(Translation)

Securities Code:June 6, 2011

6839

NOTICE OF THE 59TH ORDINARY GENERAL MEETINGOF SHAREHOLDERS

Dear Shareholders:
We would like to express our appreciation for your continued good offices.
We offer our heartfelt condolences to all shareholders who have suffered from theGreat Eastern Japan Earthquake.
Please take notice that the 59th 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 not present at themeeting, please go over the Reference Document for the General Meeting of Shareholders set
forth below and send us by return mail the enclosed voting form indicating your approval ordisapproval of the propositions no later than 5:00 p.m. on June 21 (Tuesday), 2011.

Yours very truly,

Tomonori Hayashi
Representative director, President and CEO

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

Date and hour:
June 22 (Wednesday), 2011, 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.

Report on the business report, the consolidated financial statements and theresults of audit of the consolidated financial statements by the accounting
auditors and the Board of Corporate Auditors for the 59th fiscal year (from
April 1, 2010 to March 31, 2011)2.

Report on the non-consolidated financial statements for the 59th fiscal year
(from April 1, 2010 to March 31, 2011)

Matters to be resolved:
Proposition No. 1:

Election of 9 Directors

Proposition No. 2:

Granting of retirement gratuities to the retiring
Directors- END -In attending the meeting, please present the enclosed voting form to a receptionist at the placeof the meeting.
In the event of the revision of any matter in the Reference Document for the General Meetingof Shareholders, the business report, the consolidated financial statements and thenon-consolidated financial statements, it will be posted on our Internet website(http://www.funai.jp/).

-2-

(Attached documents)
BUSINESS REPORT(April 1, 2010 to March 31, 2011)
1.

Current state of the Funai Group (the "Group")(1)

Development and results of business activities:

During the fiscal year ended March 31, 2011, the economy of the United States,
which is the Group’s principal market, was characterized by a gradual overall recovery.
Government support, coupled with quantitative easing, bolstered stock market performance,
supporting personal consumption. On the other hand, the housing market was lackluster,
unemployment remained high, and gasoline prices surged, causing uncertainty about future
consumption levels.
In the consumer electronics market, sales of mainstay LCD televisions were strong in
China and other emerging markets. Sales also increased in Japan, spurred by government
efforts to stimulate consumption (the home electronics eco-point system). In Europe andthe United States, market growth is slowing, owing to already-high product penetration. In
these markets, sales failed to increase, as consumers held back on purchasing high-end new
products, such as LED- backlight and 3D televisions, out of income uncertainty. These
circumstances put downward pressure on prices, while raw materials costs continued to
escalate, squeezing profits.
As a result of these circumstances, the Group posted a 6.0% year-on-year decrease in
net sales, to ¥295,923 million.
On the profit front, operating income plunged 93.1%, to ¥772 million; ordinary
income dropped 89.0%, to ¥1,290 million; and the Group recorded a net loss of ¥1,169
million, compared with net income of ¥10,328 million in the preceding fiscal year.
Sales by Product Segment were as follows:
Audio-visual Equipment
In the Audio-visual equipment segment, the Group was able to increase the volume of
LCD television units sold but due to intense price competition in the market, sales fell. In
the field of DVD related products, despite the top-line contribution of Blu-ray disc recordersthat were launched onto the market during the third quarter of the previous fiscal year, sales
fell significantly from the same period last year. This was mainly because of the lack ofsales generated by TV STBs in the US market after the Group's decisions to halt production
thereof and the marked decline in sales of DVD players and Blu-ray disc players.
Consequently, net sales of this product segment fell to ¥198,606 million (a fall of 15.0%
from the previous fiscal year).

-3-Note: Television set-top boxes are devices to convert digital signals into analog signals,
enabling viewers to watch terrestrial digital broadcasting on existing analog
televisions. Terrestrial analog broadcasting in the United States was ended in June
2009.
Information Equipment
In the information equipment segment, an increase in orders for printers resulted in
the Group posting net sales of ¥56,405 million (a 3.3% increase from the previous fiscal
year).
OthersSales of other products that are not included in the above categories increased asstrong demand for antennas and related devices as a result of the transition from analogue todigital terrestrial broadcasting. Consequently, the Group posted net sales of ¥40,912 million(a 52.9% increase from the previous fiscal year).
Note: As from the fiscal year under review, sales of antennas for North America that werepreviously categorized under the "Audio-visual Equipment" segment has beentransferred to the "Others" segment.
Further, prior year sales figures for"Audio-visual Equipment" include sales of antennas for North America, which
totaled ¥3,595 million for the previous fiscal year.
<Consolidated net sales by product>
Division
Audio-visual equipment
Information equipment
Others
Total(2)

Net sales(million yen)

Component rate(%)

198,606
56,40540,912295,923

67.1
19.1
13.8
100.0

Investment in plant and equipment by the Group:

Investment in plant and equipment by the Group during the fiscal year under review
totaled ¥6,061 million, comprised of ¥5,472 million by its manufacturing companies and¥589 million by its sales companies. The amount was spent principally to improve
manufacturing facilities.
(3)

Fund-raising by the Group:
Nothing to be reported.

