ANNUAL REPORT2009

FUNAI ELECTRIC CO., LTD.

Corporate Philosophy

BetterProducts

Co-Existenceand
Co-Prosperity

Greater
Trust

Dream

ActionBeliefSince its establishment, Funai Electric has built considerable trust in the consumer electronics field by providing
superior electronic goods with a focus on functionality and by promoting Funai product cost-performance.
Our unique production system, the “FPS (Funai Production System)”, our technical strength in mechatronics andour optimized global production/sales system, in addition to a slim corporate profile and speedy management, arevital management resources that have been nurtured throughout the company’s history. Funai believes that theseresources will become our greatest assets as we battle for survival in an increasingly competitive industry and during theincreasing promulgation of digital/IT technologies.
Funai Electric’s desire is to bring the entire Group together, improve quality, delivery and cost even further, and provide
the world with products that meet the demands of the times.

Contents
Financial Highlights ................................................................... 1
To Our Shareholders ................................................................. 2
Interview with the President ..................................................... 3
Topics at FY March 2009 ........................................................... 6
Research and Development ...................................................... 8

Corporate Governance and CSR ............................................ 10
Management Discussion and Analysis .................................. 12
Global Network / Directory ..................................................... 20
Members of the Board and Ofﬁcers ....................................... 22

Financial Highlights

Years ended March 31, 2009 and 2008

FUNAI ELECTRIC CO., LTD. and its Consolidated Subsidiaries(Thousands of
U.S.dollars)
2009/3(Millions of yen)
2009/3

2008/3Financial Year :¥Net sales
Operating income (loss)
Net loss

302,778¥

277,168$

3,082,337

1,410（2,406）

14,354（17,365）（5,377）（176,779）

Per Share (yen and U.S.dollars) :¥Net loss（509.33）（157.71）¥

40.00

Cash dividends（5.19）

$

50.00

0.41

End of Financial Year :¥Total equity
Total assets
Number of employees

135,596¥

158,356$

1,380,393

199,883

224,415

2,034,847

2,590

2,628

—

Note-1 : The exchange rate of ¥98.23=U.S.$1.00 (as of March 31, 2009 in the Tokyo foreign exchange market) is used for the above calculations.
Note-2 : The figure for total number of employees does not include those employees of outsourced production facilities located in China.

■ Net sales■ Operating income (loss)(¥ million)

500,000

400,000

25,000396,71220,000300,000(¥ million)

30,000277,168

302,778

20,76615,00010,000200,000

5,000
100,000

0-2,406-5,000March ’07

March ’08

March ’09

■ Net loss

March ’07

March ’08

March ’09

■ Net loss per share(¥ million)

5,000

0

-5,000

1,410

0

(¥)

200.000-3,666-200.00-5,377-107.01-10,000-157.71-400.00-15,000-17,365-20,000

March ’07

March ’08

March ’09

-509.33-600.00

March ’07

March ’08

March ’09

Annual Report 20091

To Our Shareholders
The consumer electronics industry in which Funai participates has
continued to experience a rapid decline in product prices as a result of
shortened product life cycles and intensive price competition among global
firms, and accelerating the pace of product development has become
increasingly important. Added to this has been the emergence of conditions
in which changes in consumer lifestyles and advances in digital andinformation technology have stimulated new consumer needs for digitalrelated products.
The business environment during the current period (fiscal year ended
March 2009) was also challenging. Funai managed its business under
extremely severe conditions, as the financial crisis that began in the
subprime loan problem in the United States spread to the real economy andsparked an extremely serious global recession.
As its top priority for the current year, Funai pursued efforts designed
to “realize a return to profitability” in its core TV business, and during thefirst half net sales and earnings exceeded Funai’s initial plan. Although
operating results for the full year unfortunately did not reach the targets
in our plan from the beginning of the year because of the abrupt change
in the business environment during the second half, we were able toPresident and CEO

Tomonori Hayashi

achieve higher net sales compared with the previous period, and reported
positive operating income, a welcome change from the operating loss in theprevious consolidated fiscal year. For the current period, net sales increased
9.2% year-on-year to 302,778 million yen, and operating income was 1,410
million yen, compared with an operating loss in the previous period of 2,406
million yen.
The measures Funai has taken in the past began to steadily demonstrate
results during the current period. Our tasks now are to steer a course thatwill put Funai on the path to greater growth in the years ahead, strengthen
our ability to generate earnings, and address new challenges with thecapabilities of the entire Funai Group.
We look forward to continuing to receive your understanding and support
for Funai’s efforts in the future.

July 2009

President and CEO
Tomonori Hayashi

2

Annual Report 2009

Interview with the President
Key Results for the Consolidated Fiscal Year Ended March 2009

During the current year Funai was able to lay
the strategic groundwork for growth in the years ahead.
In the previous year, Funai reported the first operatingcore North America market Funai was able to market

deficit since it began releasing its consolidated operating

four brands that are trusted names, and undertake

results. The main reason was that the TV businessdevelopment of strategic products through a multi-

centered on LCD televisions, a field in which Funai isbrand marketing effort using these products as a base.

focusing management resources as a key sector for theFunai’s ownership of non-overlapping multiple brands

future, failed to achieve its sales objective and incurred athat provide a point

loss because of a decline in profitability.

of direct contact withThe Funai Group declared “a rapid return toend consumers can be

profitability in the TV business” during the current year

described as a major

to be its top priority, and consequently pushed aheadstrength that is linked

with the reorganization of its business structure todirectly to our first steps

concentrate on the TV business. While we must stillfor future growth.

describe this effort as “a work in progress” at the present

To “strengthen costtime, the results of this approach were evident in thecompetitiveness” Funai

operating results for the current year, and we were able

worked to lower selling,

to achieve positive consolidated operating income.

general and administrative

To carry out the reorganization of Funai’s business

expenses by implementing

structure, we sought to establish our “branding strategy”

a series of cost measures throughout the entire productand “strengthen cost competitiveness.”

cycle, from product planning, development, materials

As a “branding strategy” we strove to expand earnings

procurement, manufacturing and sales to after-sales

opportunities by diversifying the Company’s brands. To

service, with an emphasis on speed, thorough inventory

the Sylvania and Emerson brands, the leading brands

controls and additional efforts to expand net sales.

produced under license by the Funai Group, we wereThis series of measures has unquestionably

able to newly add the Philips and Magnavox names as astrengthened the TV business-centered business structure

result of the brand licensing agreement concluded withof the Funai Group. In that sense we can say this year

Royal Philips Electronics in 2008 for the North America

was the year when we laid the groundwork for a leap in

TV business. As a result, in each market position in thegrowth beginning in the next consolidated fiscal year.

The four brands being developed by the Funai Group

Annual Report 20093

Interview with the President

Prospects and Measures for the Consolidated Fiscal Year Ending March 2010

We believe today’s period of uncertainty and rapid change is an
opportunity for Funai to expand its business.
The market environment for the audio-visual equipment

seeking to cut expenses by going out less often and there

category is currently undergoing a period of uncertainty

has been an increase in “nesting consumption” aimed atand rapid change.

purchasing products that can be enjoyed at home. While

In the television segment, CRT TVs have disappeared

prices on LCD televisions are already falling because

almost entirely while shipments of LCD televisions haveof stiff price competition, this has created conditions

risen significantly. In addition, in the DVD segment, sales

that will spur further price cutting in the audio-visualare expanding rapidly for Blu-ray disc players, which haveequipment category as sales of reasonably-priced home

effectively become the global standard. In other words,

entertainment products climb steadily as a result of suchin the audio-visual equipment category the market isnesting consumption.

racing into a new “full-scale diffusion period,” with LCD

Given the combination of “diffusion period” market

televisions and Blu-ray disc players in the leading role.

timing and “nesting consumption”-style purchasing,

At the same time, changes in consumer buying

LCD television and Blu-ray disc player-related products

behavior are evident as well. With many people worried

are expected to drive rapid expansion in the size of

about their job security and feeling uncertain about thethe market in the future, particularly for products that

future because of the rapid, steep recession that has

combine high quality with low prices.

swept around the world since last autumn, consumers are

Funai believes these market circumstances represent
a major opportunity for us. The source of Funai’s costcompetitiveness is the “FPS (Funai Production System),”

LCD television unit salesa unique production system that is Funai’s greatest

6 (million of units)strength, and the Company’s strong business relationship5.4

with leading sales channels, including the world’s largest
retailers, has become a driving force that will increase5

product sales of the entire Funai Group.
In LCD televisions, Funai has broadened its product4

lineup, strengthened its brand positioning and enhanced

3.4

its sales company organization. New development of Blu-3

ray disc player-related products is on track as well. Nearly

2.5
2.0

2

all of the conditions that will enable Funai to significantly
expand sales volume through well-timed introductions of
the products the market demands are in place.

1

For its core LCD televisions in particular, Funai will seek

0.5

to lay the foundation for a leap in future growth with the0March ’06
(Results)

March ’07
(Results)

March ’08
(Results)

March ’09
(Results)

March ’10
(Planned)goal of achieving a 55.6% year-on-year increase in sales
to 5.4 million units in the consolidated fiscal year ending
March 2010.

4

Annual Report 2009

Medium-Term Prospects and Measures

Medium-term plan consolidated net sales objective of 500 billion yen
rolled into the fiscal year ending March 2012.
The Funai Group has been working with the goal of

To achieve this new objective, Funai will pursue theachieving consolidated net sales of 500 billion yen in thefollowing five strategies based on a management policy

consolidated fiscal year ending March 2011 as a medium-that will “focus on promotion of viable products bolsteredterm objective. Net sales in the second half of the current

by speedy management.”

year were substantially below plan because of the

These are (1) fostering of human resources andinfluence of global recession since last autumn, however,appointments to responsible positions, (2) sales ofand as a result, net sales for the full year increased only

10 million LCD TV units, (3) expansion of the Blu-

9.2% from the previous period.

ray and related products line-up, (4) enlargement ofBecause it forecasts the severe management

mechatronics-related businesses such as printersenvironment will continue for the immediate future, theand (5) creation of new business and entrance into

Company has decided to roll its medium-term objective

emerging markets.

forward and will seek to achieve net sales of 500 billion

The most important of these on the product side are theyen in the fiscal year ending March 2012. The Company

strategies for Funai’s core LCD televisions and the burgeoning

will also restore its operating income margin for thismarket for products related to Blu-ray disc players.

phase to 5%, and seek to maintain profitability evenunder the current severe global competitive environment.

In LCD televisions, Funai has set a sales objective of
5.4 million units in the fiscal year ending March 2010 asindicated earlier, and we believe we can achieve worldwide
sales of 10 million units, including the four North America

Medium-term sales objective

brands PHILIPS, MAGNAVOX, SYLVANIA and Emerson, after

600 (¥ billion)

two years in the fiscal year ending March 2012 by moving
forward strategically with the development of these four
500

500

brand in the North America market.
In products related to Blu-ray disc players, Funai began
its full-scale introduction of players in April 2008, and

396

400

360
300

achieved a rapid increase in sales from 400 million yen

340
277

in the fiscal year ended March 2008 to 12.2 billion yen

302

in the fiscal year ended March 2009. In the future, Funai
will seek to cultivate Blu-ray as a second pillar after LCD

200

televisions, by moving rapidly to expand the lineup to
products such as recorders, home theater systems and100

portable players.
We look forward to continuing to receive your0

March ’06 March ’07 March ’08 March ’09 March ’10(Planned)

March ’12
(Target)understanding and support for Funai’s efforts in the future.

Annual Report 20095

Topics
Funai awarded “Supplier of the Year 2008
(Consumer Electronics Category)”
by U.S. retailing giant Walmart Stores
Funai Corporation, Funai’s U.S. sales subsidiary, wasawarded “Supplier of the Year 2008” by the U.S. retailer
Walmart Stores in March 2009. This was the third time
Funai received the award, following it selection in 2002
and 2004. Walmart bestows the annual award on those
suppliers that make a significant contribution to thegrowth of Walmart’s business and customer relationships
by supplying high quality, attractive products. For 2008,
LCD-TVs, Blu-ray disc players and TV digital converter
boxes provided by the Funai Group were recognized as
significant contributors to Walmart meeting its consumer
electronics goals.
In addition to these awards, Funai received an“International Supplier of the Year in 2001” award
as an outstanding supplier, and a “BILLION DOLLAR
SUPPLIER” award in 2007 for supplying over one billion
dollars of merchandise within a single fiscal year, fromthe international division of Wal-Mart Stores, Inc. Overthe past ten years, Funai has also received nine “SupplierAwards of Excellence for the Quarter” under Walmart’s
quarterly supplier award system.

U.S. subsidiary establishedfor Funai’s Philips brand business
Funai announced its brand licensing agreement with
Royal Philips Electronics for the sourcing, delivery,
marketing and sales activities for Philips brand consumer
televisions in the United States and Canada in April 2008.
Following the agreement, Funai established P&F USA,
Inc., a subsidiary to manage this business, on June 13,2008 (100% wholly-owned/Paid-in capital: US30 million
dollars). Funai will undertake the full-scale start-up andexpansion of the Philips brand business in the future.

