(Translation)

Securities Code:June 9, 2015

6839

NOTICE OF THE 63RD ORDINARY GENERAL MEETINGOF SHAREHOLDERS

Dear Shareholders:
We would like to express our appreciation for your continued good offices.
You are hereby notified that the 63rd Ordinary General Meeting of Shareholders of Funai
Electric Co., Ltd. (the “Company”) will be held as described below, and you are cordiallyinvited to attend the meeting.
Since voting rights can be exercised in writing, even if you are unable to attend the meeting,please review the attached Reference Document for the General Meeting of Shareholders set
forth below and send to us by return mail the enclosed voting form indicating your approvalor disapproval of the propositions no later than 5:00 p.m. on June 24 (Wednesday) in Japan
time, 2015.

Yours very truly,

Tomonori Hayashi
Representative Director, President, andChief Executive Officer

Funai Electric Co., Ltd.
7-1, Nakagaito 7-chome,
Daito City, OsakaDescription
1.

Date and hour:
June 25 (Thursday), 2015, 10:00 a.m.

2.

Place:
5F, Multipurpose Hall, Technology Bldg. of the Company
7-1, Nakagaito 7-chome, Daito City, Osaka

3.

Matters forming the objects of the meeting:
Matters to be reported:
1.

The business report, the consolidated financial statements and the audit resultsof the consolidated financial statements by the independent auditors and theBoard of Corporate Auditors for the 63rd fiscal year (from April 1, 2014 toMarch 31, 2015)

2.

The nonconsolidated financial statements for the 63rd fiscal year (from April 1,2014 to March 31, 2015)

Matters to be resolved:
Proposition No. 1:

Partial amendments to the Articles of Incorporation

Proposition No. 2:

Election of six (6) Directors (excluding Directors who
are Audit and Supervisory Committee Members)

Proposition No. 3:

Election of three (3) Directors who are Audit andSupervisory Committee Members

Proposition No. 4:

Election of one (1) Substitute Director who is an Audit
and Supervisory Committee Member

Proposition No. 5:

Setting of the amount of remuneration, etc. for Directors(excluding Directors who are Audit and Supervisory
Committee Members)

Proposition No. 6:

Setting of the amount of remuneration, etc. for Directors
who are Audit and Supervisory Committee Members

Proposition No. 7:

Granting retirement benefits to the retiring Corporate
Auditors- END -In attending the meeting, please submit the enclosed voting form to a receptionist at the placeof the meeting.
-2-

Of the documents to be provided upon giving notice of this Ordinary General Meeting of
Shareholders, “Notes to the consolidated financial statements” and “Notes to thenonconsolidated financial statements”, which are posted on our website(http://www.funai.jp/en/investors/) in accordance with and as provided for in the applicablelaws and ordinances and Article 14 of the Articles of Incorporation of the Company, are notattached with this notice of the Ordinary General Meeting of Shareholders. Therefore, theattached documents to this notice of the Ordinary General Meeting of Shareholders are a partof the consolidated financial statements and nonconsolidated financial statements that havebeen audited by the independent auditors to express their audit opinions.
In the event of the revision to any matters in the Reference Document for the General
Meeting of Shareholders, the business report, the consolidated financial statements and thenonconsolidated financial statements, it will be posted on our website stated above.

-3-

(Attached documents)
BUSINESS REPORT(April 1, 2014 to March 31, 2015)
1.

Current state of the Funai Group (the “Group”)(1)

Development and results of business activities:

In the fiscal year under review, the economy of the United States, which is the Group’s
mainstay market, generally was on a recovery trend, apart from a slowdown caused by alabor dispute in the West Coast ports, a cold snap and other factors from early this year.
Despite the effects of economic stagnation in Russia and the recurring Greek debt crisis, theEuropean economies were on a gradual recovery led by Germany. There were signs of aslowdown in the Chinese economy, resulting from a weakened economy in the housing
market. The speed of economic recovery in Japan remained slow because of a rebound of
the spike in demand before the consumption tax increase (from April 1, 2014), as well as theeffects of abnormal weather conditions.
Under these circumstances, the Group reported net sales of ¥217,088 million, a 7.2%
decrease from the previous fiscal year.
Operating income was ¥564 million (operating loss for the previous fiscal year was¥5,465 million); ordinary income was ¥1,924 million (ordinary loss for the previous fiscal
year was ¥2,253 million); and net income was ¥1,354 million (net loss for the previous fiscal
year was ¥6,745 million).
Income improved despite lower sales of DVD/BD-related products and printers, etc.,
because of the efficiency improvement achieved by thorough inventory management.
Net sales by product sector were as follows:
Audiovisual Equipment
In the audiovisual equipment sector, sales of LCD TVs remained static, and there was a
decline in sales of DVD/BD-related products because of the market shrinkage. As a result,net sales of this sector were ¥172,367 million, a decrease of 5.9% year on year.
Information Equipment
Despite higher sales of ink cartridges, net sales in the information equipment sector werelower because of a drop in sales of printers. As a result, net sales were ¥12,634 million, adecrease of 33.1% year on year.

-4-OtherSales of products other than the items stated above increased year over year. Sales ofelectronic reception devices decreased, however there was a moderate increase in sales ofaudio accessories and other items. Net sales were ¥32,087 million, an increase of 0.1% year
on year.
<Consolidated net sales by product group>Group
Audiovisual equipment
Information equipment
Other
Total
(2)

Net sales(millions of yen)
172,367
12,63432,087217,088

Component rate
(%)
79.4
5.8
14.8
100.0

Investment in property, plant and equipment by the Group:

Investment in property, plant and equipment by the Group during the fiscal year underreview totaled ¥3,275 million, which composed of ¥3,014 million by its manufacturing
companies and ¥261 million by its sales companies. This investment was aimed mainly at
the improvement of the manufacturing facilities.
(3)

Finance:

Nothing to be reported.
(4)

Issues to be addressed:

In the consumer electronics industry, the demand for LCD TVs expanded because of thedemand shift to higher resolutions, such as 4K and larger screens. However, the consumer
electronics industry continued to face a challenging environment because of an ongoing
downturn in the market for DVD/BD‐related products and signs of a slowdown in demandfor products, hitherto regarded as growth drivers, such as smartphones and tablets.
Under these circumstances, the issues and the measures to be taken are as follows:(i)

Increase of net sales and recovery of profitability

The Group’s top priority issue is the increase of net sales and the recovery of profitability.

-5-

(Product strategy)
Sales decreased from the previous fiscal year because sales of LCD TVs and
DVD/BD-related products, which are the Group’s main products, and printers etc., decreased.
However, the Group was able to increase income by further strengthening controls related topurchasing and sales and inventories (PSI), and by establishing systems to introduce
cost-competitive products at an appropriate time.
To increase sales, the Group took over the North American TV business of Sanyo ElectricCo., Ltd., which was a subsidiary of Panasonic Corporation, in October 2014. In February
2015, the Group concluded a licensing agreement with Eastman Kodak Company covering
the global supply, delivery, marketing, sales and servicing of Kodak brand consumer andsmall-office printer products and related consumables.
Also, the Group considered expansion into new business areas to be an urgent issue. During
the current fiscal year, the Group launched its self-developed printers after establishing theinfrastructure for providing the ink-jet printers including the manufacture and sales of ink-jet
cartridges, which are more profitable, based on the ink-jet related technologies and assets
which were acquired from Lexmark International, Inc. Previously, the Group had provided
contracted manufacturing services for ink-jet printers.
(Market strategy)
The Group recognizes the need to avoid the risks associated with excessive reliance on the
U.S. market, to level out production and sales activity by reducing the effects of seasonal
fluctuations, and to expand sales. The Group is therefore developing business in emerging
markets, such as Central and South American markets (e.g. Mexico).
To implement the above-mentioned strategies steadily, the Group is realizing business
improvements to provide products that meet market needs in a timely manner by minimizingtime lags in product planning, development, material procurement, production and sales.

(ii)

Reinforcement of the manufacturing and development systems

The Group considers excessive reliance on production in China to be a risk factor for theGroup. To avoid this risk, the Group has been working to decentralize the Group’s
production sites, which resulted in the product ratio in China to decline. However, theproduct ratio in China is still high. During the current fiscal year, the factory construction of
Funai Electric Philippines Inc., which is a production subsidiary in Philippines, wascompleted, and now the Group is preparing for an earlier-than-expected start-up.
The Company is also continuing efforts to improve development efficiency across the entire
Group, including operations in China and Asia.

-6-

(iii)

Training and appointment of human resources

The Group recognizes that improving each employee’s capabilities and more effectively
leveraging the skill set of the workforce to bolster the strength of the Group will be criticalfor ensuring the Group stays in the lead in the new era of global competition, andimplementing the Group’s medium- to long-term business strategy. Therefore, theCompany’s policy is to actively train and assign employees, regardless of their age and career,by strengthening and expanding its internal and external training systems, including language
training, among other things.
(5)

Property and income/loss:
60th(April 1, 2011 toMarch 31, 2012)

61st(April 1, 2012 toMarch 31, 2013)

62nd(April 1, 2013 toMarch 31, 2014)

63rd(April 1, 2014 toMarch 31, 2015)

Net sales(millions of yen)

246,147

192,008

234,042

217,088

Ordinary income(loss)(millions of yen)

174

(355)

(2,253)

1,924

Net income (loss)(millions of yen)

(4,629)(8,542)(6,745)

1,354

Net income (loss)
per share (yen)(135.69)(250.38)(197.70)

39.70

Total assets(millions of yen)

176,607

194,524

181,341

189,695

Equity(millions of yen)

123,843

121,398

117,684

127,881

Equity per share(yen)

3,598.03

3,520.11

3,414.77

3,712.81

Fiscal year
Item

(Note) Net income (loss) per share is calculated based on the average of the total number ofshares issued and outstanding during the fiscal year. Equity per share is calculated
based on the total number of shares issued and outstanding as of the end of the fiscal
year. Each such number of shares does not include the shares of treasury stock.

-7-

(6)

Major subsidiaries:

Capital stock

Ratio of equity
participation of
the Company(%)¥363 million

91.40

FUNAI CORPORTION, INC. US$68.5 million

100.0

Trade name

DX ANTENNA Co., Ltd.

Main business

Manufacture and sale ofelectronic equipment related toreceivers
Sale of the Company’s products(Note)

Manufacture of the Company’s
products
Each ratio of equity participation of the Company is obtained by calculating down to the third
decimal place and thereafter rounding upward or downward to the nearest second decimal
place, as the case may be.

(7)

Major businesses of the Group:

Funai Electric (HK) Ltd.

HK$115 million

100.0

Division

Principal products

Audiovisual equipment

LCD TVs, DVD players, DVD recorders, BD players and BD
recordersInformation equipment

Printers and ink cartridges

Other

Audio accessories and electronic equipment related to receivers(8)

Major business sites of the Group:
Category

Funai Electric Co., Ltd.
Production and sales
subsidiaryJapan

Overseas

Sales subsidiaries

Production subsidiary

(9)

Name

Location

Head Office

Daito City, Osaka

Tokyo Branch

Chiyoda-ku, Tokyo

DX ANTENNA Co., Ltd.

Hyogo-ku, Kobe City

FUNAI CORPORATION, INC.

