##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 FORM 20-F
 o
    
    REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g)
OF THE SECURITIES EXCHANGE ACT OF 1934
 OR
 þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended March 31, 2005
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
 OR
 o
    
    SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Date of event requiring this shell company report ________________________
If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).     Yes o     No þ
  PIONEER KABUSHIKI KAISHA
  PIONEER CORPORATION
  JAPAN
 4-1, MEGURO 1-CHOME, MEGURO-KU, TOKYO 153-8654, JAPAN
  Title of each class
    
    Name of each exchange on which registeredCommon Stock, each represented by
one American Depositary Share
    
    New York Stock Exchange
   
  
  
   Title of class
    
    Outstanding as of
March 31, 2005
(Japan time)Common Stock
    
    174,428,646
  þ o
  þ o




---



##### Table of Contents



PageCertain Defined Terms
    
    
    4Cautionary Statement with Respect to Forward-Looking Statements
    
    
    4PART IItem 1. Identity of Directors, Senior Management and Advisers
    
    
    4Item 2. Offer Statistics and Expected Timetable
    
    
    4Item 3. Key Information
    
    
    5Item 4. Information on the Company
    
    
    13Item 5. Operating and Financial Review and Prospects
    
    
    28Item 6. Directors, Senior Management and Employees
    
    
    51Item 7. Major Shareholders and Related Party Transactions
    
    
    61Item 8. Financial Information
    
    
    62Item 9. The Offer and Listing
    
    
    64Item 10. Additional Information
    
    
    65Item 11. Quantitative and Qualitative Disclosures About Market Risk
    
    
    85Item 12. Description of Securities Other than Equity Securities
    
    
    87PART IIItem 13. Defaults, Dividend Arrearages and Delinquencies
    
    
    88Item 14. Material Modifications to the Rights of Security Holders and Use of Proceeds
    
    
    88Item 15. Controls and Procedures
    
    
    88Item 16. [Reserved]
    
    
    89Item 16A. Audit Committee Financial Expert
    
    
    89Item 16B. Code of Ethics
    
    
    89Item 16C. Principal Accountant Fees and Services
    
    
    90Item 16D. Exemptions from the Listing Standards for Audit Committees
    
    
    91Item 16E. Purchases of Equity Securities by the Issuer and Affiliated Purchasers
    
    
    91PART IIIItem 17. Financial Statements
    
    
    92Item 18. Financial Statements
    
    
    92Item 19. Exhibits
    
    
    92EX-1.01 REGULATIONS OF THE BOARD OF DIRECTORS, AS AMENDED AND CURRENTLY IN EFFECTEX-1.02 REGULATIONS OF THE BOARD OF CORPORATE AUDITORS, AS AMENDED AND CURRENTLY IN EFFECTEX-2.01 SHARE HANDLING REGULATIONS, AS AMENDED AND CURRENTLY IN EFFECTEX-12.01 CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002EX-12.02 CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002EX-13.01 CERTIFICATION OF CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
 3




---



##### 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
  4




---



##### Table of Contents



Item 3. Key Information
 A. Selected financial data
  Year ended March 312001
    
    
    2002
    
    
    2003
    
    
    2004
    
    
    2005(In millions of yen, except per share data)Consolidated Statements of Operations Data:Operating revenue (Note 4) (Note 5)
    
    ¥
    610,171
    
    
    ¥
    629,777
    
    
    ¥
    677,259
    
    
    ¥
    700,885
    
    
    ¥
    733,648Income (loss) from continuing operations
before income taxes (Note 5)
    
    
    34,216
    
    
    
    14,472
    
    
    
    28,079
    
    
    
    41,848
    
    
    
    (187
    )Income (loss) from discontinued operations,
net of tax (Note 5)
    
    
    (53
    )
    
    
    565
    
    
    
    136
    
    
    
    4,475
    
    
    
    Net income (loss)
    
    
    18,298
    
    
    
    8,047
    
    
    
    16,078
    
    
    
    24,838
    
    
    
    (8,789
    )Per share of common stock and
per American Depositary Share (ADS):Income (loss) from continuing operations:Basic
    
    
    102.06
    
    
    
    41.56
    
    
    
    89.48
    
    
    
    116.07
    
    
    
    (50.11
    )Diluted
    
    
    102.00
    
    
    
    41.55
    
    
    
    89.48
    
    
    
    115.18
    
    
    
    (50.11
    )Net income (loss):Basic
    
    
    101.76
    
    
    
    44.70
    
    
    
    90.24
    
    
    
    141.58
    
    
    
    (50.11
    )Diluted
    
    
    101.70
    
    
    
    44.69
    
    
    
    90.24
    
    
    
    140.52
    
    
    
    (50.11
    )Consolidated Balance Sheets Data:Total assets
    
    ¥
    605,156
    
    
    ¥
    645,129
    
    
    ¥
    647,029
    
    
    ¥
    722,542
    
    
    ¥
    725,167Short-term borrowings
    
    
    37,571
    
    
    
    45,867
    
    
    
    29,893
    
    
    
    23,327
    
    
    
    33,152Current portion of long-term debt
    
    
    7,996
    
    
    
    2,551
    
    
    
    974
    
    
    
    4,510
    
    
    
    19,276Long-term debt, less current portion
    
    
    38,304
    
    
    
    35,677
    
    
    
    32,196
    
    
    
    89,691
    
    
    
    81,219Shareholders equity
    
    
    336,995
    
    
    
    347,003
    
    
    
    318,393
    
    
    
    332,938
    
    
    
    332,239Common stock
    
    
    48,843
    
    
    
    49,049
    
    
    
    49,049
    
    
    
    49,049
    
    
    
    49,049Number of shares issued (in thousands)
    
    
    179,894
    
    
    
    180,064
    
    
    
    180,064
    
    
    
    180,064
    
    
    
    180,064
 5




---



##### Table of Contents



Year ended March 312001
    
    
    2002
    
    
    2003
    
    
    2004
    
    
    2005(In millions of yen,
except per share data and percentage amounts)Other Data:Capital expenditures (Note 5)
    
    ¥
    41,944
    
    
    ¥
    46,909
    
    
    ¥
    40,493
    
    
    ¥
    57,978
    
    
    ¥
    63,866Research and development (R&D) expenses
    
    
    37,105
    
    
    
    39,050
    
    
    
    45,388
    
    
    
    51,483
    
    
    
    55,897Cash flows from operating activities (Note 5)
    
    
    51,141
    
    
    
    57,358
    
    
    
    91,509
    
    
    
    60,378
    
    
    
    19,946Cash flows from investing activities (Note 5)
    
    
    (41,481
    )
    
    
    (51,396
    )
    
    
    (35,228
    )
    
    
    (52,754
    )
    
    
    (93,516
    )Cash flows from financing activities (Note 5)
    
    
    (46,567
    )
    
    
    (4,207
    )
    
    
    (34,680
    )
    
    
    51,827
    
    
    
    (4,019
    )Return on equity (Note 1)
    
    
    5.6
    %
    
    
    2.4
    %
    
    
    4.8
    %
    
    
    7.6
    %
    
    
    (2.6
    %)Return on assets (Note 2)
    
    
    3.0
    %
    
    
    1.3
    %
    
    
    2.5
    %
    
    
    3.6
    %
    
    
    (1.2
    %)Cash dividends declared per share of common
stock and per ADS (Note 3):Interim    (in yen)
    
    
    7.50
    
    
    
    7.50
    
    
    
    7.50
    
    
    
    12.50
    
    
    
    12.50(in U.S. dollars)
    
    
    0.07
    
    
    
    0.06
    
    
    
    0.06
    
    
    
    0.12
    
    
    
    0.12Year-end (in yen)
    
    
    7.50
    
    
    
    7.50
    
    
    
    10.00
    
    
    
    12.50
    
    
    
    12.50(in U.S. dollars)
    
    
    0.06
    
    
    
    0.06
    
    
    
    0.08
    
    
    
    0.11
    
    
    
    0.11
 
 Notes:
    
    
    1.
    
    
    Net income (loss) as a percentage of average shareholders equity.2.
    
    
    Net income (loss) as a percentage of average total assets.3.
    
    
    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.4.
    
    
    In fiscal 2003, we adopted EITF (Emerging Issues Task Force) 01-9 Accounting for
Consideration Given by a Vendor to a Customer (Including a Reseller of the Vendors
Products). The adoption resulted in a reduction in net sales and a corresponding decrease in
selling, general and administrative expenses. Previously reported amounts have been
reclassified accordingly.5.
    
    
    As a result of the sale of subsidiaries in the audio/video software business in fiscal 2004,
the gain on such sale, as well as the operating results of the discontinued operations, are
presented as a separate line item in the consolidated statements of operations in accordance
with Statement of Financial Accounting Standards No. 144, Accounting for the Impairment or
Disposal of Long-Lived Assets. Previously reported amounts have been reclassified
accordingly.
 6




---



##### Table of Contents



Exchange rates (yen per U.S. dollar)
  Year ended March 31
    
    Average
    
    
    High
    
    
    Low
    
    
    Period-end2001
    
    ¥
    111.65
    
    
    ¥
    104.19
    
    
    ¥
    125.54
    
    
    ¥
    125.542002
    
    
    125.64
    
    
    
    115.89
    
    
    
    134.77
    
    
    
    132.702003
    
    
    121.10
    
    
    
    115.71
    
    
    
    133.40
    
    
    
    118.072004
    
    
    112.75
    
    
    
    104.18
    
    
    
    120.55
    
    
    
    104.182005
    
    
    107.28
    
    
    
    102.26
    
    
    
    114.30
    
    
    
    107.222005March
    
    
    
    
    
    
    103.87
    
    
    
    107.49April
    
    
    
    
    
    
    104.64
    
    
    
    108.67May
    
    
    
    
    
    
    104.41
    
    
    
    108.17June
    
    
    
    
    
    
    106.64
    
    
    
    110.91July
    
    
    
    
    
    
    110.47
    
    
    
    113.42August
    
    
    
    
    
    
    109.37
    
    
    
    112.12
  B. Capitalization and indebtedness
  C. Reasons for the offer and use of proceeds
  D. Risk factors
 Cautionary Statement with Respect to Forward-Looking Statements
 Economic conditions may adversely affect our sales and profitability
  7




---



##### Table of Contents



Fluctuations in foreign currency 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 adversely affected
   
    
    We may be unable to obtain adequate funding and resources
necessary for investments in new products and technologies.
    
    Our long-term investments and commitment of significant resources
may not result in successful new products or technologies. For
example, we have invested substantial resources in the expansion
of our production capacity for plasma display panels (PDPs) to
meet anticipated demand, but such demand may not materialize.
 8




---



##### Table of Contents




    
    We may not be able to anticipate successfully the new products and
technologies which will gain market acceptance and that such
products can be successfully marketed.
    
    Our newly developed products or technologies may not be
successfully protected as proprietary intellectual property
rights.
    
    Our products may become obsolete earlier than expected due to
rapid advancements in technology and changes in consumer
preferences.
    
    A delay in commercializing new technologies now under development
may prevent us from keeping up with market demand. For
example, if we lag behind our competitors in the commercialization
of active-matrix full-color OLED displays, which are now under
development in our affiliated company, ELDis, Inc., we may not
secure a significant share of this market.
  Our exposure to the plasma display market has increased significantly as a result of our recent
substantial investments in the plasma display business
  Competition generally, and especially on the basis of price and standardization of products,
may adversely affect our results of operations
   9




---



##### Table of Contents



Failure of our next generation optical disc format to gain broad market acceptance may
adversely affect our business and results of operations
   de facto
 A substantial decline in our royalty revenue as a result of the expiration of many of our
existing patents relating to laser optical disc technologies may adversely affect our
profitability
  If we are unable to successfully manage the risks inherent in our international activities and
our overseas expansion, our results of operations and production capacity could be adversely
affected
  
    
    Unexpected legal or regulatory changes;
    
    Unfavorable political or economic factors;
    
    Difficulties in recruiting and retaining personnel;
    
    Labor disputes including strikes;
    
    Less developed technological infrastructure, which can affect our production or other activities or result in lower
customer acceptance of our products and services;
    
    Potentially adverse tax consequences; and
    
    Social, political or economic turmoil due to terrorism, war, or other factors.
  10




---



##### Table of Contents



Our dependence on certain third-party manufacturers and suppliers for parts and components
could adversely affect our production capacity and results of operations
  Our performance in the OEM business is substantially dependent on the performance of our
customers businesses
  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
   11




---



##### Table of Contents



Limits on intellectual property protection may make us vulnerable to competition from third
parties that use our technology and expertise
  Product defects resulting in a large-scale product recall or successful products liability
claims against us could result in a significant cost or a negative impact on our reputation and
adversely affect our business results and financial condition
  Failure to achieve the goals of collaborations, tie-ups, and joint ventures with third parties
may adversely affect our results of operations and future growth
  Governmental regulation may limit our activities or increase our costs of operations
  12




---



##### Table of Contents



Damage to our production facilities as a result of disasters, power outages or similar events
may significantly reduce our production capacity
  Employee retirement benefit costs and obligations may adversely affect our results of
operations
  
 Item 4. Information on the Company
 A. History and development of the Company
 History
    13




---



##### Table of Contents



Registered office
  Principal capital expenditures, investments and divestitures
   B. Business overview
 Strategy
  14




---



##### Table of Contents




    
    develop innovative, technologically-advanced products that meet and stimulate market
demand;
    
    enhance our brand recognition and promote customer satisfaction;
    
    leverage our leadership position in the car electronics business;
    
    focus on our strategic products targeting global markets; and
    
    adopt optimal production methods to maximize profitability.
 Develop innovative, technologically-advanced products that meet and stimulate market demand
  Enhance our brand recognition and promote customer satisfaction
 sound. vision. soul
 Leverage our leadership position in the car electronics business
  Focus on our strategic products targeting global markets
  15




---



##### Table of Contents



Adopt optimal production methods to maximize profitability
  Strategic Focus Pioneer Group Vision
   
    
    ¥1.2 trillion of consolidated operating revenue
    
    ROE (Return on Equity) in excess of 10%
  
    
    No.1 in DVD worldwide
    
    Establishing a business foundation for plasma displays and OLED displays
    
    From stand-alone to network
    
    Toward the key-device, key-technologies business
  Nature of operations
   16




---



##### Table of Contents



17




---



##### Table of Contents



Operating Revenue from Unaffiliated Customers by Business Segments
 Year ended March 312003
    
    
    2004
    
    
    2005(In millions of yen, except for percentage amounts)Home ElectronicsDomestic
    
    ¥
    86,766
    
    
    
    12.8
    %
    
    ¥
    78,798
    
    
    
    11.2
    %
    
    ¥
    87,954
    
    
    
    12.0
    %Overseas
    
    
    191,202
    
    
    
    28.2
    
    
    
    202,684
    
    
    
    29.0
    
    
    
    213,274
    
    
    
    29.1Total
    
    ¥
    277,968
    
    
    
    41.0
    %
    
    ¥
    281,482
    
    
    
    40.2
    %
    
    ¥
    301,228
    
    
    
    41.1
    %Car ElectronicsDomestic
    
    ¥
    105,736
    
    
    
    15.6
    %
    
    ¥
    121,708
    
    
    
    17.4
    %
    
    ¥
    120,260
    
    
    
    16.4
    %Overseas
    
    
    175,354
    
    
    
    25.9
    
    
    
    170,479
    
    
    
    24.3
    
    
    
    183,150
    
    
    
    25.0Total
    
    ¥
    281,090
    
    
    
    41.5
    %
    
    ¥
    292,187
    
    
    
    41.7
    %
    
    ¥
    303,410
    
    
    
    41.4
    %OthersDomestic
    
    ¥
    62,137
    
    
    
    9.2
    %
    
    ¥
    62,792
    
    
    
    9.0
    %
    
    ¥
    53,935
    
    
    
    7.3
    %Overseas
    
    
    43,480
    
    
    
    6.4
    
    
    
    52,603
    
    
    
    7.4
    
    
    
    64,838
    
    
    
    8.8Total
    
    ¥
    105,617
    
    
    
    15.6
    %
    
    ¥
    115,395
    
    
    
    16.4
    %
    
    ¥
    118,773
    
    
    
    16.1
    %Patent Licensing
    
    ¥
    12,584
    
    
    
    1.9
    %
    
    ¥
    11,821
    
    
    
    1.7
    %
    
    ¥
    10,237
    
    
    
    1.4
    %Total Operating Revenue
    
    ¥
    677,259
    
    
    
    100.0
    %
    
    ¥
    700,885
    
    
    
    100.0
    %
    
    ¥
    733,648
    
    
    
    100.0
    %
 Home Electronics:
    18




---



##### Table of Contents



Car Electronics:
    Patent Licensing:
    Others:
    19




---



##### Table of Contents



Principal markets
  Operating Revenue by Geographic Market
 Year ended March 312003
    
    
    2004
    
    
    2005(In millions of yen, except for percentage amounts)Japan
    
    ¥
    254,639
    
    
    
    37.6
    %
    
    ¥
    263,298
    
    
    
    37.6
    %
    
    ¥
    262,149
    
    
    
    35.7
    %North America
    
    
    190,147
    
    
    
    28.1
    
    
    
    170,711
    
    
    
    24.3
    
    
    
    174,120
    
    
    
    23.7Europe
    
    
    132,977
    
    
    
    19.6
    
    
    
    146,250
    
    
    
    20.9
    
    
    
    150,770
    
    
    
    20.6Other Regions
    
    
    99,496
    
    
    
    14.7
    
    
    
    120,626
    
    
    
    17.2
    
    
    
    146,609
    
    
    
    20.0Total
    
    ¥
    677,259
    
    
    
    100.0
    %
    
    ¥
    700,885
    
    
    
    100.0
    %
    
    ¥
    733,648
    
    
    
    100.0
    %
 
 Note:
    
    Operating revenue by geographic market represents revenue from unaffiliated customers, based
on the geographic location of each unaffiliated customer. Seasonality
  Marketing channels
  After-sales service
  20




---



##### Table of Contents



Raw materials and sources of supply
     Patents and licenses
  21




---



##### Table of Contents



Competition
  Import restrictions
  Governmental regulation
  22




---



##### Table of Contents



C. Organizational structure
  
 23




---



##### Table of Contents



OwnershipCountry of
    
    interest and votingName of subsidiary
    
    incorporation
    
    interest
    
    Principal businessTohoku Pioneer
Corporation
    
    Japan
    
    
    67.0
    %
    
    Manufacture of car electronics
products, factory automation
systems and OLED display panelsPioneer Display Products Corporation
    
    Japan
    
    
    100.0
    %
    
    Manufacture of plasma displaysPioneer Plasma Display
Corporation
    
    Japan
    
    
    100.0
    %
    
    Manufacture of plasma displaysPioneer North America,
Inc.
    
    U.S.A.
    
    
    100.0
    %
    
    Coordination of the activities of Pioneers North American
subsidiaries and affiliatesPioneer Electronics
(USA) Inc.
    
    U.S.A.
    
    
    100.0
    %
    
    Distribution of electronics productsPioneer Electronics
Capital Inc.
    
    U.S.A.
    
    
    100.0
    %
    
    Financing to Pioneer and its
subsidiariesDiscovision Associates*
    
    U.S.A.
    
    
    100.0
    %
    
    Licensing of worldwide patents
relating to laser optical disc
technologiesPioneer Europe NV
    
    Belgium
    
    
    100.0
    %
    
    Coordination of the activities of
Pioneers European subsidiaries and
affiliates, and distribution of
electronics productsPioneer Electronics
Asiacentre, Pte. Ltd.
    
