim dividends in December. See Item 10.B. Memorandum and articles of
associationCommon stockDividends.

The following table sets forth the dividends paid by Pioneer for each of the
periods shown. The
U.S. dollar equivalents for the dividends shown are based on the noon buying
rate for cable transfer in New York City as certified for customs purposes by
the Federal Reserve Bank of New York for yen on the date of the dividend
payment:

|                   |  |                    |       |         |  |   |      |  | 
|------------------ |  | ------------------ | ----- | ------- |  | - | ---- |  | 
|                   |  | Dividend per share
|                   |  |                   
|Record date        |  | Yen                |       | Dollars
|                   |  |                    |       |        
|March 31, 1997     |  |                    | ¥5.00 |         |  | $ | 0.04 | 
|                  
|                  
|                  
|                  
|September 30, 1997 |  |                    | ¥2.50 |         |  | $ | 0.02 | 
|                  
|                  
|                  
|                  
|March 31, 1998     |  |                    | ¥5.00 |         |  | $ | 0.04 | 
|                  
|                  
|                  
|                  
|September 30, 1998 |  |                    | ¥5.00 |         |  | $ | 0.04 | 
|                  
|                  
|                  
|                  
|March 31, 1999     |  |                    | ¥5.00 |         |  | $ | 0.04 | 
|                  
|                  
|                  
|                  
|September 30, 1999 |  |                    | ¥5.00 |         |  | $ | 0.05 | 
|                  
|                  
|                  
|                  
|March 31, 2000     |  |                    | ¥5.00 |         |  | $ | 0.05 | 
|                  
|                  
|                  
|                  
|September 30, 2000 |  |                    | ¥7.50 |         |  | $ | 0.07 | 
|                  
|                  
|                  
|                  
|March 31, 2001     |  |                    | ¥7.50 |         |  | $ | 0.06 | 

On September 18, 2001, Pioneer announced that, subject to the approval of its
Board of Directors to be obtained in October 2001, the interim
dividend payable to shareholders of record as of September 30, 2001 will be 7.50 yen per share.

Pioneer currently intends to continue to pay dividends on its common stock in
amounts similar to those paid for fiscal 2001. The payment and the amount of
any future dividends, however, are subject to the level of our current business
results and future business forecast including earnings, our financial
condition and other factors, including statutory restrictions on the payment of
dividends.

B. Significant changes

There were no significant changes nor have any relevant facts occurred after
the date of the financial statements included in this annual report.

58



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##### Table of Contents






Item 9. The Offer and Listing

A. Offer and listing details

The following table sets forth for the period indicated the reported high and
low sales prices per share of Pioneers Common Stock on the Tokyo Stock Exchange
(TSE) and per share of Pioneers ADSs on the New York Stock Exchange (NYSE). See
Item 9.C. Markets, regarding the markets for
Pioneers shares.

|                              |             |      |                                 |        |                         |      |  |        |  |  |   |       |  |  |   |       |  | 
|----------------------------- | ----------- | ---- | ------------------------------- | ------ | ----------------------- | ---- |  | ------ |  |  | - | ----- |  |  | - | ----- |  | 
|                              |             |      | Tokyo Stock Exchange            |        | New York Stock Exchange
|                              |             |      | Price per share of Common Stock |        | Price per share of ADS 
|                              |             |      | (yen)                           |        | (U.S. dollars)         
|                              |             |      |                                 |        |                        
|                              |             | High |                                 | Low    |                         | High |  | Low   
|                              |             |      |                                 |        |                         |      |  |       
|                             
|Annual
        highs and lows |             |     
|                             
|                             
|                             
|                             
|Year
ended March 31           |             |      |                                 |        |                         |      |  |        |  |  |   |       |  |  |   |      
|                              | 1997        |      |                                 | ¥2,650 |                         |      |  | ¥1,810 |  |  | $ | 23.88 |  |  | $ | 16.00 | 
|                             
|                             
|                             
|                             
|                              | 1998        |      |                                 | 3,160  |                         |      |  | 1,850  |  |  |   | 27.25 |  |  |   | 15.13 | 
|                             
|                             
|                             
|                             
|                              | 1999        |      |                                 | 2,920  |                         |      |  | 1,720  |  |  |   | 21.13 |  |  |   | 14.88 | 
|                             
|                             
|                             
|                             
|                              | 2000        |      |                                 | 3,690  |                         |      |  | 1,711  |  |  |   | 34.75 |  |  |   | 16.13 | 
|                             
|                             
|                             
|                             
|                              | 2001        |      |                                 | 4,940  |                         |      |  | 2,085  |  |  |   | 45.38 |  |  |   | 20.50 | 
|                             
|                             
|                             
|                             
|                             
|Quarterly
highs and lows      |             |     
|                             
|                             
|                             
|                             
|Fiscal 2000                   |             |      |                                 |        |                         |      |  |        |  |  |   |       |  |  |   |      
|                             
|                             
|                             
|                             
|                              | 1st quarter |      |                                 | 2,405  |                         |      |  | 1,956  |  |  |   | 19.69 |  |  |   | 16.13 | 
|                             
|                             
|                             
|                             
|                              | 2nd quarter |      |                                 | 2,495  |                         |      |  | 1,711  |  |  |   | 20.88 |  |  |   | 16.63 | 
|                             
|                             
|                             
|                             
|                              | 3rd quarter |      |                                 | 3,080  |                         |      |  | 1,751  |  |  |   | 29.75 |  |  |   | 16.75 | 
|                             
|                             
|                             
|                             
|                              | 4th quarter |      |                                 | 3,690  |                         |      |  | 2,630  |  |  |   | 34.75 |  |  |   | 26.63 | 
|                             
|                             
|                             
|                             
|                             
|Fiscal 2001                   |             |     
|                             
|                             
|                             
|                             
|                              | 1st quarter |      |                                 | 4,350  |                         |      |  | 2,085  |  |  |   | 40.50 |  |  |   | 20.50 | 
|                             
|                             
|                             
|                             
|                              | 2nd quarter |      |                                 | 4,940  |                         |      |  | 3,500  |  |  |   | 45.38 |  |  |   | 32.00 | 
|                             
|                             
|                             
|                             
|                              | 3rd quarter |      |                                 | 4,580  |                         |      |  | 2,710  |  |  |   | 42.50 |  |  |   | 24.13 | 
|                             
|                             
|                             
|                             
|                              | 4th quarter |      |                                 | 3,750  |                         |      |  | 2,720  |  |  |   | 30.94 |  |  |   | 23.45 | 
|                             
|                             
|                             
|                             
|                             
|Monthly
highs and lows        |             |      |                                 |        |                         |      |  |        |  |  |   |       | 
|                             
|                             
|                             
|                             
|2001                          |             |     
|                             
|                             
|                             
|                             
|                              | March       |      |                                 | 3,750  |                         |      |  | 2,720  |  |  |   | 30.40 |  |  |   | 23.45 | 
|                             
|                             
|                             
|                             
|                              | April       |      |                                 | 3,930  |                         |      |  | 3,020  |  |  |   | 31.75 |  |  |   | 25.18 | 
|                             
|                             
|                             
|                             
|                              | May         |      |                                 | 4,250  |                         |      |  | 3,570  |  |  |   | 34.70 |  |  |   | 30.50 | 
|                             
|                             
|                             
|                             
|                              | June        |      |                                 | 3,950  |                         |      |  | 3,580  |  |  |   | 32.25 |  |  |   | 29.25 | 
|                             
|                             
|                             
|                             
|                              | July        |      |                                 | 3,920  |                         |      |  | 2,960  |  |  |   | 31.05 |  |  |   | 24.00 | 
|                             
|                             
|                             
|                             
|                              | August      |      |                                 | 3,430  |                         |      |  | 2,355  |  |  |   | 27.71 |  |  |   | 19.51 | 

B. Plan of distribution

Not applicable

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C. Markets

The primary market for shares of Pioneers common stock is the Tokyo Stock Exchange
(TSE). Pioneers shares of common stock have been listed on the TSE since
October 1961 and on the Osaka Securities Exchange since April 1968.

Since December 1976, Pioneers American Depositary Shares (ADSs) have been
listed and traded on the New York Stock Exchange (NYSE), having been traded on
the United States over-the-counter market since February 1970. Pioneers ADSs,
each representing one share of common stock, are evidenced by American
Depositary Receipts (ADRs) issued by Citibank, N.A., New York, as Depositary.

In addition, Curaçao Depositary Shares of Pioneer, evidenced by Curaçao
Depositary Receipts, have been listed and traded on the Euronext Amsterdam
since February 1969.

D. Selling shareholders

Not applicable

E. Dilution

Not applicable

F. Expenses of the issue

Not applicable






Item 10. Additional Information

A. Share capital

Not applicable

B. Memorandum and articles of association

Organization

Pioneer is a joint stock corporation (kabushiki kaisha)incorporated in Japan
under the Commercial Code (shoho)of Japan. It is registered in the Commercial
Register (shogyo tokibo)maintained by the Meguro Branch Office of the Tokyo
Legal Affairs Bureau.

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Objects and purposes

Article 2 of the Articles of Incorporation of Pioneer provides that its purpose
is to engage in the following lines of business: manufacture and sale of
electronic and electrical machinery and appliances, optical instruments,
medical instruments, and other machinery and appliances; planning, production,
manufacture and sale of audio, video and computer software; manufacture and
sale of woodworks, agricultural products and plant for their cultivation; sale
of foods and beverages including liquor, and operation of restaurants and
amusement facilities; sale and purchase, rental and lease, and management of
real estate and real estate agency business; publishing and printing business,
advertising agency business, construction business and non-life insurance
agency business; acquisition, management and transfer of industrial property
rights, copyrights and other intellectual property rights; and all business
incidental and related to each and every one of the businesses in the preceding
businesses.

Directors

Under the Commercial Code, each Director has executive powers and duties to
manage the affairs of Pioneer and each Representative Director, who is elected
from among the Directors by the Board of Directors, has the statutory authority
to represent Pioneer in all respects. Under the Commercial Code, the Directors
must refrain from engaging in any business competing with Pioneer unless
approved by the Board of Directors and any Director who has a material interest
in the subject matter of a resolution to be taken by the Board of Directors
cannot vote on such resolution. The total amount of remuneration to Directors
and to Corporate Auditors are subject to the approval of the general meeting of
shareholders. Within such authorized amounts the Board of Directors and the
Board of Corporate Auditors respectively determine the compensation to each
Director and Corporate Auditor.

Except as stated below, neither the Commercial Code nor Pioneers Articles of
Incorporation make special provisions as to the Directors or Corporate
Auditors power to vote in connection with their compensation; the borrowing
power exercisable by a Representative Director (or a Director who is given
power by a Representative Director to exercise such power), their retirement
age or requirement to hold any shares of capital stock of Pioneer. The
Commercial Code specifically requires the resolution of the Board of Directors
for a company to acquire or dispose of material assets; to borrow a substantial
amount of money; to employ or discharge from employment important employees,
such as general managers; and to establish, change or abolish material
corporate organization such as a branch office. The Regulations of the Board
of Directors of Pioneer require a resolution of the Board of Directors for
Pioneer to borrow a large amount of money or to give a guarantee in a large
amount. There is no written rule as to what constitutes a large amount in
these contexts. However, it has been the general practice of Pioneers Board
of Directors to adopt a resolution for a borrowing or guaranteeing in an amount
not less than ¥100 million or its equivalent.

Common stock

General

Set forth below is information relating to Pioneers Common Stock, including
brief summaries of the relevant provisions of Pioneers Articles of
Incorporation and Share Handling Regulations, as currently in effect, and of
the Commercial Code of Japan and related legislation. The discussion of the
Commercial Code below reflects certain amendments to the Commercial Code (the
2001 Amendments), which will become effective on October 1, 2001.

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In order to assert shareholders rights against Pioneer, a shareholder must
have its name and address registered on Pioneers register of shareholders, in
accordance with Pioneers Share Handling Regulations. The registered
beneficial holder of deposited shares underlying the ADSs is the Depositary for
the ADSs. Accordingly, holders of ADSs will not be able directly to assert
shareholders rights to Pioneer.

A holder of shares may choose, at its discretion, to participate in the central
clearing system for share certificates under the Law Concerning Central
Clearing of Share Certificates and Other Securities of Japan. Participating
shareholders must deposit certificates representing all of the shares to be
included in this clearing system with the Japan Securities Depository Center
(JASDEC). If a holder is not a participating institution in JASDEC, it must
participate through a participating institution, such as securities company or
bank having a clearing account with JASDEC. All shares deposited with JASDEC
will be registered in the name of JASDEC on Pioneers register of shareholders.
Each participating shareholder will in turn be registered on Pioneers
register of beneficial shareholders and be treated in the same way as
shareholders registered on Pioneers register of shareholders. For the purpose
of transferring deposited shares, delivery of share certificates is not
required. Entry of the share transfer in the books maintained by JASDEC for
participating institutions, or in the book maintained by a participating
institution for its customers, has the same effect as delivery of share
certificates. The registered beneficial owners may exercise the rights
attached to the shares, such as voting rights, and will receive dividends (if
any) and notices to shareholders directly from Pioneer. The shares held by a
person as a registered shareholder and those held by the same person as a
registered beneficial owner are aggregated for these purposes. Beneficial
owners may at any time withdraw their shares from deposit and receive share
certificates.

Authorized capital

Article 5 of the Articles of Incorporation of Pioneer provides that the total
number of shares authorized to be issued by Pioneer is four hundred million
(400,000,000) shares.

As of March 31, 2001, 179,894,370 shares of common stock with a par value of 50
yen per share were issued and outstanding.

The 2001 Amendments eliminate the concept of par value of shares of capital
stock. Thus, on and after October 1, 2001, all shares of capital stock of
Pioneer will have no par value.

Dividends

The Articles of Incorporation of Pioneer provide that the accounts shall be
closed on March 31 of each year and that dividends, if any, shall be paid to
shareholders, beneficial shareholders and pledgees of record as of the end of
such day. After the close of the fiscal period, the Board of Directors
prepares, among other things, a proposed allocation of profits for dividends
and other purposes; this proposal is submitted to the Board of Corporate
Auditors of Pioneer and to independent certified public accountants and then
submitted for approval to the ordinary general meeting of shareholders, which
is normally held in June each year. In addition to provisions for dividends,
if any, and for the legal reserve and other reserves, the allocation of profits
customarily includes a bonus to Directors and Corporate Auditors. In addition
to year-end dividends, the Board of Directors may by its resolution declare a
cash distribution pursuant to Article 293-5 of the Commercial Code (an interim
dividend) to shareholders, beneficial shareholders and pledgees of record as
of the end of each September 30, without shareholders approval, but subject to
the limitations described below.

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The Commercial Code provides that a company may not make any distribution of
profit by way of dividends or interim dividends for any fiscal period unless it
has set aside in its legal reserve an amount equal to at least one-tenth of the
amount paid by way of appropriation of retained earnings for such fiscal period
or of the amount of such interim dividends until the aggregate amount of
additional paid-in capital and legal reserve is one-quarter of its stated
capital. Under the Commercial Code, Pioneer is permitted to distribute profits
by way of year-end or interim dividends out of the excess of its net assets
over the aggregate of:



|(i)   |  | its stated capital;                                                                                                                                                                                                      
|----- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|     
|(ii)  |  | its additional paid-in capital;                                                                                                                                                                                          
|     
|(iii) |  | its accumulated legal reserve;                                                                                                                                                                                           
|     
|(iv)  |  | the legal reserve to be set aside in respect of the fiscal period concerned;                                                                                                                                             
|     
|(v)   |  | the excess, if any, of unamortized expenses incurred in preparation for
commencement of business and in connection with R&D over the aggregate of
amounts referred to in (ii), (iii) and (iv) above; and                 
|     
|(vi)  |  | if certain assets of Pioneer are stated at market value pursuant to the
provisions of the Commercial Code, the excess, if any, of the aggregate
amount of their market value over the aggregate acquisition cost thereof.

In the case of interim dividends, the net assets are calculated by reference to
the balance sheet as at the last closing of Pioneers accounts, but adjusted to
reflect; (x) any subsequent payment by way of appropriation of retained
earnings and transfer to legal reserve in respect thereof; (y) any subsequent
transfer of retained earnings to stated capital; and (z) if Pioneer has been
authorized, pursuant to a resolution of an ordinary general meeting of
shareholders, to purchase shares of its common stock (see Item 10.B.
Memorandum and articles of associationCommon stockRepurchase by Pioneer of
its common stock), the total amount of the purchase price of such shares so
authorized by such resolutions that may be paid by Pioneer, provided that
interim dividends may not be paid where there is a risk that at the end of the
fiscal year there might not be any excess of net assets over the aggregate of
the amounts referred to in (i) through (vi) above.

Under its Articles of Incorporation, Pioneer is not obligated to pay any
dividends which are left unclaimed for a period of three years after the date
on which they first became payable.

Stock splits

Pioneer may at any time split shares in issue into a greater number of shares
by resolution of the Board of Directors, and may amend its Articles of
Incorporation to increase the number of the authorized shares to be issued in
proportion to the relevant stock split in principle pursuant to a resolution of
the Board of Directors rather than a special resolution of a general meeting of
shareholders which is otherwise required for amending the Articles of
Incorporation.

In the event of a stock split, generally, shareholders will not be required to
exchange share certificates for new share certificates, but certificates
representing the additional shares resulting from the stock split will be
issued to shareholders. When a stock split is to be made, Pioneer must give
public notice of the stock split, specifying the record date therefor, at least
two weeks prior to such record date. In addition, promptly after the stock
split takes effect, Pioneer must give notice to each shareholder specifying the
number of shares to which such shareholder is entitled by virtue of the stock
split.

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General meeting of shareholders

The ordinary general meeting of shareholders to settle accounts of Pioneer for
each fiscal year is normally held in June in each year in or near Meguro-ku or
Minato-ku, Tokyo, Japan. In addition, Pioneer may hold an extraordinary
general meeting of shareholders whenever necessary by giving notice of
convocation thereof at least two weeks prior to the date set for the meeting.

Notice of convocation of a shareholders meeting setting forth the place, time
and purpose thereof, must be mailed to each shareholder having voting rights
(or, in the case of a non-resident shareholder, to his or her standing proxy or
mailing address in Japan) at least two weeks prior to the date set for the
meeting.

Any shareholder or group of shareholders holding at least 300 voting rights or
one percent of the total outstanding voting rights for six months or more may
propose a matter to be considered at a general meeting of shareholders by
submitting a written request to a Representative Director at least six weeks
prior to the date set for such meeting.

Voting rights

So long as Pioneer maintains the unit share system (see Item 10.B. Memorandum
and articles of associationCommon stockUnit share system) a shareholder
constituting one or more whole units is entitled to one voting right per unit
of shares subject to the limitations on voting rights set forth in the
following paragraph. If Pioneer eliminates from its Articles of Incorporation
the provisions relating to the unit of shares, holders of common stock will
have one voting right for each share they hold. Except as otherwise provided
by law or by the Articles of Incorporation, a resolution can be adopted at a
general meeting of shareholders by a majority of voting rights represented at
the meeting. The Commercial Code and Pioneers Articles of Incorporation
provide, however, that the quorum for the election of Directors and Corporate
Auditors shall not be less than one-third of the total number of voting rights.
Pioneers shareholders are not entitled to cumulative voting in the election
of Directors. A corporate shareholder more than one-quarter of whose
outstanding shares are directly or indirectly owned by Pioneer may not exercise
its voting rights with respect to shares of common stock of Pioneer that it
owns. Shareholders may exercise their voting rights through proxies, provided
that the proxies are also shareholders holding voting rights. Pioneers
shareholders also may cast their votes in writing.

The Commercial Code provides that in order to amend the Articles of
Incorporation and in certain other instances, including, a reduction of stated
capital, the removal of a Director or Corporate Auditor, dissolution, merger or
consolidation with a certain exception under which shareholders resolution is
not required, the transfer of the whole or an important part of the business,
the taking over of the whole of the business of any other corporation with a
certain exception under which shareholders resolution is not required, share
exchange or share transfer for the purpose of establishing 100 percent
parent-subsidiary relationships with a certain exception under which
shareholders resolution is not required, splitting of the corporation into two
or more corporations with a certain exception under which shareholders
resolution is not required, any offering of new shares at a specially
favorable price (or any offering of convertible bonds or bonds with warrants
to subscribe for new shares of capital stock at a specially favorable
conversion or exercise conditions) to any persons other than shareholders or
granting to Directors and/or employees rights to subscribe for new shares if
the Articles of Incorporation so permit, the quorum shall be a majority of the
total voting rights and the approval of the shareholders of at least two-thirds of
the voting rights represented at the meeting is required (the special
shareholders resolutions).

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Subscription rights

Holders of Pioneers shares of common stock have no pre-emptive rights under
its Articles of Incorporation. Authorized but unissued shares may be issued at
such times and upon such terms as the Board of Directors determines, subject to
the limitations as to the offering of new shares at a specially favorable
price mentioned under Voting rights above. The Board of Directors may,
however, determine that shareholders shall be given subscription rights
regarding a particular issue of new shares, in which case such rights must be
given on uniform terms to all shareholders as at a record date of which not
less than two weeks prior public notice must be given. Each of the
shareholders to whom such rights are given must also be given notice of the
expiry thereof at least two weeks prior to the date on which such rights
expire.

Rights to subscribe for new shares may be made generally transferable by the
Board of Directors. Whether Pioneer will make subscription rights generally
transferable in future rights offerings will depend upon the circumstances at
the time of such offerings. If subscription rights are not made generally
transferable, transfers by a non-resident of Japan or a corporation organized
under the laws of a foreign country or whose principal office is located in a
foreign country will be enforceable against Pioneer and third parties only if
Pioneers prior written consent to each such transfer is obtained. When such
consent is necessary in the future for the transfer of subscription rights,
Pioneer intends to consent, on request, to all such transfers by such a
non-resident or foreign corporation.

The Commercial Code permits a company to provide in
its articles of
incorporation that it may, by a special shareholders resolution, grant to its
directors and/or employees rights to subscribe for new shares if there exists a
justifiable reason. Article 10 of Pioneers Articles of Incorporation provides
that Pioneer may grant to its Directors and/or employees rights to subscribe
for new shares pursuant to the provisions of the Commercial Code.

Liquidation rights

In the event of a liquidation of Pioneer, the assets remaining after payment of
all debts and liquidation expenses and taxes will be distributed among
shareholders in proportion to the respective numbers of shares of common stock
held.

Record date

March 31 is the record date for Pioneers year-end dividends. So long as
Pioneer maintains in its Articles of Incorporation a provision for the unit of
shares, the shareholders and beneficial shareholders who are registered as the
holders of one unit of shares or more in Pioneers registers of shareholders
and/or beneficial shareholders at the end of each March 31 are also entitled to
exercise shareholders rights at the ordinary general meeting of shareholders
with respect to the fiscal year ending on such March 31. September 30 is the
record date for interim dividends. In addition, Pioneer may set a record date
for determining the shareholders and/or beneficial shareholders entitled to
other rights and for other purposes by giving at least two weeks prior public
notice.

The price of shares generally goes ex-dividends or ex-rights on Japanese stock
exchanges on the third business day prior to a record date (or if the record
date is not a business day, the fourth business day prior thereto), for the
purpose of dividends or rights offerings.

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Repurchase by Pioneer of its common stock

Except as otherwise permitted by the Commercial Code as set out below, Pioneer
or any of its subsidiaries cannot acquire Pioneers common stock except by
means of a reduction of capital in the manner prescribed by the Commercial
Code.

Pioneer may acquire shares of its common stock in response to a shareholders
request for purchase of his/her shares representing less than one unit. See
Item 10.B. Memorandum and articles of
associationCommon stockUnit share
systemRepurchase by Pioneer of shares constituting less than a unit.

Pioneers Articles of Incorporation provide that it may purchase up to
17,000,000 shares of common stock by a resolution of the Board of Directors for
the purpose of retiring the same with distributable profits. No such purchase
pursuant to a resolution of the Board of Directors may be made after the
conclusion of the ordinary general meeting of shareholders for the fiscal year
ending immediately after the Board resolution. No Board resolution has been
made for this purpose.

In addition, Pioneers Articles of Incorporation provide that it may purchase
up to 30,000,000 shares of common stock at a total price not exceeding ¥70
billion by a resolution of the Board of Directors for the purpose of retiring
the same with additional paid-in capital. No Board resolution has been made
for this purpose.

The above provisions of Pioneers Articles of Incorporation were made before
the 2001 Amendments come into force. However, Pioneer may acquire its shares
of common stock by resolution of the Board of Directors pursuant to the above
authorization by the Articles of Incorporation until the ordinary general
meeting of shareholders for the fiscal year ending March 31, 2002.

Under the Commercial Code as amended by the 2001 Amendments, in order for
Pioneer to purchase its own shares a resolution of an ordinary general meeting
of shareholders is required with respect to (i) the total number of shares and
the total acquisition price which Pioneer may purchase during the period ending
the conclusion of the next ordinary general meeting of shareholders, or (ii) if
the purchase(s) is/are to be made from a specified person or persons, the
identity of such person(s). The total amount of purchase price referred to
above cannot exceed the amount which can be distributed as dividends as
described underDividends above. The shareholders resolution for (ii) above
shall be by a special shareholders resolution and any shareholder who received
a convocation notice of the general meeting of shareholders where the
resolution on item (ii) above is sought may require Pioneer in writing not
later than five days prior to the date set for the meeting to include him/her as
the seller of his/her shares in the proposed purchase(s). Any purchase by
Pioneer of its shares pursuant to the shareholders resolutions except in the
case of (ii) above should be made either on the stock exchange or by way of
tender offer. Shares so purchased may be retired by a resolution of the Board
of Directors or held by Pioneer as treasury shares.

Unit share system

The 2001 Amendments abolish the unit share
(tan-i-kabushiki) system existing
under the Commercial Code before the 2001 Amendments and a new unit share
system called tangen-kabushiki is now introduced as described below.

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Different from the existing unit share system, whether or not to adopt the new
unit share system by providing in its Articles of Incorporation for the number
of shares constituting the new unit is at the discretion of Pioneer. However,
under the 2001 Amendments, it is deemed that Pioneer has provided in the
Articles of Incorporation 100 shares as its new unit of shares and that a
provision is also made in the Articles of Incorporation that no share
certificate for any number less than a full new unit shall be issued. Although
the number of shares constituting a new unit will be deemed to be included in
the Articles of Incorporation, any amendment to the Articles of Incorporation
reducing (but not increasing) the number of shares constituting a unit or
eliminating the provisions for the unit of shares may be made by the resolution
of the Board of Directors rather than by the special shareholders resolution,
which is otherwise required for amending the Articles of Incorporation. The
number of shares constituting one new unit, however, cannot exceed 1,000 or one
two-hundredth (1/200) of all issued shares.

Voting rights under the new unit share system

Under the new unit share system, shareholders shall have one voting right for
each unit of shares that they hold. Any number of shares less than a full unit
will carry no voting rights.

Share certificates for less than a unit

Under the new unit share system, Pioneer has an option either to issue share
certificates for less than a unit of shares or to provide in its Articles of
Incorporation not to issue share certificates for less than a unit of shares.
As stated above, upon the 2001 Amendments coming into effect, Pioneer is deemed
to have provided in the Articles of Incorporation not to issue share
certificates for less than a unit of shares. Unless Pioneers Board of
Directors adopts a resolution to eliminate the provision for the unit shares
from the Articles of Incorporation or the shareholders amend the Articles of
Incorporation by a special shareholders resolution to eliminate the provision
not to issue share certificates for less than a unit of shares, a share
certificate for any number of shares less than a unit will in general not be
issued. As the transfer of shares normally requires the delivery of the share
certificates therefor, any fraction of a unit for which no share certificates
are issued is not transferable.

Repurchase by Pioneer of shares constituting less than a unit

A holder of shares constituting less than one unit may require Pioneer to
purchase such shares at their market value.

Effect of the unit share system on holders of ADRs

A holder who owns ADRs evidencing less than 100 ADSs will indirectly own less
than a whole unit of shares of common stock. Although, as discussed above,
under the unit share system (whether the existing unit share system or the new
unit share system) holders of less than a unit have the right to require
Pioneer to purchase their shares, holders of ADRs evidencing ADSs that
represent other than integral multiples of whole units are unable to withdraw
the underlying shares of common stock representing less than a unit and,
therefore, are unable, as a practical matter, to exercise the rights to require
Pioneer to purchase such underlying shares unless Pioneers Articles of
Incorporation are amended to eliminate the provision not to issue share
certificates for the numbers of shares less than a unit. See Item 12.
Description of Securities Other than Equity SecuritiesWithdrawal of shares on
cancellation of ADSs. As a result, access to the Japanese markets by holders
of ADRs through the withdrawal mechanism will not be available for dispositions
of shares of common stock in lots less than a unit. The unit share system does
not affect the transferability of ADSs, which may be transferred in lots of any
size.

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Reporting of substantial
shareholdings

The Securities and Exchange Law of Japan and regulations thereunder require
any person who has become, beneficially and solely or jointly, a holder of more
than five percent of the total issued shares of capital stock of a company
listed on any Japanese stock exchange or whose shares are traded on the
over-the-counter market in Japan to file with the Director of a competent Local
Finance Bureau within five business days a report concerning such
shareholdings.

A similar report must also be filed in respect of any subsequent change of one
percent or more in any such holding or any change in material matters set out
in reports previously filed, with certain exceptions. For this purpose, shares
issuable to such person upon conversion of convertible securities or exercise
of share subscription warrants are taken into account in determining both the
number of shares held by such holder and the issuers total issued share
capital. Copies of such report must also be furnished to the issuer of such
shares and all Japanese stock exchanges on which the shares are listed or (in
the case of shares traded over-the-counter) the Japan Securities Dealers
Association.

