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FORM 6-K

SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549

Report of Foreign Private Issuer

Pursuant to Rule 13a-16 or 15d-16 of

the Securities Exchange Act of 1934

For the month of July 2007

Commission File Number: 1-07952

KYOCERA CORPORATION

6 Takeda Tobadono-cho, Fushimi-ku,

Kyoto 612-8501, Japan

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F:

Form 20-F  X    Form 40-F

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Registration S-T Rule 101(b)(1):     

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Registration S-T Rule 101(b)(7):     

Indicate by check mark whether by furnishing the information contained in this Form, the registrant is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.

Yes          No  X

If “Yes” is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b); 82-

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SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereto duly authorized.

Date: July 3, 2007

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Information furnished on this form:

EXHIBITS

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Corporate Profile

Since its founding in 1959, Kyocera (as used in this Annual Report, “Kyocera” refers to the Kyocera Group on a consolidated basis) has continuously strived to uphold its management rationale: “To provide opportunities for the material and intellectual growth of all our employees, and through our joint efforts, contribute to the advancement of society and humankind.” In doing so, Kyocera creates new markets and develops new products and businesses using unique technologies. As a result, Kyocera has become a leading manufacturer of diverse components, devices and equipment, as well as a provider of high-value-added services. Going forward, Kyocera will continuously seek to create new value for society using its innovative “Amoeba Management” system and “Kyocera Philosophy,” which establish “Doing what is right as a human being” as the principal criterion for all business decisions.

Based on our three basic management policies, “Practice the customer-first principle,” “Promote global management” and “Establish a highly profitable structure,” Kyocera aims to be “a creative company that continues to grow” by ensuring sustainable corporate growth. We will accomplish this by driving sales expansion and higher profitability in each business, and through the pursuit of synergies within the Group. At the same time, we seek to be respected by society for upholding the highest corporate ethics — meeting shareholders’ expectations and earning society’s trust as “The Company” that creates new value on a global scale.

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Financial Highlights

Kyocera Corporation and Consolidated Subsidiaries

Forward-Looking Statements

Certain of the statements made in this document are forward-looking statements (within the meaning of Section 21E of the U.S. Securities and Exchange Act of 1934), which are based on our current assumptions and beliefs in light of the information currently available to us. These forward-looking statements involve known and unknown risks, uncertainties and other factors. Such risks, uncertainties and other factors include, but are not limited to: general conditions in the Japanese or global economy; unexpected changes in economic, political and legal conditions in China; intense competitive pressures to which our products are subject; manufacturing delays or defects resulting from outsourcing or internal manufacturing processes; various export risks which may affect the significant percentage of our revenues derived from overseas sales; the effect of foreign exchange fluctuations on our results of operations; industry demand for skilled employees; insufficient protection of our intellectual property; expenses associated with licenses we require to continue to manufacture and sell products; our research and development not producing desired results; our market or supply chains being affected by terrorism, plague, wars or similar events; earthquakes and other natural disasters affecting our headquarters and major facilities; impairment losses on investments in equity securities; and our ability to launch innovative products and otherwise meet the advancing technical requirements of our customers, particularly in the highly competitive markets for ceramics, semiconductors and electronic components. Such risks, uncertainties and other factors may cause our actual results, performance, achievements or financial position to be materially different from any future results, performance, achievements or financial position expressed or implied by these forward-looking statements. We undertake no obligation to publicly update any forward-looking statements included in this document.

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To Our Shareholders

To be “a creative company that continues to grow”

Fiscal 2007 Initiatives

Under the new organizational structure adopted in April 2006, the Kyocera Group produced significant achievements during the year ended March 31, 2007 (fiscal 2007) as we pursued our goal to be “a creative company that continues to grow.” In fiscal 2007 we recorded increases in both sales and profits for the third consecutive year.

To achieve continuous sales growth with high profitability for the future, we have focused on the following initiatives:

From its early history, Kyocera has implemented “Amoeba Management,” a unique system of internal control which monitors profit performance at the small group level. Under this system, the company is divided into small groups, or amoebas, which operate on a self-supporting basis. The Amoeba Management System is designed to ensure that all employees share Kyocera’s corporate philosophy, which is based on universal values and integrity. Every amoeba member is encouraged to exercise responsibility and achieve individual targets using originality and ingenuity. We believe the Amoeba Management System has been a driving force in the growth of the Kyocera Group, providing a competitive advantage over other companies.

To continue Kyocera’s medium- to long-term growth, we will return to our origins and strengthen our practice of this system. Specifically, our top priorities are to enhance two key elements of the workplace: “executional excellence,” the ability of each amoeba to achieve its targets consistently; and “operational excellence” — the workplace vitality that exists across all development, manufacturing, sales and support divisions.

We believe that the reinforcement of Amoeba Management was a major contributor to the business expansion we achieved in fiscal 2007.

Kyocera refined its portfolio to focus on businesses with high market share and high growth potential, and concentrated management resources on businesses in need of strengthening.

In July 2006 a Kyocera subsidiary, Kyocera Kinseki Corporation, acquired Hertz Technology Inc. to enhance its crystal device business, a market which shows strong growth potential. Through this acquisition, the Kyocera Group gained new technology in tuning-fork crystal units, which are expected to grow in demand. Essential to mobile phone handsets and music players, these components represent a strategic expansion in the scope of our crystal device product line. By integrating the new management resources, we will develop a wide range of products to expand our crystal device business.

In August 2006 Kyocera divested itself of its shares in Kyocera Leasing Co., Ltd., a subsidiary engaged in financing services, due to reduced group synergies.

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Fiscal 2007 Results

Fiscal 2007 saw a significant increase in global production of mobile phone handsets, PCs, digital TVs and other digital consumer products, which impacted our Group’s major markets. As a result, demand for electronic devices and other components used in these products remained high throughout the year. Meanwhile, structural reforms implemented in the Telecommunications Equipment Group prior to fiscal 2007 yielded favorable results. In addition, new products in the Equipment Business contributed to a substantial improvement in sales and profit.

Consolidated net sales for fiscal 2007 increased by 9.4% compared with fiscal 2006, to ¥1,283,897 million ($10,880 million). In the Component Business, all segments showed profit increases. Sales in the Equipment Business also increased, notably in the Telecommunications Equipment and Information Equipment Groups.

In all business segments, operating profit increased compared with fiscal 2006. Profit from operations increased 35.5% to ¥135,102 million ($1,145 million). Income from continuing operations before income taxes rose 33.5% to ¥156,540 million ($1,327 million). Net income totaled ¥106,504 million ($903 million), an increase of 52.8% in comparison with fiscal 2006, due in part to a ¥4,305 million ($36 million) tax refund resulting from the voiding of a portion of a tax assessment relating to transfer pricing adjustments. Consequently, diluted earnings per share soared to ¥564.79 ($4.79).

For a more detailed analysis of business performance, see pages 18-34 (Operating and Financial Review and Prospects).

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Basic Management Policy

Kyocera has adopted the following three basic management policies in pursuit of its goal of being “a creative company that continues to grow.”

Earning the trust of customers is the basis of business. Kyocera believes that we can overcome the toughest competition by providing complete customer satisfaction and winning our customers’ trust in all matters.

Kyocera will promote global management on a product segment basis in both the Components and Equipment Businesses to become “a creative company that continues to grow.” Kyocera will create new technologies, products and markets by strengthening each business and pursuing effective use of all internal resources. We will also seek to continue optimizing development, manufacturing and marketing structures globally.

To further enhance profitability, Kyocera will strengthen its “Amoeba Management,” which will drive our future growth.

Fiscal 2008 Initiatives

Based on these three basic management policies, Kyocera aims to be “a creative company that continues to grow.” During fiscal 2008, Kyocera will work to create new value to strengthen our competitiveness in each business and attain continuous sales expansion with high profitability. We will also continue efforts to reinforce our “Amoeba Management” as begun in fiscal 2007. Specific initiatives are as follows:

Kyocera will continue to improve the quality of its products and services as its top priority, and will establish internal structures to attain the highest possible quality. We believe that quality improvement provides the very foundation for management’s goal to maximize revenue and minimize expenses.