U.S.A.

P&F USA, Inc.

U.S.A.

P&F MEXICANA. S.A. DE
C.V.

MexicoFunai Electric (HK) Ltd.

Hong Kong

Employees of the Group:
Number of employees(persons)
3,604

Change from the end of the previous fiscal year(+ or -) (persons)-1,508(Notes) 1. The above number of employees represents those actively at work.
2. The number of employees decreased due principally to the curtailment of production of-8-

information equipment at Zhong Shan Funai Electron Co., a production subsidiary in
China.

(10)

Major lenders:

Nothing to be reported.
(11)

Other important matters concerning the current state of the Group:

The Company resolved to acquire from Koninklijke Philips N.V. (hereinafter, “Philips”) all
shares in a company that would succeed the operation of Philips’ Lifestyle Entertainment
Business and concluded a share purchase agreement on January 29, 2013. However, Philips
filed against the Company a petition as of October 25, 2013 for arbitration to claim
compensation for damages on the grounds of a breach of the agreement by the Company andthe petition was served on the Company by the International Chamber of Commerce (ICC) on
November 8, 2013.
With regard to this matter, the Company recognizes that there was no breach of theagreement on its part. Consequently, on December 6, 2013, the Company filed with the ICC
a counterclaim for claiming compensation for damages on the grounds of the breach of theagreement and undue action by Philips.
On May 20, 2014, the Company received notice from Philips of the amount of the claim forcompensatory damages. On October 1, 2014, the Company filed a statement with the ICC
that included an indication of the amount of compensatory damages claimed against Philips.
On December 24, 2014, the Company received Philips’s statement of reply, in which
Philips revised the amount of its claim for compensatory damages.

-9-

2.

Matters concerning the shares of the Company(1)

Total number of shares authorized:

80,000,000 shares(2)

Total number of shares issued:

36,130,796 shares(including 2,011,665 shares of treasury stock)(3)

Number of shareholders:

9,325 persons(4)

Principal shareholders (top 10):
Name

Tetsuro Funai
Funai Information Science Promotion Foundation
Tetsuo Funai
Japan Trustee Services Bank, Ltd. (Trust account)
The Master Trust Bank of Japan, Ltd.
State Street Bank and Trust Company 505103
The Bank of New York 133522
Chase Manhattan Bank GTS Clients Account Escrow
Ftsu Limited Liability Company
FT Development Co, Ltd.

Number of shares held
(thousands of share)
12,709
1,540
1,079
902
680
551
533
530
470
470

Shareholding
ratio (%)
37.25
4.51
3.16
2.65
2.00
1.62
1.56
1.55
1.38
1.38

(Notes) 1. The Company, which holds 2,011 thousand shares of treasury stock, is not included in theabove-listed principal shareholders.
2. Each shareholding ratio is obtained by deducting shares of treasury stock of the Company
and calculating down to the third decimal place and thereafter rounding upward or
downward to the nearest second decimal place, as the case may be.

(5)

Other important matters concerning shares:
Nothing to be reported.

- 10 -

3.

Matters concerning stock acquisition rights:(1)

Stock acquisition rights issued and outstanding at the end of the fiscal year under review:(i)

Number of stock acquisition rights:(Note)(ii)

3,835 rights

The number of stock acquisition rights is shown by reducing from the numberof stock acquisition rights granted, the number of stock acquisition rights
exercised, and the number of stock acquisition rights that the persons entitledthereto ceased to have due to retirement or other terms of exercise of the rights.

Class and number of shares to beissued or transferred upon exerciseof the stock acquisition rights:
383,500 shares of common stock(100 shares per stock acquisition right)(iii) Stock acquisition rights held by Directorsby category:Category

Numberof rights

HolderExercise price

Exercise period

The first stock acquisition rights
for the year ended March 31, 2009

Director

20

1¥1,609August 1, 2010
to July 31, 2017

The first stock acquisition rights
for the year ended March 31, 2015

Director

90

2¥1,296

September 1,
2016 to August
31, 2023

Issue

(2)

Stock acquisition rights allotted during the fiscal year under review:
Stock acquisition rights issued at the meeting of the Board of Directors held on October 10,
2014:
(i)

Number of stock acquisition rights:

1,200 rights(ii) Class and number of shares to be issued ortransferred upon exercise of the stock 120,000 shares of common stockacquisition rights:(100 shares per stock acquisition right)(iii) Amount of property to be paid in upon
exercise of stock acquisition rights:¥129,600 per right(¥1,296 per share)(iv) Exercise period of stock acquisition rights:- 11 -

September 1, 2016 to August 31, 2023

(v) Stock acquisition rights allotted:
Number of rights

Number of shares
to be issued ortransferred

Number of holders

Directors of the Company

160

16,0003

Employees of the Company

140

14,0002

Corporate officers andemployees of the subsidiaries

900

90,0003Category(3)

Other important matters concerning stock acquisition rights, etc.:
Nothing to be reported.

- 12 -

4.

Matters concerning Officers of the Company:(1)

Directors and Corporate Auditors (as of March 31, 2015)
Title

Name

Business in charge and importantconcurrent office

Representative Director
and Chairman

Tetsuro Funai

Representative Director,
President and Chief
Executive Officer (CEO)Tomonori Hayashi

Representative Director
and Officer

Tetsuhiro Maeda

General Manager of Management Planning
Headquarters andGeneral Manager of New Business
Headquarters

Director and Officer

Joji Okada

General Manager of Development &Technology Headquarters andGeneral Manager of Intellectual Property
Rights Headquarters

Outside Director

Mitsuo Yonemoto

Vice President and Director of T.P.S.
Laboratory Co., Ltd.;
Outside Director of THE SAILOR PEN
CO., LTD. andOutside Corporate Auditor of Oriental
Chain Mfg. Co., Ltd.

Outside Director

Yoshiaki Bannai

President and Representative Director ofBe.com corporation

Full-time Corporate
Auditor

Hiromu Ishizaki

Outside Corporate Auditor

Shinichi Komeda

Outside Corporate Auditor

Masahide Morimoto(Notes)Chairman of Funai Information Science
Promotion Foundation; andChairman of Funai Scholarship Foundation

1. As of October 2, 2014, Representative Director, President and CEO was changed
as follows:
As Director Yoshikazu Uemura resigned from the office of Representative
Director, President and CEO, Director Tomonori Hayashi, who had been Vice
Chairman, assumed the office of Representative Director, President and CEO.
2. Full-time Corporate Auditor Hiromu Ishizaki, who is qualified as a certified tax
accountant, has considerable knowledge of financing and accounting.
3. The Company has designated Outside Director Mitsuo Yonemoto and Outside
Corporate Auditor Shinichi Komeda as independent officers in accordance withthe rules of Tokyo Stock Exchange, Inc. and registered them with the exchange.
4. The Company has established a Nomination Committee and a Compensation
Committee (both of which are voluntary committees). The composition of eachof the committees is as follows:• Nomination Committee: Tetsuro Funai (Chairman), Tomonori Hayashi,
Tetsuhiro Maeda and Joji Okada- 13 -

• Compensation Committee: Tetsuhiro Maeda (Chairman), Tetsuro Funai,Tomonori Hayashi, Joji Okada and Mitsuo Yonemoto(2)

Director who retired during the fiscal year under review:
Retirement
date

Name
Yoshikazu Uemura

November 11,
2014

ReasonResignation

Title, business in charge and importantconcurrent office upon retirement
Director(For reference)
The Company has adopted a “System of Officers” and the Officers as of March 31,
2015 who did not concurrently hold the offices of Directors were as follows:
Officer
Officer
Officer
Officer
Officer
Officer(3)

Hideaki Funakoshi
Kazuo Uga
Takeshi Ito
Kiyoshi Chinzei
Kazuhiko Yamamoto
Motomi Adachi

Total amount of remuneration, etc. for Directors and Corporate Auditors
Total amount of remuneration, etc. for the fiscal year under review:
Category
Director(Outside Director)
Corporate Auditor(Outside Corporate Auditor)
Total(Outside Director/Corporate Auditor)

Number ofrecipients
7
(2)
3
(2)
10
(4)

Amount of payments¥85,921 thousand(¥10,600 thousand)¥19,987 thousand(¥10,400 thousand)¥105,909 thousand(¥21,000 thousand)(Notes) 1. The above-listed amount of payments includes the following amount ofallowance for Officers’ retirement benefits recorded as expenses for the fiscal
year under review:• ¥10,475 thousand for six Directors (including ¥1,000 thousand for two outside
Directors)• ¥1,537 thousand for three Corporate Auditors (including ¥800 thousand for
two outside Corporate Auditors)
2. The above-listed amount of payments includes the following amount of
remuneration in stock options recorded as expenses for the fiscal year underreview:• ¥436 thousand for three Directors- 14 -

3. The above-listed amount of payments includes the payment to one Director who
retired from office as of November 11, 2014.

(4)

Other important matters concerning officers:
Nothing to be reported.

(5)

Matters concerning outside officers:(i)Concurrent holding of important offices of executive officers of othercorporations and their relationships with the Company:•

Director Mitsuo Yonemoto is Vice President and Director of T.P.S. LaboratoryCo., Ltd. The Company has no special relationship with T.P.S. LaboratoryCo., Ltd.

•

Director Yoshiaki Bannai is President and Representative Director of Be.com
corporation.
The Company has no special relationship with Be.com
corporation.

(ii)

Concurrent holding of important offices of outside officers of othercorporations and their relationships with the Company:•

Director Mitsuo Yonemoto is outside Director of THE SAILOR PEN CO.,LTD. and outside Corporate Auditor of Oriental Chain Mfg. Co., Ltd. The
Company has no special relationship with THE SAILOR PEN CO., LTD. andOriental Chain Mfg. Co., Ltd.

(iii)

Kinship among executive officers of the Company and its specified related
enterprises:
Nothing to be reported.

(iv)•

Major activities during the fiscal year under review:
Attendance at the meetings of the Board of Directors and the Board of
Corporate Auditors:
Board of Directors
Name

Board of Corporate
Auditors
NumberNumberofattendedmeetings-

Director

Mitsuo Yonemoto

Numberofmeetings
16

Director

Yoshiaki Bannai

16

16

-

-

Corporate Auditor

Shinichi Komeda

16

16

13

13

Corporate Auditor

Masahide Morimoto

16

16

13

13

(Note)

Numberattended16

In addition to the number of the meetings of the Board of Directors above,- 15 -

written resolutions, which shall be deemed to have been adopted pursuant
to the provisions of Article 370 of the Companies Act and Article 23 of the
Articles of Incorporation of the Company, were adopted on three occasions.
•

Speeches at meetings of the Board of Directors and the Board of Corporate
Auditors:
Name

Director

Mitsuo Yonemoto

Director

Yoshiaki Bannai

Corporate
Shinichi Komeda
AuditorCorporate
Masahide Morimoto
Auditor(v)

Speeches
He attended meetings of the Board of Directors andexpressed opinions principally from the standpoint of amanagement consultant, as well as the standpoint of an
independent officer.
He attended meetings of the Board of Directors andexpressed opinions principally from the standpoint of aveteran top executive.
He attended meetings of the Board of Directors and theBoard of Corporate Auditors and expressed opinions
principally from the standpoint of a veteran top
executive, as well as the standpoint of an independent
officer.
He attended meetings of the Board of Directors and theBoard of Corporate Auditors and expressed opinions
principally from the standpoint of a veteran top
executive, as well as a technical standpoint of financeand securities.