Except for the general limitation under Japanese anti-trust and anti-monopoly
regulations against holding of shares of capital stock of a Japanese
corporation which leads or may lead to a restraint of trade or monopoly, and
except for general limitations under the Commercial Code or Pioneers Articles
of Incorporation on the rights of shareholders applicable regardless of
residence or nationality, there is no limitation under Japanese laws and
regulations applicable to Pioneer or under its Articles of Incorporation on the
rights of non-resident or foreign shareholders to hold the shares of common
stock of Pioneer or exercise voting rights thereon.

There is no provision in Pioneers Articles of Incorporation that would have an
effect of delaying, deferring or preventing a change in control of Pioneer and
that would operate only with respect to merger, consolidation, acquisition or
corporate restructuring involving Pioneer.

C. Material contracts

Pioneer is party to a patent portfolio license, dated July 29, 1999 between
itself as licensee and MPEG LA, L.L.C., as licensing administrator on behalf of
various licensors, in respect of a patent portfolio covering the video data
compression and data transport standard known as the MPEG-2 Standard. The
agreement, which expires in 2004 subject to the right of renewal for successive
periods, establishes the royalty payable by Pioneer and its licensed affiliates
for use of the patent portfolio more fully described in the contract. A copy
of the contract has been filed as an exhibit to this annual report.

D. Exchange controls

The Japanese Foreign Exchange and Foreign Trade Law, currently in effect (the
Law), does not affect or restrict the rights of a non-resident or foreign
corporation to acquire or hold shares of common stock of Pioneer except that
in the event of acquisition of shares of common stock, unless such acquisition
is made through a securities company or other financial institution, the
acquiring non-resident or foreign corporation is subject to a post-transaction
reporting requirement under the Law. However, the Minister of Finance has the
power to impose a licensing requirement in certain acquisitions in extremely
limited circumstances. Under the Law, dividends paid on, and the proceeds of
sales in Japan of, shares of common stock of Pioneer held by non-residents may
in general be converted into any foreign currency and repatriated abroad.

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E. Taxation

The discussion below is not intended to constitute a complete analysis of all
tax consequences relating to the acquisition, ownership and disposition of
shares of common stock and ADSs. Prospective purchasers and holders of the
shares of common stock or ADSs should consult their own tax advisors concerning
the tax consequences of their particular situations.

The following is a general summary of the principal U.S. federal and Japanese
tax consequences of the acquisition, ownership and disposition of shares of
common stock or ADSs by an investor that holds those shares or ADSs, as capital
assets (generally, property held for investment). This summary does not
purport to address all material tax consequences that may be relevant to
holders of shares of common stock or ADSs, and does not take into account the
specific circumstances of any particular investors, some of which (such as
tax-exempt entities, banks, insurance companies, broker-dealers, investors
liable for alternative minimum tax, investors that own or are treated as owning
10% or more of our voting stock, investors that hold shares of common stock or
ADSs as part of a straddle, hedge, conversion transaction or other integrated
transaction, persons that hold shares of common stock or ADSs through a
partnership or other pass-through entity and investors whose functional
currency is not the U.S. dollar) may be subject to special tax rules. This
summary is based on the tax laws of the United States as in effect on the date
hereof, as well as on the current income tax convention between the United
States and Japan (the Treaty), all of which are subject to change (possibly
with retroactive effect), and to differing interpretations. The discussion on
the tax laws of Japan below reflects certain amendment to certain Japanese tax
laws, which will become effective on October 1, 2001, along with the amendment
to the Commercial Code of Japan. In this regard, U.S. holders should note that
the United States and Japan recently announced that they will begin formal
renegotiation of the Treaty, commencing October 2001. In addition, this
summary is based in part upon the representations of the depositary and the
assumption that each obligation in the deposit agreement referred to in Item
12. Description of Securities Other than Equity SecuritiesDescription of the
American Depositary Shares, and in any related agreement, will be performed in
accordance with its terms.

For purposes of this discussion, a U.S. Holder is any beneficial owner of
shares of common stock or ADSs that is:



| |  | an individual citizen or resident of the United States,                                                                                                                                                                   
|- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| 
| |  | a corporation or other entity taxable as a corporation organized under the laws of the United States
or any State,                                                                                                        
| 
| |  | an estate the income of which is subject to U.S. federal income tax without regard to its source, or                                                                                                                      
| 
| |  | a trust that is subject to the primary supervision of a U.S. court and the control of one or more U.S.
persons, or that has a valid election in effect under applicable
Treaty regulations to be treated as
a U.S. person.

69



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An Eligible U.S. Holder is a U.S. Holder that:



| |  | is a resident of the United States for purposes of the Treaty,                                                                                                                                                                                                                                      
|- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| 
| |  | does not maintain a permanent establishment or fixed base in Japan to which shares of common stock or
ADSs are attributable and through which the U.S. Holder carries on or has carried on business (or, in
the case of an individual, performs or has performed independent personal services), and
| 
| |  | is not otherwise ineligible for benefits under the Treaty with respect to income and gain derived in
connection with the shares of common stock or ADSs.                                                                                                                                            

A Non-U.S. Holder is any beneficial owner of shares of common stock or ADSs
that is not a U.S. Holder.

This summary does not address any aspects of U.S. federal tax law other
than income taxation, and does not discuss any aspects of Japanese tax law
other than income taxation, inheritance and gift taxation and securities
transfer taxation. Investors are urged to consult their tax advisor regarding
the U.S. federal, state and local and Japanese and other tax consequences of
acquiring, owning and disposing of shares of common stock or ADSs. In
particular, where relevant, investors are urged to confirm their status as
Eligible U.S. Holders with their tax advisors and to discuss with their tax
advisors any possible consequences of their failure to qualify as Eligible U.S.
Holders. In general, taking into account the earlier assumptions, for purposes
of the Treaty and for U.S. federal income and Japanese tax purposes, owners of
ADRs evidencing ADSs will be treated as the owners of the shares of common
stock represented by those ADSs, and exchanges of shares of common stock for
ADSs, and exchanges of ADSs for shares of common stock, will not be subject to
U.S. federal income or Japanese tax.

Japanese taxation

Generally, a non-resident of Japan or a non-Japanese corporation is subject to
Japanese withholding tax on dividends paid by a Japanese corporation. Stock
splits in themselves are not subject to Japanese income tax.

In the absence of an applicable tax treaty, convention or agreement reducing
the maximum rate of withholding tax, the rate of Japanese withholding tax
applicable to dividends paid by Japanese corporations to non-residents of Japan
or non-Japanese corporations is 20%. At the date of this document,
Japan has income tax treaties, conventions or agreements whereby the
withholding tax rate is reduced, in most cases, to 15 percent for portfolio
investors with, among other countries, Australia, Belgium, Canada, Denmark,
Finland, France, Germany, Ireland, Italy, Luxembourg, The Netherlands, New
Zealand, Norway, Singapore, Spain, Sweden, Switzerland, the United Kingdom and
the United States.

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Under the Treaty, as currently in force, the maximum rate of Japanese
withholding tax which may be imposed on dividends paid by a Japanese
corporation to Eligible U.S. Holders generally is limited to 15% of the
gross amount actually distributed. An Eligible U.S. Holder is required to
submit an Application Form for Income Tax Convention Regarding Relief from
Japanese Income Tax on Dividends in advance through Pioneer to the relevant tax
authority before such payment of dividends. A standing proxy in Japan for a
non-resident holder of common stock may provide this application service. With
respect to ADRs, the Depositary or its agent will apply for this reduced rate
on behalf of Eligible U.S. Holders by submitting two Application Forms (one
before payment of dividends, the other within eight months after Pioneers
fiscal year-end) to the Japanese tax authorities. To claim this reduced rate,
an Eligible U.S. Holder of ADRs will be required to file a proof of taxpayer
status, residence and beneficial ownership (as applicable) and to provide other
information or documents as may be required by the Depositary. An Eligible
U.S. Holder who does not submit an application in advance will be entitled to
claim the refund of withholding taxes withheld in excess of the rate under the
Treaty from the relevant Japanese tax authority.

If Pioneer purchases shares of its common stock by way of a tender offer,
individual shareholders who sold the shares to Pioneer in such tender offer and
who are residents of Japan or non-residents of Japan having a permanent
establishment within Japan, if such purchases are made on or before March 31,
2002, will be subject to Japanese taxation applicable to gains realized by
individuals from sales of shares  26 percent separate taxation upon filing tax
returns (although up to March 31, 2003, the taxpayers may choose
a 1.05%
withholding tax on the gross sales proceeds). However, this is an interim
measure applicable to the period ending March 31, 2002, and after such date,
unless the present treatment is extended, a similar treatment as those
currently applicable to foreign corporations having a permanent establishment
within Japan as discussed in the next sentence will be applicable. If the
sellers are foreign corporations having a permanent establishment within Japan,
the portion of the proceeds received from Pioneer corresponding to the excess
over the aggregate of the portions attributable to stated capital and
additional paid-in capital will be deemed dividends and subject to taxation on
dividends and the rest of the net proceeds will be subject to taxation
treatment on gains realized from sales of shares. For non-resident individuals
having no permanent establishment within Japan, no Japanese income tax will
accrue, except in certain exceptional circumstances. For foreign corporations
having no permanent establishment within Japan, the portion of the proceeds
received from Pioneer which is deemed dividends as discussed in the third
sentence of this paragraph will be subject to withholding tax
(generally 20%, subject to applicable income tax treaty provisions); otherwise, except
in certain exceptional cases, no further Japanese tax will be imposed.

Gains derived by a non-resident of Japan or a non-Japanese corporation from the
sale of shares of common stock or ADRs outside Japan or from the sale of shares
of common stock within Japan by a non-resident of Japan or a non-Japanese
corporation not having a permanent establishment in Japan, are in general not
subject to Japanese income or corporation tax.

Japanese inheritance or gift tax at progressive rates may be payable by an
individual who has acquired shares of common stock or ADRs as a legatee, heir
or donee even though neither the individual nor the deceased nor donor is a
Japanese resident.

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U.S. federal income taxation

U.S. Holders

Subject to the passive foreign investment company rules discussed below, under
U.S. federal income tax law, the gross amount of any distribution made by us in
respect of shares of common stock or ADSs (without reduction for Japanese
withholding taxes) will constitute a taxable dividend to the extent paid out of
current or accumulated earnings and profits, as determined for U.S. federal
income tax purposes. A dividend generally will be included in the gross income
of a U.S. Holder, as ordinary income, when the dividend is actually or
constructively received by the U.S. Holder in the case of shares of common
stock, or by the depositary, in the case of ADSs. The dividend will not be
eligible for the dividends received deduction generally allowed to U.S.
corporations. A dividend paid in yen will be included in gross income in a
U.S. dollar amount based on the yen/U.S. dollar exchange rate in effect on the
date that dividend is included in the income of the U.S. Holder, regardless of
whether the payment is converted into dollars. Generally, any gain or loss
resulting from currency exchange fluctuations during the period from the date
the dividend payment is included in the gross income of a U.S. Holder through
the date that payment is converted into U.S. dollars (or otherwise disposed of)
will be treated as U.S. source ordinary income or loss.

To the extent, if any, that the amount of any distribution received by a U.S.
Holder in respect of shares of common stock or ADSs exceeds our current and
accumulated earnings and profits, the distribution first will be treated as a
tax-free return of the U.S. Holders adjusted tax basis in those shares or
ADSs, and any balance in excess of that adjusted tax basis will be treated as
capital gain. We do not expect to compute our earnings and profits under U.S.
federal income tax principles, and therefore holders should assume that our
distributions generally will be treated as paid out of our earnings and profits
for U.S. federal income tax purposes.

Distributions of additional shares of common stock that are made to U.S.
Holders with respect to their shares of common stock or ADSs and that are part
of a pro rata distribution to all our shareholders, generally will not be
subject to U.S. federal income tax.

For U.S. foreign tax credit purposes, dividends included in gross income by a
U.S. Holder in respect of shares of common stock or ADSs will constitute income
from sources outside the United States, and generally will be treated
separately, together with other items of passive income (or, in the case of
some holders, financial services income) in computing foreign tax credit
limitations. Subject to generally applicable limitations under U.S. federal
income tax law and the Treaty, any Japanese withholding tax imposed in respect
of a Pioneer dividend may be claimed as a credit against the U.S. federal
income tax liability of a U.S. Holder, or as a deduction from that holders
taxable income. Additionally, special rules apply to individuals whose foreign
source income during the taxable year consists entirely of qualified passive
income and whose creditable foreign taxes paid or accrued during the taxable
year do not exceed $300 ($600 in the case of a joint return). Further, under
some circumstances, a U.S. Holder that:



| |  | has held shares of common stock or ADSs for less than a specified minimum period, or
|- |  | ------------------------------------------------------------------------------------
| 
| |  | is obligated to make payments related to our dividends,                             

will not be allowed a foreign tax credit for
foreign taxes imposed on Pioneer dividends. Finally, foreign tax credits may not be allowed in respect of
arrangements in which the U.S. Holders expected economic return, after non-U.S.
taxes, is insubstantial. U.S. Holders are urged to consult their tax advisors
regarding the availability of the foreign tax credit under their particular
circumstances.

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In general, subject to the passive foreign investment company rules discussed
below, upon a sale or other disposition of shares of common stock or ADSs, a
U.S. Holder will recognize gain or loss for U.S. federal income tax purposes in
an amount equal to the difference between the amount realized and the U.S.
Holders tax basis in those shares or ADSs. That gain or loss generally will
be capital gain or loss and, if the U.S. Holders holding period for those
shares or ADSs exceeds one year, will be long-term capital gain or loss. Some
U.S. Holders, including individuals, are eligible for preferential rates of
U.S. federal income tax in respect of net long-term capital gain. Under U.S.
federal tax law, the deduction of capital losses is subject to limitations.
Any gain or loss recognized by a U.S. Holder in respect of the sale or other
disposition of shares of common stock or ADSs generally will be treated as U.S.
source income or loss for foreign U.S. tax credit purposes.

We do not believe that we are, for U.S. federal income tax purposes, a
passive foreign investment company (a PFIC), and intend to continue our
operations in such a manner that we will not become a PFIC in the future. The
PFIC determination is made annually and is based on the value of our assets
(including goodwill) and composition of income. If we become a PFIC, unless a
U.S. Holder elects to be taxed annually on a mark-to-market basis with respect
to his/her shares of common stock or ADSs, any gain realized on a sale or other
disposition of shares of common stock or ADSs and certain excess
distributions would be treated as realized ratably over the U.S. Holders
holding period for the shares of common stock or ADSs and for amounts allocated
to years during or after which we are a PFIC, would be taxed at the highest tax
rate in effect for each such year to which the gain or excess distribution was
allocated, together with an interest charge in respect of the tax attributable
to each such year. Any U.S. Holder who owns shares of common stock or ADSs
during any year that we are a PFIC would be required to file Internal Revenue
Service Form 8621.

Non-U.S. Holders

Distributions received by a Non-U.S. Holder in respect of shares of common
stock or ADSs generally will not be subject to any U.S. federal income or
withholding tax, unless the Non-U.S. Holder conducts a trade or business within
the United States and the distributions are effectively connected with that
trade or business.

A Non-U.S. Holder generally will not be subject to U.S. federal income tax in
respect of gain recognized on a sale or other disposition of shares of common
stock or ADSs, unless the gain is effectively connected with a trade or business
conducted by the Non-U.S. Holder within the United States, or the Non-U.S.
Holder is an individual who was present in the United States for 183 or more
days in the taxable year of the disposition and other conditions are met.

If an income tax treaty applies to a Non-U.S. Holder, it may require, as a
condition for the Non-U.S. Holder to be subject to U.S. federal income taxation
on dividends or capital gains that are effectively connected with trade or
business conducted by a Non-U.S. Holder in the United States, that the
dividends or capital gains be attributable to a permanent establishment or
fixed base that the Non-U.S. Holder maintains in the United States.

Income that is effectively connected with a U.S. trade or business of a
Non-U.S. Holder, and, if an income tax treaty applies and so requires, is
attributable to a U.S. permanent establishment or fixed base of the Non-U.S.
Holder, generally will be taxed in the same manner as the income of a U.S.
Holder. In addition, however, under certain circumstances, such income that is
realized by a corporate Non-U.S. Holder may be subject to an additional branch
profits tax at the rate of 30% or at a lower rate that may be prescribed by an
applicable income tax treaty.

73



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Backup withholding and information reporting

In general, information reporting requirements will apply to dividends on
shares of common stock or ADSs paid to U.S. Holders in the United States or
through certain U.S. related financial intermediaries and to the proceeds
received upon the sale, exchange or redemption of shares of common stock or
ADSs by U.S. Holders within the United States or through certain U.S. related
financial intermediaries. Furthermore, backup withholding may apply to those
amounts if a U.S. Holder fails to provide an accurate tax identification number
or to report interest and dividends required to be shown on its U.S. federal
income tax returns. The amount of backup withholding imposed on a payment to a
U.S. Holder will be allowed as a credit against the holders U.S. federal
income tax liability.

Dividends on shares of common stock or ADSs paid to Non-U.S. Holders and
proceeds received upon the sale, exchange or redemption of shares of common
stock or ADSs by Non-U.S. Holders, generally are exempt from information
reporting and backup withholding. However, a holder may be required to provide
certification of his or her non-U.S. status to obtain that exemption.

F. Dividends and paying agents

Not applicable

G. Statement by experts

Not applicable

H. Documents on display

It is possible to read and copy documents referred to in this annual report on
Form 20-F that have been filed with the SEC at the SECs public reference room
located at 450 Fifth Street, NW, Washington, D.C. 20549.

I. Subsidiary information

Not applicable






Item 11. Quantitative and Qualitative Disclosures About Market Risk

We operate internationally, giving rise to exposure to market risks from
changes in foreign exchange rates and interest rates. In an effort to manage
potential adverse effects caused by market fluctuations in foreign exchange
rates and interest rates, we hedge these market risks by selectively using
derivative financial instruments. However, we do not hedge all of our
exposure, and the extent of hedge as well as type of hedging instruments to be
used depends on factors including, but not limited to, type of risks exposed,
market conditions and hedging cost. We do not hold or issue derivative
financial instruments for trading purposes. To minimize credit risks from
derivative financial instruments, we limit counterparties to reputable
international financial institutions.

Marketable securities held by us are exposed to risk from changes in equity
prices and consist entirely of available-for-sale securities. We do not take
hedging measures against the market exposures on those securities.

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To hedge certain purchase and sale commitments and anticipated but not yet
committed transactions denominated in other than functional currencies, we
enter into forward exchange contracts and purchases and writes currency
options. Written options are entered into only with purchased options.

The following table provides information about our derivative financial
instruments related to foreign currency exchange transactions as of March 31,
2001 and 2000, which have been translated into yen at the rate as of such date,
together with the related weighted average contractual exchange rates at March
31, 2001 and 2000. All of the contracts mature within one year.

March 31, 2001

|                                   |  |         |         |         |  |          |        |        |  |        |        |        |  |       |       |   |  |                                      |        |  |  |  |       |  |  |  |         |  
|---------------------------------- |  | ------- | ------- | ------- |  | -------- | ------ | ------ |  | ------ | ------ | ------ |  | ----- | ----- | - |  | ------------------------------------ | ------ |  |  |  | ----- |  |  |  | ------- | -
|Forward exchange contract          |  |         |         |         |  |          |        |        |  |        |        |        |  |       |       |   |  | Millions of yen except average rates
|                                  
|Functional currency                |  | Yen     |         | THB     |  | Euro     |        | A$     |  | S$     |        |        |  |      
|                                   |  |         |         |         |  |          |        |        |  |        |        |        |  |      
|Sell/Buy                           |  | US$/Yen |         | THB/US$ |  | Euro/Yen |        | A$/Yen |  | A$/US$ |        | US$/S$ |  | Total
|                                  
|Contract amounts                   |  |         | ¥11,647 |         |  |          | ¥32    |        |  |        | ¥7,544 |        |  |       | ¥301  |   |  |                                      | ¥186   |  |  |  | ¥123  |  |  |  | ¥19,833 |  
|                                  
|                                  
|                                  
|                                  
|Average contractual
exchange rates |  |         | 115.37  |         |  |          | 36.429 |        |  |        | 107.01 |        |  |       | 59.98 |   |  |                                      | 0.5158 |  |  |  | 1.795 |  |  |  |         |  
|                                  
|                                  
|                                  
|                                  
|Fair value                         |  |         | ¥(660   | )       |  |          | ¥1     |        |  |        | ¥(86   | )      |  |       | ¥(1   | ) |  |                                      | ¥9     |  |  |  | ¥0    |  |  |  | ¥(737   | )
|                                  
|                                  

|                       |  |         |        |         |  |        |         |        |  |                                      |      |   |  |  |      |  |  |  |        | 
|---------------------- |  | ------- | ------ | ------- |  | ------ | ------- | ------ |  | ------------------------------------ | ---- | - |  |  | ---- |  |  |  | ------ | 
|Currency option        |  |         |        |         |  |        |         |        |  | Millions of yen except average rates
|                      
|Functional currency    |  | Yen     |        | A$      | 
|                       |  |         |        |        
|Sell/Buy               |  | US$/Yen |        | Yen/US$ |  | A$/US$ |         | US$/A$ |  | Total                               
|                      
|Notional amount        |  |         | ¥1,487 |         |  |        | ¥1,486  |        |  |                                      | ¥434 |   |  |  | ¥434 |  |  |  | ¥3,841 | 
|                      
|                      
|                      
|                      
|Average execution rate |  |         | 119.30 |         |  |        | 0.00838 |        |  |                                      | 0.55 |   |  |  | 0.58 |  |  |  |        | 
|                      
|                      
|                      
|                      
|Fair value             |  |         | ¥(6    | )       |  |        | ¥(8     | )      |  |                                      | ¥(46 | ) |  |  | ¥67  |  |  |  | ¥7     | 
|                      
|                      

|                                   |  |         |        |         |  |          |         |        |  |                                      |        |       |  |  |       |  |  |  |        |  |  |  |         | 
|---------------------------------- |  | ------- | ------ | ------- |  | -------- | ------- | ------ |  | ------------------------------------ | ------ | ----- |  |  | ----- |  |  |  | ------ |  |  |  | ------- | 
|March 31, 2000                    
|                                  
|Forward exchange contract          |  |         |        |         |  |          |         |        |  | Millions of yen except average rates
|                                  
|Functional currency                |  | Yen     |        | Euro    |  | A$       |         |        |  |                                     
|                                   |  |         |        |         |  |         
|Sell/Buy                           |  | US$/Yen |        | Yen/US$ |  | Euro/Yen |         | A$/Yen |  | A$/US$                               |        | Total
|                                  
|Contract amounts                   |  |         | ¥5,658 |         |  |          | ¥2,582  |        |  |                                      | ¥4,290 |       |  |  | ¥77   |  |  |  | ¥183   |  |  |  | ¥12,790 | 
|                                  
|                                  
|                                  
|                                  
|Average contractual
exchange rates |  |         | 106.43 |         |  |          | 0.00937 |        |  |                                      | 106.46 |       |  |  | 66.96 |  |  |  | 0.6616 |  |  |  |         | 
|                                  
|                                  
|                                  
|                                  
|Fair value                         |  |         | ¥79    |         |  |          | (¥103   | )      |  |                                      | ¥212   |       |  |  | ¥5    |  |  |  | ¥13    |  |  |  | ¥206    | 
|                                  
|                                  

|                       |  |         |        |         |  |        |         |        |  |         |       |       |  |                                      |      |  |  |  |      |  |  |  |        | 
|---------------------- |  | ------- | ------ | ------- |  | ------ | ------- | ------ |  | ------- | ----- | ----- |  | ------------------------------------ | ---- |  |  |  | ---- |  |  |  | ------ | 
|Currency option        |  |         |        |         |  |        |         |        |  |         |       |       |  | Millions of yen except average rates
|                      
|Functional currency    |  | Yen     |        | A$      |  |        |         |       
|                       |  |         |        |        
|Sell/Buy               |  | US$/Yen |        | Yen/US$ |  | Yen/A$ |         | A$/US$ |  | Euro/A$ |       | Total
|                      
|Notional amount        |  |         | ¥2,452 |         |  |        | ¥1,226  |        |  |         | ¥506  |       |  |                                      | ¥159 |  |  |  | ¥28  |  |  |  | ¥4,371 | 
|                      
|                      
|                      
|                      
|Average execution rate |  |         | 106.21 |         |  |        | 0.00942 |        |  |         | 73.56 |       |  |                                      | 0.66 |  |  |  | 0.62 |  |  |  |        | 
|                      
|                      
|                      
|                      
|Fair value             |  |         | ¥19    |         |  |        | ¥26     |        |  |         | ¥26   |       |  |                                      | ¥9   |  |  |  | ¥0   |  |  |  | ¥80    | 
|                      

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To change the currency and interest rate features of intercompany finance
transactions, we have entered into currency swap contracts with banks.
Currency swap contracts effectively changed, in substance, U.S. dollars
floating interest rate intercompany borrowings into yen fixed interest rate
borrowings and Euro/Belgian franc floating interest rate borrowings. The
foreign exchange risk inherent in our currency swap as of March 31, 2001 and
2000 is summarized as follows:

|                                   |                                   |        |                  |        |                        |        |         |  |         |                               |                        |        |            |  |         |        |         |  |      |  |          |  |  |  | 
|---------------------------------- | --------------------------------- | ------ | ---------------- | ------ | ---------------------- | ------ | ------- |  | ------- | ----------------------------- | ---------------------- | ------ | ---------- |  | ------- | ------ | ------- |  | ---- |  | -------- |  |  |  | 
|Currency swap as of March 31, 2001 |                                   |        |                  |        |                        |        |         |  |         | Millions except average rates
|                                  
|                                   |                                   |        |                  |        |                        |        |         |  |         |                               | Expected maturity date |        |            |  |        
|                                   |                                   |        | Contract amounts |        | (year ending March 31) |        |         |  |        
|                                   |                                   |        |                  |        |                        |        |         |  |        
|                                   |                                   |        | Sell             |        | Buy                    |        | 2002    |  | 2003    |                               | Total                  |        | Fair value
|                                  
|Functional currency: Yen           |                                   |        | ¥17,193          |        |                        | US$150 |         |  | ¥11,300 |                               |                        |        | ¥5,893     |  |         |        | ¥17,193 |  |      |  | ¥1,673   | 
|                                  
|                                  
|                                  
|                                  
|                                   | Average contractual exchange rate |        |                  |        |                        |        |         |  |         |                               |                        | 113.54 |            |  |         | 117.85 |         |  |      |  |          |  |  |  | 
|                                  
|                                  
|                                  
|                                  
|Functional currency: Euro          |                                   | EUR110 |                  | US$100 |                        |        | ¥12,016 |  |         |                               |                        |        |            |  | ¥12,016 |        |         |  | ¥367 | 
|                                  
|                                  
|                                  
|                                  
|                                   | Average contractual exchange rate |        |                  |        |                        |        |         |  |         |                               |                        | 0.91   |            |  |         |        |         |  |      |  |          |  |  |  | 
|                                  
|                                  
|Currency
swap as of March 31, 2000 |                                   |        |                  |        |                        |        |         |  |         | Millions except average rates
|                                  
|                                   |                                   |        |                  |        |                        |        |         |  |         |                               | Expected maturity date |        |            |  |        
|                                   |                                   |        | Contract amounts |        | (year ending March 31) |        |         |  |        
|                                   |                                   |        |                  |        |                        |        |         |  |        
|                                   |                                   |        | Sell             |        | Buy                    |        | 2001    |  | 2002    |                               | Total                  |        | Fair value
|                                  
|Functional currency: Yen           |                                   |        | ¥21,676          |        |                        | US$190 |         |  | ¥10,376 |                               |                        |        | ¥11,300    |  |         |        | ¥21,676 |  |      |  | ¥(1,324) | 
|                                  
|                                  
|                                  
|                                  
|                                   | Average contractual exchange rate |        |                  |        |                        |        |         |  |         |                               |                        | 115.55 |            |  |         | 113.54 |         |  |      |  |          |  |  |  | 
|                                  
|                                  
|                                  
|                                  
|Functional currency: Euro          |                                   | EUR50  |                  | US$50  |                        |        | ¥5,056  |  |         |                               |                        |        |            |  | ¥5,056  |        |         |  | ¥286 | 
|                                  
|                                  
|                                  
|                                  
|                                   | Average contractual exchange rate |        |                  |        |                        |        |         |  |         |                               |                        | 1.01   |            |  |         |        |         |  |      |  |          |  |  |  | 
|                                  

With respect to interest rate risk inherent in our currency swaps as of March
31, 2001 and 2000, see Item 11. Quantitative and
Qualitative Disclosures About Market RiskInterest rate
risk.

