##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 20-F

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

For the fiscal year ended March 31, 2002

Commission file number 1-7616

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

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

JAPAN
(Jurisdiction of incorporation or organization)

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

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

| |  |                                                                 |  |                                          
| |  | --------------------------------------------------------------- |  | -----------------------------------------
| |  | Title of each class                                             |  | Name of each exchange on which registered
|
|
|
|
| |  |                                                                 |  |                                          
|
|
|
|
| |  | Common Stock, each represented by
one American Depositary Share |  | New York Stock Exchange                  



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##### Table of Contents



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

None

(Title of Class)


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

None

(Title of Class)


Indicate the number of outstanding shares of each of the issuers classes of
capital or common stock as of the close of the period covered by the annual
report.

|               |  |                                  |             | 
|-------------- |  | -------------------------------- | ----------- | 
|               |  | Outstanding as of March 31, 2002
|Title of class |  | (Japan time)                    
|Common Stock   |  |                                  | 180,063,836 | 

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.

|       |  |   
|------ |  | --
|Yes  X |  | No

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

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

2



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TABLE OF CONTENTS



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



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##### Table of Contents



TABLE OF CONTENTS

|                                                                                      |  |      |    | 
|------------------------------------------------------------------------------------- |  | ---- | -- | 
|                                                                                      |  | Page
|Certain Defined Terms                                                                 |  |      | 4  | 
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                     
|Cautionary Statement with Respect to Forward-Looking Statements                       |  |      | 4  | 
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                      |  |      |    | 
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                     
|PART I                                                                                |  |      |    | 
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                      |  |      |    | 
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                     
|Item 1. Identity of Directors, Senior Management and Advisers                         |  |      | 4  | 
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                     
|Item 2. Offer Statistics and Expected Timetable                                       |  |      | 4  | 
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                     
|Item 3. Key Information                                                               |  |      | 5  | 
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                     
|Item 4. Information on the Company                                                    |  |      | 13 | 
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                     
|Item 5. Operating and Financial Review and Prospects                                  |  |      | 28 | 
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                     
|Item 6. Directors, Senior Management and Employees                                    |  |      | 45 | 
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                     
|Item 7. Major Shareholders and Related Party Transactions                             |  |      | 53 | 
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                     
|Item 8. Financial Information                                                         |  |      | 54 | 
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                     
|Item 9. The Offer and Listing                                                         |  |      | 56 | 
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                     
|Item 10. Additional Information                                                       |  |      | 57 | 
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                     
|Item 11. Quantitative and Qualitative Disclosures About Market Risk                   |  |      | 72 | 
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                     
|Item 12. Description of Securities Other than Equity Securities                       |  |      | 76 | 
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                      |  |      |    | 
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                     
|PART II                                                                               |  |      |    | 
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                      |  |      |    | 
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                     
|Item 13. Defaults, Dividend Arrearages and Delinquencies                              |  |      | 77 | 
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                     
|Item 14. Material Modifications to the Rights of Security Holders and Use of Proceeds |  |      | 77 | 
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                     
|Item 15. [Reserved]                                                                   |  |      |    | 
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                     
|Item 16. [Reserved]                                                                   |  |      |    | 
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                      |  |      |    | 
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                     
|PART III                                                                              |  |      |    | 
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                      |  |      |    | 
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                     
|Item 17. Financial Statements                                                         |  |      | 78 | 
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                     
|Item 18. Financial Statements                                                         |  |      | 78 | 
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                     
|Item 19. Exhibits                                                                     |  |      | 78 | 

3



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##### Table of Contents






Certain Defined Terms

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

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

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




Cautionary Statement with Respect to Forward-Looking Statements

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




PART I




Item 1. Identity of Directors, Senior Management and Advisers

Not applicable




Item 2. Offer Statistics and Expected Timetable

Not applicable

4



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##### Table of Contents






Item 3. Key Information

A. Selected financial data

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

|                                                                                  |         |   |                                             |       |      |   |         |      |      |   |         |       |  |   |         |        |  |   |         |       | 
|--------------------------------------------------------------------------------- | ------- | - | ------------------------------------------- | ----- | ---- | - | ------- | ---- | ---- | - | ------- | ----- |  | - | ------- | ------ |  | - | ------- | ----- | 
|                                                                                  |         |   | (In millions of yen, except per share data)
|                                                                                  |         |   |                                             |      
|                                                                                  |         |   | Year ended March 31                        
|                                                                                  |         |   |                                            
|                                                                                  |         |   | 1998                                        |       | 1999 |   | 2000    |      | 2001 |   | 2002   
|                                                                                  |         |   |                                             |       |      |   |         |      |      |   |        
|Consolidated Statement of Income Data:                                            |         |   |                                             |       |      |   |         |      |      |   |         |       |  |   |         |        |  |   |         |      
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|Operating revenue (1)                                                             |         | ¥ | 579,435                                     |       |      | ¥ | 589,065 |      |      | ¥ | 615,871 |       |  | ¥ | 647,069 |        |  | ¥ | 668,899 |      
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|Operating income (1)                                                              |         |   | 28,872                                      |       |      |   | 20,116  |      |      |   | 23,593  |       |  |   | 33,819  |        |  |   | 21,281  |      
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|Income before income taxes                                                        |         |   | 18,836                                      |       |      |   | 12,533  |      |      |   | 27,808  |       |  |   | 34,193  |        |  |   | 15,343  |      
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|Net income                                                                        |         |   | 6,163                                       |       |      |   | 1,159   |      |      |   | 13,075  |       |  |   | 18,298  |        |  |   | 8,047   |      
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|Net
income per share of common stock and
per American Depositary Share (ADS) (2): |         |   |                                             |       |      |   |         |      |      |   |         |       |  |   |         |        |  |   |         |      
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                  | Basic   |   |                                             | 34.32 |      |   |         | 6.45 |      |   |         | 72.81 |  |   |         | 101.76 |  |   |         | 44.70 | 
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                  | Diluted |   |                                             | 34.32 |      |   |         | 6.45 |      |   |         | 72.80 |  |   |         | 101.70 |  |   |         | 44.69 | 
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|Consolidated Balance Sheet Data:                                                  |         |   |                                             |       |      |   |         |      |      |   |         |       |  |   |         |        |  |   |         |      
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|Total assets                                                                      |         | ¥ | 595,553                                     |       |      | ¥ | 592,407 |      |      | ¥ | 601,137 |       |  | ¥ | 605,156 |        |  | ¥ | 645,129 |      
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|Short-term borrowings                                                             |         |   | 54,899                                      |       |      |   | 46,153  |      |      |   | 41,318  |       |  |   | 37,571  |        |  |   | 45,867  |      
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|Current portion of long-term debt                                                 |         |   | 8,835                                       |       |      |   | 6,455   |      |      |   | 37,235  |       |  |   | 7,996   |        |  |   | 2,551   |      
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|Long-term debt, less current portion                                              |         |   | 58,097                                      |       |      |   | 82,958  |      |      |   | 47,060  |       |  |   | 38,304  |        |  |   | 35,677  |      
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|Shareholders equity                                                              |         |   | 330,098                                     |       |      |   | 313,244 |      |      |   | 312,460 |       |  |   | 336,995 |        |  |   | 347,003 |      
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|Number of shares outstanding (in thousands)                                       |         |   | 179,573                                     |       |      |   | 179,573 |      |      |   | 179,588 |       |  |   | 179,894 |        |  |   | 180,064 |      

5



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|                                                                  |          |                   |        |      |      |        |         |                                                                    |      |        |         |      |      |        |        |      |      |        |         |      |      |  |         |   |  | 
|----------------------------------------------------------------- | -------- | ----------------- | ------ | ---- | ---- | ------ | ------- | ------------------------------------------------------------------ | ---- | ------ | ------- | ---- | ---- | ------ | ------ | ---- | ---- | ------ | ------- | ---- | ---- |  | ------- | - |  | 
|                                                                  |          |                   |        |      |      |        |         | (In
millions of yen, except per share data
and percentage amounts)
|                                                                  |          |                   |        |      |      |        |         |                                                                   
|                                                                  |          |                   |        |      |      |        |         | Year ended March 31                                               
|                                                                  |          |                   |        |      |      |        |         |                                                                   
|                                                                  |          |                   |        |      |      |        |         | 1998                                                               |      | 1999   |         | 2000 |      | 2001   |        | 2002
|                                                                  |          |                   |        |      |      |        |         |                                                                    |      |        |         |      |      |        |        |     
|Other Data:                                                       |          |                   |        |      |      |        |         |                                                                    |      |        |         |      |      |        |        |      |      |        |         |      |      |  |         |  
|                                                                 
|                                                                 
|                                                                 
|                                                                 
|Capital expenditures                                              |          | ¥                 | 26,898 |      |      | ¥      | 33,070  |                                                                    |      | ¥      | 25,458  |      |      | ¥      | 42,183 |      |      | ¥      | 46,996  |     
|                                                                 
|                                                                 
|                                                                 
|                                                                 
|Research and development (R&D) expenses                           |          | 31,042            |        |      |      | 31,131 |         |                                                                    |      | 33,265 |         |      |      | 37,105 |        |      |      | 39,050 |        
|                                                                 
|                                                                 
|                                                                 
|                                                                 
|Cash flows from operating activities                              |          |                   |        |      |      |        | 36,015  |                                                                    |      |        | 37,904  |      |      |        | 45,390 |      |      |        | 51,241  |      |      |  | 57,110  |  
|                                                                 
|                                                                 
|                                                                 
|                                                                 
|Cash flows from investing activities                              |          |                   |        |      |      |        | (31,836 | )                                                                  |      |        | (38,157 | )    |      |        | 11,984 |      |      |        | (41,581 | )    |      |  | (51,148 | )
|                                                                 
|                                                                 
|                                                                 
|                                                                 
|Cash flows from financing activities                              |          |                   |        |      |      |        | (744    | )                                                                  |      |        | 13,112  |      |      |        | (4,139 | )    |      |        | (46,567 | )    |      |  | (4,207  | )
|                                                                 
|                                                                 
|                                                                 
|                                                                 
|                                                                 
|Return on equity (3)                                              |          |                   |        |      |      |        | 1.88    | %                                                                  |      |        | 0.36    | %    |      |        | 4.18   | %    |      |        | 5.63    | %    |      |  | 2.35    | %
|                                                                 
|                                                                 
|                                                                 
|                                                                 
|Return on assets (4)                                              |          |                   |        |      |      |        | 1.06    | %                                                                  |      |        | 0.20    | %    |      |        | 2.19   | %    |      |        | 3.03    | %    |      |  | 1.29    | %
|                                                                 
|                                                                 
|                                                                 
|                                                                 
|Cash dividends declared per share of common
stockand per ADS (5): |          |                   |        |      |      |        |         |                                                                    |      |        |         |      |      |        |        |      |      |        |        
|                                                                 
|                                                                 
|                                                                 
|                                                                 
|                                                                  | Interim  | (in yen)          |        |      | 2.50 |        |         |                                                                    | 5.00 |        |         |      | 5.00 |        |        |      | 7.50 |        |         |      | 7.50 | 
|                                                                 
|                                                                 
|                                                                 
|                                                                 
|                                                                  |          | (in U.S. dollars) |        | 0.02 |      |        |         | 0.04                                                               |      |        |         | 0.05 |      |        |        | 0.07 |      |        |         | 0.06 |     
|                                                                 
|                                                                 
|                                                                 
|                                                                 
|                                                                  | Year-end | (in yen)          |        |      | 5.00 |        |         |                                                                    | 5.00 |        |         |      | 5.00 |        |        |      | 7.50 |        |         |      | 7.50 | 
|                                                                 
|                                                                 
|                                                                 
|                                                                 
|                                                                  |          | (in U.S. dollars) |        | 0.04 |      |        |         | 0.04                                                               |      |        |         | 0.05 |      |        |        | 0.06 |      |        |         | 0.06 |     



Notes:



|(1) |  | In fiscal 2000, we changed the reporting of income from patents and
related expenses, which had been previously presented in Other income
(expenses). The gross patent revenue is presented as Royalty revenue
and the related expenses are included in Selling, general and
administrative expenses. Previously reported amounts have been
reclassified to conform to this presentation.
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|   
|   
|   
|   
|(2) |  | Basic net income per share of common stock and per ADS has been
computed based on the weighted average number of shares outstanding
during each year. Diluted net income per share of common stock and
ADS has been computed on the basis that all dilutive warrants and
stock options were exercised. One ADS represents one share of common
stock.                                           
|   
|   
|   
|   
|   
|(3) |  | Net income as a percentage of average shareholders equity.                                                                                                                                                                                                                                                                                                                                    
|   
|   
|   
|   
|   
|(4) |  | Net income as a percentage of average total assets.                                                                                                                                                                                                                                                                                                                                            
|   
|   
|   
|   
|   
|(5) |  | 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.                                                                                                                                                                    

6



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##### Table of Contents



Exchange rates (yen per U.S. dollar)

The exchange rate between the yen and the U.S. dollar, based upon the noon
buying rate for cable transfers in New York City as certified for customs
purposes by the Federal Reserve Bank of New York, was ¥116.62 = US ¥1.00 on
July 11, 2002.

|                    |          |         |   |        |  |     |   |            |  |  |   |        |  |  |   |        | 
|------------------- | -------- | ------- | - | ------ |  | --- | - | ---------- |  |  | - | ------ |  |  | - | ------ | 
|Year ended March 31 |          | Average |   | High   |  | Low |   | Period-end
|                    |          |         |   |        |  |     |   |           
|                    | 1998     |         | ¥ | 123.57 |  |     | ¥ | 111.42     |  |  | ¥ | 133.99 |  |  | ¥ | 133.29 | 
|                   
|                   
|                   
|                   
|                    | 1999     |         |   | 128.10 |  |     |   | 108.83     |  |  |   | 147.14 |  |  |   | 118.43 | 
|                   
|                   
|                   
|                   
|                    | 2000     |         |   | 110.02 |  |     |   | 101.53     |  |  |   | 124.45 |  |  |   | 102.73 | 
|                   
|                   
|                   
|                   
|                    | 2001     |         |   | 111.65 |  |     |   | 104.19     |  |  |   | 125.54 |  |  |   | 125.54 | 
|                   
|                   
|                   
|                   
|                    | 2002     |         |   | 125.05 |  |     |   | 115.89     |  |  |   | 134.77 |  |  |   | 132.70 | 
|                   
|                   
|                   
|                   
|                    |          |         |   |        |  |     |   |            |  |  |   |        |  |  |   |       
|                   
|                   
|                   
|                   
|2002                |          |         |   |        |  |     |   |            |  |  |   |        |  |  |   |       
|                   
|                   
|                   
|                   
|                    | January  |         |   |        |  |     |   | 130.93     |  |  |   | 134.64 |  |  |   |        | 
|                   
|                   
|                   
|                   
|                    | February |         |   |        |  |     |   | 132.26     |  |  |   | 134.77 |  |  |   |        | 
|                   
|                   
|                   
|                   
|                    | March    |         |   |        |  |     |   | 127.07     |  |  |   | 133.46 |  |  |   |        | 
|                   
|                   
|                   
|                   
|                    | April    |         |   |        |  |     |   | 128.13     |  |  |   | 133.40 |  |  |   |        | 
|                   
|                   
|                   
|                   
|                    | May      |         |   |        |  |     |   | 123.08     |  |  |   | 128.66 |  |  |   |        | 
|                   
|                   
|                   
|                   
|                    | June     |         |   |        |  |     |   | 119.38     |  |  |   | 125.64 |  |  |   |        | 

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

B. Capitalization and indebtedness

Not applicable

C. Reasons for the offer and use of proceeds

Not applicable

D. Risk factors

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

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Economic conditions may adversely affect our business results and financial
condition

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

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

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

Our operations involve the global production and distribution of products.
Revenue and expense items that are denominated in local currency, such as
sales, expenses and assets in each region, are translated into yen in preparing
our consolidated financial statements. Depending on the rate of exchange at
the time of currency translation, the values of such items in yen may be
affected, even if their value has not changed in their original currency.
Generally, an appreciation of the yen against other currencies, particularly
the yen against the U.S. dollar and the euro in which we make significant
sales, has a negative effect on our business results. A depreciation of the
yen against other currencies has the opposite effect.

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

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

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

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



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

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

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

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

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

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

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

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

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

Our patent, license and other intellectual property rights make a significant
contribution to our net income. Although less than 5% of our revenue
is generated by our worldwide patents relating to laser optical disc
technologies, these rights were responsible for between approximately 60%-80%
of our operating income in the last three fiscal years. The legal protections
afforded these rights have a limited duration under applicable laws, and the
length of protection varies from country to country or region.
Therefore,
a significant portion of such patents will expire in Europe and Japan
by the end of fiscal 2003. As a
result, our royalty revenue is expected to decline substantially. While we are
trying to develop new patents and acquire third party patent rights, we do not
expect that the revenue, if any, from such new patents will be sufficient to
offset the decrease in royalty revenue resulting from the expiration of our
existing patents. Royalty revenue from patent licensing also depends to a
material degree on the sales of patented products by our licensees, making it
hard for us to predict actual royalty revenue amounts. For a discussion of our
patent licensing business, see Item 4.B. Business overviewNature of
operations.

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

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



| |  | Unexpected legal or regulatory changes                                                                                                                                   
|- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| 
| |  | Unfavorable political or economic factors                                                                                                                                
| 
| |  | Difficulties in recruiting and retaining personnel                                                                                                                       
| 
| |  | Less developed technological infrastructure, which can affect our
production or other activities or result in lower customer acceptance
of our products and services; and
| 
| |  | Potentially adverse tax consequences                                                                                                                                     

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In order to produce our products competitively and to reduce costs, we
established new production facilities in the Peoples Republic of China
(China). We invested a total of ¥4 billion in fiscal 2002 to build
production capacities for various products, including DVD-related components
and car stereo products, in the Shanghai and Dongguan areas. In opening a new manufacturing facility, however, it
typically takes time to achieve success in production. Therefore, there is no
guarantee that cost savings as expected will be realized in the immediate term,
if at all. Furthermore, we may experience difficulties in managing a
production facility and entering into business arrangements in China in light
of unexpected events, including political or legal changes, labor shortages or
strikes or changes in economic conditions in China. Accordingly, such
incidents could have an adverse impact on our business results and financial
condition. For information on our China plants, see Item 4.A. History
and development of the CompanyPrincipal capital expenditures, investments and
divestitures.

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

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

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

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

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

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

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

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

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

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

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

Failure in collaboration, tie-ups, and establishment of joint venture companies
with third parties may adversely affect our business results and financial
condition

In our technological development process, we carry out many activities with
other companies in the forms of collaboration, technological tie-ups, or joint
ventures to optimize management resources and utilize the synergy of combined
technologies. We will continue to take a positive approach to exploiting these
opportunities. If differences arise among the parties due to managerial,
financial or other reasons, we may not enjoy the results of such effective
development, and thereby our business results and financial condition may be
adversely affected.

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

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

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

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






Item 4. Information on the Company

A. History and development of the Company

History

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

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

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

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

In fiscal 2001, we started supplying to PC makers DVD-R/RW drives that can
record up to seven times as much data as conventional CD-R/RW drives. In
fiscal 2002, we introduced to the Japanese consumer market hard disk drive
(HDD) car navigation systems with faster search and display of routes to
designated destinations.

Registered office

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

Principal capital expenditures, investments and divestitures

Capital expenditures were paid for principally out of our internally generated
working capital. See the table in Item 3.A. Selected financial data for
figures. The facilities for production comprised those for OEL displays and
DVD pickups, and plants and machinery for plasma displays. See the table in
Item 4.D. Property, plants and equipment, of this annual report for a list of
our principal plants.

In fiscal 2002, we installed a second manufacturing line for plasma displays at
our plant in Shizuoka, Japan, enabling us to produce up to 150
thousand units a
year. To meet potential demand for plasma displays, we plan to add another
line there, which is expected to start operation in the fall of 2003, with an
expected production of 100 thousand units annually.

To improve cost competitiveness and to reallocate a major portion of production
to China, Pioneer established two production subsidiaries in China in fiscal
2001 and these plants began operation in the fall of 2001. We continue
expanding parts procurement, designing products, and increasing the proportion
of our production in China.

B. Business overview

Strategy

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

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



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

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

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

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

Enhance our brand recognition and promote customer satisfaction

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

Leverage our leadership position in the car electronics business

We believe one of our strengths lies in our core business segment, the car
electronics business. We lead the world market for car audio products. We
were the first in the industry to introduce car navigation systems to the
Japanese consumer market in fiscal 1991 and have maintained a leading position
by offering DVD-ROM type models. To strengthen this product line and lead the
car navigation market, we introduced in Japan in June 2001 a new car navigation
system incorporating a HDD, which features substantially
faster access times than those of the existing DVD-ROM drive models, while in
October 2001 we brought out affordably-priced and easy-to-operate DVD models.

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

Focus on our strategic products targeting global markets

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

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Adopt optimal production methods to maximize profitability

We strive to adopt ideal production methods catered to each type of product and
market demand. While we focus on reducing manufacturing and operating costs,
our goal is to achieve overall efficiency in production by, for example, taking
into account the proximity of the end-market, production facilities and labor
costs. Consequently, to produce our strategic products we established two new
plants in China and started production of DVD-related and car electronics
products in fiscal 2002. We are continuing to expand parts procurement, design
products, and increase the proportion of our production in China. Also, we are
producing an increased volume of plasma displays in our expanded facility in
Shizuoka, Japan. To enhance cost competitiveness and achieve economies of
scale, we sell our key products on an OEM basis to other manufacturers.
Additionally, we plan to introduce new inventory and production control systems
to reduce inventories of the whole Pioneer group.

Strategic FocusVision
2005

Consistent with the strategies described above, in fiscal 1999 we announced
Vision 2005, a medium term initiative as follows.

(i)  To become a leader in the DVD industry

We believe the DVD format will become the dominant high-density, high-capacity
medium for sound, video and data recording, storage and playback. As a leader
in this field, we have introduced attractive models of consumer-use DVD
recorders, DVD home theater systems, DVD car navigation systems as well as
DVD-R/RW drives for PC use, that have a competitive edge in design, function
and price, contributing to the expansion of the DVD market.

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

We believe large-screen plasma displays offer significant advantages over
cathode ray tubes (CRTs). Among other advantages, plasma displays are thinner
and lighter than CRTs. Thus, we expect that plasma display panels in the
future will capture a substantial portion of the larger-screen TV market, in
which currently CRTs and projection TVs are dominant. Since introducing the
first plasma displays in fiscal 1998, we have established a solid presence both
in consumer and commercial markets worldwide as a result of our excellent
reputation for the large-screen high-resolution images of our plasma displays.
To meet the expected rising demand, we expanded our production capacity in
October 2001 by establishing a second line at our Shizuoka plant in Japan, and
we plan to add another line there, which is expected to start operation in the
fall of 2003.

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

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

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

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

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

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

Nature of operations

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

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

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

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

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

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

|                        |       |                 |          |        |         |                     |       |      |      |      |         |        |         |         |       |     |      |      |         |        |         |         |       |     |      |      |   | 
|----------------------- | ----- | --------------- | -------- | ------ | ------- | ------------------- | ----- | ---- | ---- | ---- | ------- | ------ | ------- | ------- | ----- | --- | ---- | ---- | ------- | ------ | ------- | ------- | ----- | --- | ---- | ---- | - | 
|                        |       |                 |          |        |         | Year ended March 31
|                        |       |                 |          |        |         |                    
|                        |       |                 |          |        |         | 2000                |       | 2001 |      | 2002
|                        |       |                 |          |        |         |                     |       |      |      |     
|Electronics             |       |                 |          |        |         |                     |       |      |      |      |         |        |         |         |       |     |      |      |         |        |         |         |       |    
|                       
|                       
|                       
|                       
|                        |       | Audio/Video     |          |        |         |                     |       |      |      |      |         |        |         |         |       |     |      |      |         |        |         |         |       |     |     
|                       
|                       
|                       
|                       
|                        |       |                 | Domestic |        | ¥       | 56,482              |       |      |      | 9.2  | %       |        | ¥       | 50,556  |       |     |      | 7.8  | %       |        | ¥       | 51,177  |       |     |      | 7.6  | %
|                       
|                       
|                       
|                       
|                        |       |                 | Overseas |        |         | 133,547             |       |      |      | 21.7 |         |        |         | 140,583 |       |     |      | 21.7 |         |        |         | 144,541 |       |     |      | 21.6 |  
|                        |       |                 |          |        |         |                     |       |      |      |      |         |        |         |         |       |     |      |      |         |        |         |         |       |     |      |      |   | 
|                        |       |                 | 190,029  |        |         |                     | 30.9  |      |      |      | 191,139 |        |         |         | 29.5  |     |      |      | 195,718 |        |         |         | 29.2  |    
|                       
|                       
|                       
|                       
|                        |       | Car Electronics |          |        |         |                     |       |      |      |      |         |        |         |         |       |     |      |      |         |        |         |         |       |     |     
|                       
|                       
|                       
|                       
|                        |       |                 | Domestic |        |         | 82,353              |       |      |      | 13.3 |         |        |         | 89,891  |       |     |      | 13.9 |         |        |         | 96,115  |       |     |      | 14.4 |  
|                       
|                       
|                       
|                       
|                        |       |                 | Overseas |        |         | 163,520             |       |      |      | 26.6 |         |        |         | 154,987 |       |     |      | 23.9 |         |        |         | 165,096 |       |     |      | 24.7 |  
|                        |       |                 |          |        |         |                     |       |      |      |      |         |        |         |         |       |     |      |      |         |        |         |         |       |     |      |      |   | 
|                        |       |                 | 245,873  |        |         |                     | 39.9  |      |      |      | 244,878 |        |         |         | 37.8  |     |      |      | 261,211 |        |         |         | 39.1  |    
|                       
|                       
|                       
|                       
|                        |       | Others          |          |        |         |                     |       |      |      |      |         |        |         |         |       |     |      |      |         |        |         |         |       |     |      |     
|                       
|                       
|                       
|                       
|                        |       |                 | Domestic |        |         | 45,492              |       |      |      | 7.4  |         |        |         | 62,846  |       |     |      | 9.7  |         |        |         | 63,570  |       |     |      | 9.5  |  
|                       
|                       
|                       
|                       
|                        |       |                 | Overseas |        |         | 67,343              |       |      |      | 10.9 |         |        |         | 87,766  |       |     |      | 13.6 |         |        |         | 86,976  |       |     |      | 13.0 |  
|                        |       |                 |          |        |         |                     |       |      |      |      |         |        |         |         |       |     |      |      |         |        |         |         |       |     |      |      |   | 
|                        |       |                 | 112,835  |        |         |                     | 18.3  |      |      |      | 150,612 |        |         |         | 23.3  |     |      |      | 150,546 |        |         |         | 22.5  |    
|                        |       |                 |          |        |         |                     |       |      |      |      |         |        |         |         |       |     |      |      |         |        |         |         |       |     |      |      |   | 
|                        |       | Domestic        |          |        | 184,327 |                     |       |      | 29.9 |      |         |        | 203,293 |         |       |     | 31.4 |      |         |        | 210,862 |         |       |     | 31.5 |     
|                       
|                       
|                       
|                       
|                        |       | Overseas        |          |        | 364,410 |                     |       |      | 59.2 |      |         |        | 383,336 |         |       |     | 59.2 |      |         |        | 396,613 |         |       |     | 59.3 |     
|                        |       |                 |          |        |         |                     |       |      |      |      |         |        |         |         |       |     |      |      |         |        |         |         |       |     |      |      |   | 
|                        | Total |                 |          | ¥      | 548,737 |                     |       |      | 89.1 | %    |         | ¥      | 586,629 |         |       |     | 90.6 | %    |         | ¥      | 607,475 |         |       |     | 90.8 | %   
|                        |       |                 |          |        |         |                     |       |      |      |      |         |        |         |         |       |     |      |      |         |        |         |         |       |     |      |      |   | 
|AV Software             |       |                 |          |        |         |                     |       |      |      |      |         |        |         |         |       |     |      |      |         |        |         |         |       |    
|                       
|                       
|                       
|                       
|                        |       | Domestic        |          |        | ¥       | 23,788              |       |      |      | 3.9  | %       |        | ¥       | 27,690  |       |     |      | 4.3  | %       |        |         | 31,560  |       |     |      | 4.7  |  
|                       
|                       
|                       
|                       
|                        |       | Overseas        |          |        |         | 23,886              |       |      |      | 3.9  |         |        |         | 12,220  |       |     |      | 1.9  |         |        |         | 12,276  |       |     |      | 1.9  |  
|                        |       |                 |          |        |         |                     |       |      |      |      |         |        |         |         |       |     |      |      |         |        |         |         |       |     |      |      |   | 
|                        | Total |                 | ¥        | 47,674 |         |                     |       | 7.7  | %    |      | ¥       | 39,910 |         |         |       | 6.2 | %    |      | ¥       | 43,836 |         |         |       | 6.6 | %   
|                        |       |                 |          |        |         |                     |       |      |      |      |         |        |         |         |       |     |      |      |         |        |         |         |       |     |      |      |   | 
|Patent Licensing        |       | ¥               | 19,460   |        |         |                     | 3.2   | %    |      | ¥    | 20,530  |        |         |         | 3.2   | %   |      | ¥    | 17,588  |        |         |         | 2.6   | %  
|                        |       |                 |          |        |         |                     |       |      |      |      |         |        |         |         |       |     |      |      |         |        |         |         |       |     |      |      |   | 
|Total Operating Revenue |       | ¥               | 615,871  |        |         |                     | 100.0 | %    |      | ¥    | 647,069 |        |         |         | 100.0 | %   |      | ¥    | 668,899 |        |         |         | 100.0 | %  
|                        |       |                 |          |        |         |                     |       |      |      |      |         |        |         |         |       |     |      |      |         |        |         |         |       |     |      |      |   | 

18



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##### Table of Contents



Electronics

Audio/Video:

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

Sales by product for fiscal 2002 in the Audio/Video group are as follows:
Plasma displays have rapidly grown mainly for home use, accounting for the
largest sales in this group. DVD players and DVD recorders also contributed
substantially to sales in this group. Sales of stereo systems accounted for a
material portion of sales as well. Particularly in North America, both
projection TVs and AV receivers accounted for a material portion of sales in
this group.

We believe the traditional home audio markets of Japan, North America and
Europe have matured and accordingly, price competition in these markets is
strong. We do not expect the traditional home audio markets in these regions
to grow substantially. We believe growth will come from new products, such as
DVD-related products and plasma displays. JEITA (Japan Electronics and
Information Technology Industry Association) forecasts an approximately 30%
increase in consumer DVD player sales worldwide, from 29 million units in 2001
to 38 million in 2002. In our DVD business, we are shifting the emphasis from
price-competitive DVD players to higher value-added DVD recorders and DVD home
theater systems. In our plasma display business, we have launched new 50- and
43-inch models of high-definition displays in fiscal 2002 and we are promoting
them vigorously in the worldwide market.

Car Electronics:

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

Sales by product for fiscal 2002 in the Car Electronics group are as follows:
Car CD players accounted for the largest sales in this group. In Japan, our
car navigation systems accounted for a material portion of sales in this group.

Both in Japan and outside Japan, sales in this group are generally made in the
consumer market and to automobile manufacturers on an OEM basis for
installation in new cars on production lines or as optional parts. Sales in
this category are gradually shifting from the consumer market to the OEM
market, as automobile manufacturers place greater emphasis on differentiation
of their cars. Our strong brand recognition in both markets is helping us
maintain our leading market share of car electronics products on a global
basis. Especially in the field of car navigation systems, we launched in June
2001, HDD models which have substantially faster access times
and have attractive and convenient
features, such as their faster search and display of routes to designated
destinations. Our affordable, easy-to-operate DVD models, which were launched
in October 2001, have earned excellent reputations as well. In addition, car
audio products incorporating a radio tuner for digital satellite broadcasting
were well received. As we keep introducing innovative car electronics
products, we will continue to seek to distinguish our products from our
competitors.

19



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##### Table of Contents



Others:

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

Sales by product for fiscal 2002 in this group are as follows: DVD-R/RW drives
accounted for the largest sales in this group. Set-top boxes of cable-TV
systems and digital broadcast, and DVD-ROM drives also accounted for a material
portion of sales in this group. In Japan, factory automation systems such as
for car-related systems, also contributed to sales.

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

AV Software

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

Sales in this segment are substantially smaller than those of the Electronics
segment. Characteristically, they show much volatility year to year, depending
upon the presence or absence of hit movie and music titles. The main markets
of this segment are Japan and North America. Sales analysis by product for
fiscal 2002 in this segment is as follows: DVDs accounted for the largest
sales in this category, due mainly to the expansion of the DVD player market,
especially in Japan.

Patent Licensing

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

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

Royalty revenue from patent licensing of digital playback equipment, such as
CD-ROM and CD-R drives, accounted for a substantial portion of revenue in this
segment in fiscal 2002. In addition, patent licensing of digital discs
contributed significantly to royalty revenue. As PC market sales slumped, our
revenue from patent licensing was negatively affected in fiscal 2002.

Revenue from the Patent Licensing segment is substantially less than from our
other segments, constituting less than 5% of operating revenue for fiscal 2002.
However, contribution of this segment to our operating revenue is substantial
compared to its contribution to our operating revenue constituting between
approximately 60%-80% of our operating revenue in each of the last three fiscal
years. A number of these patents in Europe and Japan will expire by
the end of fiscal 2003, which
will result in a substantial decrease in royalty revenue.

20



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##### Table of Contents



Principal markets

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

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

|              |       |   |                     |         |      |  |      |       |   |   |         |         |  |  |      |       |   |   |         |         |  |  |      |       |  
|------------- | ----- | - | ------------------- | ------- | ---- |  | ---- | ----- | - | - | ------- | ------- |  |  | ---- | ----- | - | - | ------- | ------- |  |  | ---- | ----- | -
|              |       |   | Year ended March 31
|              |       |   |                    
|              |       |   | 2000                |         | 2001 |  | 2002
|              |       |   |                     |         |      |  |     
|Japan         |       | ¥ | 208,115             |         |      |  | 33.8 | %     |   | ¥ | 230,983 |         |  |  | 35.7 | %     |   | ¥ | 242,422 |         |  |  | 36.2 | %    
|             
|             
|             
|             
|North America |       |   | 200,930             |         |      |  | 32.6 |       |   |   | 213,592 |         |  |  | 33.0 |       |   |   | 200,428 |         |  |  | 30.0 |      
|             
|             
|             
|             
|Europe        |       |   | 135,728             |         |      |  | 22.0 |       |   |   | 126,019 |         |  |  | 19.5 |       |   |   | 132,189 |         |  |  | 19.8 |      
|             
|             
|             
|             
|Other Regions |       |   | 71,098              |         |      |  | 11.6 |       |   |   | 76,475  |         |  |  | 11.8 |       |   |   | 93,860  |         |  |  | 14.0 |      
|              |       |   |                     |         |      |  |      |       |   |   |         |         |  |  |      |       |   |   |         |         |  |  |      |      
|              | Total |   | ¥                   | 615,871 |      |  |      | 100.0 | % |   | ¥       | 647,069 |  |  |      | 100.0 | % |   | ¥       | 668,899 |  |  |      | 100.0 | %
|              |       |   |                     |         |      |  |      |       |   |   |         |         |  |  |      |       |   |   |         |         |  |  |      |      

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

Seasonality

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

Marketing channels

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

After-sales service

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

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

Raw materials and sources of supply

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

No single source accounted for more than 6% of total supply purchases in fiscal
2002. We have not experienced any material difficulties in obtaining raw
materials, parts and products and believe that we will continue to be able to
obtain them to meet our needs.