To overcome intense competition, we will enhance our manufacturing capabilities by clearly defining the roles of production sites worldwide. At Japanese manufacturing sites we will strengthen production technology through such efforts as developing new processes and streamlining production lines. We will establish production systems that contribute to higher profitability than our competitors both in Asia and globally.

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Outside Japan, we will establish a system that is attentive to regional markets and customers, and enhance price competitiveness by reconsidering the best production locations for each product. In the process, we will strive to manage risk arising from any regional concentration of production facilities and continually examine the need for additional production sites.

The Kyocera Group operates many businesses. Our goal is to organically integrate Group-wide management resources and technologies to create new businesses and cultivate new markets ahead of our competitors. Moreover, we will pursue a broad synergy of technologies — not only between components and equipment (vertical integration), but also within components and materials (horizontal development). In so doing, we will aim to create competitive, high-value-added products.

Kyocera will promote its diversification by selecting strategic business areas on the basis of existing management resources, potential for group synergy, and current market position. Each business will promote strict profitability enhancement using “ Amoeba Management” and swift decision making to support the different strategies within each segment. Kyocera will improve profitability within each business and make strategic investments to achieve mid- to long-term growth.

On the basis of the above criteria, Kyocera will expand its production capacity for solar energy products and ceramic capacitors during fiscal 2008, from a medium-term perspective. We will also expand our semiconductor parts and information equipment businesses by making use of the Kyocera Group’s management resources and targeting greater market share by differentiating Kyocera from competitors.

We will continue to strengthen our management foundation by returning to the origins of “Amoeba Management” as we work to create new value. The management of the Kyocera Group is confident that these policies will lead to sales and profit growth over the medium to long term. We respectfully ask all shareholders and other stakeholders for their continued support and understanding of these endeavors to enhance Kyocera’s corporate value.

June 2007

Noboru Nakamura, Chairman

Makoto Kawamura, President

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Reporting Segments at a Glance

Fine Ceramic Parts Group		Semiconductor Parts Group		Applied Ceramic Products Group		Electronic Device Group
Demand for ceramic components for semiconductor processing equipment increased.		Demand for ceramic packages used in mobile phone handsets and digital cameras increased.		Sales of solar energy products increased in the European market. Sales of medical materials and cutting tools increased.		Sales of capacitors, crystal-related components and connectors, expanded. AVX Corporation, a U.S. subsidiary, improved its performance.
Major products		Major products		Major products		Major products
Information & telecommunication components Sapphire substrates Semiconductor processing equipment components LCD manufacturing equipment components Automotive & ITS related components General industrial ceramic components		Ceramic packages for surface mount devices CCD/CMOS sensor packages LSI packages Optical communication device packages and components Organic multilayer packages and substrates		Residential & industrial solar power generating systems Solar cells and modules Cutting tools Printed circuit board micro drills Jewelry & applied ceramic related products Dental implants, artificial bone and joint prosthesis		Ceramic capacitors, tantalum capacitors Timing devices (temperature compensated crystal oscillators, ceramic resonators, crystal units) RF modules, surface acoustic wave (SAW) filters, Thermal printheads, LED printheads Amorphous silicon drums, liquid crystal displays Connectors

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Telecommunications Equipment Group		Information Equipment Group		Optical Equipment Group		Others
Sales of new mobile phone handsets expanded. Operating profit improved due to the positive effect of increased sales in Japan and improved profitability at Kyocera Wireless Corp., a U.S. subsidiary.		Sales outside Japan increased due to successful new models and marketing activities. Yen’s depreciation against Euro and U.S. dollar had a positive impact.		Sales decreased due to the downsizing of the camera business. Operating loss declined due to expenses from structural reforms.		Revenue from Kyocera Communications Systems, Co., Ltd. increased due to growth in the telecommunications engineering business. Operating profit declined slightly as a result of impairment of goodwill at a Japanese subsidiary.
Major products		Major products		Major products		Major products and services
CDMA mobile phone handsets Personal handy phone system (PHS) related products (PHS mobile phone handsets, PHS base stations, high speed wireless data transmission systems)		ECOSYS printers Copying machines Multifunctional systems		Optical modules and lenses		Chemical materials for electronic components, electrical insulators, synthetic resin molded parts Telecommunications engineering business, information and communication technology business Management consulting business Realty development business

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Business Outlook and Strategy

Fine Ceramic Parts Group

Demand for fine ceramic components used in semiconductor processing equipment is expected to remain high throughout the year ending March 31, 2008. Kyocera will strive for greater sales and market share by promoting new product development and strengthening its production systems in Japan.

Current applications for LED-related sapphire products concentrate on mobile phone handsets. However, applications are expected to expand to include PC backlights and monitors for automotive navigation systems in the near future. Kyocera is developing higher-quality, lower-cost sapphire products in response to these emerging opportunities.

We will expand sales of ceramic components for automotive applications. In response to rising environmental awareness, the market for diesel-engined vehicles is growing, particularly in Europe. Kyocera provides heater cores for glow plugs and piezo stacks for fuel-injection components that help improve combustion and reduce diesel emissions. Ceramic glow plugs with Kyocera’s heater core reach operating temperature almost instantly and offer excellent high-temperature durability— properties that cannot be provided with metal glow plugs. Kyocera’s piezo stacks further enhance combustion efficiency and reduce emissions by facilitating extremely precise control over fuel delivery at higher fuel-injection pressures.

Kyocera will also expand sales of automotive cameras, which offer excellent compactness and reliability; ceramic substrates and assemblies for automotive electronic control units (ECUs); and other strategic components for automotive applications.

Semiconductor Parts Group

Taking advantage of our leading position in the ceramic packaging market, Kyocera will strive to expand this segment using its excellent production technologies and new product development capabilities. As components used in digital consumer products become increasingly compact, multifunctional and sophisticated, ceramic package performance must improve accordingly to support such technology trends.

Although our surface-mount device (SMD) packages and image-sensor packages already command significant market share, Kyocera will aim for expansion by reinforcing product development.

As part of our effort to grow through new markets and products, we will strengthen our business in optoelectronic components that support FTTH (Fiber To The Home) fiber-optic communications services. Additional effort will be devoted to the growing market for low-temperature co-fired ceramic (LTCC) substrates, which are used in high-frequency wireless communications devices. Kyocera is actively cultivating other new markets, including automotive components and medical equipment, to expand this business.

In addition to ceramics, we will strengthen our organic package business, which will drive growth of this segment over the medium term. Our specific efforts will include mass-producing high-performance flip-chip packages used in game consoles, which

will grow in demand throughout fiscal 2008. We will also focus on expanding sales of thinner and higher density System-in-a-Package (SiP) substrates, in the expectation that the rising sophistication of mobile phone handsets will boost demand for application processors.

Consolidating Kyocera’s position as a comprehensive package manufacturer through these initiatives will provide the foundation for medium-term business expansion.

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Applied Ceramic Products Group

Due to a worldwide shortage of purified silicon, Kyocera was challenged to increase production of solar cells in fiscal 2007. To ensure the continued development of this high-growth business, we established a raw-material procurement system capable of supporting our production expansion plans for the medium term, beginning in the latter half of fiscal 2008. We will increase capacity at our key production base for solar cells in Shiga, Japan, while expanding solar module assembly capacity in Japan, China, Mexico and the Czech Republic. Through such measures we plan to boost our production volume to 500 megawatts of solar modules per year by fiscal 2011, equivalent to three times our production volume in fiscal 2007. At the same time, we will strive to reduce production costs and raise profitability by making cells thinner.

We expect intense competition in the solar energy business. Nonetheless, Kyocera intends to maintain a leading position by capitalizing on our unique competitive advantages, which include an integrated production system that covers the entire spectrum of the business — from raw-material processing to installing finished systems. Kyocera’s other differentiating advantages include excellent quality, high reliability and an extensive sales network accumulated over more than 30 years in the solar industry.

