Business Report(From April 1, 2021 to March 31, 2022)

1. Matters Concerning the Current State of the Funai Group (the “Group”)(1) Development and Results of Business Activities
In the United States, the Group’s main market, the real GDP growth rate for the full year of 2021 was highat 5.7% compared to the previous year. In particular, personal consumption increased by 5.3 points for the fullyear, driving high growth. In 2022, the impact of the Omicron mutants of the COVID-19 and the monetary
tightening policy of FRB (Federal Reserve Board) due to the effects of prolonged inflation are expected toweigh on consumer and corporate activities. In March 2022, the FRB decided to lift its monetary easing policy
and raise the policy rate. In light of these effects, the IMF (International Monetary Fund) lowered its forecast
for U.S. economic growth in 2022 to 4.0%, down 1.2% from its previous forecast.
As for the situation in Japan, the "Government Economic Outlook" approved by the Cabinet on January 17,
2022, published that the GDP growth rate for FY2021 is expected to be around 2.6% in real terms and 1.7%
in nominal terms and that GDP is expected to recover to the pre-COVID-19 level during the year. In addition,in the Monthly Economic Report released by the government on March 25, 2022, the basic assessment of theJapanese economy in March for the current status indicated that "the economy continues to recover, but
weakness remains in some areas as severe conditions from the COVID-19 remain." As for the future outlook,it also indicated that "the economy is expected to pick up, partly due to the effects of various policies andimprovement in overseas economies as all possible measures are taken against infection and economic andsocial activities move toward normalization. However, amid the uncertainties arising from the situation in
Ukraine, etc., we must pay close attention to downside risks due to factors including rising raw material prices,fluctuations in financial and capital markets, and supply-side constraints. In addition, we need to monitor the
impact of infectious diseases."
Under these circumstances, the Group recorded net sales of 69.697 billion yen (down 13.4% year-on-year)
for the current consolidated fiscal year. This decrease was due to a sharp rise in LCD panel prices in our
mainstay LCD TV business from the fourth quarter of the fiscal year ending March 31, 2021, as well as toproblems in procuring LCD panels due to the shortage of parts and other components related to the worldwide
semiconductor shortage, which caused sales to significantly underperform our plan in both the U.S. andJapanese markets.

Net sales by equipment segment are as follows.
<Audiovisual Equipment>

In the audiovisual equipment segment, as already stated, the sales significantly underperformed ourplan in both the U.S. and Japanese markets as a result of a sharp rise in LCD panel prices in our mainstay
LCD TV business from the fourth quarter of the fiscal year ending March 31, 2021, as well as to problems
in procuring LCD panels due to the shortage of parts and other components related to the worldwide
semiconductor shortage. For the Blu-ray Disc-related products, the trend of market contraction continued
due to the dissemination of video distribution services via the Internet. However, the rate of market
contraction slowed slightly in the U.S. and Japanese markets. As a result, net sales amounted to 61.069
billion yen (down 15.7% year-on-year.)<Information Equipment>
In information equipment, sales of mainstay high-capacity inkjet printers and ink cartridges were lower
than the plan, but higher than the results in the previous fiscal. As a result, net sales were 4.917 billion
yen (up 17.9% year-on-year.)-1-

<Other>

In equipment other than the above, sales of automotive backlights, medical and healthcare-related
products such as dental CT scans and nursing care bed modules decreased slightly compared to theprevious fiscal year. Consequently, net sales were 3.710 billion yen (down 3.3% year-on-year.)(Consolidated Net Sales by Equipment)
Segment

Net Sales

Sales Composition

Audiovisual Equipment

61,069 million yen

87.6％

Information Equipment

4,917

7.1

Other

3,710

5.3

Total

69,697100.0(2) Investment in Property, Plant and Equipment
Investment in property, plant and equipment during the current consolidated fiscal year totaled 968 million
yen in the Group, which comprised of 721 million yen by its manufacturing companies and 246 million yen
by its sales companies. Such investments were mainly for the improvement of manufacturing facilities.

(3) Financing
Nothing to be reported.

(4) Major Organizational Restructuring, etc.
The tender offer for the Company's shares, etc., by Shuwa System Holding Co., Ltd. was conducted fromMarch 24, 2021 to May 10, 2021, and concluded.
Subsequently, the Company became a wholly owned subsidiary of Shuwa System Holding Co., Ltd.
through the following procedures.
July 28, 2021

Resolution for consolidation of shares at theextraordinary general shareholders' meeting

August 26, 2021

Delisting

August 30, 2021

Effective date of consolidation of shares

October 6, 2021

Acquired shares from Mr. Tetsuo Funai and cancelled

November 10, 2021

Purchase of fractional shares by Shuwa System Holding
Co., Ltd.