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Interest rate risk

Interest rate risk inherent in the aforementioned currency swaps as of March
31, 2001 and 2000 is summarized as follows:

|                                                                      |  |        |                  |        |                        |        |         |  |         |                               |                        |      |            |  |         |      |         |  |      |  |         |   |  | 
|--------------------------------------------------------------------- |  | ------ | ---------------- | ------ | ---------------------- | ------ | ------- |  | ------- | ----------------------------- | ---------------------- | ---- | ---------- |  | ------- | ---- | ------- |  | ---- |  | ------- | - |  | 
|Currency swap as of March 31, 2001                                    |  |        |                  |        |                        |        |         |  |         | Millions except average rates
|                                                                     
|                                                                      |  |        |                  |        |                        |        |         |  |         |                               | Expected maturity date |      |            |  |        
|                                                                      |  |        | Contract amounts |        | (year ending March 31) |        |         |  |        
|                                                                      |  |        |                  |        |                        |        |         |  |        
|                                                                      |  |        | Sell             |        | Buy                    |        | 2002    |  | 2003    |                               | Total                  |      | Fair value
|                                                                     
|Functional
currency: Yen
Variable (US$) to Fixed (Yen)                |  |        | ¥17,193          |        |                        | US$150 |         |  | ¥11,300 |                               |                        |      | ¥5,893     |  |         |      | ¥17,193 |  |      |  | ¥1,673  |  
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|Average pay rate                                                      |  |        |                  |        |                        |        |         |  |         |                               |                        | 0.39 | %          |  |         | 0.43 | %       |  |      |  |         |   |  | 
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|Average receive rate                                                  |  |        |                  |        |                        |        |         |  |         |                               |                        | 6.11 | %          |  |         | 5.45 | %       |  |      |  |         |   |  | 
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|Functional
currency: Euro
Variable (US$) to Variable (Euro)           |  | EUR110 |                  | US$100 |                        |        | ¥12,016 |  |         |                               |                        |      |            |  | ¥12,016 |      |         |  | ¥367 | 
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|Average pay rate                                                      |  |        |                  |        |                        |        |         |  |         |                               |                        | 4.93 | %          |  |         |      |         |  |      |  |         |   |  | 
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|Average receive rate                                                  |  |        |                  |        |                        |        |         |  |         |                               |                        | 5.53 | %          |  |         |      |         |  |      |  |         |   |  | 
|                                                                     
|                                                                     
|Currency swap as of March 31, 2000                                    |  |        |                  |        |                        |        |         |  |         | Millions except average rates
|                                                                     
|                                                                      |  |        |                  |        |                        |        |         |  |         |                               | Expected maturity date |      |            |  |        
|                                                                      |  |        | Contract amounts |        | (year ending March 31) |        |         |  |        
|                                                                      |  |        |                  |        |                        |        |         |  |        
|                                                                      |  |        | Sell             |        | Buy                    |        | 2001    |  | 2002    |                               | Total                  |      | Fair value
|                                                                     
|Functional
currency: Yen
Variable (US$) to Fixed (Yen)                |  |        | ¥21,676          |        |                        | US$190 |         |  | ¥10,376 |                               |                        |      | ¥11,300    |  |         |      | ¥21,676 |  |      |  | ¥(1,324 | )
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|Average
pay rate                                                      |  |        |                  |        |                        |        |         |  |         |                               |                        | 0.55 | %          |  |         | 0.40 | %       |  |      |  |         |   |  | 
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|Average receive rate                                                  |  |        |                  |        |                        |        |         |  |         |                               |                        | 6.26 | %          |  |         | 6.15 | %       |  |      |  |         |   |  | 
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|Functional
currency: Belgian Francs
Variable (US$) to Variable (Euro) |  | EUR50  |                  | US$50  |                        |        | ¥5,056  |  |         |                               |                        |      |            |  | ¥5,056  |      |         |  | ¥286 | 
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|Average pay rate                                                      |  |        |                  |        |                        |        |         |  |         |                               |                        | 3.95 | %          |  |         |      |         |  |      |  |         |   |  | 
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|Average receive rate                                                  |  |        |                  |        |                        |        |         |  |         |                               |                        | 5.81 | %          |  |         |      |         |  |      |  |         |   |  | 
|                                                                     

As a partial hedge of our variable interest rate debt, we entered into an
interest rate swap agreement during fiscal 2000. The purpose of the swap is to
fix the interest rate on variable rate debt and reduce certain exposures to
interest rate fluctuations. The information related to the interest rate swap
as of March 31, 2000 is as follows:

|                                        |  |  |                  |      |                        |  |                                      |      |      |  |                        |  |            |  |  |        |  |  |  |        |  |  |  |   |    
|--------------------------------------- |  |  | ---------------- | ---- | ---------------------- |  | ------------------------------------ | ---- | ---- |  | ---------------------- |  | ---------- |  |  | ------ |  |  |  | ------ |  |  |  | - | ---
|Interest rate swap as of March 31, 2000 |  |  |                  |      |                        |  | Millions of yen except average rates
|                                       
|                                        |  |  |                  |      |                        |  |                                      |      |      |  | Expected maturity date |  |            |  | 
|                                        |  |  | Contract amounts |      | (year ending March 31) |  |                                      |      |     
|                                        |  |  |                  |      |                        |  |                                      |      |     
|                                        |  |  | Pay              |      | Receive                |  | 2001                                 |      | 2002 |  | Total                  |  | Fair value
|                                       
|Variable to fixed (Yen)                 |  |  |                  | 1.57 | %                      |  |                                      | 0.92 | %    |  |                        |  |            |  |  | ¥1,000 |  |  |  | ¥1,000 |  |  |  | ¥ | (9)
|                                       

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Principal cash flows by expected maturity dates, weighted average interest
rates, and fair value of our debt obligations as of March 31, 2001 and 2000 are
as follows:

|                                                                    |                       |                                      |  |            |        |                                               |        |      |       |      |       |      |       |      |       |            |       |       |       |            |        |  |        |      |        |  |        |      |         |  |         |      |         |  |         |  |  | 
|------------------------------------------------------------------- | --------------------- | ------------------------------------ |  | ---------- | ------ | --------------------------------------------- | ------ | ---- | ----- | ---- | ----- | ---- | ----- | ---- | ----- | ---------- | ----- | ----- | ----- | ---------- | ------ |  | ------ | ---- | ------ |  | ------ | ---- | ------- |  | ------- | ---- | ------- |  | ------- |  |  | 
|Long-term debt (including due within one year) as of March 31, 2001 |                       | Millions of yen except average rates
|                                                                   
|                                                                    |                       |                                      |  |            |        | Expected maturity date (year ending March 31) |        |      |       |     
|                                                                    |                       |                                      |  | Functional |        |                                               |        |      |       |     
|                                                                    |                       |                                      |  | Currency   |        | 2002                                          |        | 2003 |       | 2004 |       | 2005 |       | 2006 |       | Thereafter |       | Total |       | Fair value
|                                                                   
|Fixed rate (Yen)                                                    |                       | Yen                                  |  |            | ¥7,560 |                                               |        |      | 2,412 |      |       |      | 1,556 |      |       |            | 5,796 |       |       |            | 15,306 |  |        |      | 12,262 |  |        |      | ¥44,892 |  |         |      | ¥46,492 | 
|                                                                   
|                                                                   
|                                                                   
|                                                                   
|                                                                    | Average interest rate |                                      |  |            |        |                                               |        | 1.77 | %     |      |       | 2.37 | %     |      |       | 3.09       | %     |       |       | 3.91       | %      |  |        | 2.38 | %      |  |        | 2.99 | %       |  |         | 2.65 | %       |  |         |  | 
|                                                                   
|                                                                   
|                                                                   
|                                                                   
|Variable rate (US$)                                                 |                       | US$                                  |  |            |        |                                               |        |      |       |      |       |      |       |      |       |            |       |       |       |            | 620    |  |        |      |        |  |        |      | 620     |  |         |      | 620     | 
|                                                                   
|                                                                   
|                                                                   
|                                                                   
|                                                                    | Average interest rate |                                      |  |            |        |                                               |        |      |       |      |       |      |       |      |       |            |       |       |       |            |        |  |        | 4.47 | %      |  |        |      |         |  |         | 4.47 | %       |  |         |  | 
|                                                                   
|                                                                   
|                                                                   
|                                                                   
|Interest
free loan (PTE)                                            |                       | PTE                                  |  |            | 82     |                                               |        |      | 41    |      |       |      |       |      |       |            |       |       |       |            |        |  |        |      |        |  |        |      | 123     |  |         |      | 123     | 
|                                                                   
|                                                                   
|                                                                   
|                                                                   
|Total                                                               |                       |                                      |  |            |        |                                               | ¥7,642 |      |       |      | 2,453 |      |       |      | 1,556 |            |       |       | 5,796 |            |        |  | 15,926 |      |        |  | 12,262 |      |         |  | ¥45,635 |      |         |  | ¥47,235 | 
|                                                                   

|                                                                    |                       |                                      |  |            |         |                                               |         |      |       |      |       |      |       |      |       |            |       |       |       |            |       |  |       |      |        |  |        |      |         |  |         |      |         |  |         |  |  | 
|------------------------------------------------------------------- | --------------------- | ------------------------------------ |  | ---------- | ------- | --------------------------------------------- | ------- | ---- | ----- | ---- | ----- | ---- | ----- | ---- | ----- | ---------- | ----- | ----- | ----- | ---------- | ----- |  | ----- | ---- | ------ |  | ------ | ---- | ------- |  | ------- | ---- | ------- |  | ------- |  |  | 
|Long-term debt (including due within one year) as of March 31, 2000 |                       | Millions of yen except average rates
|                                                                   
|                                                                    |                       |                                      |  |            |         | Expected maturity date (year ending March 31) |         |      |       |     
|                                                                    |                       |                                      |  | Functional |         |                                               |         |      |       |     
|                                                                    |                       |                                      |  | Currency   |         | 2001                                          |         | 2002 |       | 2003 |       | 2004 |       | 2005 |       | Thereafter |       | Total |       | Fair value
|                                                                   
|Fixed rate (Yen)                                                    |                       | Yen                                  |  |            | ¥36,445 |                                               |         |      | 6,806 |      |       |      | 2,656 |      |       |            | 1,556 |       |       |            | 6,296 |  |       |      | 27,592 |  |        |      | ¥81,351 |  |         |      | ¥82,539 | 
|                                                                   
|                                                                   
|                                                                   
|                                                                   
|                                                                    | Average interest rate |                                      |  |            |         |                                               |         | 2.13 | %     |      |       | 1.98 | %     |      |       | 2.32       | %     |       |       | 3.09       | %     |  |       | 3.91 | %      |  |        | 2.65 | %       |  |         | 2.46 | %       |  |         |  | 
|                                                                   
|                                                                   
|                                                                   
|                                                                   
|Variable rate (Yen)                                                 |                       | Yen                                  |  |            |         |                                               |         |      | 1,000 |      |       |      |       |      |       |            |       |       |       |            |       |  |       |      |        |  |        |      | 1,000   |  |         |      | 994     | 
|                                                                   
|                                                                   
|                                                                   
|                                                                   
|                                                                    | Average interest rate |                                      |  |            |         |                                               |         |      |       |      |       | 0.92 | %     |      |       |            |       |       |       |            |       |  |       |      |        |  |        |      |         |  |         | 0.92 | %       |  |         |  | 
|                                                                   
|                                                                   
|                                                                   
|                                                                   
|Variable rate (US$)                                                 |                       | US$                                  |  |            |         |                                               |         |      |       |      |       |      |       |      |       |            |       |       |       |            |       |  |       |      | 531    |  |        |      | 531     |  |         |      | 531     | 
|                                                                   
|                                                                   
|                                                                   
|                                                                   
|                                                                    | Average interest rate |                                      |  |            |         |                                               |         |      |       |      |       |      |       |      |       |            |       |       |       |            |       |  |       |      |        |  |        | 4.70 | %       |  |         | 4.70 | %       |  |         |  | 
|                                                                   
|                                                                   
|                                                                   
|                                                                   
|Variable rate (Others)                                              |                       | Others                               |  |            | 342     |                                               |         |      |       |      |       |      |       |      |       |            |       |       |       |            |       |  |       |      |        |  |        |      | 342     |  |         |      | 342     | 
|                                                                   
|                                                                   
|                                                                   
|                                                                   
|                                                                    | Average interest rate |                                      |  |            |         |                                               |         | 6.94 | %     |      |       |      |       |      |       |            |       |       |       |            |       |  |       |      |        |  |        |      |         |  |         | 6.94 | %       |  |         |  | 
|                                                                   
|                                                                   
|                                                                   
|                                                                   
|Interest
free loan (PTE)                                            |                       | PTE                                  |  |            | 76      |                                               |         |      | 76    |      |       |      | 38    |      |       |            |       |       |       |            |       |  |       |      |        |  |        |      | 190     |  |         |      | 190     | 
|                                                                   
|                                                                   
|                                                                   
|                                                                   
|Total                                                               |                       |                                      |  |            |         |                                               | ¥36,863 |      |       |      | 7,882 |      |       |      | 2,694 |            |       |       | 1,556 |            |       |  | 6,296 |      |        |  | 28,123 |      |         |  | ¥83,414 |      |         |  | ¥84,596 | 
|                                                                   

Equity price risk

Our equity investment portfolio consists almost entirely of securities issued
by Japanese companies. At March 31, 2001 and 2000, cost, fair value, and
unrealized holding gains (net) on marketable equity securities are summarized
as follows:

|                               |  |                 |        |      |  |  |        | 
|------------------------------ |  | --------------- | ------ | ---- |  |  | ------ | 
|                               |  | Millions of yen
|                              
|                               |  | 2001            |        | 2000
|                              
|Cost                           |  |                 | ¥9,773 |      |  |  | ¥9,067 | 
|                              
|                              
|                              
|                              
|Fair value                     |  |                 | 23,658 |      |  |  | 31,696 | 
|                              
|                              
|                              
|                              
|Unrealized holding gains (net) |  |                 | 13,885 |      |  |  | 22,629 | 
|                              

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Item 12. Description of Securities Other than Equity Securities

Description of the American Depositary Shares

Citibank, N.A. acts as the depositary bank for our American Depositary Shares.
Citibanks depositary offices are located at 111 Wall Street, New York, New
York 10005. American Depositary Shares are frequently referred to as ADSs
and represent ownership interests in securities that are on deposit with the
custodian. ADSs are normally represented by certificates that are commonly
known as American Depositary Receipts or ADRs. The depositary bank
typically appoints a custodian to safekeep the securities on deposit. In this
case, the custodian is The Bank of Tokyo-Mitsubishi, Ltd., located at 3-2,
Nihombashi Hongoku-cho 1-chome, Chuo-ku, Tokyo 103-0021, Japan.

We appointed Citibank as depositary bank pursuant to a deposit agreement. A
copy of the deposit agreement is on file with the SEC under cover of a
Registration Statement on Form F-6. You may obtain a copy of the deposit
agreement from the SECs Public Reference Room at 450 Fifth Street, N.W.,
Washington, D.C. 20549. Please refer to Registration Number 333-10566, when
retrieving such copy.

We are providing you with a summary description of the material terms of the
ADSs and of your material rights as an owner of ADSs. Please remember that
summaries by their nature lack the precision of the information summarized and
that a holders rights and obligations as an owner of ADSs will be determined
by reference to the terms of the deposit agreement and not by this summary. We
urge you to review the deposit agreement in its entirety.

Each ADS represents the right to receive one share of common stock on deposit
with the custodian, subject to the limitation on the withdrawal of shares of
common stock due to the restriction under Japanese law described
underWithdrawal of shares on cancellation of ADSs below. An ADS will also
represent the right to receive any other property received by the depositary
bank or the custodian on behalf of the owner of the ADS but that has not been
distributed to the owners of ADSs because of legal restrictions or practical
considerations.

If you become an owner of ADSs, you will become a party to the deposit
agreement and therefore will be bound to its terms and to the terms of the ADR
that evidences your ADSs. The deposit agreement and the ADR specify our rights
and obligations as well as your rights and obligations as owner of ADSs and
those of the depositary bank. As an ADS holder you appoint the depositary bank
to act on your behalf in certain circumstances. The deposit agreement and the
ADRs are governed by New York law. However, our obligations to the holders of
shares of common stock will continue to be governed by the laws of Japan, which
may be different from the laws of the United States.

As an owner of ADSs, you may hold your ADSs either by means of an ADR
registered in your name or through a brokerage or safekeeping account. If you
decide to hold your ADSs through your brokerage or safekeeping account, you
must rely on the procedures of your broker or bank to assert your rights as ADS
owner. Please consult with your broker or bank to determine what those
procedures are.

Dividends and distributions

As a holder, you generally have the right to receive the distributions we make
on the securities deposited with the custodian. Your receipt of these
distributions may be limited, however, by practical considerations and legal
limitations. Holders will receive such distributions under the terms of the
deposit agreement in proportion to the number of ADSs held as of a specified
record date.

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Distributions of cash

Whenever we make a cash distribution for the securities on deposit with the
custodian, we will notify the depositary bank and deposit the funds with the
custodian. Upon receipt of such notice and of confirmation of the deposit of
the requisite funds, the depositary bank will arrange for the funds to be
converted into U.S. dollars and for the distribution of the U.S. dollars to the
holders, subject to applicable laws and regulations.

The conversion into U.S. dollars will take place only if practicable and if the
U.S. dollars are transferable to the United States. The amounts distributed to
holders will be net of the fees, expenses, taxes and governmental charges
payable by holders under the terms of the deposit agreement. The depositary
will apply the same method for distributing the proceeds of the sale of any
property (such as undistributed rights) held by the custodian in respect of
securities on deposit.

Distributions of shares

Whenever we make a free distribution of common stock for the securities on
deposit with the custodian, we will notify the depositary bank and deposit the
applicable number of shares of common stock with the custodian. Upon receipt
of notice of such deposit, the depositary bank will either distribute to
holders new ADSs representing the shares of common stock deposited or modify
the ADS-to-common stock ratio, in which case each ADS you hold will represent
rights and interests in the additional share of common stock so deposited.
Only whole new ADSs will be distributed. Fractional entitlements will be sold
and the proceeds of such sale will be distributed as in the case of a cash
distribution. The distribution of new ADSs or the modification of the
ADS-to-common stock ratio upon a distribution of shares of common stock will be
made net of the fees, expenses, taxes and governmental charges payable by
holders under the terms of the deposit agreement. In order to pay such taxes
or governmental charges, the depositary bank may sell all or a portion of the
new shares of common stock so distributed.

No such distribution of new ADSs will be made if it would violate a law (i.e.,
the U.S. securities laws) or if it is not operationally practicable. If the
depositary bank does not distribute new ADSs as described above, it will use
its best efforts to sell the shares of common stock received and will
distribute the proceeds of the sale as in the case of a distribution of cash.

Distributions of rights

Whenever we intend to distribute rights to purchase additional shares of common
stock, we will give prior notice to the depositary bank and we will assist the
depositary bank in determining whether it is lawful and reasonably practicable
to distribute rights to purchase additional ADSs to holders.

The depositary bank will establish procedures to distribute rights to purchase
additional ADSs to holders and to enable such holders to exercise such rights
if it is lawful and reasonably practicable to make the rights available to
holders of ADSs, and if we provide all of the documentation contemplated in the
deposit agreement (such as opinions to address the lawfulness of the
transaction). You may have to pay fees, expenses, taxes and other governmental
charges to subscribe for the new ADSs upon the exercise of your rights. The
depositary bank is not obligated to establish procedures to facilitate the
distribution and exercise by holders of rights to purchase new shares of common
stock other than in the form of ADSs.

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The depositary bank will not distribute the rights to you if:



| |  |  | We do not timely request that the rights be distributed to you
or we request that the rights not be distributed to you; or
| | - |  | --------------------------------------------------------------------------------------------------------------------------
|
| |  |  | We fail to deliver satisfactory documents to the depositary bank; or                                                      
|
| |  |  | It is not reasonably practicable to distribute the rights.                                                                

The depositary bank will sell the rights that are not exercised or not
distributed if such sale is lawful and reasonably practicable. The proceeds of
such sale will be distributed to holders as in the case of a cash
distribution. If the depositary bank is unable to make any rights available to
holders or to sell the rights, it will allow the rights to lapse.

Other distributions

Whenever we intend to distribute property other than cash, shares of common
stock or rights to purchase additional shares of common stock, we will notify
the depositary bank in advance and will indicate whether we wish such
distribution to be made to you. If so, we will assist the depositary bank in
determining whether such distribution to holders is lawful and reasonably
practicable.

If it is reasonably practicable to distribute such property to you and if we
provide all of the documentation contemplated in the deposit agreement, the
depositary bank will distribute the property to the holders in proportion to
the number of ADSs held by them and in a manner it deems practicable.

The distribution will be made net of fees, expenses, taxes and governmental
charges payable by holders under the terms of the deposit agreement. In order
to pay such taxes and governmental charges, the depositary bank may sell all or
a portion of the property received.

The depositary bank will not distribute the property to you and will sell the
property if:



| |  |  | We do not request that the property be distributed to you or if
we ask that the property not be distributed to you; or
| | - |  | ----------------------------------------------------------------------------------------------------------------------
|
| |  |  | We do not deliver satisfactory documents to the depositary
bank; or                                                   
|
| |  |  | The depositary bank determines that all or a portion of the
distribution to you is not reasonably practicable.        

The proceeds of such a sale will be distributed to holders as in the case of a
cash distribution.

Redemption

Our common stock is not subject to redemption at our option. We may repurchase
our common stock as described under Item 10.B. Memorandum and articles of
associationCommon stockRepurchase by Pioneer of its common stock. If, in
the future, deposited securities include redeemable securities, the following
provisions will apply.

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Whenever we decide to redeem any of the securities on deposit with the
custodian, we will notify the depositary bank. If it is reasonably practicable
and if we provide all of the documentation contemplated in the deposit
agreement, the depositary bank will mail notice of the redemption to the
holders.

The custodian will be instructed to surrender the securities being redeemed for
payment of the applicable redemption price. The depositary bank will convert
the redemption funds received into U.S. dollars under the terms of the deposit
agreement and will establish procedures to enable holders to receive the net
proceeds from the redemption upon surrender of their ADSs to the depositary
bank. You may have to pay fees, expenses, taxes and other governmental charges
upon the redemption of your ADSs. If less than all ADSs are being redeemed,
the ADSs to be retired will be selected by lot or on a pro ratabasis, as the
depositary bank may determine.

Changes affecting common stock

The shares of common stock held on deposit for your ADSs may change from time
to time. For example, there may be a change in nominal or par value, a
split-up, cancellation, consolidation or reclassification of such common stock
or a recapitalization, reorganization, merger, consolidation or sale of assets.

If any such change were to occur, your ADSs would, to the extent permitted by
law, represent the right to receive the securities received in respect of the
common stock held on deposit. The depositary bank may in such circumstances
deliver new ADSs to you or call for the exchange of your existing ADSs for new
ADSs. If the depositary bank may not lawfully distribute such securities to
you, the depositary bank may sell such securities and distribute the net
proceeds to you as in the case of a cash distribution.

Issuance of ADSs upon deposit of common stock

The depositary bank may create ADSs on your behalf if you or your broker
deposits common stock with the custodian by your order. The depositary bank
will deliver these ADSs to the person you indicate only after you pay any
applicable issuance fees and any charges and taxes payable for the transfer of
the shares of common stock to the custodian. Your ability to deposit common
stock and receive ADSs may be limited by U.S. and Japanese legal considerations
applicable at the time of deposit.

The issuance of ADSs may be delayed until the depositary bank or the custodian
receives confirmation that all required approvals have been given and that the
shares of common stock have been duly transferred to the depositary bank or its
nominee or if deposit is made by book-entry transfer, confirmation of such
transfer in the books of the Japan Securities Depository Center. The
depositary bank will only issue ADSs in whole numbers.

When you, or your broker on your behalf, make a deposit of shares of common
stock, you will be responsible for transferring good and valid title to the
depositary bank. As such, you will be deemed to represent and warrant that:



| |  |  | The shares of common stock are duly authorized, validly issued,
fully paid, non-assessable and legally obtained.     
| | - |  | ---------------------------------------------------------------------------------------------------------------------
|
| |  |  | All preemptive (and similar) rights, if any, with respect to
such common stock have been validly waived or exercised.
|
| |  |  | You are duly authorized to deposit the shares of common stock.                                                       

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| |  |  | The shares of common stock presented for deposit are free and
clear of any lien, encumbrance,
security interest, charge, mortgage or adverse claim, and are not, and
the ADSs issuable upon such deposit will not be, restricted securities
(as defined in the deposit agreement).
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | The shares of common stock presented for deposit have not been
stripped of any rights or entitlements.                                                                                                                                                                              

If any of the representations or warranties are incorrect in any way, we and
the depositary bank may, at your cost and expense, take any and all actions
necessary to correct the consequences of the misrepresentations.

Withdrawal of shares on cancellation of ADSs

As a holder, you will be entitled to present your ADSs to the depositary bank
for cancellation and then receive the corresponding number of underlying common
stock. Your ability to withdraw the shares of common stock may be limited by
U.S. and Japanese considerations applicable at the time of withdrawal.
Under the Commercial Code of Japan, as currently in effect, Pioneer is
generally not permitted to issue share certificates representing the number of
shares less than a full unit (currently, 100 shares). Thus, under the
provisions of the deposit agreement, holders of ADSs representing any number
less than a whole unit or any integral multiple thereof may not withdraw that
portion of ADSs representing less than a whole unit of shares. The depositary
bank will promptly notify you of the amount of shares, if any, that are not
deliverable and will deliver to you a new receipt or receipts evidencing such
non-deliverable portion. Trading of such portion of ADSs is possible on the
New York Stock Exchange or over-the-counter market.

In order to withdraw the shares of common stock evidenced by your ADSs, you will
be required to pay to the depositary its fees, charges and expenses for
cancellation of ADSs and the withdrawal of shares of common stock and all
applicable taxes and governmental charges payable in connection with such
surrender and withdrawal. You assume the risk for delivery of all funds and
securities upon withdrawal. Once canceled, the ADSs will not have any rights
under the deposit agreement.

If you hold an ADR registered in your name, the depositary bank may ask you to
provide proof of identity and genuineness of any signature and such other
documents as the depositary bank may deem appropriate before it will cancel
your ADSs. The withdrawal of the shares of common stock represented by your
ADSs may be delayed until the depositary bank receives satisfactory evidence of
compliance with all applicable laws and regulations. Please keep in mind that
the depositary bank will only accept ADSs for cancellation that represent a
whole number of securities on deposit. In addition, as described above, the
depositary bank will cancel ADSs for the withdrawal of shares of common stock
only in an amount representing a whole unit or an integral multiple thereof.

You will have the right to withdraw the securities represented by your ADSs at
any time except for:



| |  |  | Temporary delays that may arise because (i) the transfer books
for the common stock or ADSs are closed, or (ii) shares of common
stock are immobilized on account of a shareholders meeting or a
payment of dividends.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | Obligations to pay fees, taxes and similar charges.                                                                                                                                                                    
|
| |  |  | Restrictions imposed because of laws or regulations applicable
to ADSs or the withdrawal of securities on deposit.                                                                                                     

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The deposit agreement may not be modified to impair your right to withdraw the
securities represented by
your ADSs except to comply with mandatory provisions of law.

Voting rights

As a holder, you generally have the right under the deposit agreement to
instruct the depositary bank to exercise the voting rights for the shares of
common stock represented by your ADSs. The voting rights of holders of common
stock are described in Item 10.B. Memorandum and articles of
associationCommon stockVoting rightsand Unit share system.

At our request, the depositary bank will distribute to you any notice of
shareholders meeting received from us together with information explaining how
to instruct the depositary bank to exercise the voting rights of the securities
represented by ADSs.

If the depositary bank timely receives voting instructions from a holder of
ADSs, it will endeavor to vote the securities represented by the holders ADSs
in accordance with such voting instructions.

Please note that the ability of the depositary bank to carry out voting
instructions may be limited by practical and legal limitations and the terms of
the securities on deposit. We cannot assure you that you will receive voting
materials in time to enable you to return voting instructions to the depositary
bank in a timely manner. In the case of securities for which no voting
instructions have been received in time, you will be deemed to have authorized
and instructed the depositary to give a discretionary proxy to a person
designated by us. We have agreed, notwithstanding anything else contained in
the deposit agreement, however, that we will not knowingly allow any shares of
common stock to be voted without specific instructions if we shall not have
provided notice of the meeting and the reference materials in aid of voting
furnished to our shareholders on a timely basis. Furthermore, no such
discretionary proxy will be given with respect to any matter as to which we
inform the depositary that (i) we do not wish such proxy to be given, (ii)
substantial opposition exists or (iii) your rights will be adversely affected.
In addition, the depositary shall not have any obligation to give such
discretionary proxy if we do not deliver to the depositary an opinion as to
compliance with Japanese law and a representation letter as to the foregoing
items (i) through (iii).

To the extent the aggregate of the ADSs voted for or against a proposal do not
constitute integral multiples of a unit, the remainders in excess of the
highest integral multiple of a unit will be disregarded.

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Fees and charges

As an ADS holder, you will be required to pay the following service fees to the
depositary bank:

|                                                                                  |  |                                           
|--------------------------------------------------------------------------------- |  | ------------------------------------------
|Service                                                                           |  | Fees                                      
|                                                                                  |  |                                           
|Issuance of ADSs                                                                  |  | Up to 5¢ per ADS issued                   
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|Cancellation of ADSs                                                              |  | Up to 5¢ per ADS canceled                 
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|Exercise of rights to purchase
additional ADSs                                    |  | Up to 5¢ per ADS issued                   
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|Distribution of cash dividends                                                    |  | No fee (so long as prohibited by the NYSE)
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|Distribution of ADSs pursuant to
stock dividend or other free
stock distributions |  | No fee (so long as prohibited by the NYSE)
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|Distribution of cash proceeds
(i.e., upon sale of rights or
other entitlements)   |  | Up to 2¢ per ADS held                     
|                                                                                 

As an ADS holder, you will also be responsible to pay certain fees and expenses
incurred by the depositary bank and certain taxes and governmental charges such
as:



| |  |  | Fees for the transfer and registration of shares of common stock
charged by the registrar and transfer agent for the common stock in
Japan (i.e., upon deposit and withdrawal of shares of common
stock).
| |  |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | Expenses incurred for converting foreign currency into U.S.
dollars.                                                                                                                                     
|
| |  |  | Expenses for cable, telex and fax transmissions and for delivery of
securities.                                                                                                                          
|
| |  |  | Taxes and duties upon the transfer of securities (i.e., when shares
of common stock are deposited or withdrawn from deposit).                                                                            

We have agreed to pay certain other charges and expenses of the depositary
bank. Note that the fees and charges you may be required to pay may vary over
time and may be changed by us and by the depositary bank. You will receive
prior notice of such changes.