    Singapore
    
    
    100.0
    %
    
    Coordination of the activities of
Pioneers Asian subsidiaries and
affiliates, and manufacture and
distribution of electronics
productsPioneer China Holding
Co., Ltd.
    
    China
    
    
    100.0
    %
    
    Coordination of the activities of
Pioneers Chinese subsidiaries and
affiliates and distribution of
electronics products
 
 *
    
    Discovision Associates is a general partnership organized under the laws of the State of
California in the United States. 24




---



##### Table of Contents



D. Property, plants and equipment
  Name of plant
    
    
    
    Floor space(Name of company
    
    
    
    (square feet)which owns the plant)
    
    Location
    
    [leased space]
    
    Principal productsJapanKagoshima
Plant(Pioneer PlasmaDisplay Corporation)
    
    Izumi, Kagoshima
    
    
    1,197,000
    
    
    Plasma displaysYamanashi Plant
(Pioneer Display
Products Corporation)
    
    Nakakoma, Yamanashi
    
    
    874,000
    
    
    Plasma displaysShizuoka Plant
(Pioneer Display
Products Corporation)
    
    Fukuroi, Shizuoka
    
    
    730,000
    
    
    Plasma displaysKawagoe Plant
(Pioneer Corporation)
    
    Kawagoe, Saitama
    
    
    553,000
    
    
    Car stereos, Car navigation systemsTokorozawa Plant
(Pioneer Corporation)
    
    Tokorozawa, Saitama
    
    
    522,000
    
    
    DVD recordersTendo Plant
(Tohoku Pioneer
Corporation)
    
    Tendo, Yamagata
    
    
    479,000
    
    
    Car stereos, Car speakers,
LoudspeakersYonezawa Plant
(Tohoku Pioneer
Corporation)
    
    Yonezawa, Yamagata
    
    
    243,000
    
    
    OLED displaysKokubo Plant
(Pioneer Micro
Technology
Corporation)
    
    Kofu, Yamanashi
    
    
    194,000
    
    
    ICs, LSIsTendo the 2nd Plant
(Tohoku Pioneer
Corporation)
    
    Tendo, Yamagata
    
    
    186,000
    
    
    Factory automation systemsMogami Plant
(Mogami Denki
Corporation)
    
    Mogami, Yamagata
    
    
    141,000
    
    
    Speaker cone
 25




---



##### Table of Contents



Name of plant
    
    
    
    Floor space(Name of company
    
    
    
    (square feet)which owns the plant)
    
    Location
    
    [leased space]
    
    Principal productsOutside JapanShanghai Plant
(Shanghai Pioneer
Speakers Co., Ltd.)
    
    Shanghai, China
    
    
    458,000
    
    
    Car speakersMexico Plant
(Pioneer Speakers,
S.A. de C.V.)
    
    Baja California,
Mexico
    
    
    397,000
    
    
    Car speakersShanghai Plant
(Pioneer Technology
(Shanghai) Co.,
Ltd.)
    
    Shanghai, China
    
    
    374,000
    
    
    DVD Recorders, Car AV systems, Car stereosThailand Plant
(Pioneer
Manufacturing
(Thailand) Co.,
Ltd.)
    
    Ayutthaya, Thailand
    
    
    300,000
    
    
    Car stereos, Stereo systemsGuang Dong Plant
(Pioneer Technology
(Dongguan) Co.,
Ltd.)
    
    Guang Dong, China
    
    
    295,000
    
    
    Recordable DVD drivesGuang Dong Plant
(Dongguan Monetech
Electronic Co.,
Ltd.)
    
    Guang Dong, China
    
    
    237,000
[237,000]
    
    
    Speaker systemsMalaysia Plant
(Pioneer Technology
(Malaysia) Sdn.
Bhd.)
    
    Johor, Malaysia
    
    
    262,000
    
    
    Stereo systems, Car stereosCalifornia Plant
(Pioneer
Electronics
Technology, Inc.)
    
    California, U.S.A.
    
    
    186,000
    
    
    Plasma displays, Speaker systemsU.K. Plant
(Pioneer Technology
(U.K.) Ltd.)
    
    West Yorkshire,
United Kingdom
    
    
    184,000
    
    
    Plasma displaysOhio Plant
(Pioneer Automotive
Technologies, Inc.)
    
    Ohio, U.S.A.
    
    
    157,000
    
    
    Car stereos
 26




---



##### Table of Contents



27




---



##### Table of Contents



Item 5. Operating and Financial Review and Prospects
 Overview
    28




---



##### Table of Contents



Operating Revenue by Business Segments
 Year ended March 312003
    
    
    2004
    
    
    2005(In millions of yen, except for percentage amounts)Operating Revenue:Home Electronics
    
    ¥
    277,968
    
    
    
    41.0
    %
    
    ¥
    281,482
    
    
    
    40.2
    %
    
    ¥
    301,228
    
    
    
    41.1
    %Car Electronics
    
    
    281,090
    
    
    
    41.5
    
    
    
    292,187
    
    
    
    41.7
    
    
    
    303,410
    
    
    
    41.4Patent Licensing
    
    
    12,584
    
    
    
    1.9
    
    
    
    11,821
    
    
    
    1.7
    
    
    
    10,237
    
    
    
    1.4Others
    
    
    105,617
    
    
    
    15.6
    
    
    
    115,395
    
    
    
    16.4
    
    
    
    118,773
    
    
    
    16.1Total
    
    ¥
    677,259
    
    
    
    100.0
    %
    
    ¥
    700,885
    
    
    
    100.0
    %
    
    ¥
    733,648
    
    
    
    100.0
    %
 
 Note:
    
    Operating revenue represents revenue from unaffiliated customers.  Operating Revenue by Geographic Market
 Year ended March 312003
    
    
    2004
    
    
    2005(In millions of yen, except for percentage amounts)Japan
    
    ¥
    254,639
    
    
    
    37.6
    %
    
    ¥
    263,298
    
    
    
    37.6
    %
    
    ¥
    262,149
    
    
    
    35.7
    %North America
    
    
    190,147
    
    
    
    28.1
    
    
    
    170,711
    
    
    
    24.3
    
    
    
    174,120
    
    
    
    23.7Europe
    
    
    132,977
    
    
    
    19.6
    
    
    
    146,250
    
    
    
    20.9
    
    
    
    150,770
    
    
    
    20.6Other Regions
    
    
    99,496
    
    
    
    14.7
    
    
    
    120,626
    
    
    
    17.2
    
    
    
    146,609
    
    
    
    20.0Total
    
    ¥
    677,259
    
    
    
    100.0
    %
    
    ¥
    700,885
    
    
    
    100.0
    %
    
    ¥
    733,648
    
    
    
    100.0
    %
 
 Note:
    
    Operating revenue by geographic market represents revenue from unaffiliated customers, based
on the geographic location of each unaffiliated customer. 29




---



##### Table of Contents



Home Electronics, Car Electronics and Others
      Patent Licensing
  Currency fluctuations
   30




---



##### Table of Contents



Critical accounting policies and estimates
    Revenue recognition
   31




---



##### Table of Contents



Warranties
  32




---



##### Table of Contents



Inventories
   Beginning
    
    Provision
    
    
    Reversal
    
    
    Other
    
    
    End(In billions of yen)8.3
    
    
    7.4
    
    
    
    (6.3
    )
    
    
    0.9
    
    
    
    10.3
 Impairment of long-lived assets
  Deferred tax assets
  33




---



##### Table of Contents



Pension benefit costs
     Effect on shareholders equity
    
    
    Net periodic pension costas of March 31, 2005
    
    
    for fiscal 2006(In billions of yen)Discount rare:0.5% increase
    
    
    5.0
    
    
    
    (0.7
    )0.5% decrease
    
    
    (5.6
    )
    
    
    0.7Expected long-term rate of return:0.5% increase
    
    
    
    
    
    
    (0.3
    )0.5% decrease
    
    
    
    
    
    
    0.3
 34




---



##### Table of Contents



A. Operating results
 Fiscal 2005 compared with fiscal 2004
 Operating revenue
  Home Electronics
 Car Electronics
 Patent Licensing
 Others
 35




---



##### Table of Contents



Other revenues (Revenues excluding net sales and royalty revenue)
  Net loss from transfer of the substitutional portion of employee welfare pension plan
  Cost and expenses
 Cost of sales
 SGA expenses
 R&D expenditures
 Loss on sale and disposal of fixed assets
 36




---



##### Table of Contents



Other deductions
 Income (loss) before income taxes
  Income taxes
  Equity in losses of affiliated companies
  Net income (loss)
  37




---



##### Table of Contents



Fiscal 2004 compared with fiscal 2003
 Operating revenue
  Home Electronics
 Car Electronics
 Patent Licensing
 Others
 Other revenues (Revenues excluding net sales and royalty revenue)
  38




---



##### Table of Contents



Cost and expenses
 Cost of sales
 SGA expenses
 R&D expenditures
 Loss on sale and disposal of fixed assets
 Other deductions
 Income before income taxes
  39




---



##### Table of Contents



Income taxes
  Equity in losses of affiliated companies
  Income from continuing operations
  Income from discontinued operations, net of tax
  Net income
  40




---



##### Table of Contents



Segment information
  Business Segments
 Year ended March 31, 2005Corporate andHome Electronics
    
    
    Car Electronics
    
    
    Patent Licensing
    
    
    Others
    
    
    Eliminations
    
    
    Consolidated(In millions of yen)Operating revenue:Unaffiliated customers
    
    ¥
    301,228
    
    
    ¥
    303,410
    
    
    ¥
    10,237
    
    
    ¥
    118,773
    
    
    
    
    
    
    ¥
    733,648Inter-segment
    
    
    1,960
    
    
    
    1,321
    
    
    
    1,362
    
    
    
    39,725
    
    
    ¥
    (44,368
    )
    
    
    Total
    
    ¥
    303,188
    
    
    ¥
    304,731
    
    
    ¥
    11,599
    
    
    ¥
    158,498
    
    
    ¥
    (44,368
    )
    
    ¥
    733,648Segment income (loss)
    
    ¥
    (22,127
    )
    
    ¥
    18,591
    
    
    ¥
    9,389
    
    
    ¥
    (272
    )
    
    ¥
    (2,989
    )
    
    ¥
    2,592Identifiable assets
    
    ¥
    227,567
    
    
    ¥
    167,346
    
    
    ¥
    2,852
    
    
    ¥
    106,101
    
    
    ¥
    221,301
    
    
    ¥
    725,167Depreciation and
amortization
    
    ¥
    21,388
    
    
    ¥
    12,514
    
    
    ¥
    311
    
    
    ¥
    9,299
    
    
    ¥
    3,478
    
    
    ¥
    46,990Capital expenditures
(additions to fixed assets)
    
    ¥
    32,261
    
    
    ¥
    12,358
    
    
    
    
    
    
    ¥
    10,299
    
    
    ¥
    9,568
    
    
    ¥
    64,486
 Year ended March 31, 2004Corporate andHome Electronics
    
    
    Car Electronics
    
    
    Patent Licensing
    
    
    Others
    
    
    Eliminations
    
    
    Consolidated(In millions of yen)Operating revenue:Unaffiliated customers
    
    ¥
    281,482
    
    
    ¥
    292,187
    
    
    ¥
    11,821
    
    
    ¥
    115,395
    
    
    
    
    
    
    ¥
    700,885Inter-segment
    
    
    1,399
    
    
    
    2,460
    
    
    
    2,057
    
    
    
    36,860
    
    
    ¥
    (42,776
    )
    
    
    Total
    
    ¥
    282,881
    
    
    ¥
    294,647
    
    
    ¥
    13,878
    
    
    ¥
    152,255
    
    
    ¥
    (42,776
    )
    
    ¥
    700,885Segment income
    
    ¥
    3,247
    
    
    ¥
    29,963
    
    
    ¥
    11,398
    
    
    ¥
    2,273
    
    
    ¥
    292
    
    
    ¥
    47,173Identifiable assets
    
    ¥
    182,001
    
    
    ¥
    158,913
    
    
    ¥
    3,447
    
    
    ¥
    109,582
    
    
    ¥
    268,599
    
    
    ¥
    722,542Depreciation and
amortization
    
    ¥
    15,858
    
    
    ¥
    13,798
    
    
    ¥
    362
    
    
    ¥
    8,272
    
    
    ¥
    2,621
    
    
    ¥
    40,911Capital expenditures
(additions to fixed assets)
    
    ¥
    32,783
    
    
    ¥
    13,648
    
    
    ¥
    248
    
    
    ¥
    7,340
    
    
    ¥
    4,434
    
    
    ¥
    58,453
 
 Note:
    
    Effective from fiscal 2005, the Company presented segment income (loss) as operating revenue
less cost of sales, selling, general and administrative expenses and subsidy from the
government recognized in fiscal 2005 in connection with transfer of substitutional portion of
employee welfare pension plan to Japanese government. Previously reported amounts for fiscal
2004 have been reclassified accordingly. 41




---



##### Table of Contents



Income (loss) by business segments
 Home Electronics
 Car Electronics
 Patent licensing
 Others
 42




---



##### Table of Contents



Geographic Segments
 Year ended March 31, 2005Corporate andJapan
    
    
    North America
    
    
    Europe
    
    
    Other Regions
    
    
    Eliminations
    
    
    Consolidated(In millions of yen)Operating revenue:Unaffiliated customers
    
    ¥
    300,722
    
    
    ¥
    171,961
    
    
    ¥
    149,117
    
    
    ¥
    111,848
    
    
    
    
    
    
    ¥
    733,648Inter-area
    
    
    294,922
    
    
    
    5,405
    
    
    
    805
    
    
    
    176,198
    
    
    ¥
    (477,330
    )
    
    
    Total
    
    ¥
    595,644
    
    
    ¥
    177,366
    
    
    ¥
    149,922
    
    
    ¥
    288,046
    
    
    ¥
    (477,330
    )
    
    ¥
    733,648Segment income (loss)
    
    ¥
    (9,010
    )
    
    ¥
    (1,716
    )
    
    ¥
    (308
    )
    
    ¥
    7,029
    
    
    ¥
    6,597
    
    
    ¥
    2,592Identifiable assets
    
    ¥
    315,252
    
    
    ¥
    60,799
    
    
    ¥
    60,463
    
    
    ¥
    112,312
    
    
    ¥
    176,341
    
    
    ¥
    725,167Depreciation and
amortization
    
    ¥
    31,880
    
    
    ¥
    2,394
    
    
    ¥
    2,444
    
    
    ¥
    6,794
    
    
    ¥
    3,478
    
    
    ¥
    46,990Capital expenditures
(additions to fixed assets)
    
    ¥
    44,730
    
    
    ¥
    1,953
    
    
    ¥
    1,005
    
    
    ¥
    7,230
    
    
    ¥
    9,568
    
    
    ¥
    64,486
 Year ended March 31, 2004Corporate andJapan
    
    
    North America
    
    
    Europe
    
    
    Other Regions
    
    
    Eliminations
    
    
    Consolidated(In millions of yen)Operating revenue:Unaffiliated customers
    
    ¥
    294,198
    
    
    ¥
    168,194
    
    
    ¥
    145,390
    
    
    ¥
    93,103
    
    
    
    
    
    
    ¥
    700,885Inter-area
    
    
    278,071
    
    
    
    8,082
    
    
    
    967
    
    
    
    182,929
    
    
    ¥
    (470,049
    )
    
    
    Total
    
    ¥
    572,269
    
    
    ¥
    176,276
    
    
    ¥
    146,357
    
    
    ¥
    276,032
    
    
    ¥
    (470,049
    )
    
    ¥
    700,885Segment income
    
    ¥
    22,003
    
    
    ¥
    11,487
    
    
    ¥
    2,015
    
    
    ¥
    9,511
    
    
    ¥
    2,157
    
    
    ¥
    47,173Identifiable assets
    
    ¥
    233,601
    
    
    ¥
    46,034
    
    
    ¥
    61,754
    
    
    ¥
    99,237
    
    
    ¥
    281,916
    
    
    ¥
    722,542Depreciation and
amortization
    
    ¥
    26,014
    
    
    ¥
    2,450
    
    
    ¥
    2,130
    
    
    ¥
    7,696
    
    
    ¥
    2,621
    
    
    ¥
    40,911Capital expenditures
(additions to fixed assets)
    
    ¥
    40,314
    
    
    ¥
    2,650
    
    
    ¥
    2,113
    
    
    ¥
    8,942
    
    
    ¥
    4,434
    
    
    ¥
    58,453
 
 Notes:
    
    
    1.
    
    
    Operating revenue reported in geographic segment information above represents that of
Pioneer and its domestic subsidiaries in Japan, and each subsidiary in North America, Europe,
and Other Regions.2.
    
    
    Effective from fiscal 2005, the Company presented segment income (loss) as operating revenue
less cost of sales, selling, general and administrative expenses and subsidy from the
government recognized in fiscal 2005 in connection with transfer of substitutional portion of
employee welfare pension plan to Japanese government. Previously reported amounts for fiscal
2004 have been reclassified accordingly.
 43




---



##### Table of Contents



B. Liquidity and capital resources
 Cash flows
 Summarized Consolidated Statements of Cash Flows
 Year ended March 312004
    
    
    2005(In millions of yen)Net cash provided by operating activities
    
    ¥
    60,378
    
    
    ¥
    19,946Net cash used in investing activities
    
    
    (52,754
    )
    
    
    (93,516
    )Net cash provided by (used in) financing activities
    
    
    51,827
    
    
    
    (4,019
    )Effect of exchange rate changes on cash and cash equivalents
    
    
    (9,512
    )
    
    
    1,851Net increase (decrease) in cash and cash equivalents
    
    ¥
    49,939
    
    
    ¥
    (75,738
    )
     44




---



##### Table of Contents



Capital requirements
   Financial management
     45




---



##### Table of Contents



C. Research and development, patents and licenses, etc.
   Venturing to Innovate Flexible Displays
   D. Trend information
  Home Electronics
  46




---



##### Table of Contents



DVD recorders.
 Recordable DVD drives.
 Plasma displays.
  Car Electronics
    47




---



##### Table of Contents



Patent Licensing
  Patent licensing
 Others
 OLED displays
 E. Off-balance sheet arrangements
  48




---



##### Table of Contents



F. Tabular disclosure of contractual obligation
  Payment Due by PeriodLess than
    
    
    
    
    
    
    
    
    
    
    More thanTotal
    
    
    1 year
    
    
    1-3 years
    
    
    3-5 years
    
    
    5 years(In billions of yen)Contractual obligations:Long-term debt
    
    
    98.7
    
    
    
    19.3
    
    
    
    6.0
    
    
    
    11.4
    
    
    
    62.0Operating leases
    
    
    19.7
    
    
    
    6.3
    
    
    
    8.5
    
    
    
    2.3
    
    
    
    2.6Purchase commitment
    
    
    4.0
    
    
    
    4.0Interest payments
    
    
    1.9
    
    
    
    0.7
    
    
    
    0.9
    
    
    
    0.2
    
    
    
    0.1Contribution to
defined benefit
plans
    
    
    6.5
    
    
    
    6.5
 
 Notes:
    
    
    1.
    
    
    Total long-term debt of ¥98.7 billion does not include ¥1.8 billion
unamortized issue premium on convertible bonds.2.
    
    
    Long-term debt includes capital lease obligations.3.
    
    
    Contractual obligations do not include ¥0.7 billion deferred income which is presented as
other long-term liabilities on the consolidated balance sheet.4.
    