(4)

Issues to be tackled:

In the consumer electronics industry, as digital products have become more prevalent,
product life cycles have grown shorter and prices have continued to decline rapidly. At the-4-same time, competition has grown fiercer in line with the launch of products integrating
hardware, networks and content, meeting customer needs but blurring conventional productand industry boundaries.
The Group will address the challenges presented by this stringent competition by
concentrating on management speed, while striving to bolster sales and return to profitability
via thoroughgoing efforts to deliver popular products. To achieve these aims, we will
optimize our allocation of management resources and further cultivate the Funai Production
System (FPS), one of our core competencies. At the same time, we will make better use of
information technologies in an effort to enhance group-wide efficiency.
In this environment, we will endeavor to enhance the Group's corporate value byimplementing the policies outlined below:(i)

Increasing net sales and returning to profitability(Product strategy)
In Audio-visual equipment, with regard to LCD televisions during the fiscal year
under review, a decline in consumer purchasing propensity in our mainstay U.S. market put
sharp downward pressure on prices, causing category sales to fall year on year and resulting
in losses. To address this situation, we are working to make our products more competitive
pricewise through redesigns and by restructuring our component sourcing system. We also
recognize the need to strengthen and stabilize our revenue and profit base through more
stringent purchase, selling and inventory (PSI) management. We will develop a system forlaunching products more flexibly in response to shifts in demand for high-value-added LCD
televisions, such as those with LED backlights, and 3D and Internet-enabled models. For
Blu-ray disc-related products, in addition to 3D, Internet-enabled and portable players
launched during the fiscal year under review, we plan to round out our product lineup with
3D recorders and other items. Through such efforts, we will work to expand sales andrecover profitability.
In information equipment as well, the Group will strive to increase sales byproactively introducing high-value-added products that take advantage of the Company's baseof expertise in mechatronics, as well as Internet- and telecommunications-related products.
(Market strategy)
We will endeavor to raise the Group's net sales by boosting our sales in Europe andJapan and by entering BRICs and other emerging markets. At the same time, we will strive
to reduce the risk of overemphasizing the U.S. market and to smooth production and sales
throughout the year, mitigating the effects of seasonality.
Although we had planned to introduce LCD televisions into the Chinese market
during the fiscal year under review, excessive competition and difficult market conditions
caused us to reconsider. In contrast, we have begun building a system that will enable us todevelop these operations in Brazil and other Latin American markets.

-5-

(Sales channel strategy)
In addition to maintaining or expanding business with important Japanese andoverseas customers, we recognize that to attract new customers, we must enhance ourcommunications, respond more quickly and precisely to market needs and pay closer
attention to customer requirements.
In October 2010, we acquired from Royal Philips Electronics their hospitality
business, which involves the provision of LCD televisions to hotels and hospitals in North
America. We expect this new business channel to be highly profitable.
For the steady implementation of the above-mentioned strategies, we plan tominimize the time lags between product planning, development, material procurement,
production and sales, enabling us to provide products in a timely manner that meet market
needs precisely.
(ii)

Reinforcing manufacturing and development systems

The Group's manufacturing structure is highly dependent on China, and we recognize
this as a risk that must be mitigated. To diversify production, we increased capacity at
Funai (Thailand) Co., Ltd. and began studying the possibility of manufacturing in otherlocations during the fiscal year under review.
To increase group-wide development efficiency, as well as to reduce development
costs, we are also moving forward with efforts to expand our development facilities in China
and other Asian countries.
(iii)

Training and appointment of human resources

The Group recognizes that improving each employee's capabilities and being able tolink this to bolstering the strength of the Group will be critical for ensuring the Funai Groupstays in the lead in the new era of global competition and implementing the Group's medium
to long-term business strategy. Therefore, the Company's policy is to actively train andassign employees, without regard to whether they are younger employees or mid-career staff,
by strengthening and expanding its internal or external training systems.

-6-

(5)

Property and income/loss:
56th(April 1, 2007 to
March 31, 2008)

57th(April 1, 2008 to
March 31, 2009)

58th(April 1, 2009 to
March 31, 2010)

59th(April 1, 2010 toMarch 31, 2011)

277,167

302,777

314,911295,923

(39)

1,226

11,684

1,290

Net income (loss)(million yen)

(5,376)(17,364)

10,328(1,169)Net income (loss) per
share (yen)(157.71)(509.33)302.97(34.31)

Total assets(million yen)

224,415

199,882

204,057

193,910

Net assets(million yen)

158,356

135,596

142,779

131,228

Net assets per share(yen)

4,630.58

3,963.72

4,164.86

3,813.57

Fiscal year
Item
Net sales(million yen)
Ordinary income (loss)(million yen)

(Note) Net income (loss) per share is calculated based on the average of the total number ofshares issued and outstanding during the fiscal year. Net assets per share arecalculated based on the total number of shares issued and outstanding as of the endof the fiscal year. Each such number of shares does not include the shares oftreasury stock.
(6)

Major subsidiaries:
Ratio of equity
participation of theCompany(%)

Main business
Manufacture and sale of
DX ANTENNA Co., Ltd.
¥363 million
91.40
electronic equipment relatedwith receivers
Sale of the Company's
US$68.5 million
100.0
FUNAI CORPORTION, INC.
products
Sale of the Company's
P&F USA, INC.
US$30 million
100.0
products
Manufacture of the Company's
Funai Electric (HK) Ltd.
HK$115 million
100.0
products(Note) 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.
Trade name(7)

Capital stock

Major businesses of the Group:-7-

Division

Principal products

Audio-visual equipment

LCD TVs, DVD players, DVD recorders, Blu-ray disc players,
Blu-ray disc recorders

Information equipment

Printers

OthersElectronic equipment related to receivers(8)

Major business sites of the Group:
Category

Funai Electric Co., Ltd.
Japan

Production and sales
subsidiary
Sales subsidiaries

Overseas

Production subsidiary

Name

Location

Head Office

Daito City, Osaka

Tokyo Branch

Chiyoda-ku, Tokyo

DX ANTENNA Co., Ltd.

