Annual Report 2017-2018 CONTENTS

Company Overview

Business Domains………………………………………………… 3

Business Report…………………………………………………… 5

History…………………………………………………………………… 7

Vision

Top Message………………………………………………………… 9

Mid-term Business Plan………………………………………… 11

Directions of Approaches………………………………………12

Corporate Philosophy Editorial Policy CSR Alpine values its members as individuals, and is committed to forming an energetic Since fiscal year 2016, Alpine has published an Annual Report that combines the annual report for financial information and the and attractive company where the quality of work is enhanced. Alpine CSR……………………………………………………………13 corporate profile/CSR report for business activities centering on Provision of Products and Services to non-financial information. We consider this report an important Solve Social Problems……………………………………………14 1 Respect for Individuality communication tool to help our stakeholders understand our Sustainable Supply Chain Management…………………15 activities, and actively disclose information on our business Alpine seeks to foster the pride and enthusiasm of each employee, providing the means Customer Satisfaction plans, performance, CSR management policy, environmental and opportunities for growth, and encouraging relationships built on mutual trust. Environment……………………………………………………………16 conservation efforts, and other aspects of our business. Involvement with Local Community………………………17 2 Creating Value Participation of Diverse Human Resources…………18 Designations Within This Report Alpine eagerly takes up the challenge of maintaining technical leadership Corporate Governance…………………………………………19 Alpine: Refers to the non-consolidated domestic business. Compliance………………………………………………………… 22 in creating new values that will enhance the quality of human life. Alpine Group: Refers to all consolidated companies around Risk Management the world. Summary of CSR Activities………………………………… 23 3 Contribution to Society Alps Group: Refers to the corporate group led by Alps Electric. Alpine is committed to providing superior products and thus contributing to a fuller, richer society. Financial Data Scope and Period Covered by Report

[Scope] Conduct Guidelines This report covers the Alpine Group in Japan and around the world, Financial Analysis……………………………………………… 24 but the scope of individual topics may vary. Consolidated Balance Sheets…………………………… 27 Consolidated Statements of Income Creation, Passion, Challenge [Period] and Comprehensive Income……………………………… 29 ● In principle, this report covers the period from April 1, 2016 to We will boldly challenge ourselves to create new value and perform MONOZUKURI with passion. Consolidated Statements of Cash Flows…………… 30 March 31, 2017, but it does include some activities from before Consolidated Statements of Changes in Equity…… 31 and after that period. ● The Japanese portion of the environmental report covers VISION2020 Vision Statement the period from April 2016 to March 2017, and the overseas State of the Alpine aims to be a Mobile Media Innovation Company portion covers the period from January to December 2016. Company Published in June 2017 that provides you with an enjoyable car lifestyle. Financial/Non-financial Highlights……………………… 33

Corporate Outline and Shares…………………………… 34

1 Annual Report 2017-2018 Annual Report 2017-2018 2 Company Overview Business Domains

We will create the car lifestyles of the next generation as a mobile media innovation company. Navigation & We offer a premium car lifestyle that exceeds customer expectations in the business domains of Audio, Cockpit Display Visual, Navigation & Cockpit Display, Communication & Cloud Services, and Drive Assist. Company Overview Company

Car Navigation System BIG X”11” [Japan] Our model-specific car navigation Visual Car Navigation System systems come with 11-inch monitors, the largest in the world. AV Head Unit X209D [North America] iLX-107 A water and dustproof 9-inch [North America/ navigation system, designed exclusively for the Jeep Wrangler. Europe/Asia] We provide industry-leading devices with sophisticated flat

design and compatibility with Vision wireless Apple CarPlay®.

Rear Vision Communication &

PXH12X-R-AV Cloud Service CSR [Japan] Rear seat passengers can enjoy digital terrestrial broadcasts and DVDs on a large 12.8-inch screen. Smartphone App The unit is equipped with Alpine Connect Plasmacluster technology Data Financial [North America/ that cleans the air in the vehicle. Drive Assist Europe/Australia] The Alpine Connect smartphone app makes various applications available Audio on on-board devices. State of the Company the of State Rear View Camera HCE-C1000D-AV [Japan] This HDR camera enables bright, clear images to be displayed even in dark places, assisting with smooth parking.

Amps & Speakers X-A90F/S65C Speakers [North America/ X3-710S-AV [Japan] Europe/Asia] Delivering the ultimate sound Our 5-channel high-fidelity with special design/tuning for digital power amp and high- the Vellfire and the Alphard, resolution speakers support these speakers increase various systems. owner satisfaction.

3 Annual Report 2017-2018 Annual Report 2017-2018 4 Company Overview Business Report

We work to maximize corporate value through our global sales, production, and development network. Company Overview Company

H Headquarters S Sales Base M Manufacturing Base S D Development Base D S S S S D H M D S M H Japan 市販 S H S S 音響機器 S S S D M 13% ビジネスS S S S 事業 M 17% S Asia North America 19% S S D S S Vision 13% D% 35 H H M S M OEMビジネス 情報・通信機器事業 S Europe 80% % 39% 81 CSR

S

● Sales Ratio by Region ● Ratio of Employees by Region Audio equipment business Information and communications equipment business

Asia 3% Data Financial

North Japan 市販 ● Sales Ratio by Segment/Destination America 音響機器 % ビジネス 13 事業 17%14% Asia North America 19% China Europe

% Company the of State 13 % 36% Audio 35 17% equipment business OEMビジネス 情報・通信機器事業 19% Europe Japan 80% 81% After-market 39% 30% business 20% Information and Speakers, amps, etc. communications Navigation systems, displays, etc. equipment Positive Positive OEM business business ● Launch of new products in the after-market Factors Factors ● Launch of new products in the U.S. ● Expansion of sales in the after-market 80% 81% ● Expansion of sales for European automobile ● Expansion of sales of small/lightweight manufacturers products ● Time needed to develop business flow for the ● Integration with information and overseas after-market Asia 3% Negative ● Model changes of some vehicles of Negative communications devices Factors Factors Japanese-affiliated manufacturers

North % 8.4% 13.0decrease Sales: decrease America Sales: billion yen from billion yen from 201.7 45.9 previous previous 14% term term Forecast Forecast 201.8 billion yen China Europe 48.1 billion yen for next for next year: (0.0% increase from previous term) 36% 17% year: (4.8% increase from previous term)

5 Annual Report 2017-2018 Annual Report 2017-2018 6 Japan 30% Company Overview History

2017 sees the celebration of our 50th Alpine Electronics 50th Anniversary Logo The logo features the number 50, which uses a tire motif to symbolize mobility. The five-line stripe from our brand logo, shooting up over the number, represents our anniversary — A history of creation, resolution to progress beyond our existing business domains. passion, and challenge. Company Overview Company 9 9 99 99 5 99 55 99 M Vision

9 99 5 9 M 9 M M CSR

9 9 99 5 ( 99 Data Financial State of the Company the of State

9 99 99 99 595 59 ( ® ( ®

7 Annual Report 2017-2018 Annual Report 2017-2018 8 Vision Message from the President

We aim to look beyond 2020 to create new brand value through challenges beyond past experiences. Company Overview Company

Increase New demonstrate our company's strengths, of Business Product such as ADAS (advanced driver-assistance Scale Expansion Vision systems). In order to continue growing beyond OEM Product Prior After-market changes in the automobile industry, Alpine Order Development Cycle Introduction Product Creating needs to further polish its strengths. The Received for Automobile of New Development Markets Technologies 14th Mid-Term Business Plan lays out the Manufacturers Cycle need to further investigate HMIs (human- machine interfaces), core technologies Prior Proposals that we have developed in our work in the Joint for OEM

Workshops CSR car audio and car navigation businesses. Products Though cars are becoming more intelligent, the needs for safety and ease of use never President change. We will continue to provide our an example of the results of our work to Nobuhiko Komeya own unique value as we pursue HMIs that demonstrate the new value of the Alpine appeal to all five senses, using cutting- brand.

edge technologies like AI (artificial In addition to promoting the business Data Financial intelligence) and deep learning to create decided through customer orders, user-friendly equipment and systems. today Alpine is working on a number In addition, we will continue to of challenges related to the next steps At Alpine, we are working to achieve reform will be allocated with high priority strengthen Alpine's distinctive two-axis beyond VISION 2020. We are looking for VISION 2020, our long-term business into business for 2020 and beyond, based business model, as both an OEM and as ways to create new value both within the

vision from 2013 targeting 2020 (net sales on the 14th Mid-Term Business Plan. an after-market brand. The OEM market automobile-related domain, where we are Company the of State of 330 billion yen at a 5% operating profit When we looked into future trends moves in three-year spans and the after- exploring custom car sales and car-sharing ratio in 2020). The plan has developed for automobiles, we found a number of market market moves in one-year spans; businesses, and outside the automobile favorably, and a successful achievement major trends that Alpine must seize upon, doing business within two market cycles domain, where we are investigating the of our goals has come into view. However, such as automatic driving, connectivity, has a multiplier effect, leading to increases drone business, which uses navigation the automobile industry is experiencing EVs, and car-sharing. Bold M&A is in the value we provide to customers control technologies (GPS, gyro functions, dramatic environmental changes that were being performed by other companies in within both markets. Based on the results map information coordination, etc.). We will not taken into consideration at the time our industry and companies new to the of advanced measures worked out for continue to consider the search for brand when VISION 2020 was first developed. industry, aiming at the markets created by the Alpine brand for the after-market, new ideas and actions to be our ultimate In order to achieve VISION 2020 while these trends. In the midst of this rapidly- Alpine has established a position as a goal, with the aim of continuous corporate appropriately responding to these changes, changing business environment, Alpine global premium brand. However, people's growth. This year, in 2017, we are proud to starting in 2017 we are establishing and is collaborating with its parent company lifestyles and values are changing; one of celebrate the 50th anniversary of Alpine's promoting the 14th Mid-Term Business Alps Electric, actively developing alliances our themes is to evolve the Alpine brand establishment. We will continue to work on Plan. In the first half of the year, Alpine with various partners within Japan and in response. Already in Japan, one of our improving corporate value through efforts performed structural reform, including overseas, to speed up business activities group companies that handles model- toward ESG (environment, social, and reorganization of domestic subsidiaries. in order to handle these changes. In specific products in the domestic market governance) and further strengthening our The funds acquired by making business addition, we are developing our business, with focuses on individual needs has ties to our stakeholders. We thank you very management more efficient through this concentrating on domains where we can achieved record sales and profit. This is much for your understanding and support. June 2017