    
    The amount that the Company will contribute under its defined pension plans are based on a
number of factors, primarily rate of salary increase and the number of employees. As such,
the Company has estimated the amount of such contribution for the year ending March 31, 2006
and not the contribution for the years thereafter.
  New Accounting Standards
 Inventory Costs
  Exchanges of Nonmonetary Assets
  49




---



##### Table of Contents



Share-Based Payment
  The Meaning of Other-Than-Temporary Impairment and Its Application to Certain Investments
  Accounting for Conditional Asset Retirement Obligations
  Accounting Changes and Error Corrections
  50




---



##### Table of Contents



Item 6. Directors, Senior Management and Employees
 A. Directors and senior management
  Directors
 Name
    
    Current Position(Date of birth)
    
    (Month and year of expiration)
    
    Prior PositionKanya Matsumoto
(June 12, 1930)
    
    Chairman and Representative Director
(June 2006)
    
    June 1996:Vice Chairman and Representative
DirectorKaneo Ito
(Apr. 30, 1936)
    
    President and Representative
Director;
Chief Executive Officer
(June 2006)
    
    June 1991:Senior Managing Director and
Representative Director; General
Manager of International Business
Group; and in charge of overseas
operations and Public Relations
DivisionTamihiko Sudo
(Apr. 28, 1947)
    
    Executive Vice President and
Representative Director;
Chief Financial Officer; and
in charge of Corporate
Strategy Planning Group, Corporate Management Group,
Export Management and Quality
Control in general
(June 2006)
    
    June 2004:Senior Managing Director and
Representative Director; President
of Pioneers Mobile Entertainment
CompanyAkira Niijima
(Mar. 9, 1944)
    
    Senior Managing Director and
Representative Director; in
charge of Japanese domestic
subsidiaries
(June 2006)
    
    June 2004:Senior Managing Director and
Representative Director;
Chief Financial Officer; and
in charge of administration and
export management in general
 51




---



##### Table of Contents



Name
    
    Current Position(Date of birth)
    
    (Month and year of expiration)
    
    Prior PositionHajime Ishizuka
(May 3, 1947)
    
    Senior Managing Director and
Representative Director;
President of Pioneers Home
Entertainment Business Company and AV Business
Company; and in charge of
Procurement Group
(June 2006)
    
    June 2003:Director; President of Pioneers
Components Business Company; and in
charge of International Business
DivisionOsamu Yamada
(Mar. 16, 1944)
    
    Senior Managing Director;
General Manager of Research & Development Group and
Corporate Research &
Development Laboratories
(June 2006)
    
    June 2003:Managing Director; General Manager
of Research & Development Group and
Corporate Research & Development
LaboratoriesTadahiro Yamaguchi
(Mar. 24, 1946)
    
    Managing Director; Executive Vice President of Pioneers
Plasma Display Business
Company (in charge of
technologies and production);
and Plant Manager of Ohmori
Plant
(June 2006)
    
    June 2002:Managing Director; Executive Vice
President of Pioneers Home
Entertainment Company (in charge of
technologies, production and quality
control); in charge of Cable &
Satellite Systems Division; and
Plant Manager of Tokorozawa PlantSatoshi Matsumoto
(Apr. 15, 1954)
    
    Managing Director; General
Manager of Environmental
Preservation Group and Environmental Preservation
Division
(June 2006)
    
    June 2002:Managing Director; General Manager
of Environmental Preservation
DivisionKoichi Shimizu
(Feb. 3, 1944)
    
    Managing Director; Chairman
of Pioneer China Holding Co.,
Ltd.
(June 2006)
    
    June 2004:Managing Director; in charge of
technologies, production and quality
control in general; General Manager
of Procurement Center; and in charge
of Strategic IT DivisionYoichi Sato
(Jan. 15, 1950)
    
    Managing Director; Deputy
General Manager of Research & Development Group and General
Manager of PDP Development
Center
(June 2006)
    
    July 2004:Executive Officer; Deputy General
Manager of Research & Development
Group and General Manager of PDP
Development Center
 52




---



##### Table of Contents



Name
    
    Current Position(Date of birth)
    
    (Month and year of expiration)
    
    Prior PositionAkira Haeno
(Feb. 14, 1949)
    
    Managing Director; President
of Pioneers Mobile
Entertainment Company
(June 2006)
    
    June 2004:Executive Officer; Plant Manager of
Kawagoe Plant; and General Manager
of Production Division of Kawagoe
Plant of Pioneers Mobile
Entertainment CompanyTatsuhiro Ishikawa
(Apr. 4, 1939)
    
    Director
(June 2006)
    
    Dec. 2001 to present:Attorney-at-LawShunichi Sato
(Feb. 10, 1941)
    
    Director
(June 2006)
    
    Apr. 2000:Japanese Ambassador Extraordinary
and Plenipotentiary to Belgium
 Executive Officers
 Name
    
    Current Position(Date of birth)
    
    (Month and year of expiration)
    
    Prior PositionMasaru Saotome
(Aug. 20, 1944)
    
    Senior Managing Executive
Officer; President of
Pioneers Plasma Display
Business Company
(June 2006)
    
    June 2003:Senior Managing
Executive Officer;
Executive Vice
President of
Pioneers Home
Entertainment
Company (in charge
of sales and
marketing); and
General Manager of
Display Business
DivisionKazunori Yamamoto
(Oct. 21, 1942)
    
    Senior Managing Executive
Officer; General Manager of
International Business Group
(June 2006)
    
    June 2001:Senior Executive
Officer; President
of Pioneer North
America, Inc.Seiichiro Kurihara
(Mar. 15, 1943)
    
    Senior Executive Officer;
General Manager of Intellectual Property
Division of Research &
Development Group
(June 2006)
    
    June 2001:Executive Officer;
General Manager of
Intellectual
Property DivisionMasao Kawabata
(Aug. 10, 1948)
    
    Senior Executive Officer;
General Manager of Corporate
Branding and Communications
Division
(June 2006)
    
    June 2001:Executive Officer;
General Manager of
Corporate
Communications
Division
 53




---



##### Table of Contents



Name
    
    Current Position(Date of birth)
    
    (Month and year of expiration)
    
    Prior PositionYoshio Taniyama
(Nov. 9, 1948)
    
    Senior Executive Officer; General Manager of Corporate
Planning Division
(June 2006)
    
    June 2001:Executive Officer;
General Manager of
Finance DivisionHideki Okayasu
(May 12, 1950)
    
    Senior Executive Officer; General Manager of Finance
and Accounting Division
(June 2006)
    
    June 2001:Executive Officer;
General Manager of
Accounting DivisionBuntarou Nishikawa
(Mar. 24, 1946)
    
    Executive Officer; Executive
Vice President of Pioneers
Mobile Entertainment Company;
and General Manager of OEM
Sales Division
(June 2006)
    
    June 2001:Executive Officer;
General Manager of
Domestic Sales
Division of
Pioneers Mobile
Entertainment
CompanyOsamu Takada
(July 27, 1948)
    
    Executive Officer; General Manager of Personnel Division
(June 2006)
    
    June 1998:General Manager of
Personnel DivisionSumitaka Matsumura
(Oct. 10, 1948)
    
    Executive Officer; Deputy
General Manager of Research &
Development Group; and in
charge of Optical Disc &
Systems Development Center
(June 2006)
    
    Jan. 2001:Deputy General
Manager of Research
& Development
Group; and General
Manager of AV &
Network Development
CenterChojuro Yamamitsu
(Mar. 26, 1946)
    
    Executive Officer; Deputy
General Manager of
Environmental Preservation
Group (in charge of Eco
Products)
(June 2006)
    
    Sept. 2002:Executive Officer;
Deputy General
Manager of Research
& Development
Group; General
Manager of
Engineering; and in
charge of
Information &
Communication
Development Center
and PDP Development
CenterKenji Sato
(Aug. 29, 1947)
    
    Executive Officer; General
Manager of General
Administration Division
(June 2006)
    
    June 1998:General Manager of
General
Administration
DivisionSusumu Kotani
(Apr. 12, 1950)
    
    Executive Officer; Chairman & Managing Director of Pioneer
Europe NV
(June 2006)
    
    Sept. 2002:Managing Director
of Pioneer Europe
NV
 54




---



##### Table of Contents



Name
    
    Current Position(Date of birth)
    
    (Month and year of expiration)
    
    Prior PositionTsutomu Haga
(June 2, 1948)
    
    Executive Officer; President
& Chief Operating Officer of
Pioneer North America, Inc.
(June 2006)
    
    July 2003:President & Chief
Operating Officer
of Pioneer
Electronics (USA)
Inc.Kenji Tokuyama
(Dec. 16, 1945)
    
    Executive Officer; Executive
Vice President of Plasma
Display Business Company (in
charge of OEM); and President of Pioneer Plasma Display
Corporation
(June 2006)
    
    Jan. 2003:President of NEC
Plasma Display
CorporationKaoru Sato
(July 27, 1948)
    
    Executive Officer; Vice President of Home
Entertainment Business
Company; and Plant Manager of
Tokorozawa Plant
(June 2006)
    
    June 2004:President of
Components Business
Company of Home
Entertainment
Business CompanyKeiichi Yamauchi
(Apr. 12, 1952)
    
    Executive Officer; General
Manager of Mobile Systems
Development Center of
Research & Development Group
(June 2006)
    
    Nov. 2003:General Manager of
Mobile Systems
Development Center
of Research &
Development GroupKazumi Kuriyama
(Sept. 12, 1953)
    
    Executive Officer; Deputy
General Manager of Corporate
Research & Development
Laboratories of Research &
Development Group
(June 2006)
    
    Sept. 2002:General Manager of
Nano Process
Technology
Department of
Corporate Research
& Development
Laboratories of
Research &
Development Group
 Corporate Auditors
 Name
    
    Current Position(Date of birth)
    
    (Month and year of expiration)
    
    Prior PositionMakoto Koshiba
(Nov. 21, 1943)
    
    Corporate Auditor (full time)
(June 2007)
    
    Sept. 1999:Director; General Manager of
Accounting Division; in charge of
Finance DivisionShinji Yasuda
(June 10, 1945)
    
    Corporate Auditor (full time)
(June 2007)
    
    July 2001:Director; Managing Director of
Pioneer China Holding Co., Ltd.
 55




---



##### Table of Contents



Name
    
    Current Position(Date of birth)
    
    (Month and year of expiration)
    
    Prior PositionTerumichi Tsuchida
(Aug. 22, 1921)
    
    Corporate Auditor
(June 2008)
    
    July 1998 to present:Advisor of Meiji Yasuda Life
Insurance CompanyIsao Moriya
(Sept. 5, 1937)
    
    Corporate Auditor
(June 2007)
    
    Mar. 1968 to present:Certified Public AccountantKeiichi Nishikido
(May 2, 1953)
    
    Corporate Auditor
(June 2007)
    
    Jan. 1994 to present:Attorney-at-Law;
Managing Partner of Kohwa Sohgoh
Law Offices, Japan
    B. Compensation
   C. Board practices
  56




---



##### Table of Contents



shikko yakuin
     57




---



##### Table of Contents



Significant Differences in Corporate Governance Practices Between Pioneer Corporation and U.S.
Companies Listed on the NYSE
  Directors
  Committees
   Audit Committee
  58




---



##### Table of Contents



Corporate Governance Guidelines
  Code of Business Conduct and Ethics
  Shareholder Approval of Equity Compensation Plans
  59




---



##### Table of Contents



D. Employees
  Year ended March 312003
    
    
    2004
    
    
    2005Number of employees
    
    
    34,656
    
    
    
    36,360
    
    
    
    39,362
  E. Share ownership
  Title of class
    
    Identity of person or group
    
    Number of shares owned
    
    Percent of classCommon Stock
    
    Directors, Executive
Officers and Corporate
Auditors as a group
    
    3,448,892 shares*
    
    
    1.91
    %
 *
    
    Except for Mr. Kanya Matsumoto, Chairman of Pioneer, who owns 2,935,359 shares of common
stock, which constitutes 1.63% of all outstanding shares as of June 30, 2005, none of
Pioneers Directors, Executive Officers and Corporate Auditors is the owner of more than one
percent of Pioneers common stock.
  Total number ofshares covered by
    
    
    
    Current exercise
    
    
    Number of sharesoption
    
    
    
    price
    
    
    exercisedFiscal year granted
    
    (in thousands)
    
    Exercise period
    
    per share
    
    
    (in thousands)2001
    
    191
    
    From July 1, 2002 toJune 30, 2005
    
    ¥
    4,400
    
    
    
    2002
    
    191
    
    From July 1, 2003 toJune 30, 2006
    
    ¥
    3,791
    
    
    
    
 60




---



##### Table of Contents



Total number ofshares covered by
    
    
    
    Current exercise
    
    
    Number of sharesoption
    
    
    
    price
    
    
    exercisedFiscal year granted
    
    (in thousands)
    
    Exercise period
    
    per share
    
    
    (in thousands)2003
    
    564
    
    From July 1, 2004 toJune 29, 2007
    
    ¥
    2,477
    
    
    
    42004
    
    313
    
    From July 1, 2005 toJune 30, 2008
    
    ¥
    2,951
    
    
    
    2005
    
    316
    
    From July 3, 2006 toJune 30, 2009
    
    ¥
    2,944
    
    
    
    2006
    
    315
    
    From July 2, 2007 toJune 30, 2010
    
    ¥
    1,828
    
    
    
    
  
 Item 7. Major Shareholders and Related Party Transactions
 A. Major shareholders
  Number of shares
    
    
    Percentage ofTitle of class
    
    Name
    
    (in thousands)
    
    
    outstanding sharesCommon Stock
    
    The Master Trust Bank of Japan, Ltd. (Trust Account)
    
    
    13,804
    
    
    
    7.66
    %Common Stock
    
    Japan Trustee Services Bank, Ltd.(Trust Account)
    
    
    11,666
    
    
    
    6.47
    %Common Stock
    
    Societe Generale ParisSGOP/DAI Paris 6Z
    
    
    10,403
    
    
    
    5.77
    %
   61




---



##### Table of Contents



Voting rights
    B. Related party transactions
  C. Interests of experts and counsel
  
 Item 8. Financial Information
 A. Consolidated statements and other financial information
 Consolidated financial statements
  Legal proceedings
   62




---



##### Table of Contents



Dividend policy
 Dividends.
  Dividend per shareRecord date
    
    Yen
    
    
    DollarsMarch 31, 2001
    
    
    7.50
    
    
    
    0.06September 30, 2001
    
    
    7.50
    
    
    
    0.06March 31, 2002
    
    
    7.50
    
    
    
    0.06September 30, 2002
    
    
    7.50
    
    
    
    0.06March 31, 2003
    
    
    10.00
    
    
    
    0.08September 30, 2003
    
    
    12.50
    
    
    
    0.12March 31, 2004
    
    
    12.50
    
    
    
    0.11September 30, 2004
    
    
    12.50
    
    
    
    0.12March 31, 2005
    
    
    12.50
    
    
    
    0.11
  B. Significant changes
  63




---



##### Table of Contents



Item 9. The Offer and Listing
 A. Offer and listing details
  Tokyo Stock Exchange
    
    
    New York Stock ExchangePrice per share of Common Stock
    
    
    Price per share of ADS(yen)
    
    
    (U.S. dollars)High
    
    
    Low
    
    
    High
    
    
    LowAnnual highs and lowsYear ended March 31,2001
    
    ¥
    4,940
    
    
    ¥
    2,085
    
    
    $
    45.38
    
    
    $
    20.502002
    
    
    4,250
    
    
    
    2,150
    
    
    
    34.70
    
    
    
    16.752003
    
    
    2,860
    
    
    
    1,805
    
    
    
    21.98
    
    
    
    14.832004
    
    
    3,370
    
    
    
    2,225
    
    
    
    31.25
    
    
    
    18.902005
    
    
    3,390
    
    
    
    1,820
    
    
    
    30.85
    
    
    
    17.11Quarterly highs and lowsFiscal 20041st quarter
    
    
    2,840
    
    
    
    2,225
    
    
    
    23.75
    
    
    
    18.902nd quarter
    
    
    3,030
    
    
    
    2,515
    
    
    
    25.75
    
    
    
    20.853rd quarter
    
    
    2,995
    
    
    
    2,505
    
    
    
    28.31
    
    
    
    23.304th quarter
    
    
    3,370
    
    
    
    2,875
    
    
    
    31.25
    
    
    
    27.01Fiscal 20051st quarter
    
    
    3,390
    
    
    
    2,635
    
    
    
    30.85
    
    
    
    23.752nd quarter
    
    
    2,850
    
    
    
    2,215
    
    
    
    25.90
    
    
    
    20.303rd quarter
    
    
    2,430
    
    
    
    1,820
    
    
    
    21.85
    
    
    
    18.054th quarter
    
    
    2,055
    
    
    
    1,827
    
    
    
    19.90
    
    
    
    17.11Fiscal 20061st quarter
    
    
    2,040
    
    
    
    1,655
    
    
    
    18.82
    
    
    
    15.15Monthly highs and lows2005March
    
    
    2,015
    
    
    
    1,827
    
    
    
    19.18
    
    
    
    17.60April
    
    
    2,040
    
    
    
    1,760
    
    
    
    18.82
    
    
    
    16.60May
    
    
    1,815
    
    
    
    1,703
    
    
    
    17.34
    
    
    
    16.00June
    
    
    1,783
    
    
    
    1,655
    
    
    
    16.64
    
    
    
    15.15July
    
    
    1,687
    
    
    
    1,604
    
    
    
    15.23
    
    
    
    14.35August
    
    
    1,785
    
    
    
    1,634
    
    
    
    16.10
    
    
    
    14.55
 B. Plan of distribution
  64




---



##### Table of Contents



C. Markets
    D. Selling shareholders
  E. Dilution
  F. Expenses of the issue
  
 Item 10. Additional Information
 A. Share capital
  B. Memorandum and articles of association
 Organization
 (kabushiki kaisha) (shoho) (shogyo tokibo)
 Objects and purposes
  
    
    manufacture and sale of electronic and electrical machinery and appliances;
    
    manufacture and sale of optical instruments, medical instruments, and other machinery and appliances;
    
    planning, production, manufacture and sale of audio, video and computer software;
    
    manufacture and sale of woodwork;
    
    manufacture and sale of agricultural products and plants for their cultivation;
 65




---



##### Table of Contents




    
    sale of food 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 paragraphs.
 Directors
   Common stock
 General
    66




---



##### Table of Contents



Authorized capital
    Dividends
   67




---



##### Table of Contents



68




---



##### Table of Contents



(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; and(v)
    
    such other amounts as are set out in an ordinance of the Ministry of Justice.
 Acquisition by Pioneer of its common stock
   (1)
    
    its liabilities;(2)
    
    its stated capital;(3)
    
    its additional paid-in capital and accumulated legal reserve;(4)
    
    other amounts as provided for by an ordinance of the Ministry of Justice;(5)
    
    (if Pioneer transferred its treasury stock after the end of the last fiscal year) the
transfer price of its treasury stock after subtracting the book value thereof;(6)
    
    (if Pioneer decreased its stated capital after the end of the last fiscal year) the amount of
decrease in its stated capital (excluding the amount transferred to the additional paid-in
capital or legal reserve);(7)
    
    (if Pioneer decreased its additional paid-in capital or legal reserve after the end of the
last fiscal year) the amount of decrease in its additional paid-in capital or legal reserve
(excluding the amount transferred to the stated capital);(8)
    
    (if Pioneer cancelled its treasury stock after the end of the last fiscal year) the book
value of its treasury stock so cancelled;
 69




---



##### Table of Contents



(9)
    