Amendments and termination

We may agree with the depositary bank to modify the deposit agreement at any
time without your consent. We undertake to give holders 30 days prior notice
of any modifications that would materially prejudice any of their substantial
rights under the deposit agreement. We will not consider to be materially
prejudicial to your substantial rights any modifications or supplements that
are reasonably necessary for the ADSs to be registered under the
Securities Act of 1933
or to be eligible for book-entry settlement, in each case without imposing or
increasing the fees and charges you are required to pay. In addition, we may
not be able to provide you with prior notice of any modifications or
supplements that are required to accommodate compliance with applicable
provisions of law.

85



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You will be bound by the modifications to the deposit agreement if you continue
to hold your ADSs after the modifications to the deposit agreement become
effective. The deposit agreement cannot be amended to prevent you from
withdrawing the shares of common stock represented by your ADSs (except in
order to comply with mandatory provisions of applicable law).

We have the right to direct the depositary bank to terminate the deposit
agreement. Similarly, the depositary bank may in certain circumstances on its
own initiative terminate the deposit agreement. In either case, the depositary
bank must give notice to the holders at least 30 days before termination.
Upon termination, the following will occur under the deposit agreement:



| |  |  | For a period of six months after termination, you
will be able to request the cancellation of your ADSs and the
withdrawal of the shares of common stock represented by your
ADSs and the delivery of all other property held by the
depositary bank in respect of those shares on the same terms as
prior to the termination. During such six months period the
depositary bank will continue to collect all distributions
received on the shares of common stock on deposit (i.e.,
dividends) but will not distribute any such property to you
until you request the cancellation of your ADSs.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | After the expiration of such six months period, the
depositary bank may sell the securities held on deposit. The
depositary bank will hold the proceeds from such sale and any
other funds then held for the holders of ADSs in a non-interest
bearing account. At that point, the depositary bank will have
no further obligations to holders other than to account for the
funds then held for the holders of ADSs still outstanding.                                                                                                                                                          

Books of depositary

The depositary bank will maintain ADS holder records at its depositary office.
You may inspect such records at such office during regular business hours but
solely for the purpose of communicating with other holders in the interest of
business matters relating to the ADSs and the deposit agreement.

The depositary bank will maintain in New York facilities to record and process
the issuance, cancellation, combination, split-up and transfer of ADRs. These
facilities may be closed from time to time, to the extent not prohibited by
law.

Limitations on obligations and liabilities

The deposit agreement limits our obligations and the depositary banks
obligations to you. Please note the following:



| |  |  | We and the depositary bank are obligated only to take the
actions specifically stated in the deposit agreement without
negligence or bad faith.                                                                                                              
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | The depositary bank disclaims any liability for any failure to
carry out voting instructions, for any manner in which a vote is cast
or for the effect of any vote, provided it acts in good faith and in
accordance with the terms of the deposit agreement.

86



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| |  |  | The depositary bank disclaims any liability for any failure to
determine the lawfulness or practicality of any action, for the
content of any document forwarded to you on our behalf or for the
accuracy of any translation of such a document, for the investment
risks associated with investing in common stock, for the validity or
worth of the common stock, for any tax consequences that result from
the ownership of ADSs, for the credit-worthiness of any third party,
for allowing any rights to lapse under the terms of the deposit
agreement, for the timeliness of any of our notices or for our
failure to give notice.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | We and the depositary bank will not be obligated to perform any
act that is inconsistent with the terms of the deposit agreement.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|
| |  |  | We and the depositary bank disclaim any liability if we are
prevented or forbidden from acting on account of any law or
regulation, any provision of our Articles of Incorporation, any
provision of any securities on deposit or by reason of any act of God
or war or other circumstances beyond our control.                                                                                                                                                                                                                                                                                                                          
|
| |  |  | We and the depositary bank disclaim any liability by reason of
any exercise of, or failure to exercise, any discretion provided for
the deposit agreement or in our Articles of Incorporation or in any
provisions of securities on deposit.                                                                                                                                                                                                                                                                                                                                                                                             
|
| |  |  | We and the depositary bank further disclaim any liability for
any action or inaction in reliance on the advice or information
received from legal counsel, accountants, any person presenting
shares of common stock for deposit, any holder of ADSs or authorized
representatives thereof, or any other person believed by either of us
in good faith to be competent to give such advice or information.                                                                                                                                                                                                                               
|
| |  |  | We and the depositary bank also disclaim liability for the
inability by a holder to benefit from any distribution, offering,
right or other benefit which is made available to holders of shares
of common stock but is not, under the terms of the deposit agreement,
made available to you.                                                                                                                                                                                                                                                                                                                                            
|
| |  |  | We and the depositary bank may rely without any liability upon
any written notice, request or other document believed to be genuine
and to have been signed or presented by the proper parties.                                                                                                                                                                                                                                                                                                                                                                                                                                          

Pre-release transactions

The depositary bank may, in certain circumstances, issue ADSs before receiving
a deposit of shares of common stock or release shares of common stock before
receiving ADSs for cancellation. These transactions are commonly referred to
as pre-release transactions. The deposit agreement limits the aggregate size
of pre-release transactions and imposes a number of conditions on such
transactions (i.e., the need to receive collateral, the type of collateral
required, the representations required from brokers, etc.). The depositary
bank may retain the compensation received from the pre-release transactions.

87



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Taxes

You will be responsible for the taxes and other governmental charges payable on
the ADSs and the securities represented by the ADSs. We, the depositary bank
and the custodian may deduct from any distribution the taxes and governmental
charges payable by holders and may sell any and all property on deposit to pay
the taxes and governmental charges payable by holders. You will be liable for
any deficiency if the sale proceeds do not cover the taxes that are due.

The depositary bank may refuse to issue ADSs, to deliver, transfer, split and
combine ADRs or to release securities on deposit until all taxes and charges
are paid by the applicable holder. The depositary bank and the custodian may
take reasonable administrative actions to obtain tax refunds and reduced tax
withholding for any distributions on your behalf. However, you may be required
to provide to the depositary bank and to the custodian proof of taxpayer status
and residence and such other information as the depositary bank and the
custodian may require to fulfill legal obligations. You are required to
indemnify us, the depositary bank and the custodian for any claims with respect
to taxes based on any tax benefit obtained for you.

Foreign currency conversion

The depositary bank will arrange for the conversion of all foreign currency
received into U.S. dollars if such conversion is practical, and it will
distribute the U.S. dollars in accordance with the terms of the deposit
agreement. You may have to pay fees and expenses incurred in converting
foreign currency, such as fees and expenses incurred in complying with currency
exchange controls and other governmental requirements.

If the conversion of foreign currency is not practical or lawful, or if any
required approvals are denied or not obtainable at a reasonable cost or within
a reasonable period, the depositary bank may take the following actions in its
discretion:



| |  |  | Convert the foreign currency to the extent practical and lawful
and distribute the U.S. dollars to the holders for whom the conversion
and distribution is lawful and practical.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | Distribute the foreign currency to holders for whom the distribution is lawful and practical.                                                                                   
|
| |  |  | Hold the foreign currency (without liability for interest) for the applicable holders.                                                                                          

Other available information

We will transmit to the depositary English translations of notices, reports and
communications which are made generally available by us to holders of our
common stock, copies of our annual reports, as well as other notices provided
to holders of our common stock. The depositary has agreed to make available
copies of such notices, reports and communications at our expense to each
holder of ADSs.

88



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##### Table of Contents






PART II




Item 13. Defaults, Dividend Arrearages and Delinquencies

None




Item 14. Material
Modifications to the Rights of Security Holders and Use of Proceeds

Not applicable




Item 15. [Reserved]




Item 16. [Reserved]

89



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##### Table of Contents






PART III




Item 17. Financial Statements

See Consolidated Financial Statements and Schedules. Reference is made to
Item 19 for a list of all financial statements filed as part of this annual
report.




Item 18. Financial Statements

We have responded to Item 17 in lieu of responding to this Item.




Item 19. Exhibits

|                                                                                                                                                                                                                                              |                                                                                                   |      |      |     |  |  | 
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------- | ---- | ---- | --- |  |  | 
|                                                                                                                                                                                                                                              |                                                                                                   |      |      |     |  |  | 
|                                                                                                                                                                                                                                              |                                                                                                   |      |      |     |  |  | 
|Consolidated
Financial Statements and Schedules                                                                                                                                                                                               |                                                                                                  
|                                                                                                                                                                                                                                             
|                                                                                                                                                                                                                                             
|                                                                                                                                                                                                                                             
|                                                                                                                                                                                                                                             
|                                                                                                                                                                                                                                              | Index to Consolidated Financial Statements and Schedules                                          |      |      | F-1
|                                                                                                                                                                                                                                             
|                                                                                                                                                                                                                                             
|                                                                                                                                                                                                                                             
|                                                                                                                                                                                                                                             
|                                                                                                                                                                                                                                              | Independent Auditors Report                                                                      |      |      | F-2
|                                                                                                                                                                                                                                             
|                                                                                                                                                                                                                                             
|                                                                                                                                                                                                                                             
|                                                                                                                                                                                                                                             
|                                                                                                                                                                                                                                              | Consolidated Balance Sheets as of March 31, 2000 and 2001                                         |      |      | F-3
|                                                                                                                                                                                                                                             
|                                                                                                                                                                                                                                             
|                                                                                                                                                                                                                                             
|                                                                                                                                                                                                                                             
|                                                                                                                                                                                                                                              | Consolidated Statements of Income
for the years ended March 31, 1999, 2000 and 2001               | F-5 
|                                                                                                                                                                                                                                             
|                                                                                                                                                                                                                                             
|                                                                                                                                                                                                                                             
|                                                                                                                                                                                                                                             
|                                                                                                                                                                                                                                              | Consolidated Statements of Shareholders Equity
for the years ended March 31, 1999, 2000 and 2001 | F-6 
|                                                                                                                                                                                                                                             
|                                                                                                                                                                                                                                             
|                                                                                                                                                                                                                                             
|                                                                                                                                                                                                                                             
|                                                                                                                                                                                                                                              | Consolidated Statements of Cash Flows
for the years ended March 31, 1999, 2000 and 2001           | F-7 
|                                                                                                                                                                                                                                             
|                                                                                                                                                                                                                                             
|                                                                                                                                                                                                                                             
|                                                                                                                                                                                                                                             
|                                                                                                                                                                                                                                              | Notes to Consolidated Financial Statements                                                        |      |      | F-8
|                                                                                                                                                                                                                                             
|                                                                                                                                                                                                                                             
|                                                                                                                                                                                                                                             
|                                                                                                                                                                                                                                             
|                                                                                                                                                                                                                                             
|                                                                                                                                                                                                                                              | Supplemental information to conform with Regulation S-X:                                          |      |      |    
|                                                                                                                                                                                                                                             
|                                                                                                                                                                                                                                             
|                                                                                                                                                                                                                                             
|                                                                                                                                                                                                                                             
|                                                                                                                                                                                                                                              | Independent Auditors Report                                                                      |      | F-27
|                                                                                                                                                                                                                                             
|                                                                                                                                                                                                                                             
|                                                                                                                                                                                                                                             
|                                                                                                                                                                                                                                             
|                                                                                                                                                                                                                                              | Supplemental Notes to Consolidated Financial Statements
to Conform with Regulation S-X            | F-28
|                                                                                                                                                                                                                                             
|                                                                                                                                                                                                                                             
|                                                                                                                                                                                                                                             
|                                                                                                                                                                                                                                             
|                                                                                                                                                                                                                                              | Schedules
for the Years Ended March 31, 1999, 2000 and 2001IIValuation and Qualifying Accounts   | F-29
|                                                                                                                                                                                                                                             
|                                                                                                                                                                                                                                             
|                                                                                                                                                                                                                                             
|                                                                                                                                                                                                                                             
|                                                                                                                                                                                                                                             
|                                                                                                                                                                                                                                             
|(NoteSchedules
other than those listed above are
omitted because of the absence of the
conditions under which they are required or
because the information called for is
included in the consolidated financial
statements or notes thereto) |                                                                                                   |      |      |    

|         |  |                                                                                                             |  | 
|-------- |  | ----------------------------------------------------------------------------------------------------------- |  | 
|Exhibits |  |                                                                                                             |  | 
|1.01     |  | The Articles of
Incorporation, as amended and currently in effect (English translation)                    
|        
|        
|        
|        
|4.a (1)  |  | MPEG-2
Patent Portfolio License dated July 29, 1999, by and between MPEG LA, L.L.C. and Pioneer Corporation

90



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SIGNATURES

The registrant hereby certifies that it meets all of the requirements for
filing on Form 20-F and that it has duly caused and authorized the undersigned
to sign this annual report on its behalf.

|                         |    |                                       | 
|------------------------ | -- | ------------------------------------- | 
|                         |    | PIONEER CORPORATION
(Registrant)      | 
|                        
|                        
|                        
|                        
|Date: September 20, 2001 | By | /s/ Katsuhiro Abe                    
|                         |    | Katsuhiro Abe
Chief Financial Officer

91



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INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULES

|                                                                                                                                                                                                                                              |  |     
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----
|                                                                                                                                                                                                                                              |  | Page
|                                                                                                                                                                                                                                              |  |     
|Consolidated Financial
Statements and Schedules                                                                                                                                                                                               |  |     
|                                                                                                                                                                                                                                             
|                                                                                                                                                                                                                                             
|                                                                                                                                                                                                                                             
|                                                                                                                                                                                                                                             
|                                                                                                                                                                                                                                             
|Independent Auditors Report                                                                                                                                                                                                                  |  | F-2 
|                                                                                                                                                                                                                                             
|                                                                                                                                                                                                                                             
|                                                                                                                                                                                                                                             
|                                                                                                                                                                                                                                             
|Consolidated Balance Sheets as of March 31, 2000 and 2001                                                                                                                                                                                     |  | F-3 
|                                                                                                                                                                                                                                             
|                                                                                                                                                                                                                                             
|                                                                                                                                                                                                                                             
|                                                                                                                                                                                                                                             
|Consolidated Statements of Income
for the years ended March 31, 1999, 2000 and 2001                                                                                                                                                           |  | F-5 
|                                                                                                                                                                                                                                             
|                                                                                                                                                                                                                                             
|                                                                                                                                                                                                                                             
|                                                                                                                                                                                                                                             
|Consolidated Statements of Shareholders Equity
for the years ended March 31, 1999, 2000 and 2001                                                                                                                                             |  | F-6 
|                                                                                                                                                                                                                                             
|                                                                                                                                                                                                                                             
|                                                                                                                                                                                                                                             
|                                                                                                                                                                                                                                             
|Consolidated Statements of Cash Flows
for the years ended March 31, 1999, 2000 and 2001                                                                                                                                                       |  | F-7 
|                                                                                                                                                                                                                                             
|                                                                                                                                                                                                                                             
|                                                                                                                                                                                                                                             
|                                                                                                                                                                                                                                             
|Notes to Consolidated Financial Statements                                                                                                                                                                                                    |  | F-8 
|                                                                                                                                                                                                                                             
|                                                                                                                                                                                                                                             
|                                                                                                                                                                                                                                             
|                                                                                                                                                                                                                                             
|                                                                                                                                                                                                                                             
|Supplemental information to
conform with Regulation S-X:                                                                                                                                                                                      |  |     
|                                                                                                                                                                                                                                             
|                                                                                                                                                                                                                                             
|                                                                                                                                                                                                                                             
|                                                                                                                                                                                                                                             
|Independent Auditors Report                                                                                                                                                                                                                  |  | F-27
|                                                                                                                                                                                                                                             
|                                                                                                                                                                                                                                             
|                                                                                                                                                                                                                                             
|                                                                                                                                                                                                                                             
|Supplemental Notes to Consolidated Financial Statements
to Conform with Regulation S-X                                                                                                                                                        |  | F-28
|                                                                                                                                                                                                                                             
|                                                                                                                                                                                                                                             
|                                                                                                                                                                                                                                             
|                                                                                                                                                                                                                                             
|Schedules for the Years Ended
March 31, 1999, 2000 and 2001     IIValuation
and Qualifying Accounts                                                                                                                                          |  | F-29
|                                                                                                                                                                                                                                             
|                                                                                                                                                                                                                                             
|                                                                                                                                                                                                                                             
|                                                                                                                                                                                                                                             
|                                                                                                                                                                                                                                             
|(NoteSchedules
other than those listed above are
omitted because of the absence of the
conditions under which they are required or
because the information called for is included in the consolidated financial statements or
notes thereto)

F-1





---



##### Table of Contents






Independent Auditors Report

To the Board of Directors and Shareholders of Pioneer Corporation:

We have audited the accompanying consolidated balance sheets of Pioneer
Corporation and subsidiaries as of March 31, 2000 and 2001, and the related
consolidated statements of income, shareholders equity and cash flows for
each of the three years in the period ended March 31, 2001 (all expressed in
Japanese yen). These financial statements are the responsibility of the
Companys management. Our responsibility is to express an opinion on these
financial statements based on our audits.

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

The accompanying consolidated financial statements do not present
segment information concerning the Companys operations which, in our
opinion, is required for a complete presentation of the Companys consolidated
financial statements in accordance with accounting principles generally
accepted in the United States of America.

In our opinion, except for the omission of segment information disclosures,
such consolidated financial statements present fairly, in all material
respects, the financial position of Pioneer Corporation and subsidiaries as of
March 31, 2000 and 2001, and the results of their operations and their cash
flows for each of the three years in the period ended March 31, 2001 in
conformity with accounting principles generally accepted in the United States
of America.

Our audits also comprehended the translation of Japanese yen amounts into U.S.
dollar amounts and, in our opinion, such translation has been made in
conformity with the basis stated in Note 1. Such U.S. dollar amounts are
presented solely for the convenience of readers outside Japan.

/s/ Deloitte Touche Tohmatsu

Deloitte Touche Tohmatsu
Tokyo, Japan


May 2, 2001

F-2



---



##### Table of Contents






Consolidated Balance Sheets
Pioneer Corporation and Subsidiaries
March 31

|                                       |                                                                                                                        |                                                                                                |         |                 |          |          |         |          |          |   |           |              |            |  
|-------------------------------------- | ---------------------------------------------------------------------------------------------------------------------- | ---------------------------------------------------------------------------------------------- | ------- | --------------- | -------- | -------- | ------- | -------- | -------- | - | --------- | ------------ | ---------- | -
|                                       |                                                                                                                        |                                                                                                |         |                 |          |          |         |          |          |   |           | Thousands of
|                                       |                                                                                                                        |                                                                                                |         |                 |          |          |         |          |          |   |           | U.S. Dollars
|                                       |                                                                                                                        |                                                                                                |         | Millions of Yen |          | (Note 1)
|                                       |                                                                                                                        |                                                                                                |         |                 |          |         
|Assets                                 |                                                                                                                        | 2000                                                                                           |         | 2001            |          | 2001    
|                                      
|Current assets:                        |                                                                                                                        |                                                                                                |         |                 |          |          |         |          |          |   |           |             
|                                      
|                                      
|                                      
|                                      
|                                       | Cash and cash equivalents                                                                                             |                                                                                                |         |                 |          |          |         |          |          |   |           |              |           
|                                      
|                                      
|                                      
|                                      
|                                       |                                                                                                                        | Cash, including time deposits of ¥83,197 million
$670,944 thousand (¥100,410 million in 2000) |         |                 | ¥151,805 |          |         |          | ¥121,127 |   |           |              | $976,831   |  
|                                      
|                                      
|                                      
|                                      
|                                       | Marketable securities (Note 3)                                                                                         |                                                                                                |         | 1,606           |          |          |         | 1,598    |          |   |           | 12,887       |           
|                                      
|                                      
|                                      
|                                      
|                                       | Trade receivables                                                                                                     |                                                                                                |         |                 |          |          |         |          |          |   |           |              |           
|                                      
|                                      
|                                      
|                                      
|                                       |                                                                                                                        | Notes                                                                                          |         |                 | 7,174    |          |         |          | 8,079    |   |           |              | 65,153     |  
|                                      
|                                      
|                                      
|                                      
|                                       |                                                                                                                        | Accounts                                                                                       |         |                 | 99,890   |          |         |          | 116,594  |   |           |              | 940,274    |  
|                                      
|                                      
|                                      
|                                      
|                                       |                                                                                                                        | Allowance for doubtful notes and accounts                                                      |         |                 | (5,077   | )        |         |          | (5,895   | ) |           |              | (47,540    | )
|                                      
|                                      
|                                      
|                                      
|                                       | Inventories (Note 4)                                                                                                   |                                                                                                |         | 91,517          |          |          |         | 94,429   |          |   |           | 761,524      |           
|                                      
|                                      
|                                      
|                                      
|                                       | Deferred income taxes (Note 8)                                                                                         |                                                                                                |         | 18,297          |          |          |         | 21,897   |          |   |           | 176,589      |           
|                                      
|                                      
|                                      
|                                      
|                                       | Prepaid expenses and other current assets                                                                              |                                                                                                |         | 26,735          |          |          |         | 30,783   |          |   |           | 248,250      |           
|                                      
|                                       |                                                                                                                        | Total current assets                                                                           |         |                 | 391,947  |          |         |          | 388,612  |   |           |              | 3,133,968  |  
|                                      
|Investments and long-term receivables: |                                                                                                                        |                                                                                                |         |                 |          |          |         |          |          |   |           |             
|                                      
|                                      
|                                      
|                                      
|                                       | Marketable equity securities (Note 3)                                                                                  |                                                                                                |         | 31,590          |          |          |         | 23,639   |          |   |           | 190,637      |           
|                                      
|                                      
|                                      
|                                      
|                                       | Investments in and advances to affiliated companies (Note 5)                                                           |                                                                                                |         | 1,915           |          |          |         | 6,395    |          |   |           | 51,573       |           
|                                      
|                                      
|                                      
|                                      
|                                       | Sundry investments (Notes 3 and 15)                                                                                    |                                                                                                |         | 5,464           |          |          |         | 4,887    |          |   |           | 39,411       |           
|                                      
|                                      
|                                      
|                                      
|                                       | Long-term
receivables, less allowance for doubtful accountsof
¥3,926 million$31,661 thousand (¥3,916 million in 2000) |                                                                                                |         | 1,699           |          |          |         | 76       |          |   |           | 613          |           
|                                      
|                                       |                                                                                                                        |                                                                                                | 40,668  |                 |          |          | 34,997  |          |          |   | 282,234   |             
|                                      
|Property, plant and equipment(Note 6): |                                                                                                                        |                                                                                                |         |                 |          |          |         |          |          |   |           |             
|                                      
|                                      
|                                      
|                                      
|                                       | Land                                                                                                                   |                                                                                                |         | 25,170          |          |          |         | 25,876   |          |   |           | 208,677      |           
|                                      
|                                      
|                                      
|                                      
|                                       | Buildings                                                                                                              |                                                                                                |         | 101,478         |          |          |         | 105,256  |          |   |           | 848,839      |           
|                                      
|                                      
|                                      
|                                      
|                                       | Machinery and equipment                                                                                                |                                                                                                |         | 215,845         |          |          |         | 224,278  |          |   |           | 1,808,694    |           
|                                      
|                                      
|                                      
|                                      
|                                       | Construction in progress                                                                                               |                                                                                                |         | 2,581           |          |          |         | 3,490    |          |   |           | 28,145       |           
|                                      
|                                       |                                                                                                                        | Total                                                                                          |         |                 | 345,074  |          |         |          | 358,900  |   |           |              | 2,894,355  |  
|                                      
|                                      
|                                      
|                                      
|                                       | Accumulated depreciation                                                                                               |                                                                                                |         | (211,325        | )        |          |         | (219,143 | )        |   |           | (1,767,283   | )         
|                                      
|                                       |                                                                                                                        |                                                                                                | 133,749 |                 |          |          | 139,757 |          |          |   | 1,127,072 |             
|                                      
|Patents and other assets:              |                                                                                                                        |                                                                                                |         |                 |          |          |         |          |          |   |           |             
|                                      
|                                      
|                                      
|                                      
|                                       | Patents, net of accumulated amortization of ¥23,048 million
$185,871 thousand (¥18,964 million in 2000)               |                                                                                                |         | 3,763           |          |          |         | 3,484    |          |   |           | 28,097       |           
|                                      
|                                      
|                                      
|                                      
|                                       | Other assets (Note 8)                                                                                                  |                                                                                                |         | 31,010          |          |          |         | 38,306   |          |   |           | 308,919      |           
|                                      
|                                       |                                                                                                                        |                                                                                                | 34,773  |                 |          |          | 41,790  |          |          |   | 337,016   |             
|                                      
|                                       |                                                                                                                        | Total                                                                                          |         |                 | ¥601,137 |          |         |          | ¥605,156 |   |           |              | $4,880,290 |  
|                                      

See notes to consolidated financial statements.

F-3



---



##### Table of Contents



|                                                |                                                  |                                                            |                           |           |                 |          |          |         |        |         |           |           |              |           | 
|----------------------------------------------- | ------------------------------------------------ | ---------------------------------------------------------- | ------------------------- | --------- | --------------- | -------- | -------- | ------- | ------ | ------- | --------- | --------- | ------------ | --------- | 
|                                                |                                                  |                                                            |                           |           |                 |          |          |         |        |         |           |           | Thousands of
|                                                |                                                  |                                                            |                           |           |                 |          |          |         |        |         |           |           | U.S. Dollars
|                                                |                                                  |                                                            |                           |           | Millions of Yen |          | (Note 1)
|                                                |                                                  |                                                            |                           |           |                 |          |         
|Liabilities and Shareholders' Equity            |                                                  | 2000                                                       |                           | 2001      |                 | 2001    
|                                               
|Current liabilities:                            |                                                  |                                                            |                           |           |                 |          |          |         |        |         |           |          
|                                               
|                                               
|                                               
|                                               
|                                                | Short-term borrowings (Note 6)                   |                                                            |                           | ¥  41,318 |                 |          | ¥        | 37,571  |        |         | $         | 302,992   |             
|                                               
|                                               
|                                               
|                                               
|                                                | Current portion of long-term debt (Note 6)       |                                                            |                           | 37,235    |                 |          |          | 7,996   |        |         |           | 64,484    |             
|                                               
|                                               
|                                               
|                                               
|                                                | Accounts payabletrade                           |                                                            |                           | 43,043    |                 |          |          | 45,877  |        |         |           | 369,975   |             
|                                               
|                                               
|                                               
|                                               
|                                                | Accrued liabilities                             |                                                            |                           |           |                 |          |          |         |        |         |           |           |             
|                                               
|                                               
|                                               
|                                               
|                                                |                                                  | Taxes on income                                            |                           |           | 5,513           |          |          |         | 6,008  |         |           |           | 48,452       |          
|                                               
|                                               
|                                               
|                                               
|                                                |                                                  | Payroll                                                    |                           |           | 13,701          |          |          |         | 14,799 |         |           |           | 119,347      |          
|                                               
|                                               
|                                               
|                                               
|                                                |                                                  | Other                                                      |                           |           | 44,519          |          |          |         | 48,196 |         |           |           | 388,677      |          
|                                               
|                                               
|                                               
|                                               
|                                                | Dividends payable                                |                                                            |                           | 898       |                 |          |          | 1,349   |        |         |           | 10,879    |             
|                                               
|                                               
|                                               
|                                               
|                                                | Other current liabilities                        |                                                            |                           | 16,508    |                 |          |          | 16,029  |        |         |           | 129,266   |             
|                                               
|                                                |                                                  |                                                            | Total current liabilities |           |                 | 202,735  |          |         |        | 177,825 |           |           |              | 1,434,072 | 
|                                               
|Long-term liabilities:                          |                                                  |                                                            |                           |           |                 |          |          |         |        |         |           |          
|                                               
|                                               
|                                               
|                                               
|                                                | Long-term debt (Note 6)                          |                                                            |                           | 47,060    |                 |          |          | 38,304  |        |         |           | 308,903   |             
|                                               
|                                               
|                                               
|                                               
|                                                | Accrued pension and severance cost (Note 7)      |                                                            |                           | 16,743    |                 |          |          | 30,472  |        |         |           | 245,742   |             
|                                               
|                                               
|                                               
|                                               
|                                                | Deferred income taxes (Note 8)                   |                                                            |                           | 1,718     |                 |          |          | 721     |        |         |           | 5,814     |             
|                                               
|                                               
|                                               
|                                               
|                                                | Other long-term liabilities                      |                                                            |                           | 3,045     |                 |          |          | 2,276   |        |         |           | 18,355    |             
|                                               
|                                                |                                                  |                                                            | 68,566                    |           |                 |          | 71,773   |         |        |         | 578,814   |          
|                                               
|Commitments and contingent liabilities(Note 17) |                                                  |                                                            |                           |           |                 |          |          |         |        |         |           |          
|                                               
|                                               
|                                               
|                                               
|Minority interests                              |                                                  |                                                            | 17,376                    |           |                 |          | 18,563   |         |        |         | 149,702   |          
|                                               
|Shareholders equity(Note 9):                   |                                                  |                                                            |                           |           |                 |          |          |         |        |         |           |          
|                                               
|                                               
|                                               
|                                               
|                                                | Common stock, ¥50 par value                     |                                                            |                           |           |                 |          |          |         |        |         |           |           |             
|                                               
|                                               
|                                               
|                                               
|                                                |                                                  | Authorized 400,000,000 shares                             |                           |           |                 |          |          |         |        |         |           |           |              |          
|                                               
|                                               
|                                               
|                                               
|                                                |                                                  | Issued179,587,798 shares2000 and 179,894,370 shares2001 |                           |           | 48,452          |          |          |         | 48,843 |         |           |           | 393,895      |          
|                                               
|                                               
|                                               
|                                               
|                                                | Additional paid-in capital                       |                                                            |                           | 80,705    |                 |          |          | 81,458  |        |         |           | 656,919   |             
|                                               
|                                               
|                                               
|                                               
|                                                | Retained earnings                                |                                                            |                           | 219,745   |                 |          |          | 235,345 |        |         |           | 1,897,944 |             
|                                               
|                                               
|                                               
|                                               
|                                                | Accumulated other comprehensive income (Note 11) |                                                            |                           | (36,442   | )               |          |          | (28,651 | )      |         |           | (231,056  | )           
|                                               
|                                                |                                                  |                                                            | 312,460                   |           |                 |          | 336,995  |         |        |         | 2,717,702 |          
|                                               
|                                                |                                                  |                                                            | Total                     |           |                 | ¥601,137 |          |         | ¥      | 605,156 |           |           | $            | 4,880,290 | 
|                                               

See notes to consolidated financial statements.