6

Annual Report 2009

Funai’s information security
system further enhanced
Funai’s Information Systems Department and the
Personnel and Administration Department Remuneration
Group had previously obtained third-party certificationin accordance with the ISO/IEC 27001:2005 and JIS
Q 27001:2006 standards for information security
management systems. The Company recently passed an
expanded scope of application examination for thesesame certifications, and in November 2008 obtained
these certifications for the Information Systems
Department and the entire Personnel and Administration
Department.

Funai Electric to support“Japanese-American YouthBaseball Exchange Program”
sponsored by the
Red Sox Foundation
This year’s program was organized
to foster friendship and exchange
between citizens of Japan and theUnited States by sponsoring 12 young
people selected from youth baseballteams in Kyoto and Chiba, who visited
Boston for 11 days from July 25,
2008, where they were stayed withlocal families and were treated tobaseball clinics at Harvard University
and played in friendly game with local
teams. The participants also met withpitcher Daisuke Matsuzaka at thehome stadium of the Red Sox baseballteam, which is supported by Funai,and learned baseball tips from Red
Sox pitcher Hideki Okajima. Throughthis and similar programs, Funai
Electric supports youth development
and international cultural exchange
through sports.

■Red Sox Foundation
The Boston Red Sox Foundation is a philanthropic
organization established in 2002 and managed by the
Boston Red Sox baseball team.
The foundation conducts activities with the goal ofpromoting the health, education, recreation, andsocial service needs of children and families across
New England.

Annual Report 20097

Research and Development
Execute timely development andcommercialization of high-quality
products offering excellent cost
performance, while looking at new
future markets combining the AV
and IT markets.

With digitalization advancing rapidly on a global
scale, there are ample signs that a new market
is being formed in the consumer electronics
industry through a merging of the AV market
and IT market. Market needs are becoming morediversified as well.
In addition to further demonstrating its strength
in introducing well-timed, high-quality products
offering excellent cost performance to the market
in response to market’s needs, the Funai Groupis pursuing research and development aimed atstaying ahead of the trend in product networking
and increasing Funai’s competitiveness.
In the development of optical disk-related
technologies, digital image technologies andultra-high-density display technologies forwhich market needs are expected to grow in the
future, Funai continued to enhance its internal
development capabilities during the current year
and actively sought technical tie-ups with othercompanies, and aggressively devoted its efforts tocommercialize products using these technologies.
Research and development are being
conducted by Funai’s R&D Engineering
Department and the technology departmentsin each of the Company’s operating divisions.
For the current year, total research anddevelopment expense was 13,057 million yen.
The Funai Group is engaged in the manufactureand sale of consumer electronics products. Our
main research and development activities during
the current year are summarized below (notclassified by business segment).

8

Annual Report 2009

Audio-visual Equipment-related Technology
In optical disk-related products, Funai is pursuingdevelopment of multifunction audio visual equipment
and the development of key components in conjunction
with the transition to the next generation of Blu-ray Discplayers. Funai is also developing next generation standard
Profile2.0 (BD Live) products, as well as recorders.
In television-related products, the Company isworking on development of double speed image display
technology and support technologies for full HD as ultrahigh-density display technologies for LCD televisions. For

the United States, Funai is moving to the next generationof LCD televisions and upgrading performance to support
terrestrial digital broadcasting high performance. Funai
is also pushing ahead with the market introduction of
LCD televisions for terrestrial digital broadcasting in the
U.S. and enhancing product performance. In Europe,
Funai is pursuing technologies related to LCD televisions
in response to signs pointing to the spread of terrestrial
digital broadcasting.

Network-related Technologies
To meet the future arrival of the network system era, Funai
is pursuing the development of TV set top boxes (STB) forinteractive digital cable television (Tru2way) in the UnitedStates, as well as IP TV STB for the United States.
Funai has also developed products with WHDI installed
as a cable transmission technology, in order to achievecable and wireless high-speed, high-volume digital datatransmissions that will support the connection of future
household electronic devices to home network systems.
Funai also is continuing development to further improve
performance.

New Products
As wireless network systems, Funai is working on thedevelopment of wireless device network systems using
both the Wi-Fi format and the Wi-Max format, and istaking steps to prepare for market entry such as deliveryof peripheral devices through public demonstration tests.
Funai also developed a portable navigation device andhas entered the market to supply OEM.

Research Institute
The Funai Group manages the FUNAI ELECTRIC ADVANCEDAPPLIED TECHNOLOGY RESEARCH INSTITUTE INC. as alaboratory focused on support for nanotechnology. The
institute provides a base for development of elemental
technologies and the development of devices for productsthat mesh with the future vision of the Funai Group.
Intellectual property derived from the results obtained during
through the research process and results such as adaptationof findings to public projects have been demonstrated aswell.

Intellectual Property Strategy
In the digital television sector, the Funai Group isseeking to differentiate itself from other companies byutilizing exclusive rights to specific patents obtained
through an alliance with the Thomson Group and Funai’s

proprietary patents. Funai is also working to strengthen
and effectively use its intellectual property based on
aggressive patent applications and alliances with othercompanies.

Annual Report 20099

Corporate Governance and CSR
The Funai Group operates with the utmost awareness of its corporate social responsibilities.
Taking this to heart, the Company promotes a management approach that always keeps
in mind its responsibility towards all stakeholders, internal and external, ranging fromshareholders and customers to vendors, neighboring communities and employees.

Corporate GovernanceFunai believes that the most important management theme is to continuously increase corporate value by increasing thesoundness and efficiency of its management, enable rapid decision making to respond to changes in the marketplaceand maintain a highly transparent management.
In response to rapidly changing social trends, the Company adopted a Committee System in June 2005 to ensurethat the Group manages it business in a dynamic and flexible manner that allows rapid decision making. As of the endof July 2009, the Funai Group has 7 directors, of whom 5 are outside directors. Furthermore, the Company continues
to implement an officer system that has been in place since 2002 with the aim of establishing a system in which
management decisions and immediate action can be taken in a flexible and timely manner. As of the end of July 2009,
there are 9 officers in the Funai Group.

Summary of Committee System
Audit

Audit

Audit
Committee
Appointment/
Dismissal/Audit

Appointment

GeneralShareholders'Meeting

Board ofDirectors

CEO/
Corporate
Officers

Nomination
Committee

Authorization to makebusiness decisions

Compensation
Committee

10

Annual Report 2009

Officers

Environmental Activities
The Funai Group acknowledges theissue of the global environment as
an important management topic
and has established an Office ofEnvironmental Affairs within thehead office in order to take action in
response to environmental issues.
At the same time, we are working
towards the acquisition of ISO14001
certification (an international
standard for an environmental
management system), and manyof the Company’s facilities in andoutside of Japan are being certified.
In addition, the Company carries
out activities that aim to protect the
global environment as outlined in
the Environmental Charter. As partof these activities, we are seeking toincrease the percentage of materials
recycled to comply with the Home
Appliance Recycling Law. Other
actions include promoting “Green
Procurement” that gives priority
to eco-friendly parts, materials
and products in cooperation with

suppliers, pursuing reduced power
consumption and zero emissionsof industrial waste in Company
offices, achieving greater energy
efficiency in all of Funai’s products
and voluntarily eliminating the useof hazardous substances. In June
2005 we participated in “TeamMinus 6%,” a national project tocurb greenhouse gas emissions,and we are aggressively undertaking
measures to control global warming.

Funai Electric’s “Environmental Charter”
Basic Philosophy
Under the Company Motto, whichis “to make better products,
build greater trust, and establish
a more meaningful coexistencewith society,” we at the Funai
Group promise to implementbusiness activities that consider
environmental consequenceswith the understanding that every
single employee is responsible forprotecting the global environment.
Funai is working to realize

coexistence between nature andsociety by providing simple, highquality products to customers,
effectively using resources,
eliminating waste and reducing its
environmental burden.
Environmental Policies
1. Ensure management compliance(statute compliance).
2. Voluntarily remove dangerous
materials and provide
environment-friendly products.

3. Establish design targets that keep
the environment in mind andprovide earth-friendly products.
4. Promote improvement activities
to achieve zero emissions.
5. Establish necessary
environmental targets andconduct on-going improvementswith regular reviews.
6. Educate all employees about
the environment and work to
improve the environment.

Information Security Activities
Funai has become aware of
the increasing dependence on
information systems for business
transactions. After determiningthat it is the Company’s duty to
stakeholders to ensure information
security, Funai worked to create an
information security management
system.
On November 15, 2005, Funai’s
Information Systems Department
received both Britain’s information
security management system

certification “BS7799-Part 2:2002”
and Japan’s certification, the“Conformity Assessment Scheme forInformation Security Management
Systems (Ver.2.0).”
Additionally, to further improve
its information security management
systems, in November 2006
Funai’s Information Systems
Department also received both theinternational information security
management system standard “ISO/IEC 27001:2005” and the domestic

standard, “JISQ 27001:2006.” Funai
passed the examinations to expand
the scope of application of bothstandards in November 2008, andobtained certification for its entire
Information Systems Department
and all of the Personnel and
Administration Department.
These divisions will continue tomake further improvements in theirstandards in the future.

Annual Report 200911

Management Discussion and Analysis
FUNAI ELECTRIC CO., LTD. and its Consolidated Subsidiaries

Basic Management Policy
Based on the Company’s policy of “better products,”“greater trust” and “co-existence and co-prosperity,” ourbecoming ever more important.
Given such an environment, the Funai Group’s
management policies are as follows.

basic management policy aims to achieve mutual prosperity
with our stakeholders by building a firm relationship of trust

Expand net sales and improve profit margins

through a more efficient development, production and sales

Above all else, the key issue for the Funai Group is tosystem and the stable supply of high-quality products at

improve profit margins. To achieve this, Funai has positioned

affordable prices.

growth in sales and ensuring earnings over the medium tolong-term as its most important strategy. Funai will focus

Basic Policy Concerning Profit Distribution
Funai Electronic acknowledges that providing returns
to shareholders in connection with the distribution of
profits is one of its most important management issues,and has established a basic policy on the distribution ofdividends at a stable level to shareholders while planning
the strengthening of its management. The basic measureof a 1.0% Consolidated Dividend on Equity Ratio is used asa concrete criteria, and the results of operations and thebusiness environment are taken into consideration in orderto further implement an aggressive dividend policy.
Based upon the policy described above, the term-end
dividend for the fiscal year ended March 2009 was set at 40
yen per share (annual dividend of 40 yen).
Regarding retained earnings, we will further strengthen
the constitution of management by appropriating
Company financial resources to maintain future stableshareholders profits and develop Funai’s medium to longterm business strategies.

on manufacturing the products it can sell with an emphasison speed and greater cost competitiveness by making
additional improvements to the FPS (Funai Production
System), the Company’s unique production improvement
system, strengthening its parts procurement capabilities andthoroughly reviewing fixed costs and variable costs including
selling, general and administrative expenses.
In the audio-visual equipment category, Funai was able toexpand its product lineup and establish its brand positioningof products related to LCD televisions and Blu-ray discplayers by concluding a brand licensing agreement in April
2008 with Royal Philips Electronics for the “Philips” and“Magnavox” brands in North America. This has enabled Funai
to lay a foundation that will enable it to execute a medium tolong-term strategy aimed at expanding its share of the North
America market. In addition, Funai will pursue developmentof products that make good use of network technology thatwill soon be available.
In the information equipment category, Funai will work
to increase sales and boost profit margins by expanding
OEM sales of products that make the best use of Funai’s

Medium-Term Management Strategy andIssues to be Addressedbase in mechatronics, which is Funai’s specialty, in addition
to boosting sales of traditional products. Funai will also

As the severe economic environment resulting from thecontemplate the acquisition of effective patents that look to

global recession continues the consumer electronics industry

the future, and business and capital tie-ups, with an eye tois being asked to create new consumer needs for digital-

achieving further growth.

related products. At the same time, product life cycles arebeing shortened and prices of manufactured goods continue
to fall rapidly because of the intensive competition amongfirms, and the acceleration of product development is12

Annual Report 2009

Timely supply of products based onan accurate response to market needs
To make products that will sell, companies must further

Combination LCD TV/DVD Player (32-inch)

speed up the series of cycles from product planning todevelopment, materials procurement, manufacturing andsales by means such as applications of IT and minimizationof the time lags in each operating division. This demands the
optimum allocation of management resources (materials,
people and capital). Taking such measures will enable Funai
to supply products that accurately meet market needs on atimely basis.

Fostering of human resources andappointments to responsible positions

LCD TV (19-inch)

Net sales
Efforts to revamp Funai’s television business began todemonstrate results, and sales of LCD TVs rose steadily.
TV digital converter boxes and Blu-ray disc players also
benefitted from broad increases in sales. As a result, net
sales for the current year were 9.2% higher compared withthe previous period and ended at 302,778 million yen.