9 Annual Report 2017-2018 Annual Report 2017-2018 10 Vision Mid-Term Business Plan Vision Directions of Approaches

We continue to implement reforms for growth. We offer transportation time and spaces to excite

Mid-Term Business Plan (FY 2017 to FY 2019) all mobility users and make them want to drive. In order to accelerate growth within the rapidly We will work to create value in new domains in the way changing automobile industry, Alpine has established that only Alpine can, while further improving profits in At Alpine, we are pursuing the creation of original automatic driving is adopted in earnest, we will offer the 14th Mid-Term Business Plan, covering the three existing businesses. added value amidst changes in the relationship drivers not only sound and visuals, but also a variety years from fiscal year 2017 through fiscal year 2019. between cars and people, based on four major trends: of information to make their drives safer and more Company Overview Company automatic driving, connectivity, EVs, and car-sharing. enjoyable. Additionally, in order for Alpine’s systems We are working to evolve the HMIs (human-machine and services to offer more comfortable and richer Business interfaces) that we have polished to provide high-quality experiences for drivers and passengers beyond 2020, Carry Out Reform for New Growth entertainment in the car audio and car navigation fields, we are progressing in the development of hardware and Goal Aiming for net sales of 300 billion yen and operating profit of 12 billion yen to not just optimize communication between people software to cultivate the next generation of mobility. and cars, but create hospitable spaces that stimulate the senses beyond what is expected. As semi- • Securing profitability and carrying out prior investments for the future Priority • Responding to four major trends in the automobile industry (automatic driving, connectivity, Items EVs (electric vehicles), and car-sharing) Vision • Establishing our uniqueness using our strengths 2021 and Beyond

● The 14th Mid-Term Business Plan 3,300 Comfort + Sales Operating 2,945 3,000 Entertainment FY 1991 profit (hundred 2,858 Listed on 1st 2,730 + 2,650 millions of yen) Section of TSE 2,520 2,500 Information 106.5 Billion Yen 2,477 VISION2020 2,223 Information CSR 2,012 2,029 + 1,966 120 111 115 Entertainment 101 98 1,685 70 56 54 56 65

23 Data Financial Today 2 Full Car Interior Entertainment FY 1988 The Ultimate in Listed on 2nd Hospitable Spaces Section of TSE Cockpit 74.8 Billion Yen Creating Value through Company the of State 106 Unique HMIs 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 (Year) Car Audio & Car Navigation

In our 14th Mid-Term Business Plan, we have set sharing. The funds acquired through measures to a sales goal of 300 billion yen for fiscal year 2019. improve profits will be used to actively make prior Approximately 80% of this sales goal for fiscal year investments toward the motorized society of the future. 2019 is already accounted for through orders from Our strengths are marketing that aims to automobile manufacturers. In the next three years, comprehensively understand customers, and HMI we will continue to further improve profitability in our technologies developed to date. Alpine uses these various businesses. As one part of this effort, we have strengths while creating unique technologies and carried out large-scale organizational changes oriented services that excite people. Technology for All Five Senses toward work efficiency. In the 14th Mid-Term Business Plan, fiscal year 2019 (Hearing, Sight, Touch, Smell, and Taste) At present, the automobile industry is in a period of is established as an ending point, but these three years great change, and Alpine realizes that there are certain are considered critical as a base for future business major trends that require close attention: automatic beyond then. We will continue our reforms to create driving, connectivity, EVs (electric vehicles), and car- Alpine's own unique value.

11 Annual Report 2017-2018 Annual Report 2017-2018 12 CSR Provision of Products and Services CSR Alpine's CSR to Solve Social Problems

We work in coordination with the local community Alpine's CSR is administrative activities that are and various partners with the goal of compatibility the embodiment of our corporate philosophy. between social value and corporate value.

▪ Basic Approach and Materiality ▪ Research and Development ▪ Design with Concern for the Environment

At Alpine, we consider CSR to be administrative evaluations from the perspectives of both stakeholder We are working on research and development with We developed the Layout-Free Speakers, which activities that are the embodiment of our corporate interest and priority for Alpine. In addition to reflecting a focus on 2025 and beyond, centered on car-related use features like low sound quality degradation even Overview Company philosophy. The corporate philosophy of Alpine is our internal CSR Committee's opinions, we also trends like automatic driving, connectivity, EVs (electric at wide angles and reductions in size and weight, to allow them to be installed anywhere inside a vehicle something that has unchanging value and our corporate received opinions from external experts. While all vehicles), and car-sharing. We pursue products like vision is shared with all employees as a means to CSR activities are important, we identified key topics rather than in certain specific spots. These products sound systems, infotainment systems, and cockpit achieve our philosophy, prompting everyone to work to incorporate into the medium-term CSR plan as key retained their performance despite being made smaller displays that realize Alpine's unique “HMIs that resonate daily toward CSR. In addition, in order to ensure that concerns, and we reinforce our CSR management to and lighter, increasing vehicle interior layout flexibility our CSR activities reflect a global perspective, we have monitor the status of each issue through periodical with all five senses,” with the goal of products and and contributing to improved mileage. They have been established our unique CSR guidelines based on review. services that make customers want to drive by offering adopted as an authorized dealer option for Honda's ISO26000 standards, and we continue working on At Alpine, we believe that our entire staff’s efforts a comfortable time and space, not just for cars, but S660 convertible sports car. Vision these activities. to promote CSR activities for the entire value chain all mobility users. In addition, we are taking an active Furthermore, Alpine has identified CSR materiality will serve to establish a base for our mid-to-long-term approach toward the latest information processing from 2015 for reflection to our CSR activities. For the growth, as well as fulfilling our social responsibility. fields, such as big data and AI (artificial intelligence), specification of materiality issues, we took ISO26000 We will continue to work on improving CSR activities which are said to bring about reform for the automobile and other standards into account, and performed that embody our corporate philosophy. industry's business models and people's lifestyles. ● Alpine's CSR Guidelines ● Materiality Matrix The product installed in the headrests Layout-Free Speaker

Very High ● Mitigation of Climate ● Provision of Products ▪ Alliances Community CSR Human Change Impact and Services to Solve Involvement (Reduction of GHG*) Social Problems Rights and ● Use of Renewable ● Sustainable Supply ●Collaboration with Companies in Cutting-Edge ● Expansion into the Chinese Mobility Market Development Resources Chain Management ● Prevention of Pollution Fields We have had a cooperative relationship with Neusoft We are actively working together with leading for over 20 years, and have established a new company ey Principles Expectations from Stakeholders Top Priority companies in a number of fields, with the aim of with them to expand our automotive business in China. ● Participation of ● Customer Satisfaction Diverse Human and Protection of evolving existing business domains and creating new Utilizing Neusoft's software technology abilities, which Consumer Labor Resources (Diversity) Privacy ones. In fiscal year 2016, Alpine began collaborating they have developed deeply through their work as Issues Practices ● Prevention of ● Involvement with the Corruption Local Community with IBM Japan on the development of a next- a global IT solution company, as well as their network Data Financial generation established in China, we are working to build a business ● Ensuring of Appropriate in-vehicle system to support comfortable driving through technologies and services that could contribute ● Protection of Natural Labor Conditions and Environment Workplace Environment through a variety of dynamic information, based on their to a next-generation smart mobility society, centering ● Establishment of ● Dialog with Employees Fair and Human Resources automobile industry-oriented IoT solution Watson IoT on EVs, automatic driving, and connected cars. China Organizational Governing Structure Operating Environment Development for Automotive. In addition, we are working with Toshiba is the world's largest automobile market, and we have Practices Governance ● Responsible Political ● Ensuring of Accountability Involvement and Transparency on the development of systems that use drones to patrol already initiated EV battery-related businesses and

● Compliance Company the of State

Very and inspect electrical infrastructure, such as pylons cloud (car-sharing) services in China. High Priorities for Alpine High and power transmission lines in mountainous regions, *GHG: Greenhouse gases contributing to labor savings in their maintenance.

● Cooperation with Alps Electric We have been working to bring about a safer and more comfortable motorized society in coordination with our parent company, Alps Electric. By combining Alps Electric's years of expertise in the input field, such as their HAPTIC® products and capacitive touch panels, with Alpine's expertise in the output field, such as our navigation-centered infotainment products, we can create advanced HMIs (human-machine interfaces). Car-sharing Service in China Furthermore, we expect that connectivity technologies and products, like Bluetooth®, LTE, and V2X, increase synergy between the two companies, contributing to automatic driving in the future.