    (if Pioneer distributed surplus to shareholders after the end of the last fiscal year) the
assets distributed to shareholders by way of such distribution of surplus; and(10)
    
    other amounts as provided for by an ordinance of the Ministry of Justice.
  (1)
    
    the book value of its treasury stock;(2)
    
    (if Pioneer transferred its treasury stock after the end of the last fiscal year) the
transfer price of its treasury stock;(3)
    
    the losses as recorded for the period after the end of Pioneers last fiscal year until the
date of an extraordinary settlement of account (if any) as provided for in an ordinance of the
Ministry of Justice; and(4)
    
    other amounts as provided for by an ordinance of the Ministry of Justice.
      (1)
    
    the book value of Pioneers treasury stock;(2)
    
    (if Pioneer transferred its treasury stock after the end of the last fiscal year) the
transfer price of its treasury stock after the end of Pioneers last fiscal year; and(3)
    
    other amounts as provided for by an ordinance of the Ministry of Justice.
  70




---



##### Table of Contents



Stock splits
   Consolidation of Shares
  General meeting of shareholders
    71




---



##### Table of Contents



Voting rights
 Unit share system
  (1)
    
    acquisition of its own shares from a specific party;(2)
    
    consolidation of shares;(3)
    
    any offering of new shares at a specially favorable price (or any offering of stock
acquisition rights to subscribe for or acquire shares of capital stock, or bonds with stock
acquisition rights at specially favorable conditions) to any persons other than
shareholders;(4)
    
    the removal of a Director or Corporate Auditor (when the New Company Law becomes effective,
the removal of a Director who is elected by cumulative voting);
 72




---



##### Table of Contents



(5)
    
    the exemption of liability of a Director or Corporate Auditor with certain exceptions;(6)
    
    a reduction of stated capital (when the New Company Law becomes effective, with certain
exceptions in which a shareholders resolution is not required);(7)
    
    (when the New Company Law becomes effective ) a distribution of in-kind dividends which meets
certain requirements;(8)
    
    dissolution, merger, or consolidation with certain exceptions in which a shareholders
resolution is not required;(9)
    
    the transfer of the whole or a material part of the business;(10)
    
    the taking over of the whole of the business of any other corporation with certain exceptions
in which a shareholders resolution is not required;(11)
    
    share exchange or share transfer for the purpose of establishing 100 percent
parent-subsidiary relationships with certain exceptions in which a shareholders resolution is
not required; or(12)
    
    separating of the corporation into two or more corporations with certain exceptions in which
a shareholders resolution is not required.
 Issue of additional shares and pre-emptive rights
 Voting rights
   Liquidation rights
  73




---



##### Table of Contents



Record date
   Acquisition by Pioneer of its common stock
 Dividends   Distributable
amount
 74




---



##### Table of Contents



Dividends
 Issue of additional shares and
pre-emptive rights
 Unit share system
      75




---



##### Table of Contents



Sale by Pioneer of shares held by shareholders whose location is unknown
   Reporting of substantial shareholdings
     C. Material contracts
  76




---



##### Table of Contents



D. Exchange controls
   
    
    individuals who are not resident in Japan; and
    
    corporations whose principal offices are located outside Japan.
   
    
    individuals who are exchange non-residents;
    
    corporations that are organized under the laws of foreign
countries or whose principal offices are located outside Japan;
and
    
    corporations (1) of which 50% or more of their shares are held by
individuals who are exchange non-residents and/or corporations (a)
that are organized under the laws of foreign countries or (b)
whose principal offices are located outside Japan or (2) a
majority of whose officers, or officers having the power of
representation, are individuals who are exchange non-residents.
   77




---



##### Table of Contents



E. Taxation
    
    
    a citizen or individual resident of the United States,
    
    a corporation or other entity taxable as a corporation for U.S. federal income tax purposes organized
in or under the laws of the United States, any State, or the District of Columbia,
    
    an estate the income of which is subject to U.S. federal income tax without regard to its source, or
    
    a trust that is (i) subject to the primary supervision of a U.S. court and the control of one or more
U.S. persons, or (ii) that has a valid election in effect under applicable Treasury regulations to be
treated as a U.S. person.
  
    
    is a resident of the United States for purposes of the Treaty,
    
    does not maintain a permanent establishment in Japan (i) with which shares of common stock or ADSs are
effectively connected or (ii) of which shares of common stock or ADSs form part of the business
property, and
    
    is eligible for benefits under the Treaty with respect to income and gain derived in connection with
the shares of common stock or ADSs.
  78




---



##### Table of Contents



The discussion below is intended for general information only and does not constitute a
complete analysis of all tax consequences relating to the acquisition, ownership and disposition of
shares of common stock or the ADSs. Investors in shares of common stock or the ADSs should consult
their own tax advisors concerning the tax consequences of their particular situations.
 Japanese taxation
     79




---



##### Table of Contents



U.S. federal income taxation
 U.S. Holders
  80




---



##### Table of Contents



Taxation of Dividends
       81




---



##### Table of Contents




    
    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,
  Taxation of Capital Gains
  Passive Foreign Investment Companies
   82




---



##### Table of Contents



Non-U.S. Holders
      Backup withholding and information reporting
  83




---



##### Table of Contents



F. Dividends and paying agents
  G. Statement by experts
  H. Documents on display
  I. Subsidiary information
  84




---



##### Table of Contents



Item 11. Quantitative and Qualitative Disclosures About Market Risk
   Foreign exchange risk
     Functional
    
    Yen
    
    
    Yen
    
    
    EUR
    
    
    A$
    
    
    THB
    
    
    THB
    
    
    NT$
    
    
    Totalcurrency
    
    US$/
    
    
    Yen/
    
    
    EUR/
    
    
    A$/
    
    
    THB/
    
    
    US$/
    
    
    US$/Sell/Buy
    
    Yen
    
    
    US$
    
    
    Yen
    
    
    US$
    
    
    US$
    
    
    THB
    
    
    NT$(In millions of yen except average rates)Contract amounts
    
    ¥
    12,456
    
    
    ¥
    490
    
    
    ¥
    18,949
    
    
    ¥
    1,440
    
    
    ¥
    181
    
    
    ¥
    1,063
    
    
    ¥
    371
    
    
    ¥
    34,950average contractual
exchange rates
    
    
    104.50
    
    
    
    102.00
    
    
    
    135.93
    
    
    
    0.7741
    
    
    
    39.1100
    
    
    
    38.9461
    
    
    
    31.2325Fair value
    
    ¥
    (243
    )
    
    ¥
    23
    
    
    ¥
    (293
    )
    
    ¥
    16
    
    
    ¥
    0
    
    
    ¥
    (5
    )
    
    ¥
    (3
    )
    
    ¥
    (505
    )
 85




---



##### Table of Contents



Expected maturity dateContract amounts
    
    
    
    (year ending March 31)Buy
    
    
    Sell
    
    
    2006
    
    
    2007
    
    
    2008
    
    
    Total
    
    
    Fair value(In millions except average rates)Functional currency: Yen
    
    ¥
    24,540
    
    
    
    US$200
    
    
    ¥
    18,665
    
    
    ¥
    5,875
    
    
    
    
    
    
    ¥
    24,540
    
    
    ¥
    (3,009
    )Average contractual exchange rate
    
    
    
    
    
    
    
    
    
    
    124.43
    
    
    
    117.50Functional currency: Euro
    
    
    EUR76
    
    
    
    US$100
    
    
    ¥
    10,506
    
    
    
    
    
    
    
    
    
    
    ¥
    10,506
    
    
    ¥
    189Average contractual exchange rate
    
    
    
    
    
    
    
    
    
    
    1.3218Functional currency: Euro
    
    
    EUR3
    
    
    
    GBP2
    
    
    ¥
    443
    
    
    
    
    
    
    
    
    
    
    
    443
    
    
    ¥
    1Average contractual exchange rate
    
    
    
    
    
    
    
    
    
    
    0.6901
 Interest rate risk
 Interest rate risk
 a
  Expected maturity dateContract amounts
    
    
    
    (year ending March 31)Buy
    
    
    Sell
    
    
    2006
    
    
    2007
    
    
    2008
    
    
    Total
    
    
    Fair value(In millions except average rates)Functional currency: YenVariable (US$) to Fixed (Yen)
    
    ¥
    12,590
    
    
    
    US$100
    
    
    ¥
    12,590
    
    
    
    
    
    
    
    
    
    
    ¥
    12,590
    
    
    ¥
    (1,761
    )Average pay rate
    
    
    
    
    
    
    
    
    
    
    0.41
    %Average receive rate
    
    
    
    
    
    
    
    
    
    
    2.17
    %Fixed (US$) to Fixed (Yen)
    
    ¥
    11,950
    
    
    
    US$100
    
    
    ¥
    6,075
    
    
    ¥
    5,875
    
    
    
    
    
    
    ¥
    11,950
    
    
    ¥
    (1,248
    )Average pay rate
    
    
    
    
    
    
    
    
    
    
    (0.65
    )%
    
    
    (1.35
    )%Average receive rate
    
    
    
    
    
    
    
    
    
    
    2.88
    %
    
    
    1.21
    %Functional currency: EuroVariable (US$) to Fixed (Euro)
    
    
    EUR76
    
    
    
    US$100
    
    
    ¥
    10,506
    
    
    
    
    
    
    
    
    
    
    ¥
    10,506
    
    
    ¥
    189Average pay rate
    
    
    
    
    
    
    
    
    
    
    2.22
    %Average receive rate
    
    
    
    
    
    
    
    
    
    
    2.96
    %Functional currency: EuroFixed (GBP) to Fixed (Euro)
    
    
    EUR3
    
    
    
    GBP2
    
    
    ¥
    443
    
    
    
    
    
    
    
    
    
    
    ¥
    443
    
    
    ¥
    1Average pay rate
    
    
    
    
    
    
    
    
    
    
    2.20
    %Average receive rate
    
    
    
    
    
    
    
    
    
    
    4.61
    %
 86




---



##### Table of Contents



Functional
    
    
    Expected maturity date (year ending March 31)Currency
    
    
    2006
    
    
    2007
    
    
    2008
    
    
    2009
    
    
    2010
    
    
    Thereafter
    
    
    Total
    
    
    Fair value(In millions of yen except average rates)Fixed rate (Yen)
    
    Yen
    
    ¥
    15,294
    
    
    
    244
    
    
    
    244
    
    
    
    10,244
    
    
    
    244
    
    
    
    62,519
    
    
    ¥
    88,789
    
    
    ¥
    83,724Average interest rate
    
    
    
    
    
    
    2.36
    %
    
    
    2.90
    %
    
    
    2.90
    %
    
    
    2.80
    %
    
    
    2.90
    %
    
    
    0.03
    %
    
    
    0.78
    %Variable rate (US$)
    
    US$
    
    
    537
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    537
    
    
    
    537Average interest rate
    
    
    
    
    
    
    1.70
    %
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1.70
    %Interest free loan
(EUR)
    
    EUR
    
    
    4
    
    
    
    7
    
    
    
    7
    
    
    
    22
    
    
    
    
    
    
    
    
    
    
    
    40
    
    
    
    40Total
    
    
    
    
    
    ¥
    15,835
    
    
    
    251
    
    
    
    251
    
    
    
    10,266
    
    
    
    244
    
    
    
    62,519
    
    
    ¥
    89,366
    
    
    ¥
    84,301
 Market price risks on available-for-sale securities
  2005Cost
    
    
    Fair value(In millions of yen)Debt securities (by contractual maturities)Maturing over one year
    
    ¥
    94
    
    
    ¥
    98Equity securities
    
    ¥
    5,734
    
    
    ¥
    22,170
 
 Item 12. Description of Securities Other than Equity Securities
  87




---



##### Table of Contents



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. Controls and Procedures
   88




---



##### Table of Contents



Item 16. [Reserved]
 
 Item 16A. Audit Committee Financial Expert
   
 Item 16B. Code of Ethics
  89




---



##### Table of Contents



Item 16C. Principal Accountant Fees and Services
  Year ended March 312004
    
    
    2005(In millions of yen)Audit Fees (1)
    
    ¥
    339
    
    
    ¥
    343Audit-Related Fees (2)
    
    
    42
    
    
    
    48Tax Fees (3)
    
    
    43
    
    
    
    58All Other Fees (4)
    
    
    7
    
    
    
    42Total
    
    ¥
    431
    
    
    ¥
    491
 (1)
    
    Includes fees for the audit of our annual financial statements included in our Form 20-F and
for services provided in connection with statutory and regulatory filings or engagements.
This also includes fees billed for issuance of comfort letters and consent letters.(2)
    
    Includes fees for assurance and related services that are performed by the independent
accountant which include employee benefit plan audits, accounting consultations and audits in
connection with internal control reviews, attest services that are not required by statute or
regulation and consultation concerning financial accounting and reporting standards.(3)
    
    Includes fees for services related to tax compliance, including the preparation of tax
returns and claims for refund, tax planning and tax advice.(4)
    
    Includes fees for other than the services reported in paragraphs (1) through (3). All other
fees for fiscal 2005 include consulting services relating to compliance control.
 Policy and procedures of the Board of Corporate Auditors for pre-approval
   90




---



##### Table of Contents



Item 16D. Exemptions from the Listing Standards for Audit Committees


Item 16E. Purchases of Equity Securities by the Issuer and Affiliated Purchasers
  (c) Total Number
    
    
    (d) Maximum Numberof Shares Purchased
    
    
    of Shares that(a) Total
    
    
    (b) Average
    
    
    as Part of Publicly
    
    
    May Yet BeNumber of
    
    
    Price Paid
    
    
    Announced
    
    
    Purchased Under thePeriod
    
    Shares Purchased
    
    
    per Share
    
    
    Plans or Programs
    
    
    Plans or ProgramsApril 1 to April 30, 2004
    
    
    649
    
    
    ¥
    3,158.43
    
    
    
    
    
    
    
    May 1 to May 31, 2004
    
    
    302
    
    
    ¥
    2,824.09
    
    
    
    
    
    
    
    June 1 to June 30, 2004
    
    
    162
    
    
    ¥
    2,761.36
    
    
    
    
    
    
    
    July 1 to July 31, 2004
    
    
    598
    
    
    ¥
    2,660.23
    
    
    
    
    
    
    
    August 1 to August 31, 2004
    
    
    315
    
    
    ¥
    2,369.78
    
    
    
    
    
    
    
    September 1 to September 30, 2004
    
    
    544
    
    
    ¥
    2,373.78
    
    
    
    
    
    
    
    October 1 to October 31, 2004
    
    
    683
    
    
    ¥
    2,252.31
    
    
    
    
    
    
    
    November 1 to November 30, 2004
    
    
    741
    
    
    ¥
    1,953.67
    
    
    
    
    
    
    
    December 1 to December 31, 2004
    
    
    1,533
    
    
    ¥
    1,958.55
    
    
    
    
    
    
    
    January 1 to January 31, 2005
    
    
    509
    
    
    ¥
    1,999.15
    
    
    
    
    
    
    
    February 1 to February 28, 2005
    
    
    479
    
    
    ¥
    1,880.48
    
    
    
    
    
    
    
    March 1 to March 31, 2005
    
    
    1,000,580
    
    
    ¥
    1,963.14
    
    
    
    1,000,000
    
    
    
    0Total
    
    
    1,007,095
    
    
    ¥
    1,965.22
    
    
    
    1,000,000
 Notes:
    1.
    A holder of shares constituting less than one unit may require Pioneer to purchase
such shares at their market value in accordance with the provision of the Share Handling
Regulations of Pioneer, under the Commercial Code of Japan. All shares other than purchases
publicly announced were made by such requests.2.
    On March 11, 2005, share repurchase approved by the Board of Directors pursuant to the
Articles of Incorporation of Pioneer was announced publicly.Total number of shares approved to be purchased was up to 1,000,000 shares of common
stock.Period during which shares may be purchased was from March 14, 2005 to May 11, 2005.
Pioneer finished the purchase on March 23, 2005 prior to expiration.
 91




---



##### Table of Contents



PART III
 
 Item 17. Financial Statements
  
 Item 18. Financial Statements
  
 Item 19. Exhibits
 PageConsolidated financial statementsIndex to Consolidated Financial Statements
    
    
    F-1Report of Independent Registered Public Accounting Firm
    
    
    F-2Consolidated Balance Sheets as of March 31, 2004 and 2005
    
    
    F-3Consolidated
Statements of Operations
for the years ended March 31, 2003, 2004 and 2005
    
    
    F-5Consolidated Statements of Shareholders Equity
for the years ended March 31, 2003, 2004 and 2005
    
    
    F-6Consolidated Statements of Cash Flows
for the years ended March 31, 2003, 2004 and 2005
    
    
    F-7Notes to Consolidated Financial Statements
    
    
    F-8
 Exhibits
 1.01
    
    
    Regulations of the Board of Directors, as amended and currently in effect (English
translation)1.02
    
    
    Regulations of the Board of Corporate Auditors, as amended and currently in effect (English
translation)2.01
    
    
    Share Handling Regulations, as amended and currently in effect (English translation)12.01
    
    
    Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act
of 200212.02
    
    
    Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act
of 200213.01
    
    
    Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906
of the Sarbanes-Oxley Act of 2002
 92




---



##### Table of Contents



PIONEER CORPORATION(Registrant)Date: September 8, 2005
    By
    /s/ Tamihiko SudoTamihiko SudoChief Financial Officer 93




---



##### Table of Contents



INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
 PageConsolidated financial statementsReport of Independent Registered Public Accounting Firm
    
    
    F-2Consolidated Balance Sheets as of March 31, 2004 and 2005
    
    
    F-3Consolidated
Statements of Operations
for the years ended March 31, 2003, 2004 and 2005
    
    
    F-5Consolidated Statements of Shareholders Equity
for the years ended March 31, 2003, 2004 and 2005
    
    
    F-6Consolidated Statements of Cash Flows
for the years ended March 31, 2003, 2004 and 2005
    
    
    F-7Notes to Consolidated Financial Statements
    
    
    F-8
 F-1




---



##### Table of Contents



Report of Independent Registered Public Accounting Firm
       /s/ Deloitte Touche TohmatsuDeloitte
Touche TohmatsuTokyo, Japan
  F-2




---



##### Table of Contents



Consolidated Balance Sheets
 
 Thousands ofU.S. DollarsMillions of Yen
    
    
    (Note 1)Assets
    
    2004
    
    
    2005
    
    
    2005Current assets:Cash and cash equivalentsCash, including time deposits of ¥52,275 million$488,551 thousand (¥88,425 million in 2004)
    
    ¥
    192,419
    
    
    ¥
    116,681
    
    
    $
    1,090,477Trade receivablesNotes
    
    
    2,988
    
    
    
    2,516
    
    
    
    23,514Accounts
    
    
    112,411
    
    
    
    132,110
    
    
    
    1,234,673Allowance for doubtful notes and accounts (Note 20)
    
    
    (3,344
    )
    
    
    (2,450
    )
    
    
    (22,897
    )Inventories (Note 6)
    
    
    107,806
    
    
    
    109,015
    
    
    
    1,018,831Deferred income taxes (Note 11)
    
    
    28,886
    
    
    
    25,519
    
    
    
    238,495Prepaid expenses and other current assets
    
    
    38,622
    
    
    
    43,505
    
    
    
    406,589Total current assets
    
    
    479,788
    
    
    
    426,896
    
    
    
    3,989,682Investments and long-term receivables:Available-for-sale securities (Note 5)
    
    
    24,516
    
    
    
    22,268
    
    
    
    208,112Investments in and advances to affiliated companies (Note 7)
    
    
    5,573
    
    
    
    2,987
    
    
    
    27,916Sundry investments (Notes 5 and 18)
    