Semiconductors account for the largest percentage of parts purchased in fiscal
2002 (on a yen basis), representing approximately 40% of our total purchases.
We purchase semiconductors from various suppliers, mainly pursuant to the terms
of our basic supply agreement. Our basic supply agreement generally has a term
of one year, with an automatic renewal clause. Where we do not have two or
more suppliers, we seek longer term contracts or bulk purchases and place our
order 3 to 4 months earlier than our usual practice to reduce the risk of being
unable to obtain key parts. We purchase a portion (approximately 10%) of our
semiconductor parts, which are custom-made for our needs in accordance with our
designs and specifications, from STMicroelectronics N.V. While we do not
currently have an alternative source for the type of semiconductors supplied by
STMicroelectronics N.V., we have entered into a strategic alliance with
STMicroelectronics N.V. to assure a stable source of supply.

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

Patents and licenses

We hold a variety of patents, including those relating to laser optical disc
technology, in Japan and other countries, while we in turn are licensed to use
a number of patents owned by third parties. We consider certain patents
licensed from third parties to be important to our business. In particular,
the patents licensed from Dolby Laboratories Licensing Corporation for such
devices as noise reduction, with Koninklijke Philips Electronics N.V. for CD
products and LD products, with Thomson Licensing S.A. for CD products and LD
products and with MPEG LA, L.L.C. for digital video products are utilized in
products accounting for a substantial portion of our net sales. Termination of
such license agreements would have a material adverse effect on our business,
although we have no reason to believe that such termination will occur.

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##### Table of Contents



Competition

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

Import restrictions

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

Governmental regulation

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

23



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##### Table of Contents



C. Organizational structure

Our basic corporate structure is shown in the following chart:

(FLOW CHART)

24



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##### Table of Contents



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

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



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

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##### Table of Contents



D. Property, plants and equipment

Our manufacturing operations are conducted principally in Japan, Southeast Asia
and China. Of the total of 38 plants, 17 plants are in Japan and the remaining
21 are outside Japan. The following table sets forth information, as of March
31, 2002, with respect to our principal plants.

|                                                 |  |                     |  |                         |  |                                                                                         
|------------------------------------------------ |  | ------------------- |  | ----------------------- |  | ----------------------------------------------------------------------------------------
|Name of plant                                    |  |                     |  | Floor space             |  |                                                                                         
|(Name of company                                 |  |                     |  | (square feet)           |  |                                                                                         
|which owns the plant)                            |  | Location            |  | [of which leased space] |  | Principal products                                                                      
|                                                 |  |                     |  |                         |  |                                                                                         
|                                                 |  |                     |  |                         |  |                                                                                         
|                                                
|                                                
|                                                
|                                                
|Japan                                            |  |                     |  |                         |  |                                                                                         
|                                                
|                                                
|                                                
|                                                
|                                                 |  |                     |  |                         |  |                                                                                         
|                                                
|                                                
|                                                
|                                                
|Shizuoka Plant
(Shizuoka Pioneer
Corporation)    |  | Fukuroi, Shizuoka   |  | 750,000                 |  | Plasma displays, Projection TVs                                                         
|                                                
|                                                
|                                                
|                                                
|                                                 |  |                     |  |                         |  |                                                                                         
|                                                
|                                                
|                                                
|                                                
|Tendo Plant
(Tohoku Pioneer
Corporation)         |  | Tendo, Yamagata     |  | 495,000                 |  | Cassette car
stereos, Car CD/MD players,Car speakers,
Loudspeakers                      
|                                                
|                                                
|                                                
|                                                
|                                                 |  |                     |  |                         |  |                                                                                         
|                                                
|                                                
|                                                
|                                                
|Tokorozawa Plant
(Pioneer Corporation)           |  | Tokorozawa, Saitama |  | 489,000                 |  | Stereo systems,
Individual stereo components,DVD players, DVD-R/RW drives,
DVD recorders
|                                                
|                                                
|                                                
|                                                
|                                                 |  |                     |  |                         |  |                                                                                         
|                                                
|                                                
|                                                
|                                                
|Kawagoe Plant
(Pioneer Corporation)              |  | Kawagoe, Saitama    |  | 414,000                 |  | Cassette car
stereos, Car CD/MD players,Car navigation systems                          
|                                                
|                                                
|                                                
|                                                
|                                                 |  |                     |  |                         |  |                                                                                         
|                                                
|                                                
|                                                
|                                                
|Kofu Plant
(Pioneer Video
Corporation)           |  | Nakakoma, Yamanashi |  | 363,000                 |  | DVDs, DVD-R/RW discs, CDs, Plasma
display panels                                        
|                                                
|                                                
|                                                
|                                                
|                                                 |  |                     |  |                         |  |                                                                                         
|                                                
|                                                
|                                                
|                                                
|Kokubo Plant
(Pioneer Video
Corporation)         |  | Kofu, Yamanashi     |  | 191,000
 [77,000]       |  | ICs, LSIs                                                                               
|                                                
|                                                
|                                                
|                                                
|                                                 |  |                     |  |                         |  |                                                                                         
|                                                
|                                                
|                                                
|                                                
|Ohmori Plant
(Pioneer Corporation)               |  | Ohta, Tokyo         |  | 170,000                 |  | Equipment for cable-TV systems                                                          
|                                                
|                                                
|                                                
|                                                
|                                                 |  |                     |  |                         |  |                                                                                         
|                                                
|                                                
|                                                
|                                                
|Towada Plant
(Towada Electronics
Corporation)    |  | Towada, Aomori      |  | 158,000                 |  | DVD players, DVD-R/RW drives,
Cassette car stereos, Car CD players                      
|                                                
|                                                
|                                                
|                                                
|                                                 |  |                     |  |                         |  |                                                                                         
|                                                
|                                                
|                                                
|                                                
|Yonezawa Plant
(Tohoku Pioneer
Corporation)      |  | Yonezawa, Yamagata  |  | 151,000                 |  | OEL displays, Car speakers, Car
CD players                                              
|                                                
|                                                
|                                                
|                                                
|                                                 |  |                     |  |                         |  |                                                                                         
|                                                
|                                                
|                                                
|                                                
|Tendo the 2nd Plant
(Tohoku Pioneer
Corporation) |  | Tendo, Yamagata     |  | 139,000                 |  | Factory automation systems                                                              

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|                                                           |  |                                |  |                         |  |                                                                 
|---------------------------------------------------------- |  | ------------------------------ |  | ----------------------- |  | ----------------------------------------------------------------
|Name of plant                                              |  |                                |  | Floor Space             |  |                                                                 
|(Name of company                                           |  |                                |  | (square feet)           |  |                                                                 
|which owns the plant)                                      |  | Location                       |  | [of which leased space] |  | Principal products                                              
|                                                           |  |                                |  |                         |  |                                                                 
|                                                           |  |                                |  |                         |  |                                                                 
|                                                          
|                                                          
|                                                          
|                                                          
|Outside Japan                                              |  |                                |  |                         |  |                                                                 
|                                                          
|                                                          
|                                                          
|                                                          
|Mexico Plant
(Pioneer Speakers,
S.A. de C.V.)              |  | Baja California,
Mexico        |  | 301,000                 |  | Speaker systems                                                 
|                                                          
|                                                          
|                                                          
|                                                          
|                                                           |  |                                |  |                         |  |                                                                 
|                                                          
|                                                          
|                                                          
|                                                          
|Thailand Plant(Pioneer
Manufacturing(Thailand) Co., Ltd.)  |  | Ayutthaya, Thailand            |  | 300,000                 |  | Cassette car stereos, Car CD
players, Stereo systems            
|                                                          
|                                                          
|                                                          
|                                                          
|                                                           |  |                                |  |                         |  |                                                                 
|                                                          
|                                                          
|                                                          
|                                                          
|Taiwan Plant
(Pioneer Electronic
(Taiwan) Corp.)           |  | Tao Yuan, Taiwan               |  | 281,000                 |  | Speaker systems                                                 
|                                                          
|                                                          
|                                                          
|                                                          
|                                                           |  |                                |  |                         |  |                                                                 
|                                                          
|                                                          
|                                                          
|                                                          
|Malaysia Plant
(Pioneer Technology
(Malaysia) Sdn. Bhd.)   |  | Johor, Malaysia                |  | 262,000                 |  | Stereo systems, CD players,
Cassette car stereos, Car CD players
|                                                          
|                                                          
|                                                          
|                                                          
|                                                           |  |                                |  |                         |  |                                                                 
|                                                          
|                                                          
|                                                          
|                                                          
|Shanghai Plant
(Shanghai Pioneer Speakers Ltd.)            |  | Shanghai, China                |  | 255,000                 |  | Speaker systems                                                 
|                                                          
|                                                          
|                                                          
|                                                          
|                                                           |  |                                |  |                         |  |                                                                 
|                                                          
|                                                          
|                                                          
|                                                          
|Shanghai Plant
(Pioneer Technology
(Shanghai) Co., Ltd)    |  | Shanghai, China                |  | 233,000                 |  | DVD players, Car tuners, Cassette
car stereos                   
|                                                          
|                                                          
|                                                          
|                                                          
|                                                           |  |                                |  |                         |  |                                                                 
|                                                          
|                                                          
|                                                          
|                                                          
|Guang Dong Plant
(Dongguan Monetech
Electronic Co., Ltd.)  |  | Guang Dong, China              |  | 231,000  [230,000]      |  | Speaker systems                                                 
|                                                          
|                                                          
|                                                          
|                                                          
|                                                           |  |                                |  |                         |  |                                                                 
|                                                          
|                                                          
|                                                          
|                                                          
|California Plant
(Pioneer Electronics
Technology, Inc.)    |  | California, U.S.A.             |  | 185,000                 |  | Projection TVs, Speaker systems                                 
|                                                          
|                                                          
|                                                          
|                                                          
|                                                           |  |                                |  |                         |  |                                                                 
|                                                          
|                                                          
|                                                          
|                                                          
|U.K. Plant
(Pioneer Technology
(U.K.) Ltd.)                |  | West Yorkshire,
United Kingdom |  | 184,000                 |  | Stereo systems, CD players,
Tuners, Digital DBS decoders,       
|                                                          
|                                                          
|                                                          
|                                                          
|                                                           |  |                                |  |                         |  |                                                                 
|                                                          
|                                                          
|                                                          
|                                                          
|Guang Dong Plant
(Pioneer Technology
(Dongguan) Co., Ltd.) |  | Guang Dong, China              |  | 182,000                 |  | DVD-R/RW drives                                                 
|                                                          
|                                                          
|                                                          
|                                                          
|                                                           |  |                                |  |                         |  |                                                                 
|                                                          
|                                                          
|                                                          
|                                                          
|Others (7 plants in Japan and 11 plants outside Japan)     |  | 1,589,000    [52,000]          |  |                        
|                                                           |  |                                |  |                         |  |                                                                 
|Total                                                      |  |                                |  | 7,323,000  [359,000]    |  |                                                                 
|                                                           |  |                                |  |                         |  |                                                                 

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

As of March 31, 2002, we owned our headquarters buildings in Tokyo having an
approximate aggregate floor space of 336,000 square feet. We lease
approximately 34,000 square feet as additional head office space in Tokyo.

We also own an employee training center in Tokyo with an approximate floor
space of 17,000 square feet, and R&D facilities with an approximate aggregate
floor space of 288,000 square feet.

Our sales office buildings in Japan and outside Japan are mainly leased. The
head office buildings of some distribution subsidiaries outside Japan are owned
by us. Land and buildings for the Fukuroi Plant, the Ohio Plant, R&D
facilities, and one of our headquarters buildings with an aggregate book value
of ¥15,978 million were pledged as collateral for certain loans at March 31,
2002.

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




Item 5. Operating and Financial Review and Prospects

Critical accounting policies and estimates

The following analysis of financial condition and results of operations
discusses our consolidated financial statements, which have been prepared in
accordance with U.S. GAAP, except for segment data which is prepared in
accordance with the regulations under the Securities and Exchange Law of Japan.

The preparation of the financial statements requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and the disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of revenues and expenses
during the reporting period. On an on-going basis, management evaluates its
estimates and judgments, including those related to customer incentives, bad
debts, inventories, investments, income taxes, financing operations, warranty
obligations, retirement benefits, and contingencies and litigation. Management
bases its estimates and judgments on historical experience and on various other
factors that are believed to be reasonable under the circumstances, the results
of which form the basis for making judgments about the carrying values of
assets and liabilities that are not readily apparent from other sources.
Actual results may differ from these estimates due to the inherent uncertainty
involved in making estimates.

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We believe the following critical accounting
policies, among others, affect our
more significant judgments and estimates used in the preparation of our
consolidated financial statements.

Revenue recognition

We record estimated reductions to revenue for customer incentive offerings.
Should a greater proportion of customers redeem incentives than we estimate,
additional reductions to revenue may be required.


Allowances for doubtful accounts

We maintain allowances for doubtful accounts for estimated losses resulting
from the inability of our customers to make required payments. If the
financial condition of our customers were to deteriorate, resulting in an
impairment of their ability to make payments, additional allowances may be
required.


Warranties

We provide for the estimated cost of product warranties at the time revenue is
recognized. While we engage in extensive product quality programs and
processes, including actively monitoring and evaluating the quality of our
component suppliers, our warranty obligation is affected by product failure
rates and service costs incurred in correcting a product failure. Should
actual product failure rates or service costs differ from our estimates,
revisions to the estimated warranty liability may be required.


Inventories

We write down inventory for estimated obsolescence equal to the difference
between the cost of inventory and the estimated market value based upon
assumptions about future demand and market conditions. If actual future demand
or market conditions are less favorable than those projected by the management,
additional inventory write-downs may be required.


Impairment of investments

We hold minority interests in customers and financial institutions for the
purpose of maintaining long term relationships, some of which are in publicly
traded companies whose share prices are highly volatile and some of which are
in non-publicly traded companies whose value is difficult to determine. We
record an investment impairment charge when we believe an investment has
experienced a decline in value that is other than temporary. Future adverse
changes in market conditions or poor operating results of underlying
investments could result in losses or an inability to recover the carrying
value of the investments that may not be reflected in an investments current
carrying value, thereby possibly requiring an impairment charge in the future.


Deferred tax assets

We record a valuation allowance to reduce deferred tax assets to the amount
that we believe is more likely than not to be realized. While we have
considered future taxable income and ongoing prudent and feasible tax planning
strategies in assessing the need for the valuation allowance, in the event that
we determine that we will not be able to realize all or part of the net
deferred tax assets in the future, an adjustment to the deferred tax assets
would be charged to income in the period such determination is made. Likewise,
should we determine that we will be able to realize deferred tax assets in the
future in excess of the net recorded amount, an adjustment to the deferred tax
assets would increase income in the period such determination was made.


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Pension benefit costs

Employee retirement benefit costs and obligations are dependent on assumptions
used in the actuarial calculations. These assumptions include discount rates,
future compensation levels, return on assets, retirement rates and mortality
rates which are based upon current statistical data, as well as long-term
return on plan assets and other factors. If actual results differ from the
assumptions or assumptions are changed, the resulted effects are accumulated
and systematically recognized over future periods and, therefore, generally
affect recognized expense and the recorded obligations in future periods.


Overview

We classify our business groups into three segments: Electronics, AV
Software and Patent Licensing. We further break down our Electronics
segment into three product groups: Audio/Video, Car Electronics, and Others.
Electronics is our largest segment by revenue, accounting for 90.8% of
operating revenue (net sales plus royalty revenue) in fiscal 2002. In fiscal
2002, Audio/Video group, Car Electronics group and Others accounted for 29.2%,
39.1% and 22.5%, respectively, of operating revenue. The AV Software and
Patent Licensing segments accounted for 6.6% and 2.6%, respectively, of
operating revenue in fiscal 2002. Our primary markets for our products based
on operating revenues from unaffiliated customers for fiscal 2002 were Japan
(36%), North America (30%) and Europe (20%).

Electronics

The electronics industry is characterized by rapid technological changes, and
our ability to introduce attractive new products to the market significantly
affects the operating results of this segment. Sales of new products such as
DVD players, plasma displays, car navigation systems, digital broadcast set-top
boxes and DVD-R/RW drives for PC use have grown rapidly and in fiscal 2002
sales of such new products accounted for approximately 30% of our total sales.
We will continue to concentrate our resources on these strategic products to
expand sales even further.

The electronics industry is also characterized by continuing sales price
decreases in most product categories, making it important for us to continually
improve the efficiency of our manufacturing, distribution, service and
administrative functions. As an example of our effort, in the past five years,
we have increased the percentage of our manufacturing outside Japan from 48% to
62% in terms of the yen value of cost of goods produced, mainly by expanding
production facilities in Southeast Asia and China.

AV Software

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

Patent Licensing

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

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A. Operating results

Fiscal 2002 compared with fiscal 2001

Summary

During fiscal 2002 which ended March 31, 2002, economic conditions continued
to slow worldwide, with demand for Information Technology-related products
weakening, a situation that was made worse by the terrorist attacks on
September 11, 2001. As for foreign exchange markets, the average value of the
yen during fiscal 2002 was approximately 12% lower against the U.S. dollar, and
approximately 9% lower against the euro, compared to fiscal 2001. Despite
these circumstances, operating revenue, the sum of net sales and royalty
revenue, for fiscal 2002 reached an historic high, at ¥668.9 billion, up 3.4%
from fiscal 2001. Operating income was ¥21.3 billion, a 37.1% decrease from
¥33.8 billion recorded in fiscal 2001, and net income came to ¥8.0 billion,
down 56.0% from ¥18.3 billion posted in fiscal 2001.

Impact of foreign exchange fluctuations

Assuming yen exchange rates had remained unchanged from fiscal 2001, estimated
operating revenue and operating income would have been lower by ¥43.5 billion
and ¥14.4 billion, respectively. Such estimates are obtained by applying the
yens average exchange rates in fiscal 2001 to foreign currency-denominated
operating revenue, cost of sales and selling, general and administrative
(SGA) expenses, and do not account for the effect of changes to sales prices
implemented in accordance with foreign exchange fluctuations.

Net sales and royalty revenue

Net sales amounted to ¥651.3 billion, a 4.0% increase over fiscal 2001. Sales
in Japan came to ¥242.4 billion, up 5.0% from fiscal 2001, and overseas net
sales increased 3.4% to ¥408.9 billion.

Electronics segment sales increased 3.6% over fiscal 2001, amounting to ¥607.5
billion. Highlights of the segments results, by product group, are as follows:



| |  |  | Audio/Video (AV) group sales were up 2.4% to ¥195.7 billion,
primarily as a result of increased sales of plasma displays for home
use, DVD recorders and DVD players. Plasma display sales grew 16% in
terms of yen, and 43% in terms of units, which increased from 35
thousand to 50 thousand. In Japan, sales increased 1.2% to ¥51.2
billion, which is largely attributable to an increase in sales of
plasma displays for home use and a rise in sales of DVD recorders.
These increases more than offset a large decrease in compact stereo
system sales. Overseas, sales increased by 2.8% to ¥144.5 billion
primarily as a result of the yens depreciation and increased sales
of plasma displays for home use and DVD home theater systems in North
America and Europe.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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| |  |  | Car Electronics group sales grew 6.7% to ¥261.2 billion, mainly
as a result of increased sales to consumer markets. In Japan, sales
increased 6.9% to ¥96.1 billion, although car audio product sales to
automobile manufacturers fell by approximately 10%. The increase is
attributed to successful consumer market sales of advanced hard disk
drive (HDD) and affordable, easy-to-operate DVD car navigation
systems. Revenue from car navigation systems grew almost 80%.
Overseas, sales also increased, rising by 6.5% to ¥165.1 billion,
despite a drop in sales in Europe which was attributed to intensified
competition. This net increase was primarily due to the impact of the
yens depreciation and robust sales of certain products in North
America. Most notably, car audio products that incorporate radio tuners
for digital satellite broadcasting, which started in the U.S. in
fiscal 2002,
sold well.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | Others sales in fiscal 2002 were comparable with fiscal 2001 at
¥150.5 billion. This was the net result of increased sales of
DVD-R/RW drives both in Japan and overseas, which were offset by a
decline in sales of cellular phones and digital cable-TV set-top
boxes. In Japan, sales increased 1.2% to ¥63.6 billion as sales of
DVD-R/RW drives to personal computer (PC) makers increased while
sales of cellular phones declined. Overseas, fiscal 2002 sales were
consistent with those for fiscal 2001 at ¥87.0 billion, reflecting
the yens depreciation and a large increase in sales of DVD-R/RW
drives to PC makers, which offset lower sales in North America of
digital cable-TV set-top boxes and speaker devices for cellular
phones.                                                                                                                                                                       

AV Software segment sales increased 9.8% from fiscal 2001 to ¥43.8 billion.
Sales in Japan rose by 14.0% to ¥31.6 billion thanks to increased DVD software
sales, while overseas sales were almost the same as for fiscal 2001 at ¥12.3
billion. In North America, DVD software sales rose, while animation
videocassette sales dropped.

Royalty revenue from the Patent Licensing segment decreased 14.3% to ¥17.6
billion, compared to that of fiscal 2001. This decrease was attributable to a
reduction in royalty revenue from digital playback/recording products such as
CD-ROM and CD-R drives, as PC market sales slumped.

Cost of sales and selling, general and administrative expenses

Cost of sales increased to ¥465.3 billion from fiscal 2001s ¥447.4 billion and
cost of sales as a percentage of operating revenue also increased 0.5
percentage points to 69.6%. However, cost of sales as a percentage of net
sales remained the same as in fiscal 2001 at 71.4%. The favorable effect of a
weaker yen against the U.S. dollar and the euro on gross profit margin was
offset by the unfavorable impact of declining product prices in our major
product categories, including DVD players.

SGA expenses of ¥182.3 billion in fiscal 2002 increased by 9.9% or ¥16.4
billion over fiscal 2001. Advertising and sales promotion expenses increased
as a result of vigorous marketing activities worldwide to promote the Pioneer
brand name and our strategic products such as plasma displays. Royalty
expenses related to digital technologies utilized in our products such as DVD
products increased as well. Also, expenses incurred in connection with
restructuring of some production sites and withdrawal from certain businesses
facing unfavorable prospects account for a part of the increase in SGA
expenses. For example, approximately ¥1.6 billion in costs were incurred in
connection with the closure of the Hiwada plant in Japan, because of the
transfer of production sites to China, for special voluntary termination
benefits and other plant closure related expenses. In addition,
personnel-related expenses increased as costs for pension plans in Japan and
overseas increased. The increases in pension costs were mainly attributable to
lower returns on pension plan assets both in Japan and overseas. The ratio of
SGA expenses to operating revenue increased 1.7 percentage points to 27.3%.

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R&D expenditures, which are included in cost of sales and SGA expenses,
increased 5.2% to ¥39.1 billion, representing 5.8% of operating revenue. The
increase primarily reflected R&D activities in developing next-generation
large-capacity optical disc system and new home network control system.

Operating income

Operating income for fiscal 2002 was ¥21.3 billion, a 37.1% decrease from ¥33.8
billion recorded in fiscal 2001. The decrease primarily reflected lower
royalty revenue and increased SGA expenses as noted above. Operating income
for the Electronics segment decreased to ¥2.7 billion from ¥13.8 billion, which
was attributed to increased SGA expenses such as advertising and royalty
expenses. The AV software segment posted ¥1.8 billion in operating income for
fiscal 2002, compared with ¥0.1 billion income in fiscal 2001. This change
primarily reflected increased sales of DVDs. In the Patent Licensing segment,
operating income decreased to ¥16.8 billion from ¥19.7 billion, mainly due to a
decline of royalty revenue from digital playback/recording products such as
CD-ROM and CD-R drives, reflecting a sluggish PC market and declining unit
prices.

Other income (expenses)

Other income, on a net basis, decreased from income of ¥0.4 billion in fiscal
2001 to a net expense of ¥5.9 billion in fiscal 2002. The net change was
attributable to several factors. First, a ¥1.6 billion gain was realized on
the sale of investment securities in fiscal 2001, while there was no material
sale of investment securities in fiscal 2002. Second, an additional loss of
¥1.0 billion incurred on the write-down of investment securities, reflecting
the sharp decline of stock prices experienced in Japan. Third, a net loss was
realized in fiscal 2002 on the sale of fixed assets of ¥3.3 billion, whereas a
similar net loss in fiscal 2001 amounted to ¥0.9 billion. The losses noted
were offset by a net gain realized on foreign exchange of ¥0.3 billion, whereas
the prior year experienced net losses from foreign exchange of ¥1.2 billion.
The swing of the foreign exchange adjustments was due to a decrease in losses
related to derivative financial instruments. Although we utilize derivative
financial instruments to minimize foreign currency risk, none of these
derivatives have been designated as hedging instruments under SFAS No.133 at
March 31, 2002. Therefore, unrealized gains and losses on such instruments are
recognized currently in earnings as a part of foreign exchange gain (loss).
Lastly, we incurred net interest (interest income, less interest expense)
expense of ¥0.4 billion in fiscal 2002 as compared with net interest income of
¥0.6 billion in fiscal 2001. This change to net interest expense was
attributed to declining interest rates in the U.S. financial market.

Income before income taxes

Income before income taxes for fiscal 2002 decreased 55.1% to ¥15.3 billion
from ¥34.2 billion for fiscal 2001, as a result of the above factors.

Income taxes

Income taxes as a percentage of pre-tax income (the effective tax rate) was
43.8%, as compared to 41.9% in fiscal 2001. The normal statutory tax rate in
Japan is 42.0%.

Minority interest in income of subsidiaries

Minority interest in income of subsidiaries, which primarily consists of the
earnings of Tohoku Pioneer Corporation and its subsidiaries attributable to its
minority shareholders, amounted to ¥0.5 billion compared with ¥1.4 billion in
fiscal 2001.

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Equity in earnings (losses) of affiliated companies

Equity in earnings (losses) of affiliated companies for fiscal 2002 resulted in
a loss of ¥0.1 billion, substantially unchanged from fiscal 2001.

Net income

Net income for fiscal 2002 was ¥8.0 billion, a 56.0% decrease from fiscal 2001
net income of ¥18.3 billion. Basic net income per share of common stock was
¥44.70, compared with fiscal 2001s ¥101.76. Diluted net income per share was
¥44.69 compared with fiscal 2001s ¥101.70.

Fiscal 2001 compared with fiscal 2000

Summary

In the first half of fiscal 2001 ended March 31, 2001, economic conditions in
the U.S. and Europe were generally favorable while conditions in Japan were
sluggish. In the second half of fiscal 2001, the U.S. economy began to weaken
and subsequently conditions in Europe and Japan also deteriorated. As for
foreign exchange markets, the average value of the yen during fiscal 2001 was
1% higher against the U.S. dollar and 15% higher against the euro, when
compared to levels of fiscal 2000. Despite such economic conditions, we
recorded our highest-ever operating revenue at ¥647.1 billion, up 5.1% from
fiscal 2000. Operating income was ¥33.8 billion, a 43.3% increase over the
¥23.6 billion recorded in fiscal 2000, while net income amounted to ¥18.3
billion compared to ¥13.1 billion posted in fiscal 2000, a 39.9% increase.

Impact of foreign exchange fluctuations

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

Net sales and royalty revenue

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

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



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

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

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

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Cost of sales and selling, general and administrative expenses

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

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

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

Operating income

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

Other income (expenses)

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

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##### Table of Contents



Income before income taxes

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

Income taxes

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

Minority interest in income of subsidiaries

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

Equity in earnings (losses) of affiliated companies

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

Net income

Net income was ¥18.3 billion, a 39.9% increase over fiscal 2000s ¥13.1
billion. Basic net income per share of common stock was ¥101.76, compared with
fiscal 2000s ¥72.81. Diluted net income per share was ¥101.70, compared with
fiscal 2000s ¥72.80.

37



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##### Table of Contents



Segment Information

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

Business Segments

|                                                 |                        |       |         |                           |         |             |        |                  |        |              |        |              |        |    |         |               |       |   |         |         |         | 
|------------------------------------------------ | ---------------------- | ----- | ------- | ------------------------- | ------- | ----------- | ------ | ---------------- | ------ | ------------ | ------ | ------------ | ------ | -- | ------- | ------------- | ----- | - | ------- | ------- | ------- | 
|                                                 |                        |       |         | Millions of yen          
|                                                 |                        |       |         |                          
|                                                 |                        |       |         | Year ended March 31, 2002
|                                                 |                        |       |         |                          
|                                                 |                        |       |         |                           |         |             |        |                  |        |              |        |              |        |    |         | Corporate and |       |   |         |        
|                                                 |                        |       |         | Electronics               |         | AV software |        | Patent Licensing |        | Eliminations |        | Consolidated
|                                                 |                        |       |         |                           |         |             |        |                  |        |              |        |             
|Operating revenue:                               |                        |       |         |                           |         |             |        |                  |        |              |        |              |        |    |         |               |       |   |         |        
|                                                
|                                                
|                                                
|                                                
|                                                 | Unaffiliated customers |       | ¥       | 607,475                   |         |             | ¥      | 43,836           |        |              | ¥      | 17,588       |        |    |         |              |       |   | ¥       | 668,899 |        
|                                                
|                                                
|                                                
|                                                
|                                                 | Inter-segment          |       |         | 847                       |         |             |        | 5,189            |        |              |        | 2,208        |        |    | (¥      | 8,244         | )     |   |         |        |        
|                                                 |                        |       |         |                           |         |             |        |                  |        |              |        |              |        |    |         |               |       |   |         |         |         | 
|                                                 |                        | Total |         | ¥                         | 608,322 |             |        | ¥                | 49,025 |              |        | ¥            | 19,796 |    |         | (¥            | 8,244 | ) |         | ¥       | 668,899 | 
|                                                
|                                                
|                                                
|                                                
|Operating income                                 |                        | ¥     | 2,663   |                           |         | ¥           | 1,839  |                  |        | ¥            | 16,837 |              |        | (¥ | 58      | )             |       | ¥ | 21,281  |        
|                                                
|                                                
|                                                
|                                                
|Identifiable assets                              |                        | ¥     | 497,387 |                           |         | ¥           | 31,665 |                  |        | ¥            | 2,959  |              |        | ¥  | 113,118 |               |       | ¥ | 645,129 |        
|                                                
|                                                
|                                                
|                                                
|Depreciation and
amortization                    |                        | ¥     | 32,746  |                           |         | ¥           | 3,617  |                  |        | ¥            | 419    |              |        |    |        |               |       | ¥ | 36,782  |        
|                                                
|                                                
|                                                
|                                                
|Capital
expenditures
(additions to fixed assets) |                        | ¥     | 43,308  |                           |         | ¥           | 3,702  |                  |        | ¥            | 58     |              |        |    |        |               |       | ¥ | 47,068  |        

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



|      |  |                                                                                                                                                                                                                 
|----- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Note: |  | Electronics includes the manufacture and sale of AV (audio/video) equipment for consumer and commercial use, such as
stereo systems, DVD players, DVD recorders, plasma displays and car electronics products.
|     
|      |  | AV Software includes the production, manufacture and sales of DVDs, laser discs,
compact discs and other AV media.                                                                                            
|     
|      |  | Patent Licensing includes the licensing of patents related to optical disc technology.                                                                                                                        

38



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Geographic Segments

|                                                 |                        |       |         |                           |         |               |         |         |         |               |        |              |         |              |        |         |         |    |        |               |         |   |         |         |         | 
|------------------------------------------------ | ---------------------- | ----- | ------- | ------------------------- | ------- | ------------- | ------- | ------- | ------- | ------------- | ------ | ------------ | ------- | ------------ | ------ | ------- | ------- | -- | ------ | ------------- | ------- | - | ------- | ------- | ------- | 
|                                                 |                        |       |         | Millions of yen          
|                                                 |                        |       |         |                          
|                                                 |                        |       |         | Year
ended March 31, 2002
|                                                 |                        |       |         |                          
|                                                 |                        |       |         |                           |         |               |         |         |         |               |        |              |         |              |        |         |         |    |        | Corporate and |         |   |         |        
|                                                 |                        |       |         | Japan                     |         | North America |         | Europe  |         | Other Regions |        | Eliminations |         | Consolidated
|                                                 |                        |       |         |                           |         |               |         |         |         |               |        |              |         |             
|Operating revenue:                               |                        |       |         |                           |         |               |         |         |         |               |        |              |         |              |        |         |         |    |        |               |         |   |         |        
|                                                
|                                                
|                                                
|                                                
|                                                 | Unaffiliated customers |       | ¥       | 255,352                   |         |               | ¥       | 199,059 |         |               | ¥      | 131,925      |         |              | ¥      | 82,563  |         |    |        |              |         |   | ¥       | 668,899 |        
|                                                
|                                                
|                                                
|                                                
|                                                 | Inter-area             |       |         | 266,487                   |         |               |         | 7,403   |         |               |        | 416          |         |              |        | 157,780 |         |    | (¥     | 432,086       | )       |   |         |        |        
|                                                 |                        |       |         |                           |         |               |         |         |         |               |        |              |         |              |        |         |         |    |        |               |         |   |         |         |         | 
|                                                 |                        | Total |         | ¥                         | 521,839 |               |         | ¥       | 206,462 |               |        | ¥            | 132,341 |              |        | ¥       | 240,343 |    |        | (¥            | 432,086 | ) |         | ¥       | 668,899 | 
|                                                
|                                                
|                                                
|                                                
|Operating income (loss)                          |                        | ¥     | 5,713   |                           |         | ¥             | 11,266  |         |         | (¥            | 122    | )            |         | ¥            | 6,323  |         |         | (¥ | 1,899  | )             |         | ¥ | 21,281  |        
|                                                
|                                                
|                                                
|                                                
|Identifiable assets                              |                        | ¥     | 292,740 |                           |         | ¥             | 127,963 |         |         | ¥             | 59,357 |              |         | ¥            | 97,006 |         |         | ¥  | 68,063 |               |         | ¥ | 645,129 |        
|                                                
|                                                
|                                                
|                                                
|Depreciation and
amortization                    |                        | ¥     | 25,108  |                           |         | ¥             | 3,115   |         |         | ¥             | 2,262  |              |         | ¥            | 6,297  |         |         |    |       |               |         | ¥ | 36,782  |        
|                                                
|                                                
|                                                
|                                                
|Capital expenditures
(additions to fixed assets) |                        | ¥     | 31,049  |                           |         | ¥             | 2,164   |         |         | ¥             | 1,428  |              |         | ¥            | 12,427 |         |         |    |       |               |         | ¥ | 47,068  |        

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

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

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##### Table of Contents



B. Liquidity and capital resources

Cash Flows

Fiscal 2002 compared with fiscal 2001

Net cash provided by operating activities was ¥57.1 billion, a ¥5.9 billion
increase compared to fiscal 2001, despite a decrease in net income. This
increase mainly reflected changes in operating assets and liabilities. Trade
payables increased as a result of increased purchase of materials particularly
for DVD-R/RW drives and car navigation systems, although overall inventory
decreased. The decrease reflected our continued efforts to control and reduce
inventory levels. Increased notes and accounts receivable reflected strong
sales in the last few months of fiscal 2002, compared to the equivalent period
of fiscal 2001.