Outline of liability limitation agreements:
In accordance with Article 427, paragraph 1 of the Companies Act of Japan, theCompany has entered into an agreement with each of the two Outside Directors
and two Outside Corporate Auditors to limit the liability for any damage asprovided for in Article 423, paragraph 1 of said act within the aggregate of theamounts listed in the items of Article 425, paragraph 1 of said act.

5.

Matters concerning independent auditors:(1)

Names of the independent auditors:
Deloitte Touche Tohmatsu LLC(2)Amount of remuneration, etc., of the independent auditors for the fiscal year underreview:(i)(ii)

Remuneration, etc., of the independent auditors for the fiscal
year under review:¥47 million

Total amount of cash and other proprietary benefits payable
to the independent auditors by the Company and its
subsidiaries:¥69 million(Notes) 1. The amount of remuneration, etc., for audits under the Companies Act of Japan- 16 -

and the amount of remuneration, etc., for audits under the Financial Instruments
and Exchange Act of Japan are not separated in the audit agreement between the
Company and the independent auditors and cannot actually be separated.
Hence, the amount in item (i) above includes both amounts.
2. Among the major subsidiaries of the Company, FUNAI CORPORATION, INC.
and one other company are subject to audits by audit firms (including persons
having qualifications in foreign countries equivalent to those of the independent
auditors of the Company) other than the independent auditors of the Company.

(3)

Content of non-auditing services:
The Company has entrusted Deloitte Touche Tohmatsu LLC with, and paid
remuneration for, advisory and guidance services concerning internal control overfinancial reporting and others, which are not covered by Article 2, paragraph 1 of theCertified Public Accountant Act of Japan.

(4)

Policy on the determination of dismissal or non-reappointment of the independent
auditors:
In the event that the independent auditors are found to fall under any event of
dismissal under the items of Article 340, paragraph 1 of the Companies Act, theCompany shall, upon unanimous consent of the Corporate Auditors, dismiss theindependent auditors. In addition, in the event that there arises any problem with theperformance by the independent auditors of their duties or otherwise considerednecessary, the Company shall, upon consent of the Board of Corporate Auditors or
upon request from the Board of Corporate Auditors, prepare a proposition for thedismissal or non-reappointment of the independent auditors as an agenda item of aGeneral Meeting of Shareholders.
(Note) The “Act for partial revision of the Companies Act” (Act No. 90 of 2014) ofJapan became effective on May 1, 2015. Accordingly, the organization
responsible for determining a proposition of the dismissal or
non-reappointment of the independent auditors has been changed from theBoard of Directors to the Board of Corporate Auditors. The Act stated above
is applied for the fiscal year under review.

(5)

Outline of liability limitation agreements:
Nothing to be reported.

6.

Systems and policies of the Company(1)

Systems to secure the propriety of business activities:(i)

Systems to ensure that the Directors perform their duties in compliance withlaws, ordinances and the Articles of Incorporation
In the “Funai Group Charter of Conduct” and the “Regulations of Officers’
Compliance”, the Company shall specify the acts to be taken by the Directors
to comply with laws and ordinances and ensure that the Directors perform- 17 -

their duties in compliance with laws, ordinances and the Articles ofIncorporation.
(ii)

Systems for the storage and management of information concerning theperformance of the Directors’ duties
With regard to the storage and management of information concerning theperformance of the Directors’ duties, the minutes of meetings of the Board of
Directors and other important meetings that the Directors shall attend, circulardecision documents and other necessary documents and information to ensurethat the Directors perform their duties appropriately shall be stored andmanaged in compliance with laws, ordinances and the “Document
Management Regulations”.

(iii)

Regulations and other system for management of risk of loss
The Company shall institute “Risk Management Regulations” for managementof risk of loss. Each division or department shall manage risks related to its
operations and also control such risks systematically.

(iv)

Systems to ensure that the Directors perform their duties effectively
To ensure that management performs decision-making swiftly and effectively,
the Company shall introduce a “System of Officers”, and place Officers under
the control of the Executive Directors to ensure that the operations determinedby the Executive Directors are performed swiftly. In addition, to enhance thetransparency of the Board of Directors and strengthen its supervisory functions,the Company shall introduce the outside Directors.

(v)

Systems to ensure that the employees perform their duties in compliance withlaws, ordinances and the Articles of Incorporation
In the “Funai Group Charter of Conduct” and the “Compliance Regulations”,
the Company shall specify the acts to be taken by the employees and ensurethat the employees perform their duties in compliance with laws, ordinances
and the Articles of Incorporation.
In addition, the Company shall establish a whistle-blowing system which is
independent from its regular reporting channels and strengthen its compliancesystem.

(vi)

Systems to secure the propriety of business activities of the corporate groupcomposed of the Company, its parent company and its subsidiaries
The “Funai Group Charter of Conduct” shall be the rule of conduct of theofficers and employees of the Group.
In addition, in the “Affiliated Companies Management Regulations”, theCompany shall clearly define authorities and responsibilities of its group- 18 -

companies with regard to their important matters with due considerations totheir autonomy and independence, and ensure that the whole Group’s businessactivities are performed appropriately.
(vii)

Matters concerning the employees assisting the Corporate Auditors to performtheir duties when the Corporate Auditors request the assignment thereof
When the Corporate Auditors request the assignment of employees to assist
them to perform their duties, the Board of Directors of the Company shall,
upon consultation with the Board of Corporate Auditors, establish a secretariat
to the Board of Corporate Auditors and assign its employees to assist theBoard of Corporate Auditors.

(viii)

Matters concerning the independence of the employees set forth in (vii) above,from the Directors
When the employees, set forth in item (vii) above, are transferred to thesecretariat to the Board of Corporate Auditors, the Company shall respect theopinions of the Board of Corporate Auditors with regard to their transfer andpersonnel evaluations and ensure their independence from the Directors.

(ix)

System for reports by the Directors and employees to the Corporate Auditorsand systems for other reports to the Corporate Auditors
The Corporate Auditors shall attend meetings of the Board of Directors andother important meetings, hear from the Directors, etc., concerning the state of
execution of their duties, and inspect related materials.
In addition, the Corporate Auditors shall, in accordance with the “Regulations
Concerning Reporting to the Board of Corporate Auditors”, request the
Directors, Officers and employees to report facts that may inflict material
damage on the Company and other matters considered necessary for them toperform their duties.

(x)

Other systems to ensure that the Corporate Auditors perform their audits
effectively
To ensure that the Corporate Auditors perform their audits effectively, theCorporate Auditors shall closely cooperate with the independent auditors, andregularly meet the Representative Directors to confirm the management policy
and exchange opinions on the risks and issues surrounding the Company.

(xi)

System to ensure the reliability of financial reporting
The Company shall establish a “Basic Policy for Internal Control overFinancial Reporting” to ensure the reliability of financial reporting and theeffective and appropriate disclosure of “Internal Control Reports”. In
accordance with the Basic Policy, the Company shall establish an “Internal
Control Committee”, which shall be chaired by the Representative Director,- 19 -

President, and CEO, and shall be responsible for continuous improvement,
administration and evaluation of internal control over financial reporting andimplement a corrective measure when any defect is found.
(xii)

System for the exclusion of antisocial forces
The Company shall have a fundamental policy of having no relation with any
antisocial force and refusing any unjust claim.
In the event that a client is found to be an entity, enterprise, individual, etc.
having any relation with such antisocial force, the Company shall promptly
end a business relationship with it.
The Company shall designate its Personnel and General Affairs Department asa principal division in charge of dealing with antisocial forces and control theinformation centrally. To make its officers and employees comply with its
fundamental policy, the Company shall also define it clearly in its related rules
and regulations and establish an education system therefor. In addition, theCompany shall prepare countermeasures to prevent damages from antisocial
forces, if necessary.
In the event that any unjust claim is requested by an antisocial force, theCompany shall work closely with external specialized agencies, including thepolice and its legal counsel, and establish a cooperative system for emergency
situations.

(2)

Policies for the determination of Directors’ remuneration, etc.,:
Remuneration for Directors and Corporate Auditors shall be determined within therange of their respective maximum total amounts of remuneration determined byresolution of the General Meeting of Shareholders.
The amount of monthly remuneration for Directors shall be determined by theCompensation Committee upon authorization by the Board of Directors based on the
Company’s rules. The amount of monthly remuneration of Corporate Auditors shallbe determined upon consultation among the Corporate Auditors.
Bonuses for Directors shall be determined by the Compensation Committee upon
authorization by the Board of Directors based on the Company’s rules. Bonuses for
Corporate Auditors shall be determined upon consultation among the Corporate
Auditors.
Regarding the retirement benefits for Directors and Corporate Auditors, upon theapproval by resolution of the General Meeting of Shareholders and based on the
Company’s rules, the benefits for Directors shall be determined by the Compensation
Committee, and the benefits for Corporate Auditors shall be determined byconsultation among the Corporate Auditors.

- 20 -

(3)Policy for the determination of distribution of retained earnings, etc., by the Board of
Directors:
The Company recognizes the return out of earnings to its shareholders as one of themost important missions of management and pursues to maintain a steady dividend as
well as reinforcement of its management base.
In specific indexes, the Company plans to pay a dividend with a dividend on equity
ratio 1.0% on a consolidated basis, considering business conditions and other factors.
In accordance with the above basic policies, the Company will pay a year-end
dividend of ¥35 per share for the fiscal year under review.

=========================================================================(Note)In this business report, all figures and the number of shares are shown by
discarding any fractions of the indicated units, and rates are shown by rounding
fractions of a half or more of the indicated unit upward and the rest downward
unless otherwise indicated. Net income per share, net loss per share and equity
per share are shown by rounding off to two decimal places.

- 21 -

CONSOLIDATED BALANCE SHEET(As of March 31, 2015)(millions of yen)
ASSETS:
Current assets:

154,775

Cash and deposits .............................................................................
Notes and accounts receivable-trade .................................................
Merchandise and finished goods .......................................................
Work in process .................................................................................
Raw materials and supplies ...............................................................
Deferred tax assets .............................................................................
Other ..................................................................................................
Allowance for doubtful accounts .......................................................

66,82038,183
26,398
1,455
14,708
2,245
5,352
(389)
34,920

Fixed assets:
Property, plant and equipment:
Buildings and structures.....................................................................
Machinery, equipment, and motor vehicles .......................................
Tools, furniture, and fixtures .............................................................
Land ...................................................................................................
Lease assets ........................................................................................
Other ..................................................................................................

21,306
10,055
2,990
1,722
6,343
173
19

Intangible assets:
Patents ................................................................................................
Other ..................................................................................................

6,117
4,020
2,097

Investments and other assets:
Investment securities ..........................................................................
Deferred tax assets .............................................................................
Assets for retirement benefits ............................................................
Other ..................................................................................................
Allowance for doubtful accounts .......................................................