Hyogo-ku, Kobe City

FUNAI CORPORTION, INC. U.S.A.
P&F USA, INC.

U.S.A.

Funai Electric (HK) Ltd.

Hong Kong

Production and sales FUNAI ELECTRIC
subsidiary
EUROPE Sp.z o.o.

Poland(Note) FUNAI ELECTRIC EUROPE Sp.z o.o (incorporated in October 2006), which acquired
business from FUNAI EUROPE GmbH in April 2010, is stated herein in place of FUNAIEUROPE GmbH as from the fiscal year under review.

(9)

Employees of the Group:
Number of employees
2,861

As compared with the end of the previous fiscal year(+ or -) (persons)+ 308(Notes) 1. The above number of employees represents those actually at work.
2. The number of employees increased due principally to an increase in the employees of
Funai (Thailand) Co., Ltd.
3. The number of employees of the consignment manufacturing factories for the fiscal year
under review was 11,910, which is not included in the above number of employees.

(10)

Major lenders
Nothing to be reported.

(11)

Other important matters concerning the current state of the Group:
Nothing to be reported.

-8-

2.

Matters concerning the shares of the Company(1)

Total number of issuable shares:

80,000,000 shares(2)

Total number of issued shares:

36,123,596 shares(including 2,011,607 shares of treasury stock)(3)

Number of shareholders:

10,715 persons(4)

Principal shareholders (top ten):

Name
Tetsuro Funai
Tetsuo Funai
Funai Information Science Promotion Foundation
The Master Trust Bank of Japan, Ltd. (Trust account)
Japan Trustee Services Bank, Ltd. (Trust account)
Trust & Custody Services Bank, Ltd. (Securities investment
trust account)
Japan Trustee Services Bank, Ltd. (Trust account 9)
THE BANK OF NEW YORK TREATY JASDEC ACCOUNTNOMURA ASSET MANAGEMENT U.K. LIMITED SUB
A/C EVERGREEN NOMINEES LTD.
GOLDMAN SACHS & CO. REG

Number ofshares held
(thousandshares)12,709
1,739
1,540
1,512
1,350

Shareholding
ratio (%)
37.26
5.10
4.51
4.43
3.96

1,256
882
671

3.68
2.59
1.97

542
475

1.59
1.40

(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 2,011 thousand shares of treasury stockof 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.

-9-

3.

Matters concerning stock acquisition rights:(1)

Stock acquisition rights issued and outstanding at the end of the fiscal year under review:• Number of stock acquisition rights:(Note)

14,058 rights

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

• Class and number of shares to beissued or transferred upon exercise of
the stock acquisition rights:
1,405,800 shares of common stock(100 shares per stock acquisition right)• Stock acquisition rights held by Directors and Corporate Auditors by category:
Issue

The first stock acquisitionrights for the year ended
March 31, 2003
The first stock acquisitionrights for the year ended
March 31, 2004
The first stock acquisitionrights for the year ended
March 31, 2005
The first stock acquisitionrights for the year ended
March 31, 2006
The first stock acquisitionrights for the year ended
March 31, 2009(2)

Numberof rights

Category

HolderDirector

164

8

Outside Director

28

1

Corporate Auditor

48

1

Director

154

7

Outside Director

28

1

Corporate Auditor

14

1

Director

192

7

Director

217

7

Corporate Auditor

24

1

Director

337

9

Exercise price

Exercise period¥15,150

August 1, 2004
to July 31, 2011

¥13,646

August 1, 2005
to July 31, 2012¥16,167

August 1, 2006
to July 31, 2013¥12,369

August 1, 2007
to July 31, 2014

¥1,609August 1, 2010
to July 31, 2017

Stock acquisition rights delivered during the fiscal year under review:
Nothing to be reported.

(3)

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

- 10 -

4.

Matters concerning officers of the Company:(1)

Directors and Corporate Auditors (as of March 31, 2011)

Title

Business in charge and important concurrent
officeName

Director; Officer;
Chairman

Tetsuro Funai

Member (Chairman) of the Nomination
Committee; Member of the Compensation
Committee;
Chairman of Funai Information Science
Promotion Foundation;
Chairman of Funai Scholarship Foundation

Representative
Director; President
and CEO

Tomonori Hayashi

Chairman of the Board of Directors; Memberof the Nomination Committee, Member(Chairman) of the Compensation Committee

Director; Senior
Executive Officer

Takashi Kiyomoto

General Manager of Production Headquarters

Director; Senior
Executive Officer

Hideo Nakai

General Manager ofTechnology Headquarters

Director;
Executive Officer

Shinji Seki

General Manager of AV Headquarters

Director;
Executive Officer

Toshio Ohtaku

General Manager of New Business Div.

Director; Officer

Yoshikazu Uemura

General Manager of TV Business Div.;
Member of the Nomination Committee;
Member of the Compensation Committee;
Chairman and Representative Director of
FUNAI CORPORATION, INC.;
President and Representative Director of P&F
USA, INC.

Director; Officer

Joji Okada

Deputy General Manager of Development &Technology Headquarters;
Member of the Nomination Committee;
Member of the Compensation Committee

Director; Officer

Hideaki Funakoshi

General Manager of DVD Business Div.;
Member of the Nomination Committee;
Member of the Compensation Committee

Director; Officer

Shigeki Saji

Deputy General Manager of TV Business Div.;
Member of the Nomination Committee;
Member of the Compensation Committee

Outside Director

Mitsuo Yonemoto

Member of the Compensation Committee;
Vice President and Director of T.P.S.
Laboratory Co., Ltd.;
Outside Director of THE SAILOR PEN CO.,LTD.