Net cash used in investing activities was ¥51.1 billion for fiscal 2002, a ¥9.6
billion increase compared to fiscal 2001. The difference was partly the result
of an increase in payments made in acquiring fixed assets, reflecting
investments to complete the expansion of plasma display production facilities
and two new plants in China. The remainder of the increase is primarily
attributable to decreased proceeds from the sale of fixed assets and
available-for-sale securities.

Net cash used in financing activities was ¥4.2 billion in fiscal 2002, compared
with ¥46.6 billion used in fiscal 2001. The significant decrease is primarily
attributable to the redemption of ¥30.0 billion in unsecured bonds, which
matured in 2001, and the reduction of other short-term and long-term
borrowings.

As a result of these activities and the effect of exchange rate changes on cash
and cash equivalents of overseas subsidiaries, cash and cash equivalents
increased by ¥6.0 billion to ¥127.1 billion at the end of fiscal 2002, from
¥121.1 billion at the end of fiscal 2001.

Fiscal 2001 compared with fiscal 2000

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

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

40



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##### Table of Contents



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

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

Capital requirements

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

Purchase commitments outstanding as of March 31, 2002 for property, plant and
equipment and advertising were ¥2.9 billion. This amount includes part of ¥40
billion in capital expenditure planned for fiscal 2003, primarily for
production facilities and production molds. In July 2002, we announced a plan
to expand production capacity for plasma display panels further. This plan will
require additional ¥5 billion for capital expenditure in fiscal 2003 and ¥11
billion in fiscal 2004.

As for other contractual capital requirements, long-term debt maturing during
fiscal 2003 is ¥2.6 billion, which is significantly less than ¥7.6 billion paid
for long-term debt in fiscal 2002. The net minimum rental payment under
outstanding noncancelable operating leases is ¥3.5 billion.

Financial Management

At present, funds required for operating capital and capital expenditure are
financed through cash generated through operation or debt financing. With
regard to debt financing, short-term debt financing, with a maturity of one
year or less, is utilized to fund operating capital requirements. Therefore,
in principle, such short-term borrowing is arranged locally in the currency in
which each consolidated company carries out its operation. As of March 31,
2002, short-term borrowings of ¥45.9 billion comprised bank loans in 10
different currencies, principally Japanese yen and euro. On the other hand,
long-term borrowing to finance long-term funding requirements such as
investment in production facilities is, in principle, arranged in Japan on a
fixed interest rate basis. As of March 31, 2002, substantially all of the
long-term debt of ¥38.2 billion, including the portion due within one year, was
fixed rate yen borrowings and was comprised of ¥12.3 billion loans principally
from banks, ¥15.0 billion unsecured bonds due 2005, ¥10.0 billion unsecured
bonds due 2008, and capital lease obligations and other loans arranged locally.

We believe that our sound financial position and ability to generate positive
operating cash flows, together with an unused credit line of ¥228.1 billion,
provide sufficient resources to fund future requirements for operating capital
and for capital expenditures to sustain the growth of Pioneer.

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##### Table of Contents



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

Our R&D activities have played a crucial role in the development of our
business. Our R&D program currently centers on optical recording/playback,
flat-panel displays, digital signal processing, information/communications, and
core LSIs. In fiscal 2000, 2001 and 2002, our R&D expenses were ¥33,265
million, ¥37,105 million and ¥39,050 million, respectively, or 5.4%, 5.7% and
5.8%, respectively of our operating revenue. We plan to continue to spend more
than 5% of operating revenue on R&D each year.

As at March 31, 2002, approximately 3,500 employees worldwide were engaged in
R&D and product and production technique improvement.

Our R&D activities are carried out mainly in Japan at The Corporate Research &
Development Laboratories, as well as the AV & Network Development Center, the
Information & Communication Development Center, Optical Technology Center and
PDP Development Center. At two of our overseas wholly-owned subsidiaries, we
are also actively engaged in the development of system software related to
digital TV and of digital network technologies at Pioneer Research Center USA,
Inc., while at Pioneer Digital Design Centre, Ltd. in the UK, we are developing
a digital TV set-top box utilizing multimedia home platform technology.
Product improvement activities are the responsibility of the production
engineering departments at our various manufacturing facilities both in Japan
and overseas.

Next-Generation Large-Capacity Rewritable Optical Disc System

Pioneer has made progress on a larger-capacity optical disc using blue-violet
laser for over 2-hour digital high-definition video recording. In fiscal 2002,
Pioneer developed a prototype for a 5-inch (12cm)-diameter (CD- and DVD-sized)
phase-change optical disc system capable of storing 23.3 gigabytes (GB) of data
on a single-sided disc for recording and playback. This debuted and attracted
considerable attention at CEATEC (Combined Exhibition of Advanced Technologies)
JAPAN in Tokyo in October 2001, and at the Consumer Electronics Show in Las
Vegas in January 2002. The Company also developed the worlds first system
using read-only discs that hold up to 25 GB on one side, or 50 GB on one
dual-layered side. Pioneer publicized this breakthrough at international
conferences such as ODS (Optical Data Storage) 2001 and ISOM (International
Symposium on Optical Memory) 2001. In February 2002, a consortium of nine
companies, including Pioneer, jointly announced establishment of a unified disc
format, based on the Pioneer technologies mentioned above and other consortium
members technologies. This development aims to promote the next-generation
large-capacity rewritable optical disc format called Blu-ray Disc: a
versatile new higher-density 5-inch-diameter disc for 23.3-, 25- or 27-GB
recording, rewriting and playback on one side using blue-violet laser.


D. Trend information

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

Electronics business segment

(i)  Audio/Video group

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

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DVD products.As a result of the dramatic expansion of the market for DVD
players, they have become commodity products and suffer from significant price
competition. DVD was one of our fastest growing product areas during
the past several fiscal years, and we believe we are well-positioned to face
the competition, because of our accumulated expertise through LD development,
our expected reduction of costs as a result of shifting production to China and
introduction of new innovative products. There are, however, a number of
competing digital recording disc formats: the DVD-RW format commercialized by
us, Sony, Sharp and others, the DVD-RAM format commercialized by Matsushita,
Hitachi, Toshiba and others, and the DVD+RW format commercialized by Philips
and others.

Plasma displays.The large-screen display market for plasma displays has been
expanding in recent years, and several manufacturers have started mass
production of plasma displays that compete with ours. Each company is
increasing investment and expanding production. As the number of companies
entering this market increases, it is expected that the unit price will
decrease due to intensifying competition. Under such circumstances, we are
expanding production, while introducing new products with higher resolutions.

(ii)  Car electronics group

Severe competition in the car electronics business worldwide has led to strong
downward pressure on prices. However, the popularity of car navigation
products, which we believe is a strong area of ours, continues to increase. In
June 2001 we introduced in Japan a new car navigation system incorporating a
hard disk drive (HDD), which features substantially faster access times. In
October 2001, we also introduced in Japan affordably priced DVD models. These
new models are receiving favorable acceptance from our customers for its
attractive and convenient features. Pioneer is still leading the car
navigation market; competitors, however, have started commercializing models of
the same types.

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

(iii)  Others group

DVD-R/RW drives.In the computer industry, severe pricing pressure, strong
demand for higher-performance products and short product life are
characteristic. To counter these trends, we are focusing on high-value added
products such as DVD-R/RW drives, both for PC makers and for the consumer
market. The DVD-R/RW drives can record both on a write-once blank DVD-R disc
and a rewritable blank DVD-RW disc up to seven times as much data as that of a
CD-R or CD-RW disc. There are other competing formatsthe DVD-RAM format and
the DVD+RW formatin the drive market as well.

Set-top boxes. Recently, in both terrestrial and satellite broadcasting,
digitalization is becoming more popular throughout the world. With respect to
this trend, we put emphasis on developing and marketing digital models. In
fiscal 2000 we started shipping digital cable-TV set-top boxes in the U.S. We
have also been providing digital DBS set-top boxes in Europe since fiscal 1998,
and in fiscal 2001 we started distributing digital DBS set-top boxes in Japan.

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OEL displays. With the entry of other companies, market competition in OEL
displays is becoming even more intense, while each company is proceeding in the
development of full-color versions. To meet the competition, we have created
an alliance with Semiconductor Energy Laboratory Co., Ltd. and Sharp
Corporation in fiscal 2001, and have developed the active-matrix full-color OEL
displays since then.

AV software business segment

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

Patent licensing segment

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

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

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Item 6. Directors, Senior Management and Employees

A. Directors and senior management

Pioneers Directors, Executive Officers and Corporate Auditors as of July 1,
2002, and their pertinent information, such as position and business
experience, are as follows:

Directors

|                                 |  |                                                                                                                                                                                                                                   |  |                                                                                                                                                                                                                                                     
|-------------------------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Name                             |  | Current Position                                                                                                                                                                                                                  |  |                                                                                                                                                                                                                                                     
|(Date of birth)                  |  | (Month and year of expiration)                                                                                                                                                                                                    |  | Prior Position                                                                                                                                                                                                                                      
|                                 |  |                                                                                                                                                                                                                                   |  |                                                                                                                                                                                                                                                     
|Kanya Matsumoto
(June 12, 1930)  |  | Chairman and Representative Director of
Pioneer
(June 2004)                                                                                                                                                                       |  | June 1996:
Vice Chairman and Representative
Director of Pioneer                                                                                                                                                                                     
|                                
|                                
|                                
|                                
|                                
|Kaneo Ito
(Apr. 30, 1936)        |  | President and Representative Director of
Pioneer
(June 2004)                                                                                                                                                                      |  | June 1991:
Senior Managing Director and
Representative Director of
Pioneer, and General Manager of
International Business Group; in
charge of overseas operations and
Public Relations Division of
Pioneer                                          
|                                
|                                
|                                
|                                
|                                
|Yoshimichi Inada
(Sept. 8, 1936) |  | Executive Vice President and
Representative Director of Pioneer; in
charge of technologies, production and
quality control in general; in charge of
Components Business Division and
Strategic IT Division of Pioneer
(June 2003) |  | June 2001:
Executive Vice President and
Representative Director of
Pioneer; in charge of
technologies, production and
quality control in general; in
charge of Components Business
Division, Procurement Center and
Strategic IT Division of Pioneer
|                                
|                                
|                                
|                                
|                                
|Katsuhiro Abe
(Nov. 16, 1936)    |  | Executive Vice President and
Representative Director of Pioneer; in
charge of administration and export
management in general of Pioneer
(June 2003)                                                                              |  | June 2001:
Senior Managing Director and
Representative Director of
Pioneer; in charge of
administration and export
management in general and General
Manager of Corporate Planning
Division of Pioneer                                              
|                                
|                                
|                                
|                                
|                                
|Akira Niijima
(Mar. 9, 1944)     |  | Senior Managing Director of Pioneer and
President of Pioneers Home Entertainment
Company
(June 2003)                                                                                                                             |  | Jan. 2001:
Managing Director of Pioneer and
President of Pioneers Home
Entertainment Company                                                                                                                                                       

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|                                   |  |                                                                                                                                                                                                                                         |  |                                                                                                                                                                                                                                                                        
|---------------------------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Name                               |  | Current Position                                                                                                                                                                                                                        |  |                                                                                                                                                                                                                                                                        
|(Date of birth)                    |  | (Month and year of expiration)                                                                                                                                                                                                          |  | Prior Position                                                                                                                                                                                                                                                         
|                                   |  |                                                                                                                                                                                                                                         |  |                                                                                                                                                                                                                                                                        
|Takashi Kobayashi
(Sept. 27, 1940) |  | Senior Managing Director of Pioneer; in
charge of Corporate Communications
Division, Customer Satisfaction Planning
and Coordination Division, Intellectual
Property Division, and Business
Development Division of Pioneer
(June 2003) |  | Apr. 2000:
Managing Director of Pioneer; in
charge of Corporate Communications
Division, Customer Satisfaction
Planning and Coordination
Division, Intellectual Property
Division, Division of
Environmental Preservation, and
Business Development Division of
Pioneer
|                                  
|                                  
|                                  
|                                  
|                                  
|Tadahiro Yamaguchi
(Mar. 24, 1946) |  | Managing Director of Pioneer and
Executive Vice President of Pioneers
Home Entertainment Company (in charge of
technologies, production and quality
control)
(June 2003)                                                               |  | Nov. 2001:
Director of Pioneer and Executive
Vice President of Pioneers Home
Entertainment Company (in charge
of technologies, production and
quality control)                                                                                                        
|                                  
|                                  
|                                  
|                                  
|                                  
|Satoshi Matsumoto
(Apr. 15, 1954)  |  | Managing Director of Pioneer and General
Manager of Division of Environmental
Preservation of Pioneer
(June 2004)                                                                                                                       |  | June 1998:
Director of Pioneer and General
Manager of Division of
Environmental Preservation of
Pioneer                                                                                                                                                                
|                                  
|                                  
|                                  
|                                  
|                                  
|Hiroshi Aiba
(Sept. 15, 1940)      |  | Director of Pioneer and General Manager
of External Relations Division of Pioneer
(June 2003)                                                                                                                                           |  | Apr. 2000:
Director of Pioneer and General Manager of
Business Systems Division of
Pioneer                                                                                                                                                                             
|                                  
|                                  
|                                  
|                                  
|                                  
|Shinji Yasuda
(June 10, 1945)      |  | Director of Pioneer and Managing Director
of Pioneer China Holding Co., Ltd.
(June 2003)                                                                                                                                                |  | July 2000:
Director of Pioneer; in charge of China
Project of Pioneer                                                                                                                                                                                                  
|                                  
|                                  
|                                  
|                                  
|                                  
|Koichi Shimizu
(Feb. 3, 1944)      |  | Director of Pioneer and General Manager
of Production Management and Coordination
Division, and of
Procurement Center of Pioneer
(June 2004)                                                                                            |  | June 2001:
Senior Executive Officer of
Pioneer and Managing Director of
Pioneer Electronics Asiacentre
Pte. Ltd.                                                                                                                                                       
|                                  
|                                  
|                                  
|                                  
|                                  
|Tatsuhiro Ishikawa
(Apr. 4, 1939)  |  | Director of Pioneer
(June 2004)                                                                                                                                                                                                         |  | Dec. 2001 to present:
Attorney-at-Law                                                                                                                                                                                                                                  

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Executive Officers

|                                  |  |                                                                                                                                                         |  |                                                                                                                                               
|--------------------------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------
|Name                              |  | Current Position                                                                                                                                        |  |                                                                                                                                               
|(Date of birth)                   |  | (Month and year of expiration)                                                                                                                          |  | Prior Position                                                                                                                                
|                                  |  |                                                                                                                                                         |  |                                                                                                                                               
|Kazunori Yamamoto
(Oct. 21, 1942) |  | Senior Executive Officer of Pioneer and
President of Pioneer North America, Inc.
and President of Pioneer Electronics
(USA) Inc.
(June 2003)            |  | June 1999:
Executive Officer of Pioneer and
President of Pioneer North
America, Inc.                                                          
|                                 
|                                 
|                                 
|                                 
|                                 
|Shungo Minato
(Apr. 11, 1943)     |  | Senior Executive Officer of Pioneer and
Chairman and Managing Director of Pioneer
Europe NV 
(June 2003)                                                |  | June 1999:
Executive Officer of Pioneer and
Chairman and Managing Director of
Pioneer Europe NV                                               
|                                 
|                                 
|                                 
|                                 
|                                 
|Masaru Saotome
(Aug. 20, 1944)    |  | Senior Executive Officer of Pioneer and
Executive Vice President of Pioneers
Home Entertainment Company (in charge of
sales and marketing)
(June 2003) |  | June 1999:
Executive Office of Pioneer and
Executive Vice President of
Pioneers Home Entertainment
Company (in charge of sales and
marketing)
|                                 
|                                 
|                                 
|                                 
|                                 
|Tamihiko Sudo
(Apr. 28, 1947)     |  | Senior Executive Officer of Pioneer and
President of Pioneers Mobile
Entertainment Company
(June 2003)                                                 |  | June 2000:
Executive Officer of Pioneer and
Executive Vice President of
Pioneers Mobile Entertainment
Company                                
|                                 
|                                 
|                                 
|                                 
|                                 
|Hajime Ishizuka
(May 3, 1947)     |  | Senior Executive Officer of Pioneer and
General Manager of Components Division;
in charge of International Business
Division of Pioneer
(June 2003)     |  | June 2001:
Executive Officer of Pioneer and
General Manager of Components
Division; in charge of
International Business Division of
Pioneer   
|                                 
|                                 
|                                 
|                                 
|                                 
|Osamu Yamada
(Mar. 16, 1944)      |  | Senior Executive Officer of Pioneer and
General Manager of Research and
Development Group of Pioneer
(June 2004)                                        |  | June 1999:
Director-General of the NHK
(Nippon Hoso Kyokai; Japan
Broadcasting Corporation) Science
and Technical Research Laboratories       

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|                                   |  |                                                                                                                                        |  |                                                                                                                               
|---------------------------------- |  | -------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------------------------------------------------------------------------------------------------------------
|Name                               |  | Current Position                                                                                                                       |  |                                                                                                                               
|(Date of birth)                    |  | (Month and year of expiration)                                                                                                         |  | Prior Position                                                                                                                
|                                   |  |                                                                                                                                        |  |                                                                                                                               
|Seiichiro Kurihara
(Mar. 15, 1943) |  | Executive Officer of Pioneer and General
Manager of Intellectual Property Division
of Pioneer
(June 2003)                              |  | June 1998:
General Manager of Intellectual
Property Division of Pioneer                                                       
|                                  
|                                  
|                                  
|                                  
|                                  
|Koki Aizawa
(Dec. 19, 1944)        |  | Executive Officer of Pioneer and Deputy
General Manager of Research and
Development Group of Pioneer
(June 2003)                       |  | Jan. 2001:
Deputy General Manager of Research
and Development Group of Pioneer                                                
|                                  
|                                  
|                                  
|                                  
|                                  
|Toshihiko Norizuki
(May 23, 1945)  |  | Executive Officer of Pioneer and General
Manager of Business Systems Division and
Plant Manager of Ohmori Plant of Pioneer
(June 2003) |  | June 2001:
General Manager of Business
Systems Division and Plant Manager
of Ohmori Plant of Pioneer                          
|                                  
|                                  
|                                  
|                                  
|                                  
|Buntarou Nishikawa
(Mar. 24, 1946) |  | Executive Officer of Pioneer and
Executive Vice President of Pioneers
Mobile Entertainment Company
(June 2003)                        |  | June 2001:
Executive Officer of Pioneer and
General Manager of Domestic Sales
Division, Pioneers Mobile
Entertainment Company
|                                  
|                                  
|                                  
|                                  
|                                  
|Osamu Takada
(July 27, 1948)       |  | Executive Officer of Pioneer and General
Manager of Personnel Division of Pioneer
(June 2003)                                          |  | Sept. 1999:
General Manager of Personnel
Division of Pioneer                                                                  
|                                  
|                                  
|                                  
|                                  
|                                  
|Masao Kawabata
(Aug. 10, 1948)     |  | Executive Officer of Pioneer and General
Manager of Corporate Communications
Division of Pioneer
(June 2003)                           |  | Apr. 2000:
General Manager of Corporate
Communications Division of Pioneer                                                    
|                                  
|                                  
|                                  
|                                  
|                                  
|Sumitaka Matsumura
(Oct. 10, 1948) |  | Executive Officer of Pioneer and Deputy
General Manager of Research and
Development Group of Pioneer
(June 2003)                       |  | Jan. 2001:
Deputy General Manager of Research
and Development Group of Pioneer                                                
|                                  
|                                  
|                                  
|                                  
|                                  
|Yoshio Taniyama
(Nov. 19, 1948)    |  | Executive Officer of Pioneer and General
Manager of Finance Division of Pioneer
(June 2003)                                            |  | Sept. 1999:
General Manager of Finance
Division of Pioneer                                                                    
|                                  
|                                  
|                                  
|                                  
|                                  
|Hideki Okayasu
(May 12, 1950)      |  | Executive Officer of Pioneer and General
Manager of Accounting Division of Pioneer
(June 2003)                                         |  | July 2000:
General Manager of Accounting
Division of Pioneer                                                                  

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Corporate Auditors

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

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

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

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

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B. Compensation

The aggregate amount of compensation (including bonuses and stock-based
compensation) paid by Pioneer to all Directors, Executive Officers and
Corporate Auditors of Pioneer as a group for fiscal 2002 totaled
¥876 million.
Also, as part of Pioneers incentive compensation arrangements for Directors
and Executive Officers, Pioneer has issued bonds with detachable warrants in
Japan for the periods from fiscal 1999 to 2002. Upon the issuance of detachable warrant bonds by Pioneer, it
distributed the warrants at fair market value to both Directors and Executive
Officers of Pioneer, and certain other executive employees as a part of their
remuneration. In fiscal 2003, Pioneer changed its incentive
compensation arrangements and issued share acquisition rights for its
shares of common stock to Directors, Executive Officers and certain
employees, and certain directors/officers of certain of its
subsidiaries. See Item 6.E. Share ownership for further information.

The aggregate amount set aside as lump-sum severance indemnities by Pioneer
during fiscal 2002 for Directors, Executive Officers and Corporate Auditors of
Pioneer totaled ¥145 million. The aggregate amount is calculated by the
formula as defined in the regulations of Pioneer concerning the retirement
allowance. Provision is made for lump-sum severance payments for Directors and
Corporate Auditors of Pioneer on a basis considered adequate for such future
payments as may be approved by the shareholders. (See Note 7 in Notes to
Consolidated Financial Statements.)

C. Board practices

Pioneers Articles of Incorporation provide for a Board of Directors of three
or more members and for three or more Corporate Auditors. All Directors and
Corporate Auditors are elected at general meetings of shareholders. In
general, the term of office of Directors expires at the conclusion of the
ordinary general meeting of shareholders held with respect to the last closing
of accounts within two years after their assumption of office, and in the case
of Corporate Auditors, within three years (in the case of Corporate Auditors to
be elected at an ordinary general meeting of shareholders to be held with
respect to the first fiscal year ending on and after May 1, 2002, four years)
after their assumption of office; however, Directors and Corporate Auditors may
serve any number of consecutive terms. With respect to each expiration of the
term of office of Directors and Corporate Auditors, see Item 6.A. Directors
and senior management.

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

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

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The Corporate Auditors of Pioneer are not required to be and are not certified
public accountants. However, at least one (or, after the conclusion of the
ordinary general meeting of shareholders to be held with respect to the first
fiscal year ending on and after May 1, 2005, at least half) of the Corporate
Auditors is required to be a person who has not been a Director, Executive
Officer, general manager or employee of Pioneer or any of its subsidiaries
during the five-year period prior to his or her election as a Corporate Auditor
(or, after the conclusion of such ordinary general meeting of shareholders, a
person who has not been a Director, or employee of Pioneer or any of its
subsidiaries). The Corporate Auditors may not at the same time be Directors,
Executive Officers, general managers or employees of Pioneer or any of its
subsidiaries.

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

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

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

D. Employees

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

|                    |  |                     |        |      |  |      |        |  |  |  |        | 
|------------------- |  | ------------------- | ------ | ---- |  | ---- | ------ |  |  |  | ------ | 
|                    |  | Year ended March 31
|                    |  |                    
|                    |  | 2000                |        | 2001 |  | 2002
|                    |  |                     |        |      |  |     
|Number of employees |  |                     | 27,414 |      |  |      | 28,871 |  |  |  | 31,220 | 
|                    |  |                     |        |      |  |      |        |  |  |  |        | 

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

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E. Share ownership

The total number of shares of Pioneers common stock owned by our Directors,
Executive Officers and Corporate Auditors as a group as of March 31, 2002 is as
follows:

|               |  |                                                                 |  |                        |  |                  |      |   | 
|-------------- |  | --------------------------------------------------------------- |  | ---------------------- |  | ---------------- | ---- | - | 
|Title of class |  | Identity of person or group                                     |  | Number of shares owned |  | Percent of class |     
|               |  |                                                                 |  |                        |  |                  |     
|Common Stock   |  | Directors, Executive
Officers and Corporate
Auditors as a group |  | 3,536,495 shares*      |  |                  | 1.96 | % | 

*         Except for Mr. Kanya Matsumoto, Chairman of Pioneer, who owns 2,595,359
 shares of common stock, which constitutes 1.44% of all outstanding shares
as of March 31, 2002, none of Pioneers Directors, Executive Officers and
Corporate Auditors is the owner of more than one percent of Pioneers
common stock.

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

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

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

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

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Under amendments to the Commercial Code of Japan which became effective on
April 1, 2002, Pioneer has also issued share acquisition rights for its shares
of common stock to its Directors, Executive Officers and certain employees, and
certain directors/officers of certain of its subsidiaries.

|            |  |                        |     |                 |  |                                    |  |                  |       |  |  |  
|----------- |  | ---------------------- | --- | --------------- |  | ---------------------------------- |  | ---------------- | ----- |  |  | -
|            |  | Total number of shares |     |                 |  | Current                            |  | Number of shares
|Fiscal year |  | covered by option      |     |                 |  | exercise price                     |  | exercised       
|granted     |  | (in thousands)         |     | Exercise period |  | per share                          |  | (in thousands)  
|            |  |                        |     |                 |  |                                    |  |                 
|2003        |  |                        | 564 |                 |  | From July 1, 2004
to June 29, 2007 |  | ¥                | 2,477 |  |  | 
|           




Item 7. Major Shareholders and Related Party Transactions

A. Major shareholders

Major shareholders that owned 5% or more of Pioneers voting securities as of
March 31, 2002 on the register of shareholders were as follows:

|               |  |                                                   |  |                  |        |                    |  |  |      |  
|-------------- |  | ------------------------------------------------- |  | ---------------- | ------ | ------------------ |  |  | ---- | -
|               |  |                                                   |  | Number of shares |        | Percentage of     
|Title of class |  | Name                                              |  | (in thousand)    |        | outstanding shares
|               |  |                                                   |  |                  |        |                   
|Common Stock   |  | Japan Trustee Services Bank, Ltd.
(Trust Account) |  |                  | 15,859 |                    |  |  | 8.80 | %

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

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

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

As of March 31, 2002, there were 180,063,836 shares of common stock
outstanding, of which 926,530 shares were held in the form of
American Depositary Receipts (ADRs) (0.51%) and
9,863,888 shares (5.48%) were held of record in the form of common stock by
residents in the United States (based solely on their addresses). The number
of registered ADR holders of record (including DTC) was 88, and the number of
registered holders of record in the United States (based solely on their
addresses) of shares of common stock, including those who held shares through a
Japanese securities clearing system, was 74.

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

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

53



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##### Table of Contents



B. Related party transactions

None

C. Interests of experts and counsel

Not applicable




Item 8. Financial Information

A. Consolidated statements and other financial information

Consolidated financial statements

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

Legal proceedings

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

In fiscal 2001, we received a notice of proposed assessment from the German tax
authorities for approximately DM41 million (¥2,434 million translated at the
current foreign exchange rate at March 31, 2002) relating to a tax position
taken in prior years concerning intercompany purchase prices. We officially
challenged the proposed assessment by arbitration procedures. There was no
further development in the proceedings during fiscal 2002. It is not possible
at this time to determine the ultimate resolution of this matter.

In June 2002, we received a preliminary calculation from the United
States Internal Revenue Service (IRS) for additional taxes of approximately
US$66 million (¥8,795 million translated at the foreign exchange rate at March
31, 2002) relating to an adjustment to transfer prices between affiliated
companies for the years ended March 31, 1997 through 1999. If, after
completing its audit, the IRS files a notice of proposed assessment based on
the preliminary calculation, we intend to file a protest. In the
opinion of management, it is not possible at this time to determine the
ultimate outcome of this matter.

We are also a defendant in a lawsuit in the United States in which the
plaintiff, Gemstar-TV Guide International, Inc., alleges that we have infringed
two patents, both of which have expired. The plaintiff has not yet specified
damages. We have denied the allegations and have filed a counterclaim against
the plaintiff and another company related to the alleged patent infringement.
In addition, the same plaintiff alleges that we have infringed four other
patents. The plaintiff filed both a complaint before the International Trade
Commission (ITC) alleging patent infringement relating to our importation and
sale of the products in the United States and a complaint for unspecified
damages in the District Court, which complaint has been stayed pending the
determination of the ITC. On June 21, 2002, the ITCs administrative law judge
issued his final initial determination concluding that we did not infringe
plaintiffs patents and also that plaintiff misused one of its
patents. We anticipate that the ITC will adopt the findings and conclusions of the
administrative law judge.

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Dividend policy

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

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

|                   |  |                    |      |         |  |   |      |  | 
|------------------ |  | ------------------ | ---- | ------- |  | - | ---- |  | 
|                   |  | Dividend per share
|                   |  |                   
|Record date        |  | Yen                |      | Dollars
|                   |  |                    |      |        
|March 31, 1998     |  | ¥                  | 5.00 |         |  | $ | 0.04 | 
|                  
|                  
|                  
|                  
|September 30, 1998 |  | ¥                  | 5.00 |         |  | $ | 0.04 | 
|                  
|                  
|                  
|                  
|March 31, 1999     |  | ¥                  | 5.00 |         |  | $ | 0.04 | 
|                  
|                  
|                  
|                  
|September 30, 1999 |  | ¥                  | 5.00 |         |  | $ | 0.05 | 
|                  
|                  
|                  
|                  
|March 31, 2000     |  | ¥                  | 5.00 |         |  | $ | 0.05 | 
|                  
|                  
|                  
|                  
|September 30, 2000 |  | ¥                  | 7.50 |         |  | $ | 0.07 | 
|                  
|                  
|                  
|                  
|March 31, 2001     |  | ¥                  | 7.50 |         |  | $ | 0.06 | 
|                  
|                  
|                  
|                  
|September 30, 2001 |  | ¥                  | 7.50 |         |  | $ | 0.06 | 
|                  
|                  
|                  
|                  
|March 31, 2002     |  | ¥                  | 7.50 |         |  | $ | 0.06 | 

Pioneer intends to continue to pay an appropriate dividend amount on its common
stock. The appropriate dividend amount is determined by taking into
consideration its financial condition, consolidated business results and future
prospects, and other factors for the mid- and long-term.