13 Annual Report 2017-2018 Annual Report 2017-2018 14 CSR Sustainable Supply Chain Management CSR Environment

We strive toward responsible procurement We make a concerted effort to advance activities. environmentally-friendly company management ▪ Green Procurement ▪ Communication with Suppliers at all our domestic and overseas bases. Global environmental preservation requires broad At Alpine, we value coexistence and co-prosperity approaches not only by manufacturers, but also by through trusting relationships, and are working to ▪ Promotion of Environmental ▪ Mitigation of Climate Change Impact the suppliers of parts and materials. At Alpine, we strengthen partnerships with our suppliers. We hold Management briefing sessions throughout the world to explain The Alps and Alpine Groups have set a goal of

have established Green Procurement Standards, Overview Company the current state of production and sales as well as Alps and Alpine Group management is focused on improving energy consumption rates by an average of and promote procurement with consideration for the announcing our material procurement policy, and addressing environmental issues that are viewed as being 1% a year by 2020, through reductions of electric power environment. In fiscal year 2016, we added questions commend suppliers who have contributed to quality, among the more serious management challenges. We usage, effective use of heat, and other efforts at each of about the conditions of CSR activities to our supplier delivery date management, and cost improvements, established our Environmental Policy and Mid-term Plan our business facilities. In the Fukushima Protocol Global survey, and we are working toward supply chain-wide in order to deepen communication. based on the Alps Group Environmental Charter, and have Warming Prevention Project, organized by Fukushima CSR efforts that extend beyond the environment. established an Environmental Management Committee, to Prefecture, Alpine Giken, Inc. has been awarded the grand ● Status of 2016 Briefing Sessions work on the provision of environmentally friendly products, prize in the office & store category seven years in a row, performing environmentally friendly business activities, and in addition to other activities that aim to help us build North establishing a global environmental management structure Japan China Europe a leading presence in the local community. ▪ Addressing Procurement Risks America with a comprehensive approach taken by all group companies.

Alpine has six manufacturing bases worldwide. Vision Number ▪ Use of Renewable Resources ▪ Prevention of Pollution Their supply chains are subject to the risk of natural of Trading 72 disasters, accidents, labor disputes, bankruptcies, and 95 70 50 Partners Companies Through the improvement of the structure and We use chemicals in our manufacturing processes, other issues that can have wide-ranging effects. We Attending materials of our products and packaging, we are working but many of these chemicals can have a detrimental perform surveys on the final manufacturing locations on effective utilization of resources. For example, by impact on the environment or human health if misused or for materials and parts procured, and the information is Number of 121 making the packaging more compact on a product for an mismanaged. As a result, we consider it our responsibility centrally managed to allow us to address the identified Individuals 228 136 91 automobile manufacturer, we were able to increase the to work to reduce our use of chemicals that can have Individuals procurement risks in a timely fashion. In fiscal year Attending number of units packed per carton from 20 to 32, making major effects on the environment or the human body, as 2016, we expanded our survey to include the level of transport load much more efficient, as well as conserving well as to use them under a proper management system. CSR raw materials purchased by overseas bases, surveying materials used. Furthermore, we are making efforts to At Alpine, we strive for thorough management of the 1,200 parts from 75 companies. reuse shipping pallets, reducing the amount of scrap wood storage, use, and release of the chemicals used in our produced when disposing of pallets. manufacturing activities.

● Environmental Impact (FY 2016) CSR Customer Satisfaction INPUT Suppliers OUTPUT The Alpine Green Procurement System is We enforce green procurement and the “Zero emissions” activities are pursued to deployed globally to ensure the purchase of parts elimination of hazardous chemical substances reduce emission output. We also work to from parts and materials throughout our global and materials with low environmental impact. Data Financial reduce the release of chemical substances supply chain. Energy Conservation is pursued We pursue customer satisfaction and peace of into the atmosphere and cut CO2 emissions through new equipment, enhanced awareness, and other measures. from logistics operations. Alpine Group mind to the maximum extent. Electricity (Unit: Million kWh) Products All Alpine Group production bases around the Japan 15.94 Overseas 62.52 world acquire ISO14001 certification to ensure Car navigation systems, monitors, ▪ Alpine Customized Cars ▪ Efforts toward Functional Safety for that development and manufacture of products car stereos, etc. Fuel (Crude oil equivalent: kl) exert a low environmental impact. Our business In-Vehicle Products Japan 4,496 Overseas 17,857 facilities also work to reduce environmental Total Waste (Unit: t) At Alpine, we offer proposals for specially Company the of State impact through green procurement, zero Japan 467 Overseas 4,549 customized one-of-a-kind cars to make the time our The need for safety in in-vehicle products increases Municipal Water Supply (Unit: t) emissions, and other initiatives. as driver-assistance systems become more advanced Japan 80.8 Overseas 264.0 In Japan (6 affiliates) Emissions (CO2) into the Atmosphere customers spend in their cars even better. To date, ● Alpine Electronics, Inc. (Unit: t) and automatic driving systems are adopted, and Alpine Groundwater (Unit: t) we have done interior designs optimized for each car ● Alpine Manufacturing, Inc. Japan 10,046 Overseas 40,639 has been one of the first to establish a productization Japan 5.1 Overseas 0 ● Alpine Precision, Inc. model, based on our concept of “Alpine Style Premium process and system that comply with the ISO 26262 Purchased Parts (Semiconductors, etc.) ● Alpine Giken, Inc., etc. Overseas (13 affiliates) Space Design,” but as of April of 2017, we now offer Processed Parts (Molded parts, etc.) functional safety* standard for automobiles. In fiscal ● North America (3) full-car Alpine Style customization, including the year 2016, with the goal of bringing about a business Raw Materials (Plastic, etc.) ● Europe (4) culture of judgment and action that places the highest ● Asia (6) exterior. Our design concept combines “sporty, spartan priority on safety, we established the Functional Safety (straightforward and sturdy), sharp, simple, and smart,” Policy and produced work manuals, as well as putting for elegant and sophisticated customized cars. into practice an e-learning system for all employees Logistics involved in work related to in-vehicle products. Fuel (Fuel oil conversion: Kl) We reduce energy consumption in transportation Emissions into the Atmosphere (Unit: t) Japan 167 Overseas not tabulated through the review of transport routes, the use of Japan 164.7 Overseas not tabulated Alpine Functional Safety Policy shared shipping, and the improvement of load efficiency. “Alpine offers safe in-vehicle products that customers can use with peace of mind, through functional safety.” Customers *Functional safety: A concept of providing safety functions in order to reduce We continue reducing energy consumption, along with reductions in product weight, to reduce the the hazard of harm to drivers, passengers, and others to a permissible level in environmental impact caused by the use and disposal the event of system failure. of our products.

15 Annual Report 2017-2018 Annual Report 2017-2018 16 CSR Participation of Diverse CSR Involvement with Local Community Human Resources

We work to improve organizational and By participating in the local community, corporate climate so our diversity can help we aim to contribute to its development. the company's growth.

▪ Educational Support for Children ▪ Creating a Rich Local Environment ▪ Improving the Working Environment So All Employees Can Exercise Their Specialties

In cooperation with Iwaki City, Fukushima, we take At Alpine Group, we engage in afforestation and At Alpine, our staff features diversity across Conference, where we discuss employees' career plans, part in the Model Project for the Promotion of Saturday environmental clean-up activities to contribute to rich nationalities, races, ages, genders, and religions, and we education policies, and more. With respect to social Overview Company Learning, which follows the Saturday Educational Activities local environments, based on the unique local needs and work to create a workplace that allows them to use their concerns regarding the employment and expansion of Promotion Project initiated by the Ministry of Education, characteristics of each of our bases worldwide. In Dalian, skills to the fullest. We consider our employees' diverse the work fields of women, we have established a plan of Culture, Sports, Science, and Technology. We agree with China, we have performed ongoing clean-up activities backgrounds and individuality to be one of our strengths; action and are implementing it, following the enforcement in order to help everyone grow and play an active role, of the Act on Promotion of Women's Participation and the goal of providing children with more enriching and for the local area. In 2016, about 1,100 participants once a year we hold a Human Resource Development Advancement in the Workplace on April 1, 2016. meaningful Saturdays by promoting Saturday educational (our employees and their family members) took part activities in clean-up activities overseas, and, in 2017, about through 200 participants took part in garbage collection activities Internal Project to Think about Work public-private at local parks. partnership; Reform from Women's Points of View Vision since August of In December of 2016, we established the HANA* Project, based on the 2016, we have concept of “Creating a Better Work Environment from Women's Points offered Saturday of View.” The members of this project, consisting of female employees lessons for local in their 20s to their 40s, share work-related concerns and opinions elementary on topics like career development and child rearing, with the goal of school children changing everyone's way of thinking and solving problems for everyone. on the themes *Abbreviation of “Happiness of All is Next Alpine.” Saturday Lesson of manufacturing and science. Park Clean-up in Dalian