Outside Director

Yasuhisa Katsuta- 11 -Development&

TitleBusiness in charge and important concurrent
officeOutside Corporate Auditor of Otsuka
Pharmaceutical Co., Ltd.;
Chairman of Osaka University of Economics

Name

Full-time
Corporate Auditor

Akitaka Inoue

Outside Corporate
AuditorShinichi Komeda

Outside Corporate
AuditorMasahide Morimoto(Notes) 1. The Company, at the 58th Ordinary General Meeting of Shareholders held on
June 22, 2010, shifted from a company with committees to a company with theboard of corporate auditors.
2. Full-time Corporate Auditor Akitaka Inoue, who is qualified as a certified public
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 the Tokyo Stock Exchange and the Osaka Securities Exchange andregistered them with such exchanges.
4. The Company established a Nomination Committee and a Compensation
Committee (both of which are voluntary committees) in August 2010.

(For reference)
The Company has adopted a system of officers and the Officers as of March 31,
2011 who did not concurrently hold the offices of Directors were as follows:(2)

Officer
Officer

Masahiko Naito
Fumiaki Kidera

Officer

Nobuhisa Uchikawa

Officer

Susumu Nojii

Officer

Kazuo Uga

OfficerTakeshi Ito

Officer

Hisao Tatsumi

Officer

Katsumi Hino

Total amount of remuneration, etc. of Directors, Corporate Auditors and Corporate
Officers(i)

Total amount of remuneration, etc. for the fiscal year under review:
The Company, at the 58th Ordinary General Meeting of Shareholders held on
June 22, 2010, shifted from a company with committees to a company withthe board of corporate auditors. Hence, information will be given separately
on the company with committees and the company with the board of corporate- 12 -

auditors below:•

Company with committees (April 1, 2010 to June 22, 2010):

Director(Outside Director)

5(5)Amount of payments(thousand yen)
8,125
(8,125)

Corporate Officer
Total(Outside Director)

2
7
(5)

25,11933,244(8,125)

Category

Number of recipients(Notes) 1. No remuneration of Directors was paid to two Directors concurrently serving as
Corporate Officers. Hence, they are not included in the number of Directors
receiving remuneration of Directors.
2. The above-listed amount of payments includes the following amount as anallowance for officers' retirement gratuities for officers deducted as expenses forthe fiscal year under review:• ¥625 thousand for five Directors (including ¥625 thousand for five outside
Directors)• ¥4,000 thousand for two Corporate Officers
3. The above-listed amount of payments includes the following amount of
remuneration in stock options deducted as expenses for the fiscal year underreview:• ¥119 thousand for one Corporate Officer
4. The above-listed amount of payments includes those for three Outside Directors
who retired from office at the close of the 58th Ordinary General Meeting of
Shareholders held on June 22, 2010.
•

Company with the board of corporate auditors (June 22, 2010 to March 31,2011):
Category
Director(Outside Director)
Corporate Auditor(Outside Corporate Auditor)
Total(Outside Officer)

Number ofrecipients
12
(2)
3
(2)
15
(4)

Amount of payments(thousand yen)
245,516(9,650)17,450(7,800)262,966(17,450)(Notes) 1. The above-listed amount of payments includes the following amount as anallowance for officers' retirement gratuities for officers deducted as expenses forthe fiscal year under review:• ¥25,200 thousand for 12 Directors (including ¥750 thousand for two outside
Directors)• ¥1,350 thousand for three Corporate Auditors (including ¥600 thousand for
two outside Corporate Auditors)- 13 -

2. The above-listed amount of payments includes the following amount of
remuneration in stock options deducted as expenses for the fiscal year underreview:• ¥3,276 thousand for nine Directors
3. The above-listed amount of payments includes the following amount of officers'
bonuses for the fiscal year under review:• ¥1,700 thousand for one Director(ii)

Officers' retirement gratuities paid for the fiscal year under review:
The amount of officers' retirement gratuities paid to the officers who retired asat the close of the 58th Ordinary General Meeting of Shareholders held on
June 22, 2010 is as follows:• ¥7,500 thousand for three outside Directors(The above-listed amount includes ¥6,000 thousand deducted as expenses as
an allowance for officers' retirement gratuities included in "(i) Total amount of
remuneration, etc. for the fiscal year under review" and the total amount of
remuneration, etc. of officers in the business reports for the previous fiscal
years.)(3)

Other important matters concerning officers:
Nothing to be reported.

(4)

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 Yasuhisa Katsuta is Chairman of Osaka University of Economics.
The Company has no special relationship with Osaka University of Economics.

(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.
The Company has no special relationship with The Sailor Pen Co., Ltd.

•

Director Yasuhisa Katsuta is outside Corporate Auditor of Otsuka
Pharmaceutical Co., Ltd. The Company has no special relationship with
Otsuka Pharmaceutical Co., Ltd.

(iii)

Kinship among executive officers of the Company and its specified related- 14 -

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

Number ofmeetings
Director
Mitsuo Yonemoto
9
Director
Yasuhisa Katsuta
9
Corporate Auditor Shinichi Komeda
7
Corporate Auditor Masahide Morimoto
7

Numberattended
97
7
7

Board of Corporate
Auditors
Number of
Numbermeetings
attended
12
12
12
12

(Notes) 1. The Company, at the 58th Ordinary General Meeting of Shareholders held on
June 22, 2010, shifted from a company with committees to a company with theboard of corporate auditors. In addition to the above, two meetings of the
Audit Committee (April 1, 2010 to June 22, 2010) were held and Director
Yasuhisa Katsuta attended both meetings.
2. As to Shinichi Komeda and Masahide Morimoto, the above represents the stateof their attendance at the meetings of the Board of Directors and the Board of
Corporate Auditors since they assumed the office of Corporate Auditors as ofJune 22, 2010.