November 15, 2021

Payment of fractional shares to shareholders(5) Issues to be Addressed(i) Issues related to the management environment(A) Sales expansion and recovery of earnings strength
The Company positions the expansion of Group sales and the recovery of earnings strength as the mostimportant issues.
The Company is exposed to fierce competition in the LCD TV business, which accounts forapproximately 90% of its sales, due to factors such as the emergence of Chinese manufacturers in themarket. At the same time, the market is not expected to grow significantly in the future. In line with thissituation, the Company needs to increase the sales ratio of businesses other than the AV business toapproximately 50% in the medium- to long-term and improve the profitability of the existing LCD TV-2-business by further increasing its operational efficiency.
For the mainstay LCD TV business, we will gain consumer spending at major mass retailers in the main
North American market. In addition, we will develop our sales network in the Mexican market and link it toincreased revenue. In the Japanese market, we will cooperate with Amazon Japan LLC and Yamada
Holdings Co., Ltd. to expand sales of Japan's first TV with built-in Fire TV.
Regarding information equipment, we continue to strengthen sales of high-capacity inkjet printers. In
addition, the Company further expands the professional-use cartridge business, which accounts for a large
proportion of our business, by introducing new products that have doubled the ink ejection distance ofexisting products.
Regarding new businesses (other), in dental CT, we respond to expanding needs by strengthening our lineup
through introduction of new products. Furthermore, the Company will actively promote sales on web tocomplement the sales activities at face-to-face meetings. For automotive LCD backlights, the Company
focuses on further sales expansion for the direct backlight method, which we were the first in the world tomass produce successfully. We will also seek to enter the market for gaming monitors with distinctive featuresof TV manufacturers in preparation for the e-sports market, where demand is increasing.
In response, we will take strategic measures to (a) restructure the supply chain, secure stable procurementof components, and ensure the stable supply of products, (b) correct product sales prices in response to higher
semiconductor and panel prices, and (c) reduce service costs through improvement in design quality. The
Company procures stably the semiconductors by placing orders for the necessary annual quantities and the
LCD panels by taking measures such as placing orders without circuit boards.
In addition, we focus on reducing product return rates and minimizing losses incurred from processing
product returns with the aim of creating products selected from around the world. We will strive to improve
profit margins through these measures.
(B) Training and appointment of human resources
With the launch of a new management system in July 2021, we aim to transform the Company's culture
into "Active & Smart." As the first step toward this goal, we have launched the project towards the corporate
culture reform by young employees.
The Group recognizes that it remains important to bolster its capabilities by improving employee’s
capabilities to win out new global competition era and implement the medium- to long-term businessstrategy. Therefore, the Group conducts training for candidates for general manager and section manager
regularly every year to foster executive candidates in the future. In addition, we are actively training andassigning employees, regardless of their age and career, by enhancing and expanding internal and external
training systems.
Moreover, we also conduct e-learning and other trainings to support self-development regularly every year.
(ii) Measures to recover operating performance and strengthen financial soundness
The Group will implement the following measures to recover operating performance.
(A) Display business (flat-panel TVs, etc.)
・Strengthen efforts to gain consumer spending at major mass retailers in the North American・Expand sales of smart TVs with built-in Fire TV jointly developed with Amazon in the Japanesemarket・Expand sales by restructuring the business model and value chain in Canadian and Mexican markets(B) Digital media business (Blu-ray disc related equipment)
・Maintain and secure market share with Blu-ray disc players, etc., in the North American market
・Enhance lineup of FUNAI brand products in the Japanese market and strengthen collaboration with
OEM producers(C) Printing solution business (printer related equipment)
・Expand solution proposals through the ink cartridge "Zion," which achieved the longest ink discharge-3-

distance in the industry.
・Expand sales of special-purpose printers, including high-capacity inkjet and label printers
・Increase sales through market development, including penetrating the medical field utilizing microfluidics(microfluid control technology)(D) New businesses
・Expand sales of automotive backlights and other products and strengthen alliance strategies forautomotive-related businesses
・Expand sales of medical and healthcare-related products, including dental CT scanners, and secure therevenue baseMoreover, relationships with financial institutions remain strong, with no significant changes in their credit
stance. In the current consolidated fiscal year, the Group carried out short-term borrowings of 2 billion yen,leading to the Group's cash and deposits balance of 25.686 billion yen as of the end of the current consolidated
fiscal year. The Company recorded net income attributable to owners of the parent of 7.560 billion yen in thecurrent consolidated fiscal year, but net assets were 42.011 billion yen as of the end of the current consolidated
fiscal year, with a capital adequacy ratio of 58.0％. We believe there are no issues with our financial soundness.
We continue to take measures to improve profitability and strengthen our financial profile.