    
    3,383
    
    
    
    3,388
    
    
    
    31,664Long-term receivables, less allowance for doubtful accounts of
¥160 million$1,495 thousand (¥190 million in 2004) (Note 20)
    
    
    253
    
    
    
    185
    
    
    
    1,729Total investments and long-term receivables
    
    
    33,725
    
    
    
    28,828
    
    
    
    269,421Property, plant and equipment(Note 9):Land
    
    
    25,050
    
    
    
    32,965
    
    
    
    308,084Buildings
    
    
    113,863
    
    
    
    136,372
    
    
    
    1,274,505Machinery and equipment
    
    
    239,081
    
    
    
    293,359
    
    
    
    2,741,673Construction in progress
    
    
    7,568
    
    
    
    1,056
    
    
    
    9,869Total
    
    
    385,562
    
    
    
    463,752
    
    
    
    4,334,131Accumulated depreciation
    
    
    (229,361
    )
    
    
    (253,607
    )
    
    
    (2,370,159
    )Net property, plant and equipment
    
    
    156,201
    
    
    
    210,145
    
    
    
    1,963,972Other assets:Intangible assets (Note 8)
    
    
    18,966
    
    
    
    24,052
    
    
    
    224,785Deferred income taxes (Note 11)
    
    
    24,276
    
    
    
    25,420
    
    
    
    237,570Other
    
    
    9,586
    
    
    
    9,826
    
    
    
    91,832Total other assets
    
    
    52,828
    
    
    
    59,298
    
    
    
    554,187Total assets
    
    ¥
    722,542
    
    
    ¥
    725,167
    
    
    $
    6,777,262
  F-3




---



##### Table of Contents



Thousands ofU.S. DollarsMillions of Yen
    
    
    (Note 1)Liabilities and Shareholders Equity
    
    2004
    
    
    2005
    
    
    2005Current liabilities:Short-term borrowings (Note 9)
    
    ¥
    23,327
    
    
    ¥
    33,152
    
    
    $
    309,832Current portion of long-term debt (Note 9)
    
    
    4,510
    
    
    
    19,276
    
    
    
    180,150Trade payables
    
    
    79,439
    
    
    
    96,335
    
    
    
    900,327Accrued liabilitiesTaxes on income
    
    
    9,341
    
    
    
    4,938
    
    
    
    46,150Payroll
    
    
    17,604
    
    
    
    17,203
    
    
    
    160,776Royalty
    
    
    18,688
    
    
    
    14,811
    
    
    
    138,420Other
    
    
    35,626
    
    
    
    36,843
    
    
    
    344,327Warranty reserve (Note 20)
    
    
    5,419
    
    
    
    5,722
    
    
    
    53,477Dividends payable
    
    
    2,193
    
    
    
    2,180
    
    
    
    20,374Other current liabilities
    
    
    27,151
    
    
    
    20,710
    
    
    
    193,551Total current liabilities
    
    
    223,298
    
    
    
    251,170
    
    
    
    2,347,384Long-term liabilities:Long-term debt (Note 9)
    
    
    89,691
    
    
    
    81,219
    
    
    
    759,056Accrued pension and severance cost (Note 10)
    
    
    57,143
    
    
    
    40,022
    
    
    
    374,037Deferred income taxes (Note 11)
    
    
    1,327
    
    
    
    1,630
    
    
    
    15,234Other long-term liabilities
    
    
    301
    
    
    
    719
    
    
    
    6,720Total long-term liabilities
    
    
    148,462
    
    
    
    123,590
    
    
    
    1,155,047Commitments and contingent liabilities(Note 21)Minority interests
    
    
    17,844
    
    
    
    18,168
    
    
    
    169,794Shareholders equity(Note 12):Common stock, no par valueAuthorized 400,000,000 sharesIssued180,063,836 shares2004 and 2005
    
    
    49,049
    
    
    
    49,049
    
    
    
    458,402Capital surplus
    
    
    82,464
    
    
    
    82,735
    
    
    
    773,224Retained earnings
    
    
    273,718
    
    
    
    260,556
    
    
    
    2,435,103Accumulated other comprehensive loss (Note 14)
    
    
    (61,829
    )
    
    
    (47,669
    )
    
    
    (445,505
    )Treasury stock, at cost 4,632,962 shares2004
and 5,635,190 shares2005
    
    
    (10,464
    )
    
    
    (12,432
    )
    
    
    (116,187
    )Total shareholders equity
    
    
    332,938
    
    
    
    332,239
    
    
    
    3,105,037Total liabilities and shareholders equity
    
    ¥
    722,542
    
    
    ¥
    725,167
    
    
    $
    6,777,262
  F-4




---



##### Table of Contents



Consolidated Statements of Operations
 Thousands ofU.S. DollarsMillions of Yen
    
    
    (Note 1)2003
    
    
    2004
    
    
    2005
    
    
    2005Revenues:Operating revenue:Net sales
    
    ¥
    664,675
    
    
    ¥
    689,064
    
    
    ¥
    723,411
    
    
    $
    6,760,850Royalty revenue
    
    
    12,584
    
    
    
    11,821
    
    
    
    10,237
    
    
    
    95,673Total operating revenue
    
    
    677,259
    
    
    
    700,885
    
    
    
    733,648
    
    
    
    6,856,523Interest income
    
    
    2,153
    
    
    
    1,420
    
    
    
    1,930
    
    
    
    18,037Gain on sale of subsidiaries stock
    
    
    768
    
    
    
    
    
    
    
    
    
    
    
    Other income (Note 15)
    
    
    641
    
    
    
    504
    
    
    
    3,415
    
    
    
    31,916Total revenues
    
    
    680,821
    
    
    
    702,809
    
    
    
    738,993
    
    
    
    6,906,476Cost and expenses:Cost of sales
    
    
    473,239
    
    
    
    487,297
    
    
    
    584,060
    
    
    
    5,458,504Selling, general and administrative expenses
    
    
    168,736
    
    
    
    166,415
    
    
    
    195,693
    
    
    
    1,828,906Subsidy from the government (Note 10)
    
    
    
    
    
    
    
    
    
    
    (48,697
    )
    
    
    (455,112
    )Interest expense
    
    
    2,814
    
    
    
    2,154
    
    
    
    1,746
    
    
    
    16,318Loss on sale and disposal of fixed assets
    
    
    4,519
    
    
    
    3,454
    
    
    
    40
    
    
    
    374Other deductions (Note 15)
    
    
    3,434
    
    
    
    1,641
    
    
    
    6,338
    
    
    
    59,234Total cost and expenses
    
    
    652,742
    
    
    
    660,961
    
    
    
    739,180
    
    
    
    6,908,224Income (loss) from continuing operations before
income taxes
    
    
    28,079
    
    
    
    41,848
    
    
    
    (187
    )
    
    
    (1,748
    )Income taxes(Note 11):Current
    
    
    14,477
    
    
    
    17,829
    
    
    
    7,688
    
    
    
    71,850Deferred
    
    
    (5,445
    )
    
    
    758
    
    
    
    (2,846
    )
    
    
    (26,598
    )Total income taxes
    
    
    9,032
    
    
    
    18,587
    
    
    
    4,842
    
    
    
    45,252Income (loss) from continuing operations before
minority interest
and equity in losses
    
    
    19,047
    
    
    
    23,261
    
    
    
    (5,029
    )
    
    
    (47,000
    )Minority interest in losses (earnings) of
subsidiaries
    
    
    21
    
    
    
    (654
    )
    
    
    (692
    )
    
    
    (6,467
    )Equity in losses of affiliated companies(Note 7)
    
    
    (3,126
    )
    
    
    (2,244
    )
    
    
    (3,068
    )
    
    
    (28,673
    )Income (loss) from continuing operations
    
    
    15,942
    
    
    
    20,363
    
    
    
    (8,789
    )
    
    
    (82,140
    )Income from discontinued operations, net of tax
(Note 4)
    
    
    136
    
    
    
    4,475
    
    
    
    
    
    
    
    Net income (loss)
    
    ¥
    16,078
    
    
    ¥
    24,838
    
    
    ¥
    (8,789
    )
    
    $
    (82,140
    )
 Yen
    
    
    U.S. Dollars2003
    
    
    2004
    
    
    2005
    
    
    2005Per share of common stock and per American Depositary
Share(Note 19):Basic:Continuing operations
    
    ¥
    89.48
    
    
    ¥
    116.07
    
    
    ¥
    (50.11
    )
    
    $
    (0.47
    )Discontinued operations
    
    
    0.76
    
    
    
    25.51
    
    
    
    
    
    
    
    Net income (loss)
    
    ¥
    90.24
    
    
    ¥
    141.58
    
    
    ¥
    (50.11
    )
    
    $
    (0.47
    )Diluted:Continuing operations
    
    ¥
    89.48
    
    
    ¥
    115.18
    
    
    ¥
    (50.11
    )
    
    $
    (0.47
    )Discontinued operations
    
    
    0.76
    
    
    
    25.34
    
    
    
    
    
    
    
    Net income (loss)
    
    ¥
    90.24
    
    
    ¥
    140.52
    
    
    ¥
    (50.11
    )
    
    $
    (0.47
    )
  F-5




---



##### Table of Contents



Consolidated Statements of Shareholders Equity
 Millions of YenNumber of
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    AccumulatedShares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Other
    
    
    
    
    
    
    TotalIssued
    
    
    Common
    
    
    Capital
    
    
    Retained
    
    
    Comprehensive
    
    
    Treasury
    
    
    Shareholders(Thousands)
    
    
    Stock
    
    
    Surplus
    
    
    Earnings
    
    
    Loss
    
    
    Stock
    
    
    EquityBalance at March 31, 2002
    
    
    180,064
    
    
    ¥
    49,049
    
    
    ¥
    82,010
    
    
    ¥
    240,692
    
    
    ¥
    (24,736
    )
    
    ¥
    (12
    )
    
    ¥
    347,003Comprehensive income (loss):Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    16,078
    
    
    
    
    
    
    
    
    
    
    
    16,078Other comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (30,893
    )
    
    
    
    
    
    
    (30,893
    )Comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (14,815
    )Value ascribed to stock
options (Note 13)
    
    
    
    
    
    
    
    
    
    
    149
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    149Purchase of treasury stock (Note 12)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (11,566
    )
    
    
    (11,566
    )Sales of treasury stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (412
    )
    
    
    
    
    
    
    1,126
    
    
    
    714Cash dividends (¥17.50 per share)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,092
    )
    
    
    
    
    
    
    
    
    
    
    (3,092
    )Balance at March 31, 2003
    
    
    180,064
    
    
    
    49,049
    
    
    
    82,159
    
    
    
    253,266
    
    
    
    (55,629
    )
    
    
    (10,452
    )
    
    
    318,393Comprehensive income (loss):Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    24,838
    
    
    
    
    
    
    
    
    
    
    
    24,838Other comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (6,200
    )
    
    
    
    
    
    
    (6,200
    )Comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    18,638Value ascribed to stock
options (Note 13)
    
    
    
    
    
    
    
    
    
    
    305
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    305Purchase of treasury stock (Note 12)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (14
    )
    
    
    (14
    )Sales of treasury stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2
    
    
    
    2Cash dividends (¥25.00 per share)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,386
    )
    
    
    
    
    
    
    
    
    
    
    (4,386
    )Balance at March 31, 2004
    
    
    180,064
    
    
    
    49,049
    
    
    
    82,464
    
    
    
    273,718
    
    
    
    (61,829
    )
    
    
    (10,464
    )
    
    
    332,938Comprehensive income (loss):Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (8,789
    )
    
    
    
    
    
    
    
    
    
    
    (8,789
    )Other comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    14,160
    
    
    
    
    
    
    
    14,160Comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,371Value ascribed to stock
options (Note 13)
    
    
    
    
    
    
    
    
    
    
    270
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    270Purchase of treasury stock (Note 12)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,979
    )
    
    
    (1,979
    )Sales of treasury stock
    
    
    
    
    
    
    
    
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    11
    
    
    
    12Cash dividends (¥25.00 per share)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,373
    )
    
    
    
    
    
    
    
    
    
    
    (4,373
    )Balance at March 31, 2005
    
    
    180,064
    
    
    ¥
    49,049
    
    
    ¥
    82,735
    
    
    ¥
    260,556
    
    
    ¥
    (47,669
    )
    
    ¥
    (12,432
    )
    
    ¥
    332,239
 Thousands of U.S. Dollars (Note 1)AccumulatedOther
    
    
    
    
    
    
    TotalCommon
    
    
    Capital
    
    
    Retained
    
    
    Comprehensive
    
    
    Treasury
    
    
    ShareholdersStock
    
    
    Surplus
    
    
    Earnings
    
    
    Loss
    
    
    Stock
    
    
    EquityBalance at March 31, 2004
    
    $
    458,402
    
    
    $
    770,692
    
    
    $
    2,558,112
    
    
    $
    (577,841
    )
    
    $
    (97,795
    )
    
    $
    3,111,570Comprehensive income (loss):Net loss
    
    
    
    
    
    
    
    
    
    
    (82,140
    )
    
    
    
    
    
    
    
    
    
    
    (82,140
    )Other comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    132,336
    
    
    
    
    
    
    
    132,336Comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    50,196Value ascribed to stock
options (Note 13)
    
    
    
    
    
    
    2,523
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,523Purchase of treasury stock (Note 12)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (18,495
    )
    
    
    (18,495
    )Sales of treasury stock
    
    
    
    
    
    
    9
    
    
    
    
    
    
    
    
    
    
    
    103
    
    
    
    112Cash dividends ($0.23 per share)
    
    
    
    
    
    
    
    
    
    
    (40,869
    )
    
    
    
    
    
    
    
    
    
    
    (40,869
    )Balance at March 31, 2005
    
    $
    458,402
    
    
    $
    773,224
    
    
    $
    2,435,103
    
    
    $
    (445,505
    )
    
    $
    (116,187
    )
    
    $
    3,105,037
  F-6




---



##### Table of Contents



Consolidated Statements of Cash Flows
 Thousands ofU.S. DollarsMillions of Yen
    
    
    (Note 1)2003
    
    
    2004
    
    
    2005
    
    
    2005Operating activities:Net income (loss)
    
    ¥
    16,078
    
    
    ¥
    24,838
    
    
    ¥
    (8,789
    )
    
    $
    (82,140
    )Adjustments to reconcile net income (loss) to net cash
provided by operating activities:Income from discontinued operations, net of tax
    
    
    (136
    )
    
    
    (4,475
    )
    
    
    
    
    
    
    Depreciation and amortization
    
    
    36,238
    
    
    
    40,911
    
    
    
    46,990
    
    
    
    439,159Minority interest in (losses) earnings of subsidiaries
    
    
    (21
    )
    
    
    654
    
    
    
    692
    
    
    
    6,467Equity in losses of affiliated companies, less dividends
    
    
    3,184
    
    
    
    2,248
    
    
    
    3,072
    
    
    
    28,710Deferred income taxes
    
    
    (5,445
    )
    
    
    758
    
    
    
    (2,846
    )
    
    
    (26,598
    )Provision for pension and severance cost, less payments
    
    
    3,812
    
    
    
    3,579
    
    
    
    2,463
    
    
    
    23,019Loss on sale and disposal of fixed assets
    
    
    4,519
    
    
    
    3,454
    
    
    
    40
    
    
    
    374Impairment of long-lived assets
    
    
    
    
    
    
    
    
    
    
    4,460
    
    
    
    41,682Write-down of available-for-sale securities and sundry
investments
    
    
    1,369
    
    
    
    245
    
    
    
    51
    
    
    
    477(Gains) losses on sale of available-for-sale securities and
sundry investments
    
    
    20
    
    
    
    (37
    )
    
    
    (2,309
    )
    
    
    (21,579
    )Gain on sale of subsidiaries stock
    
    
    (768
    )
    
    
    
    
    
    
    
    
    
    
    Stock-based compensation expenses
    
    
    149
    
    
    
    305
    
    
    
    270
    
    
    
    2,523Decrease (increase) in trade notes and accounts receivable
    
    
    8,481
    
    
    
    (10,186
    )
    
    
    (12,322
    )
    
    
    (115,159
    )Decrease (increase) in inventories
    
    
    838
    
    
    
    (20,707
    )
    
    
    6,317
    
    
    
    59,037Increase in prepaid expenses and other current assets
    
    
    (1,122
    )
    
    
    (12,413
    )
    
    
    (5,051
    )
    
    
    (47,206
    )Increase in trade payables
    
    
    13,221
    
    
    
    18,989
    
    
    
    4,405
    
    
    
    41,168Increase (decrease) in accrued taxes on income
    
    
    5,450
    
    
    
    3,782
    
    
    
    (4,473
    )
    
    
    (41,804
    )Increase (decrease) in other accrued liabilities
    
    
    8,172
    
    
    
    7,654
    
    
    
    (5,898
    )
    
    
    (55,121
    )Other
    
    
    (2,530
    )
    
    
    779
    
    
    
    (7,126
    )
    
    
    (66,598
    )Net cash provided by operating activities
    
    
    91,509
    
    
    
    60,378
    
    
    
    19,946
    
    
    
    186,411Investing activities:Payment for purchase of fixed assets
    
    
    (40,493
    )
    
    
    (57,978
    )
    
    
    (63,866
    )
    
    
    (596,879
    )Payment for purchase of investment securities
    
    
    (1,543
    )
    
    
    (595
    )
    
    
    (510
    )
    
    
    (4,766
    )Payment for purchase of available-for-sale securities
    
    
    (10
    )
    
    
    (53
    )
    
    
    
    
    
    
    Payment for purchase of a subsidiary, net of cash acquired
    
    
    
    
    
    
    
    
    
    
    (34,015
    )
    
    
    (317,897
    )Payment for other assets
    
    
    (568
    )
    
    
    (953
    )
    
    
    (1,252
    )
    
    
    (11,701
    )Proceeds from sale of fixed assets
    
    
    2,982
    
    
    
    1,458
    
    
    
    2,184
    
    
    
    20,411Proceeds from sale of discontinued operations
    
    
    
    
    
    
    4,897
    
    
    
    
    
    
    
    Proceeds from sale of investment securities
    
    
    103
    
    
    
    53
    
    
    
    12
    
    
    
    112Proceeds from sale of available-for-sale securities
    
    
    3,493
    
    
    
    156
    
    
    
    3,091
    
    
    
    28,888Other
    
    
    808
    
    
    
    261
    
    
    
    840
    
    
    
    7,851Net cash used in investing activities
    
    
    (35,228
    )
    
    
    (52,754
    )
    
    
    (93,516
    )
    
    
    (873,981
    )Financing activities:Proceeds from issuance of convertible bonds
(net of issuance cost ¥1,586 million)
    
    
    
    
    
    
    60,514
    
    
    
    
    
    
    
    Payment of long-term debt
    
    
    (4,914
    )
    
    
    (934
    )
    
    
    (6,246
    )
    
    
    (58,374
    )Increase (decrease) in short-term borrowings
    
    
    (16,214
    )
    
    
    (3,509
    )
    
    
    9,025
    
    
    
    84,346Purchase of treasury stock (Note 12)
    
    
    (11,566
    )
    
    
    (14
    )
    
    
    (1,979
    )
    
    
    (18,495
    )Proceeds from sale of treasury stock
    
    
    714
    
    
    
    2
    
    
    
    12
    
    
    
    112Dividends paid
    
    
    (2,688
    )
    
    
    (3,947
    )
    
    
    (4,386
    )
    
    
    (40,991
    )Dividends paid to minority interests
    
    
    (12
    )
    
    
    (285
    )
    