Operating income
Together with efforts to shrink selling, general and

The Funai Group recognizes that measures to improveadministrative expenses in order to strengthen

employees’ skills are critical for pursuing its medium to long-competitiveness, Funai sought to lower its costs by exercisingterm business strategy. Consequently Funai will aggressively

thorough inventory control. In addition, Funai concentrated

foster its human resources and appoint individuals toon improving earnings on LCD televisions, which produced a

responsible positions, particularly its young employees, byloss in the previous period. Along with these efforts to boost

strengthening and broadening programs such as its internal

earnings capacity, the increase in sales of TV digital converter

training system.

boxes with their assured profitability also contributed tocurrent period earnings. As a result, operating income for

Business Performancethe current year totaled 1,410 million yen, compared with anoperating loss of 2,406 million yen in the previous period.

Business environment
In the current year, the global economy exhibited a

Net income (loss)

decelerating trend as a whole during the first quarter, as

Although Funai returned to profitability on an operating

regions other than the United States and newly developing

income basis, the net loss for the current year was 17,365

countries slipped into negative growth. In the second quarter

million yen compared with a net loss of 5,377 million yen

the business climate deteriorated swiftly, not only in thein the previous period, reflecting in part the recognition ofmajor industrialized countries but in newly developing

16,838 million yen as “income taxes for prior periods” incountries as well, particularly after the failure of a major U.S.

conjunction with accounting treatment based on application

investment bank in September 2008, and the financial crisisof the “Anti-Tax Haven Law.”that began in the subprime loan problem in the United States
spread from the stock markets and foreign exchange markets
to the real economy, plunging the world into a serious global
recession. One result was a severe environment in consumer
electronics industry as well, as evidenced by a rapid fall inpersonal consumption, and an ongoing decline in prices for
key products including LCD televisions, against the backdropof the worldwide economic slowdown.

Performance by Product Category
Audio-visual equipment category

Main product lineup
Funai produces and sells mainly digital devices including
LCD TVs and DVD-related products. In DVD-related products,
Funai added to its DVD player and recorder-related products
by beginning full-scale production of Blu-ray disc players in

Annual Report 200913

Management Discussion and Analysis
FUNAI ELECTRIC CO., LTD. and its Consolidated Subsidiaries

2008. In LCD televisions Funai has developed a broad lineup,

Performance results for the current term

ranging from 19-inch to 52-inch models, and is responding

Digital still camera sales exceeded the previous period

to a wide range of consumer needs by also introducing

because of a recovery in orders from OEM partners, but sales

combination model products equipped with DVD players.

of printers tumbled, suffering significantly from the effect of

Performance results for the current term

merchandise strategy reviews by OEM partners. As a result,

In the audio-visual equipment category, sales of VCRs, CRT

net sales of these products totaled 45,006 million yen, a

TVs and DVD-related products continued to shrink as the

30.7% decrease compared with the previous period.

market contracted. Nevertheless, Funai increased its sales
of LCD televisions, particularly through the expansion of its

Other products

product lineup based on the brand licensing agreement with

Other net sales totaled 27,172 million yen, a 3.0% decrease

Royal Philips Electronics. Strong sales of TV digital converter

compared with the previous period.

boxes for the United States, and the full-scale introductionof Blu-ray disc players, which are expected to enjoy robust
growth in the future, also contributed to net sales. As a

Performance by Region

result, net sales of these products totaled 230,600 million

Progress by region

yen, a 25.2% increase compared with the previous period.

By region, Funai was able to broaden its lineup of LCD
television and Blu-ray disc player-related products andInformation equipment

establish its brand positioning by concluding a brandlicensing agreement with Royal Philips Electronics in April

Main product lineup

2008, to sell the Philips and Magnavox brands in its core

In the information equipment category, Funai manufactures

North American market as a new brand policy. In Europe

printer products such as inkjet printers and laser beam

as well, Funai proceeded to build on its new businessprinters, and produces OEM-based digital still cameras.

relationships with powerful retailers such as Carrefour

In printers, Funai began transactions with its second OEM(France), Europe’s largest retail chain, and Metro AG ofpartner from 2008.

Germany. Additionally, the foundation for expanding
sales was created with the establishment of a production■ Net sales■ Operating income (loss)(¥ million)

500,000

400,000

396,712300,000

277,168(¥ million)

30,00020,000■ Net loss(¥ million)

0-4,00020,766-3,666

302,778-8,000-5,377

10,000200,000-12,000

1,410

0

100,000-16,000-2,4060

14

Annual Report 2009

March ’08

March ’09

-17,365-20,000-10,000

March ’07

March ’07

March ’08

March ’09

March ’07

March ’08

March ’09

subsidiary in Poland where products for the European market

This reflected a 45,349 million yen increase in short-term

are produced.

investments compared with the end of previous period to
56,323 million yen in conjunction with the collection of funds
from borrowers. As a result of steps to shrink merchandise

Performance results for the current termand product inventories, Funai was able to reduce inventories

In the North America market, sales of CRT TV and DVD-by 4,407 million yen compared with the end of previous

related products decreased. Sales of LCD televisions, TV

period. Property, plant and equipment totaled 16,026 million

digital converter boxes for the United States and Blu-ray discyen, a decrease of 747 million yen compared with the end

players, on the other, were higher, and as a result, net salesof previous period. The main cause of this decrease wasin the North American market were 216,150 million yen, aa 1,709 million yen decrease in buildings and structures,

19.3% increase compared with the previous period. Net sales

offset by a 643 million increase in machinery and equipment

rose in the Asian and other markets as well, with net sales

compared with the end of previous period. Investments andin the Asian market totaling 6,880 million yen, an 11.3%

other assets totaled 20,148 million yen, a decrease of 40,372

increase compared with previous period, and net sales inmillion yen compared with the end of previous period.

other markets reaching 6,312 million yen, a 112.1% increase

The main cause of this decrease were a 2,374 million yen

compared with the previous period. On the other hand, in

decrease in investment securities, and a 1,335 million yen

the European market sales of core LCD televisions stagnated,decrease in investments in and advances to unconsolidated

and net sales in the European market totaled 36,372 million

subsidiaries and associated companies, compared with theyen, a 20.2% decrease compared with the previous period.

end of the previous period. As a result of these factors, total

Net sales in the Japanese market were 37,064 million yen, a

assets decreased by 24,532 million yen compared with thedecrease of 10.3%.

end of the previous period to 199,883 million yen.

Financial Condition

Liabilities

AssetsCurrent liabilities totaled 60,383 million yen, a 116 million

Current assets totaled 163,709 million yen, a 16,587 million

yen decrease compared with end of the previous period. Thisyen increase compared with the end of the previous period.

decrease was due to a 1,813 million yen increase in short-■ Cost of sales / Cost of sales to net sales
500,000 (¥ million)

400,000

300,000

82.8(%) 100

83.7■ SGA expenses / SGA expenses to net sales
100,000 (¥ million)■ Operating income (loss) to net sales(%) 20

8

16

6

80

80,000

12

4

8

2

14.2

328,54560

231,869

(%)

17.2

85.3

60,000258,304

12.0
47,40147,70543,064200,000

40

40,000100,000

20

20,000

4

0

0

0

0

0

-2

5.2

0.5

March ’07

March ’08

March ’09

March ’07

March ’08

March ’09

-0.9
March ’07

March ’08

March ’09

Annual Report 200915

Management Discussion and Analysis
FUNAI ELECTRIC CO., LTD. and its Consolidated Subsidiaries

term bank loans and a 3,079 million yen in trade accounts

totaled 3,263 million yen, while the increase in trade

payable and other payable that accompanied the recovery inaccounts receivable was 3,892 million yen. Net cash used in

net sales, offset by a 1,995 million yen decrease in current

investing activities totaled 10,795 million yen, and included

portion of long-term debt and a 3,019 million yen decrease

proceeds from collection of loans receivable of 40,151

in income taxes payable. Long-term liabilities totaled 3,904

million yen, offset by payments into time deposits totaling

million yen, a decrease of 1,656 million yen compared with

80,481 million yen. In financing activities, repayments ofthe end of the previous period. This reflected decreases inlong-term loans payable totaled 1,419 million yen, and cash

long-term debt, liability for retirement benefits and deferred

dividends paid totaled 1,705 million yen, which together withtax liabilities of 141 million yen, 141 million yen and 591

other uses brought the net cash used in financing activities

million yen, respectively. As a result of these factors, total

to 2,563 million yen. As a result of these factors, the balanceliabilities decreased 1,772 million yen compared with theof cash and cash equivalents at end of the period decreased

end of the previous period to 64,287 million yen.

by 16,920 million yen compared with the previous period to40,180 million yen.

EquityCapital Investment

Total equity decreased 22,760 million yen compared withend of the previous period to 135,596 million yen. This

Capital investment by the Funai Group in the current

mainly was the result of a decrease in retained earnings ofperiod totaled 5,013 million yen, a 33 million yen increase

19,765 million yen, and a decrease of 2,935 million yen incompared with the previous period. Capital investments byforeign currency translation adjustments, compared with end

manufacturing companies totaled 3,977 million yen, whileof the previous period.

sales companies invested 1,035 million yen. This capital
investment was mainly for the expansion of production
facilities. During the current year Funai did not dispose of or

Cash Flowsell any important facilities.

Net cash used in operating activities totaled 729 million yen.
Depreciation and amortization expense was 4,929 million

Business Risk

yen, the increase in trade accounts payable was 6,182 million
yen and the loss before income taxes and minority interests■ Sales composition by product category (March ’09)

■ Sales by product category(%)

Information
Equipment
9.0%

Others
14.9%

Risks that may have a significant impact on the Group’s

Audiovisual Equipment

Information Equipment(¥ million)

Others26,503276,912

March ’07

93,297396,71227,998March ’08

184,184

277,168

64,98627,172

Audiovisual
Equipment
76.1%

230,600

March ’09

0

16

Annual Report 2009

100,000

45,006200,000

302,778

300,000

400,000

500,000

Blu-ray Disc Player
LCD TV (32-inch)

However, competition in the home electronic appliancefinancial situation and operating results are outlined below.
Forward-looking statements in this text are based on

industry is intense and when the cost of parts and raw

decisions made by the Group as of June 19, 2009.

materials rise, cost pressures may affect the Group’s financial
situation and operating results regardless of the fact that wehave implemented these measures.

The Funai Group’s management policy

Product supply through OEM(producing partner brands)

The Group has adopted a policy of providing high-quality, lowcost products to consumers based upon optimized production

As part of the effort to create collaborations with distributors

and sales systems on a global scale. We manufacture and selland electronic appliance manufacturers, particularly

our principal products, such as audiovisual equipment (DVD-overseas, OEMs accounted for 32.0% of the Group’s

related products, LCD TVs, etc.) and information equipment

production supply in the current consolidated fiscal year.

(printers, digital still cameras), in addition to other products

While our OEM strategy is to efficiently increase our(receiver-related electronic equipment).

market share and improve productivity through mass-

Price competition in these product areas is intense.

production, entrusting the sales strategy to our partners may

Additionally, the lifecycle of digital products is short and thealso result in unforeseen changes. Additionally, individualcompetition to develop new technologies and functions is

OEM contracts are relatively short in duration and Funai mustalso intensifying. Accordingly, these factors may affect the

be able to accurately respond to the needs of our partners.

Group’s financial situation and operating results.

We must strengthen our OEM strategy and, at the same time,

Product cost and market prices

strengthen marketing in order to complement that strategy

The Group’s primary target is customers of massfrom a long-term perspective, and create a proposal-based

merchandisers such as Wal-Mart and therefore we mustsales strategy through the establishment of the Funai brand.

deliver low prices. Consequently the Group is working to

However, the progress of these measures may affect thecut costs through measures such as establishing production

Group’s financial situation and operating results.

systems in optimal locations, pursuing further application

New technologies

of FPS (Funai Production System), the unique productivity

As the number of digital products in the home electronic

improvement system developed by Funai, and utilizing

appliance industry increases and the needs of the market

internal production of parts and centralized purchasing.

■ Sales composition by region (March ’09)

■ Sales by region

(%)

Asia
2.3%

Others2.1%

become more diverse, Funai must improve the quality,

North America

Asia

Others277,104

67,2796,180

North America
71.4%

March ’08

181,109

March ’09

216,1500100,000

5,326
38,366 396,712

2,976

45,581200,000(¥ million)

Japan
8,637

March ’07

Japan
12.2%

Europe12.0%

Europe41,322 277,168

6,880

6,312

36,37237,064300,000

302,778

400,000

500,000

Annual Report 200917

Management Discussion and Analysis
FUNAI ELECTRIC CO., LTD. and its Consolidated Subsidiaries

volume and speed of its new product development.

circumstances may affect the Group’s financial situation and

The Group must be able to respond to such issues andoperating results.

we will improve our technical capabilities, primarily in theForeign currency risk

digital product area, by collaborating with other companies,

The Funai Group selects production sites for its principal

industry and academia, and through personnel training.

products after giving consideration to optimal production

We also will consider mergers and acquisitions among oursites and sales systems.

options. However, a diversification of market needs orDVD-related products, LCD TVs, printers and digital stilltechnological innovation beyond our expectations may affectcameras are produced at Funai Electric (Hong Kong) Ltd., LCD

the Group’s financial situation and operating results.