7,496
2,814
339
1,716
2,900
(276)
189,695

TOTAL ASSETS- 22 -

(millions of yen)
LIABILITIES:Current liabilities:
Notes and accounts payable-trade ........................................................
Short-term bank loans ...........................................................................
Accounts payable-other ........................................................................
Current portion of long-term lease obligations.....................................
Income taxes payable............................................................................
Accrued bonuses ...................................................................................
Reserve for products warranty .............................................................. 2
Other .....................................................................................................

51,37831,625
4,012
11,944
126
485
212
1,228
1,743

Long-term liabilities:

10,435Long-term bank loans ...........................................................................
Long-term lease obligations .................................................................
Deferred tax liabilities ..........................................................................
Deferred tax liabilities on revaluation of land ......................................
Liabilities for directors’ and corporate auditors’ retirement benefits ...
Liabilities for retirement benefits .........................................................
Other .....................................................................................................
TOTAL LIABILITIESEQUITY:

6,683
290
1,345
226
1,093
548
247
61,813

Shareholders’ equity:

134,079

Common stock .......................................................................................

31,307

Capital surplus .......................................................................................

33,272Retained earnings ...................................................................................

93,840Treasury stock ........................................................................................

(24,341)

Accumulated other comprehensive income (loss):(7,401)

Unrealized gain on available-for-sale securities ....................................

421

Foreign currency translation adjustments ..............................................

(8,188)

Defined retirement benefit plans ............................................................

365

Stock acquisition rights:

142

Minority interests:

1,061

TOTAL EQUITY

127,881TOTAL LIABILITIES AND EQUITY- 23 -

189,695

CONSOLIDATED STATEMENT OF INCOME(from April 1, 2014 to March 31, 2015)(millions of yen)
Net sales
Cost of sales
Gross profit
Selling, general, and administrative expenses
Operating income
Nonoperating income:Interest and dividend income

217,088
179,515
37,57337,009564
311

Foreign exchange gains
Other
Nonoperating expenses:

1,570
475

Interest expense
Loss on disposal of inventories
Other
Ordinary income
Extraordinary income:Gain on sales of fixed assets
Gain on sales of investment securities
Gain on sales of investment in nonconsolidated
subsidiaries and associated companies
Extraordinary loss:
Loss on disposal of fixed assets
Impairment loss on fixed assets
Loss on closing of sales office
Other

187
147
662

134

1,110

25
618
131
14

789
2,244

635
238

Net income

996
1,924

150
824

Income before income taxes and minority interests
Income taxes – current
Income taxes – deferred
Net income before minority interests
Minority interests in net income

2,356

873
1,370
16
1,354

- 24 -

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY(from April 1, 2014 to March 31, 2015)(millions of yen)
Shareholders’ equity
Common stock

Capital surplus

31,30733,272

Balance as of April 1, 2014

Retainedearnings
93,196

Cumulative effect of change inaccounting policy

Totalshareholders’equityTreasury stock(24,341)

133,435

483

483

Balance as of April 1, 2014
(As restated)

31,30733,272

93,679(24,341)

133,918

Changes of items during the fiscal
year
Cash dividends(1,194)
1,354

Net income(1,194)
1,354

Acquisition of treasury stock

(0)

(0)

(0)
(24,341)160
134,079

Net changes of items otherthan shareholders' equity
Total changes of items during the
fiscal year
Balance as of March 31, 2015

Balance as of April 1, 2014--

31,30733,272160
93,840

Accumulated other comprehensive income (loss)
Stock
Total
Unrealized
Foreignaccumulated acquisition
Definedgain oncurrency
otheravailablerights
translation retirement comprehenfor-salebenefit plans sive income
adjustments
securities(loss)
672(17,495)(103)(16,925)
132

Cumulative effect of changes inaccounting policy

Minority
interests

Total equity

1,042

117,684

(11)

472

1,031

118,156

Balance as of April 1, 2014
(As restated)672(17,495)(103)(16,925)

132

Changes of items during the fiscal
year
Cash dividends(1,194)
1,354

Net income(0)

Acquisition of treasury stock
Net changes of items otherthan shareholders' equity(251)

Total changes of items during the
fiscal year

(251)

9,307

468

9,524

10

29

9,724

Balance as of March 31, 2015

421

(8,188)365(7,401)

142

1,061

127,881

9,307

468

9,524

10

29

9,564

========================================================================(Note)In the consolidated balance sheet, consolidated statement of income and consolidated
statement of changes in equity, all figures are shown by discarding any fractions of therelevant units, respectively.

- 25 -

Copy of Independent Auditor’s Report on Consolidated Financial Statements(TRANSLATION)
INDEPENDENT AUDITOR'S REPORTMay 18, 2015
To the Board of Directors
Funai Electric Co., Ltd.:
Deloitte Touche Tohmatsu LLC
Designated Unlimited Liability Partner,
Engagement Partner,
Certified Public Accountant:Motoo Nakamura
Designated Unlimited Liability Partner,
Engagement Partner,
Certified Public Accountant:
Akira Nakata
Designated Unlimited Liability Partner,
Engagement Partner,
Certified Public Accountant:
Akihiro Okada
Pursuant to the fourth paragraph of Article 444 of the Companies Act, we have audited theconsolidated financial statements, namely, the consolidated balance sheet as of March 31, 2015 ofFunai Electric Co., Ltd. (the "Company") and its consolidated subsidiaries, and the related
consolidated statements of income and changes in equity for the fiscal year from April 1, 2014 toMarch 31, 2015, and the related notes.
Management's Responsibility for the Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of these consolidated financial
statements in accordance with accounting principles generally accepted in Japan, and for such internal
control as management determines is necessary to enable the preparation of consolidated financial
statements that are free from material misstatement, whether due to fraud or error.
Auditor's Responsibility
Our responsibility is to express an opinion on these consolidated financial statements based on our
audit. We conducted our audit in accordance with auditing standards generally accepted in Japan.
Those standards require that we plan and perform the audit to obtain reasonable assurance about
whether the consolidated financial statements are free from material misstatement.

- 26 -

An audit involves performing procedures to obtain audit evidence about the amounts and disclosuresin the consolidated financial statements. The procedures selected depend on the auditor's judgment,
including the assessment of the risks of material misstatement of the consolidated financial statements,
whether due to fraud or error. In making those risk assessments, the auditor considers internal control
relevant to the entity's preparation and fair presentation of the consolidated financial statements inorder to design audit procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the entity's internal control. An audit also includes
evaluating the appropriateness of accounting policies used and the reasonableness of accounting
estimates made by management, as well as evaluating the overall presentation of the consolidated
financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis
for our audit opinion.
Audit Opinion
In our opinion, the consolidated financial statements referred to above present fairly, in all material
respects, the financial position of the Company and its consolidated subsidiaries as of March 31, 2015,
and the results of their operations for the year then ended in accordance with accounting principles
generally accepted in Japan.
Emphasis of Matter
As discussed in the “Notes to the Consolidated Balance Sheet: 4. Contingent liability,” Koninklijke
Philips N.V. filed against the Company a petition for arbitration to claim compensation for damages
and the petition was served on the Company by the International Chamber of Commerce. With regard
to this matter, the Company filed with the International Chamber of Commerce a counterclaim for
claiming compensation for damages against Koninklijke Philips N.V. The petition and counterclaim
may have an effect on the operating results of the Company and its consolidated subsidiaries.
However, it is not possible to make a reasonable estimate of the effect of the arbitration proceedings,
and the effect thereof, if any, on the operating results, and the financial position of the Company andits consolidated subsidiaries remains unclear.
Our opinion is not qualified in respect of this matter.
Interest
Our firm and the engagement partners do not have any interest in the Company for which disclosure
is required under the provisions of the Certified Public Accountants Act.
The above represents a translation, for convenience only, of the original report issued in the Japanese
language.
-END-- 27 -

NONCONSOLIDATED BALANCE SHEET(As of March 31, 2015)(millions of yen)
ASSETS:
Current assets:
Cash and deposits .............................................................................
Notes receivable-trade .......................................................................
Accounts receivable-trade ...................................................................
Merchandise and finished goods .........................................................
Raw materials and supplies .................................................................
Prepaid expenses .................................................................................
Deferred tax assets ..............................................................................
Other ....................................................................................................
Allowance for doubtful accounts ........................................................
Fixed assets:
Property, plant and equipment:
Buildings .............................................................................................
Structures.............................................................................................
Machinery and equipment...................................................................
Motor vehicles .....................................................................................
Tools, furniture, and fixtures...............................................................
Land.....................................................................................................
Lease assets .........................................................................................
Intangible assets:
Patents .................................................................................................
Software ..............................................................................................
Lease assets .........................................................................................
Other ....................................................................................................
Investments and other assets:
Investment securities ...........................................................................
Investment in subsidiaries and associated companies.........................
Long-term loans receivable.................................................................
Long-term prepaid expenses ...............................................................
Prepaid pension cost ............................................................................
Other ....................................................................................................
Allowance for doubtful accounts ........................................................
TOTAL ASSETS- 28 -

71,81824,51829
41,493
70
4,668
1,287
1,417
537
(2,205)48,944
7,173
2,767
42
29
0
139
4,034
160
4,647
4,020
198
0
427
37,123444
31,48916,417
960
1,794
194
(14,177)
120,763(millions of yen)
LIABILITIES:Current liabilities:
Accounts payable-trade ........................................................................
Current portion of long-term lease obligations.....................................
Accounts payable-other ........................................................................
Accrued expenses .................................................................................
Income taxes payable............................................................................
Deposit received ...................................................................................
Reserve for products warranty..............................................................
Other .....................................................................................................
Long-term liabilities:
Long-term bank loans ...........................................................................
Long-term lease obligations .................................................................
Deferred tax liabilities ..........................................................................
Liabilities for directors’ and corporate auditors’ retirement benefits ...
Other .....................................................................................................
TOTAL LIABILITIES

29,952
19,738
66
6,574
3,104
198
166
98
5
8,180
6,008
105
961
1,074
29
38,133

EQUITY
Shareholders’ equity
Common stock
Capital surplus:
Capital reserve ......................................................................................
Other capital surplus .............................................................................
Retained earnings:
Legal reserve .........................................................................................
Other retained earnings .........................................................................
Reserve for advanced depreciation of fixed assets.......................
General reserve .............................................................................
Retained earnings brought forward ..............................................
Treasury stock
Valuation and translation adjustments:
Unrealized gain on available-for-sale securities
Stock acquisition rights
TOTAL EQUITYTOTAL LIABILITIES AND EQUITY- 29 -

82,20431,30733,272
32,833438
41,966
209
41,756513
23,40017,843(24,341)
282
282
142
82,629120,763

NONCONSOLIDATED STATEMENT OF INCOME(from April 1, 2014 to March 31, 2015)(millions of yen)
Net sales
Cost of sales
Gross profit
Selling, general, and administrative expenses
Operating loss
Nonoperating income:Interest and dividend gains
Foreign exchange gains
Other
Nonoperating expenses:
Interest expense
Allowance for doubtful accounts of subsidiaries
and associated companies
Other
Ordinary loss
Extraordinary income:Gain on sales of fixed assets
Gain on sales of investment securities
Gain on sales of investment in subsidiaries andassociated companies
Extraordinary loss:
Loss on disposition of fixed assets
Loss on revaluation of investment in subsidiaries
and associated companies