- 15 -

•

Speeches at meetings of the Board of Directors, the Audit Committee and theBoard of Corporate Auditors:
Name

Speeches
He attended meetings of the Board of Directors andDirector
Mitsuo Yonemoto expressed opinions principally from the standpoint of amanagement consultant.
He attended meetings of the Board of Directors and the
Audit Committee and expressed opinions principally from
Director
Yasuhisa Katsuta
the standpoint of a veteran top executive, as well as thestandpoint of finance and treasury.
He attended meetings of the Board of Directors and the
Corporate
Shinichi Komeda
Board of Corporate Auditors and expressed opinions
Auditorprincipally from the standpoint of a veteran top executive.
He attended meetings of the Board of Directors and the
Corporate
Board of Corporate Auditors and expressed opinions
Masahide Morimoto
Auditorprincipally from the standpoint of a veteran top executive,
as well as the standpoint of finance and securities.

(v)

Outline of liability limitation agreements:
In accordance with Article 427, paragraph 1 of the Corporation Law of Japan,
the Company has entered into an agreement with each of the two outside
Directors and two outside Corporate Auditors to limit the liability for any
damage as provided for in Article 423, paragraph 1 of said law within theaggregate of the amounts listed in the items of Article 425, paragraph 1 of said
law.

5.

Matters concerning accounting auditors:(1)

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

Remuneration, etc. of the accounting auditors for the fiscal
year under review:¥50 million

Total amount of cash and other proprietary benefits payable
to the accounting auditors by the Company and its
subsidiaries:¥86 million(Notes) 1. The amount of remuneration, etc. for audits under the Corporation Law of Japanand the amount of remuneration, etc. for audits under the Financial Instruments
and Exchange Law of Japan are not separated in the audit agreement between
the Company and the accounting 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 two other companies are subject to audits by audit firms (including persons- 16 -

having qualifications in foreign countries equivalent to those of the accounting
auditors of the Company) other than the accounting auditors of the Company.

(3)

Content of non-auditing services:
Nothing to be reported.

(4)

Policy on the determination of dismissal and non-reappointment of the accounting
auditors:
In the event that the accounting auditors are found to fall under any event of dismissal
under the items of Article 340, paragraph 1 of the Corporation Law, the Company
shall, upon unanimous consent of the Corporate Auditors, dismiss the accounting
auditors. In addition, in the event that there arises any problem with theperformance by the accounting 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 accounting auditors as an agenda item of aGeneral Meeting of Shareholders.

(5)

Outline of liability limitation agreements:
Nothing to be reported.

6.

Systems and policies of the Company(1)

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

Systems to secure the execution by the Directors of their duties to comply
with laws, 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 secure the execution by the Directorsof their duties to comply with laws, ordinances and the Articles ofIncorporation.

(ii)

Systems concerning storage and management of information on the execution
by the Directors of their duties
With regard to the storage and management of information on the execution
by the Directors of their duties, minutes of meetings of the Board of Directors
and other important meetings, circular decision documents and otherdocuments and information necessary to secure the properness of businessactivities shall be stored and managed pursuant to laws, ordinances and the"document management regulations".

- 17 -

(iii)

Regulations concerning management of exposure to the risk of loss and othersystems
The Company shall institute "risk management regulations" with regard to the
management of exposure to the risk of loss. Each division or department
shall manage risks involving its operations and also control such riskssystematically.

(iv)

Systems to secure efficient execution by the Directors of their duties
To ensure swift and efficient managerial decision-making, the Company shallintroduce a "system of officers", and shall have Officers under the auspices of
the Executive Directors to ensure that the operations determined by the
Executive Directors are performed swiftly. In addition, to enhance thetransparency of the Board of Directors and strengthen its supervisory
functions, the Company shall have outside Directors.

(v)

Systems to secure the execution by employees of their duties to comply 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 secure
the execution by the employees of their duties to comply with laws,
ordinances and the Articles of Incorporation.
In addition, the Company shall establish a whistleblowing system independentof its regular reporting channels and strengthen its compliance system.

(vi)

Systems to secure the properness of business activities of the corporate group
comprised 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 groupcompanies while giving regard to their autonomy and independence, andsecure the properness of business activities of the whole Group.

(vii)

Matters concerning the employees to assist the Corporate Auditors to execute
their duties when the Corporate Auditors request the assignment thereof
When the Corporate Auditors request the assignment of employees to assist
them to execute 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 the
Corporate Auditors.

- 18 -

(viii) Matters concerning the independence of the employees set forth in (vii) abovefrom the Directors
When employee hired upon the request of a Company Auditor to assist theauditor’s duties as set forth in item (vii) above are transferred to and/or fromthe secretariat to the Board of Corporate Auditors, the Company shall respect
the opinions of the Board of Corporate Auditors with regard to such transfer
and personnel evaluations thereof and ensure his/her independence from the
Directors.
(ix)

System for reports by the Directors and employees to the Corporate Auditorsand other systems for reporting to the Corporate Auditors
The Corporate Auditors shall attend meetings of the Board of Directors andother important meetings, hear from the Directors, etc. the state of executionof 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 to
execute their duties.