TVs and DVD-related products are produced at Funai Electric(Polska) Sp.z o.o., and CRT TVs and LCD TVs are produced at

The effects of overseas market trends

Funai (Thailand) Co., Ltd.
Funai purchases products from these production

Dependence on the North American market

subsidiaries and sells them in overseas markets, particularly

A large portion of the Group’s net sales originates in overseas

North America, either through Funai’s overseas sales

markets. The North American market in particular accounted

subsidiaries or through direct sales to OEM supply partners.

for 71.4% of net sales in the current consolidated fiscal year.

Domestic sales are also conducted through direct sales andShould the North American economy rapidly enter asales subsidiaries.

recession, this may affect the Group’s financial situation

Purchases from these three overseas production

and operating results.

subsidiaries accounted for 89.9% of gross purchases during

Dependence on Chinese production

the current consolidated fiscal year. Likewise, overseas net

The Group is working to improve the cost competitivenesssales accounted for 87.8% of net sales. The majority of ourof its products by concentrating production in positive

purchasing and sales are conducted in US dollars. We believecost-benefit regions and purchasing parts in bulk. In thethis reduces the risks that accompany currency fluctuations.

current consolidated fiscal year 99.0% of our products were

However, it is impossible to completely eliminate foreign

produced overseas, with 95.1% produced under consignment

currency risk, and large currency fluctuations may affect the

fabrication in China. Changes in the Chinese government, theGroup’s financial situation and operating results.

outbreak of conflict or natural disasters or other unforeseen■ Total Equity / Shareholders’ equity ratio■ Total assets(¥ million)

400,000

300,000

272,811
224,415200,000

400,000 (¥ million)

300,000

68.5

200,000

187,362(%) 8070.4

100,000

0

Annual Report 2009

83,321March ’09

20

0March ’07

57,100March ’08

March ’09

40,18040,000135,5960March ’08

80,00040

100,000

March ’07

60(¥ million)

100,000

60,000199,883

158,356

18

67.6■ Cash and cash equivalents at the end of year

20,0000March ’07

March ’08

March ’09

Tax assessment based upon the anti-tax haven system
Information concerning the supplementary tax assessment
based on application of the anti-tax haven system for thecurrent period is provided below. There is a possibility thisassessment will affect the Group’s financial situation andoperating results if the assertions made by Funai are notrecognized as a result of legal procedures.
1. Funai received a rectification notice from the Osaka
Regional Taxation Bureau on June 28, 2005. The Bureau
determined that Funai’s Hong Kong subsidiary does notmeet the requirements for exclusion under the anti-tax
haven system and the Hong Kong subsidiary’s income forthe three fiscal years from March 2002 through March
2004 will be considered, and taxed as, Funai’s income.
Funai objected to this supplementary tax assessment, andfiled a petition seeking a review of the decision with the
Osaka Regional Tax Tribunal on July 25, 2006, and filed asuit in the Osaka District Court on November 16, 2006 to
overturn the supplementary tax assessment order.
On July 3, 2008, Funai received the written ruling of
the Osaka Regional Tax Tribunal stating it will dismiss
the Company’s assertion. Funai believes this judgment
is indeed regrettable and is not a ruling to which it canagree, and will continue to assert the validity of its
arguments in the future.
The additional tax of 16,651 million yen (19,184
million yen including incidental taxes) includes corporate,
enterprise and residence taxes. Because the “Accounting
Practices, Disclosure and Audit Treatment for Various
Taxes” (Japanese Institute of Certified Public Accountants,
Auditing and Assurance Practice Committee, Audit
Committee Report No. 63) was revised on March 8, 2007
and the accounting treatment for supplementary tax
assessments was clarified in writing, Funai charged thetax assessment to income as “prior year’s taxes” in thefiscal year ended March 31, 2007.
2. Funai received a rectification notice from the Osaka
Regional Taxation Bureau on June 16, 2008. The Bureau
determined that Funai’s Hong Kong subsidiary does notmeet the requirements for exclusion under the anti-tax
haven system and the Hong Kong subsidiary’s income forthe three fiscal years from March 2005 through March
2007 will be considered, and taxed as, Funai’s income.
In light of the continuing legal proceedings in the Osaka
District Court related to the previous notice received
for a similar issue on June 28, 2005, Funai regarded thesubmission of another claim to be highly regrettable andunacceptable, and submitted an appeals application
to the Osaka Regional Taxation Bureau’s Board of Tax
Appeals on August 6, 2008.
Although the review proceedings based on the
Company’s petition were pending in the National Tax
Tribunal, Funai was legally able to seek a judicial remedy
after three months had passed since it filed its petition,and on November 14, 2008 Funai filed a complaint
with the Osaka District Court for the rescission of the
supplementary tax assessment order. The examination ofthis complaint is currently being considered by the court,
together with the previous lawsuit.
The additional tax of 15,038 million yen (16,838
million yen including incidental taxes) includes corporate,
enterprise and residence taxes. Funai charged the tax
assessment to income as “prior year’s taxes” in thecurrent consolidated accounting fiscal year.
Under this tax system, taxes are judged based on thecurrent conditions at the end of each business periodof the foreign corporation that is subject to the law. For
reference purposes, the effect from taxation of Funai’s
Hong Kong subsidiary income for the two-year period
covering the consolidated fiscal year ended March 2008,
the consolidated fiscal year following the year subject
to investigation, and the consolidated fiscal year ended
March 2009, is estimated at approximately 700 million
yen including corporate, enterprise and residence taxes,
when calculated by deducting from the subject income
the amount of dividends Funai received from the Hong
Kong subsidiary in the fiscal year ended March 2008. For
the reason described above, Funai has not accounted forthis taxation amount at the present time.

Annual Report 200919

Global Network / Directory
Consignment Manufacturing Plants (China)

1

3

Funai Europe GmbH (Germany)

Dong Guan Plant 1

2

Dong Guan Plant 3

Dong Guan Plant 2

6

FUNAI ELECTRIC (POLSKA) Sp.z o.o.

5

4

7

Huang Jiang Plant

8

Zhong Shan Plant 1

Zhong Shan Plant 2

3

1

4

5

6

7

8

2

9

Funai (Thailand) Co., Ltd. (Thailand)

10

Funai Electric (H.K.) Ltd. (Hong Kong)

910

Product Development Strategy
Places of Business, Research Center
TOKYO BRANCH (JAPAN)
FUNAI TOKYO TECHNOLOGY CENTER (JAPAN)
FUNAI ELECTRIC ADVANCED APPLIED TECHNOLOGY RESEARCH INSTITUTE INC.
Manufacturing Subsidiaries
CHUGOKU FUNAI ELECTRIC CO., LTD. (JAPAN)
FUNAI ELECTRIC (H.K.) LTD. (HONG KONG)
Consignment manufacturing plants
DONG GUAN PLANT1,2,3 (CHINA)HUANG JIANG PLANT (CHINA)ZHONG SHAN PLANT 1 (CHINA)ZHONG SHAN PLANT 2 (CHINA)
H.F.T. INDUSTRIAL LTD. (HONG KONG)
FUNAI (THAILAND) CO., LTD. (THAILAND)FUNAI ELECTRIC (POLSKA) Sp.z o.o.

20

Annual Report 2009

Sales Subsidiaries
DX ANTENNA CO., LTD. (JAPAN)
FUNAI CORPORATION, INC. (U.S.A)
P&F USA, Inc. (U.S.A)
FUNAI EUROPE GmbH (GERMANY)
Development Subsidiary
FUNAI ELECTRIC ADVANCED APPLIEDTECHNOLOGY RESEARCH INSTITUTE INC. (JAPAN)
Affiliated Subsidiary
FUNAI SERVICE CO., LTD. (JAPAN)
FUNAI SERVICE CORPORATION (U.S.A)

14

15

FUNAI SERVICE CORPORATION (U.S.A)

11

12

16

P&F USA, Inc. (U.S.A)

Funai Corporation, Inc. (U.S.A)

13

11

13
15

Funai Electric Co., Ltd. Head Office (Japan)

12
Funai Electric Co., Ltd. Tokyo Branch(Japan)14

16

Chugoku Funai Electric Co., Ltd. (Japan)

A total of three companies in Japan and ten overseas are includedin the Funai Group’s consolidated business results for March2009 period. In addition, the Group has one oversea affiliate thatis accounted for by the equity method. Funai Electric Co., Ltd.
is mainly responsible for the intangible aspects of the Group’s
operations (development, design, etc) while the subsidiaries
undertake the tangible aspects (production, sales, etc).
Funai’s manufacturing operations are characterized by
global procurement and a global production system. The
company currently operates manufacturing facilities in three
countries: China, Thailand and Poland. In China, productionof our leading digital devices is shared among the Dong Guan,
Huang Jiang and Zhong Shan plants. Production CRT TVs
and LCD TVs in Thailand is handled by Funai (Thailand) Co.,
Ltd., which was established in July 2003. To provide a base toachieve sales growth in Europe, which is the world’s largest LCD
television market, we established Funai Electric (Polska) Sp.z
o.o. in Poland in October 2006, and began operations at the
Poland plant in June 2007. Overall, the Group employs 2,590
individuals (as of March 31, 2009).
Funai’s well-established global sales system consists of theoverseas subsidiaries Funai Corporation Inc. (USA), P&F USA, Inc.,
Funai Europe GmbH (Germany) and DX Antenna Co., Ltd. (Japan).
Additionally, FUNAI SERVICE CORPORATION was established asa service company in October 2007 in order to strengthen thesales system within the US and is under the direct control of Funai
Electric Co., Ltd. Domestic sales system has been integrated into
DX Antenna since the transfer of business from Funai Sales Co.,
Ltd. to the company.

Annual Report 200921

Members of the Board and Officers
as of June 19, 2009

Members of the Board

Corporate Officers

Tetsuro Funai••••••••••••• Chairman of Nomination andMember of Compensation
Committee

Tetsuro Funai•••••••••••••••••••• Chairman

Tomonori Hayashi•••••• Chairman of the Board,
Compensation and Member ofNomination Committee

Tomonori Hayashi••••••••••••• President and CEO

Officers
Takashi Kiyomoto•••••••••••••• Senior Executive Officer

Mitsuo Yonemoto••••••• Member of Nomination andCompensation Committee

Akira Miyazaki••••••••••• Member of Nomination, Audit
and Compensation Committee

Shigemichi Asakura•••• Chairman of Audit Committee

Hideo Nakai•••••••••••••••••••••• Senior Executive Officer
Shinji Seki•••••••••••••••••••••••• Executive Officer
Toshio Otaku•••••••••••••••••••• Executive Officer
Masahiko Naito••••••••••••••••• Officer
Fumiaki Kidera•••••••••••••••••• Officer

Yasuhisa Katsuta•••••••• Member of Nomination, Audit
and Compensation Committee

Hidetoshi Nishimura••• Member of Nomination, Audit
and Compensation Committee

22

Annual Report 2009

Nobuhisa Uchikawa••••••••••• Officer
Kenji Sakata•••••••••••••••••••••• Officer
Susumu Nojii•••••••••••••••••••• Officer

Financial Statements
FUNAI ELECTRIC CO., LTD. and its Consolidated Subsidiaries

Contents
Consolidated Balance Sheets.................................................. 24
Consolidated Statements of Operations ............................... 26
Consolidated Statements of Changes in Equity..................... 27
Consolidated Statements of Cash Flows................................ 28
Notes to the Consolidated Financial Statements................... 29
Independent Auditor’s Report................................................. 42

Annual Report 200923

Consolidated Balance Sheets
FUNAI ELECTRIC CO., LTD. and Consolidated Subsidiaries(Thousands of
U.S. dollars)(Millions of yen)

(Note 1)March 31,2009

ASSETS

March 31,
2008

2009

CURRENT ASSETS:
Cash and cash equivalents............................................................................
Short-term investments................................................................................
Receivables:
Trade.........................................................................................................
Other.........................................................................................................
Inventories (Note 3).........................................................................................
Deferred tax assets (Note 9)............................................................................
Prepaid expenses and other current assets..................................................
Allowance for doubtful receivables...............................................................

¥

40,18056,323¥57,10010,974$

409,040
573,379

28,8452,409
30,678
2,763
2,784
(273)

26,841
1,794
35,085
3,605
12,010(287)

293,648
24,524
312,308
28,12828,341(2,779)163,709147,122

1,666,589

Land...............................................................................................................
Buildings and structures................................................................................
Machinery, equipment and other..................................................................
Lease assets.................................................................................................
Construction in progress...............................................................................
Total..........................................................................................................
Accumulated depreciation.............................................................................