●Plan of Action for Supporting Women's CSR ▪ Support for Sporting Events ▪ Promoting "U-Turn Employment" Empowerment in the Workplace ●Ratio of Female Hires ●Ratio of Female Employees

among the Younger Generation Approach ■Male ■ Female In order to allow people gathered from across Japan to Improve the Ratio of Newly Graduated Women Hires 40 (Employees) 15.0 (%) (Global total and total in specific regions) 1 14.8 experience the charms of Iwaki City, we have supported We support "U-turn employment," drawing younger the Iwaki Sunshine Marathon — a sporting event In the Past From Now 35 27 The majority of new employees human resources back to their rural home regions for their Expanding the specialization 24 considered a symbol of the city's recovery from the Great have specialized in technology of newly graduated hires 14.4 careers. In January of 2017, we accepted 39 people who and have been recruited from university to the sciences. East Japan Earthquake — every year since the event engineering programs. 30 participated in a bus tour to learn about local businesses, 14.1 began. The sixth annual marathon was held on February Difficult to meet goals because Supporting the acquisition 14.0 14.0

for college students and Data Financial 12, 2017, where about of a lack of female students of specialized knowledge 25 18 other job seekers in the in the required specialties. through in-house education. 13.8 100 of our employees Tokyo area looking to work 20 volunteered to assist Approach Improving the stability of female employment through in Iwaki City, Fukushima, the improvement of the working environment and systems. the event, in addition to 12 and in addition to tours → (Goal) To ensure that the difference in length of employment those who participated as 2 between male and female employees at Alpine is less than 3 years. 15 14 of our workplaces and 13.0 runners, and we offered ● Career support for women after maternity and childcare leave explanations of the work ● Re-entry system for women who have resigned due to child rearing or long-term 10 some of our products as nursing care for families (Implemented in April 2016) 9 Company the of State we do, we also provided 8 additional prizes for the ● Extension of shorter working hours due to child rearing (Implemented in April 2016) 7 Tour to Learn about Local Businesses ● Improvement of the working environment for women in global-track positions The 6th Annual Iwaki Sunshine Marathon time for them to interact 5 5 race winners. with our employees. 1 2020 targets: Ratio of full-time female employees – 20% 0 12.0 ▪ Communication Activities with ▪ Restoration Support through Human (Formula: Full-time female employees/ Overall full-time employees) 2012 2013 2014 2015 2016 2012 2013 2014 2015 2016 Employees and Their Families Resource Development

In locations around the world, we work to deepen We participate in the Fukushima Innovation Coast communication among employees and with their families. Scheme, a national government project with the goal of the ▪ Global Human Resource Cultivation ▪ People with Disabilities Playing an In Hungary, every Christmas we invite employees' creation of new technologies and new industries to support Active Role children to our Santa Party; in 2016, about 150 children the early recovery of the Hamadori region of Fukushima Alpine dispatches entry and mid-level employees to Prefecture, which was struck by the Great East Japan attended with their parents, and they enjoyed a factory overseas subsidiaries and other organizations for a period of At Alpine, we strive to maintain a work environment Earthquake. In addition to our work to develop automatic tour, dancing and songs, one year to participate in on-site training. This system was where every one of our employees can work enthusiastically, flight systems for drones and component technologies for origami and a handicraft established to cultivate employees with a global perspective using their skills to their fullest extent, regardless of whether automatic driving, we also want to be of some help to the they have disabilities. We actively work on employment corner, a drawing contest, development of engineers and technicians in the region, so and the ability to take action that reflects an understanding activities: for example, in fiscal year 2016, we provided and more. we work to employ and educate local high school students. of culture and customs, and improve language proficiency students from facilities for individuals with disabilities with In March of 2017, we made unofficial employment offers to through actual work and life experience. In fiscal year a short-term work-experience program, offering them a 64 individuals, and we provided internal training for those 2016, one employee was dispatched to each of Germany, chance to deepen their understandings of Alpine. In 2016, who wanted to attend, regardless of what each individual Hungary, and China. 2.1% of the employees we hired had disabilities, and every studied in high school or college, helping them grow as Santa Party year since fiscal year 2014, we have met or exceeded the technicians and engineers who play active roles. percentage stipulated by law. 17 Annual Report 2017-2018 Annual Report 2017-2018 18 CSR Corporate Governance

To ensure efficient, sound, and transparent management, Alpine works hard to strengthen ▪ Internal Control As a member of the Alps Group, Alpine places with the Companies Act and the Ordinance on a priority on following the founding principles of the Alps Enforcement of the Companies Act, and conduct proper our corporate governance structure. Group led by Alps Electric Co., Ltd. We established our and effective business in all Alpine Group companies. basic philosophy and conduct guidelines for compliance Please read “Internal Control System” in our Corporate ▪ Basic Approach to Corporate Governance in accordance with the Alps Group management Governance Report for more detail on the structures of regulations, and promote compliance throughout the our internal control system. Alpine manufactures on-board information systems for the purpose of heightening corporate value.” company and our subsidiaries. In addition, we continue and equipment as a member of the Alps Group led We place importance on the sustainable development developing our internal control system and structures http://www.alpine.com/e/investor/library/ Overview Company by Alpine’s parent company, Alps Electric Co., Ltd. of shareholders and all other stakeholders, and to secure proper business management in accordance governance.html The Alps Group defines corporate governance as the maximization of their mid-to-long-term benefits; the “establishment and operation of frameworks for the therefore, our basic approach involves the maximization realization of efficient and appropriate decision-making of corporate value and the delivery of benefits directly ● Alps Group Internal Control Structure and execution of duties by senior management, prompt or indirectly to stakeholders in a balanced way to satisfy reporting of outcomes to stakeholders, and sound, their respective interests. Alpine Electronics, Inc. Alps Electric Co., Ltd. Alps Logistics Co., Ltd. efficient and transparent business administration [On-board Information [Electronic Components] [Logistics] Equipment] Vision ▪ Corporate Governance Structure Audit and Group Audit and Supervisory Audit and Supervisory Audit and Supervisory Audit and Supervisory Supervisory Committee Liaison Council Committee Committee Committee We have adopted the structure of a company with effective corporate governance and fulfill our Committee (Coordination among Audit and Supervisory Committee members Office of Audit Audit and Supervisory Office of Audit an audit and supervisory committee for corporate responsibilities to all of our stakeholders: shareholders, Members and Internal Audit Division) and Supervisory Committee Secretariat and Supervisory governance pursuant to the Companies Act of Japan. customers, local communities, and employees. We work Committee Committee Through the enhancement of auditing and supervising on the fulfillment and improvement of this policy, and functions in close cooperation with accounting auditors the smooth operation under the governance structure, Board of Directors Board of Directors and the Internal Audit Division, the Audit and Supervisory including the Audit and Supervisory Committee, in our Directors (Deliberation/reporting of important matters of the Committee, which is independent from the persons who mid-term business plan. Visit the following web page group & electronic components business) Board of Directors

execute the business, further strengthens our corporate for more information about the Alpine Corporate CSR governance structure, and improves the soundness and Governance Policy. transparency of our corporate management. Presidents Meeting/ We also have established the Alpine Corporate http://www.alpine.com/j/investor/ Presidents Group Management Meeting Presidents Presidents Presidents (Advance discussions/reporting Governance Policy to facilitate our ability to realize information/pdf/governance_policy_16.pdf on important matters of the group)

General Meeting of Shareholders Corporate Planning Corporate Planning Corporate Planning Financial Data Financial Making Proposals/ Reporting/ Election/ Election/dismissal Election/dismissal CSR CSR CSR Reporting Statement of Opinion dismissal Divisions & Accounting Accounting Accounting Liaison Councils Departments Legal Affairs Legal Affairs Legal Affairs Reporting Board of Personnel Affairs Personnel Affairs Personnel Affairs Audit, etc. Coordination/ Directors Audit and Reporting Compliance, etc. Compliance, etc. Compliance, etc. Supervisory Committee Account Auditor Whistle- External Directors Company the of State Selection/ Explanation of nomination/remuneration blowing Reporting Dismissal Internal Directors Ethics Hotline Agreement on Alps Group Administration and Management Auditing Coordination Auditing Coordination/ Reporting Instruction

Reporting Alps Group Management Paradigm (Alps Group Management Regulations/Compliance Charter/Environmental Charter) President & CEO Audit and Supervisory Committee Secretariat Monitoring Corporate Reporting ▪ Board of Directors & Board of Directors Meeting Planning Coordination Office Coordination Whistle-blowing (Secretariat Compliance/Audit Office The Alpine Board of Directors, which is composed of bylaws governing the Board of the Directors, after being for the Board 11 directors (excluding Audit and Supervisory Committee examined for legal, accounting, tax, and economic of Directors) Internal audit for organizations and the functions of corporate executives members) and 4 directors who are Audit and Supervisory soundness, in order to ensure the compliance and Instruction/Reporting Committee members (3 are external directors), rationality of the resolution of the Board of Directors. discusses and makes decisions about important matters The articles of incorporation specify that directors

Sales Division Technology Division Production Division Quality Division Administrative Division regarding the Alpine Basic Business Policy and Mid- shall be elected and removed by resolution passed at term Business Plan, and audit and monitor the business a General Shareholders Meeting by a majority vote Self-Checking by Each Division performance. The Board of Directors makes decisions of shareholders who are in attendance and whose about all important matters through discussion at number holds one third or more of the voting rights of Affiliates (Domestic/Overseas) Management monthly meetings and extraordinary general meetings, shareholders entitled to the exercise thereof, and that which are held as necessary. Topics brought up for cumulative voting shall not be employed. discussion are resolved in accordance with rules and