F-4



---



##### Table of Contents






Consolidated Statements of Income
Pioneer Corporation and Subsidiaries
Year ended March 31

|                                                                |                                                         |   |                 |         |              |      |         |         |      |      |          |         |   |   |              |           |  
|--------------------------------------------------------------- | ------------------------------------------------------- | - | --------------- | ------- | ------------ | ---- | ------- | ------- | ---- | ---- | -------- | ------- | - | - | ------------ | --------- | -
|                                                                |                                                         |   |                 |         |              |      |         |         |      |      |          |         |   |   | Thousands of
|                                                                |                                                         |   |                 |         |              |      |         |         |      |      |          |         |   |   | U.S. Dollars
|                                                                |                                                         |   | Millions of Yen |         | (Note 1)    
|                                                                |                                                         |   |                 |         |             
|                                                                |                                                         |   | 1999            |         | 2000         |      | 2001    |         | 2001
|                                                               
|Operating revenue:                                              |                                                         |   |                 |         |              |      |         |         |      |      |          |         |   |   |              |          
|                                                               
|                                                               
|                                                               
|                                                               
|                                                                | Net sales                                               |   | ¥               | 568,857 |              |      | ¥       | 596,411 |      |      | ¥        | 626,539 |   |   | $            | 5,052,734 |  
|                                                               
|                                                               
|                                                               
|                                                               
|                                                                | Royalty revenue                                         |   |                 | 20,208  |              |      |         | 19,460  |      |      |          | 20,530  |   |   |              | 165,564   |  
|                                                               
|                                                                |                                                         |   | 589,065         |         |              |      | 615,871 |         |      |      | 647,069  |         |   |   | 5,218,298    |          
|                                                               
|Operating costs and expenses:                                   |                                                         |   |                 |         |              |      |         |         |      |      |          |         |   |   |              |          
|                                                               
|                                                               
|                                                               
|                                                               
|                                                                | Cost of sales                                           |   |                 | 398,947 |              |      |         | 428,575 |      |      |          | 447,389 |   |   |              | 3,607,975 |  
|                                                               
|                                                               
|                                                               
|                                                               
|                                                                | Selling, general and administrative                     |   |                 | 170,002 |              |      |         | 163,703 |      |      |          | 165,861 |   |   |              | 1,337,589 |  
|                                                               
|                                                                |                                                         |   | 568,949         |         |              |      | 592,278 |         |      |      | 613,250  |         |   |   | 4,945,564    |          
|                                                               
|Operating income                                                |                                                         |   | 20,116          |         |              |      | 23,593  |         |      |      | 33,819   |         |   |   | 272,734      |          
|                                                               
|                                                               
|                                                               
|                                                               
|Other income (expenses):                                        |                                                         |   |                 |         |              |      |         |         |      |      |          |         |   |   |              |          
|                                                               
|                                                               
|                                                               
|                                                               
|                                                                | Interest income                                         |   |                 | 3,107   |              |      |         | 3,072   |      |      |          | 4,920   |   |   |              | 39,677    |  
|                                                               
|                                                               
|                                                               
|                                                               
|                                                                | Gain on sale and issuance of subsidiary stock (Note 18) |   |                 |        |              |      |         | 12,491  |      |      |          |        |   |   |              |          |  
|                                                               
|                                                               
|                                                               
|                                                               
|                                                                | Foreign exchange gain (loss)                            |   |                 | 330     |              |      |         | (5,132  | )    |      |          | (1,192  | ) |   |              | (9,613    | )
|                                                               
|                                                               
|                                                               
|                                                               
|                                                                | Interest expense                                        |   |                 | (4,622  | )            |      |         | (4,679  | )    |      |          | (4,301  | ) |   |              | (34,685   | )
|                                                               
|                                                               
|                                                               
|                                                               
|                                                                | Othernet (Note 12)                                     |   |                 | (6,398  | )            |      |         | (1,537  | )    |      |          | 947     |   |   |              | 7,637     |  
|                                                               
|                                                                |                                                         |   | (7,583          | )       |              |      | 4,215   |         |      |      | 374      |         |   |   | 3,016        |          
|                                                               
|Income before income taxes                                      |                                                         |   | 12,533          |         |              |      | 27,808  |         |      |      | 34,193   |         |   |   | 275,750      |          
|                                                               
|                                                               
|                                                               
|                                                               
|Income taxes(Note 8):                                           |                                                         |   |                 |         |              |      |         |         |      |      |          |         |   |   |              |          
|                                                               
|                                                               
|                                                               
|                                                               
|                                                                | Current                                                 |   |                 | 9,111   |              |      |         | 12,097  |      |      |          | 15,011  |   |   |              | 121,057   |  
|                                                               
|                                                               
|                                                               
|                                                               
|                                                                | Deferred                                                |   |                 | 2,343   |              |      |         | 3,119   |      |      |          | (691    | ) |   |              | (5,573    | )
|                                                               
|                                                                |                                                         |   | 11,454          |         |              |      | 15,216  |         |      |      | 14,320   |         |   |   | 115,484      |          
|                                                               
|Income before minority interest and equity in earnings (losses) |                                                         |   | 1,079           |         |              |      | 12,592  |         |      |      | 19,873   |         |   |   | 160,266      |          
|                                                               
|                                                               
|                                                               
|                                                               
|Minority interest in income of subsidiaries                     |                                                         |   | (386            | )       |              |      | (18     | )       |      |      | (1,445   | )       |   |   | (11,653      | )        
|                                                               
|                                                               
|                                                               
|                                                               
|Equity in earnings (losses) of affiliated companies(Note 5)     |                                                         |   | 466             |         |              |      | 501     |         |      |      | (130     | )       |   |   | (1,048       | )        
|                                                               
|Net income                                                      |                                                         | ¥ | 1,159           |         |              | ¥    | 13,075  |         |      | ¥    | 18,298   |         |   | $ | 147,565      |          
|                                                               
|                                                                |                                                         |   | Yen             |         | U.S. Dollars
|                                                                |                                                         |   |                 |         |              |     
|                                                                |                                                         |   |                 | 1999    |              | 2000 |         | 2001    |      | 2001
|                                                               
|Per share of common stock and per American Depositary Share:    |                                                         |   |                 |         |              |      |         |         |      |      |          |         |   |   |              |          
|                                                               
|                                                               
|                                                               
|                                                               
|                                                                | Net income (Note 16)                                    |   |                 |         |              |      |         |         |      |      |          |         |   |   |              |           |  
|                                                               
|                                                               
|                                                               
|                                                               
|                                                                | Basic                                                   |   |                 | ¥  6.45 |              |      |         | ¥72.81  |      |      |          | ¥101.76 |   |   |              | $0.82     |  
|                                                               
|                                                               
|                                                               
|                                                               
|                                                                | Diluted                                                 |   |                 | 6.45    |              |      |         | 72.80   |      |      |          | 101.70  |   |   |              | 0.82      |  
|                                                               
|                                                                | Cash dividends                                          |   | ¥10.00          |         |              |      | ¥10.00  |         |      |      | ¥  15.00 |         |   |   | $0.12        |          
|                                                               

See notes to consolidated financial statements.

F-5



---



##### Table of Contents






Consolidated Statements of Shareholders Equity
Pioneer Corporation and Subsidiaries
Year ended March 31

|                                                      |                                   |  |             |  |        |   |                                    |  |            |   |               |  |               |   |               |         |       |   |             |         |   |   |           |         |  
|----------------------------------------------------- | --------------------------------- |  | ----------- |  | ------ | - | ---------------------------------- |  | ---------- | - | ------------- |  | ------------- | - | ------------- | ------- | ----- | - | ----------- | ------- | - | - | --------- | ------- | -
|                                                      |                                   |  |             |  |        |   | Millions of Yen                   
|                                                      |                                   |  |             |  |        |   |                                   
|                                                      |                                   |  |             |  |        |   |                                    |  |            |   |               |  |               |   |               |         |       |   | Accumulated |         |   |   |          
|                                                      |                                   |  | Outstanding |  |        |   |                                    |  | Additional |   |               |  |               |   | Other         |         | Total
|                                                      |                                   |  | Number of   |  | Common |   | Paid-in                            |  | Retained   |   | Comprehensive |  | Shareholders'
|                                                      |                                   |  | Shares      |  | Stock  |   | Capital                            |  | Earnings   |   | Income (Loss) |  | Equity       
|                                                     
|Balance at March 31, 1998                             |                                   |  | 179,572,708 |  |        |   | ¥48,431                            |  |            |   | ¥80,555       |  |               |   | ¥209,102      |         |       |   | ¥  (7,990   | )       |   |   | ¥330,098  |        
|                                                     
|                                                     
|                                                     
|                                                     
|Comprehensive income                                  |                                   |  |             |  |        |   |                                    |  |            |   |               |  |               |   |               |         |       |   |             |         |   |   |           |        
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Net income                        |  |             |  |        |   |                                    |  |            |   |               |  |               |   |               | 1,159   |       |   |             |         |   |   |           | 1,159   |  
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Other comprehensive income (loss) |  |             |  |        |   |                                    |  |            |   |               |  |               |   |               |         |       |   |             | (16,274 | ) |   |           | (16,274 | )
|                                                      |                                   |  |             |  |        |   |                                    |  |            |   |               |  |               |   |               |         |       |   |             |         |   |   |           |        
|Comprehensive income (loss)                           |                                   |  |             |  |        |   |                                    |  |            |   |               |  |               |   |               |         |       |   |             |         |   |   | (15,115   | )      
|                                                     
|                                                     
|                                                     
|                                                     
|Value ascribed to warrants (Note 10)                  |                                   |  |             |  |        |   |                                    |  |            |   | 56            |  |               |   |               |         |       |   |             |         |   |   | 56        |        
|                                                     
|                                                     
|                                                     
|                                                     
|Cash dividends (¥10.00 per share)                     |                                   |  |             |  |        |   |                                    |  |            |   |               |  |               |   | (1,795        | )       |       |   |             |         |   |   | (1,795    | )      
|                                                     
|Balance at March 31, 1999                             |                                   |  | 179,572,708 |  |        |   | 48,431                             |  |            |   | 80,611        |  |               |   | 208,466       |         |       |   | (24,264     | )       |   |   | 313,244   |        
|                                                     
|                                                     
|                                                     
|                                                     
|Comprehensive income                                  |                                   |  |             |  |        |   |                                    |  |            |   |               |  |               |   |               |         |       |   |             |         |   |   |           |        
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Net income                        |  |             |  |        |   |                                    |  |            |   |               |  |               |   |               | 13,075  |       |   |             |         |   |   |           | 13,075  |  
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Other comprehensive income (loss) |  |             |  |        |   |                                    |  |            |   |               |  |               |   |               |         |       |   |             | (12,178 | ) |   |           | (12,178 | )
|                                                      |                                   |  |             |  |        |   |                                    |  |            |   |               |  |               |   |               |         |       |   |             |         |   |   |           |        
|Comprehensive income                                  |                                   |  |             |  |        |   |                                    |  |            |   |               |  |               |   |               |         |       |   |             |         |   |   | 897       |        
|                                                     
|                                                     
|                                                     
|                                                     
|Exercise of warrants                                  |                                   |  | 15,090      |  |        |   | 21                                 |  |            |   | 21            |  |               |   |               |         |       |   |             |         |   |   | 42        |        
|                                                     
|                                                     
|                                                     
|                                                     
|Value ascribed to warrants (Note 10)                  |                                   |  |             |  |        |   |                                    |  |            |   | 73            |  |               |   |               |         |       |   |             |         |   |   | 73        |        
|                                                     
|                                                     
|                                                     
|                                                     
|Cash dividends (¥10.00 per share)                     |                                   |  |             |  |        |   |                                    |  |            |   |               |  |               |   | (1,796        | )       |       |   |             |         |   |   | (1,796    | )      
|                                                     
|Balance at March 31, 2000                             |                                   |  | 179,587,798 |  |        |   | 48,452                             |  |            |   | 80,705        |  |               |   | 219,745       |         |       |   | (36,442     | )       |   |   | 312,460   |        
|                                                     
|                                                     
|                                                     
|                                                     
|Comprehensive income                                  |                                   |  |             |  |        |   |                                    |  |            |   |               |  |               |   |               |         |       |   |             |         |   |   |           |        
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Net income                        |  |             |  |        |   |                                    |  |            |   |               |  |               |   |               | 18,298  |       |   |             |         |   |   |           | 18,298  |  
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Other comprehensive income        |  |             |  |        |   |                                    |  |            |   |               |  |               |   |               |         |       |   |             | 7,791   |   |   |           | 7,791   |  
|                                                      |                                   |  |             |  |        |   |                                    |  |            |   |               |  |               |   |               |         |       |   |             |         |   |   |           |        
|Comprehensive income                                  |                                   |  |             |  |        |   |                                    |  |            |   |               |  |               |   |               |         |       |   |             |         |   |   | 26,089    |        
|                                                     
|                                                     
|                                                     
|                                                     
|Exercise of warrants                                  |                                   |  | 306,572     |  |        |   | 391                                |  |            |   | 391           |  |               |   |               |         |       |   |             |         |   |   | 782       |        
|                                                     
|                                                     
|                                                     
|                                                     
|Value ascribed to warrants
and stock option (Note 10) |                                   |  |             |  |        |   |                                    |  |            |   | 362           |  |               |   |               |         |       |   |             |         |   |   | 362       |        
|                                                     
|                                                     
|                                                     
|                                                     
|Cash dividends (¥15.00 per share)                     |                                   |  |             |  |        |   |                                    |  |            |   |               |  |               |   | (2,698        | )       |       |   |             |         |   |   | (2,698    | )      
|                                                     
|Balance at March 31, 2001                             |                                   |  | 179,894,370 |  |        |   | ¥48,843                            |  |            |   | ¥81,458       |  |               |   | ¥235,345      |         |       |   | ¥(28,651    | )       |   |   | ¥336,995  |        
|                                                     
|                                                      |                                   |  |             |  |        |   | Thousands of U.S. Dollars (Note 1)
|                                                      |                                   |  |             |  |        |   |                                   
|                                                      |                                   |  |             |  |        |   |                                    |  |            |   |               |  |               |   |               |         |       |   | Accumulated |         |   |   |          
|                                                      |                                   |  |             |  |        |   |                                    |  |            |   | Additional    |  |               |   |               |         | Other |   | Total      
|                                                      |                                   |  |             |  |        |   | Common                             |  | Paid-in    |   | Retained      |  | Comprehensive |   | Shareholders'
|                                                      |                                   |  |             |  |        |   | Stock                              |  | Capital    |   | Earnings      |  | Income (Loss) |   | Equity       
|                                                     
|Balance at March 31, 2000                             |                                   |  |             |  |        | $ | 390,742                            |  |            | $ | 650,847       |  |               | $ | 1,772,137     |         |       | $ | (293,887    | )       |   | $ | 2,519,839 |        
|                                                     
|                                                     
|                                                     
|                                                     
|Comprehensive income                                  |                                   |  |             |  |        |   |                                    |  |            |   |               |  |               |   |               |         |       |   |             |         |   |   |           |        
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Net income                        |  |             |  |        |   |                                    |  |            |   |               |  |               |   |               | 147,565 |       |   |             |         |   |   |           | 147,565 |  
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Other comprehensive income        |  |             |  |        |   |                                    |  |            |   |               |  |               |   |               |         |       |   |             | 62,831  |   |   |           | 62,831  |  
|                                                      |                                   |  |             |  |        |   |                                    |  |            |   |               |  |               |   |               |         |       |   |             |         |   |   |           |        
|Comprehensive income                                  |                                   |  |             |  |        |   |                                    |  |            |   |               |  |               |   |               |         |       |   |             |         |   |   | 210,396   |        
|                                                     
|                                                     
|                                                     
|                                                     
|Exercise of warrants                                  |                                   |  |             |  |        |   | 3,153                              |  |            |   | 3,153         |  |               |   |               |         |       |   |             |         |   |   | 6,306     |        
|                                                     
|                                                     
|                                                     
|                                                     
|Value ascribed to warrants and stock option (Note 10) |                                   |  |             |  |        |   |                                    |  |            |   | 2,919         |  |               |   |               |         |       |   |             |         |   |   | 2,919     |        
|                                                     
|                                                     
|                                                     
|                                                     
|Cash dividends ($0.12 per share)                      |                                   |  |             |  |        |   |                                    |  |            |   |               |  |               |   | (21,758       | )       |       |   |             |         |   |   | (21,758   | )      
|                                                     
|Balance at March 31, 2001                             |                                   |  |             |  |        | $ | 393,895                            |  |            | $ | 656,919       |  |               | $ | 1,897,944     |         |       | $ | (231,056    | )       |   | $ | 2,717,702 |        
|                                                     

See notes to consolidated financial statements.

F-6



---



##### Table of Contents






Consolidated Statements of Cash Flows
Pioneer Corporation and Subsidiaries
Year ended March 31

|                                                             |                                                                                   |                                                                     |                                                     |         |                 |         |          |         |         |        |         |         |        |         |           |          |              |          |  
|------------------------------------------------------------ | --------------------------------------------------------------------------------- | ------------------------------------------------------------------- | --------------------------------------------------- | ------- | --------------- | ------- | -------- | ------- | ------- | ------ | ------- | ------- | ------ | ------- | --------- | -------- | ------------ | -------- | -
|                                                             |                                                                                   |                                                                     |                                                     |         |                 |         |          |         |         |        |         |         |        |         |           |          | Thousands of
|                                                             |                                                                                   |                                                                     |                                                     |         |                 |         |          |         |         |        |         |         |        |         |           |          | U.S. Dollars
|                                                             |                                                                                   |                                                                     |                                                     |         | Millions of Yen |         | (Note 1)
|                                                             |                                                                                   |                                                                     |                                                     |         |                 |         |         
|                                                             |                                                                                   |                                                                     |                                                     |         | 1999            |         | 2000     |         | 2001    |        | 2001   
|                                                            
|Operating activities:                                        |                                                                                   |                                                                     |                                                     |         |                 |         |          |         |         |        |         |         |        |         |           |         
|                                                            
|                                                            
|                                                            
|                                                            
|                                                             | Net income                                                                        |                                                                     | ¥                                                   | 1,159   |                 |         | ¥        | 13,075  |         |        | ¥       | 18,298  |        |         | $         | 147,565  |             
|                                                            
|                                                            
|                                                            
|                                                            
|                                                             | Adjustments to reconcile net income to net cash provided
by operating activities: |                                                                     |                                                     |         |                 |         |          |         |         |        |         |         |        |         |           |          |             
|                                                            
|                                                            
|                                                            
|                                                            
|                                                             |                                                                                   | Depreciation and amortization                                       |                                                     |         | 32,117          |         |          |         | 32,852  |        |         |         | 32,405 |         |           |          | 261,331      |         
|                                                            
|                                                            
|                                                            
|                                                            
|                                                             |                                                                                   | Minority interest in income of subsidiaries                         |                                                     |         | 386             |         |          |         | 18      |        |         |         | 1,445  |         |           |          | 11,653       |         
|                                                            
|                                                            
|                                                            
|                                                            
|                                                             |                                                                                   | Equity in (earnings) losses of affiliated companies, less dividends |                                                     |         | (159            | )       |          |         | (250    | )      |         |         | 136    |         |           |          | 1,097        |         
|                                                            
|                                                            
|                                                            
|                                                            
|                                                             |                                                                                   | Deferred income taxes                                               |                                                     |         | 2,343           |         |          |         | 3,119   |        |         |         | (691   | )       |           |          | (5,573       | )       
|                                                            
|                                                            
|                                                            
|                                                            
|                                                             |                                                                                   | Provision for pension and severance cost, less payments             |                                                     |         | 3,228           |         |          |         | 1,763   |        |         |         | (1,993 | )       |           |          | (16,073      | )       
|                                                            
|                                                            
|                                                            
|                                                            
|                                                             |                                                                                   | Loss on sale of fixed assets                                        |                                                     |         | 2,683           |         |          |         | 2,641   |        |         |         | 914    |         |           |          | 7,371        |         
|                                                            
|                                                            
|                                                            
|                                                            
|                                                             |                                                                                   | (Gain) loss on sale and write-down of investments and securities    |                                                     |         | 876             |         |          |         | (4,151  | )      |         |         | (254   | )       |           |          | (2,048       | )       
|                                                            
|                                                            
|                                                            
|                                                            
|                                                             |                                                                                   | Impairment losses of fixed assets                                   |                                                     |         |                |         |          |         | 3,972   |        |         |         | 1,163  |         |           |          | 9,379        |         
|                                                            
|                                                            
|                                                            
|                                                            
|                                                             |                                                                                   | Gain on sale and issuance of subsidiary stock                       |                                                     |         |                |         |          |         | (12,491 | )      |         |         |       |         |           |          |             |         
|                                                            
|                                                            
|                                                            
|                                                            
|                                                             |                                                                                   | Increase in notes and accounts receivable                           |                                                     |         | (4,443          | )       |          |         | (12,500 | )      |         |         | (6,729 | )       |           |          | (54,266      | )       
|                                                            
|                                                            
|                                                            
|                                                            
|                                                             |                                                                                   | Decrease in inventories                                             |                                                     |         | 1,159           |         |          |         | 6,416   |        |         |         | 5,786  |         |           |          | 46,661       |         
|                                                            
|                                                            
|                                                            
|                                                            
|                                                             |                                                                                   | (Increase) decrease in prepaid expenses and other current assets    |                                                     |         | 8,640           |         |          |         | (691    | )      |         |         | (2,430 | )       |           |          | (19,597      | )       
|                                                            
|                                                            
|                                                            
|                                                            
|                                                             |                                                                                   | Increase (decrease) in accounts payabletrade                       |                                                     |         | (8,903          | )       |          |         | 5,536   |        |         |         | 177    |         |           |          | 1,428        |         
|                                                            
|                                                            
|                                                            
|                                                            
|                                                             |                                                                                   | Increase (decrease) in accrued taxes on income                      |                                                     |         | (2,149          | )       |          |         | 185     |        |         |         | (1,204 | )       |           |          | (9,710       | )       
|                                                            
|                                                            
|                                                            
|                                                            
|                                                             |                                                                                   | Increase in other accrued liabilities                               |                                                     |         | 999             |         |          |         | 3,820   |        |         |         | 1,184  |         |           |          | 9,548        |         
|                                                            
|                                                            
|                                                            
|                                                            
|                                                             |                                                                                   | Other                                                               |                                                     |         | (32             | )       |          |         | 2,076   |        |         |         | 3,034  |         |           |          | 24,468       |         
|                                                            
|                                                             |                                                                                   |                                                                     | Net
cash provided by operating activities           |         |                 | 37,904  |          |         |         | 45,390 |         |         |        | 51,241  |           |          |              | 413,234  |  
|                                                            
|Investing activities:                                        |                                                                                   |                                                                     |                                                     |         |                 |         |          |         |         |        |         |         |        |         |           |         
|                                                            
|                                                            
|                                                            
|                                                            
|                                                             | Payment for purchase of fixed assets                                              |                                                                     |                                                     | (33,070 | )               |         |          | (25,458 | )       |        |         | (42,183 | )      |         |           | (340,185 | )           
|                                                            
|                                                            
|                                                            
|                                                            
|                                                             | Payment for investment securities                                                 |                                                                     |                                                     | (716    | )               |         |          | (476    | )       |        |         | (5,798  | )      |         |           | (46,758  | )           
|                                                            
|                                                            
|                                                            
|                                                            
|                                                             | Payment for available-for-sale securities                                         |                                                                     |                                                     | (3,065  | )               |         |          | (1,046  | )       |        |         | (1,233  | )      |         |           | (9,943   | )           
|                                                            
|                                                            
|                                                            
|                                                            
|                                                             | Proceeds from sale of fixed assets and investment securities                      |                                                                     |                                                     | 2,569   |                 |         |          | 5,675   |         |        |         | 5,631   |        |         |           | 45,411   |             
|                                                            
|                                                            
|                                                            
|                                                            
|                                                             | Proceeds from sale of available-for-sale securities                               |                                                                     |                                                     | 1,423   |                 |         |          | 6,140   |         |        |         | 1,789   |        |         |           | 14,427   |             
|                                                            
|                                                            
|                                                            
|                                                            
|                                                             | Proceeds from sale and issuance of subsidiary stock                               |                                                                     |                                                     |        |                 |         |          | 28,780  |         |        |         |        |        |         |           |         |             
|                                                            
|                                                            
|                                                            
|                                                            
|                                                             | Decrease in loans                                                                 |                                                                     |                                                     | 1,446   |                 |         |          | 1,835   |         |        |         | 410     |        |         |           | 3,306    |             
|                                                            
|                                                            
|                                                            
|                                                            
|                                                             | Other                                                                             |                                                                     |                                                     | (6,744  | )               |         |          | (3,466  | )       |        |         | (197    | )      |         |           | (1,589   | )           
|                                                            
|                                                             |                                                                                   |                                                                     | Net cash provided by (used in) investing activities |         |                 | (38,157 | )        |         |         | 11,984 |         |         |        | (41,581 | )         |          |              | (335,331 | )
|                                                            
|Financing activities:                                        |                                                                                   |                                                                     |                                                     |         |                 |         |          |         |         |        |         |         |        |         |           |         
|                                                            
|                                                            
|                                                            
|                                                            
|                                                             | Proceeds from long-term debt                                                      |                                                                     |                                                     | 32,650  |                 |         |          | 2,000   |         |        |         |        |        |         |           |         |             
|                                                            
|                                                            
|                                                            
|                                                            
|                                                             | Payment of long-term debt                                                         |                                                                     |                                                     | (9,898  | )               |         |          | (6,292  | )       |        |         | (37,760 | )      |         |           | (304,516 | )           
|                                                            
|                                                            
|                                                            
|                                                            
|                                                             | Increase (decrease) in short-term borrowings                                      |                                                                     |                                                     | (7,548  | )               |         |          | 1,158   |         |        |         | (7,078  | )      |         |           | (57,081  | )           
|                                                            
|                                                            
|                                                            
|                                                            
|                                                             | Dividends paid                                                                    |                                                                     |                                                     | (1,795  | )               |         |          | (1,796  | )       |        |         | (2,247  | )      |         |           | (18,121  | )           
|                                                            
|                                                            
|                                                            
|                                                            
|                                                             | Other                                                                             |                                                                     |                                                     | (297    | )               |         |          | 791     |         |        |         | 518     |        |         |           | 4,178    |             
|                                                            
|                                                             |                                                                                   |                                                                     | Net cash provided by (used in) financing activities |         |                 | 13,112  |          |         |         | (4,139 | )       |         |        | (46,567 | )         |          |              | (375,540 | )
|                                                            
|Effect of exchange rate changes on cash and cash equivalents |                                                                                   |                                                                     | (1,706                                              | )       |                 |         | (3,493   | )       |         |        | 6,229   |         |        |         | 50,234    |         
|                                                            
|Net increase (decrease) in cash and cash equivalents         |                                                                                   |                                                                     | 11,153                                              |         |                 |         | 49,742   |         |         |        | (30,678 | )       |        |         | (247,403  | )       
|                                                            
|                                                            
|                                                            
|                                                            
|Cash and cash equivalents, beginning of year                 |                                                                                   |                                                                     | 90,910                                              |         |                 |         | 102,063  |         |         |        | 151,805 |         |        |         | 1,224,234 |         
|                                                            
|Cash and cash equivalents, end of year                       |                                                                                   | ¥                                                                   | 102,063                                             |         |                 | ¥       | 151,805  |         |         | ¥      | 121,127 |         |        | $       | 976,831   |         
|                                                            

See notes to consolidated financial statements.