5,194
13,37055,249295
484
74,592(58,566)

5,238
15,07954,606
20
74,943(58,170)

52,876
136,109562,446
3,003
4,927
759,361(596,213)

Net property, plant and equipment...........................................................

16,026

16,773

163,148

Investment securities (Note 4). .......................................................................
Investments in and advances to unconsolidated subsidiaries andassociated companies...............................................................................
Patents..........................................................................................................
Long-term loans............................................................................................
Deferred tax assets (Note 9)............................................................................
Other assets..................................................................................................

3,424

5,798

34,857

2,610
4,328
218
4,329
5,239

3,945
5,375
40,1183
5,281

26,57044,0602,219
44,07053,334

Total investments and other assets..........................................................

20,14860,520205,110

224,415$ 2,034,847

Total current assets...................................................................................
PROPERTY, PLANT AND EQUIPMENT:INVESTMENTS AND OTHER ASSETS:TOTAL...............................................................................................................

¥

199,883

See notes to consolidated financial statements.

24

Annual Report 2009¥(Thousands of
U.S. dollars)(Millions of yen)

(Note 1)March 31,2009

LIABILITIES AND EQUITYCURRENT LIABILITIES:
Short‑term bank loans (Note 5)........................................................................
Current portion of long-term debt (Note 5)......................................................
Payables:Trade.........................................................................................................
Other.........................................................................................................
Income taxes payable....................................................................................
Other current liabilities..................................................................................

¥

March 31,2008

11,519
1,512

¥

9,706
3,507

2009
$

117,266
15,39228,157
12,132
1,624
5,439

25,811
11,3994,643
5,433

286,644
123,506
16,53355,370Total current liabilities...............................................................................

60,38360,499614,711

LONG-TERM LIABILITIES:Long-term debt (Note 5)..................................................................................
Liability for retirement benefits (Note 6)..........................................................

945
2,343

1,086
2,484

9,620
23,852

Deferred tax liabilities (Note 9). .......................................................................
Other.............................................................................................................

27
589

618
1,372

275
5,996

Total long-term liabilities...........................................................................

3,904

5,560

39,74331,28033,24518
110,048(99)(14,999)

31,28033,245
129,813(64)(12,064)

318,436
338,440183
1,120,310(1,008)(152,692)(24,340)
135,153443
135,596(24,339)
157,871
485
158,356(247,786)
1,375,883
4,510
1,380,393

224,415$ 2,034,847

COMMITMENTS AND
CONTINGENT LIABILITIES (Notes 9, 11 and 13)
EQUITY (Notes 7, 8 and 13):
Common stock,authorized, 80,000,000 shares; issued,
36,104,196 shares in 2009 and 2008........................................................
Capital surplus...............................................................................................
Stock acquisition rights.................................................................................
Retained earnings..........................................................................................
Unrealized loss on available-for-sale securities..............................................
Foreign currency translation adjustments.....................................................
Treasury stock – at cost
2,011,321 shares in 2009 and 2,011,003 shares in 2008..........................
Total..........................................................................................................
Minority interests..........................................................................................
Total equity................................................................................................
TOTAL...............................................................................................................

¥

199,883¥

See notes to consolidated financial statements.

Annual Report 200925

Consolidated Statements of Operations
FUNAI ELECTRIC CO., LTD. and Consolidated Subsidiaries(Thousands of
U.S. dollars)(Millions of yen)

(Note 1)Years Ended
March 31,2009
NET SALES.......................................................................................................

¥Years Ended
March 31,2008

302,778¥

2009

277,168$ 3,082,337

COST OF SALES..............................................................................................
Gross profit...............................................................................................

258,304
44,474

231,869
45,2992,629,583
452,754

SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES (Note 10). .....................................................................................

43,06447,705438,400

Operating income (loss)............................................................................

1,410(2,406)

14,354OTHER INCOME (EXPENSES):Interest and dividend income........................................................................
Interest expense...........................................................................................
Foreign exchange gain (loss), net..................................................................
Provision for doubtful receivables.................................................................
Loss on impairment of investment securities...............................................
Loss on liquidation of an associated company .............................................
Gain on sales of investment securities, net..................................................
Other – net....................................................................................................

3,439
(351)
(2,893)(94)(3,087)(644)
26(1,069)

5,324
(593)
(2,026)(83)(47)(1,311)
5,622(1,970)35,010(3,573)(29,451)(957)(31,426)(6,556)265(10,884)

Other income (expenses) – net.................................................................

(4,673)

4,916(47,572)

INCOME (LOSS) BEFORE INCOME TAXES AND
MINORITY INTERESTS................................................................................

(3,263)2,510(33,218 )INCOME TAXES (Note 9):
Current..........................................................................................................
Prior years.....................................................................................................
Deferred........................................................................................................
Total income taxes....................................................................................

614
16,838(3,560)13,892

6,208
1,645
7,853

6,251
171,414(36,242)
141,423

MINORITY INTERESTS IN NET INCOME.......................................................

(210)

(34)

(2,138)NET LOSS.........................................................................................................

¥(17,365)¥

(5,377)(Yen)
PER SHARE OF COMMON STOCK (Notes 2.p and 12):
Basic net loss................................................................................................
Cash dividends applicable to the year...........................................................

¥¥

(509.33)
40.00

See notes to consolidated financial statements.

26

Annual Report 2009$

(176,779)(U.S. Dollars)¥¥

(157.71)
50.00

$
$

(5.19)
0.41

Consolidated Statements of Changes in Equity
FUNAI ELECTRIC CO., LTD. and Consolidated Subsidiaries

BALANCE, APRIL 1, 2007.....................
Adjustment due to change of the fiscal
year-end of foreign subsidiaries..........
Net loss..............................................
Cash dividends,¥55.00 per share............................
Purchase of treasury stock . ..............
Exercise of stock options...................
Net change in the year.......................

(Thousands)(Millions of yen)

Outstanding
Number of
Shares ofCommon Common
Stock
Stock

UnrealizedGain(loss)on
Available
for-sale
Securities

Stock
Acquisition Retained
Rights
Earnings

CapitalSurplus34,093 ¥ 31,279 ¥ 33,244¥ 139,468 ¥

Foreign
Currency
Translation
Adjustments

4,039 ¥

TreasuryStock3,288 ¥ (24,337) ¥ 186,981 ¥
(2,403)(2,403)(5,377)(5,377)(1,875)(2)
2(19,455)

104(1,875)(2)
2(19,351)

157,871

485

158,356

1

BALANCE, MARCH 31, 2008................
Adjustment of retained earnings due toan adoption of PITF No. 18 (Note 2 b)..........
Net loss..............................................
Cash dividends,¥50.00 per share.............................
Purchase of treasury stock . ..............
Net change in the year.......................

34,093BALANCE, MARCH 31, 2009................

34,093 ¥ 31,280 ¥ 33,245 ¥

31,28033,245381 ¥ 187,362(5,377)

(2)
1

Total
Equity(2,403)(1,875)(0)0Minority
Interests

Total

129,813(4,103)(15,352)(64)(12,064)(695)(24,339)122(17,365)(1,705)(0)(1)(3,057)

(573)

(573)

(17,365)(17,365)(1,705)(1)(3,074)(1,705)(1)(3,116)

18

(35)

(42)

18 ¥ 110,048 ¥(99) ¥ (14,999) ¥ (24,340) ¥ 135,153 ¥

443 ¥ 135,596(Thousands of U.S. Dollars) (Note.1)

CommonStockCapitalSurplus

Stock
Acquisition Retained
Rights
Earnings

BALANCE, MARCH 31, 2008............................ $ 318,436 $ 338,440
Adjustment of retained earnings due toan adoption of PITF No. 18 (Note 2 b)................
Net loss..........................................................
Cash dividends,$0.51 per share..........................................
Purchase of treasury stock.............................
Net change in the year...................................
BALANCE, MARCH 31, 2009............................ $ 318,436 $ 338,440 $

Unrealized
loss onAvailable
for-sale
Securities$1,321,522 $

Foreign
Currency
Translation
Adjustments

TreasuryStock(652) $ (122,813) $ (247,776) $1,607,157 $

(7,076)(176,779)

1,242(17,357)(10)183

Minority
Interests

Total

(356)

(31,121)

Total
Equity4,937 $1,612,094(5,834)(176,779)(5,834)(176,779)(17,357)(10)(31,294)(17,357)(10)(31,721)183 $1,120,310 $ (1,008) $ (152,692) $ (247,786) $1,375,883 $

(427)

4,510 $1,380,393

See notes to consolidated financial statements.

Annual Report 200927

Consolidated Statements of Cash Flows
FUNAI ELECTRIC CO., LTD. and Consolidated Subsidiaries(Millions of yen)(Thousands of
U.S. dollars)

Years Ended
March 31,

Years Ended
March 31,

(Note 1)OPERATING ACTIVITIES:
Income (loss) before income taxes and minority interests...........................
Adjustments for:
Income taxes – paid..................................................................................
Prior year's income taxes – paid...............................................................
Depreciation and amortization...................................................................
Gain on sale or disposal of property, plant and equipment.......................
Equity in losses of associated companies . ..............................................
Gain on sales of investment securities, net..............................................
Changes in assets and liabilities, net of effects(Increase) decrease in trade accounts receivable.................................
Decrease in inventories.........................................................................
Increase (decrease) in trade accounts payable.....................................
Decrease in liability for employees’ retirement benefits.......................
Other – net................................................................................................
Total adjustments..................................................................................

2009
¥

(3,263)

2008
¥

$

(33,218)(5,053)(16,838)
4,929
(5)
171
(26)

(5,385)
6,003
(230)
39
(5,622)(51,440)(171,414)
50,178
(51)
1,741
(265)

(3,892)
2,820
6,182
(148)
14,394
2,534

6,979
3,313
(15,472)(234)(5,615)(16,224)(39,621)28,70862,934(1,507)
146,534
25,797

Net cash used in operating activities....................................................

(729)(13,714)(7,421)INVESTING ACTIVITIES:Payments for time deposits..........................................................................
Proceeds from time deposits........................................................................
Proceeds from sale of property, plant and equipment..................................
Purchases of property, plant and equipment................................................
Purchases of intangible assets......................................................................
Proceeds from sales of investment securities..............................................
Purchases of investment securities..............................................................
Payments for loans receivable......................................................................
Proceeds from collection of loans receivable................................................
Other – net....................................................................................................

(80,481)
33,992721(4,752)
(758)
1,147
(750)
(106)
40,151
41(12,444)543(4,826)(1,556)
9,746
(546)
(280)
28
(141)

(819,312)
346,045
7,340(48,376)(7,717)
11,677(7,635)(1,079)408,745417

Net cash used in investing activities.........................................................

(10,795)(9,476)(109,895)

FINANCING ACTIVITIES:
Decrease in short-term bank loans – net.......................................................
Repayments of long-term debt.....................................................................
Repurchase of treasury stock........................................................................
Dividends paid...............................................................................................
Other – net....................................................................................................

(171)(1,419)(1)(1,705)733(5,648)(724)(3)(1,875)108(1,741)(14,446)(10)(17,357)
7,462

Net cash used in financing activities.........................................................

(2,563)(8,142)(26,092)

FOREIGN CURRENCY TRANSLATION ADJUSTMENTS
ON CASH AND CASH EQUIVALENTS.......................................................

(2,833)(2,173)(28,841)

NET DECREASE IN CASH AND CASH
EQUIVALENTS.............................................................................................

(16,920)(33,505)(172,249)

ADJUSTMENT DUE TO CHANGE OF THE FISCALYEAR-END OF FOREIGN SUBSIDIARIES...................................................

7,284

CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR...........................
CASH AND CASH EQUIVALENTS, END OF YEAR........................................

57,100¥

40,180See notes to consolidated financial statements.