154,549
136,103
18,44520,287
1,841
279
1,789
329

2,398

59
642
199

900
343

0
824
134

959

0
13

Income before income taxes

14
601

148
105

Income taxes - current
Income taxes - deferred
Net income

253
347

- 30 -

NONCONSOLIDATED STATEMENT OF CHANGES IN EQUITY(from April 1, 2014 to March 31, 2015)(millions of yen)
Shareholders’ equity
Retained earnings

Capital surplus
Commonstock

Balance as of April 1, 2014
Cumulative effect of changein accounting policy
Balance as of April 1, 2014
(As restated)
Changes of items during the
fiscal year
Reserve for advanced
depreciation of fixed
assets
Reversal of reserve foradvanced depreciationof fixed assets
Cash dividends
Net income
Acquisition of treasury stock
Net changes of items otherthan shareholders’equityOther
capitalsurplusCapitalreserve

31,30731,307

32,833

32,833438

438

Other retained earnings
Reserve for
Retained
advanced
Generalearnings
depreciation
reservebrought
of fixed
forwardassetsTotal capitalsurplusLegalreserve

33,272

209

33,272

209

501

501

23,40023,400

25

(13)

Total
shareholders’equityTreasury
stock

Total
retainedearnings

18,09942,211

601

601

18,70142,812(25)-(24,341)

82,449601(24,341)

83,051

-

13

-

-

(1,194)(1,194)(1,194)

347

347

347
(0)

(0)

Total changes of items during
the fiscal year

-

-

-

-

-

11

-

(858)

(846)

(0)

(846)

Balance as of March 31, 2015

31,307

32,833438

33,272

209

513

23,40017,843

41,966(24,341)

82,204- 31 -

(millions of yen)

Balance as of April 1, 2014

Valuation and translation adjustments
Unrealized gain
Total valuationonand translation
available-for-saleadjustments
securities
585
585

Stock acquisitionrights132

Cumulative effect of change inaccounting policy
Balance as of April 1, 2014
(As restated)

Total equity

83,167
601

585

585

132

83,769Changes of items during the
fiscal year
Reserve for advanced
depreciation of fixed assets-

Reversal of reserve for advanced
depreciation of fixed assets-

Cash dividends(1,194)

Net income347

Acquisition of treasury stock(0)

Net changes of items other thanshareholders’ equity

(303)

(303)

10

(292)

Total changes of items during the
fiscal year

(303)

(303)

10

(1,139)Balance as of March 31, 2015

282

282

142

82,629=========================================================================(Note)In the nonconsolidated balance sheet, nonconsolidated statement of income and nonconsolidated statement of changes in equity, all figures
are shown by discarding any fractions of the relevant units, respectively.

- 32 -

Copy of Independent Auditor’s Report on Nonconsolidated Financial Statements(TRANSLATION)
INDEPENDENT AUDITOR'S REPORTMay 18, 2015
To the Board of Directors
Funai Electric Co., Ltd.:
Deloitte Touche Tohmatsu LLC
Designated Unlimited Liability Partner,
Engagement Partner,
Certified Public Accountant:Motoo Nakamura
Designated Unlimited Liability Partner,
Engagement Partner,
Certified Public Accountant:
Akira Nakata
Designated Unlimited Liability Partner,
Engagement Partner,
Certified Public Accountant:
Akihiro Okada

Pursuant to the first item, second paragraph of Article 436 of the Companies Act, we have audited thefinancial statements, namely, the balance sheet as of March 31, 2015 of Funai Electric Co., Ltd. (the"Company"), and the related statements of income and changes in equity for the 63rd fiscal year from
April 1, 2014 to March 31, 2015, and the related notes and the accompanying supplemental schedules.
Management's Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these financial statements andthe accompanying supplemental schedules in accordance with accounting principles generally
accepted in Japan, and for such internal control as management determines is necessary to enable thepreparation of financial statements and the accompanying supplemental schedules that are free frommaterial misstatement, whether due to fraud or error.
Auditor's Responsibility
Our responsibility is to express an opinion on these financial statements and the accompanying
supplemental schedules based on our audit. We conducted our audit in accordance with auditing
standards generally accepted in Japan. Those standards require that we plan and perform the audit to- 33 -

obtain reasonable assurance about whether the financial statements and the accompanying
supplemental schedules are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosuresin the financial statements and the accompanying supplemental schedules. The procedures selected
depend on the auditor's judgment, including the assessment of the risks of material misstatement of
the financial statements and the accompanying supplemental schedules, whether due to fraud or error.
In making those risk assessments, the auditor considers internal control relevant to the entity's
preparation and fair presentation of the financial statements and the accompanying supplemental
schedules in order to design audit procedures that are appropriate in the circumstances, but not for the
purpose of expressing an opinion on the effectiveness of the entity's internal control. An audit also
includes evaluating the appropriateness of accounting policies used and the reasonableness ofaccounting estimates made by management, as well as evaluating the overall presentation of thefinancial statements and the accompanying supplemental schedules.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis
for our audit opinion.
Audit Opinion
In our opinion, the financial statements and the accompanying supplemental schedules referred toabove present fairly, in all material respects, the financial position of the Company as of March 31,
2015, and the results of its operations for the year then ended in accordance with accounting
principles generally accepted in Japan.
Emphasis of Matter
As discussed in the “Notes to the Nonconsolidated Balance Sheet: 3. Contingent liabilities,(arbitration),” Koninklijke Philips N.V. filed against the Company a petition for arbitration to claim
compensation for damages and the petition was served on the Company by the International Chamberof Commerce. With regard to this matter, the Company filed with the International Chamber ofCommerce a counterclaim for claiming compensation for damages against Koninklijke Philips N.V.
The petition and counterclaim may have an effect on the operating results of the Company.
However, it is not possible to make a reasonable estimate of the effect of the arbitration proceedings,
and the effect thereof, if any, on the operating results, and financial position of the Company remains
unclear.
Our opinion is not qualified in respect of this matter.
Interest
Our firm and the engagement partners do not have any interest in the Company for which disclosure isrequired under the provisions of the Certified Public Accountants Act.

The above represents a translation, for convenience only, of the original report issued in the Japanese
language and "the accompanying supplemental schedules" referred to in this report are not included in
the attached financial documents.
-END-- 34 -

Copy of Audit Report of the Board of Corporate Auditors

AUDIT REPORT
We, the Board of Corporate Auditors of Funai Electric Co., Ltd. (the “Company”),
after deliberation based upon the audit report prepared by each Corporate Auditor on theexecution by Directors of their duties during the 63rd fiscal year from April 1, 2014, throughMarch 31, 2015, have performed our audits and hereby report as follows.
1.
Method of audits by the Corporate Auditors and the Board of Corporate Auditors andthe particulars thereof:
The Board of Corporate Auditors determined the audit policy, audit plans, etc.,
received from each Corporate Auditor reports on the state of his performance of audits andthe results thereof, and also received from the Directors, etc., and the independent auditors
reports on the state of execution of their duties and demanded their explanations whenevernecessary.
Each Corporate Auditor, in accordance with the auditing standards for the Corporate
Auditors determined by the Board of Corporate Auditors and pursuant to the audit policy,
audit plans, etc., maintained constant communication with the Directors, the internal audit
division and other employees, etc., in an effort to collect information and improve theenvironment for auditing, attended meetings of the Board of Directors and other important
meetings, received from the Directors and employees, etc., reports on the state of executionof their duties, demanded their explanations whenever necessary, inspected important
decision documents, etc., and made investigations into the state of activities and property at
the head office and principal business offices of the Company. With regard to the details of
the resolutions of the Board of Directors for establishing systems to ensure that the execution
by the Directors of their duties will comply with laws or ordinances and the Articles ofIncorporation and such other systems provided for in Article 100, paragraphs 1 and 3 of theRegulations to Enforce the Companies Act of Japan as necessary to ensure the adequacy ofbusiness of joint stock corporations, as well as the status of the systems (internal control
systems) established pursuant to such resolutions, which are described in the business report,
we periodically received from the Directors and employees, etc., reports, demanded their
explanations, and expressed our opinions whenever necessary, on the state of formulation andoperation thereof. With regard to its subsidiaries, we maintained constant communicationand exchanged information with the Directors, Corporate Auditors, etc., thereof and required
the subsidiaries to render reports on their business operations whenever necessary. In
accordance with such methods, we investigated the business report and its accompanying
detailed statements for the fiscal year under review.
We also monitored and verified whether the independent auditors had maintained an
independent position and conducted adequate audits, and received from the independent
auditors reports on the state of execution of their duties and demanded their explanations
whenever necessary. In addition, we received from the independent auditors a notice that- 35 -

the “systems to secure adequate execution of duties” (as listed in the items of Article 131 of
the Regulations on Corporate Accounts) had been established in accordance with the“Standard for Quality Control Concerning Audits” (the Accounting Standards Board of Japan,
October 28, 2005) and demanded their explanations whenever necessary.
In accordance with such methods, we investigated the nonconsolidated financial
statements (the nonconsolidated balance sheet, the nonconsolidated statement of operations,the nonconsolidated statement of changes in equity, and the notes to nonconsolidated
financial statements) and their accompanying supplemental schedules, as well as theconsolidated financial statements (the consolidated balance sheet, the consolidated statementof operations, the consolidated statement of changes in equity, and the related notes), for the
fiscal year under review.
2.

Results of audit:(1)

Results of audit of the business report, etc.:
We are of the opinion:(i)That the business report and its accompanying detailed statements present fairly thestate of the Company in accordance with laws and ordinances and the Articles ofIncorporation;(ii) That in connection with the execution by the Directors of their duties, no dishonest
act or material fact of violation of laws or ordinances or the Articles of Incorporation
exists; and(iii) That the details of the resolutions of the Board of Directors on internal control
systems are proper and that the descriptions in the business report and the execution
by the Directors of their duties concerning such internal control systems containnothing to be pointed out.
(2)

Results of audit of the nonconsolidated financial statements and their accompanying
supplemental schedules:
We are of the opinion that the method and results of the audit made by the independent
auditors, Deloitte Touche Tohmatsu LLC, are proper.

(3)

Results of audit of the consolidated financial statements:- 36 -

We are of the opinion that the method and results of the audit made by the independent
auditors, Deloitte Touche Tohmatsu LLC, are proper.
May 18, 2015
Funai Electric Co., Ltd.
The Board of Corporate Auditors
Hiromu Ishizaki
Full-time Corporate Auditor(seal)

Shinichi Komeda
Outside Corporate Auditor(seal)

Masahide Morimoto
Outside Corporate Auditor(seal)- END -

- 37 -

Reference Document for the General Meeting of Shareholders
Propositions and reference information
Proposition No. 1:
1.

Partial amendments to the Articles of Incorporation

Reasons for the amendment:(1)

The Companies Act (the “Revised Companies Act”) that was revised by the“Act for partial revision of the Companies Act” (Act No. 90 of 2014) came ineffect on May 1, 2015. The Company makes a shift to a company with Audit
and Supervisory Committee, which has been newly established by the RevisedCompanies Act, from the perspective of enhancing corporate governance bystrengthening the supervisory function of its Board of Directors. For thattransition, the Company plans to establish new provisions for an Audit andSupervisory Committee and Audit and Supervisory Committee Members andabolish the provisions for the Board of Corporate Auditors and Corporate
Auditors.