Kyocera will expand its cutting tool business to support rising production among automotive manufacturers in Japan, Southeast Asia, China and Europe. We will aggressively introduce new products to capture a larger customer base and greater market share. Kyocera also aims to raise profits by capitalizing on its integrated production center in Japan, which incorporates all material processes, from raw-material processing to finished products; and by increasing production capacity in China.

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Electronic Device Group

Fiscal 2008 is expected to bring sustained growth in production of consumer electronics, including mobile phone handsets, digital TVs, PCs and game consoles. Kyocera consequently expects demand for electronic components to remain strong during the year, led by components used in higher frequency, multifunctional consumer products. To seize this business opportunity, Kyo-cera aims to expand its business with new products, including miniature, high-capacitance ceramic capacitors and smaller, lower-profile crystal units for surface-mount device (SMD) applications.

We will open a new plant for ceramic capacitors in Japan to ensure mid- to long-term growth in this segment — targeting a 20 percent increase in capacity during fiscal 2008, with a mid-term plan to double our current production capacity in Japan. We will also reinforce the synergy between Kyo-cera Corporation and AVX Corporation in our global marketing of key electronic components. Profit enhancements will be targeted through cost reduction and more effective use of production facilities in China.

In thin-film devices, R&D has focused on organic light-emitting diode (OLED) displays, and preparations to commercialize this business will continue.

Telecommunications Equipment Group

In fiscal 2008, we forecast slowing growth in the Japanese mobile phone handset market, but will strive to increase market share by launching new models. The slim W44K handset introduced in fiscal 2007 to strong sales was a good example of our product development strategy. We intend to release additional mobile handsets with superior performance and designs that anticipate the market’s evolving needs.

U.S. subsidiary Kyocera Wireless Corp. (KWC), which has struggled with profitability challenges, was profitable for the final three quarters of fiscal 2007. In fiscal 2008, KWC will strive to improve profitability by increasing market share at existing customers and winning more carriers with new models in the U.S. and other markets.

In the PHS-related business, we will concentrate on the Japanese market in fiscal 2008, aiming for increased market share by launching new handset models covering the spectrum from entry-level to sophisticated. In iBurst^™, a wireless broadband equipment business, Kyocera will cultivate new markets in the U.S., Russia and India for iBurst, an affordable, high-performance wireless broadband system.

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Information Equipment Group

We will differentiate our information equipment business on the basis of the ECOSYS concept, which is unique to Kyocera. Designed around our amorphous silicon photoconductor drum, with its extremely hard, durable surface, ECOSYS products offer outstanding reliability; a long-life print engine; lower running costs; and the eco-friendly benefit of reduced disposable waste. ECOSYS products thus help customers reduce their costs while promoting environmental preservation.

In fiscal 2008, the continued market transition from monochrome to color document equipment is expected to bring replacement demand for printers and multifunctional systems in developed markets even if the user base does not grow. Kyocera will continue to strengthen its business by introducing high quality, high speed color models into the market.

Moreover, we will introduce new products equipped with advanced technology that meet the corporate responsibility needs of the Sarbanes Oxley (SOX) Compliance. Our goal is to provide a central input/output device for the office environment capable of managing all document-imaging needs, in full color.

We will also introduce high-value-added monochrome models equipped for multiple document solutions in the European, Japanese and U.S. markets. In the BRIC markets (Brazil, Russia, India and China), we will focus on expanding sales with affordable entry-level models.

Research and Development

Kyocera is devoting substantial R&D resources for the development of new models based on the ECOSYS concept. In fiscal 2008 we will establish a new R&D center to unify various technologies for product design advancements, the development of image and electrophotography processing, printing controllers and software. The new R&D center will help accelerate our development of elemental technology and improve our collective strength and mobility.

Major development goals include strengthening our product line with color capability and solution functionality. Additionally, we will further improve our document management system, security and other coordination functions using “WiseCore,” Kyocera’s proprietary controller platform, which was released in fiscal 2007 to meet the growing needs of IT infrastructure.

Kyocera will expand its product line with high-reliability color models based on the advanced material technologies of the ECOSYS concept to achieve higher speeds and better image quality.

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Others

Expansion efforts within Kyocera’s Others segment will focus primarily on Kyocera Communication Systems Co., Ltd. (KCCS) and Kyocera Chemical Corporation (KCC), the segment’s major subsidiaries.

KCCS derives most of its revenue from information & communication technology (ICT) services and telecommunications engineering. In the ICT business, which includes systems integration and security solutions, KCCS seek to enhance profitability on a project-by-project basis. Among its telecommunications engineering services, KCCS installs, maintains and monitors base stations for mobile and wireless networks. The company regards Japan’s rising investment in mobile communications infrastructure as an opportunity to expand this business and will work to further increase its market share.

At KCC, resin products and sealants for semiconductors are a major product line. To seize opportunities for business expansion, KCC will make capital investments in this area in fiscal 2008 in response to increasing demand for these products. KCC will also strive to expand sales of magnesium-molded parts used in notebook personal computers and other devices. Meanwhile, KCC will offer continued synergies within the Kyocera Group through materials development in such fields as resins for miniature tantalum capacitors; ceramic capacitor electrodes; and polishing discs for crystal and sapphire substrates.

Commencing in fiscal 2008, the “Optical Equipment Group,” previously a separate reporting segment, will be reclassified under “Others.” We are striving to expand this business by integrating the Kyocera Group’s lens design and manufacturing technologies with our extensive electronic device expertise. Specifically, we will develop optical components for semiconductor processing equipment, digital cameras, scanners, data projectors and related products, and promote sales of these components. To reduce production costs and improve profitability, Kyocera will enhance its manufacturing activities for these products in China.

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Corporate Governance

Basic Policy

Kyocera’s management rationale is “to provide opportunities for the material and intellectual growth of all our employees, and through our joint effort, contribute to the advancement of society and humankind.” Kyocera defines corporate governance as “structures to ensure that its Directors manage the corporation in a fair and correct manner.” The purpose of corporate governance is to maintain the soundness and transparency of management, and to achieve the fairness and efficiency through which the Kyocera Group’s management rationale can be realized.

The “Kyocera Philosophy” was created by Dr. Kazuo Inamori, Kyocera’s founder, as he codified his views on the subject of business management. He was convinced that one of the most important points in managing the company was for the Kyocera Philosophy to apply to all who work for the enterprise-directors, managers and employees alike. The Kyocera Philosophy embodies many principles, from the fundamentals of business management to the specifics of day-today operations. Its principles demand impartial, fair and totally transparent management while placing emphasis on minimizing expenses and maximizing revenues. Since its founding, Kyocera has been guided by principles that naturally work toward achieving the corporate governance goals mentioned above.

Measures for Corporate Governance

Kyocera aims to implement corporate governance in compliance with the Kyocera Philosophy. In order to learn this Philosophy, all employees are provided with an opportunity to receive education and materials devoted to its principles and practice. Through this education, employees acquire the ability to observe and implement the Kyocera Philosophy in the workplace. In fiscal 2007, Kyocera managers and employees in Japan had attended training and education sessions designed to promote deeper understanding of the Kyocera Philosophy, with a cumulative total of approximately 23,000 participations in such sessions. Additionally, a total of approximately 11,000 managers of Kyocera subsidiaries outside Japan received similar training along these lines.

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Corporate Governance Systems

Kyocera implemented an Executive Officer system in June 2003 to enhance the efficiency and effectiveness of its business management. Executive officers are responsible for executing business strategy under the authority of the President and Representative Directors, who are elected by the Board of Directors. The President and Representative Directors serve to improve management efficiency by delegating authority and responsibility while regularly evaluating the appropriateness of corporate governance and internal controls. In addition, the Kyocera Group Management Committee, comprised of Executive Officers and other Directors, meets monthly to ensure that all operations comply with the company’s ethical standards.