(6) Property and Income/Loss
67th

Fiscal Term(millions of

Net salesyen)

Total assets

Equity68th(FY2018)(millions ofyen)(millions ofyen)(FY2019)69th term(FY2020)

70th(FY2021)

105,549

88,42580,44869,697

83,29370,68373,771

72,39454,05751,18951,82642,011(7) Parent Company and Major Subsidiaries(i) Parent company

Trade NameSHUWA SYSTEM CO., LTD
Shuwa System Holding Co., Ltd.

Capital Stock

Percentage of
Voting Rights
against theCompany

Relationship with
the Company

95 million yen

100.00％(100.00％)―

1,360 million yen

100.00％Management
supportNotes: 1. Shuwa System Holding Co., Ltd., the Company’s parent company, is a wholly owned subsidiary of Shuwa System Co.,
Ltd., and Shuwa System Co., Ltd. is also a parent company of the Company.
2. The number in parentheses in the Company's voting rights ratio column is the indirect ownership ratio.
3. The Company has entered into a management support agreement with our parent company, Shuwa System Holding Co.,
Ltd.

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(ii) Major subsidiaries
Trade Name

Percentage of
Voting Rights of
the Company

Capital Stock

FUNAI CORPORATION,INC.

US$ 123.5
million100.00％FUNAI (THAILAND) CO., LTD.

THB 1,568
million100.00％Funai Electric Philippi nes Inc.

PHP 1,176
million100.00％Main Business
Sales of theCompany’s
products
Sales of theCompany’s
products
Sales of theCompany’s
products(8) Main Business
Segment

Principal Products

Audiovisual
Equipment
Information
Equipment

LCD TV, organic EL TV, Blu-ray disc recorders
Blu-ray disc recorder
High-capacity inkjet and label printers
Nail art printer, ink cartridge

Other

Automotive backlights, dental CT, and other equipment(9) Major Business Sites of the Group
Category

Name

Location

Daito City,
Osaka
Chiyoda-ku,
Tokyo
U.S.A.
MexicoThailandPhilippines
Philippines
MexicoFukuyama City,
Hiroshima

Osaka Head Office

Funai ElectricCo., Ltd.

Tokyo Head OfficeSalessubsidiary

FUNAI CORPORATION, INC.
P＆F MEXICANA,S.A.DE C.V.
FUNAI (THAILAND) CO., LTD.
Funai Electric Cebu,Inc.
Funai Electric Philippines Inc.
Funai Manufacturing,S.A.DE C.V.

Production
subsidiary

Chugoku Funai Electric Co., Ltd.

(10) Employees of the GroupNo. of Employees (persons)

Change from the End of the Previous Fiscal Year(+/-) (persons)

2,144

-99

Notes: 1. The above number of employees represents those who are at work.
2. The number of employees decreased from the previous consolidated fiscal year end mainly due to personnel reduction at
FUNAI (THAILAND) CO., LTD., production subsidiary.

(11) Major Lenders
Nothing to be reported.

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(12) Matters Concerning the Transactions with Parent Company, etc.

When conducting important transactions with Shuwa System Holding Co., Ltd., and Shuwa System Co.,
Ltd., the parent companies., the Company shall pay careful attention that the necessity and terms of thetransaction are not significantly different from the ones with third parties and make decisions fairly andappropriately so that the transaction does not harm the interests of the Company.
Although the Company accepts Directors from the parent companies, etc., the Board of Directors decides
whether or not to implement the transaction after multifaceted discussions to obtain opinions from Outside
Directors based on the perspective of ensuring independence from the parent company, etc. Accordingly, theCompany determines that the transaction does not harm the interests of the Company.
Furthermore, no determination of the Board of Directors is at variance with the opinions of Outside
Directors.

(13) Other Important Matters Concerning the Current State of the Group(i) The Company transitioned from a company with an Audit and Supervisory Committee to a company withcorporate auditors on October 1, 2021.
(ii) At the Board of Directors’ meeting held on February 24, 2022, the Company resolved to conduct anabsorption-type merger on April 1, 2022, with the Company as the surviving company and its parent
company, Shuwa System Holding Co., Ltd. as the disappearing company, and concluded an Absorptiontype Merger Agreement on this merger as of the same date. Furthermore, the Absorption-type Merger
Agreement was approved at an extraordinary general shareholders' meeting and a general meeting of classshareholders by common shareholders held on the same day. This absorption-type merger was completed
on April 1, 2022. Details regarding the merger are as stated in the "Notes Regarding Significant Subsequent
Events" to the consolidated financial statements.