B. Significant changes

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

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Item 9. The Offer and Listing

A.     Offer and listing details

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

|                         |             |  |                                 |       |                         |  |      |       |     |  |   |       |  |  |   |       | 
|------------------------ | ----------- |  | ------------------------------- | ----- | ----------------------- |  | ---- | ----- | --- |  | - | ----- |  |  | - | ----- | 
|                         |             |  | Tokyo Stock Exchange            |       | New York Stock Exchange
|                         |             |  | Price per share of Common Stock |       | Price per share of ADS 
|                         |             |  | (yen)                           |       | (U.S. dollars)         
|                         |             |  |                                 |       |                        
|                         |             |  | High                            |       | Low                     |  | High |       | Low
|                         |             |  |                                 |       |                         |  |      |       |    
|Annual highs and lows    |             |  |                                 |       |                         |  |      |       |     |  |   |       |  |  |   |      
|                        
|                        
|                        
|                        
|Year ended March 31,     |             |  |                                 |       |                         |  |      |       |     |  |   |       |  |  |   |      
|                        
|                        
|                        
|                        
|                         | 1998        |  | ¥                               | 3,160 |                         |  | ¥    | 1,850 |     |  | $ | 27.25 |  |  | $ | 15.13 | 
|                        
|                        
|                        
|                        
|                         | 1999        |  |                                 | 2,920 |                         |  |      | 1,720 |     |  |   | 21.13 |  |  |   | 14.88 | 
|                        
|                        
|                        
|                        
|                         | 2000        |  |                                 | 3,690 |                         |  |      | 1,711 |     |  |   | 34.75 |  |  |   | 16.13 | 
|                        
|                        
|                        
|                        
|                         | 2001        |  |                                 | 4,940 |                         |  |      | 2,085 |     |  |   | 45.38 |  |  |   | 20.50 | 
|                        
|                        
|                        
|                        
|                         | 2002        |  |                                 | 4,250 |                         |  |      | 2,150 |     |  |   | 34.70 |  |  |   | 16.75 | 
|                        
|                        
|                        
|                        
|                        
|Quarterly highs and lows |             |  |                                 |       |                         |  |      |       |     |  |   |       |  |  |   |      
|                        
|                        
|                        
|                        
|Fiscal
2001              |             |  |                                 |       |                         |  |      |       |     |  |   |       |  |  |   |      
|                        
|                        
|                        
|                        
|                         | 1st quarter |  |                                 | 4,350 |                         |  |      | 2,085 |     |  |   | 40.50 |  |  |   | 20.50 | 
|                        
|                        
|                        
|                        
|                         | 2nd quarter |  |                                 | 4,940 |                         |  |      | 3,500 |     |  |   | 45.38 |  |  |   | 32.00 | 
|                        
|                        
|                        
|                        
|                         | 3rd quarter |  |                                 | 4,580 |                         |  |      | 2,710 |     |  |   | 42.50 |  |  |   | 24.13 | 
|                        
|                        
|                        
|                        
|                         | 4th quarter |  |                                 | 3,750 |                         |  |      | 2,720 |     |  |   | 30.94 |  |  |   | 23.45 | 
|                        
|                        
|                        
|                        
|                        
|Fiscal 2002              |             |  |                                 |       |                         |  |      |       |     |  |   |       |  |  |   |      
|                        
|                        
|                        
|                        
|                         | 1st quarter |  |                                 | 4,250 |                         |  |      | 3,020 |     |  |   | 34.70 |  |  |   | 25.18 | 
|                        
|                        
|                        
|                        
|                         | 2nd quarter |  |                                 | 3,920 |                         |  |      | 2,155 |     |  |   | 31.05 |  |  |   | 16.85 | 
|                        
|                        
|                        
|                        
|                         | 3rd quarter |  |                                 | 3,290 |                         |  |      | 2,210 |     |  |   | 26.20 |  |  |   | 19.01 | 
|                        
|                        
|                        
|                        
|                         | 4th quarter |  |                                 | 3,330 |                         |  |      | 2,150 |     |  |   | 25.06 |  |  |   | 16.75 | 
|                        
|                        
|                        
|                        
|                        
|Monthly highs and lows   |             |  |                                 |       |                         |  |      |       |     |  |   |       |  |  |   |      
|                        
|                        
|                        
|                        
|2002                     |             |  |                                 |       |                         |  |      |       |     |  |   |       |  |  |   |      
|                        
|                        
|                        
|                        
|                         | January     |  |                                 | 3,330 |                         |  |      | 2,800 |     |  |   | 25.06 |  |  |   | 20.00 | 
|                        
|                        
|                        
|                        
|                         | February    |  |                                 | 2,685 |                         |  |      | 2,150 |     |  |   | 20.00 |  |  |   | 16.75 | 
|                        
|                        
|                        
|                        
|                         | March       |  |                                 | 2,910 |                         |  |      | 2,440 |     |  |   | 22.71 |  |  |   | 18.70 | 
|                        
|                        
|                        
|                        
|                         | April       |  |                                 | 2,860 |                         |  |      | 2,385 |     |  |   | 21.65 |  |  |   | 18.22 | 
|                        
|                        
|                        
|                        
|                         | May         |  |                                 | 2,595 |                         |  |      | 2,280 |     |  |   | 20.07 |  |  |   | 18.20 | 
|                        
|                        
|                        
|                        
|                         | June        |  |                                 | 2,355 |                         |  |      | 1,981 |     |  |   | 19.13 |  |  |   | 16.75 | 

B. Plan of distribution

Not applicable

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C. Markets

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

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

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

D. Selling shareholders

Not applicable

E. Dilution

Not applicable

F. Expenses of the issue

Not applicable






Item 10. Additional Information

A. Share capital

Not applicable

B. Memorandum and articles of association

Organization

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

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Objects and purposes

Article 2 of the Articles of Incorporation of Pioneer provides that its purpose
is to engage in the following lines of business:



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

Directors

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

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

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Common stock

General

Set forth below is information relating to Pioneers Common Stock, including
brief summaries of the relevant provisions of Pioneers Articles of
Incorporation and Share Handling Regulations, as currently in effect, and of
the Commercial Code of Japan and related legislation. The discussion of the
Commercial Code below reflects certain amendments to the Commercial Code, which
became effective on October 1, 2001 (the 2001
Amendments) and on April 1, 2002
(the 2002 Amendments).

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

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

Authorized capital

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

As of March 31, 2002, 180,063,836 shares of common stock were issued and
outstanding.

The 2001 Amendments eliminated the concept of par value of shares of capital
stock. Thus, all shares of capital stock of Pioneer have no par value.

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Dividends

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

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



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

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

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

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Stock splits

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

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

General meeting of shareholders

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

Notice of convocation of a shareholders meeting setting forth the place, time
and purpose thereof, must be mailed to each shareholder having voting rights
(or, in the case of a non-resident shareholder, to his or her standing proxy or
mailing address in Japan) at least two weeks prior to the date set for the
meeting. Under the 2002 Amendments, such notice may be given to shareholders
by electronic means, subject to the consent by the relevant shareholders. The
record date for an ordinary general meeting of shareholders is March 31 of each
year.

Any shareholder or group of shareholders holding at
least 3% of the
total number of voting rights for a period of six months or more may require
the convocation of a general meeting of shareholders for a particular purpose.
Unless such shareholders meeting is convened promptly or a convocation notice
of a meeting which is to be held not later than six weeks from the day of such
demand is dispatched, the requiring shareholder may, upon obtaining a court
approval, convene such shareholders meeting.

Any shareholder or group of shareholders holding at least 300 voting rights or
1% of the total number of voting rights for a period of six months or
more may propose a matter to be considered at a general meeting of shareholders
by submitting a written request to a Representative Director at least six weeks
prior to the date set for such meeting.

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Voting rights

So long as Pioneer maintains the unit share system
(see New unit share
system below) a holder of shares constituting one or more whole units is
entitled to one voting right per unit of shares subject to the limitations on
voting rights set forth in the following paragraph. If Pioneer eliminates from
its Articles of Incorporation the provisions relating to the unit of shares,
holders of common stock will have one voting right for each share they hold.
Except as otherwise provided by law or by the Articles of Incorporation, a
resolution can be adopted at a general meeting of shareholders by a majority of
the number of voting rights of all the shareholders represented at the meeting.
The Commercial Code and Pioneers Articles of Incorporation provide, however,
that the quorum for the election of Directors and Corporate Auditors shall not
be less than one-third of the total number of voting rights of all the
shareholders. Pioneers shareholders are not entitled to cumulative voting in
the election of Directors. A corporate shareholder more than one-quarter of
whose total voting rights are directly or indirectly owned by Pioneer may not
exercise its voting rights with respect to shares of common stock of Pioneer
that it owns. In addition, Pioneer may not exercise its voting rights with
respect to its shares that it owns. Shareholders may exercise their voting
rights through proxies, provided that the proxies are also shareholders holding
voting rights. Pioneers shareholders also may cast their votes in writing.
Under the 2002 Amendments, shareholders may also exercise their voting rights
by electronic means when the Board of Directors decides to permit such method
of exercising voting rights.

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

Issue of additional shares and pre-emptive rights

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

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

Under the 2002 Amendments, subject to certain requirements, Pioneer may issue
share acquisition rights by a resolution of the Board of Directors. Holders of
share acquisition rights may exercise their rights to acquire a certain number
of shares within the exercise period as prescribed in the terms of their share
acquisition rights. Upon exercise of share acquisition rights, Pioneer will be
obliged to issue the relevant number of new shares or alternatively to transfer
the necessary number of existing shares held by it.

Liquidation rights

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

Record date

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

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

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Acquisition by Pioneer of its common stock

Pioneer may acquire its own shares through a stock exchange on which such
shares are listed (pursuant to an ordinary resolution of an ordinary general
meeting of shareholders), by way of tender offer (pursuant to an ordinary
resolution of an ordinary general meeting of shareholders), or by purchase from
a specific party other than a subsidiary of Pioneer (pursuant to a special
resolution of an ordinary general meeting of shareholders) or from a subsidiary
of Pioneer (pursuant to a resolution of the Board of Directors). When such
acquisition is made by Pioneer from a specific party other than a subsidiary of
Pioneer, any other shareholder may make a demand to a Representative Director,
more than five calendar days prior to the relevant shareholders meeting, that
Pioneer also purchase the shares held by such shareholder. Any such
acquisition of shares must satisfy certain requirements, including that the
total amount of the purchase price may not exceed the amount of the retained
earnings available for dividend payments after taking into account any
reduction, if any, of the stated capital, additional paid-in capital or legal
reserve (if such reduction of the stated capital, additional paid-in capital or
legal reserve has been authorized pursuant to a resolution of the relevant
ordinary general meeting of shareholders), minus the amount to be paid by way
of appropriation of retained earnings for the relevant fiscal year and the
amount to be transferred to stated capital. However, if it is anticipated that
the net assets on the balance sheet as at the end of the immediately following
fiscal year will be less than the aggregate amount of the stated capital,
additional paid-in capital and other items as described in (i) through (vi) to
Dividends above, Pioneer may not acquire such shares.

Shares acquired by Pioneer may be held by it for any period or may be cancelled
by resolution of the Board of Directors. Pioneer may also transfer to any
person the shares held by it, subject to a resolution of the Board of
Directors, and subject also to other requirements similar to those applicable
to the issuance of new shares, as described in Issue of additional shares and
pre-emptive rights above. Pioneer may also utilize its treasury stock for the
purpose of transfer to any person upon exercise of share acquisition rights or
for the purpose of acquiring another company by way of merger, share exchange
or corporate split through exchange of treasury stock for shares or assets of
the acquired company.

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New unit share system

The 2001 Amendments introduced a new unit share system called
tangen-kabushiki.

Pursuant to these amendments and the Articles of Incorporation of Pioneer, 100
shares constitute one unit. Although the number of shares constituting a new
unit is included in the Articles of Incorporation, any amendment to the
Articles of Incorporation reducing (but not increasing) the number of shares
constituting a unit or eliminating the provisions for the unit of shares may be
made by the resolution of the Board of Directors rather than by the special
shareholders resolution, which is otherwise required for amending the Articles
of Incorporation. The number of shares constituting one new unit, however,
cannot exceed 1,000 or one two-hundredth (1/200) of all issued shares.

Voting rights under the new unit share system

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

Share certificates for less than a unit

Unless Pioneers Board of Directors adopts a resolution to eliminate the
provision for the unit shares from the Articles of Incorporation or the
shareholders amend the Articles of Incorporation by a special shareholders
resolution to eliminate the provision not to issue share certificates for less
than a unit of shares, a share certificate for any number of shares less than a
unit will in general not be issued. As the transfer of shares normally
requires the delivery of the share certificates therefor, any fraction of a
unit for which no share certificates are issued is not transferable.

Repurchase by Pioneer of shares constituting less than a unit

A holder of shares constituting less than one unit may require Pioneer to
purchase such shares at their market value in accordance with the provisions of
the Share Handling Regulations of Pioneer.

Effect of the unit share system on holders of ADRs

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

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Reporting of substantial shareholdings

The Securities and Exchange Law of Japan and regulations thereunder requires
any person who has become, beneficially and solely or jointly, a holder of more
than 5% of the total issued shares of capital stock of a company
listed on any Japanese stock exchange or whose shares are traded on the
over-the-counter market in Japan to file with the Director-General of a
competent Local Finance Bureau of Ministry of Finance within five business days
a report concerning such shareholdings.

A similar report must also be filed in respect of any subsequent change of
1% or more in any such holding or any change in material matters set out
in reports previously filed, with certain exceptions. For this purpose, shares
issuable to such person upon conversion of convertible securities or exercise
of share subscription warrants or share acquisition rights are taken into
account in determining both the number of shares held by such holder and the
issuers total issued share capital. Copies of such report must also be
furnished to the issuer of such shares and all Japanese stock exchanges on
which the shares are listed or (in the case of shares traded over-the-counter)
the Japan Securities Dealers Association.

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

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

C.     Material contracts

Not applicable

D.     Exchange Controls

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

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E.     Taxation

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

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

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



| |  | a citizen or individual resident of the United States,                                                                                                                                                                      
|- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| 
| |  | a corporation or other entity taxable as a corporation organized 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 subject to the primary supervision of a U.S. court and the control of one or more
U.S. persons, or that has a valid election in effect under applicable Treasury regulations to be
treated as a U.S. person.

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



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

A Non-U.S. Holder is any beneficial owner of shares of common stock or ADSs that is:



| |  | an individual who is classified as a nonresident for U.S. federal income tax purposes;
|- |  | --------------------------------------------------------------------------------------
| 
| |  | a foreign corporation or other foreign entity taxable as a corporation; or            
| 
| |  | an estate or trust that is not a U.S. Holder.                                         

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

Japanese taxation

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

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

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

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

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

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U.S. federal income taxation

U.S. Holders

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

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

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

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



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

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

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

We do not believe that we are, for U.S. federal income tax purposes, a passive
foreign investment company (a PFIC), and we intend to continue our operations
in such a manner that it is highly unlikely that we would become a PFIC in the
future. The PFIC determination is made annually and is based on the portion of
our assets (including goodwill) or the portion of our income that is
characterized as passive under the PFIC rules. If we become a PFIC, unless a
U.S. Holder elects to be taxed annually on a mark-to-market basis with respect
to its shares of common stock or ADSs, any gain realized on a sale or other
disposition of shares of common stock or ADSs and certain excess
distributions would be treated as realized ratably over the U.S. Holders
holding period for the shares of common stock or ADSs; amounts allocated to
prior years while we are a PFIC would be taxed at the highest tax rate in
effect for each such year, and an additional interest charge would be added in
respect of the tax attributable to each such year. If a mark-to-market
election were made, a U.S. Holder would take into account each year the
appreciation or depreciation in value of its shares of common stock or ADS,
which would be treated as ordinary income or (subject to limitations) ordinary
loss, as would gains or losses on actual dispositions of common stock or ADSs.
Any U.S. Holder who owns shares of common stock or ADSs during any year that we
are a PFIC would be required to file Internal Revenue Service Form 8621.

Non-U.S. Holders

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

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

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

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

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Backup withholding and information reporting

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

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

F.     Dividends and paying agents

Not applicable

G.     Statement by experts

Not applicable

H.     Documents on display

It is possible to read and copy documents referred to in this annual report on
Form 20-F that have been filed with the SEC at the SECs public reference room
located at 450 Fifth Street, NW, Washington, D.C. 20549. You can also
access the documents at the SECs website (http://www.sec.gov/).

I.     Subsidiary information

Not applicable






Item 11. Quantitative and Qualitative Disclosures About Market Risk

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

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

72



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##### Table of Contents



Foreign exchange risk

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

The following table provides information about our derivative financial
instruments related to foreign currency exchange transactions as of March 31,
2002 and 2001, which have been translated into yen at the rate as of such date,
together with the related weighted average contractual exchange rates at March
31, 2002 and 2001. All of the contracts mature within one year.

March 31, 2002

|                                   |  |                                      |        |         |  |        |        |        |  |        |       |        |  |       |        |   |  |  |        |   |  |  |        |   |  |  |        |  
|---------------------------------- |  | ------------------------------------ | ------ | ------- |  | ------ | ------ | ------ |  | ------ | ----- | ------ |  | ----- | ------ | - |  |  | ------ | - |  |  | ------ | - |  |  | ------ | -
|Forward exchange contract          |  | Millions of yen except average rates
|                                  
|Functional currency                |  | Yen                                  |        | THB     |  | A$     |        | S$     |  |        |       |       
|                                   |  |                                      |        |         |  |        |        |        |  |        |       |       
|Sell/Buy                           |  | US$/Yen                              |        | THB/US$ |  | A$/Yen |        | A$/US$ |  | A$/GBP |       | US$/S$ |  | Total
|                                  
|Contract amounts                   |  |                                      | ¥266   |         |  |        | ¥149   |        |  |        | ¥100  |        |  |       | ¥1,395 |   |  |  | ¥54    |   |  |  | ¥1,067 |   |  |  | ¥3,031 |  
|                                  
|                                  
|                                  
|                                  
|Average contractual
exchange rates |  |                                      | 131.50 |         |  |        | 43.407 |        |  |        | 69.85 |        |  |       | 0.5156 |   |  |  | 0.3640 |   |  |  | 1.829  |   |  |  |        |  
|                                  
|                                  
|                                  
|                                  
|Fair value                         |  |                                      | (¥1    | )       |  |        | ¥0     |        |  |        | ¥1    |        |  |       | (¥26   | ) |  |  | (¥1    | ) |  |  | (¥6    | ) |  |  | (¥33   | )
|                                  
|                                  

|                       |  |                                      |        |         |  |       |         |   |  |   |       |   | 
|---------------------- |  | ------------------------------------ | ------ | ------- |  | ----- | ------- | - |  | - | ----- | - | 
|Currency option        |  | Millions of yen except average rates
|                      
|Functional currency    |  | Yen                                  |        |         |  |      
|                       |  |                                      |        |         |  |      
|Sell/Buy               |  | EUR/Yen                              |        | Yen/EUR |  | Total
|                      
|Notional amount        |  |                                      | ¥1,440 |         |  |       | ¥1,440  |   |  | ¥ | 2,880 |  
|                      
|                      
|                      
|                      
|Average execution rate |  |                                      | 110.00 |         |  |       | 0.00909 |   |  |   |       |  
|                      
|                      
|                      
|                      
|Fair value             |  |                                      | ¥2     |         |  |       | (¥10    | ) |  |   | (¥8   | )
|                      
|                      

March 31, 2001

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

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

73



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To change the currency and interest rate features of intercompany financial
transactions, we have entered into currency swap contracts with banks.
Currency swap contracts effectively changed, in substance, U.S. dollars
floating interest rate intercompany borrowings into yen fixed interest rate
borrowings and Euro floating interest rate borrowings. The foreign exchange
risk inherent in our currency swap as of March 31, 2002 and 2001 are summarized
as follows:

|                                      |                                   |                               |                  |        |                        |        |        |  |        |  |                        |        |        |  |            |        |        |   |        |        |        |   |      |   |       |  |  |  | 
|------------------------------------- | --------------------------------- | ----------------------------- | ---------------- | ------ | ---------------------- | ------ | ------ |  | ------ |  | ---------------------- | ------ | ------ |  | ---------- | ------ | ------ | - | ------ | ------ | ------ | - | ---- | - | ----- |  |  |  | 
|Currency swap as of March 31, 2002    |                                   | Millions except average rates
|                                     
|                                      |                                   |                               |                  |        |                        |        |        |  |        |  | Expected maturity date |        |        |  |           
|                                      |                                   |                               | Contract amounts |        | (year ending March 31) |        |        |  |       
|                                      |                                   |                               |                  |        |                        |        |        |  |       
|                                      |                                   |                               | Sell             |        | Buy                    |        | 2003   |  | 2004   |  | 2005                   |        | Total  |  | Fair value
|                                     
|Functional currency: Yen              |                                   | ¥                             | 24,678           |        |                        | US$200 |        |  | ¥5,893 |  |                        |        | ¥6,195 |  |            | ¥      | 12,590 |   |        | ¥      | 24,678 |   |      | ¥ | 2,048 | 
|                                     
|                                     
|                                     
|                                     
|                                      | Average contractual exchange rate |                               |                  |        |                        |        |        |  |        |  |                        | 117.85 |        |  |            | 123.90 |        |   |        | 125.90 |        |   |      |   |       |  |  |  | 
|                                     
|                                     
|                                     
|                                     
|Functional currency: Euro             |                                   | EUR116                        |                  | US$100 |                        | ¥      | 13,487 |  |        |  |                        |        |        |  |            |        |        | ¥ | 13,487 |        |        | ( | ¥222 | )
|                                     
|                                     
|                                     
|                                     
|                                      | Average contractual exchange rate |                               |                  |        |                        |        |        |  |        |  |                        | 0.86   |        |  |            |        |        |   |        |        |        |   |      |   |       |  |  |  | 
|                                     
|                                     
|                                     
|                                     
|Functional currency: Singapore
dollar |                                   |                               | S$65             |        |                        | US$36  |        |  | ¥4,717 |  |                        |        |        |  |            |        |        |   |        |        | ¥4,717 |   |      |   | ¥20   | 
|                                     
|                                     
|                                     
|                                     
|                                      | Average contractual exchange rate |                               |                  |        |                        |        |        |  |        |  |                        | 1.84   |        |  |            |        |        |   |        |        |        |   |      |   |       |  |  |  | 
|                                     
|                                     

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

With respect to interest rate risk inherent in our currency swaps as of March
31, 2002 and 2001, see Interest rate risk below.

74



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##### Table of Contents



Interest rate risk

Interest rate risk inherent in the aforementioned currency swaps as of March
31, 2002 and 2001 are summarized as follows:

|                                   |                                   |                               |        |                  |        |                        |        |        |  |        |  |                        |      |       |  |            |      |        |   |        |      |        |  |       |   |       |  |  |  | 
|---------------------------------- | --------------------------------- | ----------------------------- | ------ | ---------------- | ------ | ---------------------- | ------ | ------ |  | ------ |  | ---------------------- | ---- | ----- |  | ---------- | ---- | ------ | - | ------ | ---- | ------ |  | ----- | - | ----- |  |  |  | 
|Currency swap as of March 31, 2002 |                                   | Millions except average rates
|                                  
|                                   |                                   |                               |        |                  |        |                        |        |        |  |        |  | Expected maturity date |      |       |  |           
|                                   |                                   |                               |        | Contract amounts |        | (year ending March 31) |        |        |  |       
|                                   |                                   |                               |        |                  |        |                        |        |        |  |       
|                                   |                                   |                               |        | Sell             |        | Buy                    |        | 2003   |  | 2004   |  | 2005                   |      | Total |  | Fair value
|                                  
|Functional currency: Yen           |                                   |                               |        |                  |        |                        |        |        |  |        |  |                        |      |       |  |            |      |        |   |        |      |        |  |       |   |       |  | 
|                                  
|                                  
|                                  
|                                  
|                                   | Variable (US$) to Fixed (Yen)     |                               | ¥      | 24,678           |        |                        | US$200 |        |  | ¥5,893 |  |                        | ¥    | 6,195 |  |            | ¥    | 12,590 |   |        | ¥    | 24,678 |  |       | ¥ | 2,048 | 
|                                  
|                                  
|                                  
|                                  
|                                   |                                   | Average pay rate              |        |                  |        |                        |        |        |  |        |  |                        | 0.43 | %     |  |            | 0.14 | %      |   |        | 0.41 | %      |  |       |   |       |  |  |  | 
|                                  
|                                  
|                                  
|                                  
|                                   |                                   | Average receive rate          |        |                  |        |                        |        |        |  |        |  |                        | 2.02 | %     |  |            | 1.91 | %      |   |        | 2.53 | %      |  |       |   |       |  |  |  | 
|                                  
|                                  
|                                  
|                                  
|Functional currency: Euro          |                                   |                               |        |                  |        |                        |        |        |  |        |  |                        |      |       |  |            |      |        |   |        |      |        |  |       |   |       |  | 
|                                  
|                                  
|                                  
|                                  
|                                   | Variable (US$) to Variable (Euro) |                               | EUR116 |                  | US$100 |                        | ¥      | 13,487 |  |        |  |                        |      |       |  |            |      |        | ¥ | 13,487 |      |        |  | (¥222 | )
|                                  
|                                  
|                                  
|                                  
|                                   |                                   | Average pay rate              |        |                  |        |                        |        |        |  |        |  |                        | 3.85 | %     |  |            |      |        |   |        |      |        |  |       |   |       |  |  |  | 
|                                  
|                                  
|                                  
|                                  
|                                   |                                   | Average receive rate          |        |                  |        |                        |        |        |  |        |  |                        | 1.89 | %     |  |            |      |        |   |        |      |        |  |       |   |       |  |  |  | 
|                                  
|                                  
|                                  
|                                  
|Functional currency: Euro          |                                   |                               |        |                  |        |                        |        |        |  |        |  |                        |      |       |  |            |      |        |   |        |      |        |  |       |   |       |  | 
|                                  
|                                  
|                                  
|                                  
|                                   | Variable (US$) to Fixed (S$)      |                               |        | S$65             |        |                        | US$36  |        |  | ¥4,717 |  |                        |      |       |  |            |      |        |   |        |      | ¥4,717 |  |       |   | ¥20   | 
|                                  
|                                  
|                                  
|                                  
|                                   |                                   | Average pay rate              |        |                  |        |                        |        |        |  |        |  |                        | 1.14 | %     |  |            |      |        |   |        |      |        |  |       |   |       |  |  |  | 
|                                  
|                                  
|                                  
|                                  
|                                   |                                   | Average receive rate          |        |                  |        |                        |        |        |  |        |  |                        | 1.95 | %     |  |            |      |        |   |        |      |        |  |       |   |       |  |  |  | 
|                                  
|                                  

|                                   |                                   |                      |        |                  |        |                        |        |        |   |        |  |                        |      |            |   |        |      |                               |  |      |   |       |  |  |  | 
|---------------------------------- | --------------------------------- | -------------------- | ------ | ---------------- | ------ | ---------------------- | ------ | ------ | - | ------ |  | ---------------------- | ---- | ---------- | - | ------ | ---- | ----------------------------- |  | ---- | - | ----- |  |  |  | 
|Currency swap as of March 31, 2001 |                                   |                      |        |                  |        |                        |        |        |   |        |  |                        |      |            |   |        |      | Millions except average rates
|                                  
|                                   |                                   |                      |        |                  |        |                        |        |        |   |        |  | Expected maturity date |      |            |   |       
|                                   |                                   |                      |        | Contract amounts |        | (year ending March 31) |        |        |   |       
|                                   |                                   |                      |        |                  |        |                        |        |        |   |       
|                                   |                                   |                      |        | Sell             |        | Buy                    |        | 2002   |   | 2003   |  | Total                  |      | Fair value
|                                  
|Functional currency: Yen           |                                   |                      |        |                  |        |                        |        |        |   |        |  |                        |      |            |   |        |      |                               |  |      |   |       |  | 
|                                  
|                                  
|                                  
|                                  
|                                   | Variable (US$) to Fixed (Yen)     |                      | ¥      | 17,193           |        |                        | US$150 |        | ¥ | 11,300 |  |                        | ¥    | 5,893      |   |        | ¥    | 17,193                        |  |      | ¥ | 1,673 | 
|                                  
|                                  
|                                  
|                                  
|                                   |                                   | Average pay rate     |        |                  |        |                        |        |        |   |        |  |                        | 0.39 | %          |   |        | 0.43 | %                             |  |      |   |       |  |  |  | 
|                                  
|                                  
|                                  
|                                  
|                                   |                                   | Average receive rate |        |                  |        |                        |        |        |   |        |  |                        | 6.11 | %          |   |        | 5.45 | %                             |  |      |   |       |  |  |  | 
|                                  
|                                  
|                                  
|                                  
|Functional currency: Euro          |                                   |                      |        |                  |        |                        |        |        |   |        |  |                        |      |            |   |        |      |                               |  |      |   |       |  | 
|                                  
|                                  
|                                  
|                                  
|                                   | Variable (US$) to Variable (Euro) |                      | EUR110 |                  | US$100 |                        | ¥      | 12,016 |   |        |  |                        |      |            | ¥ | 12,016 |      |                               |  | ¥367 |  
|                                  
|                                  
|                                  
|                                  
|                                   |                                   | Average pay rate     |        |                  |        |                        |        |        |   |        |  |                        | 4.93 | %          |   |        |      |                               |  |      |   |       |  |  |  | 
|                                  
|                                  
|                                  
|                                  
|                                   |                                   | Average receive rate |        |                  |        |                        |        |        |   |        |  |                        | 5.53 | %          |   |        |      |                               |  |      |   |       |  |  |  | 
|                                  

75



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##### Table of Contents



Principal cash flows by expected maturity dates, weighted average interest
rates, and fair value of our debt obligations as of March 31, 2002 and 2001 are
as follows:

|                                                                    |                                      |       |  |            |       |      |  |                                               |       |      |  |      |       |      |  |            |        |       |  |            |        |  |  |      |        |  |  |      |        |  |  |      |        |  |  |   |        | 
|------------------------------------------------------------------- | ------------------------------------ | ----- |  | ---------- | ----- | ---- |  | --------------------------------------------- | ----- | ---- |  | ---- | ----- | ---- |  | ---------- | ------ | ----- |  | ---------- | ------ |  |  | ---- | ------ |  |  | ---- | ------ |  |  | ---- | ------ |  |  | - | ------ | 
|Long-term debt (including due within one year) as of March 31, 2002 | Millions of yen except average rates
|                                                                   
|                                                                    |                                      |       |  |            |       |      |  | Expected maturity date (year ending March 31)
|                                                                    |                                      |       |  | Functional |       |      |  |                                               |       |     
|                                                                    |                                      |       |  | Currency   |       | 2003 |  | 2004                                          |       | 2005 |  | 2006 |       | 2007 |  | Thereafter |        | Total |  | Fair value
|                                                                   
|Fixed rate (Yen)                                                    |                                      | Yen   |  | ¥          | 2,446 |      |  |                                               | 1,591 |      |  |      | 5,831 |      |  |            | 15,326 |       |  |            | 256    |  |  |      | 12,007 |  |  | ¥    | 37,457 |  |  | ¥    | 38,254 | 
|                                                                   
|                                                                   
|                                                                   
|                                                                   
|                                                                    | Average interest
rate                |       |  |            |       |      |  | 2.17                                          | %     |      |  | 3.06 | %     |      |  | 3.89       | %      |       |  | 2.38       | %      |  |  | 3.80 | %      |  |  | 2.97 | %      |  |  | 2.83 | %      |  |  |   |       
|                                                                   
|                                                                   
|                                                                   
|                                                                   
|Variable rate (US$)                                                 |                                      | US$   |  |            |       |      |  |                                               |       |      |  |      |       |      |  |            | 666    |       |  |            |        |  |  |      |        |  |  |      | 666    |  |  |      | 666    | 
|                                                                   
|                                                                   
|                                                                   
|                                                                   
|                                                                    | Average interest
rate                |       |  |            |       |      |  |                                               |       |      |  |      |       |      |  |            |        |       |  | 2.41       | %      |  |  |      |        |  |  |      |        |  |  | 2.41 | %      |  |  |   |       
|                                                                   
|                                                                   
|                                                                   
|                                                                   
|Interest free loan
(PTE)                                            |                                      | PTE   |  |            | 43    |      |  |                                               |       |      |  |      |       |      |  |            |        |       |  |            |        |  |  |      |        |  |  |      | 43     |  |  |      | 43     | 
|                                                                   
|                                                                    |                                      | Total |  |            |       |      |  | ¥                                             | 2,489 |      |  |      | 1,591 |      |  |            | 5,831  |       |  |            | 15,992 |  |  |      | 256    |  |  |      | 12,007 |  |  | ¥    | 38,166 |  |  | ¥ | 38,963 | 
|                                                                   
|                                                                   

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

Market price risks on available-for-sale securities

We do not own any marketable securities for trading purposes. Our equity
investment portfolio consists almost entirely of securities issued by Japanese
companies. The following table sets forth the maturity dates and cost and fair
values of debt securities in our investment portfolio, and the cost and fair
values of equity securities therein, at March 31, 2002 and 2001.

|                                            |                          |  |       |       |            |  |        |       |            |  |       |       |  |  |        |       | 
|------------------------------------------- | ------------------------ |  | ----- | ----- | ---------- |  | ------ | ----- | ---------- |  | ----- | ----- |  |  | ------ | ----- | 
|                                            | Millions of yen         
|                                            |                         
|                                            |                          |  | 2002  |       | 2001      
|                                            |                          |  |       |       |           
|                                            |                          |  | Cost  |       | Fair value |  | Cost   |       | Fair value
|                                           
|Debt securities (by contractual maturities) |                          |  |       |       |            |  |        |       |            |  |       |       |  |  |        |      
|                                           
|                                           
|                                           
|                                           
|                                            | Maturing within one year |  |       | 3,485 |            |  |        | 3,447 |            |  |       | 1,614 |  |  |        | 1,579 | 
|                                           
|                                           
|                                           
|                                           
|                                            | Maturing over one year   |  |       | 111   |            |  |        | 78    |            |  |       | 128   |  |  |        | 100   | 
|                                           
|                                           
|                                           
|                                           
|Equity securities                           |                          |  | 7,973 |       |            |  | 18,290 |       |            |  | 9,773 |       |  |  | 23,658 |      
|                                           




Item 12. Description of Securities Other than Equity Securities

Not applicable

76



---



##### Table of Contents






PART II




Item 13. Defaults, Dividend Arrearages and Delinquencies

None




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

Not applicable




Item 15. [Reserved]




Item 16. [Reserved]

77



---



##### Table of Contents






PART III




Item 17. Financial Statements

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




Item 18. Financial Statements

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




Item 19. Exhibits

|                                                |                                                                                                   |  |      |      | 
|----------------------------------------------- | ------------------------------------------------------------------------------------------------- |  | ---- | ---- | 
|                                                |                                                                                                   |  | Page
|                                                |                                                                                                   |  |     
|Consolidated financial statements and schedules |                                                                                                   |  |      |     
|                                               
|                                               
|                                               
|                                               
|                                                | Index to Consolidated Financial Statements and Schedules                                          |  |      | F-1  | 
|                                               
|                                               
|                                               
|                                               
|                                                | Independent Auditors Report                                                                      |  |      | F-2  | 
|                                               
|                                               
|                                               
|                                               
|                                                | Consolidated Balance Sheets as of March 31, 2001 and 2002                                         |  |      | F-3  | 
|                                               
|                                               
|                                               
|                                               
|                                                | Consolidated Statements of Income
for the years ended March 31, 2000, 2001 and 2002               |  |      | F-5  | 
|                                               
|                                               
|                                               
|                                               
|                                                | Consolidated Statements of Shareholders Equity
for the years ended March 31, 2000, 2001 and 2002 |  |      | F-6  | 
|                                               
|                                               
|                                               
|                                               
|                                                | Consolidated Statements of Cash Flows
for the years ended March 31, 2000, 2001 and 2002           |  |      | F-7  | 
|                                               
|                                               
|                                               
|                                               
|                                                | Notes to Consolidated Financial Statements                                                        |  |      | F-8  | 
|                                               
|                                               
|                                               
|                                               
|                                               
|                                                | Supplemental information to conform with Regulation S-X:                                          |  |      |      | 
|                                               
|                                               
|                                               
|                                               
|                                                | Independent Auditors Report                                                                      |  |      | F-27 | 
|                                               
|                                               
|                                               
|                                               
|                                                | Supplemental Notes to Consolidated Financial Statements
to Conform with Regulation S-X            |  |      | F-28 | 
|                                               
|                                               
|                                               
|                                               
|                                                | Schedules for the Years Ended March 31, 2000, 2001 and 2002

IIValuation and Qualifying Accounts |  |      | F-29 | 



| |  | (NoteSchedules other those listed above are
omitted because of the absence of the
conditions under which they are required or
because the information called for is
included in the consolidated financial
statements or notes thereto)
| |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|         |  |                                                                                                           
|-------- |  | ----------------------------------------------------------------------------------------------------------
|Exhibits |  |                                                                                                           
|1.01     |  | The Articles of Incorporation, as amended and currently in effect (English translation)                   
|        
|        
|        
|        
|2(a).01  |  | Share Handling Regulations, as amended and currently in effect (English translation)                      
|        
|        
|        
|        
|2(a).02  |  | Regulation of Meetings of the Board of Directors, as amended and
currently in effect (English translation)

78



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##### Table of Contents






SIGNATURES

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

|                    |  |    |  |                                      
|------------------- |  | -- |  | -------------------------------------
|                    |  |    |  | PIONEER CORPORATION
(Registrant)     
|                   
|                   
|                   
|                   
|                    |  |    |  |                                      
|                   
|                   
|                   
|                   
|Date: July 25, 2002 |  | By |  | /s/ Katsuhiro Abe                    
|                    |  |    |  |                                      
|                    |  |    |  | Katsuhiro Abe
Chief Financial Officer

79



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##### Table of Contents



INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULES

|                                                                                                  |  |      |      | 
|------------------------------------------------------------------------------------------------- |  | ---- | ---- | 
|                                                                                                  |  | Page
|                                                                                                  |  |     
|                                                                                                 
|                                                                                                 
|                                                                                                 
|                                                                                                 
|                                                                                                  |  |      |      | 
|                                                                                                 
|                                                                                                 
|                                                                                                 
|                                                                                                 
|Consolidated financial statements and schedules                                                   |  |      |      | 
|                                                                                                 
|                                                                                                 
|                                                                                                 
|                                                                                                 
|                                                                                                  |  |      |      | 
|                                                                                                 
|                                                                                                 
|                                                                                                 
|                                                                                                 
|Independent Auditors Report                                                                      |  |      | F-2  | 
|                                                                                                 
|                                                                                                 
|                                                                                                 
|                                                                                                 
|Consolidated Balance Sheets as of March 31, 2001 and 2002                                         |  |      | F-3  | 
|                                                                                                 
|                                                                                                 
|                                                                                                 
|                                                                                                 
|Consolidated Statements of Income
for the years ended March 31, 2000, 2001 and 2002               |  |      | F-5  | 
|                                                                                                 
|                                                                                                 
|                                                                                                 
|                                                                                                 
|Consolidated Statements of Shareholders Equity
for the years ended March 31, 2000, 2001 and 2002 |  |      | F-6  | 
|                                                                                                 
|                                                                                                 
|                                                                                                 
|                                                                                                 
|Consolidated Statements of Cash Flows
for the years ended March 31, 2000, 2001 and 2002           |  |      | F-7  | 
|                                                                                                 
|                                                                                                 
|                                                                                                 
|                                                                                                 
|Notes to Consolidated Financial Statements                                                        |  |      | F-8  | 
|                                                                                                 
|                                                                                                 
|                                                                                                 
|                                                                                                 
|                                                                                                 
|Supplemental information to conform with Regulation S-X:                                          |  |      |      | 
|                                                                                                 
|                                                                                                 
|                                                                                                 
|                                                                                                 
|Independent Auditors Report                                                                      |  |      | F-27 | 
|                                                                                                 
|                                                                                                 
|                                                                                                 
|                                                                                                 
|Supplemental Notes to Consolidated Financial Statements
to Conform with Regulation S-X            |  |      | F-28 | 
|                                                                                                 
|                                                                                                 
|                                                                                                 
|                                                                                                 
|Schedules for the Years Ended March 31, 2000, 2001 and 2002                                       |  |      |      | 
|                                                                                                 
|                                                                                                 
|                                                                                                 
|                                                                                                 
|IIValuation and Qualifying Accounts                                                              |  |      | F-29 | 

(NoteSchedules other those listed above are
omitted because of the absence of the
conditions under which they are required or
because the information called for is included
in the consolidated financial statements or
notes thereto)

F-1



---



##### Table of Contents






Independent Auditors Report



To the Board of Directors and Shareholders of Pioneer Corporation:

We have audited the accompanying consolidated balance sheets of Pioneer
Corporation and subsidiaries as of March 31, 2001 and 2002, and the related
consolidated statements of income, shareholders equity and cash flows for
each of the three years in the period ended March 31, 2002 (all expressed in
Japanese yen). These financial statements are the responsibility of the
Companys management. Our responsibility is to express an opinion on these
financial statements based on our audits.