In compliance with the Articles of Incorporation approved by its shareholders meeting, Kyocera established the Corporate Auditors and a Board of Corporate Auditors to regularly evaluate Kyocera Group business conduct. These consist of two internal and three external auditors with expertise in law, accounting and management. The Corporate Auditors attend meetings of the Board of Directors and various committees to ensure the appropriateness of business conduct.

Kyocera defines internal controls as “systems established within the corporate organization to achieve management policy and master plans in a fair manner, in order to effectuate the Company’s management rationale.” By respecting the Kyocera Philosophy as a corporate culture and enhancing internal management control systems, Kyocera aims to maintain the solid corporate governance our shareholders expect.

In April 2003, a Kyocera Disclosure Committee was established to ensure the timely disclosure of public information. This committee evaluates the basic process of disclosing information as well as the accuracy of the company’s Annual Report, Form 20-F and related documents.

In further support of its corporate governance commitment, Kyocera has established a risk management department to strengthen its risk management system. Kyocera also established internal complaint reporting systems so that employees who become aware of any breach of an internal rule can report the matter immediately. In addition to the internal auditing system, which regularly audits business conduct and reports the results to Directors, a Global Audit Division was established in May 2005 in accordance with Section 304 of the Sarbanes-Oxley Act of 2002.

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NYSE Corporate Governance Standards

Companies listed on the New York Stock Exchange (NYSE) must comply with certain standards regarding corporate governance under Section 303A of the NYSE Listed Company Manual.

However, listed companies that are foreign private issuers, such as Kyocera Corporation, are permitted to follow home country practice in lieu of certain provisions of Section 303A.

The following table shows the significant differences between the corporate governance practices followed by U.S. listed companies under Section 303A of the NYSE Listed Company Manual and those followed by Kyocera Corporation.

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Corporate Social Responsibility (CSR)

Corporate Social Responsibility (CSR)

Since Kyocera’s founding, its management rationale has been “to provide opportunities for the material and intellectual growth of all our employees, and through our joint effort, contribute to the advancement of society and humankind.” The Kyocera Philosophy, on which management practices are based, upholds “doing what is right as a human being” as the principal criterion for making business decisions. The essence of Kyocera has thus always been a matter of working hard for the ultimate good of society and mankind, based on fundamental ethical and moral values — values that derive their power to motivate from the best aspects of the human character: justice, equality, integrity, industry, courage, philanthropy, humility and loyalty. Hence, for Kyocera, CSR does not represent new concept or value system, but is rather a question of putting the Kyocera Philosophy into action. Kyo-cera’s firm conviction is that implementing this philosophy helps to build mutual trust with customers, stockholders, suppliers, local communities and other stakeholders, and contributes to the sustainable long-term development of both Kyocera and society in general.

Kyocera CSR Activities

CSR Policies

Kyocera CSR activities focus on four areas:

CSR Promotional Framework

Kyocera has a CSR Committee and a Corporate CSR Division to oversee and promote CSR activities across the Kyocera Group. The CSR Committee discusses, formulates and implements CSR-related company policy on a global basis while promoting CSR activities within Kyocera. The Corporate CSR Division is responsible for developing specific Group-wide activities based on the policies and related matters determined by the CSR Committee.

Major Social Contribution Activities

Kyocera is committed to creating useful products that contribute to human progress in economic and social terms. As a responsible corporate citizen, Kyocera maintains an active concern for issues that affect local communities and society as a whole. Besides working to address these specific issues, Kyocera strives to utilize its position as a major corporation to contribute both economically and culturally to society through sponsorship and other activities.

Sustainability Presentations

Kyocera production sites conduct regular sustainability presentations as part of their efforts to improve communications with local communities. Site managers invite local residents, government officials and supplier representatives to attend these presentations on the economic, social and environmental activities of Kyocera. These occasions also provide opportunities for factory tours and discussions of related issues.

Major Environmental Preservation Activities

Environmental issues threaten to imperil the very survival of humanity. In recognition of this, Kyocera is actively working to develop eco-friendly products while promoting environmental preservation activities such as recycling and reducing greenhouse gas emissions and industrial wastes. Ensuring that emitted substances are as biodegradable as possible is one of Kyocera’s basic environmental guidelines.

Product Eco-Assessment System

Kyocera has adopted an Environment-Consciousness Evaluation System to promote the development of eco-friendly products. Under this system, all our business and development divisions evaluate the eco-consciousness of their products and technologies at each development stage. This process involves quantitative assessments of the resources and energies consumed over the course of a product’s life cycle, along with estimates of the environmental impact of any related emissions. A product that meets eco-conscious criteria is given an eco-label designating it as a “Kyocera Global Eco-Friendly Product.” Through this initiative, Kyocera aims to fulfill its social responsibility as a manufacturer to promote the development of eco-friendly parts and finished products from the design stage onward.

For further details of these CSR activities, please refer to the Kyocera Sustainability Report, which is accessible online at Kyocera’s web site.

In English:

http://global.kyocera.com/ecology/2007.html

In Japanese:

http://www.kyocera.co.jp/ecology/2007.html

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Financial Section

Contents

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Financial Section

Operating and Financial Review and Prospects

Kyocera Corporation and Consolidated Subsidiaries

Presentation of Certain Information in Financial Section of Annual Report 2007

Operating Results

Overview

Kyocera develops, produces and distributes various kinds of products mainly for the telecommunications and information processing and environmental protection markets. Kyocera Corporation was established in 1959 as a manufacturer of ceramic parts for electronic equipment and has been expanding and diversifying its business mainly through active mergers and acquisitions, as well as applying its fine ceramic technologies to the areas of semiconductor parts, electronic devices, telecommunication, metal processing, medical and dental implants and solar energy fields. Kyocera develops, produces and distributes a variety of parts and devices for electronic equipment such as computers, automobiles, printers, copying machines and multifunctional systems, as well as consumer electronic equipment such as mobile phone handsets, digital still cameras and digital TVs. Kyocera earns revenue and income and generates cash through sales of these products.

Kyocera’s operations are classified into eight reporting segments: (1) Fine Ceramic Parts Group, (2) Semiconductor Parts Group, (3) Applied Ceramic Products Group, (4) Electronic Device Group, (5) Telecommunications Equipment Group, (6) Information Equipment Group, (7) Optical Equipment Group and (8) Others. Kyocera categorizes the Fine Ceramic Parts Group, the Semiconductor Parts Group, the Applied Ceramic Products Group and the Electronic Device Group into one main business referred to as “the Components Business,” and also categorizes the Telecommunications Equipment Group, the Information Equipment Group and the Optical Equipment Group into another main business referred to as “the Equipment Business.”

Most of Kyocera’s profits are derived from sales of products and provision of services in the information technology (IT) markets, including the electronic equipment related market. In fiscal 2007, production of digital consumer equipment such as mobile phone handsets, digital TVs and new game consoles recorded a significant year-on-year increase, which led to strong components demand for such electronic equipment. Amid a favorable market environment with strong demand for digital consumer equipment throughout fiscal 2007, Kyocera worked aggressively to launch new products and to improve productivity with the goal of achieving continuous sales expansion and high profitability. In addition, during fiscal 2007, efforts were made to strengthen “Amoeba Management System,” Kyocera’s unique management control system, in order to revitalize all business segments (“operational excellence”) within the Kyocera Group and to boost ability to achieve goals (“executional excellence”) across the Kyocera Group. As a result, sales and profits increased in both the Components and the Equipment Businesses compared with fiscal 2006.

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Results of operations

The following table shows a summary of Kyocera’s results of operations for fiscal 2006 and fiscal 2007:

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Net sales

Consolidated net sales for fiscal 2007 increased by ¥110,353 million ($935 million), or 9.4%, to ¥1,283,897 million ($10,880 million) compared with ¥1,173,544 million in fiscal 2006.