19 Annual Report 2017-2018 Annual Report 2017-2018 20 CSR Corporate Governance CSR Compliance

We are committed to thorough compliance with ▪ Audit and Supervisory Committee respect to laws, social norms, and ethics. Members of the Alpine Audit and Supervisory an internal member of the Committee, who is a full- Committee, the majority of whom are external Audit time employee familiar with the company’s business. ▪ Compliance Structure ▪ Ethics Hotline and Supervisory Committee members, strive to make The Committee also strives to provide advice to objective judgments while acting independent of the the company’s top management at meetings of the In accordance with the Alps Group Compliance Charter, Alpine has an internal whistleblowing system for persons who execute the business. The Committee Board of Directors and other important meetings in Alpine has incorporated basic rules into the Alpine Ethical all employees in Japan. Called the “Ethics Hotline,” performs audits of the company’s operations cooperation with the Internal Audit Division. Assistants and Legal Compliance Policy, which has been rolled out employees can call for consultation on issues related to through the combined effectiveness of the Audit and for the Audit and Supervisory Committee shall be to all group companies, to ensure that employees act fairly ethically questionable and illegal behavior. Furthermore, Supervisory Committee members, consisting of two assigned, and their independence from the Board of and appropriately as members of society. Alpine has initiated similar consultation systems, Overview Company lawyers and a certified public accountant serving as Directors (excluding those who are the members of the including the Ethics Hotline, at our major overseas ● Alpine Ethical Guidelines external directors with their wealth of experience, plus Audit and Supervisory Committee) shall be secured. bases in a manner suitable to the conditions in each (Alpine’s 10 Commandments) country.

Person Personal Disclosure of personal information is prohibited. ▪ External Directors Information

Ban on Violent force and language, sexual harassment, and ▪ Compliance Education Alpine has appointed three External Directors controlling shareholders, and other important matters at Discrimination discrimination are prohibited. to enhance the functions of the Board of Directors. the Board of Directors meetings. Give due consideration to the safety and quality of At Alpine, the legal affairs departments at Object Product Safety Each External Director focuses on ensuring legal Alpine appoints external directors in accordance products. each corporate center in Japan, the United States, Vision Environmental Give due consideration to the natural environment. compliance and strengthens supervisory functions with its standards for the nomination of directors, Awareness Europe and China provide compliance education

over the company’s operation through active dialogue including the Alpine Standards for Independence. In Property programs according to regional characteristics. Corporate Property Personal use of corporate property is prohibited. and advice on the selection and dismissal of top addition, we designate these individuals as independent Education is provided according to the rank and job Intellectual Violation of intellectual property of other organizations management, remuneration, supervision on conflict of corporate directors upon consent, and report such to Property is prohibited. of each employee, and the topics include human Information interest among the company, top management, and the Tokyo Stock Exchange. Personal use of or disclosure of corporate secrets is rights, harassment, engineering ethics, protection of Corporate Secrets prohibited. confidential information, and antitrust legislation. Ban on Insider Dealing of the company’s stock by the employees before ▪ Evaluation of the Effectiveness of the Board of Directors Trading disclosure of corporate information is prohibited. Trading Fair Trade Comply with antitrust legislation and every law and rule. CSR

With the aim of improving the soundness, The results revealed the sufficiency of the discussion, Donations and Receiving donations and reception beyond a reasonable transparency, efficiency, and mobility of our execution of deliberation, and management at the Board of Directors’ Reception extent is prohibited. duties, we performed an evaluation of the effectiveness meetings. We will continue this evaluation to help of our Board of Directors. improve our corporate governance and corporate value. CSR Risk Management

Message from an External Director Alpine strives to ensure the sustainability Data Financial Hoping to contribute to the sustainable growth of and reliability of our corporate activities. the company as an accounting and audit specialist ▪ Business Continuity Management ▪ Alpine Fire Brigade I was appointed as an external director (Audit and Supervisory Committee) in line with Alpine’s shift to a company with an audit and supervisory We have established a business continuity plan Iwaki Headquarters set up the Alpine Fire Brigade committee in June 2016. After participating in Alpine’s management, I have (BCP) that keeps pace with environmental changes in as a fire defense organization for self-protection State of the Company the of State visited various locations, including overseas subsidiaries, communicating order to ensure the safety of our employees and their according to the requirement for large-scale properties with top-level executives and many other employees. In doing so, I feel that families, and minimize the impact on our customers in under the Fire Service Act. The Fire Brigade is made up they are making enormous efforts to understand the market needs in detail, Hideo Kojima Director the event of an emergency situation. The plan is always of employees and conducts periodical training (fire drills, such as those of automobile manufacturers. Member of Audit and use of fire extinguishers and AED, etc.) twice monthly Nowadays, amid the drastic progress in automotive technology symbolized Supervisory Committee subject to review for strengthened collaboration with Career Summary to prepare for initial firefighting operations, emergency by automatic vehicle-control systems, it is not easy to accurately understand group companies, expansion of the scope of the BCP, May 1995 evacuation and aid in time of disaster. Our overseas the market needs to develop the businesses. Nevertheless, Alpine has a Representative Partner of Showa Ota & establishment of an information supply framework for strength that is found behind no other company. As can be seen in the fact Co. times of disaster, and other improvements. facilities also have their own fire brigades to prevent May 2000 and prepare for disasters. that Alpine was one of the first companies to advance from the field of car Executive Board Member of Century Ota audio systems into the field of car navigation, this company always takes on Showa & Co. challenges of new circumstances with pioneering ideas, fixing their eyes on May 2006 Deputy Chief Executive Officer of Ernst & ▪ Information Security the global market. Young ShinNihon LLC However, Alpine is required to build “offensive governance” in its June 2011 External auditor of Alpine Alpine recognizes that it is our social responsibility endeavors, as a foundation for rapidly giving shape to required functionality External auditor of Sumitomo Heavy at high levels of quality and managing the risks inherent in new products, Industries, Ltd. to strictly manage information about customers and such as those regarding intellectual property rights. As an external director Opened Hideo Kojima C.P.A. Office suppliers as confidential information, in the same way specializing in financial affairs, accounting, and auditing, I would like to June 2015 as handling our own information, and we have strived to External director of Sumitomo Heavy contribute to the sustainable development of the Alpine Group by giving Industries, Ltd. establish an information security management system. proper advice to establish this “offensive governance” and to improve the June 2016 Outside Director, Audit and Supervisory In fiscal year 2016, no incidents that caused adverse profitability of each business unit (BU). Committee of Alpine impacts on our customers, suppliers, or other parties Fire evacuation drill were identified.

21 Annual Report 2017-2018 Annual Report 2017-2018 22 CSR Summary of CSR Activities Financial Data Financial Analysis

We offer an analytical overview of our operating results and financial conditions for the fiscal We offer an overview of our CSR activities below year ending March 2017 below. (policies, structure, and fiscal year 2016 activities). ▪ Analysis of Operating Results for the Fiscal Year Ending March 2017 1) General Situation businesses or industries. With reference to the world economy during this Against this backdrop, the Alpine Group defined ▪ CSR Action Policies for fiscal year 2017 ▪ CSR Promotion Structure consolidated fiscal year, domestic demand steadied in this fiscal year as the year for the reform to build the the U.S., and the European economy saw continued foundation for growth to achieve the targets of VISION The Alps and Alpine Groups have formulated Alpine reorganized its CSR Committee in 2017 recovery, despite some spottiness depending on the 2020, the corporate vision formulated for the fiscal our action policies as given below, by taking into to a promotion structure that allows us to address country. On the other hand, in emerging countries, year 2020, and worked to strengthen the corporate Overview Company consideration, analyzing, and summarizing the degree CSR issues from more project-based viewpoints. The such as China, and resource-producing countries, structure through efforts including the organizational of importance for the groups, changes in external committee is composed of 14 divisions for different slowing economic growth caused mounting fears reform of the research and development department, environments, and other factors. In addition to the subjects, which promote their individual activities, placing of a downturn in the economy. While the Japanese improvement of efficiency in development investment, overall policy, we have established separate policies importance on the provision of value to society, and economy showed a gradual recovery trend, the and promotion of cost reduction. for the environment, social, and governance (ESG) sustainable company growth. The CSR Committee unstable currency fluctuations attributable to the Brexit issue and the U.S. presidential election, as well as 2) Sales and Profit categories. performs quarterly checks on the progress of the subjects, and reports the results at the Board of Directors meetings. increasing uncertainty in the overseas economy, such Consolidated sales were 247.7 billion yen (9.3% as Europe’s financial and capital market risks, clouded decrease from previous term), operating income was Action Policy CSR Committee future economic prospects. 5.6 billion yen (3.3% increase from previous term),

We shall perceive changes in external environments and expectations As for the car electronics industry, the growth of ordinary income was 7.4 billion yen (20.6% increase Vision from stakeholders in responsible ways, and build a foundation for a synergistic relationship between the field of on-board from previous term) due to reasons including the Environment (E) Social (S) Governance (G) sustainable growth. information equipment, which centers on infotainment increase of return on investment by equity method, and systems, and new fields, including the electronification profit attributable to owners of parent was 7.7 billion Environmental Conservation Labor Issues Safety and Health Issues Social Contributions Supplier Management Quality & Product Safety Governance Internal Control Compliance Business Continuity Plan (BCP) Information Security Information Disclosure Policies by Category Human Rights Issues CSR Procurement of automobiles, automatic driving, and artificial yen (27.5% decrease from previous term) due to the Promotion of activities to conserve the global intelligence (AI), has caused intensified competition decrease of the gain on sales of shares of subsidiaries Environment environment beyond the boundaries between different types of and associates booked as extraordinary income.