    
    (445
    )
    
    
    (4,159
    )Net cash provided by (used in) financing activities
    
    
    (34,680
    )
    
    
    51,827
    
    
    
    (4,019
    )
    
    
    (37,561
    )Effect of exchange rate changes on cash and cash equivalents
    
    
    (6,234
    )
    
    
    (9,512
    )
    
    
    1,851
    
    
    
    17,299Net increase (decrease) in cash and cash equivalents
    
    
    15,367
    
    
    
    49,939
    
    
    
    (75,738
    )
    
    
    (707,832
    )Cash and cash equivalents, beginning of year
    
    
    127,113
    
    
    
    142,480
    
    
    
    192,419
    
    
    
    1,798,309Cash and cash equivalents, end of year
    
    ¥
    142,480
    
    
    ¥
    192,419
    
    
    ¥
    116,681
    
    
    $
    1,090,477
  F-7




---



##### Table of Contents



Notes to Consolidated Financial Statements
 1. Basis of presentation and significant accounting policies:
 1) Basis of Presentation
           2) Summary of Significant Accounting Policies
       F-8




---



##### Table of Contents



F-9




---



##### Table of Contents



Buildings
    15-65 yearsMachinery and equipment
    2-10 years
                   F-10




---



##### Table of Contents



F-11




---



##### Table of Contents



2. Supplemental cash flow information:
  Thousands ofMillions of Yen
    
    
    U.S. Dollars2003
    
    
    2004
    
    
    2005
    
    
    2005Cash payment for interest
    
    ¥
    2,654
    
    
    ¥
    2,458
    
    
    ¥
    2,038
    
    
    $
    19,047Cash payment for income taxes
    
    
    9,047
    
    
    
    14,260
    
    
    
    17,195
    
    
    
    160,701Noncash investing activities:Acquisition of a subsidiary:Fair value of assets, net of cash acquired
    
    
    
    
    
    
    
    
    
    
    60,736
    
    
    
    567,626Liability assumed including capital lease obligation of
¥12,882 million ($120,393 thousand)
    
    
    
    
    
    
    
    
    
    
    (26,721
    )
    
    
    (249,729
    )Payment for acquisition of a subsidiary, net of cash acquired
    
    
    
    
    
    
    
    
    
    
    34,015
    
    
    
    317,897Sales of discontinued operations:Transferred assets
    
    
    
    
    
    
    14,932
    
    
    
    
    
    
    
    Transferred liabilities
    
    
    
    
    
    
    (11,823
    )
    
    
    
    
    
    
    Foreign currency translation adjustments
    
    
    
    
    
    
    (37
    )
    
    
    
    
    
    
    Gain on sales
    
    
    
    
    
    
    1,825
    
    
    
    
    
    
    
    Cash receivednet
    
    
    
    
    
    
    4,897
    
    
    
    
    
    
    
    
 F-12




---



##### Table of Contents



3. Acquisition:
     Millions of YenCurrent assets
    
    ¥
    15,390Property, plant and equipment
    
    
    37,426Acquired intangible asset of patent
    
    
    6,937Other assets
    
    
    2,065Current liabilities
    
    
    (17,420
    )Long-term liabilities
    
    
    (9,301
    )Net assets acquired
    
    ¥
    35,097
  UnauditedMillions of Yen2004
    
    
    2005Revenues
    
    ¥
    752,858
    
    
    ¥
    754,161Net income (loss)
    
    
    17,332
    
    
    
    (19,002
    )
 Yen2004
    
    
    2005Net income (loss) per share:Basic
    
    ¥
    98.80
    
    
    ¥
    (108.34
    )Diluted
    
    
    98.02
    
    
    
    (108.34
    )
 F-13




---



##### Table of Contents



4. Discontinued operations:
     Millions of Yen2003
    
    
    2004Revenues
    
    ¥
    35,051
    
    
    ¥
    16,664Cost and expenses
    
    ¥
    34,500
    
    
    ¥
    16,324Income before income taxes
    
    ¥
    551
    
    
    ¥
    340Gain on sales of discontinued operations
    
    
    
    
    
    
    1,825Income taxes (benefit)
    
    
    415
    
    
    
    (2,310
    )Income from discontinued operations
    
    ¥
    136
    
    
    ¥
    4,475
 F-14




---



##### Table of Contents



5. Available-for-sale securities and sundry investments:
  Millions of Yen2004
    
    
    2005Gross
    
    
    Gross
    
    
    
    
    
    
    
    
    
    
    Gross
    
    
    GrossUnrealized
    
    
    Unrealized
    
    
    
    
    
    
    
    
    
    
    Unrealized
    
    
    UnrealizedHolding
    
    
    Holding
    
    
    Aggregate
    
    
    
    
    
    
    Holding
    
    
    Holding
    
    
    AggregateCost
    
    
    Gains
    
    
    Losses
    
    
    Fair Value
    
    
    Cost
    
    
    Gains
    
    
    Losses
    
    
    Fair ValueMarketable equity securities:Non-current
    
    ¥
    6,520
    
    
    ¥
    17,890
    
    
    ¥
    1
    
    
    ¥
    24,409
    
    
    ¥
    5,734
    
    
    ¥
    16,438
    
    
    ¥
    2
    
    
    ¥
    22,170Marketable debt securities:Non-current
    
    
    106
    
    
    
    1
    
    
    
    
    
    
    
    107
    
    
    
    94
    
    
    
    4
    
    
    
    
    
    
    
    98Total
    
    ¥
    6,626
    
    
    ¥
    17,891
    
    
    ¥
    1
    
    
    ¥
    24,516
    
    
    ¥
    5,828
    
    
    ¥
    16,442
    
    
    ¥
    2
    
    
    ¥
    22,268Thousands of U.S. Dollars2005Gross
    
    
    GrossUnrealized
    
    
    UnrealizedHolding
    
    
    Holding
    
    
    AggregateCost
    
    
    Gains
    
    
    Losses
    
    
    Fair ValueMarketable equity securities:Non-current
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    53,589
    
    
    $
    153,626
    
    
    $
    19
    
    
    $
    207,196Marketable debt securities:Non-current
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    878
    
    
    
    38
    
    
    
    
    
    
    
    916Total
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    54,467
    
    
    $
    153,664
    
    
    $
    19
    
    
    $
    208,112
  Millions of Yen
    
    
    Thousands of U.S. DollarsLess than 12 Months
    
    
    Less than 12 MonthsFair
    
    
    Unrealized
    
    
    Fair
    
    
    UnrealizedValue
    
    
    Losses
    
    
    Value
    
    
    LossesMarketable equity securities
    
    ¥
    16
    
    
    ¥
    2
    
    
    $
    150
    
    
    $
    19
  F-15




---



##### Table of Contents



6. Inventories:
  Thousands ofMillions of Yen
    
    
    U.S. Dollars2004
    
    
    2005
    
    
    2005Finished products
    
    ¥
    51,360
    
    
    ¥
    52,807
    
    
    $
    493,523Work in process
    
    
    27,956
    
    
    
    26,330
    
    
    
    246,075Materials and supplies
    
    
    28,490
    
    
    
    29,878
    
    
    
    279,233Total
    
    ¥
    107,806
    
    
    ¥
    109,015
    
    
    $
    1,018,831
 7. Investments in and advances to affiliated companies:
     F-16




---



##### Table of Contents



Thousands ofMillions of Yen
    
    
    U.S. Dollars2004
    
    
    2005
    
    
    2005Current assets
    
    
    
    
    
    ¥
    10,619
    
    
    ¥
    8,427
    
    
    $
    78,757Property, plant and equipment
    
    
    
    
    
    
    28,978
    
    
    
    25,326
    
    
    
    236,692Other assets
    
    
    
    
    
    
    393
    
    
    
    403
    
    
    
    3,766Total assets
    
    
    
    
    
    ¥
    39,990
    
    
    ¥
    34,156
    
    
    $
    319,215Current liabilities
    
    
    
    
    
    ¥
    2,822
    
    
    ¥
    5,116
    
    
    $
    47,813Long-term liabilities
    
    
    
    
    
    
    27,110
    
    
    
    24,736
    
    
    
    231,178Shareholders equity
    
    
    
    
    10,058
    
    
    
    4,304
    
    
    
    40,224Total liabilities and shareholders equity
    
    
    
    
    
    ¥
    39,990
    
    
    ¥
    34,156
    
    
    $
    319,215Thousands ofMillions of Yen
    
    
    U.S. DollarsYear ended March 31
    
    2003
    
    
    2004
    
    
    2005
    
    
    2005Net sales
    
    ¥
    7,845
    
    
    ¥
    8,408
    
    
    ¥
    9,229
    
    
    $
    86,252Gross profit (loss)
    
    
    808
    
    
    
    1,004
    
    
    
    (1,932
    )
    
    
    (18,056
    )Net loss
    
    
    6,802
    
    
    
    5,023
    
    
    
    5,801
    
    
    
    54,215
 8. Intangible assets:
   Thousands ofMillions of Yen
    
    
    U.S. Dollars2004
    
    
    2005
    
    
    2005Gross
    
    
    
    
    
    
    Gross
    
    
    
    
    
    
    GrossCarrying
    
    
    Accumulated
    
    
    Carrying
    
    
    Accumulated
    
    
    Carrying
    
    
    AccumulatedAmount
    
    
    Amortization
    
    
    Amount
    
    
    Amortization
    
    
    Amount
    
    
    AmortizationSoftware
    
    ¥
    31,161
    
    
    ¥
    (15,412
    )
    
    ¥
    34,281
    
    
    ¥
    (19,595
    )
    
    $
    320,383
    
    
    $
    (183,131
    )Patents
    
    
    22,798
    
    
    
    (21,426
    )
    
    
    28,107
    
    
    
    (20,538
    )
    
    
    262,682
    
    
    
    (191,944
    )Other
    
    
    2,693
    
    
    
    (848
    )
    
    
    2,737
    
    
    
    (940
    )
    
    
    25,580
    
    
    
    (8,785
    )Total
    
    ¥
    56,652
    
    
    ¥
    (37,686
    )
    
    ¥
    65,125
    
    
    ¥
    (41,073
    )
    
    $
    608,645
    
    
    $
    (383,860
    )
  Thousands ofYear ending March 31
    
    Millions of Yen
    
    
    U.S. Dollars2006
    
    ¥
    6,811
    
    
    $
    63,6542007
    
    
    5,929
    
    
    
    55,4112008
    
    
    4,192
    
    
    
    39,1782009
    
    
    3,059
    
    
    
    28,5892010
    
    
    2,346
    
    
    
    21,925
  F-17




---



##### Table of Contents



9. Short-term borrowings and long-term debt:
  Thousands ofMillions of Yen
    
    
    U.S. Dollars2004
    
    
    2005
    
    
    2005Bank loans:Weighted-average interest rate 1.74% at March 31, 2004
and 1.25% at March 31, 2005:Uncollateralized
    
    ¥
    23,327
    
    
    ¥
    33,152
    
    
    $
    309,832Long-term debt at March 31, 2004 and 2005 comprises the following:Thousands ofMillions of Yen
    
    
    U.S. Dollars2004
    
    
    2005
    
    
    2005Loans, principally from banks, maturing serially through 2013
interest ranging from 3.06% to 3.90% at March 31, 2004 and from 2.90%
to 3.06% at March 31, 2005:Collateralized
    
    ¥
    2,804
    
    
    ¥
    1,960
    
    
    $
    18,318Uncollateralized
    
    
    3,680
    
    
    
    50
    
    
    
    4672.35% Uncollateralized bonds due 2005
    
    
    15,000
    
    
    
    15,000
    
    
    
    140,1872.80% Uncollateralized bonds due 2008
    
    
    10,000
    
    
    
    10,000
    
    
    
    93,458Zero coupon convertible bonds due 2011, including unamortized issue premium,
¥1,779 million ($16,626 thousand) (effective annual rate 0.5%)
    
    
    62,079
    
    
    
    61,779
    
    
    
    577,374Long-term capital lease obligations, 1.25% to 3.26% at March 31, 2005,
due principally to 2012
    
    
    
    
    
    
    11,129
    
    
    
    104,009Industrial development U.S. dollar revenue bonds due 2005 with fluctuating
interest rates (1.29% at March 31, 2004 and 1.70% at March 31, 2005),
subject to maximum rate of 15% in 2004 and 2005 and other
    
    
    638
    
    
    
    577
    
    
    
    5,393Total
    
    
    94,201
    
    
    
    100,495
    
    
    
    939,206LessPortion due within one year
    
    
    4,510
    
    
    
    19,276
    
    
    
    180,150Total
    
    ¥
    89,691
    
    
    ¥
    81,219
    
    
    $
    759,056
  F-18




---



##### Table of Contents



Thousands ofYear ending March 31
    
    Millions of Yen
    
    
    U.S. Dollars2006
    
    ¥
    19,276
    
    
    $
    180,1502007
    
    
    3,338
    
    
    
    31,1962008
    
    
    2,649
    
    
    
    24,7572009
    
    
    10,740
    
    
    
    100,3742010
    
    
    716
    
    
    
    6,6922011 and thereafter
    
    
    63,776
    
    
    
    596,037Total
    
    ¥
    100,495
    
    
    $
    939,206
   F-19




---



##### Table of Contents



10. Pension plans and accrued severance cost:
        F-20




---



##### Table of Contents



Thousands ofMillions of Yen
    
    
    U.S. Dollars2003
    
    
    2004
    
    
    2005
    
    
    2005Non-
    
    
    
    
    
    
    Non-
    
    
    
    
    
    
    Non-
    
    
    
    
    
    
    Non-contributory
    
    
    Contributory
    
    
    contributory
    
    
    Contributory
    
    
    contributory
    
    
    Contributory
    
    
    contributory
    
    
    ContributoryPlans
    
    
    Plan
    
    
    Plans
    
    
    Plan
    
    
    Plans
    
    
    Plan
    
    
    Plans
    
    
    PlanService cost
    
    ¥
    2,884
    
    
    ¥
    2,400
    
    
    ¥
    2,892
    
    
    ¥
    2,860
    
    
    ¥
    2,795
    
    
    ¥
    1,745
    
    
    $
    26,121
    
    
    $
    16,308Interest cost
    
    
    1,695
    
    
    
    3,195
    
    
    
    1,518
    
    
    
    3,301
    
    
    
    1,712
    
    
    
    3,512
    
    
    
    16,000
    
    
    
    32,823Expected return on assets
    
    
    (1,606
    )
    
    
    (1,941
    )
    
    
    (1,386
    )
    
    
    (1,741
    )
    
    
    (1,692
    )
    
    
    (2,037
    )
    
    
    (15,813
    )
    
    
    (19,037
    )Amortization of unrecognized
net actuarial loss
    
    
    1,021
    
    
    
    1,853
    
    
    
    1,632
    
    
    
    2,428
    
    
    
    1,185
    
    
    
    2,040
    
    
    
    11,075
    
    
    
    19,065Amortization of unrecognized
net assets at date of application
    
    
    (163
    )
    
    
    (344
    )
    
    
    (160
    )
    
    
    (344
    )
    
    
    (160
    )
    
    
    (344
    )
    
    
    (1,495
    )
    
    
    (3,215
    )Amortization of unrecognized
prior service gain
    
    
    (535
    )
    
    
    (364
    )
    
    
    (535
    )
    
    
    (364
    )
    
    
    (535
    )
    
    
    (364
    )
    
    
    (5,000
    )
    
    
    (3,402
    )Settlement loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    51,893
    
    
    
    
    
    
    
    484,981Derecognition of previously
accrued salary progression
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,402
    )
    
    
    
    
    
    
    (22,448
    )Net periodic benefit cost
    
    ¥
    3,296
    
    
    ¥
    4,799
    
    
    ¥
    3,961
    
    
    ¥
    6,140
    
    
    ¥
    3,305
    
    
    ¥
    54,043
    
    
    $
    30,888
    
    
    $
    505,075Actuarial assumptions used to
determine net periodic
pension cost:Discount rate
    
    
    2.7
    %
    
    
    4.3
    %
    
    
    2.2
    %
    
    
    4.1
    %
    
    
    2.5
    %
    
    
    4.1
    %Rate of salary increase
    
    
    
    *
    
    
    2.7
    %
    
    
    
    *
    
    
    2.6
    %
    
    
    
    *
    
    
    2.6
    %Long-term rate of return on plan assets
    
    
    3.9
    %
    
    
    3.9
    %
    
    
    3.9
    %
    
    
    3.9
    %
    
    
    3.9
    %
    
    
    3.9
    %
 *
    
    Non-contributory plans are not pay-related.  F-21




---



##### Table of Contents



Thousands ofMillions of Yen
    
    
    U.S. Dollars2004
    
    
    2005
    
    
    2005Non-
    
    
    
    
    
    
    Non-
    
    
    
    
    
    
    Non-contributory
    
    
    Contributory
    
    
    contributory
    
    
    Contributory
    
    
    contributory
    
    
    ContributoryPlans
    
    
    Plan
    
    
    Plans
    
    
    Plan
    
    
    Plans
    
    
    PlanChange in benefit obligation:Benefit obligation at beginning of year
    
    ¥
    69,446
    
    
    ¥
    80,512
    
    
    ¥
    68,465
    
    
    ¥
    85,660
    
    
    $
    639,860
    
    
    $
    800,561Service cost
    
    
    2,892
    
    
    
    2,860
    
    
    
    2,795
    
    
    
    1,745
    
    
    
    26,121
    
    
    
    16,308Interest cost
    
    
    1,518
    
    
    
    3,301
    
    
    
    1,712
    
    
    
    3,512
    
    
    
    16,000
    
    
    
    32,823Plan participants contribution
    
    
    
    
    
    
    659
    
    
    
    
    
    
    
    39
    
    
    
    
    
    
    
    364Actuarial loss (gain)
    
    
    (3,004
    )
    
    
    (543
    )
    
    
    (922
    )
    
    
    37,013
    
    
    
    (8,617
    )
    
    
    345,916Lump-sum cash payments
    
    
    (1,429
    )
    
    
    
    
    
    
    (1,878
    )
    
    
    
    
    
    
    (17,551
    )
    
    
    Benefits paid
    
    
    (507
    )
    
    
    (1,129
    )
    
    
    (623
    )
    
    
    (1,287
    )
    
    
    (5,822
    )
    
    
    (12,028
    )Transfer of substitutional portion
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (92,219
    )
    
    
    
    
    
    
    (861,860
    )Plan amendment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (9,602
    )
    
    
    
    
    
    
    (89,738
    )Decrease due to sales of discontinued
operations
    
    
    (451
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Benefit obligation at end of year
    
    ¥
    68,465
    
    
    ¥
    85,660
    
    
    ¥
    69,549
    
    
    ¥
    24,861
    
    
    $
    649,991
    
    
    $
    232,346Change in plan assets:Fair value of plan assets at beginning of
year
    
    ¥
    35,923
    
    
    ¥
    44,639
    
    
    ¥
    43,375
    
    
    ¥
    52,220
    
    
    $
    405,374
    
    
    $
    488,037Actual return on plan assets
    
    
    5,739
    
    
    
    5,670
    
    
    
    2,016
    
    
    
    688
    
    
    
    18,841
    
    
    
    6,430Employer contribution
    
    
    4,040
    
    
    
    2,381
    
    
    
    4,074
    
    
    
    1,821
    
    
    
    38,074
    
    
    
    17,019Plan participants contribution
    
    
    
    
    
    
    659
    
    
    
    
    
    
    
    39
    
    
    
    
    
    
    
    364Lump-sum cash payments
    
    
    (1,429
    )
    
    
    
    
    