Consolidated net sales in the Components Business in fiscal 2007 increased by ¥69,058 million ($585 million), or 11.9%, to ¥650,877 million ($5,516 million) compared with fiscal 2006. In particular, sales in the Electronic Device Group were strong throughout the year, notably ceramic capacitors and timing devices, and thus sales in the Electronic Device Group resulted in an increase of ¥26,564 million ($225 million), or 10.2% compared with fiscal 2006. In addition, sales in the Fine Ceramic Parts Group, the Semiconductor Parts Group and the Applied Ceramic Products Group also achieved growth of 17.2%, 12.6% and 11.5%, respectively, compared with fiscal 2006.

Consolidated net sales in the Equipment Business increased by ¥38,305 million ($325 million), or 7.8%, to ¥531,668 million ($4,506 million) compared with fiscal 2006. Sales in the Telecommunications Equipment Group and the Information Equipment Group increased by ¥22,148 million ($188 million), or 9.7% and ¥19,400 million ($164 million), or 7.8% compared with fiscal 2006. These increases were due to strong demand in mobile phone handsets and new printers and multifunctional systems.

A detailed analysis and discussion of Kyocera’s net sales by reporting segment and geographic segment are as follows:

Net sales by reporting segment

The following table shows a breakdown of Kyocera’s total consolidated net sales for fiscal 2006 and fiscal 2007 by the eight reporting segments:

(1) Fine Ceramic Parts Group

Sales in this segment in fiscal 2007 increased by ¥11,953 million ($101 million), or 17.2%, to ¥81,326 million ($689 million) compared with ¥69,373 million in fiscal 2006. This increase was due primarily to expanded demand for components for semiconductor processing equipment, spurred by strong production activities in the semiconductor industry.

(2) Semiconductor Parts Group

Sales in this segment increased by ¥16,993 million ($144 million), or 12.6%, to ¥152,292 million ($1,291 million) compared with ¥135,299 million in fiscal 2006. This increase was due mainly to raised demand for ceramic packages used in mobile phone handsets and digital-still-cameras.

(3) Applied Ceramic Products Group

Sales in this segment increased by ¥13,548 million ($115 million), or 11.5%, to ¥131,103 million ($1,111 million) compared with ¥117,555 million in fiscal 2006. This increase was due mainly to sales growth of solar energy products, particularly in the European market, combined with increasing demand for medical materials and cutting tools.

(4) Electronic Device Group

Sales in this segment increased by ¥26,564 million ($225 million), or 10.2%, to ¥286,156 million ($2,425 million) compared with ¥259,592 million in fiscal 2006. Demand for products such as ceramic capacitors, crystal-related components and connectors, expanded due primarily to strong production activity for digital consumer equipment. In addition, AVX Corporation (AVX), a U.S. subsidiary, also recorded increased sales.

(5) Telecommunications Equipment Group

Sales in this segment increased by ¥22,148 million ($188 million), or 9.7%, to ¥251,183 million ($2,129 million) compared with ¥229,035 million in fiscal 2006. This increase was due to sales growth of new mobile phone handsets in Japan and overseas.

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(6) Information Equipment Group

Sales in this segment increased by ¥19,400 million ($164 million), or 7.8%, to ¥268,781 million ($2,278 million) compared with ¥249,381 million in fiscal 2006. Sales of multifunctional systems and ECOSYS printers expanded in overseas resulting from aggressive introduction of new products and enhanced marketing activities.

(7) Optical Equipment Group

Sales in this segment decreased by ¥3,243 million ($27 million), or 21.7%, to ¥11,704 million ($99 million) compared with ¥14,947 million in fiscal 2006. This decrease was due mainly to the downsizing of the camera business and slow demand for camera modules for mobile phone handsets.

(8) Others

Sales in this segment increased by ¥8,247 million ($70 million), or 7.0%, to ¥125,656 million ($1,065 million) compared with ¥117,409 million in fiscal 2006. This increase was due mainly to growth of sales in the telecommunications engineering business at Kyocera Communication Systems Co., Ltd. (KCCS)

Net sales by geographic segment

The following table shows a breakdown of Kyocera’s total consolidated net sales for fiscal 2006 and fiscal 2007, distinguishing between domestic and overseas sales and, with respect to overseas sales, showing the geographical areas in which such sales were made:

Sales in Japan, which comprised 38.7% of consolidated net sales, increased by ¥29,924 million ($254 million), or 6.4%, to ¥496,959 million ($4,212 million) compared with ¥467,035 million in fiscal 2006 due to sales growth in mobile phone handsets and products in the Fine Ceramic Parts Group, such as components for semiconductor processing equipment. Overseas sales, which comprised 61.3% of consolidated net sales, increased by ¥80,429 million ($682 million), or 11.4%, to ¥786,938 million ($6,669 million) compared with ¥706,509 million in fiscal 2006, due to sales growth of the Electronic Device Group in Asia, the Information Equipment and solar energy business in Europe, and of mobile phone handsets and the Semiconductor Parts Group in the United States.

Since almost all overseas sales were denominated in U.S. dollars or Euro, the depreciation of the yen against these currencies during fiscal 2007 produced a positive impact of approximately ¥39.6 billion ($336 million) in net sales compared with fiscal 2006, after translation into yen.

Sales in the United States increased by ¥20,665 million ($175 million), or 8.1%, to ¥274,361 million ($2,325 million) compared with ¥253,696 million in fiscal 2006 due to sales growth of mobile phone handsets at Kyocera Wireless Corp. (KWC), the Semiconductor Parts Group and the Information Equipment Group. Sales in Asia increased by ¥17,932 million ($152 million), or 9.0%, to ¥216,663 million ($1,836 million) compared with ¥198,731 million in fiscal 2006 due to higher sales growth of the Electronic Device Group for digital consumer equipment and of the Semiconductor Parts Group. Sales in Europe increased by ¥26,375 million ($224 million), or 14.3%, to ¥210,726 million ($1,786 million) compared with ¥184,351 million in fiscal 2006 due mainly to sales growth of the Information Equipment Group such as ECOSYS printers and multifunctional systems and the Electronic Device Group, combined with expanded sales in solar energy products. Sales in Others increased by ¥15,457 million ($131 million), or 22.2%, to ¥85,188 million ($722 million) compared with ¥69,731 million in fiscal 2006 due primarily to sales growth of mobile phone handsets.

Cost of sales and gross profit

In fiscal 2007, cost of sales increased by ¥65,428 million ($554 million), or 7.8%, to ¥900,470 million ($7,631 million) from ¥835,042 million in fiscal 2006. This is due mainly to an increase in net sales and raw material costs increased with expansion of production due to strong demand in the Components Business and the Equipment Business.

Raw material costs of ¥388,095 million ($3,289 million) accounted for 43.1%, and labor costs of ¥163,836 million ($1,388 million) accounted for 18.2% out of the total cost of sales. The ratio of cost of sales to net sales was 70.1%, a decrease of 1.1 points compared with 71.2% in fiscal 2006, which was led by improved productivity. Reduction of production costs at KWC as a result of structual reforms and also cost reduction in the Optical Equipment Group due mainly to the downsizing of the camera business contributed to this improvement.

As a result, gross profit increased by ¥44,925 million ($381 million), or 13.3%, in fiscal 2007 to ¥383,427 million ($3,249 million) from ¥338,502 million in fiscal 2006. The gross profit ratio increased by 1.1 points from 28.8% to 29.9%.

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SG&A expenses and profit from operations

Selling, general and administrative (SG&A) expenses in fiscal 2007 increased by ¥9,518 million ($81 million), or 4.0%, to ¥248,325 million ($2,104 million) compared with ¥238,807 million in fiscal 2006. Labor cost was ¥119,267 million ($1,011 million), or 48.0% of total SG&A expenses, and sales promotion and advertising cost was ¥41,337 million ($350 million), or 16.6% of total SG&A expenses. The proportion of SG&A expenses to net sales dropped by 0.9 points to 19.4% in fiscal 2007 compared with 20.3% in fiscal 2006. The primary reason for the increase in SG&A expenses in fiscal 2007 was an increase in sales promotion costs due to vigorous marketing efforts and in software development costs in the Equipment Business.