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

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

In our opinion, except for the omission of segment information disclosures,
such consolidated financial statements present fairly, in all material
respects, the financial position of Pioneer Corporation and subsidiaries as of
March 31, 2001 and 2002, and the results of their operations and their cash
flows for each of the three years in the period ended March 31, 2002 in
conformity with accounting principles generally accepted in the United States
of America.

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



/s/ Deloitte Touche Tohmatsu
Deloitte Touche Tohmatsu
Tokyo, JapanMay 2, 2002, except for Note 20.b and c, as to which the
dates are June 28, 2002 and July 15, 2002, respectively.

F-2



---



##### Table of Contents






Consolidated Balance Sheets
Pioneer Corporation and Subsidiaries
March 31

|                                       |                                                                                                                      |                                                                                               |                                             |          |                 |          |          |          |          |          |  |            |              |            | 
|-------------------------------------- | -------------------------------------------------------------------------------------------------------------------- | --------------------------------------------------------------------------------------------- | ------------------------------------------- | -------- | --------------- | -------- | -------- | -------- | -------- | -------- |  | ---------- | ------------ | ---------- | 
|                                       |                                                                                                                      |                                                                                               |                                             |          |                 |          |          |          |          |          |  |            | Thousands of
|                                       |                                                                                                                      |                                                                                               |                                             |          |                 |          |          |          |          |          |  |            | U.S. Dollars
|                                       |                                                                                                                      |                                                                                               |                                             |          | Millions of Yen |          | (Note 1)
|                                       |                                                                                                                      |                                                                                               |                                             |          |                 |          |         
|Assets                                 |                                                                                                                      | 2001                                                                                          |                                             | 2002     |                 | 2002    
|                                      
|Current assets:                        |                                                                                                                      |                                                                                               |                                             |          |                 |          |          |          |          |          |  |           
|                                      
|                                      
|                                      
|                                      
|                                       | Cash and cash equivalents                                                                                           |                                                                                               |                                             |          |                 |          |          |          |          |          |  |            |             
|                                      
|                                      
|                                      
|                                      
|                                       |                                                                                                                      | Cash,
including time deposits of ¥55,915 million
$420,414 thousand (¥83,197 million in 2001) |                                             |          | ¥121,127        |          |          |          | ¥127,113 |          |  |            | $  955,737   |           
|                                      
|                                      
|                                      
|                                      
|                                       | Available-for-sale securities (Note 3)                                                                               |                                                                                               |                                             | 1,598    |                 |          |          | 3,455    |          |          |  | 25,977     |             
|                                      
|                                      
|                                      
|                                      
|                                       | Trade receivables                                                                                                   |                                                                                               |                                             |          |                 |          |          |          |          |          |  |            |             
|                                      
|                                      
|                                      
|                                      
|                                       |                                                                                                                      | Notes                                                                                         |                                             |          | 8,079           |          |          |          | 10,240   |          |  |            | 76,992       |           
|                                      
|                                      
|                                      
|                                      
|                                       |                                                                                                                      | Accounts                                                                                      |                                             |          | 116,594         |          |          |          | 120,456  |          |  |            | 905,684      |           
|                                      
|                                      
|                                      
|                                      
|                                       |                                                                                                                      | Allowance for doubtful notes and accounts                                                     |                                             |          | (5,895          | )        |          |          | (5,133   | )        |  |            | (38,594      | )         
|                                      
|                                      
|                                      
|                                      
|                                       | Inventories (Note 4)                                                                                                 |                                                                                               |                                             | 94,429   |                 |          |          | 96,910   |          |          |  | 728,647    |             
|                                      
|                                      
|                                      
|                                      
|                                       | Deferred income taxes (Note 8)                                                                                       |                                                                                               |                                             | 21,897   |                 |          |          | 26,270   |          |          |  | 197,519    |             
|                                      
|                                      
|                                      
|                                      
|                                       | Prepaid expenses and other current assets                                                                            |                                                                                               |                                             | 30,783   |                 |          |          | 32,509   |          |          |  | 244,429    |             
|                                      
|                                       |                                                                                                                      |                                                                                               | Total current assets                        |          |                 | 388,612  |          |          |          | 411,820  |  |            |              | 3,096,391  | 
|                                      
|Investments and long-term receivables: |                                                                                                                      |                                                                                               |                                             |          |                 |          |          |          |          |          |  |           
|                                      
|                                      
|                                      
|                                      
|                                       | Available-for-sale securities (Note 3)                                                                               |                                                                                               |                                             | 23,739   |                 |          |          | 18,360   |          |          |  | 138,045    |             
|                                      
|                                      
|                                      
|                                      
|                                       | Investments in and advances to affiliated companies (Note 5)                                                         |                                                                                               |                                             | 6,395    |                 |          |          | 11,067   |          |          |  | 83,210     |             
|                                      
|                                      
|                                      
|                                      
|                                       | Sundry investments (Note 15)                                                                                         |                                                                                               |                                             | 4,787    |                 |          |          | 3,203    |          |          |  | 24,083     |             
|                                      
|                                      
|                                      
|                                      
|                                       | Long-term
receivables, less allowance for doubtful accounts
of ¥186 million$1,398 thousand (¥3,926 million in 2001) |                                                                                               |                                             | 76       |                 |          |          | 374      |          |          |  | 2,812      |             
|                                      
|                                       |                                                                                                                      |                                                                                               | Total investments and long-term receivables |          |                 | 34,997   |          |          |          | 33,004   |  |            |              | 248,150    | 
|                                      
|Property, plant and equipment(Note 6): |                                                                                                                      |                                                                                               |                                             |          |                 |          |          |          |          |          |  |           
|                                      
|                                      
|                                      
|                                      
|                                       | Land                                                                                                                 |                                                                                               |                                             | 25,876   |                 |          |          | 26,525   |          |          |  | 199,436    |             
|                                      
|                                      
|                                      
|                                      
|                                       | Buildings                                                                                                            |                                                                                               |                                             | 105,256  |                 |          |          | 110,869  |          |          |  | 833,602    |             
|                                      
|                                      
|                                      
|                                      
|                                       | Machinery and equipment                                                                                              |                                                                                               |                                             | 224,278  |                 |          |          | 242,600  |          |          |  | 1,824,060  |             
|                                      
|                                      
|                                      
|                                      
|                                       | Construction in progress                                                                                             |                                                                                               |                                             | 3,490    |                 |          |          | 2,163    |          |          |  | 16,263     |             
|                                      
|                                       |                                                                                                                      |                                                                                               | Total                                       |          |                 | 358,900  |          |          |          | 382,157  |  |            |              | 2,873,361  | 
|                                      
|                                      
|                                      
|                                      
|                                       | Accumulated depreciation                                                                                             |                                                                                               |                                             | (219,143 | )               |          |          | (231,397 | )        |          |  | (1,739,827 | )           
|                                      
|                                       |                                                                                                                      |                                                                                               | Net property, plant and equipment           |          |                 | 139,757  |          |          |          | 150,760  |  |            |              | 1,133,534  | 
|                                      
|Other assets:                          |                                                                                                                      |                                                                                               |                                             |          |                 |          |          |          |          |          |  |           
|                                      
|                                      
|                                      
|                                      
|                                       | Patents, net of accumulated amortization of ¥25,562 million
$192,195 thousand (¥23,048 million in 2001)             |                                                                                               |                                             | 3,484    |                 |          |          | 3,287    |          |          |  | 24,715     |             
|                                      
|                                      
|                                      
|                                      
|                                       | Deferred income taxes (Note 8)                                                                                       |                                                                                               |                                             | 16,301   |                 |          |          | 25,151   |          |          |  | 189,105    |             
|                                      
|                                      
|                                      
|                                      
|                                       | Other                                                                                                                |                                                                                               |                                             | 22,005   |                 |          |          | 21,107   |          |          |  | 158,699    |             
|                                      
|                                       |                                                                                                                      |                                                                                               | Total other assets                          |          |                 | 41,790   |          |          |          | 49,545   |  |            |              | 372,519    | 
|                                      
|                                       |                                                                                                                      |                                                                                               | Total                                       |          |                 | ¥605,156 |          |          |          | ¥645,129 |  |            |              | $4,850,594 | 
|                                      

See notes to consolidated financial statements.

F-3



---



##### Table of Contents



|                                                |                                                                                                                                               |                 |                             |         |                 |         |          |         |        |         |         |           |              |           | 
|----------------------------------------------- | --------------------------------------------------------------------------------------------------------------------------------------------- | --------------- | --------------------------- | ------- | --------------- | ------- | -------- | ------- | ------ | ------- | ------- | --------- | ------------ | --------- | 
|                                                |                                                                                                                                               |                 |                             |         |                 |         |          |         |        |         |         |           | Thousands of
|                                                |                                                                                                                                               |                 |                             |         |                 |         |          |         |        |         |         |           | U.S. Dollars
|                                                |                                                                                                                                               |                 |                             |         | Millions of Yen |         | (Note 1)
|                                                |                                                                                                                                               |                 |                             |         |                 |         |         
|Liabilities and
Shareholders Equity            |                                                                                                                                               | 2001            |                             | 2002    |                 | 2002   
|                                               
|Current liabilities:                            |                                                                                                                                               |                 |                             |         |                 |         |          |         |        |         |         |          
|                                               
|                                               
|                                               
|                                               
|                                                | Short-term borrowings (Note 6)                                                                                                                |                 | ¥                           | 37,571  |                 |         | ¥        | 45,867  |        |         | $       | 344,865   |             
|                                               
|                                               
|                                               
|                                               
|                                                | Current portion of long-term debt (Note 6)                                                                                                    |                 |                             | 7,996   |                 |         |          | 2,551   |        |         |         | 19,181    |             
|                                               
|                                               
|                                               
|                                               
|                                                | Trade payables                                                                                                                                |                 |                             | 45,877  |                 |         |          | 57,231  |        |         |         | 430,308   |             
|                                               
|                                               
|                                               
|                                               
|                                                | Accrued liabilities                                                                                                                          |                 |                             |         |                 |         |          |         |        |         |         |           |             
|                                               
|                                               
|                                               
|                                               
|                                                |                                                                                                                                               | Taxes on income |                             |         | 6,008           |         |          |         | 4,642  |         |         |           | 34,902       |          
|                                               
|                                               
|                                               
|                                               
|                                                |                                                                                                                                               | Payroll         |                             |         | 14,799          |         |          |         | 15,662 |         |         |           | 117,759      |          
|                                               
|                                               
|                                               
|                                               
|                                                |                                                                                                                                               | Other           |                             |         | 48,196          |         |          |         | 52,302 |         |         |           | 393,248      |          
|                                               
|                                               
|                                               
|                                               
|                                                | Dividends payable                                                                                                                             |                 |                             | 1,349   |                 |         |          | 1,350   |        |         |         | 10,150    |             
|                                               
|                                               
|                                               
|                                               
|                                                | Other current liabilities                                                                                                                     |                 |                             | 16,029  |                 |         |          | 14,705  |        |         |         | 110,564   |             
|                                               
|                                                |                                                                                                                                               |                 | Total current liabilities   |         |                 | 177,825 |          |         |        | 194,310 |         |           |              | 1,460,977 | 
|                                               
|Long-term liabilities:                          |                                                                                                                                               |                 |                             |         |                 |         |          |         |        |         |         |          
|                                               
|                                               
|                                               
|                                               
|                                                | Long-term debt (Note 6)                                                                                                                       |                 |                             | 38,304  |                 |         |          | 35,677  |        |         |         | 268,248   |             
|                                               
|                                               
|                                               
|                                               
|                                                | Accrued pension and severance cost (Note 7)                                                                                                   |                 |                             | 30,472  |                 |         |          | 46,270  |        |         |         | 347,895   |             
|                                               
|                                               
|                                               
|                                               
|                                                | Deferred income taxes (Note 8)                                                                                                                |                 |                             | 721     |                 |         |          | 918     |        |         |         | 6,902     |             
|                                               
|                                               
|                                               
|                                               
|                                                | Other long-term liabilities                                                                                                                   |                 |                             | 2,276   |                 |         |          | 1,707   |        |         |         | 12,835    |             
|                                               
|                                                |                                                                                                                                               |                 | Total long-term liabilities |         |                 | 71,773  |          |         |        | 84,572  |         |           |              | 635,880   | 
|                                               
|Commitments and contingent liabilities(Note 17) |                                                                                                                                               |                 |                             |         |                 |         |          |         |        |         |         |          
|                                               
|                                               
|                                               
|                                               
|Minority interests                              |                                                                                                                                               |                 | 18,563                      |         |                 |         | 19,244   |         |        |         | 144,692 |          
|                                               
|Shareholders equity(Note 9):                   |                                                                                                                                               |                 |                             |         |                 |         |          |         |        |         |         |          
|                                               
|                                               
|                                               
|                                               
|                                                | Common stock, ¥50 par value2001, No par value2002
Authorized 400,000,000 shares
Issued179,894,370 shares2001 and 180,063,836 shares2002 |                 |                             | 48,843  |                 |         |          | 49,049  |        |         |         | 368,790   |             
|                                               
|                                               
|                                               
|                                               
|                                                | Additional paid-in capital                                                                                                                    |                 |                             | 81,458  |                 |         |          | 82,010  |        |         |         | 616,616   |             
|                                               
|                                               
|                                               
|                                               
|                                                | Retained earnings                                                                                                                             |                 |                             | 235,345 |                 |         |          | 240,692 |        |         |         | 1,809,714 |             
|                                               
|                                               
|                                               
|                                               
|                                                | Accumulated other comprehensive income (loss) (Note 11)                                                                                       |                 |                             | (28,651 | )               |         |          | (24,736 | )      |         |         | (185,985  | )           
|                                               
|                                               
|                                               
|                                               
|                                                | Treasury stock, at cost 4,272 shares2002                                                                                                     |                 |                             |        |                 |         |          | (12     | )      |         |         | (90       | )           
|                                               
|                                                |                                                                                                                                               |                 | Total shareholders equity  |         |                 | 336,995 |          |         |        | 347,003 |         |           |              | 2,609,045 | 
|                                               
|                                                |                                                                                                                                               |                 | Total                       |         | ¥               | 605,156 |          |         | ¥      | 645,129 |         |           | $            | 4,850,594 | 
|                                               

F-4



---



##### Table of Contents






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

|                                                                |                                                         |         |                                    |          |                 |         |              |          |      |         |            |          |        |         |         |           |              |           | 
|--------------------------------------------------------------- | ------------------------------------------------------- | ------- | ---------------------------------- | -------- | --------------- | ------- | ------------ | -------- | ---- | ------- | ---------- | -------- | ------ | ------- | ------- | --------- | ------------ | --------- | 
|                                                                |                                                         |         |                                    |          |                 |         |              |          |      |         |            |          |        |         |         |           | Thousands of
|                                                                |                                                         |         |                                    |          |                 |         |              |          |      |         |            |          |        |         |         |           | U.S. Dollars
|                                                                |                                                         |         |                                    |          | Millions of Yen |         | (Note 1)    
|                                                                |                                                         |         |                                    |          |                 |         |             
|                                                                |                                                         |         |                                    |          | 2000            |         | 2001         |          | 2002 |         | 2002      
|                                                               
|Operating revenue:                                              |                                                         |         |                                    |          |                 |         |              |          |      |         |            |          |        |         |         |          
|                                                               
|                                                               
|                                                               
|                                                               
|                                                                | Net sales                                               |         |                                    | ¥596,411 |                 |         |              | ¥626,539 |      |         |            | ¥651,311 |        |         | $       | 4,897,075 |             
|                                                               
|                                                               
|                                                               
|                                                               
|                                                                | Royalty revenue                                         |         |                                    | 19,460   |                 |         |              | 20,530   |      |         |            | 17,588   |        |         |         | 132,241   |             
|                                                               
|                                                                |                                                         |         | Total operating revenue            |          |                 | 615,871 |              |          |      | 647,069 |            |          |        | 668,899 |         |           |              | 5,029,316 | 
|                                                               
|Operating costs and expenses:                                   |                                                         |         |                                    |          |                 |         |              |          |      |         |            |          |        |         |         |          
|                                                               
|                                                               
|                                                               
|                                                               
|                                                                | Cost of sales                                           |         |                                    | 428,575  |                 |         |              | 447,389  |      |         |            | 465,336  |        |         |         | 3,498,767 |             
|                                                               
|                                                               
|                                                               
|                                                               
|                                                                | Selling, general and administrative                     |         |                                    | 163,703  |                 |         |              | 165,861  |      |         |            | 182,282  |        |         |         | 1,370,541 |             
|                                                               
|                                                                |                                                         |         | Total operating costs and expenses |          |                 | 592,278 |              |          |      | 613,250 |            |          |        | 647,618 |         |           |              | 4,869,308 | 
|                                                               
|Operating income                                                |                                                         |         | 23,593                             |          |                 |         | 33,819       |          |      |         | 21,281     |          |        |         | 160,008 |          
|                                                               
|                                                               
|                                                               
|                                                               
|Other income (expenses):                                        |                                                         |         |                                    |          |                 |         |              |          |      |         |            |          |        |         |         |          
|                                                               
|                                                               
|                                                               
|                                                               
|                                                                | Interest income                                         |         |                                    | 3,072    |                 |         |              | 4,920    |      |         |            | 3,039    |        |         |         | 22,849    |             
|                                                               
|                                                               
|                                                               
|                                                               
|                                                                | Gain on sale and issuance of subsidiary stock (Note 18) |         |                                    | 12,491   |                 |         |              |         |      |         |            |         |        |         |         |          |             
|                                                               
|                                                               
|                                                               
|                                                               
|                                                                | Foreign exchange gain (loss)                            |         |                                    | (5,132   | )               |         |              | (1,192   | )    |         |            | 297      |        |         |         | 2,233     |             
|                                                               
|                                                               
|                                                               
|                                                               
|                                                                | Interest expense                                        |         |                                    | (4,679   | )               |         |              | (4,301   | )    |         |            | (3,445   | )      |         |         | (25,902   | )           
|                                                               
|                                                               
|                                                               
|                                                               
|                                                                | Othernet (Note 12)                                     |         |                                    | (1,537   | )               |         |              | 947      |      |         |            | (5,829   | )      |         |         | (43,827   | )           
|                                                               
|                                                                |                                                         |         | Total other income (expenses)      |          | 4,215           |         |              |          | 374  |         |            |          | (5,938 | )       |         |           | (44,647      | )        
|                                                               
|Income before income taxes                                      |                                                         |         | 27,808                             |          |                 |         | 34,193       |          |      |         | 15,343     |          |        |         | 115,361 |          
|                                                               
|                                                               
|                                                               
|                                                               
|Income taxes(Note 8):                                           |                                                         |         |                                    |          |                 |         |              |          |      |         |            |          |        |         |         |          
|                                                               
|                                                               
|                                                               
|                                                               
|                                                                | Current                                                 |         |                                    | 12,097   |                 |         |              | 15,011   |      |         |            | 11,107   |        |         |         | 83,511    |             
|                                                               
|                                                               
|                                                               
|                                                               
|                                                                | Deferred                                                |         |                                    | 3,119    |                 |         |              | (691     | )    |         |            | (4,385   | )      |         |         | (32,970   | )           
|                                                               
|                                                                |                                                         |         | Total income taxes                 |          |                 | 15,216  |              |          |      | 14,320  |            |          |        | 6,722   |         |           |              | 50,541    | 
|                                                               
|Income before minority interest and equity in earnings (losses) |                                                         |         | 12,592                             |          |                 |         | 19,873       |          |      |         | 8,621      |          |        |         | 64,820  |          
|                                                               
|                                                               
|                                                               
|                                                               
|Minority interest in income of subsidiaries                     |                                                         |         | (18                                | )        |                 |         | (1,445       | )        |      |         | (504       | )        |        |         | (3,789  | )        
|                                                               
|                                                               
|                                                               
|                                                               
|Equity in earnings (losses) of affiliated companies(Note 5)     |                                                         |         | 501                                |          |                 |         | (130         | )        |      |         | (70        | )        |        |         | (527    | )        
|                                                               
|Net income                                                      |                                                         |         | ¥  13,075                          |          |                 |         | ¥  18,298    |          |      |         | ¥    8,047 |          |        | $       | 60,504  |          
|                                                               
|                                                               
|                                                                |                                                         |         |                                    | Yen      |                 |         | U.S. Dollars
|                                                                |                                                         |         |                                    |          |                 |         |             
|                                                                |                                                         |         |                                    | 2000     |                 | 2001    |              | 2002     |      |         | 2002      
|                                                               
|Per share of common stock and per American Depositary Share:    |                                                         |         |                                    |          |                 |         |              |          |      |         |            |          |        |         |         |          
|                                                               
|                                                               
|                                                               
|                                                               
|                                                                | Net income (Note 16)                                    |         |                                    |          |                 |         |              |          |      |         |            |          |        |         |         |           |             
|                                                               
|                                                               
|                                                               
|                                                               
|                                                                |                                                         | Basic   |                                    |          |                 | ¥72.81  |              |          |      | ¥101.76 |            |          |        | ¥44.70  |         |           |              | $0.34     | 
|                                                               
|                                                               
|                                                               
|                                                               
|                                                                |                                                         | Diluted |                                    |          |                 | 72.80   |              |          |      | 101.70  |            |          |        | 44.69   |         |           |              | 0.34      | 
|                                                               

See notes to consolidated financial statements.

F-5



---



##### Table of Contents






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

|                                                       |                                   |  |             |  |        |  |                 |  |            |  |               |  |          |  |               |        |             |  |           |         |       |  |      |   |  |  |           |         |  
|------------------------------------------------------ | --------------------------------- |  | ----------- |  | ------ |  | --------------- |  | ---------- |  | ------------- |  | -------- |  | ------------- | ------ | ----------- |  | --------- | ------- | ----- |  | ---- | - |  |  | --------- | ------- | -
|                                                       |                                   |  |             |  |        |  | Millions of Yen
|                                                       |                                   |  |             |  |        |  |                
|                                                       |                                   |  | Outstanding |  |        |  |                 |  |            |  |               |  |          |  |               |        | Accumulated |  |           |         |       |  |      |   | 
|                                                       |                                   |  | Number of   |  |        |  |                 |  | Additional |  |               |  |          |  | Other         |        |             |  |           |         | Total
|                                                       |                                   |  | Shares      |  | Common |  | Paid-in         |  | Retained   |  | Comprehensive |  | Treasury |  | Shareholders'
|                                                       |                                   |  | (Thousands) |  | Stock  |  | Capital         |  | Earnings   |  | Income (Loss) |  | Stock    |  | Equity       
|                                                      
|Balance at March 31, 1999                              |                                   |  | 179,573     |  |        |  | ¥ 48,431        |  |            |  | ¥ 80,611      |  |          |  | ¥ 208,466     |        |             |  | (¥ 24,264 | )       |       |  |      |   |  |  | ¥ 313,244 |        
|                                                      
|                                                      
|                                                      
|                                                      
|Comprehensive income                                   |                                   |  |             |  |        |  |                 |  |            |  |               |  |          |  |               |        |             |  |           |         |       |  |      |   |  |  |           |        
|                                                      
|                                                      
|                                                      
|                                                      
|                                                       | Net income                        |  |             |  |        |  |                 |  |            |  |               |  |          |  |               | 13,075 |             |  |           |         |       |  |      |   |  |  |           | 13,075  |  
|                                                      
|                                                      
|                                                      
|                                                      
|                                                       | Other comprehensive income
(loss) |  |             |  |        |  |                 |  |            |  |               |  |          |  |               |        |             |  |           | (12,178 | )     |  |      |   |  |  |           | (12,178 | )
|                                                       |                                   |  |             |  |        |  |                 |  |            |  |               |  |          |  |               |        |             |  |           |         |       |  |      |   |  |  |           |        
|Comprehensive income                                   |                                   |  |             |  |        |  |                 |  |            |  |               |  |          |  |               |        |             |  |           |         |       |  |      |   |  |  | 897       |        
|                                                      
|                                                      
|                                                      
|                                                      
|Exercise of warrants                                   |                                   |  | 15          |  |        |  | 21              |  |            |  | 21            |  |          |  |               |        |             |  |           |         |       |  |      |   |  |  | 42        |        
|                                                      
|                                                      
|                                                      
|                                                      
|Value ascribed to warrants
(Note 10)                   |                                   |  |             |  |        |  |                 |  |            |  | 73            |  |          |  |               |        |             |  |           |         |       |  |      |   |  |  | 73        |        
|                                                      
|                                                      
|                                                      
|                                                      
|Cash dividends (¥10.00
per share)                      |                                   |  |             |  |        |  |                 |  |            |  |               |  |          |  | (1,796        | )      |             |  |           |         |       |  |      |   |  |  | (1,796    | )      
|                                                      
|Balance at March 31, 2000                              |                                   |  | 179,588     |  |        |  | 48,452          |  |            |  | 80,705        |  |          |  | 219,745       |        |             |  | (36,442   | )       |       |  |      |   |  |  | 312,460   |        
|                                                      
|                                                      
|                                                      
|                                                      
|Comprehensive income                                   |                                   |  |             |  |        |  |                 |  |            |  |               |  |          |  |               |        |             |  |           |         |       |  |      |   |  |  |           |        
|                                                      
|                                                      
|                                                      
|                                                      
|                                                       | Net income                        |  |             |  |        |  |                 |  |            |  |               |  |          |  |               | 18,298 |             |  |           |         |       |  |      |   |  |  |           | 18,298  |  
|                                                      
|                                                      
|                                                      
|                                                      
|                                                       | Other comprehensive income        |  |             |  |        |  |                 |  |            |  |               |  |          |  |               |        |             |  |           | 7,791   |       |  |      |   |  |  |           | 7,791   |  
|                                                       |                                   |  |             |  |        |  |                 |  |            |  |               |  |          |  |               |        |             |  |           |         |       |  |      |   |  |  |           |        
|Comprehensive income                                   |                                   |  |             |  |        |  |                 |  |            |  |               |  |          |  |               |        |             |  |           |         |       |  |      |   |  |  | 26,089    |        
|                                                      
|                                                      
|                                                      
|                                                      
|Exercise of warrants                                   |                                   |  | 306         |  |        |  | 391             |  |            |  | 391           |  |          |  |               |        |             |  |           |         |       |  |      |   |  |  | 782       |        
|                                                      
|                                                      
|                                                      
|                                                      
|Value ascribed to warrants
and stock options (Note 10) |                                   |  |             |  |        |  |                 |  |            |  | 362           |  |          |  |               |        |             |  |           |         |       |  |      |   |  |  | 362       |        
|                                                      
|                                                      
|                                                      
|                                                      
|Cash dividends (¥15.00
per share)                      |                                   |  |             |  |        |  |                 |  |            |  |               |  |          |  | (2,698        | )      |             |  |           |         |       |  |      |   |  |  | (2,698    | )      
|                                                      
|Balance at March 31, 2001                              |                                   |  | 179,894     |  |        |  | 48,843          |  |            |  | 81,458        |  |          |  | 235,345       |        |             |  | (28,651   | )       |       |  |      |   |  |  | 336,995   |        
|                                                      
|                                                      
|                                                      
|                                                      
|Comprehensive income                                   |                                   |  |             |  |        |  |                 |  |            |  |               |  |          |  |               |        |             |  |           |         |       |  |      |   |  |  |           |        
|                                                      
|                                                      
|                                                      
|                                                      
|                                                       | Net income                        |  |             |  |        |  |                 |  |            |  |               |  |          |  |               | 8,047  |             |  |           |         |       |  |      |   |  |  |           | 8,047   |  
|                                                      
|                                                      
|                                                      
|                                                      
|                                                       | Other comprehensive income        |  |             |  |        |  |                 |  |            |  |               |  |          |  |               |        |             |  |           | 3,915   |       |  |      |   |  |  |           | 3,915   |  
|                                                       |                                   |  |             |  |        |  |                 |  |            |  |               |  |          |  |               |        |             |  |           |         |       |  |      |   |  |  |           |        
|Comprehensive income                                   |                                   |  |             |  |        |  |                 |  |            |  |               |  |          |  |               |        |             |  |           |         |       |  |      |   |  |  | 11,962    |        
|                                                      
|                                                      
|                                                      
|                                                      
|Exercise of warrants                                   |                                   |  | 170         |  |        |  | 206             |  |            |  | 206           |  |          |  |               |        |             |  |           |         |       |  |      |   |  |  | 412       |        
|                                                      
|                                                      
|                                                      
|                                                      
|Value ascribed to warrants
and stock options (Note 10) |                                   |  |             |  |        |  |                 |  |            |  | 346           |  |          |  |               |        |             |  |           |         |       |  |      |   |  |  | 346       |        
|                                                      
|                                                      
|                                                      
|                                                      
|Purchase and sale of treasury
stock, net               |                                   |  |             |  |        |  |                 |  |            |  |               |  |          |  |               |        |             |  |           |         |       |  | (¥12 | ) |  |  | (12       | )      
|                                                      
|                                                      
|                                                      
|                                                      
|Cash dividends (¥15.00
per share)                      |                                   |  |             |  |        |  |                 |  |            |  |               |  |          |  | (2,700        | )      |             |  |           |         |       |  |      |   |  |  | (2,700    | )      
|                                                      
|Balance at March 31, 2002                              |                                   |  | 180,064     |  |        |  | ¥49,049         |  |            |  | ¥82,010       |  |          |  | ¥240,692      |        |             |  | (¥24,736  | )       |       |  | (¥12 | ) |  |  | ¥347,003  |        
|                                                      

|                                                       |                            |   |                                    |  |         |   |            |  |               |   |           |        |               |  |             |        |  |  |       |   |  |   |           |        | 
|------------------------------------------------------ | -------------------------- | - | ---------------------------------- |  | ------- | - | ---------- |  | ------------- | - | --------- | ------ | ------------- |  | ----------- | ------ |  |  | ----- | - |  | - | --------- | ------ | 
|                                                       |                            |   | Thousands of U.S. Dollars (Note 1)
|                                                       |                            |   |                                   
|                                                       |                            |   |                                    |  |         |   |            |  |               |   |           |        |               |  | Accumulated |        |  |  |       |   |  |   |          
|                                                       |                            |   |                                    |  |         |   | Additional |  |               |   |           |        | Other         |  |             |        |  |  | Total
|                                                       |                            |   | Common                             |  | Paid-in |   | Retained   |  | Comprehensive |   | Treasury  |        | Shareholders'
|                                                       |                            |   | Stock                              |  | Capital |   | Earnings   |  | Income (Loss) |   | Stock     |        | Equity       
|                                                      
|Balance at March 31, 2001                              |                            | $ | 367,241                            |  |         | $ | 612,466    |  |               | $ | 1,769,511 |        |               |  | ($215,421   | )      |  |  |       |   |  | $ | 2,533,797 |       
|                                                      
|                                                      
|                                                      
|                                                      
|Comprehensive income                                   |                            |   |                                    |  |         |   |            |  |               |   |           |        |               |  |             |        |  |  |       |   |  |   |           |       
|                                                      
|                                                      
|                                                      
|                                                      
|                                                       | Net income                 |   |                                    |  |         |   |            |  |               |   |           | 60,504 |               |  |             |        |  |  |       |   |  |   |           | 60,504 | 
|                                                      
|                                                      
|                                                      
|                                                      
|                                                       | Other comprehensive income |   |                                    |  |         |   |            |  |               |   |           |        |               |  |             | 29,436 |  |  |       |   |  |   |           | 29,436 | 
|                                                       |                            |   |                                    |  |         |   |            |  |               |   |           |        |               |  |             |        |  |  |       |   |  |   |           |       
|Comprehensive income                                   |                            |   |                                    |  |         |   |            |  |               |   |           |        |               |  |             |        |  |  |       |   |  |   | 89,940    |       
|                                                      
|                                                      
|                                                      
|                                                      
|Exercise of warrants                                   |                            |   | 1,549                              |  |         |   | 1,549      |  |               |   |           |        |               |  |             |        |  |  |       |   |  |   | 3,098     |       
|                                                      
|                                                      
|                                                      
|                                                      
|Value
ascribed to warrants
and stock options (Note 10) |                            |   |                                    |  |         |   | 2,601      |  |               |   |           |        |               |  |             |        |  |  |       |   |  |   | 2,601     |       
|                                                      
|                                                      
|                                                      
|                                                      
|Purchase and sale of treasury
stock, net               |                            |   |                                    |  |         |   |            |  |               |   |           |        |               |  |             |        |  |  | ($90  | ) |  |   | (90       | )     
|                                                      
|                                                      
|                                                      
|                                                      
|Cash dividends ($0.11 per share)                       |                            |   |                                    |  |         |   |            |  |               |   | (20,301   | )      |               |  |             |        |  |  |       |   |  |   | (20,301   | )     
|                                                      
|Balance at March 31, 2002                              |                            | $ | 368,790                            |  |         | $ | 616,616    |  |               | $ | 1,809,714 |        |               |  | ($185,985   | )      |  |  | ($90  | ) |  | $ | 2,609,045 |       
|                                                      

See notes to consolidated financial statements.