    
    (1,878
    )
    
    
    
    
    
    
    (17,551
    )
    
    
    Benefits paid
    
    
    (507
    )
    
    
    (1,129
    )
    
    
    (623
    )
    
    
    (1,287
    )
    
    
    (5,822
    )
    
    
    (12,028
    )Transfer of substitutional portion
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (41,120
    )
    
    
    
    
    
    
    (384,299
    )Decrease due to sales of discontinued
operations
    
    
    (391
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Fair value of plan assets at end of year
    
    ¥
    43,375
    
    
    ¥
    52,220
    
    
    ¥
    46,964
    
    
    ¥
    12,361
    
    
    $
    438,916
    
    
    $
    115,523Funded status
    
    ¥
    (25,090
    )
    
    ¥
    (33,440
    )
    
    ¥
    (22,585
    )
    
    ¥
    (12,500
    )
    
    $
    (211,075
    )
    
    $
    (116,823
    )Unrecognized actuarial loss
    
    
    27,476
    
    
    
    35,483
    
    
    
    25,045
    
    
    
    19,912
    
    
    
    234,066
    
    
    
    186,094Unrecognized net assets at the date of
application
    
    
    (486
    )
    
    
    (953
    )
    
    
    (326
    )
    
    
    (609
    )
    
    
    (3,047
    )
    
    
    (5,691
    )Unrecognized prior service gain
    
    
    (7,700
    )
    
    
    (4,209
    )
    
    
    (7,165
    )
    
    
    (13,447
    )
    
    
    (66,963
    )
    
    
    (125,673
    )Net amount recognized
    
    ¥
    (5,800
    )
    
    ¥
    (3,119
    )
    
    ¥
    (5,031
    )
    
    ¥
    (6,644
    )
    
    $
    (47,019
    )
    
    $
    (62,093
    )Amounts recognized in the statement of financial
position consist of:Accrued benefit liabilities
    
    ¥
    (23,017
    )
    
    ¥
    (27,302
    )
    
    ¥
    (20,589
    )
    
    ¥
    (12,170
    )
    
    $
    (192,421
    )
    
    $
    (113,738
    )Accumulated other comprehensive income
    
    
    17,217
    
    
    
    24,183
    
    
    
    15,558
    
    
    
    5,526
    
    
    
    145,402
    
    
    
    51,645Net amount recognized
    
    ¥
    (5,800
    )
    
    ¥
    (3,119
    )
    
    ¥
    (5,031
    )
    
    ¥
    (6,644
    )
    
    $
    (47,019
    )
    
    $
    (62,093
    )Accumulated benefit obligation at end of year
    
    ¥
    66,392
    
    
    ¥
    79,522
    
    
    ¥
    67,543
    
    
    ¥
    24,531
    
    
    $
    631,243
    
    
    $
    229,261Actuarial assumptions used to determine benefit
obligations:Discount rate
    
    
    2.5
    %
    
    
    4.1
    %
    
    
    2.5
    %
    
    
    2.5
    %Rate of salary increase
    
    
    
    *
    
    
    2.6
    %
    
    
    
    *
    
    
    
    **
 *
    
    Non-contributory plans are not pay-related.**
    
    Corporate portion of contributory plan are not pay-related.  F-22




---



##### Table of Contents



Thousands ofMillions of Yen
    
    
    U.S. Dollars2003
    
    
    2004
    
    
    2005
    
    
    2005Service cost
    
    ¥
    566
    
    
    ¥
    542
    
    
    ¥
    565
    
    
    $
    5,280Interest cost
    
    
    632
    
    
    
    639
    
    
    
    693
    
    
    
    6,477Expected return on assets
    
    
    (166
    )
    
    
    (442
    )
    
    
    (580
    )
    
    
    (5,420
    )Amortization of unrecognized net actuarial
loss (gain)
    
    
    (9
    )
    
    
    11
    
    
    
    52
    
    
    
    486Amortization of unrecognized prior service cost
    
    
    17
    
    
    
    16
    
    
    
    4
    
    
    
    37Curtailment/settlement loss (gain)
    
    
    (168
    )
    
    
    (18
    )
    
    
    26
    
    
    
    243Net periodic benefit cost
    
    ¥
    872
    
    
    ¥
    748
    
    
    ¥
    760
    
    
    $
    7,103Actuarial assumptions used to determine net
periodic pension cost:Discount rate
    
    
    6.5
    %
    
    
    6.1
    %
    
    
    5.6
    %Rate of salary increase
    
    
    4.3
    %
    
    
    3.9
    %
    
    
    4.0
    %Long-term rate of return on plan assets
    
    
    7.5
    %
    
    
    7.6
    %
    
    
    7.0
    %
  F-23




---



##### Table of Contents



Thousands ofMillions of Yen
    
    
    U.S. Dollars2004
    
    
    2005
    
    
    2005Change in benefit obligation:Benefit obligation at beginning of year
    
    ¥
    10,732
    
    
    ¥
    12,574
    
    
    $
    117,514Service cost
    
    
    542
    
    
    
    565
    
    
    
    5,280Interest cost
    
    
    639
    
    
    
    693
    
    
    
    6,477Plan participants contribution
    
    
    103
    
    
    
    110
    
    
    
    1,028Actuarial loss
    
    
    1,496
    
    
    
    781
    
    
    
    7,299Benefits paid
    
    
    (235
    )
    
    
    (228
    )
    
    
    (2,131
    )Curtailment
    
    
    (80
    )
    
    
    (1,412
    )
    
    
    (13,196
    )Translation adjustments
    
    
    (623
    )
    
    
    512
    
    
    
    4,785Benefit obligation at end of year
    
    ¥
    12,574
    
    
    ¥
    13,595
    
    
    $
    127,056Change in plan assets:Fair value of plan assets at beginning of year
    
    ¥
    6,248
    
    
    ¥
    7,656
    
    
    $
    71,551Actual return on plan assets
    
    
    1,249
    
    
    
    499
    
    
    
    4,664Employer contribution
    
    
    703
    
    
    
    990
    
    
    
    9,252Plan participants contribution
    
    
    103
    
    
    
    110
    
    
    
    1,028Benefits paid
    
    
    (232
    )
    
    
    (228
    )
    
    
    (2,131
    )Translation adjustments
    
    
    (415
    )
    
    
    303
    
    
    
    2,832Fair value of plan assets at end of year
    
    ¥
    7,656
    
    
    ¥
    9,330
    
    
    $
    87,196Funded status
    
    ¥
    (4,918
    )
    
    ¥
    (4,265
    )
    
    $
    (39,860
    )Unrecognized actuarial loss
    
    
    2,317
    
    
    
    1,814
    
    
    
    16,954Unrecognized prior service cost
    
    
    62
    
    
    
    58
    
    
    
    542Net amount recognized
    
    ¥
    (2,539
    )
    
    ¥
    (2,393
    )
    
    $
    (22,364
    )Amounts recognized in the statement of financial position
consists of:Accrued benefit liabilities
    
    ¥
    (3,096
    )
    
    ¥
    (3,263
    )
    
    $
    (30,495
    )Accumulated other comprehensive income
    
    
    557
    
    
    
    870
    
    
    
    8,131Net amount recognized
    
    ¥
    (2,539
    )
    
    ¥
    (2,393
    )
    
    $
    (22,364
    )Accumulated benefit obligation at end of year
    
    ¥
    10,556
    
    
    ¥
    12,344
    
    
    $
    115,364Actuarial assumptions used to determine benefit obligations:Discount rate
    
    
    5.6%
    
    
    
    5.4%Rate of salary increase
    
    
    4.0%
    
    
    
    4.0%
  Thousands ofMillions of Yen
    
    
    U.S. Dollars2004
    
    
    2005
    
    
    2005Accumulated benefit obligations
    
    ¥
    10,430
    
    
    ¥
    11,474
    
    
    $
    107,234Fair value of plan assets
    
    
    7,483
    
    
    
    8,369
    
    
    
    78,215
  F-24




---



##### Table of Contents



Asset Category
    
    2004
    
    
    2005Equity securities
    
    
    46
    %
    
    
    53
    %Debt securities
    
    
    30
    
    
    
    34Real estate and other
    
    
    24
    
    
    
    13Total
    
    
    100
    %
    
    
    100
    %
      Thousands ofYear ending March 31
    
    Millions of Yen
    
    
    U.S. Dollars2006
    
    ¥
    2,314
    
    
    $
    21,6262007
    
    
    2,905
    
    
    
    27,1502008
    
    
    3,567
    
    
    
    33,3362009
    
    
    4,028
    
    
    
    37,6452010
    
    
    4,499
    
    
    
    42,047Years 20112015
    
    
    26,888
    
    
    
    251,290
 11. Income taxes:
     F-25




---



##### Table of Contents



Thousands ofMillions of Yen
    
    
    U.S. Dollars2003
    
    
    2004
    
    
    2005
    
    
    2005Computed tax expense at normal statutory tax rate
    
    ¥
    11,793
    
    
    ¥
    17,576
    
    
    ¥
    (77
    )
    
    $
    (720
    )Increase (decrease) resulting from:Loss operations
    
    
    992
    
    
    
    1,294
    
    
    
    6,137
    
    
    
    57,355Realization of tax benefit of operating loss carryforwards
    
    
    (1,056
    )
    
    
    (395
    )
    
    
    (671
    )
    
    
    (6,271
    )Expenses not deductible for tax purpose:Domestic
    
    
    269
    
    
    
    280
    
    
    
    251
    
    
    
    2,346Foreign
    
    
    439
    
    
    
    149
    
    
    
    325
    
    
    
    3,037Difference in foreign and Japanese tax rates
    
    
    (1,595
    )
    
    
    (1,608
    )
    
    
    (1,848
    )
    
    
    (17,271
    )Effect of tax rate change on deferred taxes
    
    
    835
    
    
    
    447
    
    
    
    
    
    
    
    Tax benefit for discontinued operations
    
    
    
    
    
    
    3,025
    
    
    
    
    
    
    
    Tax credit for research and development expenses
    
    
    (530
    )
    
    
    (898
    )
    
    
    (232
    )
    
    
    (2,168
    )Other
    
    
    (2,115
    )
    
    
    (1,283
    )
    
    
    957
    
    
    
    8,944Provision for income taxes
    
    ¥
    9,032
    
    
    ¥
    18,587
    
    
    ¥
    4,842
    
    
    $
    45,252Total income taxes provided for the years ended March 31, 2003, 2004 and 2005 are as follows:Thousands ofMillions of Yen
    
    
    U.S. Dollars2003
    
    
    2004
    
    
    2005
    
    
    2005Provision for income taxes on income from continuing operations
    
    ¥
    9,032
    
    
    ¥
    18,587
    
    
    ¥
    4,842
    
    
    $
    45,252Provision for income taxes (benefit) on income from discontinued
operations
    
    
    415
    
    
    
    (2,310
    )
    
    
    
    
    
    
    Shareholders equitydirectly charged (credited):Minimum pension liability adjustments
    
    
    (8,927
    )
    
    
    6,953
    
    
    
    8,225
    
    
    
    76,869Net unrealized gains on securities
    
    
    (899
    )
    
    
    4,009
    
    
    
    (593
    )
    
    
    (5,542
    )Total
    
    ¥
    (379
    )
    
    ¥
    27,239
    
    
    ¥
    12,474
    
    
    $
    116,579Income from continuing operations before income taxes and income tax expense comprised the following components:Thousands ofMillions of Yen
    
    
    U.S. Dollars2003
    
    
    2004
    
    
    2005
    
    
    2005Income (loss)
from continuing
operations before
income taxes:Domestic
    
    ¥
    10,137
    
    
    ¥
    18,481
    
    
    ¥
    (8,656
    )
    
    $
    (80,897
    )Foreign
    
    
    17,942
    
    
    
    23,367
    
    
    
    8,469
    
    
    
    79,149Total
    
    ¥
    28,079
    
    
    ¥
    41,848
    
    
    ¥
    (187
    )
    
    $
    (1,748
    )Income taxesCurrent:Domestic
    
    ¥
    6,643
    
    
    ¥
    10,799
    
    
    ¥
    4,091
    
    
    $
    38,233Foreign
    
    
    7,834
    
    
    
    7,030
    
    
    
    3,597
    
    
    
    33,617Total
    
    ¥
    14,477
    
    
    ¥
    17,829
    
    
    ¥
    7,688
    
    
    $
    71,850Income taxesDeferred:Domestic
    
    ¥
    (3,296
    )
    
    ¥
    (385
    )
    
    ¥
    (1,576
    )
    
    $
    (14,729
    )Foreign
    
    
    (2,149
    )
    
    
    1,143
    
    
    
    (1,270
    )
    
    
    (11,869
    )Total
    
    ¥
    (5,445
    )
    
    ¥
    758
    
    
    ¥
    (2,846
    )
    
    $
    (26,598
    )
  F-26




---



##### Table of Contents



Thousands ofMillions of Yen
    
    
    U.S. Dollars2004
    
    
    2005
    
    
    2005Deferred
    
    
    Deferred
    
    
    Deferred
    
    
    Deferred
    
    
    Deferred
    
    
    DeferredTax
    
    
    Tax
    
    
    Tax
    
    
    Tax
    
    
    Tax
    
    
    TaxAssets
    
    
    Liabilities
    
    
    Assets
    
    
    Liabilities
    
    
    Assets
    
    
    LiabilitiesInventories
    
    ¥
    6,911
    
    
    
    
    
    
    ¥
    5,590
    
    
    
    
    
    
    $
    52,243
    
    
    
    Marketable equity securities
    
    
    2,971
    
    
    ¥
    5,017
    
    
    
    2,040
    
    
    ¥
    4,445
    
    
    
    19,066
    
    
    $
    41,542Allowance for notes and accounts receivable
    
    
    1,040
    
    
    
    
    
    
    
    824
    
    
    
    
    
    
    
    7,701
    
    
    
    Accrued expenses
    
    
    11,893
    
    
    
    
    
    
    
    16,316
    
    
    
    
    
    
    
    152,486
    
    
    
    Warranty reserve
    
    
    2,784
    
    
    
    
    
    
    
    1,863
    
    
    
    
    
    
    
    17,411
    
    
    
    Tax loss carryforwards
    
    
    9,297
    
    
    
    
    
    
    
    21,232
    
    
    
    
    
    
    
    198,430
    
    
    
    Pension and severance cost
    
    
    22,268
    
    
    
    
    
    
    
    15,116
    
    
    
    
    
    
    
    141,271
    
    
    
    Property
    
    
    1,840
    
    
    
    
    
    
    
    4,230
    
    
    
    
    
    
    
    39,533
    
    
    
    Depreciation
    
    
    1,907
    
    
    
    302
    
    
    
    3,029
    
    
    
    490
    
    
    
    28,308
    
    
    
    4,580Royalty receivable
    
    
    974
    
    
    
    
    
    
    
    539
    
    
    
    
    
    
    
    5,037
    
    
    
    Other
    
    
    10,268
    
    
    
    3,408
    
    
    
    6,539
    
    
    
    2,469
    
    
    
    61,112
    
    
    
    23,075Total
    
    
    72,153
    
    
    
    8,727
    
    
    
    77,318
    
    
    
    7,404
    
    
    
    722,598
    
    
    
    69,197Valuation allowance
    
    
    (11,591
    )
    
    
    
    
    
    
    (20,605
    )
    
    
    
    
    
    
    (192,570
    )
    
    
    Total
    
    ¥
    60,562
    
    
    ¥
    8,727
    
    
    ¥
    56,713
    
    
    ¥
    7,404
    
    
    $
    530,028
    
    
    $
    69,197
  Millions of YenBalance at
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Balance atBeginning
    
    
    
    
    
    
    
    
    
    
    Translation
    
    
    EndValuation Allowance
    
    of Period
    
    
    Addition*
    
    
    Deduction
    
    
    Adjustments
    
    
    of Period2003
    
    ¥
    18,299
    
    
    ¥
    5,741
    
    
    ¥
    (8,912
    )
    
    ¥
    164
    
    
    ¥
    15,2922004
    
    
    15,292
    
    
    
    1,956
    
    
    
    (5,469
    )
    
    
    (188
    )
    
    
    11,5912005
    
    
    11,591
    
    
    
    12,851
    
    
    
    (3,963
    )
    
    
    126
    
    
    
    20,605Thousands of U.S. DollarsBalance at
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Balance atBeginning
    
    
    
    
    
    
    
    
    
    
    Translation
    
    
    EndValuation Allowance
    
    of Period
    
    
    Addition*
    
    
    Deduction
    
    
    Adjustments
    
    
    of Period2005
    
    $
    108,327
    
    
    $
    120,103
    
    
    $
    (37,037
    )
    
    $
    1,177
    
    
    $
    192,570
 *
    
    Addition includes valuation allowance of ¥7,953 million ($74,327 thousand) recognized by PPD at the time of acquisition at September 30, 2004.    F-27




---



##### Table of Contents



Thousands ofYear ending March 31
    
    Millions of Yen
    
    
    U.S. Dollars2006
    
    ¥
    203
    
    
    $
    1,8972007
    
    
    536
    
    
    
    5,0092008
    
    
    593
    
    
    
    5,5422009
    
    
    155
    
    
    
    1,4492010
    
    
    6,630
    
    
    
    61,963Thereafter
    
    
    47,973
    
    
    
    448,346Total
    
    ¥
    56,090
    
    
    $
    524,206
   12. Shareholders equity:
 
        F-28




---



##### Table of Contents



13. Stock-based compensation plans:
    YenWeighted-Average
    
    
    Number ofWeighted-Average
    
    
    Grant Date
    
    
    SharesYear
    
    Plan
    
    Exercisable Period
    
    Exercise Price
    
    
    Share Price
    
    
    (Thousands)2001
    
    Stock option
    
    From July 1, 2002 to June 30, 2005
    
    ¥
    4,400
    
    
    ¥
    4,250
    
    
    
    1912002
    
    Stock option
    
    From July 1, 2003 to June 30, 2006
    
    
    3,791
    
    
    
    3,750
    
    
    
    1912003
    
    Stock option
    
    From July 1, 2004 to June 29, 2007
    
    
    2,477
    
    
    
    2,170
    
    
    
    5642004
    
    Stock option
    
    From July 1, 2005 to June 30, 2008
    
    
    2,951
    
    
    
    2,845
    
    
    
    3132005
    
    Stock option
    
    From July 3, 2006 to June 30, 2009
    
    
    2,944
    
    
    
    2,660
    
    
    
    316
 U.S. DollarsWeighted-AverageWeighted-Average
    
    
    Grant DateYear
    
    Plan
    
    Exercisable Period
    
    Exercise Price
    
    
    Share Price2005
    
    Stock option
    
    From July 3, 2006 to June 30, 2009
    
    $
    27.51
    
    
    $
    24.86
 F-29




---



##### Table of Contents



2003
    
    
    2004
    
    
    2005Risk-free interest rate
    
    
    0.24
    %
    
    
    0.34
    %
    
    
    0.50
    %Expected lives
    
    3.48 years
    
    3.48 years
    
    3.48 yearsExpected volatility
    
    
    52.81
    %
    
    
    48.13
    %
    
    
    40.02
    %Expected dividends
    
    
    0.69
    %
    
    
    0.88
    %
    
    
    0.93
    %
  Weighted-Average
    
    
    Weighted-Average ExerciseNumber of Shares
    
    
    Remaining Life
    
    
    Price per Share(Thousands)
    
    
    (Years)
    
    
    
    Yen
    
    
    U.S. DollarsOutstanding at March 31, 2002
    
    
    1,177
    
    
    