Although SG&A expenses increased as above, profit from operations increased by ¥35,407 million ($300 million), or 35.5%, to ¥135,102 million ($1,145 million) compared with ¥99,695 million in fiscal 2006 due to further increase of gross profit. The operating margin rose by 2.0 points to 10.5% in fiscal 2007 compared with 8.5% in fiscal 2006.

Interest and dividend income

Interest and dividend income in fiscal 2007 increased by ¥6,482 million ($55 million), or 72.1%, to ¥15,472 million ($131 million) compared with ¥8,990 million in fiscal 2006. This was mainly due to favorable investment management results and an increase in dividend income from KDDI Corporation (KDDI). Kyocera has an investment policy aimed at low risk, stability and liquidity, and does not typically invest in high-risk financial instruments only for pursuing profits.

Interest expense

Interest expense in fiscal 2007 increased by ¥346 million ($3 million), or 26.6%, to ¥1,647 million ($14 million) compared with ¥1,301 million in fiscal 2006. This was mainly due to an increase in interest expense at foreign subsidiaries and a slight upward trend of interest rates in Japanese financial market.

Foreign currency translation

During fiscal 2007, the averaged exchange rate into the yen depreciated by ¥4, or 3.5%, against the U.S. dollar and depreciated by ¥12, or 8.7%, against Euro compared with fiscal 2006, respectively. At March 31, 2007, the yen depreciated by ¥1, or 0.9%, against the U.S. dollar and depreciated by ¥14, or 9.8%, against Euro compared with at March 31, 2006, respectively. Kyocera recorded foreign currency transaction losses of ¥65 million ($1 million) in fiscal 2007.

Kyocera typically enters into forward exchange contracts to minimize currency exchange risks on foreign currency denominated receivables and payables. Kyocera confines its use of derivative financial instruments to the hedging of its foreign exchange exposures, and does not utilize derivative transactions for trading purposes.

Gains and losses from investments

In fiscal 2007, Kyocera’s earnings or losses on equity-method investments resulted in earnings of ¥2,621 million ($22 million), an increase of ¥3,837 million ($33 million) compared with losses of ¥1,216 million in fiscal 2006. Kyocera’s equity in earnings of affiliates and unconsolidated subsidiaries in fiscal 2007 was derived mainly from interests in WILLCOM INC.(WILLCOM).

Kyocera Corporation owns a 30% interest in WILLCOM, which operates a PHS service in Japan. Kyocera Corporation accounted for this investment using the equity method. WILLCOM recorded net losses due mainly to temporary sales commission in fiscal 2006. However, WILLCOM recorded net income derived from an increase in net sales originated by steady increase of customers in fiscal 2007. As a result, Kyocera recognized earnings on equity method investments.

Gains on sales and maturities of securities, net in fiscal 2007 increased by ¥2,347 million ($20 million), or 159.4%, to ¥3,819 million ($32 million) compared with ¥1,472 million in fiscal 2006. This was due mainly to realization of unrealized gains by sale of investment securities.

Following the merger of Mitsubishi Tokyo Financial Group, Inc. and UFJ Holdings, Inc., on October 1, 2005, Kyocera’s shares of UFJ Holdings, Inc. were exchanged for the shares of the new company, Mitsubishi UFJ Financial Group, Inc. As a result of this share exchange, Kyocera recorded a gain of ¥5,281 million in fiscal 2006.

Kyocera Corporation owned a 36.02% interest in Taito Corporation, a major affiliate which operates in the electric amusement business. Kyocera accounted for its investment under the equity method. On September 28, 2005, Kyocera Corporation sold its entire holding of shares of Taito Corporation in a tender offer bid for the shares of Taito Corporation by Square Enix Co., Ltd., one of the leading companies in the game software industry. As a result of this sale of the shares of Taito Corporation, Kyocera Corporation recorded a gain on sales of investment in an affiliate of ¥6,931 million in fiscal 2006.

Kyocera Mita Corporation (KMC) owns a 30% interest in Triumph-Adler AG Group (TA), which is a distributor of office equipment and accounted for its investment under the equity method. Kyocera recognized loss on impairment of investment in TA of ¥3,492 million due to an extended decline in its market value in fiscal 2006. Kyocera did not recognize loss on impairment of investment in TA due to increase of its market value in fiscal 2007.

Income from continuing operations before income taxes

Enhanced profitability through the effects of increased sales and improved productivity contributed to increased operating profit of all reporting segments in the Components and the Equipment Businesses. In addition, interest and dividend income and equity in earnings of affiliates and unconsolidated subsidiaries increased compared with fiscal 2006. As a result, income from continuing operations before income taxes for fiscal 2007 increased by ¥39,303 million ($333 million), or 33.5%, to ¥156,540 million ($1,327 million) compared with ¥117,237 million in fiscal 2006. Operating profit in the Components Business resulted in an increase of ¥26,906 million ($228 million), or 34.6% due primarily to sales growth and improvement productivity in the Electronic Device Group. Operating profit in the Equipment Business significantly increased by ¥13,434 million ($114 million), or 71.0% due to rising sales of the Information Equipment Group, making a profit in the Telecommunications Equipment Group and decreased operating loss in the Optical Equipment Group.

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Operating profit by reporting segment

The following table shows a breakdown of Kyocera’s consolidated income from continuing operations before income taxes, and operating profit for fiscal 2006 and fiscal 2007 by the eight reporting segments:

(1) Fine Ceramic Parts Group

Operating profit in this segment increased by ¥4,663 million ($40 million), or 42.3%, to ¥15,677 million ($133 million) compared with ¥11,014 million in fiscal 2006. This was primarily due to sales growth of components for semiconductor processing equipment, which is the core products in this reporting segment.

(2) Semiconductor Parts Group

Operating profit in this segment increased by ¥4,468 million ($38 million), or 25.2%, to ¥22,210 million ($188 million) compared with ¥17,742 million in fiscal 2006. This increase was due mainly to sales growth of ceramic packages for mobile phone handsets and digital still cameras.

(3) Applied Ceramic Products Group

Operating profit in this segment increased by ¥458 million ($4 million), or 2.1%, to ¥22,334 million ($189 million) compared with ¥21,876 million in fiscal 2006. Operating profit in this segment grew due mainly to increased profit in dental implants, artificial bone and joint prosthesis and jewelry and applied ceramic related products.

(4) Electronic Device Group

Operating profit in this segment increased by ¥17,317 million ($147 million), or 63.7%, to ¥44,487 million ($377 million) compared with ¥27,170 million in fiscal 2006. Demand for products such as capacitors, crystal-related components and connectors, expanded due primarily to strong production activity for digital consumer equipment throughout the year. In addition, AVX in particular, improved its operating profit.

(5) Telecommunications Equipment Group

Operating profit in this segment improved by ¥1,997 million ($17 million) to ¥291 million ($2 million) compared with ¥1,706 million in operating loss in fiscal 2006. Despite the impairment loss of inventory in the PHS business in fiscal 2007, operating profit in this segment improved due to reduction of operating loss at KWC as a result of structural reforms along with sales growth of new mobile phone handsets in Japan.

(6) Information Equipment Group

Operating profit in this segment increased by ¥7,558 million ($64 million), or 28.6%, to ¥33,970 million ($288 million) compared with ¥26,412 million in fiscal 2006. This was due to sales growth of ECOSYS printers, multifunctional systems and consumables as well as the positive effects of the yen’s depreciation against the European currencies and the U.S. dollar.

(7) Optical Equipment Group

Operating loss in this segment decreased by ¥3,879 million ($33 million), to ¥1,895 million ($16 million) compared with ¥5,774 million in fiscal 2006 due mainly to the downsizing of the camera business and absence of expense on structural reform.

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(8) Others

Operating profit in this segment decreased by ¥207 million ($2 million), or 2.3%, to ¥8,776 million ($74 million) compared with ¥8,983 million in fiscal 2006. This decline was due mainly to impairment of goodwill, which was caused by stagnant sales and profit results amounting to ¥1,478 million ($13 million) at a domestic subsidiary.