Strengthening of management in view of external Social standards and external environments (Human rights, ▪ Outlook for the Next Term CSR labor safety, procurement) Signs of growing uncertainty, including the policy 2) Information and Communication Equipment Strengthening of corporate risk countermeasures and Governance trends of the new U.S. administration, the rise of Business business foundations protectionism in the West, and geopolitical risks, We concentrate our efforts on the sales expansion suggest continued obscure conditions of the world of model-specific large-screen navigation systems that ▪ 2016 Summary economy. Also, the car electronics industry is expected have been brought to Western after-markets with the to experience continued difficult business conditions aim of cultivating new demand, with continued focus on Financial Data Financial Category Main Activities due to factors such as technological innovations and pickup trucks and SUVs in the U.S., where automobile intensifying competition between companies. sales continue to be strong. As for the Japanese after- Greenhouse Gas Our greenhouse gas reduction goals for facilities and logistics were achieved Under these circumstances, the Alpine Group, market, we aim to increase sales through customized Reduction through the promotion of our environmental implementation plan. aiming to achieve the targets of VISION 2020, cars that feature a navigation system with the industry’s the corporate vision formulated for fiscal year 2020, is largest screen, a rear monitor, a special interior design, Environment Waste was reduced by 10% compared to the base year through the extended striving to build a more robust business foundation by and special exterior parts. Waste Reduction application of wooden pallets. implementing structural reform through restructuring the Environmental education was provided for our employees and local elementary group, which includes the merger of our technological The consolidated earnings outlook for the next term, Environmental Education development subsidiary in Japan into Alpine to enhance taking into account the matters that can be anticipated school students. our technological development capabilities, and the at the present moment, is forecasted as follows: Company the of State Three production bases acquired OHSAS 18001 Occupational Health and Safety consolidation of three manufacturing subsidiaries Labor Safety Management System certification. in Japan to improve our production efficiency. The (Unit: Hundred initiatives for each business segment are summarized ● Consolidated Earnings Outlook millions of yen) Following the enactment of the UK Modern Slavery Act 2015, we posted as follows: Human Rights From a statement on our website concerning human trafficking and slavery. Second Full First half previous half year Supplier Survey A CSR survey was conducted, targeting 265 suppliers around the world. 1) Audio Equipment Business term We endeavor to expand the sales of sound systems A survey was conducted for parts purchased at our six production bases, Social Procurement Risks that have been highly rated as genuine products for 0.9% to an extent including the final production locations at raw material levels. Sales 1,200 1,300 2,500 automobile manufacturers, as well as appealing to increase A women’s working group to consider pleasant working environments from customers, with the added value of slim, lightweight Women’s Empowerment women’s viewpoints was set up. speakers that contribute to automobile mileage and 15.8% Operating income 21 44 65 eco-friendliness, and new compact and lightweight increase Participation in a national project to support the swift recovery of the Hamadori speaker products that are highly adaptable to changes Regional Contribution area of Fukushima Prefecture, which was affected by the Great East Japan in vehicle interior designs through improved flexibility 24.7% Ordinary income 17 39 56 Earthquake. in potential installation locations, in order to increase decrease orders. Shift to a Company with Alpine transitioned from a company with a board of company auditors to Profit attributable to 89.7% an Audit and Supervisory (10) 18 8 a company with an audit and supervisory committee. owners of parent decrease Governance Committee Compliance education was provided using programs prepared according to the Compliance Education Note: Projected exchange rate for the earnings forecast: regional characteristics of different countries. 1 USD = 108 JPY, 1 EUR = 116 JPY

23 Annual Report 2017-2018 Annual Report 2017-2018 24 Financial Data Financial Analysis

5) Potential Risks in Overseas Operations damage. Any product defect leading to a large-scale ▪ Analysis of Cash Flows and Financials for the Fiscal Year Ending March 2017 Many of the Alpine Group’s production and sales recall or product liability claim could severely impact operations are performed in the United States, our group’s value, as well as entailing considerable 1) Cash Flows the previous year). This decrease was primarily due Cash flows from operating activities to a 2.0 billion yen decrease from cash dividends paid. Europe, China, and other Asian countries. These cost, and may cause an adverse impact on the Net cash provided by operating activities increased As a result, there was a 6.9 billion yen increase in operations in the overseas markets potentially involve performance and financial conditions of our group. 3.4 billion yen (compared to a 2.0 billion yen increase free cash flow (compared to a 1.3 billion yen decrease various risks, including: 1. Unexpected changes in the previous year). This increase was primarily due to the previous year). Free cash flow is the total of cash laws or taxation systems, 2. Unfavorable factors of 10) Public Regulations 13.1 billion yen in profit before income taxes, 6.4 billion flows from operating activities and cash flows from politics or economy, and 3. Terrorism, wars, or other The Alpine Group is subject to the various yen in depreciation, an increase in net cash resulting investing activities. social disorder. Any of these events could cause government regulations and legal restrictions of each a severe impact on the performance of our group’s country where we operate business, such as business Overview Company from a 3.2 billion yen decrease in inventories, 1.5 billion 2) Assets, liabilities and net assets yen in share of profit of entities accounted for using Total assets as of the end of the year were business. and investment approvals and import and export equity method, 6.2 billion yen in gain on sales of 201.8 billion yen, a decrease of 3.3 billion yen year on regulations, including tariffs. Inability to abide by shares of subsidiaries and associates, a 4.5 billion yen year. This was primarily due to a 4.0 billion yen increase 6) Supply System for Specific Parts these regulations may restrict our business activities increase in notes and accounts receivable, a 1.0 billion in cash and deposits, a 2.6 billion yen increase in notes The Alpine Group strives to produce critical parts and lead to increased costs, causing an adverse yen decrease in notes and accounts payable, and and accounts receivable, a 4.4 billion yen decrease in within the group; however, some critical parts are impact on the performance and financial conditions of a 5.9 billion yen decrease in net cash from payment inventories, a 4.4 billion yen decrease in other current supplied by companies outside the group. In the event our group. of income taxes. assets, and a 1.3 billion yen decrease in property, plant, that such a company becomes unable to supply the Cash flows from investing activities and equipment. parts in the required quantity as scheduled, due to 11) Disaster Risks Net cash provided by investing activities increased Liabilities decreased 4.8 billion yen year on year to a disaster or other reason(s), we may suffer a delay The Alpine Group takes all possible measures Vision 3.4 billion yen (compared to a 3.4 billion yen decrease 56.5 billion yen. This was primarily due to a 3.0 billion yen in production, lost sales opportunities, or other losses, to prepare against disasters, including earthquakes; the previous year). This increase was primarily due decrease in notes and accounts payable, a 400 million leading to an adverse impact on the performance and however, an unexpectedly large-scale disaster, to a 4.9 billion yen purchase of property, plant, and yen increase in accrued expenses, a 700 million financial conditions of our group. causing a power failure or other interrupting equipment; a 2.9 billion yen purchase of intangible yen decrease in the provision for product warranties, conditions, may lead to worsened performance assets; 2.2 billion yen in payments of loans receivable; a 1.1 billion yen decrease in other current liabilities, and 7) Requirements of Customer Companies and deteriorated financial conditions for our group. 1.6 billion yen in payments for investments in capital; a 200 million yen decrease in other non-current liabilities. The Alpine Group’s OEM business is targeted at automobile manufacturers throughout the world, and, 9.3 billion yen in proceeds from sales of shares of Net assets increased 1.5 billion yen year on year to 12) Risks Related to Environmental Pollution CSR subsidiaries and associates; and 5.4 billion yen in 145.3 billion yen. This was primarily due to a 5.6 billion in the medium term, we aim to further expand sales The Alpine Group is making efforts to cope with collection of loans receivable. yen increase in retained earnings and a 4.0 billion yen through structural reform in terms of order reception. environmental risks, as part of our CSR activities Cash flows from financing activities decrease in foreign currency translation adjustment. These automobile manufacturers are becoming under the Alps Group Environmental Charter. Our Net cash provided by financing activities decreased As a result, the capital adequacy ratio increased increasingly demanding for high quality, low costs, specific activities include: purification of soil and 2.2 billion yen (compared to a 3.2 billion yen decrease 1.9 points year on year to 71.1%. and short delivery times to survive amid global ground water at our domestic facilities, prevention competition. Sales in this field are greatly influenced of chemical substance leakage, and strict control

by the circumstances surrounding customer of drainage and exhaust. However, there is no Data Financial ▪ Business and Other Risks companies, such as their performance and changes guarantee that our future business activities will in their procurement policies, and price reductions not cause environmental pollution that is currently 1) Economic Fluctuations fluctuations or other factors may adversely affect the to meet customer demands may cause an adverse unknown. In the event that such an unexpected The Alpine Group operates its business on performance and financial conditions of our group. impact on the performance and financial conditions situation occurs or becomes evident, the expenditures a global scale, with a focus on the mobile multimedia of our group. for the countermeasures may lead to a deterioration business. Our group’s products are sold around the 3) New Product Development of the operating results and financial conditions of our world in various markets, whether directly or indirectly The Alpine Group continues active investment 8) Intellectual Property group. through automobile manufacturers. Accordingly, the in research and development, in order to develop The Alpine Group strives to protect the results of