28

2,510

2009

Annual Report 2009

83,321¥57,100581,289$

409,040

Notes to Consolidated Financial Statements
FUNAI ELECTRIC CO., LTD. and Consolidated Subsidiaries

1. BASIS OF PRESENTING CONSOLIDATED FINANCIAL STATEMENTS
The accompanying consolidated financial statements have been prepared in accordance with the provisions set forth in theJapanese Financial Instruments and Exchange Act and its related accounting regulations and in conformity with accounting principles
generally accepted in Japan, (“Japanese GAAP”) which are different in certain respects as to application and disclosure requirements ofInternational Financial Reporting Standards.
In preparing these consolidated financial statements, certain reclassifications and rearrangements have been made to theconsolidated financial statements issued domestically in order to present them in a form which is more familiar to readers outside
Japan. In addition, certain reclassifications have been made in the 2008 consolidated financial statements to conform to theclassifications used in 2009.
The consolidated financial statements are stated in Japanese yen, the currency of the country in which FUNAI ELECTRIC Co., Ltd. (the“Company”) is incorporated and operates. The translations of Japanese yen amounts into U.S. dollar amounts are included solely forthe convenience of readers outside Japan and have been made at the rate of ¥ 98.23 to $1, the approximate rate of exchange at March
31, 2009. Such translations should not be construed as representations that the Japanese yen amounts could be converted into U.S.
dollars at that or any other rate.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES(a) 	Consolidation—The consolidated financial statements as of March 31, 2009 include the accounts of the Company and its 13 significant(12 in 2008) subsidiaries (together, the “Group”).
Under the control or influence concept, those companies in which the Company, directly or indirectly, is able to exercise control
over operations are fully consolidated, and those companies over which the Group has the ability to exercise significant influence areaccounted for by the equity method.
Investments in 2 associated companies are accounted for by the equity method.
Investments in the remaining unconsolidated subsidiaries and associated companies are stated at cost. If the equity method of
accounting had been applied to the investments in these companies, the effect on the accompanying consolidated financial statements
would not be material.
The excess of the cost of an acquisition over the fair value of the net assets of the acquired subsidiary at the date of acquisition is
being amortized over a period of 5 years.
All significant intercompany balances and transactions have been eliminated in consolidation. All material unrealized profit included
in assets resulting from transactions within the Group is eliminated.
(b) 	Unification of Accounting Policies Applied to Foreign Subsidiaries for the Consolidated Financial Statements—In May 2006, the
Accounting Standards Board of Japan (the “ASBJ”) issued ASBJ Practical Issues Task Force (PITF) No.18, “Practical Solution on
Unification of Accounting Policies Applied to Foreign Subsidiaries for the Consolidated Financial Statements”. PITF No.18 prescribes:(1) the accounting policies and procedures applied to a parent company and its subsidiaries for similar transactions and events
under similar circumstances should in principle be unified for the preparation of the consolidated financial statements, (2) financial
statements prepared by foreign subsidiaries in accordance with either International Financial Reporting Standards or the generally
accepted accounting principles in the United States of America tentatively may be used for the consolidation process, (3) however, thefollowing items should be adjusted in the consolidation process so that net income is accounted for in accordance with Japanese GAAP
unless they are not material: 1) amortization of goodwill; 2) scheduled amortization of actuarial gain or loss of pensions that has been
directly recorded in the equity; 3) expensing capitalized development costs of R&D; 4) cancellation of the fair value model accounting forproperty, plant, and equipment and investment properties and incorporation of the cost model accounting; 5) recording the prior years’
effects of changes in accounting policies in the income statement where retrospective adjustments to financial statements have been
incorporated; and 6) exclusion of minority interests from net income, if contained. PITF No.18 was effective for fiscal years beginningon or after April 1, 2008 with early adoption permitted.
The Company applied this accounting standard effective April 1, 2008. The effect of this change on the consolidated statements ofoperations is immaterial.
(c) 	Cash Equivalents—Cash equivalents are short-term investments that are readily convertible into cash and that are exposed toinsignificant risk of changes in value.
Cash equivalents include time deposits, certificate of deposits, commercial paper and bond funds, all of which mature or become due
within three months of the date of acquisition.

Annual Report 200929

(d) 	Inventories—Prior to April 1, 2008, inventories of the Company and its consolidated domestic subsidiaries were stated at cost,
determined by the average method for finished products and work in process, and by the first-in first-out method. In July 2006,
the ASBJ issued ASBJ Statement No.9,” Accounting Standard for Measurement of Inventories”, which was effective for fiscal years
beginning on or after April 1, 2008 with early adoption permitted. This standard requires that inventories held for sale in the ordinary
course of business be measured at the lower of cost or net selling value, which is defined as the selling price less additional estimatedmanufacturing costs and estimated direct selling expenses. The replacement cost may be used in place of the net selling value, if
appropriate.
The Company applied the new accounting standard for measurement of inventories effective April 1, 2008. The effect of this change
on consolidated statements of operations is immaterial.
Inventories of consolidated foreign subsidiaries are stated at the lower of cost or market substantially determined by the first-in firstout method.
(e) 	Property, Plant and Equipment—Property, plant and equipment are stated at cost. Depreciation of property, plant and equipment of
the Company and its consolidated domestic subsidiaries is computed substantially by the declining-balance method while the straightline method is applied to buildings acquired after April 1, 1998, at rates based on the estimated useful lives of the assets. Depreciationof property, plant and equipment of consolidated foreign subsidiaries is principally computed by the straight-line method at rates basedon the estimated useful lives assets. The range of useful lives is principally from 3 to 50 years for buildings and structures and from 1 to
20 years for machinery and equipment.
(Changes in useful life of property, plant and equipment)
The useful life of property, plant and equipment with respect to Domestic Group was changed as a result of the review of useful life ofthese assets in conjunction with the revision of the corporate tax act Machinery and equipment were changed to 7 years from 11 years.
The effect of this change on the consolidated statements of operations is immaterial.
(f) 	Investment Securities—Investment securities are classified and accounted for, depending on management’s intent. All securities areclassified as available-for-sale securities.
Marketable available-for-sale securities are reported at fair value, with unrealized gains and losses, net of applicable taxes, reported
in a separate component of equity.
Non-marketable available-for-sale securities are stated at cost determined by the moving-average method. For other than temporary
declines in fair value, investment securities are reduced to net realizable value by a charge to income.
(g) 	Patents— Patents are carried at cost less accumulated amortization, which is computed by the straight-line method over the estimateduseful lives.
(h) 	Long-lived assets—The Group reviews its long-lived assets for impairment whenever events or changes in circumstance indicate thecarrying amount of an asset or asset group may not be recoverable. An impairment loss would be recognized if the carrying amount ofan asset or asset group exceeds the sum of the undiscounted future cash flows expected to result from the continued use and eventual
disposition of the asset or asset group. The impairment loss would be measured at the amount by which the carrying amount of theasset exceeds its recoverable amount, which is the higher of the discounted cash flows from the continued use and eventual dispositionof the asset or the net selling price at disposition.
(i) 	Retirement and Pension Plans—The Company and certain consolidated subsidiaries have non-contributory funded defined benefit
pension plans and unfunded retirement benefit plans for employees. Certain consolidated foreign subsidiaries also have defined
pension plans.
Effective April 1, 2000, the Group adopted a new accounting standard for employees’ retirement benefits and accounted forthe liability for retirement benefits based on the projected benefit obligations and plan assets at the balance sheet date. The totaltransitional obligation determined as of April 1, 2000, was charged to income when adopted, except that of a certain domestic
subsidiary which is amortized over 15 years.
Actuarial gains or losses are amortized by the straight line method over a period within the average remaining years of service of theemployee (10 years) starting from the following period. Prior service cost is amortized by the straight line method over a period within
the average remaining years of service of the employee (10 years).
Retirement allowances for directors and executive officers are recorded to state the liability at the amount that would be required if all
directors and excecutive officers retired at each balance sheet date.

30

Annual Report 2009

(j) 	Stock Options—The ASBJ statement No.8, ”Accounting Standard for Stock Options” and related guidance are applicable to stock
options granted on and after May 1, 2006.
This standard requires companies to recognize compensation expense for employee stock options based on the fair value at the dateof grant and over the vesting period as consideration for receiving goods or services. The standard also requires companies to accountfor stock options granted to non-employees based on the fair value of either the stock option or the goods or services received. In the
consolidated balance sheet, the stock option is presented as stock acquisition right as a separate component of equity until exercised.
The standard covers equity-settled, share-based payment transactions, but does not cover cash-settled, share-based paymenttransactions. In addition, the standard allows unlisted companies to measure options at their intrinsic value if they cannot reliably
estimate fair value.
The company has applied the accounting standard for stock options to those granted on and after May 1, 2006.
(k) 	Research and Development Costs—Research and development costs are charged to income as incurred.
(l) 	Leases— In March 2007, the ASBJ issued ASBJ Statement No.13, “Accounting Standard for Lease Transactions”, which revised theprevious accounting standard for lease transactions issued in June 1993. The revised accounting standard for lease transactions iseffective for fiscal years beginning on or after April 1, 2008 with early adoption permitted for fiscal years beginning on or after April 1,
2007.
Under the previous accounting standard, finance leases that deem to transfer ownership of the leased property to the lessee were
to be capitalized. However, other finance leases were permitted to be accounted for as operating lease transactions if certain “as if
capitalized” information is disclosed in the note to the lessee’s financial statements. The revised accounting standard requires that all
finance lease transactions should be capitalized to recognize lease assets and lease obligations in the balance sheet. In addition, therevised accounting standard permits leases which existed at the transition date and do not transfer ownership of the leased property to
the lessee to be accounted for as operating lease transactions.
The Group applied the revised accounting standard effective April 1, 2008. In addition, the Group accounted for leases which existed
at the transition date and do not transfer ownership of the leased property to the lessee as operating lease transactions. There is noeffect of this change on consolidated statements of operations.
(m) 	Income Taxes—The provision for income taxes is computed based on the pretax income included in the consolidated statementsof operations. The asset and liability approach is used to recognize deferred tax assets and liabilities for the expected future tax
consequences of temporary differences between the carrying amounts and the tax bases of assets and liabilities. Deferred taxes aremeasured by applying currently enacted tax laws to the temporary differences.
(n) 	Foreign Currency Transactions—All short-term and long-term monetary receivables and payables denominated in foreign currencies
are translated into Japanese yen at the exchange rates at the balance sheet date. The foreign exchange gains and losses from translation
are recognized in the consolidated statements of operations to the extent that they are not hedged by forward exchange contracts.
(o) 	Foreign Currency Financial Statements—The balance sheet accounts of the consolidated foreign subsidiaries are translated into
Japanese yen at the current exchange rate as of the balance sheet date except for equity, which is translated at the historical rate.
Differences arising from such translation were shown as “Foreign currency translation adjustments” in a separate component ofequity.
Revenue and expense accounts of consolidated foreign subsidiaries are translated into yen at the average exchange rate.
(p) 	Per Share Information—Basic net loss per share is computed by dividing net income available to common shareholders by theweighted-average number of common shares outstanding for the period.
Diluted net income per share reflects the potential dilution that could occur if stock options were exercised into common stock.
Diluted net income per share of common stock assumes full conversion of full exercise of outstanding warrants. Diluted net income pershare is not disclosed because of the Company’s net loss position.
Cash dividends per share presented in the accompanying consolidated statements of operations are dividends applicable to therespective years including dividends to be paid after the end of the year.
(q) 	New Accounting Pronouncements
	Construction Contracts—Under the current Japanese GAAP, either the completed-contract method or the percentage-of-completion

Annual Report 200931

method is permitted to account for construction contracts. In December 2007, the ASBJ issued a new accounting standard forconstruction contracts. Under this new accounting standard, the construction revenue and construction costs should be recognized by
the percentage-of-completion method, if the outcome of a construction contract can be estimated reliably. When total construction
revenue, total construction costs and the stage of completion of the contract at the balance sheet date can be reliably measured, theoutcome of a construction contract can be estimated reliably. If the outcome of a construction contract cannot be reliably estimated,the completed-contract method shall be applied. When it is probable that total construction costs will exceed total construction
revenue, an estimated loss on the contract should be immediately recognized by providing for loss on construction contracts. This
standard is applicable to construction contracts and software development contracts and effective for fiscal years beginning on or after
April 1, 2009 with early adoption permitted for fiscal years beginning on or before March 31, 2009 but after December 27, 2007.

3. INVENTORIESInventories at March 31, 2009 and 2008 consisted of the following:(Millions of yen)
2009
Finished products.....................................................................................
Work in process.......................................................................................
Raw materials and supplies......................................................................
Total.....................................................................................................

¥
¥

2008

20,926
1,635
8,117
30,678¥¥(Thousands of
U.S. dollars)
2009

21,124
1,293
12,66835,085$$

213,030
16,64582,633
312,308

4. INVESTMENT SECURITIESThe carrying amounts and aggregate fair values of investment securities at March 31, 2009 and 2008 were as follows:(Millions of yen)
Cost

March 31, 2009

Unrealized
Gains

Unrealized
LossesFair
Value

Securities classified as:
Available-for-sale:
Equity securities...................................................

¥

2,262

¥

174

¥

(170)

¥

2,266

March 31, 2008
Securities classified as:
Available-for-sale:
Equity securities...................................................

¥

4,166

¥

735

¥

(635)

¥

4,266

(Thousands of U.S. dollars)
March 31, 2009

Cost

Unrealized
Gains

Unrealized
Losses

$

$

Fair
Value

Securities classified as:
Available-for-sale:
Equity securities...................................................

32

Annual Report 2009$

23,028

1,771(1,731)$

23,068Available-for-sale securities whose fair value is not readily determinable as of March 31, 2009 and 2008 were as follows:

Carrying amount(Millions of yen)
2009
2008
Available-for-sale:
Equity securities...................................................................................
Investments in limited partners...........................................................
Total.................................................................................................