(2)

To prepare in advance for a vacancy in the statutory number of Directors who
are Audit and Supervisory Committee Members, the Company intends toestablish a new provision about the election of substitute Directors who are
Audit and Supervisory Committee Members in Article 18 of the existing
Articles of Incorporation. In the provision, the Company shall define theeffective period of the election of the substitute Directors and the term ofoffice if they assume office of Directors who are an Audit and Supervisory
Committee Members.

(3)

With the expansion of the scope of the Officers eligible to enter into limited
liability agreements under the Revised Companies Act, the Company plans tochange Article 26 of the existing Articles of Incorporation to enter into limited
liability agreements with Directors who do not execute business, to fulfill their
expected roles. Each Corporate Auditor has consented to the amendment to
the Articles of Incorporation related to limited liability agreements.

(4)

With regard to the indemnification of the Corporate Auditors that are provided
in the existing Articles of Incorporation, the Company intends to establish atransitional measure as a supplementary provision to make it remain effective
after the shift to a company with Audit and Supervisory Committee.

(5)

In addition, the Company intends to change the numbering of the Articles, etc.,
to reflect each of the above-mentioned changes accordingly.

The amendment to the Articles of Incorporation in this proposition shall become
effective from the close of this General Meeting of Shareholders.

- 38 -

2.

Details of the amendment:
The details of the proposed amendment are set forth below:(Underlines show amendment)
Existing Articles of Incorporation
Chapter I. General Provisions

Proposed amendment
Chapter I. General Provisions

From Article 1 to Article 3 (Description From Article 1 to Article 3 (Same as existing)omitted)(Organizations)(Organizations)

Article 4.
The Company shall have thefollowing organizations in addition to theGeneral Meeting of Shareholders, Directors
and Corporate Auditors:

Article 4.
The Company shall have thefollowing organizations in addition to theGeneral Meeting of Shareholders andDirectors:

(1)
(2)
(3)

(1)
(2)

The Board of Directors;
Board of Corporate Auditors; andIndependent Auditors.

(3)
Article 5. (Description omitted)
Chapter II.

The Board of Directors;
The Audit and Supervisory Committee;
andIndependent Auditors.

Article 5. (Same as existing)Shares

Chapter II.

SharesFrom Article 6 to Article 10 (Description From Article 6 to Article 10 (Same asomitted)existing)
Chapter III. General Meeting of
Shareholders

Chapter III. General Meeting of
Shareholders

From Article 11 to Article 16 (Description From Article 11 to Article 16 (Same asomitted)existing)
Chapter IV. Directors and Board of
Directors(Number)

Chapter IV. Directors and Board of
Directors(Number)

Article 17.
The Company shall have not Article 17.
The Company shall have notmore than 20 Directors.
more than 20 Directors (excluding Directors
who are Audit and Supervisory Committee
Members) and not more than five Directors
who are Audit and Supervisory Committee
Members.
- 39 -

Existing Articles of Incorporation(Method of election)

Proposed amendment(Method of election)

Article 18.
Directors shall be elected at Article 18.
Directors shall be elected, byGeneral Meetings of Shareholders.
separating Directors who are Audit andSupervisory Committee Members from those
who are not, at General Meetings ofShareholders.
2.

(Description omitted)

2.

(Same as existing)3.

(Description omitted)

3.

(Same as existing)(To be newly established)4.
In preparation for a vacancy in thestatutory number of Directors who are Audit
and Supervisory Committee Members, theCompany may elect substitute Directors who
are Audit and Supervisory Committee
Members at a General Meeting of
Shareholders pursuant to the provision of
Article 329, paragraph 3 of the Companies
Act of Japan.

(To be newly established)5.
The resolution for the election ofsubstitute Directors who are Audit andSupervisory Committee Members under thepreceding paragraph shall remain effective
until the commencement of the Ordinary
General Meeting of Shareholders relating to
the last fiscal year ending within two (2) years
after the close of the General Meeting of
Shareholders relating to their election.

(Term of office)(Term of office)

Article 19.
The term of office of Directors
shall expire at the close of the Ordinary
General Meeting of Shareholders relating to
the last fiscal year ending within one (1) year
after their election.

Article 19.
The term of office of Directors(excluding Directors who are Audit andSupervisory Committee Members) shall
expire at the close of the Ordinary General
Meeting of Shareholders relating to the last
fiscal year ending within one (1) year after
their election.

- 40 -

Existing Articles of Incorporation(To be newly established)

Proposed amendment
2.
The term of office of substitute
Directors who are Audit and Supervisory
Committee Members shall expire at the closeof the Ordinary General Meeting of
Shareholders relating to the last fiscal year
ending within two (2) years after theirelection.

(To be newly established)3.
The term of office of a Director who is
an Audit and Supervisory Committee Member
elected as a substitute to fill a vacancy createdby the retirement of a Director who is an
Audit and Supervisory Committee Member
prior to the expiration of the term of officeshall expire at the expiration term of office ofthe retired Director who is an Audit andSupervisory Committee Member.

From Article 20 to Article 21 (Description From Article 20 to Article 21 (Same asomitted)existing)(Notice of meeting of the Board of Directors)(Notice of meeting of the Board of Directors)

Article 22.
Notice for convening ameeting of the Board of Directors shall bedispatched to each Director and each
Corporate Auditor not later than three (3)days prior to the date of the meeting;provided, however, that such period of notice
may be shortened in the case of urgent
necessity.

Article 22.
Notice for convening ameeting of the Board of Directors shall bedispatched to each Director not later than
three (3) days prior to the date of the meeting;provided, however, that such period of notice
may be shortened in the case of urgent
necessity.

2.
If consented to by all the Directors andCorporate Auditors, a meeting of the Board of
Directors may be held without following theconvocation procedure.

2.
If consented to by all the Directors, ameeting of the Board of Directors may beheld without following the convocation
procedure.

- 41 -

Existing Articles of Incorporation
Article 23.
(Description omitted)

Proposed amendment
Article 23.
(Same as existing)(To be newly established)(Entrustment of determination
execution of important business)

of

the

Article 24.
The Board of Directors may,by its resolution pursuant to Article 399-13,
paragraph 6 of the Companies Act, entrust allor part of the determination of the executionof important business (excluding the matterslisted in the items of Article 399-13,
paragraph 5 of the Companies Act) to bemade by the Board of Directors to a Director
or Directors.
Article 24.

Article 25.

(Description omitted)(Same as existing)(Remuneration, etc.)(Remuneration, etc.)

Article 25.
Remuneration, bonuses andother proprietary benefits that Directors may
receive from the Company in consideration of
the execution of their duties ("remuneration,etc.") shall be determined by resolution of aGeneral Meeting of Shareholders.

Article 26.
Remuneration, bonuses andother proprietary benefits that Directors may
receive from the Company in consideration of
the execution of their duties ("remuneration,etc.") shall be determined by resolution of aGeneral Meeting of Shareholders, byseparating Directors who are Audit andSupervisory Committee Members from those
who are not.

(Indemnification of Directors)(Indemnification of Directors)

Article 26.

Article 27.

(Description omitted)

2.
The Company may enter into anagreement with any outside Director to limit
liabilities for any damage as provided for in
Article 423, paragraph 1 of the Companies
Act of Japan to the aggregate amount asprovided for in the items of paragraph 1 of
Article 425 of the said Act, pursuant to theprovision of Article 427, paragraph 1 of thesaid Act.

(Same as existing)

2.
The Company may enter into anagreement with any Director (excluding an
executive Director, etc.) to limit liabilities forany damage as provided for in Article 423,
paragraph 1 of the Companies Act of Japan tothe aggregate amount as provided for in theitems of paragraph 1 of Article 425 of the said
Act, pursuant to the provision of Article 427,
paragraph 1 of the said Act.

- 42 -

Existing Articles of Incorporation

Proposed amendment

Chapter V. Corporate Auditors and(To be deleted)
Board of Corporate Auditors(Number)
Article 27.
The Company shall have not (To be deleted)less than three (3) Corporate Auditors.
(Method of election)
Article 28.
Corporate Auditors shall be (To be deleted)elected at General Meetings of Shareholders.
2.
Resolutions for the election of (To be deleted)
Corporate Auditors shall be adopted at a
General Meeting of Shareholders at whichshareholders holding one-third (1/3) or moreof voting rights of the shareholders entitled tovote shall be present, by a majority of thevoting rights of the shareholders so present.
3.
In preparation for a vacancy in such (To be deleted)number of Corporate Auditors as provided forin laws or ordinances, the Company may electan alternate Corporate Auditor or Auditors
at a General Meeting of Shareholders
pursuant to the provision of Article 329,
paragraph 2 of the Companies Act of Japan.
4.
The resolution for the election of an (To be deleted)
Alternate Corporate Auditor or Auditors
under the preceding paragraph shall remain
effective until the commencement of theOrdinary General Meeting of Shareholders
relating to the last fiscal year to end withinfour (4) years after his/her/their election.

- 43 -

Existing Articles of Incorporation(Term of office)Proposed amendment

Article 29.
The term of office of (To be deleted)
Corporate Auditors shall expire at the close oftheOrdinary
GeneralMeetingof
Shareholders relating to the last fiscal year to
end within four (4) years after their election.
2.
The term of office of a Corporate (To be deleted)
Auditor elected to fill a vacancy created by
the retirement of a Corporate Auditor prior to
the expiration of the term of office shall
expire at such time as the term of office of theretired Statutory Auditor would expire.
(Full-time Corporate Auditors)
Article 30.
The Board of Corporate (To be deleted)
Auditors shall, by its resolution, appoint one(1) or more full-time Corporate Auditors.
(Notice of meeting of the Board of Corporate
Auditors)
Article 31.
Notice for convening a (To be deleted)meeting of the Board of Corporate Auditors
shall be dispatched to each Corporate Auditor
not later than three (3) days prior to the dateof the meeting; provided, however, that such
period of notice may be shortened in the caseof urgent necessity.
2.
If consented to by all the Corporate (To be deleted)
Auditors, a meeting of the Board of Corporate
Auditors may be held without following theconvocation procedure.
(Method of adopting resolutions of the Boardof Corporate Auditors)
Article 32.
Resolutions of the Board of (To be deleted)
Corporate Auditors shall be adopted by amajority of the Corporate Auditors.

- 44 -

Existing Articles of Incorporation(Regulations of the Board of Corporate
Auditors)

Proposed amendment

Article 33.
All matters concerning the (To be deleted)
Board of Corporate Auditors shall begoverned by the Regulations of the Board of
Corporate Auditors to be established by the
Board of Corporate Auditors, in addition asprovided for in laws or ordinances or in these
Articles of Incorporation.
(Remuneration, etc.)
Article 34.
Remuneration,etc.
of (To be deleted)
Corporate Auditors shall be determined byresolution of a General Meeting of
Shareholders.
(Indemnification of Corporate Auditors)
Article 35.
The Company may, by (To be deleted)
resolution of the Board of Directors, exempt
any Corporate Auditor (including any former
Corporate Auditor) from liabilities for any
damage as provided for in Article 423,
paragraph 1 of the Companies Act of Japan,
to the extent allowable by law, pursuant to theprovision of Article 426, paragraph 1 of thesaid Act.
2.
The Company may enter into an (To be deleted)agreement with any outside Corporate
Auditor to limit liabilities for any damage asprovided for in Article 423, paragraph 1 of theCompanies Act of Japan to the aggregate
amount as provided for in the items ofparagraph 1 of Article 425 of the said Act,
pursuant to the provision of Article 427,
paragraph 1 of the said Act.