(x)

Other systems to ensure effective audits by the Corporate Auditors
To ensure effective audits by the Corporate Auditors, the Corporate Auditors
shall closely cooperate with the accounting auditors, and regularly meet theRepresentative Director to confirm the management policy and exchange
opinions on the risks and issues involving the Company.

(2)

Policies on the determination of remuneration, etc. of officers, etc.
Remuneration of Directors and Corporate Auditors shall be determined within thescope of their respective maximum total amounts of remuneration determined byresolution of the General Meeting of Shareholders.
The amount of monthly remuneration of Directors shall be determined on a specificbasis of the Company set up by the Compensation Committee upon authorization by
the Board of Directors. The amount of monthly remuneration of Corporate Auditors
shall be determined upon consultation among the Corporate Auditors.
Bonuses of Directors shall be determined on a specific basis of the Company set upby the Compensation Committee upon authorization by the Board of Directors.
Bonuses of Corporate Auditors shall be determined upon consultation among the
Corporate Auditors.
Officers' retirement gratuities to Directors and Corporate Auditors shall, upon
approval of the granting thereof to Directors and Corporate Auditors by resolution of
the General Meeting of Shareholders, be determined by the Compensation Committee- 19 -

upon authorization by the Board of Directors with regard to those to Directors, andupon consultation among the Corporate Auditors with regard to those to Corporate
Auditors.
(3)

Policy on the determination of distribution of retained earnings, etc. by the Board of
Directors:
The Company recognizes the paying out of earnings to its shareholders as one of themost important missions of management and attaches basic importance tostrengthening its operating base and maintaining a constant payment of dividends.
In concrete terms, the Company will implement its dividend policy, based on thedividend rate of 1.0% for net assets on a consolidated basis, while taking into
consideration business conditions and other factors.

=========================================================================(Note)In this business report, amounts and the number of shares are indicated bydiscarding any fraction of the indicated unit, and rates are indicated 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 net
assets per share are indicated by rounding upward five-thousandths of one yen or
more to the nearest one-hundredth of one yen.

- 20 -

CONSOLIDATED BALANCE SHEET(As of March 31, 2011)(million yen)
ASSETS:
Current assets:

158,820

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 receivables...................................................

70,07636,36723,565
1,795
18,477
3,721
4,956
(139)
35,089Fixed assets:
Tangible fixed assets:
Buildings and structures.....................................................................
Machinery, equipment and motor vehicles........................................
Tools, furniture and fixtures ..............................................................
Land ...................................................................................................
Lease assets........................................................................................
Other ..................................................................................................

16,290
5,700
2,824
2,228
5,136
391
7

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

3,720

Investment and other assets:
Investment securities..........................................................................
Deferred tax assets .............................................................................
Other ..................................................................................................
Allowance for doubtful receivables ...................................................

15,079
6,268
4,239
4,924
(352)

2,786
933

193,910TOTAL ASSETS- 21 -

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

58,92628,938
10,096205
12,555
2,071
1
484
1,225
3,347

Long-term liabilities:

3,755

Long-term debt .....................................................................................
Long-term lease obligations .................................................................
Deferred tax liabilities ..........................................................................
Deferred tax liabilities on revaluation of land......................................
Liabilities for retirement benefits .........................................................
Liabilities for directors’ retirement benefits.........................................
Other .....................................................................................................
TOTAL LIABILITIESNET ASSETS:

33
368
63
274
1,354
1,038
623
62,681

Shareholders' equity:

156,962

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

31,300Capital surplus .......................................................................................

33,265Retained earnings...................................................................................

116,738

Treasury stock........................................................................................

(24,341)

Accumulated other comprehensive loss

(26,874)

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

612

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

(27,486)

Stock acquisition right87

Minority interests:

1,052

TOTAL NET ASSETS

131,228

TOTAL LIABILITIES AND NET ASSETS

193,910- 22 -

CONSOLIDATED STATEMENT OF OPERATIONS(from April 1, 2010 to March 31, 2011)(million yen)
Net sales
Cost of sales
Gross profit
Selling, general and administrative expenses
Operating income
Non-operating income:

295,923
255,61440,30839,536772

Interest and dividend income
Foreign exchange gain
Other
Non-operating expenses:

398
196
302

Interest expense
Loss on investments in partnership
Other
Ordinary income
Special gain
Gain on sales of investment securities
Other
Special loss:
Loss on disposal of fixed assets
Liquidation loss on affiliated company
Other

132
41
205

328

31
88
45

166
1,453

1,642
633

Net loss

379
1,290

282
45

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

897

2,276
823
346
1,169

- 23 -

CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY(from April 1, 2010 to March 31, 2011)(million yen)
Shareholders' equity
Commonstock
Balance as of March 31, 2010

CapitalsurplusRetainedearnings

31,28033,24519

19

Treasury stock

119,272(24,340)

Total
shareholders'equity159,457

Changes of items during the
fiscal year
Issuance of new stock

39

Cash dividends(1,363)(1,169)Net loss(1,363)(1,169)Purchase of treasury stock

(0)

(0)

(0)
(24,341)(2,494)
156,962

Net changes of items other thanshareholders' equity
Total changes of items during
the fiscal year
Balance as of March 31, 2011

Balance as of March 31, 201019
31,30019
33,265(2,533)
116,738

Accumulated other comprehensive loss
Stock
Total
Unrealized
Foreignacquisition
accumulated
gain oncurrency
otherrightsavailable-for- translation comprehensive
sale securities adjustments
income470(17,936)(17,465)
62

Minority
interests

Total net
assets726

142,779

Changes of items during the
fiscal year
New issue of stock

39

Dividends from surplus(1,363)(1,169)Net loss
Purchase of treasury stock
Net changes of items other thanshareholders' equity

(0)
141

(9,549)(9,408)25

326(9,057)

Total changes of items during the
fiscal year

141

(9,549)(9,408)25

326(11,551)

Balance as of March 31, 2011

612

(27,486)(26,874)

87

1,052

131,228- 24 -NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Notes on Matters Forming the Basis of Presentation of Consolidated Financial
Statements
1.

