Financial overview

In million yen	FY2006	FY2005	Rate of Change (%)	Factors
Overall
Sales	708,126	709,613	(0.2)	-
Operating income	22,077	45,471	(51.4)	- Operating income and ordinary income dropped year-on-year due to a large decrease in sales of HDD heads.
Ordinary income	24,631	46,402	(46.9)
Net income	4,918	18,870	(73.9)	- Net income largely decreased from what it was last year because the Company posted an extraordinary loss to cover an impairment loss.
Electronic components
Sales	403,181	416,629	(3.2)	- Sales and operating income declined year-on-year, as the Company was unable to offset a drop in sales at the magnetic device business.
Operating income	5,264	28,441	(81.5)

Automotive business at the Electronic Component Division
1. Electronic component business
- Sales stood at 92,600 million yen
- Sales increased in the area of sensors and switches that improve driving safety and fuel efficiency.

2. Electronics component business
- Sales were 97,100 million yen
- Sales increased from what they were the previous year, thanks to greater sales of the Company's proprietary products such as steering modules, which were designed to meet market demand for multi-functional devices; and front panel modules. Sales were also supported by gains from lower exchange rates for the yen.

The Company will largely expand its automotive electric products business. It plans to increase sales of products incorporating its unique technologies; such as multi-function input devices, air-conditioning panels and keyless entry systems; targeting at 95 billion yen sales per year in the division to achieve in the next three years, up 40% from the FY 2005 sales of 81.4 billion yen. (From a story in the Nikkan Jidosha Shimbun on May. 27, 2006)

Business Alliance
The Company and Toko Inc. have agreed to enter into a business alliance. Based on the agreement, the Company will acquire Toko's shares worth roughly 500 million yen. The two companies will build cooperation in a mutually complementary form in the area of semiconductor business including joint development of sensor integrated circuits; they will also create synergy by sharing their sales channel. (From an article in the Nikkan Jidosha Shimbun on Mar. 22, 2007)

Transfer of the HDD business
The Company revealed that the Company has concluded a basic agreement with TDK Corporation concerning the transfer of the Company's hard disc drive (HDD) head business to TDK. The Company and TDK are now discussing the details on handover of related equipment and intellectual property rights such as patent properties and know-how, aiming to conclude and execute a definitive contract as soon as possible. The Company aims to increase its competitive edge by making full use of its equipment, accumulated technology, and manpower employed in the thing film deposition and microfabrication segments in new businesses. (From an article in the Nikkan Jidosha Shimbun on Mar. 22, 2007)

R&D Expenditures

(in millions yen)	FY2006	FY2005	FY2004
Overall	46,804	42,829	42,466
Electronic components	18,002	16,604	19,897

Electronic Components Division
It's Electronic Components Division is engaged in various R&D activities with Japanese and foreign universities and laboratories including Kenbridge University in the U.K and Massachusetts Institute of Technology in the U.S.A. In addition, Alps is working to build a main business development office which will conduct R&D on process and electronic parts. In addition, it is forming a business unit engaged in developing more customer-oriented products in each product area.

Automotive Electronics Division
It's automotive Electronics Division is working on general R&D activities, from developing parts, on up to complete systems in the area of of HMI (Human Machine Interface. This will be based on products which make full use of the Group's proprietary as well as elemental technology. These parts will be focused around input, communications, and sensor devices.

The Company is working on promoting technology and product development in the following areas:
-Developing its AI (Alps Innovative) cockpit that makes use of the Company's proprietary technologies such as haptic technology, electrostatic capacity detection technology; and camera technology in four areas on vehicles, namely instrument panels, steering systems, center consoles, and overhead consoles.
-Conducing advanced R&D activities on by-wire technology.
-The Company is developing high-precision rudder-angle magnetic sensors that are capable of responding to vehicle control systems. It is also working on basic development activities to engineer tire pressure monitoring systems that do not require batteries.