Corporate

Corporate income and losses constitute income and expenses related to the provision of management-related services by Kyocera’s head office to each reporting segment, together with any profit-and-loss items that management judges not to belong within the above reporting segments, such as gains or losses relating to investment securities. Corporate income decreased by ¥4,216 million ($36 million), or 33.0%, to ¥8,569 million ($73 million) compared with ¥12,785 million in fiscal 2006. Interest and dividend income, which were the main contributors, increased compared with fiscal 2006. However, the income in fiscal 2006 included a gain of ¥6,931 million through the sale of entire shares of Taito Corporation, an exchange gain of ¥5,281 million on shares of UFJ Holdings, Inc. in connection with the exchange of shares for the shares of Mitsubishi UFJ Financial Group, and a loss of ¥3,492 million on impairment of investment in TA, an affiliate of KMC. As a result, corporate profit decreased compared with fiscal 2006.

Taxes

Current and deferred income taxes in fiscal 2007 increased by ¥2,127 million ($18 million), or 4.5%, to ¥48,887 million ($414 million) compared with ¥46,760 million in fiscal 2006.

Current income taxes in fiscal 2007 included the tax refunds of ¥4,305 million ($36 million). The tax refunds were related to the cancellation of a portion of ¥12,748 additional taxes imposed by Osaka Regional Tax Bureau on March 28, 2005 which Kyocera had expensed in the year ended March 31, 2005. For detailed information, see Note 14 to the Consolidated Financial Statements in this annual report.

The effective tax rate of 31.2% in fiscal 2007 was 8.7 points lower than 39.9% in fiscal 2006. The decrease in the effective tax rate is due mainly to the changes in valuation allowance against deferred tax assets. In fiscal 2006, Kyocera recognized additional valuation allowance against deferred tax assets at several subsidiaries with continued losses, which made the effective tax rate 5.8% higher than the Japanese statutory tax rate. In fiscal 2007, there were no significant changes in valuation allowance against deferred tax assets. The tax refunds related to the transfer pricing adjustments also contributed to the lower effective tax rate in fiscal 2007, which made the effective tax rate 2.8% lower than the Japanese statutory tax rate. For detailed information, see Note 16 to the Consolidated Financial Statements in this annual report.

Minority interests

Kyocera’s minority interests are principally related to AVX, which accounted for approximately 30% of all minority ownership interests. Minority interests increased by ¥1,935 million ($16 million) to ¥6,324 million ($54 million) in fiscal 2007 compared with ¥4,389 million in fiscal 2006. This was due mainly to a large increase in net income at AVX.

Sale of the shares of Kyocera Leasing Co., Ltd.

On August 1, 2006, Kyocera sold its entire shares in KLC (presently Diamond Asset Finance Company Limited) to Diamond Lease Company Limited (presently Mitsubishi UFJ Lease & Finance Company Limited) for ¥25,274 million ($214 million), aimed to concentrate Kyocera’s management resources on its core businesses to enhance and improve its corporate value. In recent years, within the financing industry, active reorganization has been ongoing. Amid such circumstances, Kyocera considered it was better for KLC to work with Diamond Lease Company Limited, not with Kyocera which is mainly engaged in manufacturing, to enable KLC to continue to grow and further develop its businesses. Kyocera also believed this sale would enable Kyocera to concentrate management resources on its businesses requiring enhancement to improve its corporate value.

Kyocera has accounted for the results of operations and the sale of KLC less appreciable income taxes, as discontinued operations in accordance with SFAS No.144, “Accounting for the Impairment or Disposal of Long-Lived Assets” in its consolidated statements of income.

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Liquidity and Capital Resources

Capital resources

In the short term, Kyocera expects cash demands for working capital and funds for capital expenditures required for the expansion of operations, purchases of Kyocera Corporation’s common stock, and payments of dividends to stockholders. Kyocera’s primary source of short-term liquidity is cash generated by operations. Certain subsidiaries also generate capital in the form of loans from financial institutions. At March 31, 2007, Kyocera’s short-term borrowings and long-term debt including current portion totaled ¥28,386 million ($241 million). The ratio to total assets of 1.3% still reflected at a low level of dependence. Most borrowings were denominated in the yen, the U.S. dollar and the Euro but certain borrowings were denominated in other foreign currencies. Details of these borrowings are described in “Tabular Disclosure of Contractual obligations,” which also includes the information regarding obligations for the acquisition or construction of property, plant and equipment.

Capital expenditures in fiscal 2007 decreased by ¥18,964 million ($161 million), or 21.3%, to ¥69,896 million ($592 million) from ¥88,860 million in fiscal 2006. In fiscal 2007, Kyocera made capital expenditures particularly to increase production capacity in the Electronic Device Group with business expansion. However, overall capital expenditures in fiscal 2007 decreased compared with fiscal 2006, which included large-scale capital expenditures in the organic package business and the solar energy business. R&D expenditures increased by ¥3,664 million ($31 million), or 6.4%, to ¥61,100 million ($518 million) from ¥57,436 million in fiscal 2006. Nearly all capital and R&D expenditures were funded using cash in hand or cash generated by operations.

During fiscal 2008, Kyocera expects total capital expenditures to be approximately ¥86,000 million ($729 million), and total R&D expenditures to be approximately ¥67,000 million ($568 million). Kyocera believes that Kyocera needs to invest its resources continuously in the development of new business areas and improved technology in order to create new products, commercialize advanced technologies and thereby secure future earnings streams.

At March 31, 2007, Kyocera’s working capital totaled ¥740,303 million ($6,274 million), an increase of ¥198,258 million ($1,680 million), or 36.6%, from ¥542,045 million at March 31, 2006. This was due to the effect of an increase in short-term investments including negotiable certificate of deposits and a decrease of debt by the sale of KLC in fiscal 2007. Kyocera plans to continue to improve capital efficiency by shortening manufacturing lead-time and reducing inventory level. Cash from operations has generally been sufficient for Kyocera to fund its working capital requirements and to fulfill its future capital expenditures, debt repayments and other obligations. Kyocera’s net cash provided by operating activities in fiscal 2007 was ¥149,644 million ($1,268 million) and cash and cash equivalents at March 31, 2007 were ¥282,208 million ($2,392 million). Kyocera believes that its working capital is sufficient for present and predictable future requirements.

Kyocera Corporation holds its treasury stock to facilitate the implementation of flexible capital policies and to develop its business in a dynamic manner in response to changes in the operating environment.

In fiscal 2007, Kyocera Corporation paid cash dividends totaling ¥18,787 million ($159 million), at ¥100 ($0.8) per share. Kyocera Corporation received approval at the general meeting of shareholders held on June 27, 2007 for the payment of year-end dividends totaling ¥11,319 million ($96 million), ¥60 ($0.5) per share, on June 28, 2007 to all stockholders of record on March 31, 2007.

Kyocera believes cash on hand and cash from operations will be sufficient to fund all cash requirements outlined above, at least through fiscal 2008. Consequently, Kyocera does not currently intend to use any other external financing sources that might affect its credit agency ratings. If cash generated by operations are insufficient for funding purposes, Kyocera retains other financing options, including external sources, such as short-term or long-term borrowings, as well as financing directly in the capital markets through issuances of debt or equity securities. As evidenced by an equity to assets ratio of 71.1% at March 31, 2007, Kyocera maintains a strong financial position, which leads Kyocera to believe that any capital requirements could be secured from external sources at a relatively low cost. Kyocera also maintains good business relationships with several major financial institutions.

Any future significant deterioration in market demand for Kyocera’s products, or a slump in product prices to levels substantially below those projected by Kyocera, could adversely affect Kyocera’s operating results and financial position, possibly resulting in reduced liquidity.

Cash flows

The following table shows a summary of Kyocera’s cash flows for fiscal 2006 and fiscal 2007:

Net cash provided by operating activities in fiscal 2007 decreased by ¥21,433 million ($182 million), or 12.5%, to ¥149,644 million ($1,268 million) from ¥171,077 million in fiscal 2006. This was due mainly to decreases in cash inflow related to inventories and receivables, although net income increased by ¥36,808 million ($312 million), or 52.8%, to ¥106,504 million ($903 million) from ¥69,696 million in fiscal 2006. As a result, net cash provided by operating activities in fiscal 2007 decreased compared with fiscal 2006.