Matters concerning the scope of consolidation(1)

Number of consolidated subsidiaries:(2)

Names of major consolidated subsidiaries:

14

DX ANTENNA Co., Ltd., FUNAI CORPORATION, INC. and Funai Electric (HK)Ltd.
Zhong Yue FUNAI Electron co. a subsidiary incorporated during the fiscal year
under review, is newly included in consolidation.
FUNAI ASIA PTE LTD. is excluded from the scope of consolidation as from thefiscal year under review as its liquidation has been completed.
(3)

Names of major non-consolidated subsidiary:
FGS Co., Ltd.
(Reason for exclusion from consolidation)
The non-consolidated subsidiary is a small company and its aggregate amount of total
assets, net sales, net income (based on the Company's equity interest) and retained
earnings (based on the Company's equity interest) are not material to the consolidated
financial statements.

2.

Matters concerning the application of equity method(1)

Number of non-consolidated subsidiaries towhich the equity method is applicable:

1

Names of non-consolidated subsidiaries towhich the equity method is applicable:

Highsonic Industrial Ltd.

(2)
(3)

Number of affiliates to which the equity method
is applicable:
0
PT. DISPLAY DEVICES INDONESIA is excluded from the scope of application of
the equity method as from the fiscal year under review as its liquidation has been
completed.

(4)

Names of major non-consolidated subsidiaries and affiliates to which the equity
method is not applicable:- 25 -

Non-consolidated subsidiary:
Affiliate:

FGS Co., Ltd.
Digitec Industrial Ltd.

(Reason for exclusion from the equity method)
The non-consolidated subsidiary and affiliate have no material impact on net income(based on the Company's equity interest) and retained earnings (based on the
Company's equity interest) and generally, they are not material.
(5)

As the fiscal year-end of Highsonic Industrial Ltd., a non-consolidated subsidiary towhich the equity method is applicable, differs from the consolidated fiscal year-end,
its financial statements for its fiscal year are used.
(Change in accounting policies)
As from the fiscal year under review, the "Accounting Standard for Equity Method of
Accounting for Investments" (Accounting Standards Board of Japan (ASBJ)
Corporate Accounting Standard No.16, issued on March 10, 2008) and the "Practical
Solution on Unification of Accounting Policies Applied to Associates Accounted for
Using the Equity Method" (Practical Issues Task Force (PITF) No.24, March 10,2008) are applied.
The change has no effect on ordinary income and income before income taxes.

(6)

Fiscal years of consolidated subsidiaries
The consolidated subsidiaries whose fiscal year-ends differ from the end of theconsolidated fiscal year-end are as follows:
Name

Fiscal year-end

DX ANTENNA Co., Ltd.

February 28

FUNAI ELECTRIC (MALAYSIA) SDN. BHD.

December 31

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

December 31

Zhong Yue FUNAI Electron co.

December 31

For DX ANTENNA Co., Ltd., FUNAI ELECTRIC (MALAYSIA) SDN. BHD. andP&F MEXICANA, S.A. DE C.V. listed above, their financial statements compiled
as of their respective fiscal year-ends are used to tabulate consolidated results.
However, significant transactions that occur between that time and the fiscal
year-end are reflected in the consolidated financial statements as so required.
For Zhong Yue FUNAI Electron co., its financial statements compiled based on theprovisional settlement of account made as of its group’s consolidated fiscal year end
are used to tabulate consolidated results.
3.

Matters concerning accounting policies- 26 -

(1)Valuation basis and methods for major assets(i)Securities:
Available-for- sale securities:
Marketable securities:
Stated at fair value on the balance sheet date of the fiscal year (Unrealized
gain or loss and net of applicable taxes reported in a seperate component ofequity. Costs of securities sold are determined by the moving averagemethod.)Non-marketable securities:
Stated at cost determined by the moving average method(ii)

Inventories:
As to the Company and its Japanese consolidated subsidiaries, merchandiseand finished goods and work in process are stated principally at cost under the
average method (Book value is written down to net realizable value if not
profitable). Raw materials are stated principally at cost by the first-in, first-out
method (Book value is written down to net realizable value if not profitable).
As to the overseas consolidated subsidiaries, merchandise and finished goods,
work in process and raw materials are stated principally at the lower of cost or
market determined by the first-in, first-out method.

(2)

Method of depreciation of major fixed assets:(i)

Tangible fixed assets (excluding lease assets):
The declining-balance method is adopted by the Company and its Japaneseconsolidated subsidiaries (however, with regard to the buildings (excluding
appurtenances thereto) acquired on or after April 1, 1998, the straight-line method
has been adopted). The straight-line method is adopted by the overseas
consolidated subsidiaries.
The main useful lives are as follows:
Buildings and structures:
Machinery, equipment and motor vehicles:
Tools, furniture and fixtures:

3–50 years
3–7 years
1–20 years(ii) Intangible assets (excluding lease assets):
Stated by the straight-line method by the Company and its consolidated
subsidiaries. However, depreciation of goodwill is made equally for five years;- 27 -

depreciation of patent rights is made by the straight-line method based on theestimated economically usable period; and depreciation of software for internal
use is made by the straight-line method based on the internal usable years (fiveyears).
(iii) Lease assets:
Lease assets related to finance lease transactions that do not transfer ownershipare depreciated by the straight-line method, based on the assumption that theuseful life equals to the lease term and the residual value equals to zero.
Any finance lease transaction that does not transfer ownership, which became
effective prior to the fiscal year during which the "Accounting Standard for Lease
Transactions" (Accounting Standards Board of Japan ("ASBJ") Statement No. 13)
first became applicable, is treated similarly to the manner in which ordinary leasetransactions are treated.
(3)Standards for providing important allowances(i)

Allowance for doubtful receivables:
To meet losses from loan default, the Company sets aside an estimateduncollectible amount, by taking into consideration the actual loss rate in respectof general credits and the individual possibilities of collection in respect ofpossible non-performing credits and other specific claims.