F-7



---



##### Table of Contents






Notes to Consolidated Financial Statements
Pioneer Corporation and Subsidiaries

1. Basis of presentation and significant accounting policies:

1) Basis of Presentation

Basis of Financial Statements
The accompanying consolidated financial statements are stated in
Japanese yen, the currency of the country in which Pioneer Corporation (Pioneer
Kabushiki Kaisha) (the parent company) is incorporated. The translation of
Japanese yen amounts into U.S. dollar amounts for the year ended March 31,
2001 is included solely for the convenience of readers outside Japan and has
been made at the rate of ¥124 to U.S.$1.00, the approximate rate of exchange
at March 31, 2001. Such translation should not be construed as a representation
that Japanese yen amounts could be converted into U.S. dollars at the above or
other rate.     The accompanying consolidated financial statements have been prepared on
the basis of accounting principles generally accepted in the United States of
America except for the omission of segment information concerning the
operations of the parent company and its majority-owned subsidiaries
(together, the Company), as required by Statement of Financial Accounting
Standards (SFAS) No. 131.     Effect has been given in the consolidated financial statements to
adjustments which, because of either customary accounting practices in Japan or
income tax law requirements, have not been entered in the Companys general
books of account. The major adjustments include those relating to (1)
accounting for pension costs, (2) accounting for leases, and (3) accounting for
foreign currency translation.

Nature of Operations 
The Company is engaged in the development, manufacture and sale of electronics
products such as audio, video and car electronics, and of AV (audio/video)
software on a global scale. The Company is one of the leading manufacturers of
consumer, commercial and industrial AV products, including those employing
laser optical disc technologies.     The principal production activities of the Company are carried out in
Japan and Southeast Asia. The Companys products are generally sold under its
own brand names, principally Pioneer. The principal markets for
the Company are Japan, the United States of America, European
countries and Asia. The Company sells its products to customers in
consumer, commercial and industrial markets through its sales offices in Japan,
and its sales subsidiaries and independent distributors overseas. On
an original-equipment-manufacturer basis, the Company markets certain
products, such as car electronics products, to
other companies.

Use of Estimates
The preparation of the consolidated financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
the disclosure of contingent assets and liabilities at the dates of these
statements and the reported amounts of revenues and expenses during the
reporting period.     Due to the inherent uncertainty involved in making
estimates, actual results could differ from those estimates.

2) Summary of Significant Accounting Policies

Consolidation and Investments in Affiliated Companies 
The consolidated financial statements include the accounts of the parent
company and its majority-owned subsidiaries. Investments in 20% to 50% owned
companies are accounted for by the equity method of accounting. The excess of
the cost of the investment in subsidiaries and 20% to 50% owned companies over
the equity in the net assets at the date of acquisition is amortized over a
5-to-10-year period, with
the exception of minor amounts which are charged to income in the year of
acquisition, unless it is determined that the value of such
investment should be written down to fair value. All significant intercompany
transactions have been eliminated.     Gains and losses resulting from the issuance of
subsidiaries stock are recognized in consolidated earnings.

Foreign Currency Translation
For all significant foreign operations, the functional currency is the local
currency. Generally, all asset and liability accounts of foreign operations are
translated into Japanese yen at year-end rates and all revenue and expense
accounts are translated at rates prevailing at the time of the transactions.
The resulting translation adjustments are accumulated and reported as a
component of shareholders equity.     Foreign currency receivables and payables are translated at year-end
exchange rates and resulting exchange gains and losses are recognized in
earnings currently.

F-8



---



##### Table of Contents



Revenue Recognition
Sales are generally recorded when merchandise is shipped to
customers based on purchase orders or when services are
rendered to the third parties. In certain cases, terms of the
contract require the product to pass customer inspection after
shipment and the Company records the sale upon satisfactory
customer acceptance. Royalty revenue is recognized based on
royalty statements from licensees.

Cash and Cash Equivalents
Consolidated cash and cash equivalents include cash on
hand and deposits in bank including time deposits. The
Company considers all time deposits with an original
maturity of one year or less to be cash equivalents. Generally,
such time deposits can be withdrawn at any time without
diminution of the principal amount.

Marketable and Other Securities
Under SFAS No. 115, Accounting for Certain Investments
in Debt and Equity Securities, all debt securities and
marketable equity securities held by the Company are
classified as available-for-sale securities, and are carried at
their fair values with unrealized gains and losses reported as a
component of shareholders equity. Other investments other
than marketable securities are stated at cost or less. The cost
of securities is determined using the average-cost method.

Inventories
Inventories are valued at the lower of cost, which is determined principally by the average-cost method, or market.

Property, Plant and Equipment and Depreciation
Property, plant and equipment are stated at cost. Depreciation is computed principally using the declining-balance
method for assets located in Japan and under the straight-line
method for assets located outside Japan, using rates based on
the estimated useful lives of the assets.

     The estimated useful lives are as follows:

|                        |           
|----------------------- | ----------
|Buildings               | 365 years
|                       
|                       
|                       
|                       
|Machinery and equipment | 217 years

Patents
The cost of patents, purchased when the Company acquired
the business of a partnership, Discovision Associates, are
amortized based on the straight-line basis over 1020 years.

Long-Lived Assets
The Company reviews its long-lived assets and certain
identifiable intangibles for impairment whenever events or
changes in circumstances indicate that the carrying amount
of an asset may not be recoverable. When the sum of
expected future cash flows is less than the carrying amount of
the asset, an impairment loss is recognized.     During the year ended March 31, 2000, the Company
recorded an impairment loss of ¥1,872 million related
to previously purchased intangible assets of its karaoke
business reflecting reduced revenue expectations from the
business and ¥2,100 million related to a factory facility
closed during the year.     During the year ended March 31, 2001, the Company
recorded an additional impairment loss of ¥1,163 million
($9,379 thousand) related to intangible assets of its karaoke
business.

Income Taxes
Income taxes are provided based on the asset and liability
method of accounting. Deferred income taxes are recorded to
reflect the tax consequences in future years of differences
between the tax basis of assets and liabilities and their financial
reporting amounts at year-end. These deferred taxes are
measured by applying currently enacted tax laws. A valuation
allowance is established to reduce deferred tax assets if it is
more likely than not that all, or some portion, of such deferred
tax assets will not be realized.

Accounting for Stock-Based Compensation
The Company accounts for its stock-based compensation
agreements using the fair value based method in accordance with
SFAS No. 123, Accounting for Stock-Based Compensation.

Earnings per Share
Basic net income per share has been computed by dividing
net income available to holders of common stock by the
weighted-average number of shares of common stock outstanding during each year. Diluted net income per share
reflects the potential dilution and has been computed on
the basis that all dilutive warrants and stock options were
exercised.

F-9



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##### Table of Contents



Derivatives
Derivative financial instruments utilized by the Company
are comprised principally of foreign exchange forward
contracts, currency options and currency swaps. Foreign
exchange forward contracts and currency options, the majority of which mature within six months, and currency swaps,
which mature from 2001 to 2003, are designated as hedges
of exposures to foreign exchange risk and interest risk.
The Company does not hold or issue derivative financial
instruments for trading purposes.     Gains and losses on hedges of existing assets and liabilities
are included in the carrying amounts of those assets and
liabilities and are ultimately recognized in other income
(expenses). Gains and losses related to qualifying hedges of
firm commitments or anticipated transactions are also
deferred and are recognized in other income (expenses) or as
adjustments of carrying amounts when the hedged transaction occurs. Unrealized gains and losses on forward contracts
including foreign currency options intended as hedges for
foreign currency risk of anticipated transactions with companies within the consolidated group are recognized currently
in other income (expenses).

Reclassifications
In fiscal 2001, Minority interest in income of subsidiaries previously included in Othernet of Other
income (expenses) is presented separately. Previously
reported amounts have been reclassified to conform to
this presentation.New Accounting Standard
In June 1998, the Financial Accounting Standards
Board issued SFAS No. 133, Accounting for Derivative
Instruments and Hedging Activities, as amended by SFAS
No. 138. SFAS No. 133 requires an entity to recognize all
derivatives as either assets or liabilities in the statement of
financial position and measure those instruments at fair
value. Gains or losses resulting from changes in the values of
those derivatives would be accounted for depending on the
use of the derivative and whether it qualifies for hedge
accounting. The Company will adopt SFAS No. 133 on
April 1, 2001. The adoption of this standard will not have a
material impact on the Companys financial position, results
of operations or cash flows.

2. Supplemental cash flow information:

Selected cash payments and noncash activities for the years ended March 31, 1999, 2000 and 2001 were as follows:

|                              |                                        |   |                 |       |              |   |        |     |      |   |        |     |  |   |              |       | 
|----------------------------- | -------------------------------------- | - | --------------- | ----- | ------------ | - | ------ | --- | ---- | - | ------ | --- |  | - | ------------ | ----- | 
|                              |                                        |   |                 |       |              |   |        |     |      |   |        |     |  |   | Thousands of
|                              |                                        |   | Millions of Yen |       | U.S. Dollars
|                              |                                        |   |                 |       |             
|                              |                                        |   | 1999            |       | 2000         |   | 2001   |     | 2001
|                             
|Cash payment for interest     |                                        | ¥ | 4,607           |       |              | ¥ | 4,608  |     |      | ¥ | 4,889  |     |  | $ | 39,427       |      
|                             
|                             
|                             
|                             
|Cash payment for income taxes |                                        |   | 11,266          |       |              |   | 11,953 |     |      |   | 16,245 |     |  |   | 131,008      |      
|                             
|                             
|                             
|                             
|Noncash investing activities: |                                        |   |                 |       |              |   |        |     |      |   |        |     |  |   |              |      
|                             
|                             
|                             
|                             
|                              | Capitalized lease obligations incurred |   |                 | 1,082 |              |   |        | 259 |      |   |        | 141 |  |   |              | 1,137 | 
|                             

F-10



---



##### Table of Contents



3. Available-for-sale securities:

Cost, gross unrealized holding gains, gross unrealized holding losses and the aggregate fair value of available-for-sale securities at
March 31, 2000 and 2001 were as follows:

|                              |             |       |   |                 |        |       |   |            |        |            |   |           |     |       |   |        |        |            |   |            |        |            |   |        |        |  |   |       |       |  |   |        |        | 
|----------------------------- | ----------- | ----- | - | --------------- | ------ | ----- | - | ---------- | ------ | ---------- | - | --------- | --- | ----- | - | ------ | ------ | ---------- | - | ---------- | ------ | ---------- | - | ------ | ------ |  | - | ----- | ----- |  | - | ------ | ------ | 
|                              |             |       |   | Millions of Yen
|                              |             |       |   |                
|                              |             |       |   | 2000            |        | 2001 
|                              |             |       |   |                 |        |      
|                              |             |       |   |                 |        |       |   | Gross      |        | Gross      |   |           |     |       |   |        |        |            |   | Gross      |        | Gross      |   |        |        | 
|                              |             |       |   |                 |        |       |   | Unrealized |        | Unrealized |   |           |     |       |   |        |        |            |   | Unrealized |        | Unrealized |   |        |        | 
|                              |             |       |   |                 |        |       |   | Holding    |        | Holding    |   | Aggregate |     |       |   |        |        | Holding    |   | Holding    |        | Aggregate 
|                              |             |       |   | Cost            |        | Gains |   | Losses     |        | Fair Value |   | Cost      |     | Gains |   | Losses |        | Fair Value
|                             
|Marketable equity securities: |             |       |   |                 |        |       |   |            |        |            |   |           |     |       |   |        |        |            |   |            |        |            |   |        |        |  |   |       |       |  |   |       
|                             
|                             
|                             
|                             
|                              | Current     |       | ¥ | 104             |        |       | ¥ | 3          |        |            | ¥ | 1         |     |       | ¥ | 106    |        |            | ¥ | 19         |        |            |   |       |        |  |   |      |       |  | ¥ | 19     |       
|                             
|                             
|                             
|                             
|                              | Non-current |       |   | 8,963           |        |       |   | 23,298     |        |            |   | 671       |     |       |   | 31,590 |        |            |   | 9,754      |        |            | ¥ | 14,972 |        |  | ¥ | 1,087 |       |  |   | 23,639 |       
|                             
|                             
|                             
|                             
|Marketable debt securities:   |             |       |   |                 |        |       |   |            |        |            |   |           |     |       |   |        |        |            |   |            |        |            |   |        |        |  |   |       |       |  |   |       
|                             
|                             
|                             
|                             
|                              | Current     |       |   | 1,558           |        |       |   |           |        |            |   | 58        |     |       |   | 1,500  |        |            |   | 1,614      |        |            |   |       |        |  |   | 35    |       |  |   | 1,579  |       
|                             
|                             
|                             
|                             
|                              | Non-current |       |   | 134             |        |       |   |           |        |            |   | 9         |     |       |   | 125    |        |            |   | 128        |        |            |   |       |        |  |   | 28    |       |  |   | 100    |       
|                             
|                              |             | Total |   | ¥               | 10,759 |       |   | ¥          | 23,301 |            |   | ¥         | 739 |       |   | ¥      | 33,321 |            |   | ¥          | 11,515 |            |   | ¥      | 14,972 |  |   | ¥     | 1,150 |  |   | ¥      | 25,337 | 
|                             

|                              |             |       |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |   |                           |        |       |   |            |         |  |            |            |       |           |   |         |         | 
|----------------------------- | ----------- | ----- |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | - | ------------------------- | ------ | ----- | - | ---------- | ------- |  | ---------- | ---------- | ----- | --------- | - | ------- | ------- | 
|                              |             |       |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |   | Thousands of U.S. Dollars
|                              |             |       |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |   |                          
|                              |             |       |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |   | 2001                     
|                              |             |       |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |   |                          
|                              |             |       |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |   |                           |        |       |   | Gross      |         |  | Gross      |            |       |           |  
|                              |             |       |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |   |                           |        |       |   | Unrealized |         |  | Unrealized |            |       |           |  
|                              |             |       |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |   |                           |        |       |   | Holding    |         |  | Holding    |            |       | Aggregate
|                              |             |       |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |   | Cost                      |        | Gains |   |            | Losses  |  |            | Fair Value
|                             
|Marketable equity securities: |             |       |  |  |  |  |  |  |  |  |  | 
|                             
|                             
|                             
|                             
|                              | Current     |       |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | $ | 153                       |        |       |   |           |         |  |            |           |       |           | $ | 153     |        
|                             
|                             
|                             
|                             
|                              | Non-current |       |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |   | 78,661                    |        |       | $ | 120,742    |         |  | $          | 8,766      |       |           |   | 190,637 |        
|                             
|                             
|                             
|                             
|Marketable debt securities:   |             |       |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |   |                           |        |       |   |            |         |  |            |            |       |           |   |        
|                             
|                             
|                             
|                             
|                              | Current     |       |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |   | 13,016                    |        |       |   |           |         |  |            | 282        |       |           |   | 12,734  |        
|                             
|                             
|                             
|                             
|                              | Non-current |       |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |   | 1,033                     |        |       |   |           |         |  |            | 226        |       |           |   | 807     |        
|                             
|                              |             | Total |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |   | $                         | 92,863 |       |   | $          | 120,742 |  |            | $          | 9,274 |           |   | $       | 204,331 | 
|                             

Gross realized gains on available-for-sale securities for
the years ended March 31, 1999, 2000 and 2001 were
¥1,123 million, ¥3,655 million and ¥1,556 million ($12,548
thousand), respectively. Gross realized losses for the years
ended March 31, 1999, 2000 and 2001 were ¥152 million,
¥292 million and ¥2 million ($16 thousand), respectively.

At March 31, 2001, the fair values of marketable debt
securities which were classified as available-for-sale due in one year and due over one year were ¥128 million
($1,033 thousand) and ¥1,551 million ($12,508 thousand),
respectively.

F-11



---



##### Table of Contents



4. Inventories:

Inventories at March 31, 2000 and 2001 comprise the following:

|                       |       |        |   |                 |   |        |              |        |   |         |              |         |  | 
|---------------------- | ----- | ------ | - | --------------- | - | ------ | ------------ | ------ | - | ------- | ------------ | ------- |  | 
|                       |       |        |   |                 |   |        |              |        |   |         | Thousands of
|                       |       |        |   | Millions of Yen |   |        | U.S. Dollars
|                       |       |        |   |                 |  
|                       |       |        |   | 2000            |   |        |              | 2001   |   |         |              | 2001   
|                      
|Finished products      | ¥     | 48,657 |   |                 | ¥ | 52,501 |              |        | $ | 423,395 |             
|                      
|                      
|                      
|                      
|Work in process        |       | 18,481 |   |                 |   | 16,921 |              |        |   | 136,460 |              |        
|                      
|                      
|                      
|                      
|Materials and supplies |       | 24,379 |   |                 |   | 25,007 |              |        |   | 201,669 |             
|                      
|                       | Total |        | ¥ | 91,517          |   |        | ¥            | 94,429 |   |         | $            | 761,524 |  | 
|                      

5. Investments in and advances to affiliated companies:

Investments in and advances to affiliated companies principally represent the
Companys equity in the underlying assets of 20% to 50% owned
companies. Dividends received from companies accounted for on an equity
basis were ¥305 million, ¥251 million and ¥6 million ($49 thousand),
respectively, for the years ended March 31, 1999, 2000 and 2001.

6. Short-term borrowings and long-term debt:

Short-term borrowings at March 31, 2000 and 2001 comprise the following:

|           |                                                                                     |           |  |                 |        |              |  |      |        |  |  |              |         | 
|---------- | ----------------------------------------------------------------------------------- | --------- |  | --------------- | ------ | ------------ |  | ---- | ------ |  |  | ------------ | ------- | 
|           |                                                                                     |           |  |                 |        |              |  |      |        |  |  | Thousands of
|           |                                                                                     |           |  | Millions of Yen |        | U.S. Dollars
|           |                                                                                     |           |  |                 |        |             
|           |                                                                                     |           |  | 2000            |        | 2001         |  | 2001
|          
|Bank loans |                                                                                     |           |  |                 |        |              |  |      |        |  |  |             
|          
|          
|          
|          
|           | Weighted
average interest rate 3.54% at March 31, 2000
and 3.61% at March 31, 2001: |           |  |                 |        |              |  |      |        |  |  |              |        
|          
|          
|          
|          
|           |                                                                                     | Unsecured |  | ¥               | 41,318 |              |  | ¥    | 37,571 |  |  | $            | 302,992 | 
|          

F-12



---



##### Table of Contents



Long-term debt at March 31, 2000 and 2001 comprises the following:

|                                                                                                                                                                                                             |           |  |                 |        |              |  |        |        |  |  |              |         | 
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ | --------- |  | --------------- | ------ | ------------ |  | ------ | ------ |  |  | ------------ | ------- | 
|                                                                                                                                                                                                             |           |  |                 |        |              |  |        |        |  |  | Thousands of
|                                                                                                                                                                                                             |           |  | Millions of Yen |        | U.S. Dollars
|                                                                                                                                                                                                             |           |  |                 |        |             
|                                                                                                                                                                                                             |           |  | 2000            |        | 2001         |  | 2001  
|                                                                                                                                                                                                            
|Loans,
principally from banks, maturing serially through 2031
interest ranging from 0.88% to 4.00% at March 31, 2000 and 2001:                                                                               |           |  |                 |        |              |  |        |        |  |  |              |        
|                                                                                                                                                                                                            
|                                                                                                                                                                                                            
|                                                                                                                                                                                                            
|                                                                                                                                                                                                            
|                                                                                                                                                                                                             | Secured   |  | ¥               | 8,700  |              |  | ¥      | 6,792  |  |  | $            | 54,774  | 
|                                                                                                                                                                                                            
|                                                                                                                                                                                                            
|                                                                                                                                                                                                            
|                                                                                                                                                                                                            
|                                                                                                                                                                                                             | Unsecured |  |                 | 18,967 |              |  |        | 13,100 |  |  |              | 105,645 | 
|                                                                                                                                                                                                            
|                                                                                                                                                                                                            
|                                                                                                                                                                                                            
|                                                                                                                                                                                                            
|2.15% Unsecured bonds due 2000                                                                                                                                                                               |           |  | 30,000          |        |              |  |       |        |  |  |             |        
|                                                                                                                                                                                                            
|                                                                                                                                                                                                            
|                                                                                                                                                                                                            
|                                                                                                                                                                                                            
|2.35% Unsecured bonds due 2005                                                                                                                                                                               |           |  | 15,000          |        |              |  | 15,000 |        |  |  | 120,968      |        
|                                                                                                                                                                                                            
|                                                                                                                                                                                                            
|                                                                                                                                                                                                            
|                                                                                                                                                                                                            
|2.80% Unsecured bonds due 2008                                                                                                                                                                               |           |  | 10,000          |        |              |  | 10,000 |        |  |  | 80,645       |        
|                                                                                                                                                                                                            
|                                                                                                                                                                                                            
|                                                                                                                                                                                                            
|                                                                                                                                                                                                            
|Long-term
capital lease obligations, 3.27% to 7.00% at March 31, 2000
and
3.15% to 7.00% at March 31, 2001, due principally to 2005                                                                          |           |  | 881             |        |              |  | 665    |        |  |  | 5,363        |        
|                                                                                                                                                                                                            
|                                                                                                                                                                                                            
|                                                                                                                                                                                                            
|                                                                                                                                                                                                            
|Industrial
development U.S. dollar revenue bonds due 2005 with fluctuating
interest rates (4.70% at March 31, 2000, and 3.70% at March 31, 2001),
subject to maximum
rates of 15% in 2000 and 2001 and other |           |  | 747             |        |              |  | 743    |        |  |  | 5,992        |        
|                                                                                                                                                                                                            
|                                                                                                                                                                                                             | Total     |  |                 | 84,295 |              |  |        | 46,300 |  |  |              | 373,387 | 
|                                                                                                                                                                                                            
|                                                                                                                                                                                                            
|                                                                                                                                                                                                            
|                                                                                                                                                                                                            
|LessPortion due within one year                                                                                                                                                                             |           |  | 37,235          |        |              |  | 7,996  |        |  |  | 64,484       |        
|                                                                                                                                                                                                            
|                                                                                                                                                                                                             | Total     |  | ¥               | 47,060 |              |  | ¥      | 38,304 |  |  | $            | 308,903 | 
|                                                                                                                                                                                                            

The outstanding bonds indentures generally require the parent company to
provide collateral for the outstanding bonds if the parent company provides
collateral to new bonds issued in Japan.

Land and buildings with a book value of ¥16,416 million ($132,387
thousand) were pledged as collateral for certain loans of the Company at March
31, 2001.

The aggregate annual maturities of long-term debt during the five years
ending March 31, 2006 are as follows:

|                     |  |                 |        |              |  |              |         | 
|-------------------- |  | --------------- | ------ | ------------ |  | ------------ | ------- | 
|                     |  |                 |        |              |  | Thousands of
|Year ending March 31 |  | Millions of Yen |        | U.S. Dollars
|                    
|2002                 |  | ¥               | 7,996  |              |  | $            | 64,484  | 
|                    
|                    
|                    
|                    
|2003                 |  |                 | 2,672  |              |  |              | 21,548  | 
|                    
|                    
|                    
|                    
|2004                 |  |                 | 1,623  |              |  |              | 13,089  | 
|                    
|                    
|                    
|                    
|2005                 |  |                 | 5,821  |              |  |              | 46,944  | 
|                    
|                    
|                    
|                    
|2006                 |  |                 | 15,926 |              |  |              | 128,435 | 
|                    

Substantially all short-term and long-term loans from
banks are made under agreements which, as is customary in
Japan, provide that the bank may, under certain conditions,
require the borrower to provide collateral (or additional
collateral) or guarantors with respect to the loans, and that
the bank may treat any collateral, whether furnished as
security for short-term or long-term loans or otherwise, as
collateral for all indebtedness to such bank. The Company
has no compensating balance arrangements with any
lending bank.

F-13



---



##### Table of Contents



7. Pension plans and accrued severance cost:

The parent company and major domestic subsidiaries have
trusteed non-contributory defined benefit pension plans
which cover substantially all of their employees. The benefits
are in the form of annuity payments and/or lump-sum
payments and are based on points and length of service and
conditions under which termination occurs. The Companys
policy is to fund amounts required to maintain sufficient plan
assets to provide for accrued benefits, subject to the limitation
on deductibility imposed by the Japanese income tax laws.
The plan assets are invested primarily in interest-bearing
securities, marketable equity securities and loan receivables. In
February 2000, the parent company agreed with its labour
union to amend its non-contributory pension plans in
several respects. A major change was a change in the benefits
calculation factor from basic salary amounts to points
based on the position of and length of services rendered by
employees. The amendment generated an unrecognized prior
service gain of ¥9,728 million.
     The Company also sponsors a domestic contributory
welfare pension plan covering substantially all of its Japanese
employees. The benefits of the welfare pension plan are based
on years of service and on the average compensation during
years of service and subject to governmental regulations. The
welfare plan consists of a basic component, which has been
specified by the Japanese governments welfare pension
regulations, and an additional component established by
the Company. Management considers that a portion of the
contributory plans, which are administered by a board of
trustees composed of management and labor representatives,
represents a welfare pension plan carried on behalf of the
Japanese government. Management believes that the benefit
obligation for the additional component is approximately
one fifth of the total benefit obligation. The welfare pension
plan is funded in conformity with the funding requirements
of applicable governmental regulations. The plan assets are
invested primarily in interest-bearing securities, marketable
equity securities and loan receivables.
     In September 2000, the Company amended its domestic
contributory welfare pension plan in accordance with the
amendment of Welfare Pension Insurance Act. A major
change was a reduction of future pension benefit payments
effective April 2000 and raising the eligibility age for pension benefit payments effective April 2002. The amendment
generated an unrecognized prior service gain of ¥5,301
million ($42,750 thousand).
     Net periodic benefit costs for the non-contributory plans
and the contributory plan of the parent company and certain
domestic subsidiaries for 1999, 2000 and 2001 consisted of
the following:

|                                                               |                           |   |                 |       |              |   |              |       |              |   |              |       |              |   |              |       |              |   |        |       |      |   |        |       |  |   |              |        |  |   |         |        | 
|-------------------------------------------------------------- | ------------------------- | - | --------------- | ----- | ------------ | - | ------------ | ----- | ------------ | - | ------------ | ----- | ------------ | - | ------------ | ----- | ------------ | - | ------ | ----- | ---- | - | ------ | ----- |  | - | ------------ | ------ |  | - | ------- | ------ | 
|                                                               |                           |   |                 |       |              |   |              |       |              |   |              |       |              |   |              |       |              |   |        |       |      |   |        |       |  |   | Thousands of
|                                                               |                           |   | Millions of Yen |       | U.S. Dollars
|                                                               |                           |   |                 |       |             
|                                                               |                           |   | 1999            |       | 2000         |   | 2001         |       | 2001        
|                                                               |                           |   |                 |       |              |   |              |       |             
|                                                               |                           |   | Non-            |       |              |   |              |       | Non-         |   |              |       |              |   | Non-         |       |              |   |        |       | Non- |   |        |       | 
|                                                               |                           |   | Contributory    |       | Contributory |   | Contributory |       | Contributory |   | Contributory |       | Contributory |   | Contributory |       | Contributory
|                                                               |                           |   | Plans           |       | Plan         |   | Plans        |       | Plan         |   | Plans        |       | Plan         |   | Plans        |       | Plan        
|                                                              
|Service cost                                                   |                           | ¥ | 3,654           |       |              | ¥ | 955          |       |              | ¥ | 3,178        |       |              | ¥ | 1,288        |       |              | ¥ | 2,519  |       |      | ¥ | 1,312  |       |  | $ | 20,315       |        |  | $ | 10,581  |       
|                                                              
|                                                              
|                                                              
|                                                              
|Interest cost                                                  |                           |   | 2,274           |       |              |   | 2,451        |       |              |   | 2,152        |       |              |   | 2,649        |       |              |   | 1,732  |       |      |   | 2,954  |       |  |   | 13,968       |        |  |   | 23,822  |       
|                                                              
|                                                              
|                                                              
|                                                              
|Expected return on assets                                      |                           |   | (1,281          | )     |              |   | (1,438       | )     |              |   | (1,328       | )     |              |   | (1,508       | )     |              |   | (2,091 | )     |      |   | (2,450 | )     |  |   | (16,863      | )      |  |   | (19,758 | )     
|                                                              
|                                                              
|                                                              
|                                                              
|Amortization of unrecognized
net actuarial loss                |                           |   | 927             |       |              |   | 401          |       |              |   | 577          |       |              |   | 651          |       |              |   | 171    |       |      |   | 276    |       |  |   | 1,379        |        |  |   | 2,226   |       
|                                                              
|                                                              
|                                                              
|                                                              
|Amortization of unrecognized
net assets at date of application |                           |   | (163            | )     |              |   | (344         | )     |              |   | (163         | )     |              |   | (344         | )     |              |   | (163   | )     |      |   | (344   | )     |  |   | (1,315       | )      |  |   | (2,774  | )     
|                                                              
|                                                              
|                                                              
|                                                              
|Amortization of unrecognized
prior service gain                |                           |   | (9              | )     |              |   |             |       |              |   | (9           | )     |              |   |             |       |              |   | (535   | )     |      |   |       |       |  |   | (4,315       | )      |  |   |        |       
|                                                              
|                                                               | Net periodic benefit cost |   | ¥               | 5,402 |              |   | ¥            | 2,025 |              |   | ¥            | 4,407 |              |   | ¥            | 2,736 |              |   | ¥      | 1,633 |      |   | ¥      | 1,748 |  |   | $            | 13,169 |  |   | $       | 14,097 | 
|                                                              