Net cash used in investing activities in fiscal 2007 decreased by ¥13,764 million ($117 million), or 8.3%, to ¥151,703 million ($1,286 million) from of ¥165,467 million in fiscal 2006.

There was ¥24,553 million ($208 million) of cash inflow proceeded from sale of shares of KLC in fiscal 2007 whereas there was ¥24,133 million of cash flow proceeded from sale of shares of Taito Corporation in fiscal 2006. In addition, although acquisition of time deposits significantly increased, there were decreases in payments for purchases of property, plant and equipment, and purchases of available-for-sales securities as well as increases in sales or redemptions of available-for-sales securities and withdrawals of time deposits. As a result, net cash used in investing activities in fiscal 2007 decreased compared with fiscal 2006.

Net cash used in financing activities in fiscal 2007 decreased by ¥2,644 million ($22 million), or 11.4%, to ¥20,645 million ($175 million) from ¥23,289 million in fiscal 2006. This was due to an increase by ¥5,327 million ($45 million) in sale of treasury stock by exercises of stock options and a decrease in payments of long-term debt, which exceeded decreases in proceeds from short-term borrowings and long-term debt. On August 1, 2006, Kyocera sold its shares in KLC, a subsidiary engaged in financing services. As a result, both the amounts of proceed from insurance of short-tem and long-term debts, and the amounts of payments of short-term and long-term debt, which are included in financial activities, will decrease in fiscal 2008 and afterwards, however, such decreases will not have significant effects on Kyocera’s cash flows in total. See Note 3 to the Consolidated Financial Statements in this annual report.

The yen’s depreciation against the U.S. dollar and Euro between March 31, 2006 and 2007 resulted in increases in cash and cash equivalents of ¥4,103 million ($35 million).

At March 31, 2007, cash and cash equivalents totaled ¥282,208 million ($2,392 million). This represented a decrease of ¥18,601 million ($158 million), or 6.2%, from ¥300,809 million at March 31, 2006. Most of Kyocera’s cash and cash equivalents were denominated in yen but certain cash and cash equivalents, mainly in overseas subsidiaries, were denominated in foreign currencies, such as the U.S. dollar.

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Assets, liabilities and stockholders’ equity

Kyocera’s total assets at March 31, 2007 increased by ¥198,942 million ($1,686 million), or 10.3%, to ¥2,130,464 million ($18,055 million), compared with ¥1,931,522 million at March 31, 2006.

Cash and cash equivalents decreased by ¥18,601 million ($158 million), or 6.2%, to ¥282,208 million ($2,392 million). This was due mainly to the effect of net cash used to cover dividend payments and deposit of negotiable certificates of deposits aiming for higher interest, exceeding net cash gained by operating activities as well as the sale of all of Kyocera’s shares of KLC.

Short-term investments increased by ¥125,553 million ($1,064 million), or 142.8%, to ¥213,495 million ($1,809 million), due mainly to increases in negotiable certificates of deposits and bonds maturing within one year, which were reclassified from securities and other investments.

Short-term and long-term finance receivables that were recognized as loan assets by KLC., were eliminated. This is because KLC ceased being a consolidated subsidiary of Kyocera as a result of the sale of all of Kyocera’s shares of KLC. in August 2006.

Accounts receivables increased by ¥25,987 million ($220 million), or 12.4%, to ¥236,380 million ($2,003 million), due mainly to an increase in sales in the Telecommunications Equipment Group at Kyocera Corporation and at KMC.

Inventories increased by ¥18,624 million ($158 million), or 9.8%, to ¥209,188 million ($1,773 million). This was due mainly to increases in finished goods held by KMC and Kyocera International Inc. (KII) as well as work-in-progress items of Kyocera Corporation and AVX, in line with increased sales and more new product lines.

Securities and other investments increased by ¥137,191 million ($ 1,163 million), or 24.8%, to ¥690,568 million ($5,852 million), due mainly to increased market value at March 31, 2007 of KDDI stock and other equity securities compared with March 31, 2006.

Total property, plant and equipment at cost, net of accumulated depreciation, decreased by ¥4,440 million ($38 million), or 1.6%, to ¥280,906 million ($2,381 million). Capital expenditure in fiscal 2007 was ¥69,896 million ($592 million), and depreciation was ¥70,155 million ($595 million).

Other assets increased by ¥23,627 million ($200 million), or 111.3%, to ¥44,855 million ($380 million). This increase was due mainly to an increase of ¥23,614 million ($200 million) prepaid benefit costs upon Kyocera’s adoption of SFAS No.158, “Employer’s Accounting for Defined Benefit Pension and Other Post-retirement Plans.”

Kyocera’s total liabilities at March 31, 2007 decreased by ¥28,522 million ($242 million), or 4.9%, to ¥548,981 million ($4,652 million), compared with ¥577,503 million at March 31, 2006.

Total debt, composed of short-term borrowings and long-term debt including debt due within one year, decreased by ¥112,186 million ($951 million), or 79.8%, to ¥28,386 million ($241 million), due mainly to the sale of KLC.

Deferred income taxes-non-current liabilities increased by ¥81,172 million ($688 million), or 64.6%, to ¥206,858 million ($1,753 million), due mainly to an increase in market value at March 31, 2007 of KDDI stock and other equity securities compared with March 31, 2006.

Minority interests in subsidiaries, principally AVX, increased by ¥1,981 million ($17 million), or 3.1%, to ¥66,923 million ($567 million), compared with ¥64,942 million at March 31, 2006, due mainly to strong performance at AVX.

Total stockholders’ equity at March 31, 2007 increased by ¥225,483 million ($1,911 million), or 17.5%, to ¥1,514,560 million ($12,835 million), compared with ¥1,289,077 million at March 31, 2006.

Retained earnings at March 31, 2007 increased by ¥87,717 million ($743 million), or 9.1%, due to net income for fiscal 2007 of ¥106,504 million ($903 million), less cash dividend payments of ¥18,787 million ($159 million).

Accumulated other comprehensive income increased by ¥130,109 million ($1,103 million), or 178.4%, to ¥203,056 million ($1,721 million). Net unrealized gains on securities increased by ¥102,021 million ($865 million), or 123.4%, due mainly to increased market value at March 31, 2007 of KDDI stock and other equity securities compared with March 31, 2006. Pension adjustments, which were reported for the first time upon Kyocera’s adoption of the SFAS No.158, were ¥15,419 million ($131 million), at March 31, 2007. Foreign currency translation adjustments increased by ¥10,474 million ($89 million), to ¥2,904 million ($25 million), due mainly to the depreciation of the yen against the euro.

The stockholders’ equity ratio at March 31, 2007 was 71.1%, up 4.4 percentage points from 66.7% at March 31, 2006.

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Table of Contents

Significant customer

In fiscal 2007, Kyocera’s sales to KDDI amounted to ¥123,163 million ($1,044 million), or 9.6% of consolidated net sales.

KDDI provides telecommunication services, and Kyocera sells mainly telecommunication equipments to KDDI. Kyocera Corporation made an equity investment in KDDI when it was founded and currently, a director of Kyocera Corporation is a member of the board of directors of KDDI. At March 31, 2007, Kyocera Corporation’s equity interest in KDDI was 12.76%. Kyocera serves KDDI as an independent vendor in terms of price determination, remittance condition and product distribution. All of the agreements and ongoing contractual commitments between Kyocera and KDDI have been made on an arm’s-length basis. Kyocera expects that KDDI will remain a significant customer in the future.

Tabular disclosure of contractual obligations

The following tables provide information about Kyocera’s contractual obligations and other commercial commitments that will affect Kyocera’s liquidity for the next several years, as of March 31, 2007. Kyocera anticipates that funds to be required to fulfill these debt obligations and commitments will be generated internally from operations.