performance and financial conditions of our group attractive new products. However, rapid technological our technological research and development, as well 13) Risks of Fluctuations in Market Prices of Company the of State may be adversely affected by economic fluctuations progress and changes in customer needs may hinder as other efforts, through patents, trademarks, and Securities attributable to political and economic conditions, the expected process of new product development, other intellectual property rights. However, protection The Alpine Group does not hold securities for natural disasters, environmental issues, or other which may impair future growth and profitability, through intellectual property rights can be insufficient trading purposes; however, because all securities with factors, in any of the main markets, including Japan, causing an adverse impact on the performance and in some areas, and we may not be able to effectively market prices are subject to fair value assessment, North America, Europe, and Asia. financial conditions of our group. prevent the use of our group’s intellectual property by changes in market prices in stock markets may cause a third party to produce similar products. In addition, an adverse impact on the performance and financial 2) Foreign Exchange Risks 4) Price Competition our group’s future products or technology may be conditions of our group. Overseas sales account for 87.3% of the Alpine Price competition is heating up in the mobile claimed to infringe upon other companies’ intellectual Group’s sales. In addition, the financial statements multimedia industry, which the Alpine Group belongs property rights. 14) Risks Related to Legal Proceedings and of our foreign subsidiaries are prepared on a local to, causing price declines in the after-market. In Lawsuits currency basis. Therefore, our group is subject addition, further price drops are expected in the future 9) Product Imperfections The Alpine Group strives to implement the to the influence of fluctuations in exchange rates. due to demands from automobile manufacturers for The Alpine Group produces various products compliance system that we have established Generally speaking, the appreciation of the yen cost reduction, successive entry of competitors, and in accordance with strict quality control standards. regarding our business activities. Nevertheless, in the against foreign currencies, particularly the dollar and other reasons. We continue working on structural Nevertheless, there is no guarantee that all event that legal proceedings have been initiated or the euro, causes an adverse impact on our group’s reforms in terms of cost and profitability from global products are free from defects and recalls in future. a lawsuit has been filed by a regulatory authority on performance. We are hedging against exchange perspectives; however, these sales price drops may Additionally, although we have a product liability suspicion of violating a law in relation to our group’s rate changes through forward exchange contract cause an adverse impact on the performance and insurance policy, there is no guarantee that this activities, the result may affect the performance and and other means; however, sharp exchange rate financial conditions of our group. insurance will sufficiently cover the final cost of any financial conditions of our group.

25 Annual Report 2017-2018 Annual Report 2017-2018 26 Financial Data Consolidated Balance Sheets

(Millions of yen) (Millions of yen)

As of March 31, 2016 As of March 31, 2017 As of March 31, 2016 As of March 31, 2017

(Assets) (Liabilities)

Current assets Current liabilities

Cash and deposits 49,282 53,309 Notes and accounts payable - trade 27,088 24,079

Notes and accounts receivable - trade 36,742 39,429 Accrued expenses 8,553 9,033

Merchandise and finished goods 20,885 18,310 Income taxes payable 893 944

Work in process 1,003 737 Deferred tax liabilities - 0 Company Overview Company Raw materials and supplies 8,236 6,591 Provision for bonuses 2,027 2,211

Deferred tax assets 1,168 1,197 Provision for directors’ bonuses 42 55

Other 13,323 8,894 Provision for product warranties 5,617 4,841

Allowance for doubtful accounts (260) (139) Other 6,737 5,538

Total current assets 130,382 128,330 Total current liabilities 50,961 46,705

Non-current assets Non-current liabilities Vision Property, plant and equipment Deferred tax liabilities 4,697 4,548

Buildings and structures 26,863 26,360 Net defined benefit liability 3,590 3,410

Accumulated depreciation (18,106) (18,378) Provision for directors’ retirement benefits 55 70

Buildings and structures, net 8,756 7,981 Other 2,073 1,794

Machinery, equipment and vehicles 24,109 23,937 Total non-current liabilities 10,416 9,823 CSR

Accumulated depreciation (17,833) (17,939) Total liabilities 61,377 56,529

Machinery, equipment and vehicles, net 6,275 5,997 (Net assets)

Tools, furniture, fixtures and dies 52,954 52,271 Shareholders’ equity

Accumulated depreciation (46,793) (46,592) Capital stock 25,920 25,920 Financial Data Financial Tools, furniture, fixture and dies, net 6,160 5,679 Capital surplus 24,905 24,903

Land 4,946 4,863 Retained earnings 82,115 87,758

Leased assets 189 199 Treasury shares (1,407) (1,401)

Accumulated depreciation (71) (86) Total shareholders’ equity 131,534 137,180

Leased assets, net 117 112 Accumulated other comprehensive income

Construction in progress 1,150 1,459 Valuation difference on available-for-sale securities 7,653 7,338 State of the Company the of State

Total property, plant and equipment 27,408 26,095 Deferred gains or losses on hedges (5) (0)

Intangible assets 2,668 4,457 Revaluation reserve for land (1,310) (1,261)

Investments and other assets Foreign currency translation adjustment 5,914 1,908

Investment securities 25,343 25,199 Remeasurements of defined benefit plans (1,803) (1,713)

Investments in capital 16,246 13,881 Total accumulated other comprehensive income 10,449 6,272

Net defined benefit asset 14 60 Subscription rights to shares 54 83

Deferred tax assets 702 679 Non-controlling interests 1,766 1,791

Other 2,423 3,158 Total net assets 143,805 145,328

Allowance for doubtful accounts (6) (6) Total liabilities and net assets 205,182 201,857

Total investments and other assets 44,724 42,974

Total non-current assets 74,800 73,527

Total assets 205,182 201,857

27 Annual Report 2017-2018 Annual Report 2017-2018 28 Financial Data Consolidated Statements of Financial Data Consolidated Statements of Income and Comprehensive Income Income and Comprehensive Income

(Millions of yen) (Millions of yen)

Fiscal year ended March 31, 2016 Fiscal year ended March 31, 2017 Fiscal year ended March 31, 2016 Fiscal year ended March 31, 2017

Net sales 273,056 247,751 Cash flows from operating activities Cost of sales 231,107 205,495 Profit before income taxes 22,234 13,131 Gross profit 41,949 42,256 Depreciation 7,240 6,417 Selling, general and administrative expenses 36,515 36,644 Increase (decrease) in net defined benefit liability 229 (91) Operating income 5,434 5,612 Increase (decrease) in accrued expenses (3,009) 698 Non-operating income Interest and dividend income (692) (760) Interest income 276 272 Interest expenses 379 19 Share of (profit) loss of entities accounted for using equity Overview Company Dividend income 415 487 (1,256) (1,594) method Share of profit of entities accounted for using equity method 1,256 1,594 Loss (gain) on sales of property, plant and equipment (64) (30) Other 577 477 Loss (gain) on sales of shares of subsidiaries and associates (15,620) (6,268) Total non-operating income 2,525 2,832 Decrease (increase) in notes and accounts receivable - 4,956 (4,539) Non-operating expenses trade Interest expenses 379 19 Decrease (increase) in inventories (1,281) 3,238 Foreign exchange losses 842 507 Increase (decrease) in notes and accounts payable - trade (39) (1,079) Sales discounts 141 100 Increase (decrease) in provision for product warranties (46) (585)

Commission fee 65 65 Other, net (1,159) 49 Vision Overseas withholding tax 196 203 Subtotal 11,870 8,604 Other 165 108 Interest and dividend income received 919 809 Total non-operating expenses 1,789 1,005 Interest expenses paid (379) (19) Ordinary income 6,170 7,439 Income taxes paid (10,428) (5,949) Extraordinary income Income taxes refund 60 34 Net cash provided by (used in) operating activities 2,043 3,478

Gain on sales of non-current assets 91 64 CSR Gain on sales of investment securities - 127 Cash flows from investing activities Gain on sales of shares of subsidiaries and associates 15,620 6,268 Purchase of property, plant and equipment (6,650) (4,924) Compensation income 315 25 Proceeds from sales of property, plant and equipment 203 226 Other 175 - Purchase of intangible assets (843) (2,932) Total extraordinary income 16,203 6,485 Payments of loans receivable (3,728) (2,240) Proceeds from sales of shares of subsidiaries and Extraordinary losses 20,569 9,398 associates Data Financial Loss on sales and retirement of non-current assets 65 68 Payments for investments in capital (14,005) (1,683) Loss on valuation of investment securities 73 - Collection of loans receivable 1,258 5,430 Loss on change in equity - 700 Other, net (228) 168 Other - 25 Net cash provided by (used in) investing activities (3,425) 3,441 Total extraordinary losses 138 793 Cash flows from financing activities Profit before income taxes 22,234 13,131 Purchase of treasury shares (700) (0) Income taxes - current 8,666 5,797 Cash dividends paid (2,417) (2,067)

Income taxes - deferred 2,612 (560) Dividends paid to non-controlling interests (50) (64) Company the of State Total income taxes 11,278 5,237 Other, net (56) (94) Profit 10,955 7,894 Net cash provided by (used in) financing activities (3,224) (2,227) (Profit attributable to) Effect of exchange rate change on cash and cash equivalents (2,367) (665) Profit attributable to owners of parent 10,698 7,760 Net increase (decrease) in cash and cash equivalents (6,973) 4,026 Profit attributable to non-controlling interests 256 134 Cash and cash equivalents at beginning of period 56,130 49,282 Other comprehensive income Increase (decrease) in cash and cash equivalents resulting from 125 - Valuation difference on available-for-sale securities (1,912) 887 change of scope of consolidation