F-6



---



##### Table of Contents






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

|                                                             |                                                                                   |                                                                     |                                                     |         |                 |        |          |         |        |         |         |         |        |         |         |          |              |          |  
|------------------------------------------------------------ | --------------------------------------------------------------------------------- | ------------------------------------------------------------------- | --------------------------------------------------- | ------- | --------------- | ------ | -------- | ------- | ------ | ------- | ------- | ------- | ------ | ------- | ------- | -------- | ------------ | -------- | -
|                                                             |                                                                                   |                                                                     |                                                     |         |                 |        |          |         |        |         |         |         |        |         |         |          | Thousands of
|                                                             |                                                                                   |                                                                     |                                                     |         |                 |        |          |         |        |         |         |         |        |         |         |          | U.S. Dollars
|                                                             |                                                                                   |                                                                     |                                                     |         | Millions of Yen |        | (Note 1)
|                                                             |                                                                                   |                                                                     |                                                     |         |                 |        |         
|                                                             |                                                                                   |                                                                     |                                                     |         | 2000            |        | 2001     |         | 2002   |         | 2002   
|                                                            
|Operating activities:                                        |                                                                                   |                                                                     |                                                     |         |                 |        |          |         |        |         |         |         |        |         |         |         
|                                                            
|                                                            
|                                                            
|                                                            
|                                                             | Net income                                                                        |                                                                     | ¥                                                   | 13,075  |                 |        | ¥        | 18,298  |        |         | ¥       | 8,047   |        |         | $       | 60,504   |             
|                                                            
|                                                            
|                                                            
|                                                            
|                                                             | Adjustments
to reconcile net income to net cash provided
by operating activities: |                                                                     |                                                     |         |                 |        |          |         |        |         |         |         |        |         |         |          |             
|                                                            
|                                                            
|                                                            
|                                                            
|                                                             |                                                                                   | Depreciation and amortization                                       |                                                     |         | 32,852          |        |          |         | 32,405 |         |         |         | 36,782 |         |         |          | 276,556      |         
|                                                            
|                                                            
|                                                            
|                                                            
|                                                             |                                                                                   | Minority interest in income of subsidiaries                         |                                                     |         | 18              |        |          |         | 1,445  |         |         |         | 504    |         |         |          | 3,789        |         
|                                                            
|                                                            
|                                                            
|                                                            
|                                                             |                                                                                   | Equity in (earnings) losses of affiliated companies, less dividends |                                                     |         | (250            | )      |          |         | 136    |         |         |         | 79     |         |         |          | 594          |         
|                                                            
|                                                            
|                                                            
|                                                            
|                                                             |                                                                                   | Deferred income taxes                                               |                                                     |         | 3,119           |        |          |         | (691   | )       |         |         | (4,385 | )       |         |          | (32,970      | )       
|                                                            
|                                                            
|                                                            
|                                                            
|                                                             |                                                                                   | Provision for pension and severance cost, less payments             |                                                     |         | 1,763           |        |          |         | (1,993 | )       |         |         | 392    |         |         |          | 2,947        |         
|                                                            
|                                                            
|                                                            
|                                                            
|                                                             |                                                                                   | Loss on sale of fixed assets                                        |                                                     |         | 2,641           |        |          |         | 914    |         |         |         | 3,340  |         |         |          | 25,113       |         
|                                                            
|                                                            
|                                                            
|                                                            
|                                                             |                                                                                   | (Gain) loss on sale and write-down of investments and securities    |                                                     |         | (4,151          | )      |          |         | (254   | )       |         |         | 2,287  |         |         |          | 17,195       |         
|                                                            
|                                                            
|                                                            
|                                                            
|                                                             |                                                                                   | Impairment losses of fixed assets                                   |                                                     |         | 3,972           |        |          |         | 1,163  |         |         |         |       |         |         |          |             |         
|                                                            
|                                                            
|                                                            
|                                                            
|                                                             |                                                                                   | Gain on sale and issuance of subsidiary stock                       |                                                     |         | (12,491         | )      |          |         |       |         |         |         |       |         |         |          |             |         
|                                                            
|                                                            
|                                                            
|                                                            
|                                                             |                                                                                   | Increase in trade notes and accounts receivable                     |                                                     |         | (12,500         | )      |          |         | (6,729 | )       |         |         | (2,225 | )       |         |          | (16,729      | )       
|                                                            
|                                                            
|                                                            
|                                                            
|                                                             |                                                                                   | Decrease in inventories                                             |                                                     |         | 6,416           |        |          |         | 5,786  |         |         |         | 3,288  |         |         |          | 24,722       |         
|                                                            
|                                                            
|                                                            
|                                                            
|                                                             |                                                                                   | Increase in prepaid expenses and other current assets               |                                                     |         | (691            | )      |          |         | (2,430 | )       |         |         | (2,706 | )       |         |          | (20,346      | )       
|                                                            
|                                                            
|                                                            
|                                                            
|                                                             |                                                                                   | Increase in trade payables                                          |                                                     |         | 5,536           |        |          |         | 177    |         |         |         | 9,304  |         |         |          | 69,955       |         
|                                                            
|                                                            
|                                                            
|                                                            
|                                                             |                                                                                   | Increase (decrease) in accrued taxes on income                      |                                                     |         | 185             |        |          |         | (1,204 | )       |         |         | (1,473 | )       |         |          | (11,075      | )       
|                                                            
|                                                            
|                                                            
|                                                            
|                                                             |                                                                                   | Increase in other accrued liabilities                               |                                                     |         | 3,820           |        |          |         | 1,184  |         |         |         | 2,716  |         |         |          | 20,421       |         
|                                                            
|                                                            
|                                                            
|                                                            
|                                                             |                                                                                   | Other                                                               |                                                     |         | 2,076           |        |          |         | 3,034  |         |         |         | 1,160  |         |         |          | 8,722        |         
|                                                            
|                                                             |                                                                                   |                                                                     | Net cash provided by operating activities           |         |                 | 45,390 |          |         |        | 51,241  |         |         |        | 57,110  |         |          |              | 429,398  |  
|                                                            
|Investing activities:                                        |                                                                                   |                                                                     |                                                     |         |                 |        |          |         |        |         |         |         |        |         |         |         
|                                                            
|                                                            
|                                                            
|                                                            
|                                                             | Payment for purchase of fixed assets                                              |                                                                     |                                                     | (25,458 | )               |        |          | (42,183 | )      |         |         | (46,996 | )      |         |         | (353,353 | )           
|                                                            
|                                                            
|                                                            
|                                                            
|                                                             | Payment for investment securities                                                 |                                                                     |                                                     | (476    | )               |        |          | (5,798  | )      |         |         | (4,566  | )      |         |         | (34,331  | )           
|                                                            
|                                                            
|                                                            
|                                                            
|                                                             | Payment for available-for-sale securities                                         |                                                                     |                                                     | (1,046  | )               |        |          | (1,233  | )      |         |         | (2,031  | )      |         |         | (15,271  | )           
|                                                            
|                                                            
|                                                            
|                                                            
|                                                             | Proceeds from sale of fixed assets and investment securities                      |                                                                     |                                                     | 5,675   |                 |        |          | 5,631   |        |         |         | 2,203   |        |         |         | 16,564   |             
|                                                            
|                                                            
|                                                            
|                                                            
|                                                             | Proceeds from sale of available-for-sale securities                               |                                                                     |                                                     | 6,140   |                 |        |          | 1,789   |        |         |         | 177     |        |         |         | 1,331    |             
|                                                            
|                                                            
|                                                            
|                                                            
|                                                             | Proceeds from sale and issuance of subsidiary stock                               |                                                                     |                                                     | 28,780  |                 |        |          |        |        |         |         |        |        |         |         |         |             
|                                                            
|                                                            
|                                                            
|                                                            
|                                                             | Decrease in loans receivable                                                      |                                                                     |                                                     | 1,835   |                 |        |          | 410     |        |         |         | 1,071   |        |         |         | 8,053    |             
|                                                            
|                                                            
|                                                            
|                                                            
|                                                             | Other                                                                             |                                                                     |                                                     | (3,466  | )               |        |          | (197    | )      |         |         | (1,006  | )      |         |         | (7,564   | )           
|                                                            
|                                                             |                                                                                   |                                                                     | Net cash provided by (used in) investing activities |         |                 | 11,984 |          |         |        | (41,581 | )       |         |        | (51,148 | )       |          |              | (384,571 | )
|                                                            
|Financing activities:                                        |                                                                                   |                                                                     |                                                     |         |                 |        |          |         |        |         |         |         |        |         |         |         
|                                                            
|                                                            
|                                                            
|                                                            
|                                                             | Proceeds from long-term debt                                                      |                                                                     |                                                     | 2,000   |                 |        |          |        |        |         |         |        |        |         |         |         |             
|                                                            
|                                                            
|                                                            
|                                                            
|                                                             | Payment of long-term debt                                                         |                                                                     |                                                     | (6,292  | )               |        |          | (37,760 | )      |         |         | (7,560  | )      |         |         | (56,842  | )           
|                                                            
|                                                            
|                                                            
|                                                            
|                                                             | Increase (decrease) in short-term borrowings                                      |                                                                     |                                                     | 1,158   |                 |        |          | (7,078  | )      |         |         | 5,866   |        |         |         | 44,105   |             
|                                                            
|                                                            
|                                                            
|                                                            
|                                                             | Dividends paid                                                                    |                                                                     |                                                     | (1,796  | )               |        |          | (2,247  | )      |         |         | (2,699  | )      |         |         | (20,293  | )           
|                                                            
|                                                            
|                                                            
|                                                            
|                                                             | Other                                                                             |                                                                     |                                                     | 791     |                 |        |          | 518     |        |         |         | 186     |        |         |         | 1,399    |             
|                                                            
|                                                             |                                                                                   |                                                                     | Net cash used in financing activities               |         |                 | (4,139 | )        |         |        | (46,567 | )       |         |        | (4,207  | )       |          |              | (31,631  | )
|                                                            
|Effect of exchange rate changes on cash and cash equivalents |                                                                                   |                                                                     | (3,493                                              | )       |                 |        | 6,229    |         |        |         | 4,231   |         |        |         | 31,812  |         
|                                                            
|Net increase (decrease) in cash and cash equivalents         |                                                                                   |                                                                     | 49,742                                              |         |                 |        | (30,678  | )       |        |         | 5,986   |         |        |         | 45,008  |         
|                                                            
|                                                            
|                                                            
|                                                            
|Cash and cash equivalents, beginning of year                 |                                                                                   |                                                                     | 102,063                                             |         |                 |        | 151,805  |         |        |         | 121,127 |         |        |         | 910,729 |         
|                                                            
|Cash and cash equivalents, end of year                       |                                                                                   | ¥                                                                   | 151,805                                             |         |                 | ¥      | 121,127  |         |        | ¥       | 127,113 |         |        | $       | 955,737 |         
|                                                            

See notes to consolidated financial statements.

F-7



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##### Table of Contents






Notes to Consolidated Financial Statements
Pioneer Corporation and Subsidiaries

1. Basis of presentation and significant accounting policies:

1) Basis of Presentation

Basis of Financial StatementsThe accompanying consolidated financial statements are
stated in Japanese yen, the currency of the country in which
Pioneer Corporation (Pioneer Kabushiki Kaisha) (the parent
company) is incorporated. The translation of Japanese yen
amounts into U.S. dollar amounts for the year ended March
31, 2002 is included solely for the convenience of readers
outside Japan and has been made at the rate of ¥133 to
U.S.$1.00, the approximate rate of exchange at March 31,
2002. Such translation should not be construed as a representation that
Japanese yen amounts could be converted into
U.S. dollars at the above or any other rate.

The accompanying consolidated financial statements have
been prepared on the basis of accounting principles generally
accepted in the United States of America except for the
omission of segment information concerning the operations
of the parent company and its majority-owned subsidiaries
(together, the Company), as required by Statement of
Financial Accounting Standards (SFAS) No.131.

Effect has been given in the consolidated financial statements to
adjustments which, because of either customary
accounting practices in Japan or income tax law requirements, have not been
entered in the Companys general books
of account. The major adjustments include those relating to
(1) accounting for pension costs, (2) accounting for leases,
and (3) accounting for financial instruments.

Nature of OperationsThe Company is engaged in the development, manufacture
and sale of electronics products such as audio, video and car
electronics, and of AV (audio/video) software on a global
scale. The Company is one of the leading manufacturers of
consumer, commercial and industrial AV products, including
those employing laser optical disc technologies.

The principal production activities of the Company
are carried out in Asia including Japan. The Companys
products are generally sold under its own brand names,
principally Pioneer. The principal markets for the
Company are Japan, the United States of America,
European countries and Asia. The Company sells its
products to customers in consumer, commercial and industrial markets through
its sales offices in Japan, and its sales
subsidiaries and independent distributors overseas. On
an original-equipment-manufacturer basis, the Company
markets certain products, such as car electronics products, to
other companies.

Use of EstimatesThe preparation of the consolidated financial statements in
conformity with generally accepted accounting principles
requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and
the disclosure of contingent assets and liabilities at the dates
of these statements and the reported amounts of revenues and
expenses during the reporting period.

Due to the inherent uncertainty involved in making
estimates, actual results could differ from those estimates.

2) Summary of Significant Accounting Policies

Consolidation and Investments in Affiliated
CompaniesThe consolidated financial statements include the accounts
of the parent company and its majority-owned subsidiaries.
Investments in 20% to 50% owned companies are accounted
for by the equity method of accounting. In July 2001, the
Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 141 (SFAS 141),
Business Combinations. SFAS 141 requires the purchase
method of accounting for business combinations initiated
after June 30, 2001 and eliminates the pooling-of-interests
method. The excess of the cost of the investment in subsidiaries and 20% to 50%
owned companies over the equity
in the net assets at the date of acquisition before July 1, 2001
is amortized over a 5-to-10-year period. The adoption of
SFAS 141 did not have a significant impact on the
Companys consolidated financial statements. All significant
intercompany transactions have been eliminated.

Gains and losses resulting from the issuance of
subsidiaries stock are recognized in consolidated earnings.

Foreign Currency TranslationFor all significant foreign operations, the functional currency
is the local currency. Generally, all asset and liability accounts
of foreign operations are translated into Japanese yen at
year-end rates and all revenue and expense accounts are
translated at rates prevailing at the time of the transactions.
The resulting translation adjustments are accumulated and
reported as a component of accumulated other comprehensive
income (loss).

Foreign currency receivables and payables are translated at
year-end exchange rates and resulting exchange gains and
losses are recognized in earnings currently.

F-8



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##### Table of Contents



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

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

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

The Company reviews the fair value of its available-for-sale
securities on a regular basis to determine if the fair value of any
individual security has declined below its cost and if such
decline is other than temporary. If the decline in value is
judged to be other than temporary, the cost basis of the
security is written down to fair value. The resulting realized
loss is included in the statements of consolidated income
in the period in which the decline was deemed to be other
than temporary.

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

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

The estimated useful lives are as follows:

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

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

Long-Lived AssetsThe Company reviews its long-lived assets and certain
identifiable intangibles for impairment whenever events or
changes in circumstances indicate that the carrying amount
of an asset may not be recoverable. When the sum of
expected future cash flows is less than the carrying amount of
the asset, an impairment loss is recognized. Such impairment
loss is measured as the amount by which the carrying amount
of the asset exceeds the fair value of the asset.

During the year ended March 31, 2000, the Company
recorded an impairment loss of ¥1,872 million related
to previously purchased intangible assets of its karaoke
business reflecting reduced revenue expectations from the
business and ¥2,100 million related to a factory facility
closed during the year.

During the year ended March 31, 2001, the Company
recorded an additional impairment loss of ¥1,163 million
related to intangible assets of its karaoke business.

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

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

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

F-9



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##### Table of Contents



DerivativesDerivative financial instruments utilized by the Company are comprised
principally of forward exchange contracts, currency options and currency swaps.
Forward exchange contracts and currency options, the majority of which mature
within six months, and currency swaps, which mature from 2002 to 2005, are
utilized to hedge exposures to foreign exchange risk and interest risk. The
Company does not hold or issue derivative financial instruments for trading
purposes.

Prior to April 1, 2001, gains and losses on hedges of existing
assets and liabilities were included in the carrying amounts of those assets
and liabilities and were ultimately recognized in other income (expenses).
Gains and losses related to qualifying hedges of firm commitments or
anticipated transactions were also deferred and were recognized in other income
(expenses) or as adjustments of carrying amounts when the hedged transaction
occurred. Unrealized gains and losses on forward contracts including foreign
currency options intended as hedges for foreign currency risk of anticipated
transactions with companies within the consolidated group were recognized
currently in other income (expenses).

Accounting ChangesAt April 1, 2001, the Company adopted SFAS No. 133, Accounting for Derivative
Instruments and Hedging Activities, as amended by SFAS No. 138, Accounting
for Certain Derivative Instruments and Certain Hedging Activitiesan amendment
of FASB Statement No.133. Under SFAS No.133, all derivative instruments are
recognized in the balance sheet at their fair values and changes in fair value
are recognized immediately in earnings, unless the derivatives qualify as
hedges of future cash flows. For derivatives qualifying as hedges of future
cash flows, the effective portion of changes in fair value is recorded in other
comprehensive income, then recognized in earnings along with the related
effects of the hedged items. Any ineffective portion of hedges is reported in
earnings as it occurs.

The cumulative effect of adopting this accounting
change at April 1, 2001, was not significant.

Forward exchange contracts,
currency swaps and currency options are utilized to hedge certain foreign
currency and interest rate exposures. However, none of these derivatives were
designated as hedging instruments under SFAS No. 133 at March 31, 2002.
Unrealized gains and losses on such instruments are recognized currently in
earnings.

ReclassificationsCertain reclassifications and format changes have been made to prior year
amounts to conform to the current year presentation.

New Accounting StandardsIn July 2001, the Financial Accounting Standards Board issued SFAS No. 142,
Goodwill and Other Intangible Assets, which is effective for fiscal years
beginning after December 15, 2001. Under SFAS No. 142, goodwill and other
intangible assets with indefinite lives will no longer be amortized. Instead,
the carrying value of these assets will be reviewed for impairment at least
annually, or more frequently should circumstances indicate. Intangible assets
with definite lives will continue to be amortized over their estimated useful
lives. The adoption of SFAS No. 142 will not have a material impact on the
Companys consolidated financial position, result of operation or cash flows.

In June 2001, the Financial Accounting Standards Board issued SFAS No.
143, Accounting for Asset Retirement Obligations, which is effective for
fiscal years beginning after June 15, 2002. SFAS No. 143 addresses the
recognition and
remeasurement of obligations associated with the retirement
of tangible long-lived assets. The adoption of SFAS No. 143
will not have a material impact on the Companys consolidated
financial position, result of operation or cash flows.

In October 2001, the Financial Accounting Standards
Board issued SFAS No.144, Accounting for the Impairment
or Disposal of Long-Lived Assets, which is effective for fiscal
years beginning after December 15, 2001. SFAS No. 144
applies to all long-lived assets (including discontinued
operations) and it develops one accounting model for
long-lived assets that are to be disposed of by sale. The
Company has not determined the impact of its adoption on
its consolidated financial position or result of operations.

In April 2001, the Emerging Issues Task Force reached
a final consensus on Issue (EITF) 00-14, Accounting
for Certain Sales Incentives. EITF 00-14 addresses the
recognition, measurement, and income statement classification for sales incentives offered voluntarily by a
vendor without charge to customers that can be used in,
or that are exercisable by a customer as a result of, a
single exchange transaction. In April 2001, the Emerging
Issues Task Force also reached a final consensus on EITF
00-25, Vendor Income Statement Characterization of
Consideration Paid to a Reseller of the Vendors Products.
EITF 00-25 addresses income statement characterization of consideration, other than that directly addressed in EITF
00-14. EITF 01-9, Accounting for Consideration given
by a Vendor to a Customer (including a Reseller of the
Vendors Products), was issued to codify and reconcile
EITF 00-14 and EITF 00-25.

F-10



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##### Table of Contents



EITF 01-9 should be applied
for the period beginning after December 15, 2001. The
adoption of the recognition standards for liabilities is
not expected to have a material effect on the Companys
consolidated financial position or results of operations.  However, the adoption of the income statement display
requirements of EITF 01-9 will result in a reduction in
reported sales and a corresponding decrease in selling,
general and administrative expenses, with no effect on
net income. The Company is currently assessing the impact
on the Companys consolidated results of operations.
The Company will reclassify prior years consolidated
financial statements for comparative purposes if the impact
is material.



2.  Supplemental cash flow information:

Selected cash payments and noncash activities for the years ended March 31,
2000, 2001 and 2002 were as follows:

|                              |                                        |   |                 |     |              |   |        |     |      |   |        |   |  |   |              |   | 
|----------------------------- | -------------------------------------- | - | --------------- | --- | ------------ | - | ------ | --- | ---- | - | ------ | - |  | - | ------------ | - | 
|                              |                                        |   |                 |     |              |   |        |     |      |   |        |   |  |   | Thousands of
|                              |                                        |   | Millions of Yen |     | U.S. Dollars
|                              |                                        |   |                 |     |             
|                              |                                        |   | 2000            |     | 2001         |   | 2002   |     | 2002
|                             
|Cash payment for interest     |                                        | ¥ | 4,608           |     |              | ¥ | 4,889  |     |      | ¥ | 3,281  |   |  | $ | 24,669       |  
|                             
|                             
|                             
|                             
|Cash payment for income taxes |                                        |   | 11,953          |     |              |   | 16,245 |     |      |   | 12,580 |   |  |   | 94,586       |  
|                             
|                             
|                             
|                             
|Noncash investing activities: |                                        |   |                 |     |              |   |        |     |      |   |        |   |  |   |              |  
|                             
|                             
|                             
|                             
|                              | Capitalized lease obligations incurred |   |                 | 259 |              |   |        | 141 |      |   |        |  |  |   |              |  | 
|                             



3.  Available-for-sale securities:

Cost, gross unrealized holding gains, gross unrealized holding losses and the
aggregate fair value of available-for-sale securities at March 31, 2001 and
2002 were as follows:

|                              |             |       |   |                 |        |       |   |            |        |            |   |           |       |       |   |        |            |         |   |            |           |            |   |        |        |  |   |     |     |  |   |        |        | 
|----------------------------- | ----------- | ----- | - | --------------- | ------ | ----- | - | ---------- | ------ | ---------- | - | --------- | ----- | ----- | - | ------ | ---------- | ------- | - | ---------- | --------- | ---------- | - | ------ | ------ |  | - | --- | --- |  | - | ------ | ------ | 
|                              |             |       |   | Millions of Yen
|                              |             |       |   |                
|                              |             |       |   | 2001            |        | 2002 
|                              |             |       |   |                 |        |      
|                              |             |       |   |                 |        |       |   | Gross      |        | Gross      |   |           |       |       |   |        |            |         |   | Gross      |           | Gross      |   |        |        | 
|                              |             |       |   |                 |        |       |   | Unrealized |        | Unrealized |   |           |       |       |   |        |            |         |   | Unrealized |           | Unrealized |   |        |        | 
|                              |             |       |   |                 |        |       |   | Holding    |        | Holding    |   | Aggregate |       |       |   |        |            | Holding |   | Holding    | Aggregate
|                              |             |       |   | Cost            |        | Gains |   | Losses     |        | Fair Value |   | Cost      |       | Gains |   | Losses | Fair Value
|                             
|Marketable equity securities: |             |       |   |                 |        |       |   |            |        |            |   |           |       |       |   |        |            |         |   |            |           |            |   |        |        |  |   |     |     |  |   |       
|                             
|                             
|                             
|                             
|                              | Current     |       | ¥ | 19              |        |       |   |           |        |            |   |          |       |       | ¥ | 19     |            |         | ¥ | 10         |           |            |   |       |        |  | ¥ | 2   |     |  | ¥ | 8      |       
|                             
|                             
|                             
|                             
|                              | Non-current |       |   | 9,754           |        |       | ¥ | 14,972     |        |            | ¥ | 1,087     |       |       |   | 23,639 |            |         |   | 7,963      |           |            | ¥ | 10,805 |        |  |   | 486 |     |  |   | 18,282 |       
|                             
|                             
|                             
|                             
|Marketable debt securities:   |             |       |   |                 |        |       |   |            |        |            |   |           |       |       |   |        |            |         |   |            |           |            |   |        |        |  |   |     |     |  |   |       
|                             
|                             
|                             
|                             
|                              | Current     |       |   | 1,614           |        |       |   |           |        |            |   | 35        |       |       |   | 1,579  |            |         |   | 3,485      |           |            |   |       |        |  |   | 38  |     |  |   | 3,447  |       
|                             
|                             
|                             
|                             
|                              | Non-current |       |   | 128             |        |       |   |           |        |            |   | 28        |       |       |   | 100    |            |         |   | 111        |           |            |   |       |        |  |   | 33  |     |  |   | 78     |       
|                             
|                              |             | Total |   | ¥               | 11,515 |       |   | ¥          | 14,972 |            |   | ¥         | 1,150 |       |   | ¥      | 25,337     |         |   | ¥          | 11,569    |            |   | ¥      | 10,805 |  |   | ¥   | 559 |  |   | ¥      | 21,815 | 
|                             

F-11



---



##### Table of Contents



|                              |             |       |   |                           |        |       |   |            |        |            |   |           |       |  |   |         |         | 
|----------------------------- | ----------- | ----- | - | ------------------------- | ------ | ----- | - | ---------- | ------ | ---------- | - | --------- | ----- |  | - | ------- | ------- | 
|                              |             |       |   | Thousands of U.S. Dollars
|                              |             |       |   |                          
|                              |             |       |   | 2002                     
|                              |             |       |   |                          
|                              |             |       |   |                           |        |       |   | Gross      |        | Gross      |   |           |       | 
|                              |             |       |   |                           |        |       |   | Unrealized |        | Unrealized |   |           |       | 
|                              |             |       |   |                           |        |       |   | Holding    |        | Holding    |   | Aggregate
|                              |             |       |   | Cost                      |        | Gains |   | Losses     |        | Fair Value
|                             
|Marketable equity securities: |             |       |   |                           |        |       |   |            |        |            |   |           |       |  |   |        
|                             
|                             
|                             
|                             
|                              | Current     |       | $ | 75                        |        |       |   |           |        |            | $ | 15        |       |  | $ | 60      |        
|                             
|                             
|                             
|                             
|                              | Non-current |       |   | 59,872                    |        |       | $ | 81,241     |        |            |   | 3,654     |       |  |   | 137,459 |        
|                             
|                             
|                             
|                             
|Marketable debt securities:   |             |       |   |                           |        |       |   |            |        |            |   |           |       |  |   |        
|                             
|                             
|                             
|                             
|                              | Current     |       |   | 26,203                    |        |       |   |           |        |            |   | 286       |       |  |   | 25,917  |        
|                             
|                             
|                             
|                             
|                              | Non-current |       |   | 834                       |        |       |   |           |        |            |   | 248       |       |  |   | 586     |        
|                             
|                              |             | Total |   | $                         | 86,984 |       |   | $          | 81,241 |            |   | $         | 4,203 |  |   | $       | 164,022 | 
|                             

Gross realized gains on available-for-sale securities for the
years ended March 31, 2000 and 2001 were ¥3,655 million
and ¥1,556 million, respectively. Gross realized losses for the
years ended March 31, 2000 and 2001 were ¥292 million
and ¥2 million, respectively. Neither gross realized gains nor
losses on available-for-sale securities was recorded for the year
ended March 31, 2002.

At March 31, 2002, the fair values of marketable debt
securities which were classified as available-for-sale due in
one year and due over one year by contractual maturities were
¥1,999 million ($15,030 thousand) and ¥1,526 million
($11,473 thousand), respectively. For the years ended
March 31, 2000, 2001 and 2002, losses on write-down of
marketable equity securities were recognized to reflect
the decline in market value considered to be other than
temporary totaling ¥652 million, ¥246 million and ¥1,828
million ($13,744 thousand), respectively.



4.  Inventories:

Inventories at March 31, 2001 and 2002 comprise the following:

|                       |       |  |                 |         |              |  |         |         |  |   |              |         | 
|---------------------- | ----- |  | --------------- | ------- | ------------ |  | ------- | ------- |  | - | ------------ | ------- | 
|                       |       |  |                 |         |              |  |         |         |  |   | Thousands of
|                       |       |  | Millions of Yen |         | U.S. Dollars
|                       |       |  |                 |         |             
|                       |       |  | 2001            |         | 2002         |  | 2002   
|                      
|Finished products      |       |  | ¥52,501         |         |              |  | ¥53,912 |         |  | $ | 405,354      |        
|                      
|                      
|                      
|                      
|Work in process        |       |  | 16,921          |         |              |  | 18,813  |         |  |   | 141,451      |        
|                      
|                      
|                      
|                      
|Materials and supplies |       |  | 25,007          |         |              |  | 24,185  |         |  |   | 181,842      |        
|                      
|                       | Total |  |                 | ¥94,429 |              |  |         | ¥96,910 |  |   | $            | 728,647 | 
|                      



5.  Investments in and advances to affiliated companies:

Investments in and advances to affiliated companies principally represent the
Companys equity in the underlying assets
of 20% to 50% owned companies. Dividends received
from companies accounted for on an equity basis were
¥251 million, ¥6 million and ¥9 million ($67 thousand),
respectively, for the years ended March 31, 2000, 2001
and 2002.

F-12



---



##### Table of Contents



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

Short-term borrowings at March 31, 2001 and 2002 comprise the following:

|           |                                                                                     |           |  |                 |        |              |  |      |        |  |  |              |         | 
|---------- | ----------------------------------------------------------------------------------- | --------- |  | --------------- | ------ | ------------ |  | ---- | ------ |  |  | ------------ | ------- | 
|           |                                                                                     |           |  |                 |        |              |  |      |        |  |  | Thousands of
|           |                                                                                     |           |  | Millions of Yen |        | U.S. Dollars
|           |                                                                                     |           |  |                 |        |             
|           |                                                                                     |           |  | 2000            |        | 2001         |  | 2001
|          
|Bank loans |                                                                                     |           |  |                 |        |              |  |      |        |  |  |             
|          
|          
|          
|          
|           | Weighted
average interest rate 3.61% at March 31, 2001
and 2.04% at March 31, 2002: |           |  |                 |        |              |  |      |        |  |  |              |        
|          
|          
|          
|          
|           |                                                                                     | Unsecured |  | ¥               | 37,571 |              |  | ¥    | 45,867 |  |  | $            | 344,865 | 
|          

Long-term debt at March 31, 2001 and 2002 comprises the following:

|                                                                                                                                                                                                             |       |           |        |                 |        |              |        |        |       |  |         |              |        | 
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ | ----- | --------- | ------ | --------------- | ------ | ------------ | ------ | ------ | ----- |  | ------- | ------------ | ------ | 
|                                                                                                                                                                                                             |       |           |        |                 |        |              |        |        |       |  |         | Thousands of
|                                                                                                                                                                                                             |       |           |        | Millions of Yen |        | U.S. Dollars
|                                                                                                                                                                                                             |       |           |        |                 |        |             
|                                                                                                                                                                                                             |       |           |        | 2001            |        | 2002         |        | 2002  
|                                                                                                                                                                                                            
|Loans, principally from banks, maturing serially through 2031
interest ranging
from 0.88% to 4.00% at March 31, 2001 and from 1.39%
to 4.00% at March 31, 2002:                                              |       |           |        |                 |        |              |        |        |       |  |         |             
|                                                                                                                                                                                                            
|                                                                                                                                                                                                            
|                                                                                                                                                                                                            
|                                                                                                                                                                                                            
|                                                                                                                                                                                                             |       | Secured   |        | ¥               | 6,792  |              |        | ¥      | 6,172 |  |         | $            | 46,406 | 
|                                                                                                                                                                                                            
|                                                                                                                                                                                                            
|                                                                                                                                                                                                            
|                                                                                                                                                                                                            
|                                                                                                                                                                                                             |       | Unsecured |        |                 | 13,100 |              |        |        | 6,160 |  |         |              | 46,316 | 
|                                                                                                                                                                                                            
|                                                                                                                                                                                                            
|                                                                                                                                                                                                            
|                                                                                                                                                                                                            
|2.35% Unsecured bonds due 2005                                                                                                                                                                               |       |           | 15,000 |                 |        |              | 15,000 |        |       |  | 112,782 |             
|                                                                                                                                                                                                            
|                                                                                                                                                                                                            
|                                                                                                                                                                                                            
|                                                                                                                                                                                                            
|2.80% Unsecured bonds due 2008                                                                                                                                                                               |       |           | 10,000 |                 |        |              | 10,000 |        |       |  | 75,188  |             
|                                                                                                                                                                                                            
|                                                                                                                                                                                                            
|                                                                                                                                                                                                            
|                                                                                                                                                                                                            
|Long-term
capital lease obligations, 3.15% to 7.00% at March 31, 2001
and 6.15% at March 31, 2002, due principally to 2002                                                                                   |       |           | 665    |                 |        |              | 62     |        |       |  | 466     |             
|                                                                                                                                                                                                            
|                                                                                                                                                                                                            
|                                                                                                                                                                                                            
|                                                                                                                                                                                                            
|Industrial development U.S. dollar revenue bonds due 2005 with fluctuating
interest rates (3.70% at March 31, 2001, and 1.65% at March 31, 2002),
subject to maximum rates of 15% in 2001 and 2002 and other |       |           | 743    |                 |        |              | 834    |        |       |  | 6,271   |             
|                                                                                                                                                                                                            
|                                                                                                                                                                                                             | Total |           |        | 46,300          |        |              |        | 38,228 |       |  |         | 287,429      |       
|                                                                                                                                                                                                            
|                                                                                                                                                                                                            
|                                                                                                                                                                                                            
|                                                                                                                                                                                                            
|LessPortion due within one year                                                                                                                                                                             |       |           | 7,996  |                 |        |              | 2,551  |        |       |  | 19,181  |             
|                                                                                                                                                                                                            
|                                                                                                                                                                                                             | Total |           | ¥      | 38,304          |        |              | ¥      | 35,677 |       |  | $       | 268,248      |       
|                                                                                                                                                                                                            

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

Land and buildings with a book value of ¥15,978 million
($120,135 thousand) were pledged as collateral for certain
loans of the Company at March 31, 2002.