2. Matters Concerning Accounting Auditor(1) Name of Accounting Auditor
Deloitte Touche Tohmatsu LLC(2) Amount of Remuneration, etc. for the Accounting Auditor for the Current Fiscal Year(i) Remuneration, etc., of the accounting auditor for the current fiscal year

45 million yen(ii) Total amount of cash and other proprietary benefits to be paid by the Company

45 million yen

to the accounting auditor(Note) The amount of remuneration, etc., for audits under the Companies Act of Japan and the amount of remuneration, etc.,
for audits under the Financial Instruments and Exchange Act of Japan are not separated in the audit agreement between
the Company and the accounting auditor and cannot actually be separated. Hence, the amount in item (i) above includes
both amounts.

(3) Outline of Liability Limitation Agreements
Nothing to be reported.

(4) Outline of Indemnification Agreements
Nothing to be reported.

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3. Matters Concerning Development of Systems to Ensure Appropriateness of Business
Operations(1) System to Ensure Appropriateness of Business Operations(i) System to ensure that the Directors and employees perform their duties in compliance with laws orordinances and the Articles of Incorporation
Under the “Funai Group Charter of Conduct,” the “Regulations of Officers’ Compliance,” and the“Regulations of Compliance,” the Company shall clarify acts to be taken by Directors, Officers, andemployees to ensure their performance of duties in compliance with laws or ordinances and the Articles ofIncorporation. The Company also established the “Whistleblower Protection Regulations” to prohibit
unfavorable treatment of whistleblowers.
(ii) System for the storage and management of information concerning Directors’ performance of duties
With regard to the storage and management of information concerning the Directors’ performance of
duties, the minutes of meetings of the Board of Directors and other important meetings that Directors attend,
circular decision documents, and other documents and information necessary for Directors to perform theirduties shall be appropriately stored and managed in compliance with laws and regulation and the“Document Management Regulations.”(iii) Regulations and other system for managing the risk of loss
The Company appoints the Officers responsible for risk management to properly grasp and evaluate risks
the Company is exposed to and manage risks related to their respective operations in charge under the “RiskManagement Regulations.”(iv) System to ensure that Directors perform their duties effectively
Under the “Officer System” introduced to ensure quick and effective decision-making by the
management, the Company shall assign Executive Officers under the control of the Executive Director toensure that the operations determined by the Executive Director are performed swiftly. In addition, theCompany appoints Outside Directors and has corporate auditors to enhance the transparency of the Boardof Directors and strengthen its supervisory functions.
(v) Systems to secure the propriety of business activities of the Group composed of the Company and its
subsidiaries(A) System of reporting to the Company the matters concerning duties performed by Directors, etc. of its
subsidiaries
The Company sets materiality standards and reporting items for the subsidiaries under the “AffiliatedCompanies Management Regulations” to grasp the management status of the subsidiaries appropriately. It
requires the subsidiaries to submit operating results and financial reports monthly based on it.
(B) Regulations and other system for managing the risk of loss for the subsidiaries
To manage the operation and administration of the subsidiaries, the Company shall set agenda and discusswith them the matters that may affect their financial condition and administration in terms of financing,technology, personnel, transactions, etc., under the “Affiliated Companies Management Regulations.”(C) System to ensure that Directors, etc. of the subsidiaries perform their duties effectively
To ensure that the subsidiaries manage the business effectively, the Company shall allow them to manage
businesses that respect their managerial autonomy and independence under corporate regulations based on
the “Affiliated Companies Management Regulations.”(D) System to ensure that Directors, etc., and employees of the subsidiaries perform their duties in compliancewith laws or ordinances and the Articles of Incorporation
Under the “Funai Group Charter of Conduct” as a code of conduct for all Officers and employees of theFunai Group, and the “Funai Group Procurement Policies” and “Regulations of Compliance” based on theCharter of Conduct, the Company shall clarify acts to be taken by Directors, etc., and employees of the-7-