Recent developments (FY2006)
The Company announced development of a high-sensitive magnetic sensor which has applied advanced technologies as micro fabrication. It will market this new product as the latest device for automotive parts and personal computers. The Company's department responsible for cutting-edge technologies as micro fabrication and nanomaterial S (micro mechatronics) has developed the product named "GMR Sensor." As it utilizes a high-sensitive and high-power device, a simplified or downsized circuit and more accurate signals can be expected. Its little piece-to-piece variations in quality will eliminate work of sorting and demarcations according to rank at manufacturing processes of electronic equipments. Higher resistance to heat and deterioration with age has been achieved to make it useful under severe conditions as with automobiles. (From a story in the Nikkan Jidosha Shimbun on May. 19, 2006)

The Company presented its "AI (Alps Innovative ) Cockpit," which incorporates the latest input device technologies for automobiles. Considering transition from the mechanical control system to "By Wire" system, new operation devices as a steering wheel, a gear shift lever, multi-functional switches and a large screen monitor have been incorporated in an actual vehicle. The Company will make promotional efforts toward automakers and parts suppliers for the product as the next generation interface. Primarily through its Automotive Products Division, The Company has introduced its latest technologies and devices into the AI Cockpit in a real vehicle. Based on the "human-machine interface" development concept, it divided the input operation zones inside an automobile into four areas: the overhead console (ceiling), the instrument panel, the center console and the steering wheel. The Company has then created the optimal input methods for each of these areas. (From a story in the Nikkan Jidosha Shimbun on May. 25, 2006)

The Company announced development and mass production of the "TSL Series" Terrestrial Digital Broadcast (1-Seg) TV tuner for vehicles. Its small and thin design boasts high reliability and resistance to vibration and temperature change of the car environment. In response to the frequent changes in wave frequencies during high-speed driving, The Company has selected the most appropriate ICs to supply the TSL Series with high-speed channel search functions. The placement of a soldering pattern on the side surface of the circuit board secures a wide soldering area. (From an article in the Nikkan Jidosha Shimbun on Nov. 21, 2006)

Capital Investment

(in millions yen)	FY2006	FY2005	FY2004
Overall	45,307	50,061	47,127
Electronic components	29,525	37,170	33,066

Electronic component division
- The Company focused its investment activities on increasing production of automotive sensors and switches.

The Company will drastically revise its investment plan for the electronics component segment - the Company's core business. In order to cope with price hikes of materials and lower selling prices, the Company has decided to slash the fiscal 2006 budget for capital investments and R&D by 4.2 billion yen. Its original plan involved large investments in the electronics component sector, as application of electronics products is growing worldwide in mobile devices including cellular phones, as well as in automotive electric equipment. Despite brisk sales of automotive components such as switches and steering sensors this year, the Company saw its sales drop in the tuner sector amid severe price competitions. In addition, its income is projected to be hit severely by soaring material prices. Through close reexamination of each investment item, the Company has decided to either curtail the budget or postpone some of low-priority projects to the next fiscal year or after. (From an article in the Nikkan Jidosha Shimbun on Nov. 14, 2006)

Overseas
Shanghai Alps Electronics Co., Ltd., the Company's production base of high-frequency products in China, opened a new plant by moving to the new location. At this new production site, Shanghai Alps will expand its business of in-car radio tuners and TV tuners with the state-of-the-art equipment and production expertise. Shanghai Alps was established in 1993 as a joint venture, in an attempt to participate in China's national project under which television and VTR production was promoted. The Chinese subsidiary manufactures mainly high-frequency parts for broadcasting. The new plant, established to cope with the growing electronics market in China, started operations in January 2006.(From an article in the Nikkan Jidosha Shimbun on Sep. 19, 2006)

Ningbo Alps Electronics Co., Ltd., its Chinese joint venture in Ningbo, Zhejiang, held an opening ceremony for its new plant and new headquarters in the same city. Having started operations in October 2005, the new production facility has recently launched full operations as the largest production facility of the Alps group. Established as a joint venture to produce audio system parts, Ningbo Alps commenced production of car and home audio system components in 1993. The Company is now a global supply center of heads for hard disc drives and miniature switches. (From an article in the Nikkan Jidosha Shimbun on Sep. 21, 2006)

Capital investment projects

Name (Location)		Type of facility	Planned investment (million yen)	Start	Completion
Alps Electric Co., Ltd	Component Division (Osaki City, Miyagi Prefecture) (Wakuya-Cho, Toda-Gun, Miyagi Prefecture)	Manufacturing facilities	6,900	Apr. 2007	Mar. 2008
	Headquarters (Ota Ward, Tokyo), Kansai Branch (Suita City, Osaka), etc.	Facilities at the headquarters and Kansai Branch	4,282	Apr. 2007	Mar. 2008