During fiscal 2006, year ended March 31, 2007, the Japanese economy continued to recover modestly, supported by solid export growth and corporate investment due to improved earnings results. However, private consumption has remained almost flat. Overseas, while a decelerating trend was seen in the U.S. economy, evident in particular in a slowdown in the housing market, the Asian economy, including China, maintained high growth and the European economy as a whole continued to recover steadily. There were some bright spots in the electronics industry, meanwhile, as digital audio-visual equipment continued to grow, led by flat-panel TVs. Intensifying global competition, however, led to progressive price erosion in this growing market, meaning there was little ground for optimism.

Under these conditions, we achieved consolidated net sales for fiscal 2006 of ¥3,127.7 billion, up 11.8% over the previous year, while operating income was ¥186.5 billion, up 13.9%, and net income was ¥101.7 billion, up 14.7%. Each of these financial indicators represents a historic high for the fourth consecutive year.

In Consumer/Information Products, we worked to further expand sales of LCD TVs. Amid increasing demand for LCD TVs around the globe, we expanded our lineup of large-size LCD TVs, including cutting-edge full high-definition models, and worked toward expanding sales worldwide. Other efforts included a release of unique products that incorporate our proprietary device technology, such as mobile phones capable of receiving "One segment broadcasting," or "One Seg," a new type of terrestrial digital broadcasting for mobile equipment. In Electronic Components, we strove to further expand our LCD business. For large-size LCDs, we began operations at the Kameyama No. 2 Plant. This is the world’s first LCD production facility to adopt eighth generation (8G) glass substrates, which enables the production of 40-inch-class and 50-inch-class LCD panels with extremely high efficiency. We also started the second phase at the plant, intensifying production capacity for large-size LCDs. For small- and medium-size LCDs, we increased sales of System LCDs for mobile equipment, including mobile phones. Additionally, we have taken various other actions, such as capacity enhancement for solar cells and creation of distinctive devices intended for our uniquely featured products.

Sharp will continue to aggressively promote its one-of-a-kind strategy in fiscal 2007 aimed at propelling further corporate growth.

In Consumer/Information Products, we will work to further expand our LCD TV business. By leveraging a highly efficient worldwide production system with the Kameyama Plant at its nucleus, we will expand the lineup of cutting-edge full high-definition models globally. Industry-leading one-of-a-kind products in other business areas will also be upgraded. These include our original proprietary mobile phones and wireless PDAs, utilizing our unique technologies. In Electronic Components, we will enhance our line of original devices through the following measures. To further expand our LCD business, we will increase sales of panels for LCD TVs with the start of the third phase at the Kameyama No. 2 Plant. Other measures include further boosting sales of System LCDs for mobile equipment. For other devices, including solar cells, we will also work to improve competitiveness through technological innovation and cost reduction.

Sharp will undertake the following initiatives aimed at overcoming challenges in order to realize stable growth into the future.

Sharp will maximize the strength of its vertically-integrated business model and promote the creation of unique products equipped with original cutting-edge devices. Especially for LCDs, our core competence, we will expand sales of LCD applied products globally, by intensifying R&D, enhancing production systems and improving cost competitiveness. Through these efforts, we are committed to achieving stable growth as a "valued one-of-a-kind company" and enhancing our brand value globally.

Sharp sees the issue of environmental protection as a medium-term business challenge. With our energy-creating and energy-saving technologies, we aim to achieve our corporate vision of being a company that has "zero global warming impact by 2010." We will contribute to the realization of a sustainable society by pursuing coexistence between business expansion and environmental protection. Specifically, we will work to reduce environmental burden at all production stages, along with enhancing the business of photovoltaic power generation systems, a source of clean energy, and introducing environmentally friendly products.

Sharp will strengthen the fundamentals of its manufacturing activities, which we see as a driving force for future growth. These include establishing an efficient value chain which enables delivery with a shortened lead time at low cost and promoting global procurement activities. We will also implement proactive strategies for intellectual property making effective use of our patent assets and pursue high reliability and safety of our products as a means to boost customer satisfaction.

In an effort to achieve further corporate competitiveness, Sharp will promote effective utilization of its management resources. These include nurturing our core personnel from a global standpoint and deploying financial strategies for more aggressive investment activities. We will also promote the proliferation of IT to support the entire value chain.

Sharp considers distributing profits to shareholders to be one of management's top priorities. While maintaining consistently stable dividend pay-outs, and while carefully considering our consolidated business performance, financial situation and future business development in a comprehensive manner, we will implement a set of measures to return profits to our shareholders, such as increasing the amount of periodic dividends. Based on this policy, for fiscal 2006 we distributed a total annual dividend of ¥26 per share, an increase of ¥4 over the previous year. Our dividends have now been raised for seven consecutive years. We plan to increase the total annual dividend a further ¥2 to ¥28 in fiscal 2007. Going forward, we will continue striving proactively to return profits to shareholders, aiming for a dividend pay-out ratio of 30% on a consolidated basis.

Sharp established a Chairman position on April 1, 2007, thereby starting a new Chairman/President structure. We seek to further increase profitability and corporate value through this new management structure. We ask all shareholders for their continued support.

July 2007

Katsuhiko Machida Chairman & CEO Mikio Katayama President & COO