F-14



---



##### Table of Contents



Reconciliations of beginning and ending balances of benefit obligations and the fair value of the plan assets are as follows:

|                                                                      |                                                |                                          |        |                 |        |              |        |              |        |              |         |              |        |              |         |         |        |   |          |              |         |   |          |          |         | 
|--------------------------------------------------------------------- | ---------------------------------------------- | ---------------------------------------- | ------ | --------------- | ------ | ------------ | ------ | ------------ | ------ | ------------ | ------- | ------------ | ------ | ------------ | ------- | ------- | ------ | - | -------- | ------------ | ------- | - | -------- | -------- | ------- | 
|                                                                      |                                                |                                          |        |                 |        |              |        |              |        |              |         |              |        |              |         |         |        |   |          | Thousands of
|                                                                      |                                                |                                          |        | Millions of Yen |        | U.S. Dollars
|                                                                      |                                                |                                          |        |                 |        |             
|                                                                      |                                                |                                          |        | 2000            |        | 2001         |        | 2001        
|                                                                      |                                                |                                          |        |                 |        |              |        |             
|                                                                      |                                                |                                          |        | Non-            |        |              |        |              |        | Non-         |         |              |        |              |         | Non-    |        |   |          |             
|                                                                      |                                                |                                          |        | Contributory    |        | Contributory |        | Contributory |        | Contributory |         | Contributory |        | Contributory
|                                                                      |                                                |                                          |        | Plans           |        | Plan         |        | Plans        |        | Plan         |         | Plans        |        | Plan        
|                                                                     
|Change in benefit obligation:                                         |                                                |                                          |        |                 |        |              |        |              |        |              |         |              |        |              |         |         |        |   |          |              |         |   |          |         
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                      | Benefit obligation at beginning of year        |                                          | ¥      | 61,430          |        |              | ¥      | 52,988       |        |              | ¥       | 54,016       |        |              | ¥       | 59,113  |        |   | $        | 435,613      |         |   | $        | 476,718  |        
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                      | Service cost                                   |                                          |        | 3,178           |        |              |        | 1,288        |        |              |         | 2,519        |        |              |         | 1,312   |        |   |          | 20,315       |         |   |          | 10,581   |        
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                      | Interest cost                                  |                                          |        | 2,152           |        |              |        | 2,649        |        |              |         | 1,732        |        |              |         | 2,954   |        |   |          | 13,968       |         |   |          | 23,822   |        
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                      | Plan participants contribution                |                                          |        |                |        |              |        | 1,031        |        |              |         |             |        |              |         | 1,050   |        |   |          |             |         |   |          | 8,468    |        
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                      | Plan benefit amendments                        |                                          |        | (9,728          | )      |              |        |             |        |              |         |             |        |              |         | (5,301  | )      |   |          |             |         |   |          | (42,750  | )      
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                      | Actuarial (gain) loss                          |                                          |        | (503            | )      |              |        | 2,032        |        |              |         | 3,041        |        |              |         | 6,627   |        |   |          | 24,524       |         |   |          | 53,443   |        
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                      | Benefits paid                                  |                                          |        | (2,513          | )      |              |        | (875         | )      |              |         | (1,917       | )      |              |         | (732    | )      |   |          | (15,460      | )       |   |          | (5,903   | )      
|                                                                     
|                                                                      |                                                | Benefit obligation at end of year        |        | ¥               | 54,016 |              |        | ¥            | 59,113 |              |         | ¥            | 59,391 |              |         | ¥       | 65,023 |   |          | $            | 478,960 |   |          | $        | 524,379 | 
|                                                                     
|Change in plan assets:                                                |                                                |                                          |        |                 |        |              |        |              |        |              |         |              |        |              |         |         |        |   |          |              |         |   |          |         
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                      | Fair value of plan assets at beginning of year |                                          | ¥      | 36,652          |        |              | ¥      | 42,083       |        |              | ¥       | 46,459       |        |              | ¥       | 54,436  |        |   | $        | 374,669      |         |   | $        | 439,000  |        
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                      | Actual return on plan assets                   |                                          |        | 8,905           |        |              |        | 10,667       |        |              |         | (5,934       | )      |              |         | (6,473  | )      |   |          | (47,855      | )       |   |          | (52,202  | )      
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                      | Employer contribution                          |                                          |        | 3,415           |        |              |        | 1,530        |        |              |         | 3,726        |        |              |         | 1,618   |        |   |          | 30,049       |         |   |          | 13,048   |        
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                      | Plan participants contribution                |                                          |        |                |        |              |        | 1,031        |        |              |         |             |        |              |         | 1,050   |        |   |          |             |         |   |          | 8,468    |        
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                      | Benefits paid                                  |                                          |        | (2,513          | )      |              |        | (875         | )      |              |         | (1,917       | )      |              |         | (732    | )      |   |          | (15,460      | )       |   |          | (5,903   | )      
|                                                                     
|                                                                      |                                                | Fair value of plan assets at end of year |        | ¥               | 46,459 |              |        | ¥            | 54,436 |              |         | ¥            | 42,334 |              |         | ¥       | 49,899 |   |          | $            | 341,403 |   |          | $        | 402,411 | 
|                                                                     
|Funded status                                                         |                                                | ¥                                        | (7,557 | )               |        | ¥            | (4,677 | )            |        | ¥            | (17,057 | )            |        | ¥            | (15,124 | )       |        | $ | (137,557 | )            |         | $ | (121,968 | )       
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|Unrecognized actuarial loss                                           |                                                |                                          | 8,561  |                 |        |              | 9,993  |              |        |              | 19,456  |              |        |              | 25,267  |         |        |   | 156,903  |              |         |   | 203,766  |         
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|Unrecognized net assets at the date of application                    |                                                |                                          | (1,135 | )               |        |              | (2,329 | )            |        |              | (972    | )            |        |              | (1,985  | )       |        |   | (7,838   | )            |         |   | (16,008  | )       
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|Unrecognized prior service gain                                       |                                                |                                          | (9,840 | )               |        |              |       |              |        |              | (9,305  | )            |        |              | (5,301  | )       |        |   | (75,040  | )            |         |   | (42,750  | )       
|                                                                     
|                                                                      |                                                | Net amount recognized                    |        | ¥               | (9,971 | )            |        | ¥            | 2,987  |              |         | ¥            | (7,878 | )            |         | ¥       | 2,857  |   |          | $            | (63,532 | ) |          | $        | 23,040  | 
|                                                                     
|Amounts recognized in the statement of financial
position consist of: |                                                |                                          |        |                 |        |              |        |              |        |              |         |              |        |              |         |         |        |   |          |              |         |   |          |         
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                      | Accrued benefit liabilities                    |                                          | ¥      | (11,398         | )      |              | ¥      | (2,336       | )      |              | ¥       | (14,181      | )      |              | ¥       | (12,965 | )      |   | $        | (114,363     | )       |   | $        | (104,557 | )      
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                      | Accumulated other comprehensive income         |                                          |        | 1,427           |        |              |        | 5,323        |        |              |         | 6,303        |        |              |         | 15,822  |        |   |          | 50,831       |         |   |          | 127,597  |        
|                                                                     
|                                                                      |                                                | Net amount recognized                    |        | ¥               | (9,971 | )            |        | ¥            | 2,987  |              |         | ¥            | (7,878 | )            |         | ¥       | 2,857  |   |          | $            | (63,532 | ) |          | $        | 23,040  | 
|                                                                     
|Accumulated benefit obligation at end of year                         |                                                | ¥                                        | 51,333 |                 |        | ¥            | 56,772 |              |        | ¥            | 56,515  |              |        | ¥            | 62,864  |         |        | $ | 455,766  |              |         | $ | 506,968  |         
|                                                                     
|Actuarial assumptions:                                                |                                                |                                          |        |                 |        |              |        |              |        |              |         |              |        |              |         |         |        |   |          |              |         |   |          |         
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                      | Discount rate                                  |                                          |        | 3.2%            |        |              |        | 5.0%         |        |              |         | 2.8%         |        |              |         | 4.5%    |        |   |          |              |         |   |          |          |        
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                      | Rate of salary increase                        |                                          |        | *              |        |              |        | 3.1%         |        |              |         | *           |        |              |         | 3.1%    |        |   |          |              |         |   |          |          |        
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                      | Long-term rate of return on plan assets        |                                          |        | 3.5%            |        |              |        | 3.5%         |        |              |         | 4.5%         |        |              |         | 4.5%    |        |   |          |              |         |   |          |          |        
|                                                                     

|* | Non-contributory plans are not pay-related after February 2000 amendment.
|- | -------------------------------------------------------------------------

F-15



---



##### Table of Contents



The unrecognized prior service gain is being amortized
over 18 years. The unrecognized actuarial loss and the
unrecognized net assets at the date of initial application are
being amortized over the average remaining service period of
employees, both for the non-contributory plans and for the
contributory plan.
     Substantially all of the employees of major U.S. subsidiaries are covered
by a defined benefit pension plan. The
projected benefit obligations for the plan and related
fair value of plan assets were ¥2,551 million and ¥ 3,194
million, respectively, at March 31, 2000 and ¥3,509 million
($28,298 thousand) and ¥3,188 million ($25,710 thousand),
respectively, at March 31, 2001.
     With respect to directors, provision is made for lump-sum
severance indemnities on a basis considered adequate for such
future payments as may be approved by the shareholders.
     The net charges to income for worldwide pension plans
and severance indemnities for the years ended March 31,
1999, 2000 and 2001 were ¥8,849 million, ¥10,087 million
and ¥4,560 million ($36,774 thousand), respectively.

8. Income taxes:

The Company is subject to a number of different income
taxes which, in the aggregate, indicate a normal statutory tax
rate of approximately 47.5% for the year ended March 31,
1999 and 42% for the years ended March 31, 2000 and 2001
in Japan.
     Income tax expense for the year ended March 31, 2000
included a ¥510 million charge resulting from the settlement of a proposed
assessment from the Internal Revenue Service
relating to a tax position taken in prior years in connection
with a business realignment.
     The Companys provision for income taxes differed from
the provision for income taxes at the normal statutory tax
rates in Japan as follows:

|                                                  |                                                                                                          |   |                 |        |              |   |        |        |      |   |        |        |   |   |              |         |  
|------------------------------------------------- | -------------------------------------------------------------------------------------------------------- | - | --------------- | ------ | ------------ | - | ------ | ------ | ---- | - | ------ | ------ | - | - | ------------ | ------- | -
|                                                  |                                                                                                          |   |                 |        |              |   |        |        |      |   |        |        |   |   | Thousands of
|                                                  |                                                                                                          |   | Millions of Yen |        | U.S. Dollars
|                                                  |                                                                                                          |   |                 |        |             
|                                                  |                                                                                                          |   | 1999            |        | 2000         |   | 2001   |        | 2001
|                                                 
|Computed tax expense at normal statutory tax rate |                                                                                                          | ¥ | 5,953           |        |              | ¥ | 11,679 |        |      | ¥ | 14,361 |        |   | $ | 115,815      |        
|                                                 
|                                                 
|                                                 
|                                                 
|Increase (decrease) resulting from:               |                                                                                                          |   |                 |        |              |   |        |        |      |   |        |        |   |   |              |        
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  | Changes
in valuation allowance, net of effects of
carryforward loss expiration and exchange rate changes |   |                 | 1,750  |              |   |        | 7,076  |      |   |        | 2,004  |   |   |              | 16,161  |  
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  | Expenses not deductible for tax purpose                                                                  |   |                 | 256    |              |   |        | 223    |      |   |        | 563    |   |   |              | 4,540   |  
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  | Difference in foreign and Japanese tax rates                                                             |   |                 | (1,878 | )            |   |        | (1,790 | )    |   |        | (2,739 | ) |   |              | (22,089 | )
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  | Effect of tax rate change on deferred taxes                                                              |   |                 | 4,293  |              |   |        | 384    |      |   |        |       |   |   |              |        |  
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  | Write down of investment in a subsidiary                                                                 |   |                 |       |              |   |        |       |      |   |        | (1,092 | ) |   |              | (8,806  | )
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  | Effect of tax on gain from sale and issuance of subsidiary stock                                         |   |                 |       |              |   |        | (1,747 | )    |   |        |       |   |   |              |        |  
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  | Other                                                                                                    |   |                 | 1,080  |              |   |        | (609   | )    |   |        | 1,223  |   |   |              | 9,863   |  
|                                                 
|Provision for income taxes                        |                                                                                                          | ¥ | 11,454          |        |              | ¥ | 15,216 |        |      | ¥ | 14,320 |        |   | $ | 115,484      |        
|                                                 

F-16



---



##### Table of Contents



Total income taxes provided for the years ended March 31, 1999, 2000 and 2001 are as follows:

|                                                  |  |                 |        |              |  |      |        |      |  |   |        |   |  |              |         |  
|------------------------------------------------- |  | --------------- | ------ | ------------ |  | ---- | ------ | ---- |  | - | ------ | - |  | ------------ | ------- | -
|                                                  |  |                 |        |              |  |      |        |      |  |   |        |   |  | Thousands of
|                                                  |  | Millions of Yen |        | U.S. Dollars
|                                                  |  |                 |        |             
|                                                  |  | 1999            |        | 2000         |  | 2001 |        | 2001
|                                                 
|Provision for income taxes                        |  | ¥               | 11,454 |              |  | ¥    | 15,216 |      |  | ¥ | 14,320 |   |  | $            | 115,484 |  
|                                                 
|                                                 
|                                                 
|                                                 
|Shareholders equitydirectly charged (credited): |  |                 |        |              |  |      |        |      |  |   |        |   |  |              |         |  
|                                                 
|                                                 
|                                                 
|                                                 
|Minimum pension liability adjustments             |  |                 | (2,362 | )            |  |      | 5,657  |      |  |   | (6,456 | ) |  |              | (52,064 | )
|                                                 
|                                                 
|                                                 
|                                                 
|Net unrealized gains on securities                |  |                 | 480    |              |  |      | (639   | )    |  |   | (3,638 | ) |  |              | (29,339 | )
|                                                 
|Total                                             |  | ¥               | 9,572  |              |  | ¥    | 20,234 |      |  | ¥ | 4,226  |   |  | $            | 34,081  |  
|                                                 

The significant components of the deferred tax assets and liabilities at March 31, 2000 and 2001 are as follows:

|                             |       |   |                 |        |              |   |          |       |             |   |          |        |             |   |       |       |  |   |              |         |  |   |        |        | 
|---------------------------- | ----- | - | --------------- | ------ | ------------ | - | -------- | ----- | ----------- | - | -------- | ------ | ----------- | - | ----- | ----- |  | - | ------------ | ------- |  | - | ------ | ------ | 
|                             |       |   |                 |        |              |   |          |       |             |   |          |        |             |   |       |       |  |   | Thousands of
|                             |       |   | Millions of Yen |        | U.S. Dollars
|                             |       |   |                 |        |             
|                             |       |   | 2000            |        | 2001         |   | 2001    
|                             |       |   |                 |        |              |   |         
|                             |       |   | Deferred        |        | Deferred     |   | Deferred |       | Deferred    |   | Deferred |        | Deferred   
|                             |       |   | Tax             |        | Tax          |   | Tax      |       | Tax         |   | Tax      |        | Tax        
|                             |       |   | Assets          |        | Liabilities  |   | Assets   |       | Liabilities |   | Assets   |        | Liabilities
|                            
|Inventories                  |       | ¥ | 6,738           |        |              |   |         |       |             | ¥ | 7,398    |        |             |   |      |       |  | $ | 59,661       |         |  |   |       |       
|                            
|                            
|                            
|                            
|Marketable equity securities |       |   | 281             |        |              | ¥ | 7,324    |       |             |   | 30       |        |             | ¥ | 2,800 |       |  |   | 242          |         |  | $ | 22,581 |       
|                            
|                            
|                            
|                            
|Accrued expenses             |       |   | 5,566           |        |              |   |         |       |             |   | 6,406    |        |             |   |      |       |  |   | 51,661       |         |  |   |       |       
|                            
|                            
|                            
|                            
|Tax loss carryforwards       |       |   | 17,284          |        |              |   |         |       |             |   | 13,278   |        |             |   |      |       |  |   | 107,081      |         |  |   |       |       
|                            
|                            
|                            
|                            
|Pension and severance cost   |       |   | 6,745           |        |              |   |         |       |             |   | 12,951   |        |             |   |      |       |  |   | 104,444      |         |  |   |       |       
|                            
|                            
|                            
|                            
|Land                         |       |   | 2,266           |        |              |   |         |       |             |   | 2,052    |        |             |   |      |       |  |   | 16,548       |         |  |   |       |       
|                            
|                            
|                            
|                            
|Depreciation                 |       |   | 2,165           |        |              |   | 348      |       |             |   | 1,890    |        |             |   | 330   |       |  |   | 15,242       |         |  |   | 2,661  |       
|                            
|                            
|                            
|                            
|Royalty receivable           |       |   | 1,385           |        |              |   |         |       |             |   | 1,491    |        |             |   |      |       |  |   | 12,024       |         |  |   |       |       
|                            
|                            
|                            
|                            
|Other                        |       |   | 9,215           |        |              |   | 1,937    |       |             |   | 15,324   |        |             |   | 2,421 |       |  |   | 123,581      |         |  |   | 19,524 |       
|                            
|                             | Total |   |                 | 51,645 |              |   |          | 9,609 |             |   |          | 60,820 |             |   |       | 5,551 |  |   |              | 490,484 |  |   |        | 44,766 | 
|                            
|                            
|                            
|                            
|Valuation allowance          |       |   | (16,503         | )      |              |   |         |       |             |   | (17,792  | )      |             |   |      |       |  |   | (143,484     | )       |  |   |       |       
|                            
|                             | Total |   | ¥               | 35,142 |              |   | ¥        | 9,609 |             |   | ¥        | 43,028 |             |   | ¥     | 5,551 |  |   | $            | 347,000 |  |   | $      | 44,766 | 
|                            

F-17



---



##### Table of Contents



The valuation allowance principally relates to deferred tax
assets for loss carryforwards of subsidiaries.     During the years ended March 31, 2000 and 2001, the
valuation allowances were increased by ¥4,774 million and
¥1,289 million ($10,395 thousand), respectively.     Deferred tax assetsnon-current of ¥8,954 million and
¥16,301 million ($131,459 thousand) are included in other
assets in the accompanying consolidated balance sheets at
March 31, 2000 and 2001, respectively.     At March 31, 2001, the Company has tax loss carry-forwards which are available
to reduce taxable income in subsequent periods. If not utilized, such loss
carryforwards expire as follows:

|                     |       |                 |          |              |  |   |              |         | 
|-------------------- | ----- | --------------- | -------- | ------------ |  | - | ------------ | ------- | 
|                     |       |                 |          |              |  |   | Thousands of
|Year ending March 31 |       | Millions of Yen |          | U.S. Dollars
|                    
|2002                 |       |                 | ¥  2,636 |              |  | $ | 21,258       |        
|                    
|                    
|                    
|                    
|2003                 |       |                 | 2,465    |              |  |   | 19,879       |        
|                    
|                    
|                    
|                    
|2004                 |       |                 | 3,962    |              |  |   | 31,951       |        
|                    
|                    
|                    
|                    
|2005                 |       |                 | 2,973    |              |  |   | 23,976       |        
|                    
|                    
|                    
|                    
|2006                 |       |                 | 292      |              |  |   | 2,355        |        
|                    
|                    
|                    
|                    
|Thereafter           |       |                 | 25,034   |              |  |   | 201,887      |        
|                    
|                     | Total |                 |          | ¥37,362      |  |   | $            | 301,306 | 
|                    

No provision for income taxes is recognized on undistributed earnings of
foreign subsidiaries where the Company considers that such earnings are
reinvested or would not, under the present Japanese tax laws, be subject to
additional taxation should they be distributed to the parent company.
Undistributed earnings of foreign subsidiaries (including related
cumulative translation adjustments) at March 31, 2000 and 2001 amounted to
approximately ¥88,328 million and ¥111,506 million ($899,242 thousand),
respectively. It is not practical to estimate the amount of taxes that might be
payable on the eventual remittance of such earnings.     The domestic undistributed earnings would not, under the present Japanese
tax laws, be subject to additional taxation.

9. Shareholders equity:

Common Stock and Additional Paid-in Capital
As permitted by the Commercial Code of Japan (the Code) prior to April 1,
1991, the parent company had made free share distributions which were accounted
for by a transfer from additional paid-in capital to common stock or without
any transfers in the capital accounts.     Companies in the United States issuing shares in similar transactions
would be required to account for them as stock dividends. Had the distributions
been accounted for in the manner adopted by the United States companies,
¥179,076 million ($1,444,161 thousand) would have been transferred from
retained earnings to appropriate capital accounts as of March 31, 2001.

Retained Earnings
Retained earnings consist of legal reserve and unappropriated retained
earnings.     The Code provides that an amount at least equal to 10% of all cash
payments which are made as an appropriation of
retained earnings applicable to
each fiscal period shall be appropriated and set aside as a legal reserve until
such reserve equals 25% of capital stock.     Under the Code, the amount available for dividends is based on
unappropriated retained earnings as recorded on the books of the parent
company. Certain adjustments, not recorded on the parent companys books, are
reflected in the financial statements as described in Note 1. At March 31,
2001, retained earnings recorded on the parent companys books of account
were ¥142,752 million ($1,151,226 thousand).     The appropriations of retained earnings for the year ended March 31,
2001, which have been incorporated in the accompanying financial
statements, will be proposed for approval at the general shareholders meeting
to be held on June 28, 2001, and will be recorded in the parent companys
general books of account after shareholders approval.

F-18



---



##### Table of Contents



10. Stock-based compensation plans:

The Company has two types of stock-based compensation plans as incentive plans
for directors and selected employees.

Warrant plan
Upon issuance of detachable warrant bonds by the parent company, a consolidated
subsidiary purchased all of the bonds and the Company distributed the warrants
at fair market value to directors and certain employees of the
Company as a part of their remuneration.

Stock option plan
In accordance with approval of shareholders meeting on June 29, 2000, the
Company granted share subscription rights to employees. The Company recorded
the fair value of the stock option as a part of their remuneration.

A summary of information for the Company s stock-based
compensation plans is as follows:


|     |  |              |  |                                         |  |                |       |                  |  |             |       |                  |  |           |     |  |  | 
|---- |  | ------------ |  | --------------------------------------- |  | -------------- | ----- | ---------------- |  | ----------- | ----- | ---------------- |  | --------- | --- |  |  | 
|     |  |              |  |                                         |  |                |       | Yen              |  |             |       |                 
|     |  |              |  |                                         |  |                |       |                  |  |             |       |                 
|     |  |              |  |                                         |  |                |       |                  |  |             |       | Weighted-Average |  | Number of
|     |  |              |  |                                         |  |                |       | Weighted-Average |  | Grant Date  |       | Shares          
|Year |  | Plan         |  | Exercisable Period                      |  | Exercise Price |       | Share Price      |  | (Thousands)
|    
|1999 |  | Warrant      |  | From July 1, 1999 to June 8, 2001       |  | ¥              | 2,783 |                  |  | ¥           | 2,520 |                  |  |           | 269 | 
|    
|    
|    
|    
|2000 |  | Warrant      |  | From July 3, 2000 to September 12, 2002 |  |                | 2,188 |                  |  |             | 1,925 |                  |  |           | 320 | 
|    
|    
|    
|    
|2001 |  | Warrant      |  | From July 2, 2001 to September 25, 2003 |  |                | 4,729 |                  |  |             | 4,543 |                  |  |           | 284 | 
|    
|    
|    
|    
|2001 |  | Stock option |  | From July 1, 2002 to June 30, 2005      |  |                | 4,400 |                  |  |             | 4,250 |                  |  |           | 191 | 
|    

|     |  |              |  |                                         |  |                |       |                  |  |            |       |                  |  |  |  |  |  | 
|---- |  | ------------ |  | --------------------------------------- |  | -------------- | ----- | ---------------- |  | ---------- | ----- | ---------------- |  |  |  |  |  | 
|     |  |              |  |                                         |  |                |       | U.S.
Dollars    
|     |  |              |  |                                         |  |                |       |                 
|     |  |              |  |                                         |  |                |       |                  |  |            |       | Weighted-Average | 
|     |  |              |  |                                         |  |                |       | Weighted-Average |  | Grant Date |      
|Year |  | Plan         |  | Exercisable Period                      |  | Exercise Price |       | Share Price      |  |           
|    
|2001 |  | Warrant      |  | From July 2, 2001 to September 25, 2003 |  | $              | 38.14 |                  |  | $          | 36.64 |                 
|    
|    
|    
|    
|2001 |  | Stock option |  | From July 1, 2002 to June 30, 2005      |  |                | 35.48 |                  |  |            | 34.27 |                 
|    
|    
|    
|    
|    

Remuneration cost recognized for stock-based compensation plans for the
years ended March 31, 1999, 2000 and 2001 were ¥56 million, ¥73
million and ¥362 million ($2,919 thousand), respectively.

The weighted-average fair value per share at the date of
grant for the warrants and the stock options granted during
the years ended March 31, 1999, 2000 and 2001 were ¥ 208,
¥228 and ¥762 ($6.15), respectively, and were estimated using
the Black-Scholes option-valuation model.

F-19



---



##### Table of Contents



A summary of the status of the Companys warrants and options as of March 31, 1999, 2000 and 2001, and changes during
the years is as follows:

|                              |           |  |                  |      |                |  |                  |  |                           |   |       |       |  |   |       |       | 
|----------------------------- | --------- |  | ---------------- | ---- | -------------- |  | ---------------- |  | ------------------------- | - | ----- | ----- |  | - | ----- | ----- | 
|                              |           |  |                  |      |                |  |                  |  | Weighted-Average Exercise
|                              |           |  |                  |      |                |  | Weighted-Average |  | Price per Share          
|                              |           |  | Number of Shares |      | Remaining Life |  |                 
|                              |           |  | (Thousands)      |      | (Years)        |  | Yen              |  | U.S. Dollars             
|                             
|Outstanding at March 31, 1998 |           |  |                 |      |                |  |                  |  |                           |   |      |       |  |   |       |      
|                             
|                             
|                             
|                             
|                              | Granted   |  |                  | 269  |                |  |                  |  |                           |   | ¥     | 2,783 | 
|                             
|                             
|                             
|                             
|                              | Exercised |  |                  |     |                |  |                  |  |                           |   |       |      |  |   |       |       | 
|                              |           |  |                  |     
|Outstanding at March 31, 1999 |           |  | 269              |      |                |  | 2.3              |  |                           |   | 2,783 |      
|                             
|                             
|                             
|                             
|                              | Granted   |  |                  | 320  |                |  |                  |  |                           |   |       | 2,188 |  |   |       |       | 
|                             
|                             
|                             
|                             
|                              | Exercised |  |                  | (15  | )              |  |                  |  |                           |   |       | 2,783 | 
|                              |           |  |                  |     
|Outstanding at March 31, 2000 |           |  | 574              |      |                |  | 1.9              |  |                           |   | 2,452 |       |  |   |       |      
|                             
|                             
|                             
|                             
|                              | Granted   |  |                  | 475  |                |  |                  |  |                           |   |       | 4,597 |  |   | $     | 37.07 | 
|                             
|                             
|                             
|                             
|                              | Exercised |  |                  | (306 | )              |  |                  |  |                           |   |       | 2,551 |  |   |       | 20.57 | 
|                             
|Outstanding at March 31, 2001 |           |  | 743              |      |                |  | 2.4              |  |                           | ¥ | 3,782 |       |  | $ | 30.50 |      
|                             
|Exercisable at March 31, 2000 |           |  | 254              |      |                |  |                  |  |                           | ¥ | 2,783 |       |  |   |       |      
|                             
|Exercisable at March 31, 2001 |           |  | 268              |      |                |  |                  |  |                           | ¥ | 2,338 |       |  | $ | 18.85 |      
|                             

11. Other comprehensive income:

Change in accumulated other comprehensive income (loss)
is as follows:

|                          |  |                           |         |                     |  |                      |         |                     |  |                    |          |                   |  |   |          |  
|------------------------- |  | ------------------------- | ------- | ------------------- |  | -------------------- | ------- | ------------------- |  | ------------------ | -------- | ----------------- |  | - | -------- | -
|                          |  | Millions of Yen          
|                          |  |                          
|                          |  |                           |         |                     |  |                      |         |                     |  | Cumulative Foreign |          | Total Accumulated
|                          |  | Minimum Pension           |         | Net Unrealized      |  | Currency Translation |         | Other Comprehensive
|                          |  | Liability Adjustments     |         | Gains on Securities |  | Adjustments          |         | Income (Loss)      
|                         
|Balance at March 31, 1998 |  | ¥                         | (8,005  | )                   |  | ¥                    | 12,122  |                     |  | ¥                  | (12,107  | )                 |  | ¥ | (7,990   | )
|                         
|                         
|                         
|                         
|Adjustments for the year  |  |                           | (2,611  | )                   |  |                      | 544     |                     |  |                    | (14,207  | )                 |  |   | (16,274  | )
|                         
|Balance at March 31, 1999 |  |                           | (10,616 | )                   |  |                      | 12,666  |                     |  |                    | (26,314  | )                 |  |   | (24,264  | )
|                         
|                         
|                         
|                         
|Adjustments for the year  |  |                           | 7,824   |                     |  |                      | (919    | )                   |  |                    | (19,083  | )                 |  |   | (12,178  | )
|                         
|Balance at March 31, 2000 |  |                           | (2,792  | )                   |  |                      | 11,747  |                     |  |                    | (45,397  | )                 |  |   | (36,442  | )
|                         
|                         
|                         
|                         
|Adjustments for the year  |  |                           | (8,847  | )                   |  |                      | (5,085  | )                   |  |                    | 21,723   |                   |  |   | 7,791    |  
|                         
|Balance at March 31, 2001 |  | ¥                         | (11,639 | )                   |  | ¥                    | 6,662   |                     |  | ¥                  | (23,674  | )                 |  | ¥ | (28,651  | )
|                         
|                          |  | Thousands of U.S. Dollars
|                          |  |                          
|                          |  |                           |         |                     |  |                      |         |                     |  | Cumulative Foreign |          | Total Accumulated
|                          |  | Minimum Pension           |         | Net Unrealized      |  | Currency Translation |         | Other Comprehensive
|                          |  | Liability Adjustments     |         | Gains on Securities |  | Adjustments          |         | Income (Loss)      
|                         
|Balance at March 31, 2000 |  | $                         | (22,516 | )                   |  |                      | $94,734 |                     |  | $                  | (366,105 | )                 |  | $ | (293,887 | )
|                         
|                         
|                         
|                         
|Adjustments for the year  |  |                           | (71,347 | )                   |  |                      | (41,008 | )                   |  |                    | 175,186  |                   |  |   | 62,831   |  
|                         
|Balance at March 31, 2001 |  | $                         | (93,863 | )                   |  |                      | $53,726 |                     |  | $                  | (190,919 | )                 |  | $ | (231,056 | )
|                         