- 45 -

Existing Articles of Incorporation

Proposed amendment(To be newly established)

Chapter V. Audit and Supervisory
Committee(To be newly established)(Notice of meeting of the Audit andSupervisory Committee)
Article 28.
Notice for convening ameeting of the Audit and Supervisory
Committee shall be dispatched to each Audit
and Supervisory Committee Member not later
than three (3) days prior to the date of themeeting; provided, however, that such periodof notice may be shortened in the case ofurgent necessity.

(To be newly established)2.
If consented to by all the Audit andSupervisory Committee Members, a meetingof the Audit and Supervisory Committee may
be held without following the convocation
procedure.

(To be newly established)(Method of adopting resolutions of the Audit
and Supervisory Committee)
Article 29.
Resolutions of the Audit andSupervisory Committee shall be adopted at its
meeting at which a majority of the Audit andSupervisory Committee Members entitled toparticipate in the voting shall be present, by amajority of the Audit and Supervisory
Committee Members so present.

(To be newly established)

Regulations of the Audit and Supervisory
Committee)
Article 30.
All matters concerning the
Audit and Supervisory Committee shall begoverned by the Regulations of the Audit andSupervisory Committee to be established by
the Audit and Supervisory Committee, in
addition as provided for in laws or ordinances
or in these Articles of Incorporation.

- 46 -

Existing Articles of Incorporation

Proposed amendment

Chapter VI. Accounts

Chapter VI. Accounts

From Article 36 to Article 39 (Descriptions From Article 31 to Article 34 (Same asomitted)existing)
Supplementary Provisions
Article 1.

(Description omitted)(To be newly established)

Supplementary Provisions
Article 1.

(Same as existing)

Article 2.
The Company may, byresolution of the Board of Directors, exempt
any Corporate Auditor (including any former
Corporate Auditor) who remains in office up
to the close of the 63rd Ordinary General
Meeting of Shareholders from liabilities forany damage as provided for in Article 423,
paragraph 1 of the Companies Act of Japan,
to the extent allowable by law, pursuant to theprovision of Article 426, paragraph 1 of thesaid Act.

- 47 -

Proposition No. 2:

Election of six (6) Directors (excluding Directors who are Audit andSupervisory Committee Members)

The term of office of all the (6) Directors currently in office will expire at the close ofthis Ordinary General Meeting of Shareholders. On the condition that Proposition No. 1“Partial Amendments to the Articles of Incorporation” is approved and adopted as proposed,
the Company will make a shift to a company with Audit and Supervisory Committee.
Hence, it is hereby proposed that six (6) Directors (excluding Directors who are Audit andSupervisory Committee Members; the same applies hereinafter in this proposition), including
two (2) outside Directors, be elected to enhance the transparency of the Board of Directors
and attempt the efficiency of management.
This proposition shall become effective subject to Proposition No. 1 “Partial
amendments to the Articles of Incorporation” becoming effective as proposed.
The candidates for Director are as follows:

Candidate
No.

1.

Name
(Date of birth)

Tetsuro Funai

Brief history, post in the Company and business incharge (and important concurrent office)April 1951

Established Funai Sewing MachineCompany

Dec. 1952

Representative Director of Funai
Sewing Machine Co., Ltd.

August 1961

Founding President andRepresentative Director of Funai
Electric Co., Ltd. (the "Company")

June 2005

Director of the Company;
President and CEO of the Company

June 2008

Director of the Company;
Chairman and Officer of theCompany

June 2010

Chairman and Officer of theCompany

June 2012

Chairman of the Company(January 24, 1927)

October 2014

Chairman and Representative
Director of the Company (To date)(Chairman of Funai Information Science Promotion
Foundation)(Chairman of Funai Scholarship Foundation)- 48 -

Number ofshares of theCompany heldby Candidate

12,709,288
sharesCandidate
No.

2.

Name
(Date of birth)Tomonori Hayashi

April 1969

Joined the Company

October 2002

Officer of the Company

June 2005

Executive Officer of theCompany

March 2006

CEO of FUNAI CORPORATION
INC.

June 2007

Senior Executive Officer of theCompany

March 2008

General Manager of AV
Headquarters of the Company

June 2008

Director of the Company;
President and CEO of theCompany(March 13, 1947)

Candidate for
Outside Director

3.

Brief history, post in the Company and business incharge (and important concurrent office)Mitsuo Yonemoto(March 18, 1939)

June 2010

Representative Director of theCompany;
President and CEO of theCompany

January 2014

Director of the Company;
Vice Chairman of the Company

October 2014

Representative Director of theCompany; (To date)President and CEO of theCompany (To date)July 1995

Vice President and Director of
T.P.S. Laboratory Co., Ltd. (Todate)

September 1998

Outside Director of the Company(To date)

March 2009

Outside Director of THE
SAILOR PEN CO., LTD. (Todate)

June 2012

Outside Corporate Auditor of
Oriental Chain Mfg. Co., Ltd. (Todate)(Vice President and Director of T.P.S. LaboratoryCo., Ltd.)(Outside Director of THE SAILOR PEN CO., LTD.)(Outside Corporate Auditor of Oriental Chain Mfg.
Co., Ltd.)- 49 -

Number ofshares of theCompany heldby Candidate

15,400 shares

100 shares

Candidate
No.

Name
(Date of birth)

Brief history, post in the Company and business incharge (and important concurrent office)April 1977
April 1990
April 1999

April 2003

February 2004
December 2005
April 2007
4.

Joji Okada(August 27, 1954)

October 2009

June 2010
June 2011

June 2014

Joined Hitachi, Ltd.
Chief Engineer, Hitachi, Ltd.
General Manager of Development
Office, System LSI Business
Dept. and Semiconductor Groupof Hitachi, Ltd.
General Manager of Global
Marketing Dept. of Renesas
Technology Corp.
Representative Director of
Applause Technologies Co., Ltd.
Joined the Company
Executive Manager ofDevelopment & Technology
Headquarters of the Company
Officer and Deputy General
Manager of Development &Technology Headquarters of theCompany
Director of the Company (Todate)
Officer and General Manager ofDevelopment & Technology
Headquarters of the Company
Officer, General Manager ofDevelopment & Technology
Headquarters and General
Manager of Intellectual Property
Rights Headquarters of theCompany (To date)- 50 -

Number ofshares of theCompany heldby Candidate

500 shares

Candidate
No.

Name
(Date of birth)
Candidate for
Outside Director

Brief history, post in the Company and business incharge (and important concurrent office)April 1979

Joined TDK Corporation

June 2000

President and Representative
Director of Terra Logic Japan Inc.
(renamed Zoran Japan
Corporation in August 2003)
Country General Manager; andVice President in charge of Japan
area Sales & Marketing of Zoran
Corporation (U.S.A.)
Advisor of the Company

June 2005
5.

Yoshiaki Bannai(August 3, 1954)

January 2012

Outside Director of the Company(To date)
July 2012
President and Representative
Director of Be.com corporation(To date)(President and Representative Director of Be.com
corporation)
June 2012- 51 -

Number ofshares of theCompany heldby Candidate- shareCandidate
No.

Name
(Date of birth)

Brief history, post in the Company and business incharge (and important concurrent office)April 1980

Joined Sanyo Electric Co., Ltd.

October 1998

General Manager of TechnicalEngineering Dept., Personnel
Communication Business Div. of
Sanyo Electric Co., Ltd.
Managing Director of Sanyo
Telecommunications Co., Ltd.
Vice President, Telecom
Company of Sanyo Electric Co.,
Ltd.
Executive Officer of Sanyo
Electric Co., Ltd.
Executive Officer and General
Manager of Solar Business Div.
of Sanyo Electric Co., Ltd.
Managing Executive Officer of
Sanyo Electric Co., Ltd.
Joined the Company
Executive Manager of Strategic
Technology Department,
Development Technology
Headquarters of the Company
Officer and General Manager ofBusiness Department, New
Business Div. of the Company
Officer and General Manager ofCorporate Planning Div. andGeneral Manager of Business
Department, New Business Div.
of the Company (To date)Representative Director of theCompany (To date)

April 2002
April 2005

April 2006
April 2008

6.

Tetsuhiro Maeda

April 2011

(July 4, 1954)

August 2012
January 2013

April 2013

April 2014

October 2014

Number ofshares of theCompany heldby Candidate- share(Notes) 1. None of the candidates for Director has any special interests with the Company.
2. Candidates for Directors, Messrs. Mitsuo Yonemoto and Yoshiaki Bannai, are candidates
for outside Director.
3. Reasons for the selection of the candidates for outside Director:
Management has judged that Mr. Mitsuo Yonemoto will be able to offer advice based on
his broad experience as a management consultant.
Management has judged that Mr. Yoshiaki Bannai will be able to use his broad
knowledge and experience in corporate management and the creation of new businesses.
4. Years of service of outside Directors of the Company:
Mr. Mitsuo Yonemoto will have served as outside Director for 17 years at the close ofthis Ordinary General Meeting of Shareholders.

- 52 -

Mr. Yoshiaki Bannai will have served as outside Director for three years at the close ofthis Ordinary General Meeting of Shareholders.
5. Designation of independent officer:
The Company has designated Mr. Mitsuo Yonemoto as an independent officer inaccordance with the rules of Tokyo Stock Exchange, Inc. and registered him with suchexchange.
6. Conclusion of limited liability agreements:
The Company has entered into an agreement with each of outside Directors Mr. Mitsuo
Yonemoto and Mr. Yoshiaki Bannai to limit their liability for any damage as provided forin Article 423, paragraph 1 of the Companies Act of Japan within the aggregate amountas provided for in the items of Article 425, paragraph 1 of the said Act, pursuant to
Article 427, paragraph 1 of the said Act. If they are reelected, such agreements will berenewed.

Proposition No. 3:

Election of three (3) Directors who are Audit and Supervisory
Committee Members

On the condition that Proposition No. 1 “Partial amendments to the Articles ofIncorporation” is approved and adopted as proposed, the Company will make a shift to acompany with Audit and Supervisory Committee. Hence, it is hereby proposed that three(3) Directors who are Audit and Supervisory Committee Members be elected.
This proposition shall become effective subject to Proposition No. 1 “Partial
amendments to the Articles of Incorporation” becoming effective as proposed.

- 53 -

The candidates for Director who are Audit and Supervisory Committee Members are
as follows:

Candidate
No.