subsidiaries to ensure their performance of duties in compliance with laws or ordinances and the Articles
of Incorporation.
(vi) Systems concerning reporting to the corporate auditors(A) System of reporting by Directors, Executive Officers, and employees of the Company to report to thecorporate auditors
If Directors, Executive Officers, and employees of the Company find any fact that has caused or may causesignificant damage to the Company, they shall immediately report the fact to the corporate auditors.
(B) System for Directors, corporate auditors, Executive Officers, and employees of the subsidiaries to reportto corporate auditors
If Directors, Executive Officers, and employees of the subsidiaries are required to report the fact by the
corporate auditors of the Company, they shall immediately do so unless there is any justifiable reason to thecontrary. If Directors, corporate auditors, Executive Officers, and employees of the subsidiaries find any
fact that has caused or may cause significant damage to the Company, they shall immediately report it to
the corporate auditors.
(vii) System to ensure that any person who has reported to the corporate auditors does not suffer unfavorable
treatment because of giving such a report
The Company prohibits unfavorable treatment of whistleblowers under the “Regulations of Compliance”
and the “Whistleblower Protection Regulations.” The Company also ensures that any person who reports
to the corporate auditors does not suffer unfavorable treatment because of giving such a report.
(viii) Matters concerning policies on the treatment of expenses to be incurred in duties performed by corporate
auditors
When a corporate auditor requests payment of expenses for the performance of their duties, the Company
shall make such payments unless such expenses are not necessary for their performance of duties.
(ix) Other systems to ensure that the corporate auditors conduct audits effectively
To ensure that the corporate auditors conduct audits effectively, the corporate auditors shall closelycooperate with the accounting auditors, hold regular meetings with the Representative Directors andDirectors, etc., of the subsidiaries to confirm the management policies and exchange opinions on risks andissues surrounding the Company.
(x) System to ensure the reliability of financial reporting
The Company shall establish a “Basic Policy for Internal Control over Financial Reporting” to ensure
the reliability of financial reporting and the effective and appropriate disclosure of “Internal Control
Reports.” Under the Basic Policy, the Company shall establish an “Internal Control Committee,” chairedby the President and CEO, continuously develop, operate, and evaluate internal control over financial
reporting and promptly correct any defect in case it is found.
(xi) System for the exclusion of antisocial forces
The Company shall have a basic policy of having no relation with any antisocial force and refusing any
unjust claim.
In the event that a client is found to be an entity, enterprise, individual, etc., having any relation with such
antisocial force, the Company shall promptly terminate a business relationship with it.
The Company designates the Personnel and General Affairs Department as a principal division in chargeof dealing with antisocial forces and controlling the information centrally. To ensure compliance by Officers
and employees, the Company also defines this basic policy clearly in the related regulations and establishes
an education system. Furthermore, the Company develops countermeasures as necessary to prevent damage
by antisocial forces.In the event that any unjust claim is made by an antisocial force, the Company will
work closely with external specialized agencies, including the police and legal counsels, and build acooperative system for emergencies.
-8-(2) Summary of Operation Status of Systems to Secure Propriety of Business Activities(i) ComplianceIn addition to establishing the “Funai Group Charter of Conduct” as a code of conduct, the Company has
established the “Regulations of Officers’ Compliance” and the “Regulations of Compliance” and clarified
the basic policy on compliance to all Officers and employees, thereby ensured that they perform their duties
in compliance with laws or ordinances and the Articles of Incorporation.

The Company also has awhistleblower system to prevent violations of law and detect problems swiftly.
The Company provided Directors, corporate auditors, Executive Officers, and employees with e-learning
sessions twice in the current fiscal year as educational activities to raise their awareness of compliance.
(ii) Risk management
The Company shall perform continuous risk management to minimize losses and disadvantages inbusiness activities through regular monitoring by a risk management division under the “Risk Management
Regulations.”(iii) Directors’ performance of duties
The Board of Directors, which consists of seven Directors including one Outside Director, makes
decisions on the matters required by laws or ordinances and important matters concerning the management
and supervises the execution of business. During the current fiscal year, the Board of Directors held 20
meetings. In addition, the Investment and Loan Committee held six sessions, the Nomination Committee
held three sessions, and the Compensation Committee held four sessions.
(iv) Corporate auditors’ performance of duties
The corporate auditors attend meetings of the Board of Directors and the Investment and Loan Committee,
as well as monthly reporting meetings. During the fiscal year under review, the Audit and Supervisory
Committee held eight sessions during the period when the Company was a company with an Audit andSupervisory Committee. After the transition to a company with corporate auditors, the Company conducteda written audit for Directors regarding the execution of their duties.

◎ The amounts and numbers of shares stated in this business report are shown by rounding down to the nearest whole unit, and the ratios areshown by rounding off to the first decimal place unless otherwise indicated.

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