The aggregate annual maturities of long-term debt during
the five years ending March 31, 2007 are as follows:

|                     |  |                 |        |                          |  |   |         | 
|-------------------- |  | --------------- | ------ | ------------------------ |  | - | ------- | 
|Year ending March 31 |  | Millions of Yen |        | Thousands ofU.S. Dollars
|                    
|2003                 |  | ¥               | 2,551  |                          |  | $ | 19,181  | 
|                    
|                    
|                    
|                    
|2004                 |  |                 | 1,591  |                          |  |   | 11,962  | 
|                    
|                    
|                    
|                    
|2005                 |  |                 | 5,831  |                          |  |   | 43,842  | 
|                    
|                    
|                    
|                    
|2006                 |  |                 | 15,992 |                          |  |   | 120,241 | 
|                    
|                    
|                    
|                    
|2007                 |  |                 | 256    |                          |  |   | 1,925   | 
|                    

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

F-13



---



##### Table of Contents



7. Pension plans and accrued severance cost:

The parent company and major domestic subsidiaries have
trusteed non-contributory defined benefit pension plans
which cover substantially all of their employees. The benefits
are in the form of annuity payments and/or lump-sum
payments and are based on points and length of service and
conditions under which termination occurs. The Companys
policy is to fund amounts required to maintain sufficient plan
assets to provide for accrued benefits, subject to the limitation
on deductibility imposed by the Japanese income tax laws.
The plan assets are invested primarily in interest-bearing
securities, marketable equity securities and loan receivables.

The Company also sponsors a domestic contributory
welfare pension plan covering substantially all of its Japanese
employees. The benefits of the welfare pension plan are based
on years of service and on the average compensation during
years of service and subject to governmental regulations. The
welfare plan consists of a basic component, which has been
specified by the Japanese governments welfare pension
regulations, and an additional component established by
the Company. Management considers that a portion of
the contributory plan, which is administered by a board of
trustees composed of management and labor representatives,
represents a welfare pension plan carried on behalf of the
Japanese government. Management believes that the benefit
obligation for the additional component is approximately
one fifth of the total benefit obligation. The welfare pension
plan is funded in conformity with the funding requirements
of applicable governmental regulations. The plan assets are
invested primarily in interest-bearing securities, marketable
equity securities and loan receivables.

In September 2000, the Company amended its domestic
contributory welfare pension plan in accordance with the
amendment of the Welfare Pension Insurance Act. A major
change was a reduction of future pension benefit payments
effective April 2000 and raising the eligibility age for
pension benefit payments effective April 2002. The amendment generated an
unrecognized prior service gain of
¥5,301 million.

Net periodic benefit costs for the non-contributory plans
and the contributory plan of the parent company and certain
domestic subsidiaries for 2000, 2001 and 2002 consisted of
the following:

|                                                               |                           |  |                 |        |              |  |              |        |              |  |              |        |              |  |              |        |              |  |        |        |      |  |        |        |  |  |              |         |  |  |          |         | 
|-------------------------------------------------------------- | ------------------------- |  | --------------- | ------ | ------------ |  | ------------ | ------ | ------------ |  | ------------ | ------ | ------------ |  | ------------ | ------ | ------------ |  | ------ | ------ | ---- |  | ------ | ------ |  |  | ------------ | ------- |  |  | -------- | ------- | 
|                                                               |                           |  |                 |        |              |  |              |        |              |  |              |        |              |  |              |        |              |  |        |        |      |  |        |        |  |  | Thousands of
|                                                               |                           |  | Millions of Yen |        | U.S. Dollars
|                                                               |                           |  |                 |        |             
|                                                               |                           |  | 2000            |        | 2001         |  | 2002         |        | 2002        
|                                                               |                           |  |                 |        |              |  |              |        |             
|                                                               |                           |  | Non-            |        |              |  |              |        | Non-         |  |              |        |              |  | Non-         |        |              |  |        |        | Non- |  |        |        | 
|                                                               |                           |  | Contributory    |        | Contributory |  | Contributory |        | Contributory |  | Contributory |        | Contributory |  | Contributory |        | Contributory
|                                                               |                           |  | Plans           |        | Plan         |  | Plans        |        | Plan         |  | Plans        |        | Plan         |  | Plans        |        | Plan        
|                                                              
|Service cost                                                   |                           |  | ¥3,178          |        |              |  | ¥1,288       |        |              |  | ¥2,519       |        |              |  | ¥1,312       |        |              |  | ¥2,657 |        |      |  | ¥1,288 |        |  |  | $19,977      |         |  |  | $  9,684 |        
|                                                              
|                                                              
|                                                              
|                                                              
|Interest cost                                                  |                           |  | 2,152           |        |              |  | 2,649        |        |              |  | 1,732        |        |              |  | 2,954        |        |              |  | 1,662  |        |      |  | 2,926  |        |  |  | 12,496       |         |  |  | 22,000   |        
|                                                              
|                                                              
|                                                              
|                                                              
|Expected return on assets                                      |                           |  | (1,328          | )      |              |  | (1,508       | )      |              |  | (2,091       | )      |              |  | (2,450       | )      |              |  | (1,907 | )      |      |  | (2,245 | )      |  |  | (14,338      | )       |  |  | (16,880  | )      
|                                                              
|                                                              
|                                                              
|                                                              
|Amortization of unrecognized
net actuarial loss                |                           |  | 577             |        |              |  | 651          |        |              |  | 171          |        |              |  | 276          |        |              |  | 744    |        |      |  | 1,287  |        |  |  | 5,594        |         |  |  | 9,677    |        
|                                                              
|                                                              
|                                                              
|                                                              
|Amortization of unrecognized
net assets at date of application |                           |  | (163            | )      |              |  | (344         | )      |              |  | (163         | )      |              |  | (344         | )      |              |  | (163   | )      |      |  | (344   | )      |  |  | (1,226       | )       |  |  | (2,586   | )      
|                                                              
|                                                              
|                                                              
|                                                              
|Amortization of unrecognized
prior service gain                |                           |  | (9              | )      |              |  |             |        |              |  | (535         | )      |              |  |             |        |              |  | (535   | )      |      |  | (364   | )      |  |  | (4,022       | )       |  |  | (2,737   | )      
|                                                              
|                                                               | Net periodic benefit cost |  |                 | ¥4,407 |              |  |              | ¥2,736 |              |  |              | ¥1,633 |              |  |              | ¥1,748 |              |  |        | ¥2,458 |      |  |        | ¥2,548 |  |  |              | $18,481 |  |  |          | $19,158 | 
|                                                              

F-14



---



##### Table of Contents



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

|                                                                      |                                                |                                          |          |                 |           |              |          |              |          |              |          |              |           |              |          |          |          |  |           |              |            |   |           |           |           | 
|--------------------------------------------------------------------- | ---------------------------------------------- | ---------------------------------------- | -------- | --------------- | --------- | ------------ | -------- | ------------ | -------- | ------------ | -------- | ------------ | --------- | ------------ | -------- | -------- | -------- |  | --------- | ------------ | ---------- | - | --------- | --------- | --------- | 
|                                                                      |                                                |                                          |          |                 |           |              |          |              |          |              |          |              |           |              |          |          |          |  |           | Thousands of
|                                                                      |                                                |                                          |          | Millions of Yen |           | U.S. Dollars
|                                                                      |                                                |                                          |          |                 |           |             
|                                                                      |                                                |                                          |          | 2001            |           | 2002         |          | 2002        
|                                                                      |                                                |                                          |          |                 |           |              |          |             
|                                                                      |                                                |                                          |          | Non-            |           |              |          |              |          | Non-         |          |              |           |              |          | Non-     |          |  |           |             
|                                                                      |                                                |                                          |          | Contributory    |           | Contributory |          | Contributory |          | Contributory |          | Contributory |           | Contributory
|                                                                      |                                                |                                          |          | Plans           |           | Plan         |          | Plans        |          | Plan         |          | Plans        |           | Plan        
|                                                                     
|Change in benefit obligation:                                         |                                                |                                          |          |                 |           |              |          |              |          |              |          |              |           |              |          |          |          |  |           |              |            |   |           |          
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                      | Benefit obligation at beginning of year        |                                          |          | ¥54,016         |           |              |          | ¥59,113      |          |              |          | ¥59,391      |           |              |          | ¥65,023  |          |  |           | $446,549     |            |   |           | $488,895  |          
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                      | Service cost                                   |                                          |          | 2,519           |           |              |          | 1,312        |          |              |          | 2,657        |           |              |          | 1,288    |          |  |           | 19,977       |            |   |           | 9,684     |          
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                      | Interest cost                                  |                                          |          | 1,732           |           |              |          | 2,954        |          |              |          | 1,662        |           |              |          | 2,926    |          |  |           | 12,496       |            |   |           | 22,000    |          
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                      | Plan participants contribution                |                                          |          |                |           |              |          | 1,050        |          |              |          |             |           |              |          | 1,080    |          |  |           |             |            |   |           | 8,120     |          
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                      | Plan benefit amendments                        |                                          |          |                |           |              |          | (5,301       | )        |              |          |             |           |              |          |         |          |  |           |             |            |   |           |          |          
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                      | Actuarial loss                                 |                                          |          | 3,041           |           |              |          | 6,627        |          |              |          | 1,492        |           |              |          | 4,718    |          |  |           | 11,218       |            |   |           | 35,474    |          
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                      | Lump-sum cash payments                         |                                          |          | (1,671          | )         |              |          |             |          |              |          | (2,078       | )         |              |          |         |          |  |           | (15,624      | )          |   |           |          |          
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                      | Benefits paid                                  |                                          |          | (246            | )         |              |          | (732         | )        |              |          | (322         | )         |              |          | (730     | )        |  |           | (2,421       | )          |   |           | (5,489    | )        
|                                                                     
|                                                                      |                                                | Benefit obligation at end of year        |          |                 | ¥59,391   |              |          |              | ¥65,023  |              |          |              | ¥62,802   |              |          |          | ¥74,305  |  |           |              | $472,195   |   |           |           | $558,684  | 
|                                                                     
|Change in plan assets:                                                |                                                |                                          |          |                 |           |              |          |              |          |              |          |              |           |              |          |          |          |  |           |              |            |   |           |          
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                      | Fair value of plan assets at beginning of year |                                          |          | ¥46,459         |           |              |          | ¥54,436      |          |              |          | ¥42,334      |           |              |          | ¥49,899  |          |  |           | $318,301     |            |   |           | $375,181  |          
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                      | Actual return on plan assets                   |                                          |          | (5,934          | )         |              |          | (6,473       | )        |              |          | (2,494       | )         |              |          | (2,855   | )        |  |           | (18,752      | )          |   |           | (21,466   | )        
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                      | Employer contribution                          |                                          |          | 3,726           |           |              |          | 1,618        |          |              |          | 3,727        |           |              |          | 2,384    |          |  |           | 28,022       |            |   |           | 17,925    |          
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                      | Plan participants contribution                |                                          |          |                |           |              |          | 1,050        |          |              |          |             |           |              |          | 1,080    |          |  |           |             |            |   |           | 8,120     |          
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                      | Lump-sum cash payments                         |                                          |          | (1,671          | )         |              |          |             |          |              |          | (2,078       | )         |              |          |         |          |  |           | (15,624      | )          |   |           |          |          
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                      | Benefits paid                                  |                                          |          | (246            | )         |              |          | (732         | )        |              |          | (322         | )         |              |          | (730     | )        |  |           | (2,421       | )          |   |           | (5,489    | )        
|                                                                     
|                                                                      |                                                | Fair value of plan assets at end of year |          |                 | ¥42,334   |              |          |              | ¥49,899  |              |          |              | ¥41,167   |              |          |          | ¥49,778  |  |           |              | $309,526   |   |           |           | $374,271  | 
|                                                                     
|Funded status                                                         |                                                |                                          | (¥17,057 | )               |           |              | (¥15,124 | )            |          |              | (¥21,635 | )            |           |              | (¥24,527 | )        |          |  | ($162,669 | )            |            |   | ($184,413 | )        
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|Unrecognized actuarial loss                                           |                                                |                                          | 19,456   |                 |           |              | 25,267   |              |          |              | 24,605   |              |           |              | 33,798   |          |          |  | 185,000   |              |            |   | 254,120   |          
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|Unrecognized net assets at the date of application                    |                                                |                                          | (972     | )               |           |              | (1,985   | )            |          |              | (809     | )            |           |              | (1,641   | )        |          |  | (6,083    | )            |            |   | (12,339   | )        
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|Unrecognized prior service gain                                       |                                                |                                          | (9,305   | )               |           |              | (5,301   | )            |          |              | (8,770   | )            |           |              | (4,937   | )        |          |  | (65,940   | )            |            |   | (37,120   | )        
|                                                                     
|                                                                      |                                                | Net amount recognized                    |          |                 | (¥  7,878 | )            |          |              | ¥  2,857 |              |          |              | (¥  6,609 | )            |          |          | ¥  2,693 |  |           |              | ($  49,692 | ) |           |           | $  20,248 | 
|                                                                     
|Amounts recognized in the statement of financial
position consist of: |                                                |                                          |          |                 |           |              |          |              |          |              |          |              |           |              |          |          |          |  |           |              |            |   |           |          
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                      | Accrued benefit liabilities                    |                                          |          | (¥14,181        | )         |              |          | (¥12,965     | )        |              |          | (¥19,358     | )         |              |          | (¥22,063 | )        |  |           | ($145,549    | )          |   |           | ($165,887 | )        
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                      | Accumulated other comprehensive income         |                                          |          | 6,303           |           |              |          | 15,822       |          |              |          | 12,749       |           |              |          | 24,756   |          |  |           | 95,857       |            |   |           | 186,135   |          
|                                                                     
|                                                                      |                                                | Net amount recognized                    |          |                 | (¥  7,878 | )            |          |              | ¥  2,857 |              |          |              | (¥  6,609 | )            |          |          | ¥  2,693 |  |           |              | ($  49,692 | ) |           |           | $  20,248 | 
|                                                                     
|Accumulated benefit obligation at end of year                         |                                                |                                          | ¥56,515  |                 |           |              | ¥62,864  |              |          |              | ¥60,438  |              |           |              | ¥71,841  |          |          |  | $454,421  |              |            |   | $540,158  |          
|                                                                     
|Actuarial assumptions:                                                |                                                |                                          |          |                 |           |              |          |              |          |              |          |              |           |              |          |          |          |  |           |              |            |   |           |          
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                      | Discount rate                                  |                                          |          | 2.8%            |           |              |          | 4.5%         |          |              |          | 2.7%         |           |              |          | 4.3%     |          |  |           |              |            |   |           |           |          
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                      | Rate of salary increase                        |                                          |          | *              |           |              |          | 3.1%         |          |              |          | *           |           |              |          | 2.7%     |          |  |           |              |            |   |           |           |          
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                      | Long-term rate of return on plan assets        |                                          |          | 4.5%            |           |              |          | 4.5%         |          |              |          | 4.5%         |           |              |          | 4.5%     |          |  |           |              |            |   |           |           |          
|                                                                     



|* |  | Non-contributory plans are not pay-related.
|- |  | -------------------------------------------

F-15



---



##### Table of Contents



The unrecognized prior service gain, the unrecognized
actuarial loss and the unrecognized net assets at the date of
initial application are being amortized over the average
remaining service period of employees, both for the non-contributory plans and for the contributory plan.

Substantially all of the employees of major U.S. subsidiaries are covered by a defined benefit pension plan. The
projected benefit obligations for the plan and related
fair value of plan assets were ¥3,509 million and ¥3,188
million, respectively, at March 31, 2001 and ¥4,450 million
($33,459 thousand) and ¥3,695 million ($27,782 thousand),
respectively, at March 31, 2002.

With respect to directors, provision is made for lump-sum
severance indemnities on a basis considered adequate for such
future payments as may be approved by the shareholders.

In February 2002, the Company announced the closure
of the Hiwada plant in Fukushima, Japan because of
the transfer of production sites to China. In relation to
this closure, the Company recorded special termination
benefits for employees voluntary termination of ¥906
million ($6,812 thousand) for the year ended March 31,
2002 which were included in the selling, general and
administrative expenses.

The net charges to income for worldwide pension plans,
severance indemnities and special termination benefits for
the years ended March 31, 2000, 2001 and 2002 were
¥10,087 million, ¥4,560 million and ¥8,947 million
($67,271 thousand), respectively.



8. Income taxes:

The Company is subject to a number of different income
taxes which, in the aggregate, indicate a normal statutory tax
rate of approximately 42% for the years ended March 31,
2000, 2001 and 2002 in Japan.

Income tax expense for the year ended March 31, 2000
included a ¥510 million charge resulting from the settlement
of a proposed assessment from the Internal Revenue Service
relating to a tax position taken in prior years in connection
with a business realignment.

The Companys provision for income taxes differed from
the provision for income taxes at the normal statutory tax
rates in Japan as follows:

|                                                  |                                                                                                          |          |         |                 |     |                           |         |        |     |      |        |        |     |  |         |         |       | 
|------------------------------------------------- | -------------------------------------------------------------------------------------------------------- | -------- | ------- | --------------- | --- | ------------------------- | ------- | ------ | --- | ---- | ------ | ------ | --- |  | ------- | ------- | ----- | 
|                                                  |                                                                                                          |          |         | Millions of Yen |     | Thousands of
U.S. Dollars
|                                                  |                                                                                                          |          |         |                 |     |                          
|                                                  |                                                                                                          |          |         | 2000            |     | 2001                      |         | 2002   |     | 2002
|                                                 
|Computed tax expense at normal statutory tax rate |                                                                                                          |          | ¥11,679 |                 |     |                           | ¥14,361 |        |     |      | ¥6,444 |        |     |  | $48,451 |        
|                                                 
|                                                 
|                                                 
|                                                 
|Increase (decrease) resulting from:               |                                                                                                          |          |         |                 |     |                           |         |        |     |      |        |        |     |  |         |        
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  | Changes in valuation allowance, net of effects of
carryforward loss expiration and exchange rate changes |          |         | 7,076           |     |                           |         | 2,004  |     |      |        | 74     |     |  |         | 556     |      
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  | Expenses not deductible for tax purpose                                                                  |          |         |                 |     |                           |         |        |     |      |        |        |     |  |         |         |      
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  |                                                                                                          | Domestic |         | 223             |     |                           |         | 563    |     |      |        | 737    |     |  |         | 5,541   |      
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  |                                                                                                          | Foreign  |         |                 | 424 |                           |         |        | 229 |      |        |        | 221 |  |         |         | 1,662 | 
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  | Amortization of goodwill                                                                                 |          |         | 339             |     |                           |         | 256    |     |      |        | 314    |     |  |         | 2,361   |      
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  | Difference in foreign and Japanese tax rates                                                             |          |         | (1,790          | )   |                           |         | (2,739 | )   |      |        | (1,958 | )   |  |         | (14,722 | )    
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  | Effect of tax rate change on deferred taxes                                                              |          |         | 384             |     |                           |         |       |     |      |        |       |     |  |         |        |      
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  | Write-down of investment in a subsidiary                                                                 |          |         |                |     |                           |         | (1,092 | )   |      |        |       |     |  |         |        |      
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  | Effect of tax on gain from sale and issuance of subsidiary stock                                         |          |         | (1,747          | )   |                           |         |       |     |      |        |       |     |  |         |        |      
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  | Other                                                                                                    |          |         | (1,372          | )   |                           |         | 738    |     |      |        | 890    |     |  |         | 6,692   |      
|                                                 
|Provision for income taxes                        |                                                                                                          |          | ¥15,216 |                 |     |                           | ¥14,320 |        |     |      | ¥6,722 |        |     |  | $50,541 |        
|                                                 

F-16



---



##### Table of Contents



Total income taxes provided for the years ended March 31, 2000, 2001 and 2002 are as follows:

|                                                  |                                       |       |        |                 |        |              |        |        |       |      |        |        |         |   |         |              |           |  
|------------------------------------------------- | ------------------------------------- | ----- | ------ | --------------- | ------ | ------------ | ------ | ------ | ----- | ---- | ------ | ------ | ------- | - | ------- | ------------ | --------- | -
|                                                  |                                       |       |        |                 |        |              |        |        |       |      |        |        |         |   |         | Thousands of
|                                                  |                                       |       |        | Millions of Yen |        | U.S. Dollars
|                                                  |                                       |       |        |                 |        |             
|                                                  |                                       |       |        | 2000            |        | 2001         |        | 2002   |       | 2002
|                                                 
|Provision for income taxes                        |                                       | ¥     | 15,216 |                 |        | ¥            | 14,320 |        |       |      | ¥6,722 |        |         |   | $50,541 |             
|                                                 
|                                                 
|                                                 
|                                                 
|Shareholders equitydirectly charged (credited): |                                       |       |        |                 |        |              |        |        |       |      |        |        |         |   |         |             
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  | Minimum pension liability adjustments |       |        | 5,657           |        |              |        | (6,456 | )     |      |        | (6,460 | )       |   |         | (48,571      | )        
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  | Net unrealized gains on securities    |       |        | (639            | )      |              |        | (3,638 | )     |      |        | (1,502 | )       |   |         | (11,294      | )        
|                                                 
|                                                  |                                       | Total |        | ¥               | 20,234 |              |        | ¥      | 4,226 |      |        |        | (¥1,240 | ) |         |              | ($  9,324 | )
|                                                 

The significant components of the deferred tax assets and liabilities at March 31, 2001 and 2002 are as follows:

|                             |  |                     |        |                          |  |                     |       |                          |  |                     |        |                          |  |   |       |  |  |              |         |   |  |   |        | 
|---------------------------- |  | ------------------- | ------ | ------------------------ |  | ------------------- | ----- | ------------------------ |  | ------------------- | ------ | ------------------------ |  | - | ----- |  |  | ------------ | ------- | - |  | - | ------ | 
|                             |  |                     |        |                          |  |                     |       |                          |  |                     |        |                          |  |   |       |  |  | Thousands of
|                             |  | Millions of Yen     |        | U.S. Dollars            
|                             |  |                     |        |                         
|                             |  | 2001                |        | 2002                     |  | 2002               
|                             |  |                     |        |                          |  |                    
|                             |  | Deferred
Tax
Assets |        | Deferred
Tax
Liabilities |  | Deferred
Tax
Assets |       | Deferred
Tax
Liabilities |  | Deferred
Tax
Assets |        | Deferred
Tax
Liabilities
|                            
|Inventories                  |  | ¥                   | 7,398  |                          |  |                     |      |                          |  | ¥                   | 9,214  |                          |  |   |      |  |  | $            | 69,278  |   |  |   |       | 
|                            
|                            
|                            
|                            
|Marketable equity securities |  |                     | 30     |                          |  | ¥                   | 2,800 |                          |  |                     | 443    |                          |  | ¥ | 24    |  |  |              | 3,331   |   |  | $ | 180    | 
|                            
|                            
|                            
|                            
|Accrued expenses             |  |                     | 6,406  |                          |  |                     |      |                          |  |                     | 7,901  |                          |  |   |      |  |  |              | 59,406  |   |  |   |       | 
|                            
|                            
|                            
|                            
|Tax loss carryforwards       |  |                     | 13,278 |                          |  |                     |      |                          |  |                     | 15,184 |                          |  |   |      |  |  |              | 114,165 |   |  |   |       | 
|                            
|                            
|                            
|                            
|Pension and severance cost   |  |                     | 12,951 |                          |  |                     |      |                          |  |                     | 18,589 |                          |  |   |      |  |  |              | 139,767 |   |  |   |       | 
|                            
|                            
|                            
|                            
|Land                         |  |                     | 2,052  |                          |  |                     |      |                          |  |                     | 2,347  |                          |  |   | 248   |  |  |              | 17,647  |   |  |   | 1,865  | 
|                            
|                            
|                            
|                            
|Depreciation                 |  |                     | 1,890  |                          |  |                     | 330   |                          |  |                     | 958    |                          |  |   | 293   |  |  |              | 7,203   |   |  |   | 2,203  | 
|                            
|                            
|                            
|                            
|Royalty receivable           |  |                     | 1,491  |                          |  |                     |      |                          |  |                     | 953    |                          |  |   |      |  |  |              | 7,165   |   |  |   |       | 
|                            
|                            
|                            
|                            
|Other                        |  |                     | 15,324 |                          |  |                     | 2,421 |                          |  |                     | 17,346 |                          |  |   | 3,568 |  |  |              | 130,421 |   |  |   | 26,827 | 
|                            
|Total                        |  |                     | 60,820 |                          |  |                     | 5,551 |                          |  |                     | 72,935 |                          |  |   | 4,133 |  |  |              | 548,383 |   |  |   | 31,075 | 
|                            
|                            
|                            
|                            
|Valuation allowance          |  | (                   | 17,792 | )                        |  |                     |      |                          |  | (                   | 18,299 | )                        |  |   |      |  |  | (            | 137,586 | ) |  |   |       | 
|                            
|Total                        |  | ¥                   | 43,028 |                          |  | ¥                   | 5,551 |                          |  | ¥                   | 54,636 |                          |  | ¥ | 4,133 |  |  | $            | 410,797 |   |  | $ | 31,075 | 
|                            

F-17



---



##### Table of Contents



The valuation allowance principally relates to deferred tax
assets for loss carryforwards of subsidiaries.

During the years ended March 31, 2001 and 2002, the
valuation allowances were increased by ¥1,289 million and
¥507 million ($3,812 thousand), respectively.

At March 31, 2002, the Company has tax loss carryforwards which are available to reduce taxable income in
subsequent periods. If not utilized, such loss carryforwards
expire as follows:

|                     |  |                 |          |              |  |              |         |  | 
|-------------------- |  | --------------- | -------- | ------------ |  | ------------ | ------- |  | 
|                     |  |                 |          |              |  | Thousands of
|Year ending March 31 |  | Millions of Yen |          | U.S. Dollars
|                    
|2003                 |  |                 | ¥  1,420 |              |  | $            | 10,677  | 
|                    
|                    
|                    
|                    
|2004                 |  |                 | 3,472    |              |  |              | 26,105  | 
|                    
|                    
|                    
|                    
|2005                 |  |                 | 2,818    |              |  |              | 21,188  | 
|                    
|                    
|                    
|                    
|2006                 |  |                 | 258      |              |  |              | 1,940   | 
|                    
|                    
|                    
|                    
|2007                 |  |                 | 5,610    |              |  |              | 42,180  | 
|                    
|                    
|                    
|                    
|Thereafter           |  |                 | 29,202   |              |  |              | 219,564 | 
|                    
|Total                |  |                 | ¥42,780  |              |  | $            | 321,654 | 
|                    

No provision for income taxes is recognized on undistributed earnings of foreign subsidiaries where the Company
considers that such earnings are reinvested or would not,
under the present Japanese tax laws, be subject to additional
taxation should they be distributed to the parent company.
Undistributed earnings of foreign subsidiaries (including
related cumulative translation adjustments) at March 31,
2001 and 2002 amounted to approximately ¥111,506
million and ¥133,934 million ($1,007,023 thousand),
respectively. It is not practical to estimate the amount of
taxes that might be payable on the eventual remittance of
such earnings.

The domestic undistributed earnings would not, under the
present Japanese tax laws, be subject to additional taxation.

9. Shareholders equity:

Common Stock and Additional Paid-in
CapitalAs permitted by the Commercial Code of Japan (the Code)
prior to April 1, 1991, the parent company had made free
share distributions which were accounted for by a transfer
from additional paid-in capital to common stock or without
any transfers in the capital accounts.

Companies in the United States issuing shares in similar
transactions would be required to account for them as stock
dividends. Had the distributions been accounted for in the
manner adopted by the United States companies, ¥179,076
million ($1,346,436 thousand) would have been transferred
from retained earnings to appropriate capital accounts as of
March 31, 2002.

Retained EarningsRetained earnings consist of legal reserve and unappropriated
retained earnings.

The parent company is subject to the Code amendments
which became effective from October 1, 2001. Prior to
October 1, 2001, the Code required at least 50% of the issue
price of new shares, with a minimum of the par value thereof,
to be designated as stated capital as determined by resolution
of the Board of Directors. Proceeds in excess of amounts
designated as stated capital were credited to additional
paid-in capital. Effective October 1, 2001, the revised Code
eliminated common stock par values resulting in all shares
being recorded with no par value.

Prior to October 1, 2001, the Code also provided that an
amount at least equal to 10% of the aggregate amount of cash
dividends and certain other cash payments which are made as
an appropriation of retained earnings applicable to each fiscal
period shall be appropriated and set aside as a legal reserve
until such reserve equals 25% of stated capital. Effective
October 1, 2001, the revised Code allows for such appropriations to be
determined based on total additional paid-in
capital and legal reserves. The amount of total additional
paid-in capital and legal reserve which exceeds 25% of stated
capital can be transferred to retained earnings by resolution
of the shareholders.

The Code permits companies to transfer a portion of
additional paid-in capital and legal reserve to stated capital
by resolution of the Board of Directors. The Code also
permits companies to transfer a portion of unappropriated
retained earnings, available for dividends, to stated capital by
resolution of the shareholders.

F-18



---



##### Table of Contents



Prior to October 1, 2001, the Code imposed certain
restrictions on the purchase and sale of treasury stock.
Effective October 1, 2001, the Code eliminated these restrictions allowing companies to purchase treasury stock by a
resolution of the shareholders at the general shareholders
meeting and dispose of such treasury stock by resolution of
the Board of Directors on and after April 1, 2002.

The amount available for dividends is based on unappropriated retained
earnings as recorded on the books of
the parent company. Certain adjustments, not recorded on
the parent companys books, are reflected in the financial
statements as described in Note 1. At March 31, 2002,
retained earnings recorded on the parent companys books of
account were ¥143,108 million ($1,076,000 thousand).

The appropriations of retained earnings for the year ended
March 31, 2002, which have been incorporated in the accompanying financial statements, will be proposed for approval at
the general shareholders meeting to be held on June 27,
2002, and will be recorded in the parent companys general
books of account after shareholders approval.

10. Stock-based compensation plans:

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

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

Stock option planIn accordance with approval of shareholders meetings on
June 29, 2000 and June 28, 2001, the Company granted
share subscription rights to employees. The Company
recorded the fair value of the stock option as a part of their
remuneration.

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



|     |  |              |  |                                         |  |                                 |         |                                         |  |                              |         |  |  |  |     |  |  |  |  | 
|---- |  | ------------ |  | --------------------------------------- |  | ------------------------------- | ------- | --------------------------------------- |  | ---------------------------- | ------- |  |  |  | --- |  |  |  |  | 
|     |  |              |  |                                         |  |                                 |         |                                         |  | Yen                          |         |  |  | 
|     |  |              |  |                                         |  |                                 |         |                                         |  |                              |         |  |  | 
|Year |  | Plan         |  | Exercisable Period                      |  | Weighted-Average
Exercise Price |         | Weighted-Average
Grant Date
Share Price |  | Number
of
Shares
(Thousands)
|    
|2000 |  | Warrant      |  | From July 3, 2000 to September 12, 2002 |  |                                 | ¥ 2,188 |                                         |  |                              | ¥ 1,925 |  |  |  | 320 | 
|    
|    
|    
|    
|2001 |  | Warrant      |  | From July 2, 2001 to September 25, 2003 |  |                                 | 4,728   |                                         |  |                              | 4,543   |  |  |  | 284 | 
|    
|    
|    
|    
|2001 |  | Stock option |  | From July 1, 2002 to June 30, 2005      |  |                                 | 4,400   |                                         |  |                              | 4,250   |  |  |  | 191 | 
|    
|    
|    
|    
|2002 |  | Warrant      |  | From July 1, 2002 to August 26, 2004    |  |                                 | 3,266   |                                         |  |                              | 2,700   |  |  |  | 413 | 
|    
|    
|    
|    
|2002 |  | Stock option |  | From July 1, 2003 to June 30, 2006      |  |                                 | 3,791   |                                         |  |                              | 3,750   |  |  |  | 191 | 
|    



|     |  |              |  |                                      |  |                                 |        |                                         |  |              |        |  |  |  |  |  |  |  |  | 
|---- |  | ------------ |  | ------------------------------------ |  | ------------------------------- | ------ | --------------------------------------- |  | ------------ | ------ |  |  |  |  |  |  |  |  | 
|     |  |              |  |                                      |  |                                 |        |                                         |  | U.S. Dollars |        |  |  | 
|     |  |              |  |                                      |  |                                 |        |                                         |  |              |        |  |  | 
|Year |  | Plan         |  | Exercisable Period                   |  | Weighted-Average
Exercise Price |        | Weighted-Average
Grant
Date
Share Price |  |              |        | 
|     |  |              |  |                                     
|2002 |  | Warrant      |  | From July 1, 2002 to August 26, 2004 |  |                                 | $24.56 |                                         |  |              | $20.30 | 
|    
|    
|    
|    
|2002 |  | Stock option |  | From July 1, 2003 to June 30, 2006   |  |                                 | 28.50  |                                         |  |              | 28.20  |  |  |  |  | 
|     |  |              |  |                                     

Remuneration cost recognized for stock-based compensation plans for the years ended March 31, 2000, 2001 and
2002 were ¥73 million, ¥362 million and ¥346 million
($2,601 thousand), respectively.