Name(Date of birth)[New]
Candidate foroutside Director

1.
Shinichi Komeda(May 15, 1937)

Brief history, post in the Company and business incharge (and important concurrent office)Joined Nichimen Corporation(now Sojitz Corporation)
July 1987
General Manager of Dept. I of
Electronic Information
Headquarters, Osaka Head Officeof Nichimen Corporation
September
Vice President and General
1990
Manager of Chicago Branch of
Nichimen U.S.A.
May 1991
Outside Director of Navigation
Technologies Corp. (now
NAVTEQ Corp.)
March 1995
President and Representative
Director of Nichimen ElectricParts Co., Ltd.
March 2001
President and Representative
Director of TOKYO DEN-ON
Co., Ltd.
February 2006 Representative Director of
NAVTEQ Corp.
May 2010
Director of NAVTEQ Corp.

Number ofshares of theCompany heldby Candidate

April 1962

June 2010

Outside Corporate Auditor of theCompany (To date)- 54 -- shareCandidate
No.

Name
(Date of birth)[New]

Brief history, post in the Company and business incharge (and important concurrent office)April 1967
June 1991

Candidate foroutside Director
September
1995

Masahide Morimoto2.

April 1999

(August 27, 1944)

June 2001

June 2002

April 2007
June 2010

Joined Daiwa Securities Co. Ltd.
Director, General Manager ofHigashi-Tokyo Headquarters andGeneral Manager of Tokyo
Metropolitan-West Sales
Headquarters of Daiwa Securities
Co. Ltd.
Managing Director and General
Manager of Osaka-Kinki-Shikoku
Sales Headquarters of Daiwa
Securities Co. Ltd.
Senior Managing Director,
Representative Director andGeneral Manager of Osaka
Branch of Daiwa Securities
SMBC Co. Ltd. (now Daiwa
Securities Co., Ltd.)
President and Representative
Director of Daiwa Tochi
Tatemono Co., Ltd. (now Daiwa
Property Co., Ltd.)
President and Representative
Director of Daiwa Sanko Co.,
Ltd. (now Daiwa Office Service
Co., Ltd.)Special Advisor of Daiwa
Property Co., Ltd.
Outside Corporate Auditor of theCompany (To date)- 55 -

Number ofshares of theCompany heldby Candidate

2,000 shares

Candidate
No.

Name
(Date of birth)[New]

Brief history, post in the Company and business incharge (and important concurrent office)April 1970
July 1981

Candidate foroutside Director
August 1988

April 1990
Hiroyuki Makiura
3.

(June 1, 1947)

November
1994

July 1999
June 2004
April 2008

April 2010

Number ofshares of theCompany heldby Candidate

Joined Nichimen Co., Ltd. (nowSojitz Corporation)
General Manager of Machine
Dept., Los Angeles Branch of
Nichimen U.S.A.
General Manager of Car
Electronics Dept., Chicago
Branch of Nichimen U.S.A.
General Manager of Detroit
Branch of Nichimen U.S.A.
General Manager of Dept. II of
Electronic Information Division,
Nichimen Corporation (nowSojitz Corporation)
Senior Trade Advisor (JETRO) to
the State of Ohio, U.S.A.
Director of Foster ElectricCompany, Limited
Officer of Foster ElectricCompany, Limited and Presidentof Fostex Company
Vice President of Foster Electric(Europe) GmbH- share(Notes) 1. None of the candidates for Director have any special interests with the Company.
2. Candidates for Director, Messrs. Shinichi Komeda, Masahide Morimoto and Hiroyuki
Makiura, are candidates for outside Director.
3. Reasons for the selection of the candidates for outside Director:
Management has judged that Messrs. Shinichi Komeda, Masahide Morimoto and
Hiroyuki Makiura, who have long engaged in corporate management, will be able to use
their capabilities and knowledge for the audit systems of the Company.
4. Years of service of Corporate Auditors:
Messrs. Shinichi Komeda and Masahide Morimoto, who are currently outside Corporate
Auditors of the Company, will have served as Corporate Auditors for five years at theclose of this Ordinary General Meeting of Shareholders, respectively.
5. Designation of independent officer:
The Company has designated Mr. Shinichi Komeda as an independent officer inaccordance with the rules of Tokyo Stock Exchange, Inc. and registered him with suchexchange.
6. Conclusion of limited liability agreements:
The Company has entered into an agreement with each of outside Corporate Auditors Mr.
Shinichi Komeda and Mr. Masahide Morimoto to limit their liability for any damage asprovided for in Article 423, paragraph 1 of the Companies Act of Japan within the- 56 -

aggregate amount as provided for in the items of Article 425, paragraph 1 of the said Act,
pursuant to Article 427, paragraph 1 of the said Act. If Messrs. Shinichi Komeda,
Masahide Morimoto and Hiroyuki Makiura are elected as Directors who are Audit andSupervisory Committee Members, the Company will enter into limited liability
agreements with the same content with the aforementioned with them.

Proposition No. 4:

Election of one (1) Substitute Director who is an Audit andSupervisory Committee Member

On the condition that Proposition No. 1 “Partial amendments to the Articles ofIncorporation” is approved and adopted as proposed, the Company will make a shift to acompany with Audit and Supervisory Committee. Hence, to prepare in advance for avacancy in the statutory number of Directors who are Audit and Supervisory Committee
Members, it is hereby proposed that one (1) substitute Director who is an Audit andSupervisory Committee Member be elected in advance in accordance with the provision of
Article 329, paragraph 3 of the Companies Act of Japan.
With regard to the effectiveness of the election, it may be repealed by resolution of
the Board of Directors upon consent thereto by the Audit and Supervisory Committee only
before he assumes office.
This proposition shall become effective subject to Proposition No. 1 “Partial
amendments to the Articles of Incorporation” becoming effective as proposed.
The candidate for substitute Director who is an Audit and Supervisory Committee
Member is as follows:
Name

Brief history (and important concurrent office)(Date of birth)

Candidate foralternate outside
Director

April 1979

Joined TDK Corporation

June 2000

President and Representative
Director of Terra Logic Japan Inc.
(renamed Zoran Japan Corporationin August 2003)
Country General Manager; andVice President in charge of Japan
area Sales & Marketing of Zoran
Corporation (U.S.A.)
Advisor of the Company

June 2005

Yoshiaki Bannai

January 2012

(August 3, 1954)

June 2012
July 2012

Number of sharesof the Company
held by Candidate- shareOutside Director of the Company(To date)
President and Representative
Director of Be.com Co., Ltd. (Todate)(Notes) 1. Candidate for substitute Director who is an Audit and Supervisory Committee Member
has no special interests with the Company.

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2. Candidate for substitute Director who is an Audit and Supervisory Committee Member,
Mr. Yoshiaki Bannai, is a candidate for substitute outside Director.
3. Reasons for the selection of the candidate to substitute outside Director:
Management has judged that Mr. Yoshiaki Bannai, who has long engaged in corporate
management, will be able to use his capabilities and knowledge for the audit systems of
the Company.
When Proposition No. 2 is approved and adopted as proposed, he will assume the officeof Director who is not a Director serving on the Audit and Supervisory Committee. Incase of any vacancy in the statutory number of Directors who are Audit and Supervisory
Committee Members, he will resign from the office of Director who is not a Director
serving on the Audit and Supervisory Committee and assume the office of Director who
is an Audit and Supervisory Committee Member
4. Conclusion of limited liability agreements:
When Mr. Yoshiaki Bannai assumes the office of Director who is an Audit andSupervisory Committee Member, the Company will enter into an agreement with him to
limit his liability for any damage as provided for in Article 423, paragraph 1 of theCompanies Act of Japan within the aggregate amount as provided for in the items of
Article 425, paragraph 1 of the said Act, pursuant to Article 427, paragraph 1 of the said
Act.

Proposition No. 5:

Setting of the amount of remuneration, etc. for Directors(excluding Directors who are Audit and Supervisory Committee
Members)

The amount of remuneration, etc. for Directors of the Company has been fixed at no
more than ¥550 million per year (including the amount of ¥30 million of remuneration, etc.
for outside Directors per year) since it was approved at the 58th Ordinary General Meeting of
Shareholders held on June 22, 2010. On the condition that Proposition No. 1 “Partial
amendments to the Articles of Incorporation” is approved and adopted as proposed, theCompany will make a shift to a company with Audit and Supervisory Committee. Hence, in
accordance with Article 361, paragraphs 1 and 2 of the Companies Act, it is hereby proposedthat the current cap on the amount of remuneration for Directors be abolished and that theamount of remuneration, etc. for Directors (excluding Directors who are Audit andSupervisory Committee Members; the same applies hereinafter in this proposition) be no
more than ¥550 million per year (including the amount of ¥30 million of remuneration, etc.
for outside Directors per year) in consideration of the economic conditions and various otherfactors.
The amount of remuneration, etc. for Directors (excluding Directors who are Audit
and Supervisory Committee Members) shall not include wages for employees who areconcurrently serving as Directors.
Currently, the Company has six Directors (including two outside Directors). Upon
the approval and adoption of Proposition No. 1 and Proposition No. 2 as proposed, there will
be six Directors (including two outside Directors) (excluding Directors who are Audit andSupervisory Committee Members).

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This proposition shall become effective subject to Proposition No. 1 “Partial
amendments to the Articles of Incorporation” becoming effective as proposed.
Proposition No. 6:

Setting of the amount of remuneration, etc. for Directors who are
Audit and Supervisory Committee Members

On the condition that Proposition No. 1 “Partial amendments to the Articles ofIncorporation” is approved and adopted as proposed, the Company will make a shift to acompany with Audit and Supervisory Committee. Hence, in accordance with Article 361,
paragraphs 1 and 2 of the Companies Act, it is hereby proposed that the amount of
remuneration, etc. for Directors who are Audit and Supervisory Committee Members be no
more than ¥40 million per year in consideration of the economic conditions and various otherfactors.
Upon the approval and adoption of Proposition No. 1 and Proposition No. 3 as
proposed, there will be three Directors who are Audit and Supervisory Committee Members(including three outside Directors).
This proposition shall become effective subject to Proposition No. 1 “Partial
amendments to the Articles of Incorporation” becoming effective as proposed.
Proposition No. 7:

Granting retirement benefits to the retiring Corporate Auditors

On the condition that Proposition No. 1 “Partial amendments to the Articles ofIncorporation” is approved and adopted as proposed, the Company will make a shift to acompany with Audit and Supervisory Committee, and upon the amendment to the Articles ofIncorporation becoming effective, all three Corporate Auditors will retire due to the
expiration of the term of office. Hence, it is hereby proposed that retirement benefits be
granted to Messrs. Hiromu Ishizaki, Shinichi Komeda and Masahide Morimoto, who will
retire as Corporate Auditors at the close of this Ordinary General Meeting of Shareholders, inappreciation of services rendered by them while in office, within the extent of a reasonableamount in accordance with the established standards of the Company and that determinationof the actual amount, the time and method of presentation, etc. be left to the consultation
among the Directors who are Audit and Supervisory Committee Members.
This proposition shall become effective subject to Proposition No. 1 “Partial
amendments to the Articles of Incorporation” becoming effective as proposed.
The brief histories of the retiring Corporate Auditors are as follows:
Name

Brief history

Hiromu Ishizaki

June 2012

Corporate Auditor of the Company (To date)

Shinichi Komeda

June 2010

Outside Corporate Auditor of the Company (To date)

Masahide Morimoto

June 2010

Outside Corporate Auditor of the Company (To date)- END - 59 -