F-20



---



##### Table of Contents



Tax effects allocated to each component of other comprehensive income (loss) and reclassification adjustments are as follows:

|                                                    |                                                                   |  |                 |        |               |  |          |       |            |  |        |       |   |   |          |        |  
|--------------------------------------------------- | ----------------------------------------------------------------- |  | --------------- | ------ | ------------- |  | -------- | ----- | ---------- |  | ------ | ----- | - | - | -------- | ------ | -
|                                                    |                                                                   |  | Millions of Yen
|                                                    |                                                                   |  |                
|                                                    |                                                                   |  | Before-Tax      |        | Tax (Expense) |  | Minority |       | Net-of-Tax
|                                                    |                                                                   |  | Amount          |        | or Benefit    |  | Interest |       | Amount    
|                                                   
|1999:                                               |                                                                   |  |                 |        |               |  |          |       |            |  |        |       |   |   |          |       
|                                                   
|                                                   
|                                                   
|                                                   
|Minimum pension liability adjustments               |                                                                   |  | ¥  (4,973       | )      |               |  | ¥2,362   |       |            |  |       |       |   | ¥ | (2,611   | )     
|                                                   
|                                                   
|                                                   
|                                                   
|Net unrealized gains on securities:                 |                                                                   |  |                 |        |               |  |          |       |            |  |        |       |   |   |          |       
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Unrealized holding gains arising during year                      |  |                 | 1,978  |               |  |          | (940  | )          |  |        | ¥  17 |   |   |          | 1,055  |  
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | LessReclassification adjustment for gains realized in net income |  |                 | (971   | )             |  |          | 460   |            |  |        |      |   |   |          | (511   | )
|                                                    |                                                                   |  |                
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Net unrealized gains                                              |  |                 | 1,007  |               |  |          | (480  | )          |  |        | 17    |   |   |          | 544    |  
|                                                   
|                                                   
|                                                   
|                                                   
|Cumulative foreign currency translation adjustments |                                                                   |  | (14,328         | )      |               |  |         |       |            |  | 121    |       |   |   | (14,207  | )     
|                                                   
|Other comprehensive income (loss)                   |                                                                   |  | ¥(18,294        | )      |               |  | ¥1,882   |       |            |  | ¥138   |       |   | ¥ | (16,274  | )     
|                                                   
|
|2000:                                               |                                                                   |  |                 |        |               |  |          |       |            |  |        |       |   |   |          |       
|                                                   
|                                                   
|                                                   
|                                                   
|Minimum pension liability adjustments               |                                                                   |  | ¥  13,471       |        |               |  | ¥(5,657  | )     |            |  | ¥  10  |       |   | ¥ | 7,824    |       
|                                                   
|                                                   
|                                                   
|                                                   
|Net unrealized gains on securities:                 |                                                                   |  |                 |        |               |  |          |       |            |  |        |       |   |   |          |       
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Unrealized holding gains arising during year                      |  |                 | 1,194  |               |  |          | (500  | )          |  |        | (41   | ) |   |          | 653    |  
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | LessReclassification adjustment for gains realized in net income |  |                 | (2,711 | )             |  |          | 1,139 |            |  |        |      |   |   |          | (1,572 | )
|                                                    |                                                                   |  |                
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Net unrealized losses                                             |  |                 | (1,517 | )             |  |          | 639   |            |  |        | (41   | ) |   |          | (919   | )
|                                                   
|                                                   
|                                                   
|                                                   
|Cumulative foreign currency translation adjustments |                                                                   |  | (19,561         | )      |               |  |         |       |            |  | 478    |       |   |   | (19,083  | )     
|                                                   
|Other comprehensive income (loss)                   |                                                                   |  | ¥   (7,607      | )      |               |  | ¥(5,018  | )     |            |  | ¥447   |       |   | ¥ | (12,178  | )     
|                                                   
|2001:                                               |                                                                   |  |                 |        |               |  |          |       |            |  |        |       |   |   |          |       
|                                                   
|                                                   
|                                                   
|                                                   
|Minimum pension liability adjustments               |                                                                   |  | ¥(15,375        | )      |               |  | ¥  6,456 |       |            |  | ¥   72 |       |   |   | ¥ (8,847 | )     
|                                                   
|                                                   
|                                                   
|                                                   
|Net unrealized gains on securities:                 |                                                                   |  |                 |        |               |  |          |       |            |  |        |       |   |   |          |       
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Unrealized holding losses arising during year                     |  |                 | (7,432 | )             |  |          | 3,121 |            |  |        | 45    |   |   |          | (4,266 | )
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | LessReclassification adjustment for gains realized in net income |  |                 | (1,308 | )             |  |          | 517   |            |  |        | (28   | ) |   |          | (819   | )
|                                                    |                                                                   |  |                
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Net unrealized losses                                             |  |                 | (8,740 | )             |  |          | 3,638 |            |  |        | 17    |   |   |          | (5,085 | )
|                                                   
|                                                   
|                                                   
|                                                   
|Cumulative foreign currency translation adjustments |                                                                   |  | 22,353          |        |               |  |         |       |            |  | (630   | )     |   |   | 21,723   |       
|                                                   
|Other comprehensive income (loss)                   |                                                                   |  | ¥  (1,762       | )      |               |  | ¥10,094  |       |            |  | ¥(541  | )     |   |   | ¥  7,791 |       
|                                                   

|                                                    |                                                                   |  |                           |         |               |  |          |        |            |  |          |      |   |  |           |         |  
|--------------------------------------------------- | ----------------------------------------------------------------- |  | ------------------------- | ------- | ------------- |  | -------- | ------ | ---------- |  | -------- | ---- | - |  | --------- | ------- | -
|                                                    |                                                                   |  | Thousands of U.S. Dollars
|                                                    |                                                                   |  |                          
|                                                    |                                                                   |  | Before-Tax                |         | Tax (Expense) |  | Minority |        | Net-of-Tax
|                                                    |                                                                   |  | Amount                    |         | or Benefit    |  | Interest |        | Amount    
|                                                   
|2001:                                               |                                                                   |  |                           |         |               |  |          |        |            |  |          |      |   |  |           |        
|                                                   
|                                                   
|                                                   
|                                                   
|Minimum pension liability adjustments               |                                                                   |  | $(123,992                 | )       |               |  | $52,064  |        |            |  | $    581 |      |   |  | $(71,347  | )      
|                                                   
|                                                   
|                                                   
|                                                   
|Net unrealized gains on securities:                 |                                                                   |  |                           |         |               |  |          |        |            |  |          |      |   |  |           |        
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Unrealized holding losses arising during year                     |  |                           | (59,936 | )             |  |          | 25,170 |            |  |          | 363  |   |  |           | (34,403 | )
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | LessReclassification adjustment for gains realized in net income |  |                           | (10,548 | )             |  |          | 4,169  |            |  |          | (226 | ) |  |           | (6,605  | )
|                                                    |                                                                   |  |                          
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Net unrealized losses                                             |  |                           | (70,484 | )             |  |          | 29,339 |            |  |          | 137  |   |  |           | (41,008 | )
|                                                   
|                                                   
|                                                   
|                                                   
|Cumulative foreign currency translation adjustments |                                                                   |  | 180,266                   |         |               |  |         |        |            |  | (5,080   | )    |   |  | 175,186   |        
|                                                   
|Other comprehensive income (loss)                   |                                                                   |  | $  (14,210                | )       |               |  | $81,403  |        |            |  | $(4,362  | )    |   |  | $  62,831 |        
|                                                   

F-21



---



##### Table of Contents



12. Supplemental information:

Supplemental information for the years ended March 31, 1999, 2000 and 2001 is as
follows:

|                                                               |  |                 |        |              |  |      |        |      |  |   |        |  |  |              |         | 
|-------------------------------------------------------------- |  | --------------- | ------ | ------------ |  | ---- | ------ | ---- |  | - | ------ |  |  | ------------ | ------- | 
|                                                               |  |                 |        |              |  |      |        |      |  |   |        |  |  | Thousands of
|                                                               |  | Millions of Yen |        | U.S. Dollars
|                                                               |  |                 |        |             
|                                                               |  | 1999            |        | 2000         |  | 2001 |        | 2001
|                                                              
|Research and development expenses charged to cost and expenses |  | ¥               | 31,131 |              |  | ¥    | 33,265 |      |  | ¥ | 37,105 |  |  | $            | 299,234 | 
|                                                              
|                                                              
|                                                              
|                                                              
|Advertising costs charged to expense as incurred               |  |                 | 11,694 |              |  |      | 10,682 |      |  |   | 10,434 |  |  |              | 84,145  | 
|                                                              

Othernet as shown in other income (expenses) for the years ended March 31, 1999, 2000 and 2001 consisted of the following:

|                                                                        |       |   |                 |        |              |   |        |        |      |  |         |         |  |   |              |       | 
|----------------------------------------------------------------------- | ----- | - | --------------- | ------ | ------------ | - | ------ | ------ | ---- |  | ------- | ------- |  | - | ------------ | ----- | 
|                                                                        |       |   |                 |        |              |   |        |        |      |  |         |         |  |   | Thousands of
|                                                                        |       |   | Millions of Yen |        | U.S. Dollars
|                                                                        |       |   |                 |        |             
|                                                                        |       |   | 1999            |        | 2000         |   | 2001   |        | 2001
|                                                                       
|Net gains (losses) on sale and write-down of investments and securities |       | ¥ | (876            | )      |              | ¥ | 4,151  |        |      |  | ¥   254 |         |  | $ | 2,048        |      
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|Losses on sale and impairment of fixed assets                           |       |   | (2,683          | )      |              |   | (4,741 | )      |      |  | (914    | )       |  |   | (7,371       | )    
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|Other                                                                   |       |   | (2,839          | )      |              |   | (947   | )      |      |  | 1,607   |         |  |   | 12,960       |      
|                                                                       
|                                                                        | Total |   | ¥               | (6,398 | )            |   | ¥      | (1,537 | )    |  |         | ¥   947 |  |   | $            | 7,637 | 
|                                                                       

13. Leased assets:

The Company leases certain land, machinery and equipment, office space,
warehouses, computer equipment and employees residential facilities primarily
under operating leases.

Rental expenses under operating leases for the years ended March 31, 1999, 2000
and 2001 aggregated ¥8,389 million, ¥8,765 million and ¥5,962 million ($48,081
thousand), respectively. Such rentals relate principally to
cancelable leases which are renewable upon expiration.


The net minimum rental payments under operating leases that have initial or
remaining noncancelable lease terms in excess of one year at March 31, 2001 are
as follows:


|                     |                              |                 |       |              |  |   |              |  |  |  |  |  |  |  |  |  | 
|-------------------- | ---------------------------- | --------------- | ----- | ------------ |  | - | ------------ |  |  |  |  |  |  |  |  |  | 
|                     |                              |                 |       |              |  |   | Thousands of
|Year ending March 31 |                              | Millions of Yen |       | U.S. Dollars
|                    
|2002                 |                              | ¥               | 2,803 |              |  | $ | 22,605       | 
|                    
|                    
|                    
|                    
|2003                 |                              |                 | 1,405 |              |  |   | 11,330       | 
|                    
|                    
|                    
|                    
|2004                 |                              |                 | 1,013 |              |  |   | 8,169        | 
|                    
|                    
|                    
|                    
|2005                 |                              |                 | 696   |              |  |   | 5,613        | 
|                    
|                    
|                    
|                    
|2006                 |                              |                 | 368   |              |  |   | 2,968        | 
|                    
|                    
|                    
|                    
|Thereafter           |                              |                 | 989   |              |  |   | 7,976        | 
|                    
|                     | Total minimum future rentals | ¥               | 7,274 |              |  | $ | 58,661       | 
|                    

F-22



---



##### Table of Contents



14. Financial instruments:

Derivatives
The Company operates internationally, giving rise to exposure to market risks from changes in foreign exchange rates
and interest rates. Derivative financial instruments are
utilized by the Company to reduce those risks but are not
held or issued for trading purposes.

To hedge certain purchase and sale commitments and
anticipated but not yet committed transactions denominated
in other than functional currencies, the Company enters into
forward exchange contracts and purchases and writes
currency options. Written options are entered into only with
purchased options.


The notional amounts of forward exchange contracts as
of March 31, 2000 and 2001 were ¥12,790 million and
¥19,833 million ($159,944 thousand), respectively. The
notional amounts of currency options purchased were ¥3,117
million and ¥1,921 million ($15,492 thousand) as of March
31, 2000 and 2001, respectively. The notional amount
of currency options written was ¥1,254 million and
¥1,920 million ($15,484 thousand) as of March 31, 2000
and 2001, respectively.


To change currency and interest rate features of
intercompany finance transactions, the Company entered
into currency swap contracts with banks. Currency swap
contracts effectively changed, in substance, the U.S.
dollars floating interest rate intercompany borrowings into
Japanese yen fixed interest rate borrowings and the euro
floating interest rate borrowings. The notional amounts of
currency swap contracts as of March 31, 2000 and 2001
were ¥26,732 million and ¥29,209 million ($235,556
thousand), respectively.


Concentration of Credit Risk
The Company distributes its products to a diverse group of
domestic and foreign customers. Trade receivables arising
from these sales represent credit risk to the Company.
However, due to the large number and diversity of
the Companys customer base, concentration of credit
risk with respect to trade receivables is limited. The
Company performs ongoing credit evaluation of its
customers financial condition and, generally, requires no
collateral from its customers.

Derivative financial instruments that the Company
holds or issues may expose the Company to credit risks
if the counterparties are unable to meet the terms of
such contracts.


The Company minimizes credit risk exposure of these
derivatives by limiting the counterparties to major international banks and financial institutions as well as avoiding
concentration with certain counterparties, and also by
making frequent credit reviews of these counterparties.
Management does not expect to incur any losses as the result
of counterparty default.


The net cash requirements arising from the previously
mentioned risk management activities are not expected to
be material.


F-23



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##### Table of Contents



15. Fair value of financial instruments:

The following table presents the carrying amounts and fair values of the Companys financial instruments at March 31, 2000
and 2001:

|                                       |                                            |  |                 |        |              |  |          |        |       |  |          |        |       |  |   |        |   |  |              |         |   |  |   |         |  
|-------------------------------------- | ------------------------------------------ |  | --------------- | ------ | ------------ |  | -------- | ------ | ----- |  | -------- | ------ | ----- |  | - | ------ | - |  | ------------ | ------- | - |  | - | ------- | -
|                                       |                                            |  |                 |        |              |  |          |        |       |  |          |        |       |  |   |        |   |  | Thousands of
|                                       |                                            |  | Millions of Yen |        | U.S. Dollars
|                                       |                                            |  |                 |        |             
|                                       |                                            |  | 2000            |        | 2001         |  | 2001    
|                                       |                                            |  |                 |        |              |  |         
|                                       |                                            |  | Carrying        |        | Fair         |  | Carrying |        | Fair  |  | Carrying |        | Fair 
|                                       |                                            |  | Amounts         |        | Value        |  | Amounts  |        | Value |  | Amounts  |        | Value
|                                      
|Assets:                                |                                            |  |                 |        |              |  |          |        |       |  |          |        |       |  |   |        |   |  |              |         |   |  |   |        
|                                      
|                                      
|                                      
|                                      
|                                       | Long-term receivables                      |  | ¥               | 1,699  |              |  | ¥        | 1,699  |       |  | ¥        | 76     |       |  | ¥ | 76     |   |  | $            | 613     |   |  | $ | 613     |  
|                                      
|                                      
|                                      
|                                      
|Liabilities:                           |                                            |  |                 |        |              |  |          |        |       |  |          |        |       |  |   |        |   |  |              |         |   |  |   |        
|                                      
|                                      
|                                      
|                                      
|                                       | Long-term debt, including current maturity |  |                 | 84,295 |              |  |          |        |       |  |          | 46,300 |       |  |   |        |   |  |              | 373,387 |   |  |   |         |  
|                                      
|                                      
|                                      
|                                      
|                                       | LessCapital lease obligations             |  |                 | 881    |              |  |          |        |       |  |          | 665    |       |  |   |        |   |  |              | 5,363   |   |  |   |         |  
|                                       |                                            |  |                 |        |              |  |          |        |       |  |          |        |       |  |   |        |   |  |              |         |   |  |   |        
|                                       | Long-term debtnet                         |  |                 | 83,414 |              |  |          | 84,596 |       |  |          | 45,635 |       |  |   | 47,235 |   |  |              | 368,024 |   |  |   | 380,927 |  
|                                      
|                                      
|                                      
|                                      
|Derivativesunrealized gains (losses): |                                            |  |                 |        |              |  |          |        |       |  |          |        |       |  |   |        |   |  |              |         |   |  |   |        
|                                      
|                                      
|                                      
|                                      
|                                       | Forward exchange contracts                 |  |                 | 276    |              |  |          | 206    |       |  |          | (737   | )     |  |   | (737   | ) |  |              | (5,944  | ) |  |   | (5,944  | )
|                                      
|                                      
|                                      
|                                      
|                                       | Currency swap                              |  |                 | (958   | )            |  |          | (1,038 | )     |  |          | 2,069  |       |  |   | 2,040  |   |  |              | 16,685  |   |  |   | 16,452  |  
|                                      
|                                      
|                                      
|                                      
|                                       | Interest rate swap                         |  |                 | (3     | )            |  |          | (9     | )     |  |          |       |       |  |   |       |   |  |              |        |   |  |   |        |  
|                                      
|                                      
|                                      
|                                      
|                                       | Currency option                            |  |                 | 27     |              |  |          | 80     |       |  |          | 7      |       |  |   | 7      |   |  |              | 56      |   |  |   | 56      |  
|                                      

Estimation of Fair Values
The following notes summarize the major methods and
assumptions used in estimating the fair values of financial
instruments.

Short-term financial instruments are valued at their carrying amounts included in the consolidated balance sheets,
which are reasonable estimates of fair value due to the relatively
short period to maturity of the instruments. This approach
is applied to cash and cash equivalents, trade receivables,
short-term borrowings and accounts payabletrade.


The carrying amounts and the fair values of available-for-sale securities are disclosed in Note 3.


Sundry investments included equity interests in non-public companies, amounting to ¥3,916 million and ¥3,764
million ($30,354 thousand) at March 31, 2000 and 2001,
respectively, and memberships amounting to ¥1,423 million
and ¥1,023 million ($8,250 thousand) at March 31, 2000
and 2001, respectively. The corresponding fair values at
those dates were not computed as such estimation is not
practicable.


The fair values of long-term receivables were estimated
by a discounting estimated future cash flows using current
interest rates.


The fair values of the Companys long-term debt were
estimated using a discounted cash flow analysis based on
incremental borrowing rates for similar types of borrowing
arrangements.


The fair values of forward exchange contracts were
estimated based on the quoted market rates of similar contracts.
The currency swap and the interest rate swap were valued at
replacement cost. The fair values of foreign currency options
were measured using valuation models.


F-24



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##### Table of Contents



16. Basic and diluted earnings per share:

A reconciliation of the numerators and denominators of basic and diluted net
income per share computation for the years ended March 31, 1999, 2000 and 2001
is as follows:

|                                            |  |         |       |                              |         |              |      |  |         |         |  |              |         |       |              |  | 
|------------------------------------------- |  | ------- | ----- | ---------------------------- | ------- | ------------ | ---- |  | ------- | ------- |  | ------------ | ------- | ----- | ------------ |  | 
|                                            |  |         |       |                              |         |              |      |  |         |         |  |              |         |       | Thousands of
|                                            |  |         |       | Millions of Yen              |         | U.S. Dollars
|                                            |  |         |       |                              |         |             
|                                            |  |         | 1999  |                              | 2000    |              | 2001 |  | 2001   
|                                           
|Net income available to common shareholders |  | ¥1,159  |       |                              | ¥13,075 |              |      |  | ¥18,298 |         |  | $            | 147,565 |      
|                                           
|                                           
|                                           
|                                           
|                                           
|                                           
|                                            |  |         |       |                             
|                                            |  |         |       | Number of Shares (Thousands)
|                                            |  |         |       |                             
|Weighted average common shares outstanding  |  | 179,573 |       |                              | 179,574 |              |      |  | 179,813 |         |  |              |         |      
|                                           
|                                           
|                                           
|                                           
|Effect of dilutive warrants                 |  |         |      |                              |         | 32           |      |  |         | 103     | 
|                                            |  |         |       |                             
|Diluted common shares outstanding           |  | 179,573 |       |                              | 179,606 |              |      |  | 179,916 |         |  |              |         |      
|                                            |  |         |       |                             
|                                           
|                                           
|                                            |  |         |       |                              |         | Yen          |      |  |         |         |  | U.S. Dollars
|                                           
|Net income per share                       
|                                           
|                                           
|                                           
|                                           
|Basic                                       |  |         | ¥6.45 |                              |         | ¥72.81       |      |  |         | ¥101.76 |  |              |         | $0.82 |             
|                                           
|                                           
|                                           
|                                           
|Diluted                                     |  |         | 6.45  |                              |         | 72.80        |      |  |         | 101.70  |  |              |         | 0.82  |             
|                                           

17. Commitments and contingent liabilities:

Commitments outstanding at March 31, 2001 for the
purchase of property, plant and equipment and advertisement payments approximated ¥2,455 million ($19,798
thousand).

Contingent liabilities at March 31, 2001 principally for
loans guaranteed in the ordinary course of business
amounted to ¥3,333 million ($26,879 thousand).


During the year ended March 31, 2001, the Company
received a notice of proposed assessment from the German
tax authorities for approximately DM55 million (¥3,075
million translated at the current foreign exchange rate
at March 31, 2001) relating to a tax position taken in
prior years concerning intercompany purchase prices. The
Company officially challenged the proposed assessment by
arbitration procedures. In the opinion of management, it is
not possible at this time to determine the ultimate resolution
of this matter.


F-25



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##### Table of Contents



18. Gain on sale of interest in subsidiary:

In March 2000, the Company sold a portion of its holdings
in its wholly owned subsidiary, Tohoku Pioneer Corporation
through an initial public offering reducing the Companys
ownership to 67.0%. Tohoku Pioneer Corporation engages
in the development, manufacture and sale of electronics
products.

4,000 thousand shares were newly issued at ¥4,252 per
share and 2,600 thousand shares were sold by the Company.
The net cash proceeds from issuance of stock and sale of stock
were ¥17,008 million and ¥11,772 million, respectively.


Gain on issuance of stock was ¥7,136 million and gain
on sale of existing stock was ¥5,355 million. Deferred taxes
have been provided on a certain portion of gains from the
issuance of new shares as the Company considers that it is
possible to sell a part of its shareholdings while keeping its
majority ownership.


19. Remuneration of directors and officers:

The aggregate remuneration (including bonuses and stock-based compensation [See Note 10]) charged to income by the
parent company for directors and officers for the years ended
March 31, 1999, 2000 and 2001 totaled ¥740 million, ¥733
million and ¥811 million ($6,540 thousand), respectively.

F-26



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##### Table of Contents






INDEPENDENT AUDITORS REPORT ON SUPPLEMENTAL INFORMATION

To the Board of Directors and Shareholders of Pioneer Corporation:

We have audited the consolidated financial statements of Pioneer Corporation
and subsidiaries as of March 31, 2000 and 2001, and for each of the three years
in the period ended March 31, 2001, and our report thereon appears on page F-2.
Our audits were conducted for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental information listed in
the index to consolidated financial statements and schedules is presented for
the purpose of additional analysis and is not a required part of the basic
financial statements. This supplemental information is the responsibility of
the Companys management. Such information has been subjected to the auditing
procedures applied in our audits of the basic financial statements and, in our
opinion, is fairly stated in all material respects when considered in relation
to the basic financial statements taken as a whole.

/s/ Deloitte Touche Tohmatsu

Deloitte Touche Tohmatsu
Tokyo, Japan
May 2, 2001

F-27



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##### Table of Contents






PIONEER CORPORATION AND SUBSIDIARIES

SUPPLEMENTAL NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
TO CONFORM WITH REGULATION S-X



|A. |  | SHORT-TERM BORROWINGS AND LONG-TERM DEBT                                                                                                                                                                                                                                                            
|-- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|   |  | Unused lines of credit for short-term financing at March 31, 2001,
approximated ¥193,760 million of which ¥30,000 million relates to commercial
paper programs. Unused commitments for long-term financing arrangements at
March 31, 2001 amounted to ¥9,300 million. There were no commitment fees.
|  
|B. |  | INCOME TAXES                                                                                                                                                                                                                                                                                        
|  
|   |  | Income before income taxes and income tax expense was comprised of the
following components:                                                                                                                                                                                                        

|                                   |          |   |                     |        |      |   |        |        |  |   |        |        |  
|---------------------------------- | -------- | - | ------------------- | ------ | ---- | - | ------ | ------ |  | - | ------ | ------ | -
|                                   |          |   | Millions of Yen    
|                                   |          |   |                    
|                                   |          |   | Year Ended March 31
|                                   |          |   |                    
|                                   |          |   | 1999                |        | 2000 |   | 2001  
|                                   |          |   |                     |        |      |   |       
|Income (loss) before income taxes: |          |   |                     |        |      |   |        |        |  |   |        |       
|                                  
|                                  
|                                  
|                                  
|                                   | Domestic |   | ¥                   | (3,254 | )    |   | ¥      | 8,342  |  |   | ¥      | 5,967  |  
|                                   | Foreign  |   |                     | 15,787 |      |   |        | 19,466 |  |   |        | 28,226 |  
|                                   |          |   |                     |        |      |   |        |        |  |   |        |       
|                                   |          | ¥ | 12,533              |        |      | ¥ | 27,808 |        |  | ¥ | 34,193 |       
|                                   |          |   |                     |        |      |   |        |        |  |   |        |       
|                                  
|                                  
|                                  
|                                  
|Income taxesCurrent:              |          |   |                     |        |      |   |        |        |  |   |        |       
|                                  
|                                  
|                                  
|                                  
|                                   | Domestic |   | ¥                   | 2,148  |      |   | ¥      | 2,883  |  |   | ¥      | 4,906  |  
|                                   | Foreign  |   |                     | 6,963  |      |   |        | 9,214  |  |   |        | 10,105 |  
|                                   |          |   |                     |        |      |   |        |        |  |   |        |       
|                                   |          | ¥ | 9,111               |        |      | ¥ | 12,097 |        |  | ¥ | 15,011 |       
|                                   |          |   |                     |        |      |   |        |        |  |   |        |       
|                                  
|                                  
|                                  
|                                  
|Income taxesDeferred:             |          |   |                     |        |      |   |        |        |  |   |        |       
|                                  
|                                  
|                                  
|                                  
|                                   | Domestic |   | ¥                   | 3,398  |      |   | ¥      | 2,927  |  |   | ¥      | (872   | )
|                                   | Foreign  |   |                     | (1,055 | )    |   |        | 192    |  |   |        | 181    |  
|                                   |          |   |                     |        |      |   |        |        |  |   |        |       
|                                   |          | ¥ | 2,343               |        |      | ¥ | 3,119  |        |  | ¥ | (691   | )     
|                                   |          |   |                     |        |      |   |        |        |  |   |        |       



|C. |  | SHAREHOLDERS EQUITY                                                                                                                                                                                                               
|-- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|   |  | Retained earnings at March 31, 2001, include the parent companys and its
consolidated subsidiaries equity in undistributed earnings of 20% to 50%
owned companies accounted for on an equity basis in the amount of ¥125
million.

F-28



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##### Table of Contents






SCHEDULE II

PIONEER CORPORATION AND SUBSIDIARIES

VALUATION AND QUALIFYING ACCOUNTS

YEARS ENDED MARCH 31, 1999, 2000 AND 2001

|               |  |                 |  |            |  |              |  |           |  |           
|-------------- |  | --------------- |  | ---------- |  | ------------ |  | --------- |  | ----------
|               |  | Millions of Yen
|Allowance for  |  |                
|Doubtful Notes |  | Balance at      |  | Charged to |  | Deductions   |  |           |  | Balance at
|and Accounts   |  | Beginning       |  | Costs and  |  | for Accounts |  |           |  | End of    
|Receivables    |  | of Period       |  | Expenses   |  | Written Off  |  | Other     |  | Period    
|               |  |                 |  |            |  |              |  |           |  |           
|               |  |                 |  |            |  |              |  | (a)       |  |           
|              
|1999           |  | ¥  11,143       |  | ¥  1,156   |  | ¥     (798)  |  | ¥   (503) |  | ¥  10,998 
|              
|              
|              
|              
|2000           |  | 10,998          |  | 908        |  | (2,466)      |  | (447)     |  | 8,993     
|              
|              
|              
|              
|2001           |  | 8,993           |  | 1,164      |  | (861)        |  | 525       |  | 9,821     



|(a) |  | Collection of accounts previously written off, translation adjustments,
and effects of newly consolidated subsidiaries.
|--- |  | -----------------------------------------------------------------------------------------------------------------------

F-29