¥
¥

591
567
1,158

¥

739
793
1,532

¥

(Thousands of
U.S. dollars)
2009
$
$

6,017
5,772
11,789Proceeds from sales of available-for-sale securities for the years ended March 31, 2009 and 2008 were ¥ 26 million ($ 265 thousand)and ¥ 8,887 million, respectively. Gross realized gains and losses on these sales, computed on the moving average cost basis, were ¥26 million ($ 265 thousand) and ¥ 0 million ($ 0 thousand), respectively, for the year ended March 31, 2009 and ¥ 5,626 million and ¥ 4
million, respectively, for the year ended March 31, 2008.

5. SHORT-TERM BANK LOANS AND LONG TERM DEBT
Short-term bank loans bore interest at an annual average rate of 1.6% and 3.3% at March 31, 2009 and 2008, respectively.
Long-term debt at March 31, 2009 and 2008 consisted of the following:(Millions of yen)2009
Unsecured loans from banks and other financial
institutions, due serially to 2012 with averageinterest rates 1.3% (2009) and 1.9% (2008):...........................................
Obligations under finance leases.............................................................
Total.....................................................................................................
Less current portion.................................................................................
Long-term debt, less current portion........................................................

¥

¥

2,086
371
2,457
(1,512)945

2008(Thousands of
U.S. dollars)
2009

¥

4,593

$

¥

4,593
(3,507)1,086$

21,236
3,776
25,012(15,392)
9,620

Annual maturities of long-term debt, excluding finance leases (see Note 11), at March 31, 2009, were as follows:Year Ending(Millions of yen)March 312010.........................................................................................................................
¥
1,419
2011.........................................................................................................................
333
334
2012.........................................................................................................................
¥
2,086
Total.........................................................................................................................

(Thousands of
U.S. dollars)$$

14,4463,390
3,400
21,236

6. RETIREMENT AND PENSION PLANS
The Company and certain consolidated subsidiaries have severance payment plans for employees and directors. Under mostcircumstances, employees terminating their employment are entitled to retirement benefits determined based on the rate of pay at thetime of termination, years of service and certain other factors. Such retirement benefits are made in the form of a lump-sum severance
payment from the Company or from certain consolidated subsidiaries and annuity payments from a trustee. Employees are entitled tolarger payments if the termination is involuntary, by retirement at the mandatory retirement age, by death, or by voluntary retirement at
certain specific ages prior to the mandatory retirement age.

Annual Report 200933

The Company and certain consolidated subsidiaries have non-contributory funded defined benefit pension plans and unfunded
retirement benefit plans for employees. Certain consolidated foreign subsidiaries also have defined pension plans.
The liability for employees’ retirement benefits at March 31, 2009 and 2008 consisted of the followings:(Millions of yen)
2009
Projected benefit obligation......................................................................
Fair value of plan assets...........................................................................
Unrecognized prior service cost...............................................................
Unrecognized actuarial loss......................................................................
Unrecognized transitional obligation.........................................................
Prepaid pension cost................................................................................
Net liability............................................................................................

¥

¥

8,792
(6,021)444(2,442)
(933)
1,476
1,316

2008
¥

9,036
(7,871)
512(745)(1,058)
1,590
1,464

¥

(Thousands of
U.S. dollars)
2009
$

$

89,504(61,295)
4,520(24,860)(9,498)15,026
13,397The components of net periodic benefit costs for the years ended March 2009 and 2008 are as follows:(Millions of yen)2009
Service cost..............................................................................................
Interest cost.............................................................................................
Expected return on plan assets................................................................
Amortization of prior service cost.............................................................
Recognized actuarial loss.........................................................................
Amortization of transitional obligation......................................................
Net periodic benefit costs....................................................................

¥

¥

554
186
(176)
(68)
137
125
758

2008
¥

¥

469
187
(199)
(68)
7
125
521

(Thousands of
U.S. dollars)
2009
$

$

5,639
1,894
(1,792)
(692)
1,395
1,273
7,717

Assumptions used for the years ended March 31, 2009 and 2008 are set forth as follows:

Discount rate............................................................................................
Expected rate of return on plan assets....................................................
Amortization period of prior service cost..................................................
Recognition period of actuarial gain / loss................................................

2009

2008

1.4-2.5%
1.4-2.5%
10 years
10 years

1.4-2.5%
1.4-2.5%
10 years
10 years

The total transitional obligation determined as of April 1, 2000 was charged to income when adopted, except that of a certain
domestic subsidiary which is amortized over 15 years.
Retirement allowance for directors and executive officers at March 31, 2009 and 2008 were ¥1,027 million ($10,455 thousand) and¥1,020 million, respectively, which were included in liability for retirement benefits. Retirement allowance for directors and executive
officers are paid subject to the approval of the Compensation Committee or shareholders’ meeting.

7. EQUITY
Since May 1, 2006, Japanese companies have been subject to the Companies Act of Japan (the “Companies Act”). The significant
provisions in the Companies Act that affect financial and accounting matters are summarized below:(a) Dividends
Under the Companies Act, companies can pay dividends at any time during the fiscal year in addition to the year-end dividend upon
resolution at the shareholders meeting. For companies that meet certain criteria such as; (1) having the Board of Directors, (2) having
independent auditors, (3) having the Board of Corporate Auditors, and (4) the term of service of the directors is prescribed as one year

34

Annual Report 2009

rather than two years of normal term by its articles of incorporation, the Board of Directors may declare dividends (except for dividends
in kind) at any time during the fiscal year if the company has prescribed so in its articles of incorporation. The Company meets all theabove criteria. The Board of Directors of companies with board committees (an appointment committee, compensation committee andaudit committee) can also do so because such companies with board committees already, by nature, meet the above criteria under theCompanies Act, even though such companies have an Audit Committee instead of the Board of Corporate Auditors. The Company isorganized as a company with board committees.
Semiannual interim dividends may also be paid once a year upon resolution by the Board of Directors if the articles of incorporationof the company so stipulate. The Companies Act provides certain limitations on the amounts available for dividends or the purchase oftreasury stock. The limitation is defined as the amount available for distribution to the shareholders, but the amount of net assets after
dividends must be maintained at no less than ¥ 3 million.
(b) Increases / decreases and transfer of common stock, reserve and surplus
The Companies Act requires that an amount equal to 10% of dividends must be appropriated as a legal reserve (a component ofretained earnings) or as additional paid-in capital (a component of capital surplus) depending on the equity account charged upon thepayment of such dividends until the total of aggregate amount of legal reserve and additional paid-in capital equals 25% of the common
stock. Under the Companies Act, the total amount of additional paid-in capital and legal reserve may be reversed without limitation.
The Companies Act also provides that common stock, legal reserve, additional paid-in capital, other capital surplus and retained
earnings can be transferred among the accounts under certain conditions upon resolution of the shareholders.
(c) Treasury stock and treasury stock acquisition rights
The Companies Act also provides for companies to purchase treasury stock and dispose of such treasury stock by resolution of theBoard of Directors. The amount of treasury stock purchased cannot exceed the amount available for distribution to the shareholders
which is determined by specific formula. Under the Companies Act, stock acquisition rights, are now presented as a separate
component of equity. The Companies Act also provides that companies can purchase both treasury stock acquisition rights andtreasury stock. Such treasury stock acquisition rights are presented as a separate component of equity or deducted directly from stockacquisition rights.

8. STOCK OPTIONSThe stock options outstanding as of March 31, 2009 are as follows:

Stock Option

PersonGrantedNumber of
Options
grantedDate of
Grant

Exercise
Price

Exercise Period

2001 Stock Option

4 directors
284 employees

421,400 shares

2001.7.26¥ 9,549($ 97)

From January 1, 2004
to December 31, 2010

2002 Stock Option

6 directors
381 employees
18 other persons

399,700 shares

2002.7.23¥ 15,150($ 154)

From August 1, 2004
to July 31, 20112003 Stock Option

4 directors
313 employees
6 other persons

378,500 shares2003.7.22¥ 13,646($ 139)From August 1, 2005
to July 31, 20122004 Stock Option ①

2 directors
293 employees
5 other persons

359,900 shares2004.7.21¥ 16,167($ 165)

From August 1, 2006
to July 31, 20132004 Stock Option ②

20 employees
1 other person

25,600 shares2004.8.13¥ 16,836($ 171)

From August 1, 2006
to July 31, 20132005 Stock Option

2 directors
293 employees
5 other persons

346,400 shares2005.7.12¥ 12,369($ 126)

From August 1, 2007
to July 31, 20142008 Stock Option

1 director
10 corporate
officers
315 employees

431,700 shares2008.11.20¥ 1,609($ 16)

From August 1, 2010
to July 31, 2017

Annual Report 200935

The stock option activity is as follows:

For the year ended March 31, 2008
Non-vested
March 31, 2007 – Outstanding...................
Granted..................................................
Canceled................................................
Vested....................................................
March 31, 2008 – Outstanding...................
VestedMarch 31, 2007 - Outstanding....................
Vested....................................................
Exercised................................................
Canceled................................................
March 31, 2008 – Outstanding...................
For the year ended March 31, 2009Non-vested
March 31, 2008 – Outstanding...................
Granted..................................................
Canceled................................................
Vested....................................................
March 31, 2009 – Outstanding...................
VestedMarch 31, 2008 - Outstanding....................
Vested....................................................
Exercised................................................
Canceled................................................
March 31, 2009 – Outstanding...................
Exercise price.............................................
Average stock price at exercise.................
Fair value price at grant date......................
a.............................................................
b.............................................................
c.............................................................
d.............................................................
e.............................................................
f..............................................................
g.............................................................
Exercise Perioda : From August 1, 2010 to July 31, 2017b : From August 1, 2011 to July 31, 2017
c : From August 1, 2012 to July 31, 2017
d : From August 1, 2013 to July 31, 2017
e : From August 1, 2014 to July 31, 2017
f : From August 1, 2015 to July 31, 2017
g : From August 1, 2016 to July 31, 201736

Annual Report 2009

2001
Stock
Option(Shares)

2002
Stock
Option(Shares)

2003
Stock
Option(Shares)

2004
Stock
Option①(Shares)

2004
Stock
Option②(Shares)

2005
Stock
Option(Shares)

2008
Stock
Option(Shares)

346,400(346,400)
311,900

399,600

378,500

359,900

25,600399,600

378,500

359,900

25,600(300)
311,600

346,400
346,400

431,700
9,800
421,900
311,600

399,600

378,500

359,900

25,600346,400

311,600

399,600

378,500

359,900

25,600346,400¥ 9,549($97)——¥ 15,150($154)——¥ 13,646($139)——¥ 16,167($165)——¥ 16,836($171)——¥ 12,369($126)——¥ 1,609
($16)
—
—
¥
440
($4)
¥
447
($5)
¥
454
($5)
¥
458
($5)
¥
475
($5)
¥
487
($5)
¥
510
($5)

The assumptions used to measure fair value of 2008 Stock Option
Estimate method		Black-Scholes option pricing model

Volatility of stock price...............................
Estimated remaining outstanding period....
Estimated dividend.....................................
Interest rate with risk free..........................

a49.17%
5.194years¥
50($0.51)0.865%b
48.65%
5.695years¥
50($0.51)0.895%

c
48.30%
6.196years¥
50($0.51)0.929%

d47.75%
6.694years¥
50($0.51)
0.972%e48.51%
7.195years¥
50($0.51)
1.027%

f
48.90%
7.693years¥
50($0.51)
1.095%

g50.26%
8.194years¥
50($0.51)
1.177%

9. INCOME TAXESThe Company and its domestic subsidiaries are subject to Japanese national and local income taxes which, in the aggregate, resulted
in a normal effective statutory tax rate of approximately 40.7% for the years ended March 31, 2009 and 2008.
The tax effects of significant temporary differences and tax loss carryforwards which resulted in deferred tax assets and liabilities at
March 31, 2009 and 2008 are as follows:(Millions of yen)
2009
Deferred tax assets :The liability for retirement benefits......................................................
Accounts payable.................................................................................
Allowance for doubtful receivable........................................................
Accrued employees’ bonuses..............................................................
Impairment loss on investment securities...........................................
Inventories...........................................................................................
Intercompany profit..............................................................................
Tax loss carryforwards of consolidated subsidiaries............................
Previous taxed income of foreign subsidiaries . ..................................
Other....................................................................................................
Less valuation allowance.....................................................................
Total.................................................................................................
Deferred tax liabilities:
Tax purpose reserves in accordance with Japanese tax law...............
Prepaid pension cost............................................................................
Other....................................................................................................
Total.................................................................................................
Net deferred tax assets............................................................................