The weighted-average fair value per share at the date of
grant for the warrants and the stock options granted during
the years ended March 31, 2000, 2001 and 2002 were ¥228,
¥762 and ¥573 ($4.31), respectively, and were estimated using
the Black-Scholes option-valuation model.

F-19



---



##### Table of Contents



A summary of the status of the Companys warrants and options as of March
31, 2000, 2001 and 2002, and changes during
the years is as follows:

|                              |           |  |                  |      |                                |  |                                  |  |              |  |        |       |  |   |       |       | 
|----------------------------- | --------- |  | ---------------- | ---- | ------------------------------ |  | -------------------------------- |  | ------------ |  | ------ | ----- |  | - | ----- | ----- | 
|                              |           |  | Number of Shares |      | Weighted-AverageRemaining Life |  | Weighted-Average
Price per Share
|                              |           |  | (Thousands)      |      | (Years)                        |  | Yen                              |  | U.S. Dollars
|                              |           | 
|Outstanding at March 31, 1999 |           |  | 269              |      |                                |  | 2.3                              |  |              |  | ¥2,783 |       |  |   |       |      
|                             
|                             
|                             
|                             
|                              | Granted   |  |                  | 320  |                                |  |                                  |  |              |  |        | 2,188 |  |   |       |       | 
|                             
|                             
|                             
|                             
|                              | Exercised |  |                  | (15  | )                              |  |                                  |  |              |  |        | 2,783 |  |   |       |       | 
|                              |           |  |                  |     
|Outstanding at March 31, 2000 |           |  | 574              |      |                                |  | 1.9                              |  |              |  | 2,452  |       |  |   |       |      
|                             
|                             
|                             
|                             
|                              | Granted   |  |                  | 475  |                                |  |                                  |  |              |  |        | 4,597 |  |   |       |       | 
|                             
|                             
|                             
|                             
|                              | Exercised |  |                  | (306 | )                              |  |                                  |  |              |  |        | 2,551 |  |   |       |       | 
|                             
|Outstanding at March 31, 2001 |           |  | 743              |      |                                |  | 2.4                              |  |              |  | 3,782  |       |  |   |       |      
|                             
|                             
|                             
|                             
|                              | Granted   |  |                  | 604  |                                |  |                                  |  |              |  |        | 3,432 |  |   | $     | 25.80 | 
|                             
|                             
|                             
|                             
|                              | Exercised |  |                  | (170 | )                              |  |                                  |  |              |  |        | 2,425 |  |   |       | 18.23 | 
|                             
|Outstanding at March 31, 2002 |           |  | 1,177            |      |                                |  | 2.5                              |  |              |  | ¥3,798 |       |  | $ | 28.56 |      
|                             
|Exercisable at March 31, 2001 |           |  | 268              |      |                                |  |                                  |  |              |  | ¥2,338 |       |  |   |       |      
|                             
|Exercisable at March 31, 2002 |           |  | 382              |      |                                |  |                                  |  |              |  | ¥4,075 |       |  | $ | 30.64 |      
|                             



11.  Other comprehensive income:

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

|                          |  |                                       |          |                                    |  |                                                     |         |                                                     |  |  |          |   |  |  |          |  
|------------------------- |  | ------------------------------------- | -------- | ---------------------------------- |  | --------------------------------------------------- | ------- | --------------------------------------------------- |  |  | -------- | - |  |  | -------- | -
|                          |  | Millions of Yen                      
|                          |  |                                      
|                          |  | Minimum
Pension
Liability Adjustments |          | Net
Unrealized
Gains on Securities |  | Cumulative
Foreign
Currency
Translation
Adjustments |         | Total
Accumulated
Other
Comprehensive
Income (Loss)
|                         
|Balance at March 31, 1999 |  |                                       | (¥10,616 | )                                  |  |                                                     | ¥12,666 |                                                     |  |  | (¥26,314 | ) |  |  | (¥24,264 | )
|                         
|                         
|                         
|                         
|Adjustments for the year  |  |                                       | 7,824    |                                    |  |                                                     | (919    | )                                                   |  |  | (19,083  | ) |  |  | (12,178  | )
|                         
|Balance at March 31, 2000 |  |                                       | (2,792   | )                                  |  |                                                     | 11,747  |                                                     |  |  | (45,397  | ) |  |  | (36,442  | )
|                         
|                         
|                         
|                         
|Adjustments for the year  |  |                                       | (8,847   | )                                  |  |                                                     | (5,085  | )                                                   |  |  | 21,723   |   |  |  | 7,791    |  
|                         
|Balance at March 31, 2001 |  |                                       | (11,639  | )                                  |  |                                                     | 6,662   |                                                     |  |  | (23,674  | ) |  |  | (28,651  | )
|                         
|                         
|                         
|                         
|Adjustments for the year  |  |                                       | (8,848   | )                                  |  |                                                     | (2,079  | )                                                   |  |  | 14,842   |   |  |  | 3,915    |  
|                         
|Balance at March 31, 2002 |  |                                       | (¥20,487 | )                                  |  |                                                     | ¥ 4,583 |                                                     |  |  | (¥8,832  | ) |  |  | (¥24,736 | )
|                         

|                          |  |                                       |         |                                    |  |                                                     |         |                                                     |  |    |         |   |  |    |         |  
|------------------------- |  | ------------------------------------- | ------- | ---------------------------------- |  | --------------------------------------------------- | ------- | --------------------------------------------------- |  | -- | ------- | - |  | -- | ------- | -
|                          |  | Thousands of U.S. Dollars            
|                          |  |                                      
|                          |  | Minimum
Pension
Liability Adjustments |         | Net
Unrealized
Gains on Securities |  | Cumulative
Foreign
Currency
Translation
Adjustments |         | Total
Accumulated
Other Comprehensive
Income (Loss)
|                         
|Balance at March 31, 2001 |  | ($                                    | 87,511  | )                                  |  | $                                                   | 50,090  |                                                     |  | ($ | 178,000 | ) |  | ($ | 215,421 | )
|                         
|                         
|                         
|                         
|Adjustments for the year  |  |                                       | (66,527 | )                                  |  |                                                     | (15,631 | )                                                   |  |    | 111,594 |   |  |    | 29,436  |  
|                         
|Balance at March 31, 2002 |  | ($                                    | 154,038 | )                                  |  | $                                                   | 34,459  |                                                     |  | ($ | 66,406  | ) |  | ($ | 185,985 | )
|                         

F-20



---



##### Table of Contents



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

|                                                    |                                                                   |  |                 |        |               |  |          |       |            |  |        |     |   |  |           |        |  
|--------------------------------------------------- | ----------------------------------------------------------------- |  | --------------- | ------ | ------------- |  | -------- | ----- | ---------- |  | ------ | --- | - |  | --------- | ------ | -
|                                                    |                                                                   |  | Millions of Yen
|                                                    |                                                                   |  |                
|                                                    |                                                                   |  | Before-Tax      |        | Tax (Expense) |  | Minority |       | Net-of-Tax
|                                                    |                                                                   |  | Amount          |        | or Benefit    |  | Interest |       | Amount    
|                                                   
|2000:                                               |                                                                   |  |                 |        |               |  |          |       |            |  |        |     |   |  |           |       
|                                                   
|                                                   
|                                                   
|                                                   
|Minimum pension liability adjustments               |                                                                   |  | ¥13,471         |        |               |  | (¥ 5,657 | )     |            |  | ¥   10 |     |   |  | ¥   7,824 |       
|                                                   
|                                                   
|                                                   
|                                                   
|Net unrealized gains on securities:                 |                                                                   |  |                 |        |               |  |          |       |            |  |        |     |   |  |           |       
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Unrealized holding gains arising during year                      |  |                 | 1,194  |               |  |          | (500  | )          |  |        | (41 | ) |  |           | 653    |  
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | LessReclassification adjustment for gains realized in net income |  |                 | (2,711 | )             |  |          | 1,139 |            |  |        |    |   |  |           | (1,572 | )
|                                                    |                                                                   |  |                
|                                                    | Net unrealized losses                                             |  |                 | (1,517 | )             |  |          | 639   |            |  |        | (41 | ) |  |           | (919   | )
|                                                   
|                                                   
|                                                   
|                                                   
|Cumulative foreign currency translation adjustments |                                                                   |  | (19,561         | )      |               |  |         |       |            |  | 478    |     |   |  | (19,083   | )     
|                                                   
|Other comprehensive income (loss)                   |                                                                   |  | (¥ 7,607        | )      |               |  | (¥ 5,018 | )     |            |  | ¥447   |     |   |  | (¥12,178  | )     
|                                                   
|2001:                                               |                                                                   |  |                 |        |               |  |          |       |            |  |        |     |   |  |           |       
|                                                   
|                                                   
|                                                   
|                                                   
|Minimum pension liability adjustments               |                                                                   |  | (¥15,375        | )      |               |  | ¥ 6,456  |       |            |  | ¥ 72   |     |   |  | (¥ 8,847  | )     
|                                                   
|                                                   
|                                                   
|                                                   
|Net unrealized gains on securities:                 |                                                                   |  |                 |        |               |  |          |       |            |  |        |     |   |  |           |       
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Unrealized holding losses arising during year                     |  |                 | (7,432 | )             |  |          | 3,121 |            |  |        | 45  |   |  |           | (4,266 | )
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | LessReclassification adjustment for gains realized in net income |  |                 | (1,308 | )             |  |          | 517   |            |  |        | (28 | ) |  |           | (819   | )
|                                                    |                                                                   |  |                
|                                                    | Net unrealized losses                                             |  |                 | (8,740 | )             |  |          | 3,638 |            |  |        | 17  |   |  |           | (5,085 | )
|                                                   
|                                                   
|                                                   
|                                                   
|Cumulative foreign currency translation adjustments |                                                                   |  | 22,353          |        |               |  |         |       |            |  | (630   | )   |   |  | 21,723    |       
|                                                   
|Other comprehensive income (loss)                   |                                                                   |  | (¥ 1,762        | )      |               |  | ¥10,094  |       |            |  | (¥541  | )   |   |  | ¥ 7,791   |       
|                                                   
|2002:                                               |                                                                   |  |                 |        |               |  |          |       |            |  |        |     |   |  |           |       
|                                                   
|                                                   
|                                                   
|                                                   
|Minimum pension liability adjustments               |                                                                   |  | (¥15,380        | )      |               |  | ¥ 6,460  |       |            |  | ¥ 72   |     |   |  | (¥ 8,848  | )     
|                                                   
|                                                   
|                                                   
|                                                   
|Net unrealized gains on securities:                 |                                                                   |  |                 |        |               |  |          |       |            |  |        |     |   |  |           |       
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Unrealized holding losses arising during year                     |  |                 | (5,404 | )             |  |          | 2,270 |            |  |        | 7   |   |  |           | (3,127 | )
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | LessReclassification adjustment for gains realized in net income |  |                 | 1,828  |               |  |          | (768  | )          |  |        | (12 | ) |  |           | 1,048  |  
|                                                    |                                                                   |  |                
|                                                    | Net unrealized losses                                             |  |                 | (3,576 | )             |  |          | 1,502 |            |  |        | (5  | ) |  |           | (2,079 | )
|                                                   
|                                                   
|                                                   
|                                                   
|Cumulative foreign currency translation adjustments |                                                                   |  | 15,338          |        |               |  |         |       |            |  | (496   | )   |   |  | 14,842    |       
|                                                   
|Other comprehensive income (loss)                   |                                                                   |  | (¥ 3,618        | )      |               |  | ¥ 7,962  |       |            |  | (¥429  | )   |   |  | ¥ 3,915   |       
|                                                   

|                                                    |                                                                   |  |                           |         |               |   |          |        |            |  |         |     |   |  |           |         |  
|--------------------------------------------------- | ----------------------------------------------------------------- |  | ------------------------- | ------- | ------------- | - | -------- | ------ | ---------- |  | ------- | --- | - |  | --------- | ------- | -
|                                                    |                                                                   |  | Thousands of U.S. Dollars
|                                                    |                                                                   |  |                          
|                                                    |                                                                   |  | Before-Tax                |         | Tax (Expense) |   | Minority |        | Net-of-Tax
|                                                    |                                                                   |  | Amount                    |         | or Benefit    |   | Interest |        | Amount    
|                                                   
|2002:                                               |                                                                   |  |                           |         |               |   |          |        |            |  |         |     |   |  |           |        
|                                                   
|                                                   
|                                                   
|                                                   
|Minimum pension liability adjustments               |                                                                   |  | ($115,639                 | )       |               | $ | 48,571   |        |            |  | $  541  |     |   |  | ($ 66,527 | )      
|                                                   
|                                                   
|                                                   
|                                                   
|Net unrealized gains on securities:                 |                                                                   |  |                           |         |               |   |          |        |            |  |         |     |   |  |           |        
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Unrealized holding losses arising during year                     |  |                           | (40,631 | )             |   |          | 17,068 |            |  |         | 52  |   |  |           | (23,511 | )
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | LessReclassification adjustment for gains realized in net income |  |                           | 13,744  |               |   |          | (5,774 | )          |  |         | (90 | ) |  |           | 7,880   |  
|                                                    |                                                                   |  |                          
|                                                    | Net unrealized losses                                             |  |                           | (26,887 | )             |   |          | 11,294 |            |  |         | (38 | ) |  |           | (15,631 | )
|                                                   
|                                                   
|                                                   
|                                                   
|Cumulative foreign currency translation adjustments |                                                                   |  | 115,323                   |         |               |   |         |        |            |  | (3,729  | )   |   |  | 111,594   |        
|                                                   
|Other comprehensive income (loss)                   |                                                                   |  | ($27,203                  | )       |               | $ | 59,865   |        |            |  | ($3,226 | )   |   |  | $ 29,436  |        
|                                                   

F-21



---



##### Table of Contents



12.  Supplemental information:

Supplemental information for the years ended March 31, 2000, 2001 and 2002 is
as follows:

|                                                               |  |                 |         |                          |  |      |         |      |  |  |         |  |  |   |         | 
|-------------------------------------------------------------- |  | --------------- | ------- | ------------------------ |  | ---- | ------- | ---- |  |  | ------- |  |  | - | ------- | 
|                                                               |  | Millions of Yen |         | Thousands
ofU.S. Dollars
|                                                               |  |                 |         |                         
|                                                               |  | 2000            |         | 2001                     |  | 2002 |         | 2002
|                                                              
|Research and development expenses charged to cost and expenses |  |                 | ¥33,265 |                          |  |      | ¥37,105 |      |  |  | ¥39,050 |  |  | $ | 293,609 | 
|                                                              
|                                                              
|                                                              
|                                                              
|Advertising costs charged to expense as incurred               |  |                 | 10,682  |                          |  |      | 10,434  |      |  |  | 13,117  |  |  |   | 98,624  | 
|                                                              

Othernet as shown in other income (expenses) for the years ended March
31, 2000, 2001 and 2002 consisted of
the following:

|                                                                    |       |  |                 |         |                          |  |       |      |      |  |         |         |   |  |          |          |  
|------------------------------------------------------------------- | ----- |  | --------------- | ------- | ------------------------ |  | ----- | ---- | ---- |  | ------- | ------- | - |  | -------- | -------- | -
|                                                                    |       |  | Millions of Yen |         | Thousands
ofU.S. Dollars
|                                                                    |       |  |                 |         |                         
|                                                                    |       |  | 2000            |         | 2001                     |  | 2002  |      | 2002
|                                                                   
|Gains (losses) on sale and write-down of investments and securities |       |  | ¥4,151          |         |                          |  | ¥254  |      |      |  | (¥2,287 | )       |   |  | ($17,195 | )       
|                                                                   
|                                                                   
|                                                                   
|                                                                   
|Losses on sale and impairment of fixed assets                       |       |  | (4,741          | )       |                          |  | (914  | )    |      |  | (3,340  | )       |   |  | (25,113  | )       
|                                                                   
|                                                                   
|                                                                   
|                                                                   
|Other                                                               |       |  | (947            | )       |                          |  | 1,607 |      |      |  | (202    | )       |   |  | (1,519   | )       
|                                                                   
|                                                                    | Total |  |                 | (¥1,537 | )                        |  |       | ¥947 |      |  |         | (¥5,829 | ) |  |          | ($43,827 | )
|                                                                   



13.  Leased assets:

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

Rental expenses under operating leases for the years ended March 31, 2000,
2001 and 2002 aggregated ¥8,765 million, ¥5,962 million and ¥6,777 million
($50,955 thousand), respectively. Such rentals relate principally to cancelable
leases which are renewable upon expiration.

The net minimum rental payments under operating leases that have initial or
remaining noncancelable lease terms in excess of one year at March 31, 2002 are
as follows:

|                     |                              |                 |        |                          |  |   |        |        | 
|-------------------- | ---------------------------- | --------------- | ------ | ------------------------ |  | - | ------ | ------ | 
|Year ending March 31 |                              | Millions of Yen |        | Thousands ofU.S. Dollars
|                    
|2003                 |                              |                 | ¥3,537 |                          |  | $ | 26,594 |       
|                    
|                    
|                    
|                    
|2004                 |                              |                 | 2,070  |                          |  |   | 15,564 |       
|                    
|                    
|                    
|                    
|2005                 |                              |                 | 1,515  |                          |  |   | 11,391 |       
|                    
|                    
|                    
|                    
|2006                 |                              |                 | 1,018  |                          |  |   | 7,654  |       
|                    
|                    
|                    
|                    
|2007                 |                              |                 | 538    |                          |  |   | 4,045  |       
|                    
|                    
|                    
|                    
|Thereafter           |                              |                 | 989    |                          |  |   | 7,436  |       
|                    
|                     | Total minimum future rentals |                 |        | ¥9,667                   |  |   | $      | 72,684 | 
|                    

F-22



---



##### Table of Contents



14.  Financial instruments:

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

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

The notional amounts of forward exchange contracts as of March 31, 2001
and 2002 were ¥19,833 million and ¥3,031 million ($22,789 thousand),
respectively. The notional amounts of currency options purchased were ¥1,921
million and ¥1,440 million ($10,827 thousand) as of March 31, 2001 and 2002,
respectively. The notional amount of currency options written was ¥1,920
million and ¥1,440 million ($10,827 thousand) as of March 31, 2001 and 2002,
respectively.

To change currency and interest rate features of intercompany finance
transactions, the Company entered into currency swap contracts with banks.
Currency swap contracts effectively changed, in substance, the U.S. dollars
floating interest rate intercompany borrowings into Japanese yen fixed interest
rate borrowings and euro floating interest rate borrowings. The notional
amounts of currency swap contracts as of March 31, 2001 and 2002 were ¥29,209
million and ¥42,882 million ($322,421 thousand), respectively.

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

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

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

F-23



---



##### Table of Contents



15.  Fair value of financial instruments:

The following table presents the carrying amounts and fair values of the
Companys financial instruments at March 31, 2001 and 2002:

|             |                                            |  |                      |         |                          |  |                      |         |           |  |                 |         |           |  |  |         |   |  |  |          |   |  |  |          |  
|------------ | ------------------------------------------ |  | -------------------- | ------- | ------------------------ |  | -------------------- | ------- | --------- |  | --------------- | ------- | --------- |  |  | ------- | - |  |  | -------- | - |  |  | -------- | -
|             |                                            |  | Millions of Yen      |         | Thousands ofU.S. Dollars
|             |                                            |  |                      |         |                         
|             |                                            |  | 2001                 |         | 2002                     |  | 2002                
|             |                                            |  |                      |         |                          |  |                     
|             |                                            |  | Assets (liabilities) |         | Assets (liabilities)     |  | Assets (liabilities)
|             |                                            |  | CarryingAmounts      |         | FairValue                |  | CarryingAmounts      |         | FairValue |  | CarryingAmounts |         | FairValue
|            
|Assets:      |                                            |  |                      |         |                          |  |                      |         |           |  |                 |         |           |  |  |         |   |  |  |          |   |  |  |         
|            
|            
|            
|            
|             | Available-for-sale securities              |  |                      | ¥25,337 |                          |  |                      | ¥25,337 |           |  |                 | ¥21,815 |           |  |  | ¥21,815 |   |  |  | $164,022 |   |  |  | $164,022 |  
|            
|            
|            
|            
|             | Long-term receivables                      |  |                      | 76      |                          |  |                      | 76      |           |  |                 | 374     |           |  |  | 365     |   |  |  | 2,812    |   |  |  | 2,744    |  
|            
|            
|            
|            
|             | Other financial instruments                |  |                      |         |                          |  |                      |         |           |  |                 |         |           |  |  |         |   |  |  |          |   |  |  |          |  
|            
|            
|            
|            
|             | Forward exchange contracts                 |  |                      | 10      |                          |  |                      | 10      |           |  |                 |         |           |  |  |         |   |  |  |          |   |  |  |          |  
|            
|            
|            
|            
|             | Currency swap                              |  |                      | 2,069   |                          |  |                      | 2,040   |           |  |                 | 1,846   |           |  |  | 1,846   |   |  |  | 13,880   |   |  |  | 13,880   |  
|            
|            
|            
|            
|             | Currency option                            |  |                      | 67      |                          |  |                      | 67      |           |  |                 | 2       |           |  |  | 2       |   |  |  | 15       |   |  |  | 15       |  
|            
|            
|            
|            
|Liabilities: |                                            |  |                      |         |                          |  |                      |         |           |  |                 |         |           |  |  |         |   |  |  |          |   |  |  |         
|            
|            
|            
|            
|             | Long-term debt, including current maturity |  |                      | (46,300 | )                        |  |                      |         |           |  |                 | (38,228 | )         |  |  |         |   |  |  | (287,429 | ) |  |  |          |  
|            
|            
|            
|            
|             | LessCapital lease obligations             |  |                      | 665     |                          |  |                      |         |           |  |                 | 62      |           |  |  |         |   |  |  | 466      |   |  |  |          |  
|             |                                            | 
|             | Long-term debtnet                         |  |                      | (45,635 | )                        |  |                      | (47,235 | )         |  |                 | (38,166 | )         |  |  | (38,963 | ) |  |  | (286,963 | ) |  |  | (292,955 | )
|            
|            
|            
|            
|             | Other financial instruments:               |  |                      |         |                          |  |                      |         |           |  |                 |         |           |  |  |         |   |  |  |          |   |  |  |          |  
|            
|            
|            
|            
|             | Forward exchange contracts                 |  |                      | (747    | )                        |  |                      | (747    | )         |  |                 | (33     | )         |  |  | (33     | ) |  |  | (248     | ) |  |  | (248     | )
|            
|            
|            
|            
|             | Currency option                            |  |                      | (60     | )                        |  |                      | (60     | )         |  |                 | (10     | )         |  |  | (10     | ) |  |  | (75      | ) |  |  | (75      | )
|            

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

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

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

Sundry investments included equity interests in non-public companies, amounting
to ¥3,764 million and ¥2,591 million ($19,481 thousand) at March 31, 2001 and
2002, respectively, and memberships amounting to ¥1,023 million and ¥612
million ($4,602 thousand) at March 31, 2001 and 2002, respectively. The
corresponding fair values at those dates were not computed as such estimation
is not practicable.

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

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

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

F-24



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##### Table of Contents



16.  Basic and diluted earnings per share:

A reconciliation of the numerators and denominators of basic and diluted net
income per share computation for the years ended March 31, 2000, 2001 and 2002 is as follows:

|                                            |         |  |                              |       |                          |  |         |        |      |  |         |       |              |   |        |      | 
|------------------------------------------- | ------- |  | ---------------------------- | ----- | ------------------------ |  | ------- | ------ | ---- |  | ------- | ----- | ------------ | - | ------ | ---- | 
|                                            |         |  | Millions of Yen              |       | Thousands ofU.S. Dollars
|                                            |         |  |                              |       |                         
|                                            |         |  | 2000                         |       | 2001                     |  | 2002    |        | 2002
|                                           
|                                           
|                                           
|                                           
|                                           
|Net income available to common shareholders |         |  | ¥13,075                      |       |                          |  | ¥18,298 |        |      |  | ¥8,047  |       |              | $ | 60,504 |     
|                                           
|                                            |         |  |                              |       |                          |  |         |        |      |  |         |       |              |   |        |     
|                                           
|                                           
|                                           
|                                           
|                                            |         |  |                              |      
|                                            |         |  | Number of Shares (Thousands) |       |                          |  |        
|                                           
|Weighted average common shares outstanding  |         |  | 179,574                      |       |                          |  | 179,813 |        |      |  | 180,032 |       |              |   |        |     
|                                           
|                                           
|                                           
|                                           
|Effect of dilutive warrants                 |         |  | 32                           |       |                          |  | 103     |        |      |  | 32      |      
|                                           
|Diluted common shares outstanding           |         |  | 179,606                      |       |                          |  | 179,916 |        |      |  | 180,064 |       |              |   |        |     
|                                           
|                                            |         |  |                              |       |                          |  |         |        |      |  |         |       |              |   |        |     
|                                           
|                                           
|                                           
|                                           
|                                           
|                                            |         |  |                              |       |                          |  |         |        |      |  | Yen     |       | U.S. Dollars
|                                            |         | 
|Net income per share                        |         |  |                              |       |                          |  |         |        |      |  |         |       |              |   |        |     
|                                           
|                                           
|                                           
|                                           
|                                            | Basic   |  | ¥72.81                       |       |                          |  | ¥101.76 |        |      |  | ¥44.70  |       |              |   | $0.34  |     
|                                           
|                                           
|                                           
|                                           
|                                            | Diluted |  |                              | 72.80 |                          |  |         | 101.70 |      |  |         | 44.69 |              |   |        | 0.34 | 
|                                           

The stock options were not included in the computation of diluted earnings per
share because to do so would have been antidilutive for the periods presented.



17.  Commitments and contingent liabilities:

Commitments outstanding at March 31, 2002 for the purchase of property, plant
and equipment and advertisement payments approximated ¥2,887 million ($21,707
thousand).

Contingent liabilities at March 31, 2002 principally for loans guaranteed
in the ordinary course of business amounted to ¥3,101 million ($23,316
thousand).

During the year ended March 31, 2001, the Company received a notice of proposed
assessment from the German tax authorities for approximately DM41 million
(¥2,434 million translated at the current foreign exchange rate at March 31,
2002) relating to a tax position taken in prior years concerning intercompany
purchase prices. The Company officially challenged the proposed assessment by
arbitration procedures. There was no progress during the year ended March 31,
2002. In the opinion of management, it is not possible at this time to
determine the ultimate resolution of this matter.



18.  Gain on sale of interest in subsidiary:

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

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

Gain on issuance of stock was ¥7,136 million and gain on sale of existing
stock was ¥5,355 million.

F-25



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##### Table of Contents



19.  Remuneration of directors and officers:

The aggregate remuneration (including bonuses and stock-based compensation [See
Note 10]) charged to income by the parent company for directors and officers
for the years ended March 31, 2000, 2001 and 2002 totaled ¥733 million, ¥811
million and ¥876 million ($6,586 thousand), respectively.



20.  Subsequent events:

|   |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|-- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|a. |  | On April 25, 2002,
Tohoku Pioneer Corporation (Tohoku) announced the implementation of a
voluntary early retirement plan subsequent to the approval by its board of
directors. Tohoku assumes that retirement date is to be
June 30, 2002 and a special retirement allowance is to be ¥1,200 million
($9,023 thousand).                                                                                                                                                                                                                                                                                                                                
|  
|b. |  | In June 2002, the
Company received a preliminary calculation from the United States
Internal Revenue Service (IRS) for additional taxes of
approximately US$66 million (¥8,795 million
translated at the foreign exchange rate at March 31, 2002)
relating to an adjustment to transfer prices between affiliated
companies for the years ended March 31, 1997 through 1999. If,
after completing its audit, the IRS files a notice of proposed
assessment based on the preliminary calculation, the Company intends
to file a protest. In the opinion of management, it is not possible
at this time to determine the ultimate outcome of this matter.
|  
|c. |  | In July 2002, the
board of directors of Tohoku approved the guarantee of banks loans to
Eldis Corporation in an aggregate amount not to exceed
¥25,000 million ($187,970 thousand). Eldis Corporation
is a 45% owned, affiliated company of Tohoku and engages in the
development and manufacture of organic electroluminescent panels.                                                                                                                                                                                                                                                                                                                  

F-26



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##### Table of Contents



INDEPENDENT AUDITORS REPORT ON SUPPLEMENTAL INFORMATION

To the Board of Directors and Shareholders of Pioneer
Corporation:

We have audited the consolidated financial statements of Pioneer Corporation
and subsidiaries as of March 31, 2001 and 2002, and for each of the three years
in the period ended March 31, 2002, and our report thereon appears on page F-2.
Our audits were conducted for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental information listed in
the index to consolidated financial statements and schedules is presented for
the purpose of additional analysis and is not a required part of the basic
financial statements. This supplemental information is the responsibility of
the Companys management. Such information has been subjected to the auditing
procedures applied in our audits of the basic financial statements and, in our
opinion, is fairly stated in all material respects when considered in relation
to the basic financial statements taken as a whole.

/s/ Deloitte Touche Tohmatsu
Deloitte Touche Tohmatsu
Tokyo, Japan

May 2, 2002

F-27



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##### Table of Contents



PIONEER CORPORATION AND
SUBSIDIARIES

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

A.     SHORT-TERM BORROWINGS AND LONG-TERM DEBT



| |  | Unused lines of credit for short-term financing at March 31, 2002
approximated ¥220,730 million of which ¥30,000 million relates to commercial
paper programs. Unused commitments for long-term financing arrangements at
March 31, 2002 amounted to ¥7,400 million. There were no commitment fees.
| |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

B.     ACCRUED LIABILITIESOTHER



| |  | Accrued liabilitiesother included accrued royalty of ¥11,233 million and
¥13,312 million at March 31, 2001 and 2002, respectively.
| |  | -----------------------------------------------------------------------------------------------------------------------------------

C.     INCOME TAXES



| |  | Income before income taxes and income tax expense was comprised of the
following components:
| |  | --------------------------------------------------------------------------------------------

|                                   |          |   |                     |        |      |   |        |        |   |   |        |        |  
|---------------------------------- | -------- | - | ------------------- | ------ | ---- | - | ------ | ------ | - | - | ------ | ------ | -
|                                   |          |   | Millions of Yen    
|                                   |          |   | Year Ended March 31
|                                   |          |   |                    
|                                   |          |   | 2000                |        | 2001 |   | 2002  
|                                   |          |   |                     |        |      |   |       
|Income (loss) before income taxes: |          |   |                     |        |      |   |        |        |   |   |        |       
|                                  
|                                  
|                                  
|                                  
|                                   | Domestic |   | ¥                   | 8,342  |      |   | ¥      | 5,967  |   |   | ¥      | (3,655 | )
|                                  
|                                  
|                                  
|                                  
|                                   | Foreign  |   |                     | 19,466 |      |   |        | 28,226 |   |   |        | 18,998 |  
|                                   |          |   |                     |        |      |   |        |        |   |   |        |        |  
|                                   |          | ¥ | 27,808              |        |      | ¥ | 34,193 |        |   | ¥ | 15,343 |       
|                                   |          |   |                     |        |      |   |        |        |   |   |        |        |  
|Income taxesCurrent:              |          |   |                     |        |      |   |        |        |   |   |        |       
|                                  
|                                  
|                                  
|                                  
|                                   | Domestic |   | ¥                   | 2,883  |      |   | ¥      | 4,906  |   |   | ¥      | 3,879  |  
|                                  
|                                  
|                                  
|                                  
|                                   | Foreign  |   |                     | 9,214  |      |   |        | 10,105 |   |   |        | 7,228  |  
|                                   |          |   |                     |        |      |   |        |        |   |   |        |        |  
|                                   |          | ¥ | 12,097              |        |      | ¥ | 15,011 |        |   | ¥ | 11,107 |       
|                                   |          |   |                     |        |      |   |        |        |   |   |        |        |  
|Income taxesDeferred:             |          |   |                     |        |      |   |        |        |   |   |        |       
|                                  
|                                  
|                                  
|                                  
|                                   | Domestic |   | ¥                   | 2,927  |      |   | ¥      | (872   | ) |   | ¥      | (4,501 | )
|                                  
|                                  
|                                  
|                                  
|                                   | Foreign  |   |                     | 192    |      |   |        | 181    |   |   |        | 116    |  
|                                   |          |   |                     |        |      |   |        |        |   |   |        |        |  
|                                   |          | ¥ | 3,119               |        |      | ¥ | (691   | )      |   | ¥ | (4,385 | )     
|                                   |          |   |                     |        |      |   |        |        |   |   |        |        |  

D.     SHAREHOLDERS EQUITY



| |  | Retained earnings at March 31, 2002 include the parent companys and its
consolidated subsidiaries equity in undistributed earnings of 20% to 50%
owned companies accounted for on an equity basis in the amount of ¥163
million.
| |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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##### Table of Contents



SCHEDULE II

PIONEER CORPORATION AND
SUBSIDIARIES

VALUATION AND QUALIFYING
ACCOUNTS

YEARS ENDED MARCH 31, 2000, 2001
AND 2002

|               |      |            |                 |               |  |              |   |       |   |        |   |            |   |  |     |      |   |  |   |       | 
|-------------- | ---- | ---------- | --------------- | ------------- |  | ------------ | - | ----- | - | ------ | - | ---------- | - |  | --- | ---- | - |  | - | ----- | 
|               |      |            | Millions of Yen
|               |      |            |                
|Allowance for  |      |            |                 |               |  | Charged      |   |       |   |        |   |            |   |  |     |      |   | 
|Doubtful Notes |      | Balance at |                 | (Credited) to |  | Deductions   |   |       |   |        |   | Balance at
|and Accounts   |      | Beginning  |                 | Costs and     |  | for Accounts |   |       |   |        |   | End of    
|Receivables    |      | of Period  |                 | Expenses      |  | Written Off  |   | Other |   | Period
|               |      |            |                 |               |  |              |   |       |   |       
|               |      |            |                 |               |  |              |   |       |   |        |   |            |   |  | (a) |      |   |  |  
|               |      |            |                 |               |  |              |   |       |   |        |   |            |   |  |     |      |   |  |   |      
|              
|              
|              
|              
|               | 2000 |            | ¥               | 10,998        |  |              | ¥ | 908   |   |        | ¥ | (2,466     | ) |  | ¥   | (447 | ) |  | ¥ | 8,993 | 
|              
|              
|              
|              
|               | 2001 |            |                 | 8,993         |  |              |   | 1,164 |   |        |   | (861       | ) |  |     | 525  |   |  |   | 9,821 | 
|              
|              
|              
|              
|               | 2002 |            |                 | 9,821         |  |              |   | (153  | ) |        |   | (4,660     | ) |  |     | 311  |   |  |   | 5,319 | 



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

F-29