Deferred gains or losses on hedges (1) 4 Cash and cash equivalents at end of period 49,282 53,309 Foreign currency translation adjustment (4,233) (2,058) Remeasurements of defined benefit plans, net of tax (1,002) 91 Share of other comprehensive income of entities accounted (1,082) (3,146) for using equity method Total other comprehensive income (8,233) (4,221) Comprehensive income 2,722 3,672 (Comprehensive income attributable to) Comprehensive income attributable to owners of parent 2,637 3,533 Comprehensive income attributable to non-controlling interests 85 138

29 Annual Report 2017-2018 Annual Report 2017-2018 30 Financial Data Consolidated Statements of Income and Comprehensive Income

Fiscal year ended March 31, 2017 Fiscal year ended March 31, 2017 (Millions of yen) (Millions of yen)

Shareholders’ equity Shareholders’ equity Total shareholders’ Total shareholders’ Capital stock Capital surplus Retained earnings Treasury shares Capital stock Capital surplus Retained earnings Treasury shares equity equity Balance at beginning of 25,920 24,905 82,115 (1,407) 131,534 Balance at beginning of current period 25,920 24,905 73,835 (713) 123,949 current period Changes of items during period Changes of items during period

Dividends of surplus (2,068) (2,068) Overview Company

Dividends of surplus (2,418) (2,418) Profit attributable to owners of 7,760 7,760 parent Profit attributable to 10,698 10,698 Purchase of treasury shares (0) (0) owners of parent Disposal of treasury shares (0) 6 6 Purchase of treasury shares (700) (700) Transfer of loss on disposal of 0 (0) - Disposal of treasury shares (0) 5 5 treasury shares Change in ownership interest Transfer of loss on disposal 0 (0) - of parent due to transactions (2) (2) Vision of treasury shares with non-controlling interests

Net changes of items other Reversal of revaluation (49) (49) than shareholders’ equity reserve for land

Total changes of items during Net changes of items other - - 8,280 (694) 7,585 period than shareholders’ equity Total changes of items during - (2) 5,642 5 5,646 Balance at end of current period 25,920 24,905 82,115 (1,407) 131,534 CSR period Balance at end of current 25,920 24,903 87,758 (1,401) 137,180 period

Accumulated other comprehensive income Accumulated other comprehensive income Valuation Total Valuation difference Deferred Foreign Subscription Non- Data Financial Total Subscription Non- Total net difference Deferred Foreign Total net Revaluation Remeasurements accumulated rights to controlling Revaluation Remeasurements accumulated rights to controlling on gains or currency assets on gains or currency assets reserve for of defined benefit other shares interests reserve for of defined benefit other shares interests available- losses on translation available- losses on translation land plans comprehensive land plans comprehensive for-sale hedges adjustment for-sale hedges adjustment income income securities securities Balance at beginning 7,653 (5) (1,310) 5,914 (1,803) 10,449 54 1,766 143,805 Balance at beginning of of current period 7,937 (3) (1,310) 12,689 (801) 18,511 32 1,731 144,223 current period Changes of items during period Changes of items during period Dividends of surplus (2,068) State of the Company the of State Profit attributable to 7,760 Dividends of surplus (2,418) owners of parent Purchase of treasury Profit attributable to (0) 10,698 shares owners of parent Disposal of treasury 6 Purchase of treasury shares (700) shares Transfer of loss on disposal of treasury - Disposal of treasury 5 shares shares Change in ownership Transfer of loss on interest of parent due (48) (50) disposal of treasury - to transactions with shares non-controlling interests Reversal of revaluation Net changes of items 49 49 - reserve for land other than shareholders’ (283) (1) - (6,774) (1,001) (8,061) 22 35 (8,003) equity Net changes of items other than shareholders’ (314) 4 - (4,005) 89 (4,226) 28 73 (4,123) Total changes of items equity (283) (1) - (6,774) (1,001) (8,061) 22 35 (418) during period Total changes of items (314) 4 49 (4,005) 89 (4,177) 28 25 1,523 during period Balance at end of current 7,653 (5) (1,310) 5,914 (1,803) 10,449 54 1,766 143,805 Balance at end of period 7,338 (0) (1,261) 1,908 (1,713) 6,272 83 1,791 145,328 current period

31 Annual Report 2017-2018 Annual Report 2017-2018 32 State of the Company Financial/ Non-financial Highlights State of the Company Profile

● Sales ● Operating Profit ● Ordinary Profit Outline (as of June 2017) Committee Members (as of June 2017) ( ( ( 5 Corporate Name ALPINE ELECTRONICS, INC. Name Position and Responsibility/Primary Role 5 Headquarters 1-1-8 Nishi-Gotanda, Shinagawa-ku, Tokyo Nobuhiko President 95 141-8501 Komeya 5 5 Tel: +81-3-3494-1101 (main line) Hitoshi Kajiwara Managing Director Administration The headquarters is scheduled for relocation 5 9 on August 18, 2017, to the following Naoki Mizuno Managing Director Marketing & Sales address: 1-7 Yukigaya Otsuka-machi, Ota-ku, Tokyo Engineering & Koichi Endo Managing Director Tel: +81-3-5499-8111 Development 5 Toshinori Overview Company 5 5 Iwaki 20-1 Yoshima Industrial Park, Iwaki City, Director European Operations Fukushima 970-1192 Kobayashi

Tel: +81-246-36-4111 (main line) Shuji Taguchi Director Quality Assurance Date of Establishment May, 1967 5 Yasuhiro Ikeuchi Director Product Design Common Stock 160,000,000 shares

Total Issued Stocks 68,937,217 shares Youji Kawarada Director Production/Materials 5 5 5 (847,284 treasury shares not included) Deputy of Marketing & Shinji Inoue Director Sales OEM Operations

Paid-in Capital ¥25,920 million Vision Koji Ishibashi Director Deputy of Product Design ● Net Income Attributable to ● Total Assets/Net Assets/Capital ● ROE/ROA Number of Employees 12,959 (total from 35 consolidated Parent Company Shareholders Adequacy Ratio (Consolidated) companies) Masataka Executive Adviser, Alps ( (Unit: Hundred millions of yen) Director ■ Kataoka Electic Co.,Ltd. ■ ■ ■ ( ■ Domestic Subsidiaries / ALPINE ELECTRONICS MARKETING, INC. 5 95 Domestic Affiliates ALPINE MANUFACTURING, INC. Director ALPINE INFORMATION SYSTEM, INC. Hirofumi Morioka Member of Audit and (Full-time) Supervisory Committee 9 ALPINE BUSINESS SERVICE, INC. 9 ALPINE CUSTOMERS SERVICE CO., LTD. Director CSR 5 Certified Public C’S LAB CO., LTD. Hideo Kojima Member of Audit and 9 Accountant Supervisory Committee 9 5 Two others Satoko Director 5 Overseas Subsidiaries / ALPINE ELECTRONICS OF AMERICA, INC. Hasegawa Member of Audit and Lawyer Overseas Affiliates ALPINE ELECTRONICS (EUROPE) GmbH (Niiya) Supervisory Committee 5 ALPINE ELECTRONICS (CHINA) CO., LTD. 5 5 Director ALPINE OF ASIA PACIFIC INDIA PVT., LTD. Naoki Yanagida Member of Audit and Lawyer Data Financial 29 others Supervisory Committee 99 9 5 5 5 5

5 Major Shareholders (as of March 31, 2017) ● Trend in Stock Price (Circle) 5 Number of shares Percentage 3,000 State of the Company the of State 5 5 5 Rank Name held (thousands of of shares High shares) held (%) Low 2,500 1 ALPS ELECTRIC CO., LTD. 28,215 40.93 2 ● Dividend per Share ● Number of Employees ● CO Emissions 2,000 JAPAN TRUSTEE SERVICES BANK, ( ( ( 2 2,470 3.58 LTD. (TRUST ACCOUNT) 5 959 1,500 STATE STREET BANK CLIENT 3 1,917 2.78 OMNIBUS OM04 1,000 55 5 5 THE MASTER TRUST BANK OF 5 4 1,486 2.16 500 JAPAN, LTD. (TRUST ACCOUNT) 5 5 STATE STREET BANK AND TRUST 5 1,317 1.91 0 COMPANY 505103 ’16/4 5 6 7 8 9 10 11 12 ’17/1 2 3 (Year/month) 9 STATE STREET BANK AND TRUST 6 1,062 1.54 COMPANY 5 ● Share Distribution by Owner 7 THE BANK OF NEW YORK 133522 962 1.40 Financial institutions (including investment trusts, pension trusts STATE STREET BANK AND TRUST 8 889 1.29 and securities COMPANY 505001 companies) Total Corporations 68,937,217 shares 15.18% CBNY DFA INTL SMALL CAP VALUE 42.35% (excluding treasury 5 9 889 1.29 PORTFOLIO shares) Foreign investors/ Overseas THE BANK OF NEW YORK, institutional 10 888 1.29 Individuals investors TREATY JASDEC ACCOUNT 4.62% 5 5 5 37.85% Note: Percentage of shares held excludes treasury shares.

33 Annual Report 2017-2018 Annual Report 2017-2018 34 ALPINE ELECTRONICS, INC. Contact Information: Corporate Planning Office, Alpine Electronics, Inc. 20-1 Yoshima Industrial Park, Iwaki City, Fukushima 970-1192 Tel: +81-246-36-4111 (main line) URL: http://www.alpine.com