¥

¥
¥

954
790
3,650
470
331
1,579
118
5,091
4,660
3,872
(12,990)
8,525

¥

353
601
506
1,460

¥

7,065

2008
¥

¥
¥

1,012
1,576
2,364
521
1,664
888
200
2,431
2,927
(9,123)
4,460(Thousands of
U.S. dollars)
2009
$

$
$

9,712
8,042
37,158
4,785
3,370
16,075
1,201
51,82747,44039,417(132,241)86,786

¥

362
648
460
1,470

$

3,594
6,118
5,151
14,863

¥

2,990

$

71,923

Annual Report 200937

A reconciliation between the normal effective statutory tax rate and the actual effective tax rate reflected in the accompanying
consolidated statement of operations for the year ended March 31, 2008 is as follows (2009 was not presented because of the net loss
for the period):

2008
Normal effective statutory tax rate.......................................................................................................................
Expenses not deductible for income tax purposes..............................................................................................
Elimination of dividend earned from subsidiaries . ..............................................................................................
Permanently non-taxable income.........................................................................................................................
R&D tax credit......................................................................................................................................................
Lower income tax rates applicable to incomein certain foreign countries...............................................................................................................................
Indirect foreign tax credit.....................................................................................................................................
Valuation Allowance.............................................................................................................................................
Other – net...........................................................................................................................................................
Actual effective tax rate.......................................................................................................................................

40.7%
20.6
444.6
(6.5)
(32.3)(111.7)(137.3)170.3(75.5)
312.9%On June 16, 2008, the Company received a notice of a supplementary tax assessment from the Osaka Regional Taxation Bureau (the“Bureau”) regarding the application of controlled foreign companies tax measure on the taxable income of subsidiaries in Hong Kongfor the three years ended from March 31, 2005 to March 31, 2007. In the Bureau’s assessment, taxable income earned by the Hong
Kong subsidiaries should be included to the Company’s taxable income as the subsidiaries in Hong Kong are deemed not to satisfy theconditions for exclusion from the application of the above tax measure for dealing with tax havens.
The additional tax payments amounted to ¥16,838 million including penalties. The Company, having been dissatisfied with the said
supplementary tax assessment order, filed a petition with the National Tax Tribunal (the “Tribunal”) seeking a review of the decision
made by the Bureau and filed a complaint with the Osaka District court for the cancellation of the supplementary tax assessment order,
pursuant to the applicable laws and regulations.
Under this tax system, taxes are judged based on the current conditions at the end of each business period of the foreign corporationthat is subject to the law. For reference purposes, the effect from taxation of Funai’s Hong Kong subsidiary income for the two-year
period covering the consolidated fiscal year ended March 2008, the consolidated fiscal year following the year subject to investigation,and the consolidated fiscal year ended March 2009, is estimated at approximately 700 million yen including corporate, enterprise andresidence taxes, when calculated by deducting from the subject income the amount of dividends Funai received from the Hong Kong
subsidiary in the fiscal year ended March 2008. For the reason described above, Funai has not accounted for this taxation amont at thepresent time.
10. RESEARCH AND DEVELOPMENT COSTS
Research and development costs charged to income were ¥13,057 million ($132,923 thousand) and ¥14,789 million for the years
ended March 31, 2009 and 2008, respectively.

11. LEASESAs discussed in Note 2, the Company accounts for leases which existed at the transition date and do not transfer ownership of theleased property to the lessee as operating lease transactions. Pro forma information of such leases existing at the transition date, suchas acquisition cost, accumulated depreciation, obligations under finance leases, depreciation expense, interest expense, on a “as if
capitalized” basis for the years ended March 31, 2009 was as follows.
The Group leases certain machinery, computer equipment, office space and other assets.
Pro forma information of leased property of finance leases that do not transfer ownership of the leased property to the lessee on an“as if capitalized” basis for the years ended March 31, 2009 and 2008 are as follows:38

Annual Report 2009

Acquisition cost, accumulated depreciation, and net leased property:(Thousands of
U.S. dollars)
2009(Millions of yen)2009
Acquisition cost........................................................................................
Accumulated depreciation........................................................................
Net leased property..................................................................................

¥

2008

1,262
916
346

¥

¥

1,626
1,020
606

¥

$
$

12,847
9,325
3,522

Obligations under finance leases :(Thousands of
U.S. dollars)
2009(Millions of yen)2009
Due within one year.................................................................................
Due after one year....................................................................................
Total.....................................................................................................

¥

2008
178
175
353

¥

¥

259
353
612

¥

$
$

1,812
1,782
3,594

Depreciation expense, interest expense and other information under finance leases:(Thousands of
U.S. dollars)
2009(Millions of yen)
2009
Depreciation expense...............................................................................
Interest expense......................................................................................
Total.....................................................................................................
Lease payments.......................................................................................

¥

2008
260
9
269
268

¥
¥

¥

339
10
349
348

¥
¥

$
$
$

2,646
92
2,738
2,728

Depreciation expense and interest expense, which are not reflected in the accompanying statements of operations, are computed by
the straight line method and the interest method, respectively.
The minimum rental commitments under noncancellable operating leases at March 31,2009 and 2008 are follows:(Millions of yen)2009
Due within one year.................................................................................
Due after one year....................................................................................
Total.....................................................................................................

¥
¥

1,419
2,257
3,676

2008
¥
¥

1,058
3,122
4,180

(Thousands of
U.S. dollars)
2009
$
$

14,44622,97637,422

Annual Report 200939

12. NET LOSS PER SHARE
Reconciliation of the differences between basic and diluted net loss per share (“EPS”) for the years ended March 31, 2009 and 2008 is
as follows:(Millions of yen)
Net loss(Thousands ofshares)(Yen)

Weighted
averageshares(Dollars)
EPS

For the year ended March 31, 2009:
Basic EPS
Net loss available to common shareholders .......

¥(17,365)

34,093¥(509.33)

For the year ended March 31, 2008:
Basic EPS
Net loss available to common shareholders........

¥(5,377)34,093¥(157.71)($5.19)Diluted net income per share in 2009 and 2008 is not disclosed due to the loss position.

13. SUBSEQUENT EVENT
Appropriations of Retained Earnings
The following appropriation of retained earnings at March 31, 2009 was approved at the Company’s Board of Directors held on June
1, 2009:(Millions of yen)
Total.........................................................................................................................................

¥

1,364

(Thousands of
U.S. dollars)$

13,886

14. SEGMENT INFORMATION(1) Industry Segments
The Company and its subsidiaries operate in a single business segment of manufacturing and sales of electrical products in Japan andoverseas. Therefore, industry segment information is not disclosed.
(2) Geographical Segments
The geographical segments of the Company and its subsidiaries for the years ended March 31, 2009 and 2008 are summarized asfollows:

40

Annual Report 2009

(Millions of yen)
2009
Japan
Sales:
Sales to outside customers........................ ¥ 103,933
120,413Inter-segment sales...................................
Total................................................................
224,346
223,296
Operating expenses.......................................
1,050
Operating income (loss)................................. ¥
Identifiable assets.......................................... ¥ 108,739

North
America¥ 182,991
39
183,030
180,846¥
2,184¥ 40,495

Asia
¥

769
166,481
167,250
165,800¥
1,450¥ 92,999

Europe¥

Elimination

Conso-lidated
total

¥
¥

15,085 ¥¥ 302,778
13(286,946)
15,098(286,946)
302,778
17,631(286,205)
301,368(2,533) ¥(741) ¥
1,410
11,163 ¥ (53,513) ¥ 199,883

2008
Sales:
Sales to outside customers........................ ¥ 135,775 ¥ 116,605 ¥
2,592 ¥109,66811
194,319
Inter-segment sales...................................
Total
245,443
116,616
196,911
248,547
121,213
192,795
Operating expenses.......................................
4,116 ¥
Operating income (loss) ................................ ¥ (3,104) ¥ (4,597) ¥Identifiable assets.......................................... ¥ 108,383 ¥ 25,429 ¥ 114,602 ¥

22,196 ¥¥ 277,168
0(303,998)
22,196(303,998)
277,168
22,267(305,248)
279,574(71)¥1,250 ¥(2,406)
20,358 ¥ (44,357) ¥ 224,415(Thousands of U.S. dollars)
2009
Japan
Sales:
Sales to outside customers........................ $1,058,058
Inter-segment sales................................... 1,225,827
Total................................................................ 2,283,885
Operating expenses....................................... 2,273,196
Operating income (loss)................................. $ 10,689
Identifiable assets.......................................... $1,106,984

North
AmericaAsia$1,862,882
398
1,863,280
1,841,046$ 22,234$ 412,247

$
7,829
1,694,808
1,702,637
1,687,876$ 14,761$ 946,747

EuropeElimination

Conso-lidated
total$ 153,568 $
$3,082,337
132 (2,921,165)
153,700 (2,921,165) 3,082,337
179,486 (2,913,621) 3,067,983$ (25,786) $
(7,544) $ 14,354$ 113,641 $ (544,772) $2,034,847(3) Sales to Foreign Customers
Sales to foreign customers for the years ended March 31, 2009 and 2008 are summarized as follows:

2008(Thousands of
U.S. dollars)
2009

181,1096,180
45,581
2,976
235,846$ 2,200,448
70,040370,274
64,257$ 2,705,019(Millions of yen)
2009
North America..........................................................................................
Asia...........................................................................................................
Europe......................................................................................................
Other........................................................................................................
Total.....................................................................................................

¥¥

216,150
6,880
36,372
6,312
265,714¥¥Annual Report 200941

Independent Auditors’ Report

42

Annual Report 2009Company Data

Company Outline

Business Operations

Name
Foundation
Address

Audio-visual Equipment
LCD TV, DVD player, DVD recorder,
Blu-ray disc player

Tel
Fax
URL
CapitalSales
Employees

FUNAI ELECTRIC CO., LTD.
August 1961
7-7-1 Nakagaito Daito city, Osaka
574-0013, Japan
81-72-870-4303
81-72-871-1112
http://www.funaiworld.com/¥ 31,280 million¥ 302,778 million(March 2009 / Consolidated)
2,590(March 2009 / Consolidated)

Information Equipment
Printer, Digital Still Camera

Company History
Aug. 1961

Funai Electric Co., Ltd. was established in Ikuno-ku, Osaka City capitalized at ¥20 million.

Mar. 1964

Chugoku Funai Electric Co., Ltd. was established as a manufacturing company in Fukayasu-gun(nowFukuyama City), Hiroshima.
The head office was relocated to Daito City, Osaka.

Sep. 1976
Jun. 1980
May. 1991
Mar. 1992
Apr. 1992
Aug. 1994
Jan. 1996
May. 1996
Feb. 1999

Funai Electric Trading (Europe) GmbH (now Funai Europe GmbH), a sales firm, was established in
Hamburg, Germany.
Funai Corporation, Inc. was established as a sales firm in New Jersey, U.S.A.
Highsonic Industrial Ltd. (now Funai Electric (H.K.) Ltd.) was established in Hong Kong as amanagement company of processing on commission to consignment manufacturing plants in Guang
Dong province, China.
Dong Guan Plant in Dong Guan City, Guang Dong Province started operations as a consignment
manufacturing plant in China.
Zhong Shan Plant in Zhong Shan City, Guang Dong Province started operations as a consignment
manufacturing plant in China.
Funai Service Co., Ltd. was established in Higashi-Osaka City, Osaka.
Highsonic Industrial Ltd. (now Funai Electric (H.K.) Ltd.) established H.F.T Industrial Ltd. by joint
investment with a Japan company.
Funai Electric Co., Ltd. was listed on the Second Section of Osaka Securities Exchange.

Mar. 2001

Funai Electric Co., Ltd. was listed on the First Section of Tokyo Stock Exchange and the First Section of
Osaka Securities Exchange.
Closing date for the fiscal year ending on June 15 was changed to March 31.

Nov. 2001

Acquired the majority stocks of DX Antenna Co., Ltd. in Japan.

Mar. 2000

Jul. 2003

Funai (Thailand) Co., Ltd. a manufacturing company, was established in Nakornratchasima, Kingdom of Thailand.

Dec. 2003

Oct. 2006

Huang Jiang Plant in Dong Guan City, Guang Dong Province started operations as a consignment
manufacturing plant in China.
Funai Electric Advanced Applied Technology Research Institute Inc. was established in Kawasaki City,
Kanagawa (moved in Tsukuba City, Ibaraki in May, 2008).
Funai Electric (Polska) Sp.z o.o. was established as a production company in the city of Nowa Sol, Poland.

Oct. 2007

Funai Service Corporation was established in Ohio, U.S.A.

Jan. 2008

Funai Electric Co., Ltd. and Victor Company of Japan, Ltd. agreed to a business alliance in theaudiovisual equipment market.
P&F USA, Inc. was established in Georgia, U.S.A., as a sales subsidiary for Philips brand consumer TVs.

Apr. 2004

Jun. 2008
Jun. 2008

Tetsuro Funai, President and CEO, assumed the post of Chairman.
Tomonori Hayashi, Senior Executive Officer, assumed the post of President and CEO.

ANNUAL REPORT2009

FUNAI ELECTRIC CO., LTD.