    2.5
    
    
    ¥
    3,798Granted
    
    
    564
    
    
    
    
    
    
    
    2,477Expired
    
    
    (98
    )
    
    
    
    
    
    
    2,188Outstanding at March 31, 2003
    
    
    1,643
    
    
    
    2.5
    
    
    ¥
    3,441Granted
    
    
    313
    
    
    
    
    
    
    
    2,951Expired
    
    
    (284
    )
    
    
    
    
    
    
    4,728Outstanding at March 31, 2004
    
    
    1,672
    
    
    
    2.4
    
    
    ¥
    3,131Granted
    
    
    316
    
    
    
    
    
    
    
    2,944
    
    
    $
    27.51Exercised
    
    
    (4
    )
    
    
    
    
    
    
    2,477
    
    
    
    23.15Expired
    
    
    (413
    )
    
    
    
    
    
    
    3,266
    
    
    
    30.52Outstanding at March 31, 2005
    
    
    1,571
    
    
    
    2.5
    
    
    ¥
    3,059
    
    
    $
    28.59Exercisable at March 31, 2004
    
    
    795
    
    
    
    
    
    
    ¥
    3,664Exercisable at March 31, 2005
    
    
    942
    
    
    
    
    
    
    ¥
    3,133
    
    
    $
    29.28
 F-30




---



##### Table of Contents



14. Other comprehensive income:
  Millions of YenForeign Currency
    
    
    Total AccumulatedMinimum Pension
    
    
    Net Unrealized
    
    
    Translation
    
    
    Other ComprehensiveLiability Adjustments
    
    
    Gains on Securities
    
    
    Adjustments
    
    
    Income (Loss)Balance at March 31, 2002
    
    ¥
    (20,487
    )
    
    ¥
    4,583
    
    
    ¥
    (8,832
    )
    
    ¥
    (24,736
    )Adjustments for the year
    
    
    (12,188
    )
    
    
    (1,235
    )
    
    
    (17,470
    )
    
    
    (30,893
    )Balance at March 31, 2003
    
    
    (32,675
    )
    
    
    3,348
    
    
    
    (26,302
    )
    
    
    (55,629
    )Adjustments for the year
    
    
    9,745
    
    
    
    5,755
    
    
    
    (21,700
    )
    
    
    (6,200
    )Balance at March 31, 2004
    
    
    (22,930
    )
    
    
    9,103
    
    
    
    (48,002
    )
    
    
    (61,829
    )Adjustments for the year
    
    
    11,744
    
    
    
    (853
    )
    
    
    3,269
    
    
    
    14,160Balance at March 31, 2005
    
    ¥
    (11,186
    )
    
    ¥
    8,250
    
    
    ¥
    (44,733
    )
    
    ¥
    (47,669
    )
 Thousands of U.S. DollarsForeign Currency
    
    
    Total AccumulatedMinimum Pension
    
    
    Net Unrealized
    
    
    Translation
    
    
    Other ComprehensiveLiability Adjustments
    
    
    Gains on Securities
    
    
    Adjustments
    
    
    Income (Loss)Balance at March 31, 2004
    
    $
    (214,299
    )
    
    $
    85,075
    
    
    $
    (448,617
    )
    
    $
    (577,841
    )Adjustments for the year
    
    
    109,757
    
    
    
    (7,972
    )
    
    
    30,551
    
    
    
    132,336Balance at March 31, 2005
    
    $
    (104,542
    )
    
    $
    77,103
    
    
    $
    (418,066
    )
    
    $
    (445,505
    )
 F-31




---



##### Table of Contents



Millions of YenBefore-Tax
    
    
    Tax (Expense)
    
    
    Minority
    
    
    Net-of-TaxAmount
    
    
    or Benefit
    
    
    Interest
    
    
    Amount2003:Minimum pension liability adjustments
    
    ¥
    (21,255
    )
    
    ¥
    8,927
    
    
    ¥
    140
    
    
    ¥
    (12,188
    )Net unrealized gains on securities:Unrealized holding losses arising during year
    
    
    (3,502
    )
    
    
    1,472
    
    
    
    7
    
    
    
    (2,023
    )LessReclassification adjustment for losses realized in net
income
    
    
    1,366
    
    
    
    (573
    )
    
    
    (5
    )
    
    
    788Net unrealized losses
    
    
    (2,136
    )
    
    
    899
    
    
    
    2
    
    
    
    (1,235
    )Foreign currency translation adjustments
    
    
    (18,178
    )
    
    
    
    
    
    
    708
    
    
    
    (17,470
    )Other comprehensive income (loss)
    
    ¥
    (41,569
    )
    
    ¥
    9,826
    
    
    ¥
    850
    
    
    ¥
    (30,893
    )2004:Minimum pension liability adjustments
    
    ¥
    16,803
    
    
    ¥
    (6,953
    )
    
    ¥
    (105
    )
    
    ¥
    9,745Net unrealized gains on securities:Unrealized holding gains arising during year
    
    
    9,790
    
    
    
    (4,013
    )
    
    
    (16
    )
    
    
    5,761LessReclassification adjustment for gains realized in net
income
    
    
    (10
    )
    
    
    4
    
    
    
    
    
    
    
    (6
    )Net unrealized gains
    
    
    9,780
    
    
    
    (4,009
    )
    
    
    (16
    )
    
    
    5,755Foreign currency translation adjustments:Foreign currency translation adjustments arising during year
    
    
    (23,010
    )
    
    
    
    
    
    
    912
    
    
    
    (22,098
    )LessReclassification adjustment for losses realized in net
income
    
    
    398
    
    
    
    
    
    
    
    
    
    
    
    398Net foreign currency translation adjustments
    
    
    (22,612
    )
    
    
    
    
    
    
    912
    
    
    
    (21,700
    )Other comprehensive income (loss)
    
    ¥
    3,971
    
    
    ¥
    (10,962
    )
    
    ¥
    791
    
    
    ¥
    (6,200
    )2005:Minimum pension liability adjustments
    
    ¥
    20,003
    
    
    ¥
    (8,225
    )
    
    ¥
    (34
    )
    
    ¥
    11,744Net unrealized gains on securities:Unrealized holding gains arising during year
    
    
    843
    
    
    
    (347
    )
    
    
    4
    
    
    
    500LessReclassification adjustment for gains realized in net
income
    
    
    (2,293
    )
    
    
    940
    
    
    
    
    
    
    
    (1,353
    )Net unrealized losses
    
    
    (1,450
    )
    
    
    593
    
    
    
    4
    
    
    
    (853
    )Foreign currency translation adjustments
    
    
    3,292
    
    
    
    
    
    
    
    (23
    )
    
    
    3,269Other comprehensive income (loss)
    
    ¥
    21,845
    
    
    ¥
    (7,632
    )
    
    ¥
    (53
    )
    
    ¥
    14,160
 Thousands of U.S. DollarsBefore-Tax
    
    
    Tax (Expense)
    
    
    Minority
    
    
    Net-of-TaxAmount
    
    
    or Benefit
    
    
    Interest
    
    
    Amount2005:Minimum pension liability adjustments
    
    $
    186,944
    
    
    $
    (76,869
    )
    
    $
    (318
    )
    
    $
    109,757Net unrealized gains on securities:Unrealized holding gains arising during year
    
    
    7,879
    
    
    
    (3,243
    )
    
    
    37
    
    
    
    4,673LessReclassification adjustment for gains realized in net
income
    
    
    (21,430
    )
    
    
    8,785
    
    
    
    
    
    
    
    (12,645
    )Net unrealized losses
    
    
    (13,551
    )
    
    
    5,542
    
    
    
    37
    
    
    
    (7,972
    )Foreign currency translation adjustments
    
    
    30,766
    
    
    
    
    
    
    
    (215
    )
    
    
    30,551Other comprehensive income (loss)
    
    $
    204,159
    
    
    $
    (71,327
    )
    
    $
    (496
    )
    
    $
    132,336
 F-32




---



##### Table of Contents



15. Supplemental information:
  Thousands ofMillions of Yen
    
    
    U.S. Dollars2003
    
    
    2004
    
    
    2005
    
    
    2005Research and development expenses charged
to cost and expenses
    
    ¥
    45,388
    
    
    ¥
    51,483
    
    
    ¥
    55,897
    
    
    $
    522,402Advertising costs charged to expense as incurred
    
    
    11,089
    
    
    
    12,813
    
    
    
    11,599
    
    
    
    108,402
  Thousands ofMillions of Yen
    
    
    U.S. Dollars2003
    
    
    2004
    
    
    2005
    
    
    2005Gain on sale of available-for-sale
securities and sundry investments
    
    
    
    
    
    ¥
    37
    
    
    ¥
    2,309
    
    
    $
    21,579Foreign exchange gain, net
    
    
    
    
    
    
    
    
    
    
    462
    
    
    
    4,318Dividend income
    
    ¥
    283
    
    
    
    326
    
    
    
    385
    
    
    
    3,598Other
    
    
    358
    
    
    
    141
    
    
    
    259
    
    
    
    2,421Total other income
    
    ¥
    641
    
    
    ¥
    504
    
    
    ¥
    3,415
    
    
    $
    31,916
  Thousands ofMillions of Yen
    
    
    U.S. Dollars2003
    
    
    2004
    
    
    2005
    
    
    2005Impairment losses of long-lived assets
    
    
    
    
    
    
    
    
    
    ¥
    4,460
    
    
    $
    41,682Write-down of available-for-sale
securities and sundry investments
    
    ¥
    1,369
    
    
    ¥
    245
    
    
    
    51
    
    
    
    477Foreign exchange loss, net
    
    
    2,045
    
    
    
    1,244
    
    
    
    
    
    
    
    Other
    
    
    20
    
    
    
    152
    
    
    
    1,827
    
    
    
    17,075Total other deductions
    
    ¥
    3,434
    
    
    ¥
    1,641
    
    
    ¥
    6,338
    
    
    $
    59,234
     F-33




---



##### Table of Contents



16. Leased assets:
   Thousands ofMillions of Yen
    
    
    U.S. Dollars2005
    
    
    2005Machinery and equipment
    
    ¥
    12,625
    
    
    $
    117,991Accumulated depreciation
    
    
    (1,794
    )
    
    
    (16,767
    )Total
    
    ¥
    10,831
    
    
    $
    101,224
  Thousands ofYear ending March 31
    
    Millions of Yen
    
    
    U.S. Dollars2006
    
    ¥
    3,710
    
    
    $
    34,6732007
    
    
    3,261
    
    
    
    30,4762008
    
    
    2,478
    
    
    
    23,1592009
    
    
    509
    
    
    
    4,7572010
    
    
    499
    
    
    
    4,6632011 and thereafter
    
    
    1,289
    
    
    
    12,047Total minimum lease payments
    
    
    11,746
    
    
    
    109,775LessAmount representing interest
    
    
    617
    
    
    
    5,766Present value of net minimum
lease payment
    
    
    11,129
    
    
    
    104,009LessCurrent obligations
    
    
    3,441
    
    
    
    32,159Long-term capital lease obligations
    
    ¥
    7,688
    
    
    $
    71,850
   Thousands ofYear ending March 31
    
    Millions of Yen
    
    
    U.S. Dollars2006
    
    ¥
    6,335
    
    
    $
    59,2062007
    
    
    4,925
    
    
    
    46,0282008
    
    
    3,585
    
    
    
    33,5052009
    
    
    1,249
    
    
    
    11,6732010
    
    
    1,051
    
    
    
    9,822Thereafter
    
    
    2,552
    
    
    
    23,850Total minimum future rentals
    
    ¥
    19,697
    
    
    $
    184,084
 F-34




---



##### Table of Contents



17. Financial instruments:
          F-35




---



##### Table of Contents



18. Fair value of financial instruments:
  Millions of Yen
    
    

Thousands of U.S. Dollars2004
    
    
    2005
    
    
    2005Carrying
    
    
    Fair
    
    
    Carrying
    
    
    Fair
    
    
    Carrying
    
    
    FairAmounts
    
    
    Value
    
    
    Amounts
    
    
    Value
    
    
    Amounts
    
    
    ValueAssets:Available-for-sale securities
    
    ¥
    24,516
    
    
    ¥
    24,516
    
    
    ¥
    22,268
    
    
    ¥
    22,268
    
    
    $
    208,112
    
    
    $
    208,112Sundry investments
    
    
    528
    
    
    
    541
    
    
    
    411
    
    
    
    452
    
    
    
    3,841
    
    
    
    4,224Long-term receivables
    
    
    253
    
    
    
    244
    
    
    
    185
    
    
    
    179
    
    
    
    1,729
    
    
    
    1,673Other financial instruments:Forward exchange contracts
    
    
    790
    
    
    
    790
    
    
    
    50
    
    
    
    50
    
    
    
    467
    
    
    
    467Currency swap
    
    
    
    
    
    
    
    
    
    
    190
    
    
    
    190
    
    
    
    1,776
    
    
    
    1,776Liabilities:Long-term debt, including
current maturity
    
    
    (94,201
    )
    
    
    
    
    
    
    (100,495
    )
    
    
    
    
    
    
    (939,206
    )LessCapital lease obligations
    
    
    
    
    
    
    
    
    
    
    11,129
    
    
    
    
    
    
    
    104,009Long-term debtnet
    
    
    (94,201
    )
    
    
    (89,507
    )
    
    
    (89,366
    )
    
    
    (84,301
    )
    
    
    (835,197
    )
    
    
    (787,860
    )Other financial instruments:Forward exchange contracts
    
    
    (95
    )
    
    
    (95
    )
    
    
    (555
    )
    
    
    (555
    )
    
    
    (5,187
    )
    
    
    (5,187
    )Currency swap
    
    
    (3,179
    )
    
    
    (3,179
    )
    
    
    (3,009
    )
    
    
    (3,009
    )
    
    
    (28,121
    )
    
    
    (28,121
    )
          F-36




---



##### Table of Contents



19. Basic and diluted earnings (loss) per share:
  Thousands ofMillions of Yen
    
    
    U.S. Dollars2003
    
    
    2004
    
    
    2005
    
    
    2005Income (loss) from continuing operations
    
    ¥
    15,942
    
    
    ¥
    20,363
    
    
    ¥
    (8,789
    )
    
    $
    (82,140
    )Effect of dilutionZero coupon convertible
bonds
    
    
    
    
    
    
    (21
    )
    
    
    
    
    
    
    Income (loss) from continuing
operationsdiluted
    
    ¥
    15,942
    
    
    ¥
    20,342
    
    
    ¥
    (8,789
    )
    
    $
    (82,140
    )Income from discontinued operations, net of tax
    
    ¥
    136
    
    
    ¥
    4,475
    
    
    
    
    
    
    
    Net income (loss)
    
    ¥
    16,078
    
    
    ¥
    24,838
    
    
    ¥
    (8,789
    )
    
    $
    (82,140
    )Effect of dilutionZero coupon convertible
bonds
    
    
    
    
    
    
    (21
    )
    
    
    
    
    
    
    Net income (loss)diluted
    
    ¥
    16,078
    
    
    ¥
    24,817
    
    
    ¥
    (8,789
    )
    
    $
    (82,140
    )
 Number of Shares (Thousands)Weighted-average common shares outstanding
    178,168
    
    
    
    175,433
    
    
    
    175,389Effect of dilutive convertible bonds
    
    
    
    
    1,115
    
    
    
    Effect of dilutive warrants
    2
    
    
    
    
    
    
    
    Effect of stock options
    1
    
    
    
    61
    
    
    
    Diluted common shares outstanding
    178,171
    
    
    
    176,609
    
    
    
    175,389
 Yen
    
    
    U.S. DollarsBasic net income per share:Income (loss) from continuing operations
    
    ¥
    89.48
    
    
    ¥
    116.07
    
    
    ¥
    (50.11
    )
    
    $
    (0.47
    )Income from discontinued operations, net of tax
    
    
    0.76
    
    
    
    25.51
    
    
    
    
    
    
    
    Net income (loss)
    
    ¥
    90.24
    
    
    ¥
    141.58
    
    
    ¥
    (50.11
    )
    
    $
    (0.47
    )Diluted net income per share:Income (loss) from continuing operations
    
    ¥
    89.48
    
    
    ¥
    115.18
    
    
    ¥
    (50.11
    )
    
    $
    (0.47
    )Income from discontinued operations, net of tax
    
    
    0.76
    
    
    
    25.34
    
    
    
    
    
    
    
    Net income (loss)
    
    ¥
    90.24
    
    
    ¥
    140.52
    
    
    ¥
    (50.11
    )
    
    $
    (0.47
    )
 F-37




---



##### Table of Contents



20. Supplemental schedule:
  Millions of YenBalance at
    
    
    Charged (Credited)
    
    
    Deductions forBeginning
    
    
    to Costs and
    
    
    Accounts
    
    
    Translation
    
    
    Balance at EndAllowance for Doubtful Receivables
    
    of Period
    
    
    Expenses
    
    
    Written Off
    
    
    Adjustments
    
    
    of Period2003
    
    ¥
    5,319
    
    
    ¥
    411
    
    
    ¥
    (765
    )
    
    ¥
    (334
    )
    
    ¥
    4,6312004
    
    
    4,631
    
    
    
    (667
    )
    
    
    (13
    )
    
    
    (417
    )
    
    
    3,5342005
    
    
    3,534
    
    
    
    (515
    )
    
    
    (497
    )
    
    
    88
    
    
    
    2,610
 Thousands of U.S. DollarsBalance at
    
    
    Charged (Credited)
    
    
    Deductions forBeginning
    
    
    to Costs and
    
    
    Accounts
    
    
    Translation
    
    
    Balance at EndAllowance for Doubtful Receivables
    
    of Period
    
    
    Expenses
    
    
    Written Off
    
    
    Adjustments
    
    
    of Period2005
    
    $
    33,028
    
    
    $
    (4,813
    )
    
    $
    (4,645
    )
    
    $
    822
    
    
    $
    24,392
  Millions of YenBalance atBeginning
    
    
    
    
    
    
    
    
    
    
    Translation
    
    
    Balance at EndWarranty Reserve
    
    of Period
    
    
    Provision
    
    
    Payments
    
    
    Adjustments
    
    
    of Period2003
    
    ¥
    6,481
    
    
    ¥
    7,642
    
    
    ¥
    (7,374
    )
    
    ¥
    (256
    )
    
    ¥
    6,4932004
    
    
    6,493
    
    
    
    6,050
    
    
    
    (6,669
    )
    
    
    (455
    )
    
    
    5,4192005
    
    
    5,419
    
    
    
    8,030
    
    
    
    (7,844
    )
    
    
    117
    
    
    
    5,722
 Thousands of U.S. DollarsBalance atBeginning
    
    
    
    
    
    
    
    
    
    
    Translation
    
    
    Balance at EndWarranty Reserve
    
    of Period
    
    
    Provision
    
    
    Payments
    
    
    Adjustments
    
    
    of Period2005
    
    $
    50,645
    
    
    $
    75,047
    
    
    $
    (73,308
    )
    
    $
    1,093
    
    
    $
    53,477
 F-38




---



##### Table of Contents



21. Commitments and contingent liabilities:
    Guaranteed AmountThousands ofGuarantee for
    
    Guaranteed until
    
    Millions of Yen
    
    
    U.S. DollarsAffiliated company
    
    May 31, 2012October 22, 2012
    
    ¥
    25,000
    
    
    $
    233,645Affiliated company
    
    April 1, 2005March 31, 2006
    
    
    403
    
    
    
    3,766Total
    
    
    
    ¥
    25,403
    
    
    $
    237,411
    22. Remuneration of directors, executive officers and corporate auditors:
  23. Subsequent event:
  F-39