(ii) Accrued bonuses:
To meet the payment of bonuses to employees, some consolidated subsidiaries set
aside the portion for each fiscal year of an estimated amount of bonuses to be paidin the future.
(iii) Reserve for products warranty:
To meet expenses of after-sales services with regard to the products sold, theCompany sets aside an estimated amount based on the past sales record.
(iv) Liabilities for retirement benefits:
To meet the payment of retirement benefits to employees, the Company provides
an amount, based on estimated retirement benefit obligations and plan assets as ofthe end of the fiscal year.
The total transitional obligation, determined as of April 1, 2000, was charged toincome when adopted, except that of certain domestic subsidiaries which isamortized over 15 years.

- 28 -

Prior service cost is amortized by the straight line method over a period within the
average remaining years of service of the employee (10 years).
Actuarial gains or losses are amortized by the straight line method over a period
within the average remaining years of service of the employee (10 years) startingfrom the following period.
(v) Liabilities for directors’ retirement benefits:
To provide for the payment of retirement gratuities to officers, an amount payableat the end of the fiscal year under the Company's internal rules is reserved.
(4)Standards for recognizing important revenue and costs
Standards for recognizing of revenue and costs:(i)Construction work the outcome of which is deemed certain during the course ofactivity by the end of the fiscal year:
By the percentage-of-completion method (The percentage of completion at theend of the fiscal year shall be estimated by the method of comparison of incurredcosts to date with estimated total contract costs).

(ii) Other construction work:
By the completed-contract method(5)

Method and period of amortization of goodwill
Goodwill is amortized by the straight-line method over a period of five years, except
for insignificant goodwill.

(6)

Other significant accounting policies forming the basis of preparation of consolidated
financial statements
Accounting for consumption taxes consumption taxes, etc.:
method- 29 -

By the tax-exclusive

4.
Changes in Important Matters Forming the Basis of Presentation of Consolidated
Financial Statements(Application of the Accounting Standard for Asset Retirement Obligations)
As from the fiscal year under review, the "Accounting Standard for Asset Retirement
Obligations" (ASBJ Corporate Accounting Standard No.18, March 31, 2008) and the"Implementation Guidance on Accounting Standard for Asset Retirement Obligations"(ASBJ Implementation Guidance No. 21, March 31, 2008) are applied.
The change has no effect on operating income and ordinary income and has no
significant effect on income before income taxes.
(Change in Applicable Rates to Foreign Currency Exchange Conversions)
In the past, the Group applied TTS or TTB rates when carrying out foreign currency
exchange conversions. However, as from the fiscal year under review, the Group has
decided to use TTM rates instead.
This change to apply TTM rates across all exchange conversions was made in order to betterreflect periodic income and loss as a result of reviewing the circumstances wheretransactions in the Group's major operations were settled in foreign currencies and revenues
obtained were kept in foreign currencies for the purpose of settlement of trade accounts, on
the occasion when foreign exchange rates were fluctuating significantly.
As a result, net sales increased by ¥902 million and operating income increased by ¥1,112
million. Ordinary income and income before income taxes increased by ¥241 million,
respectively.

- 30 -

Notes to Consolidated Balance Sheet:1.

Accumulated depreciation of assets
Accumulated depreciation of tangible fixed assets:

2.

¥53,455 million

Accumulated loss on impairment of assets
Accumulated depreciation of assets includes accumulated loss on impairment of assets.

3.
In accordance with the Law of Land Revaluation (Law No. 34, promulgated on March
31, 1998) of Japan, one of the consolidated subsidiaries revaluated its land used for business.
The applicable taxes of the revaluation difference was ¥274 million as revalued deferred tax
liabilities. Also the revaluation difference is eliminated in consolidation, and so it is notpresented in net assets.
4.
Disposition of supplementary tax assessment based on the application of tax system for
dealing with tax havens
On June 28, 2005 and June 16, 2008, the Company received notices of supplementary
tax assessment from the Osaka Regional Taxation Bureau of aggregate taxation on the profits
of its subsidiary in Hong Kong for the three fiscal years ended from March 31, 2002 to
March 31, 2004 and the three fiscal years ended from March 31, 2005 to March 31, 2007,
respectively, as the subsidiary in Hong Kong did not satisfy the conditions for exclusionfrom the application of the tax system for dealing with tax havens. The Company disagreed
with the assessment and considered it to be unacceptable. The Company has contested thevalidity in court.
The additional tax payment amounts were ¥16,651 million (¥19,184 million including
incidental taxes) and ¥15,038 million (¥16,838 million including incidental taxes),
respectively, including corporate income taxes, inhabitant taxes and enterprise taxes. They
were respectively recognized as "income taxes for prior periods" for the fiscal year ended
March 31, 2007 and the fiscal year ended March 31, 2009 in accordance with the "Treatmentof Accounting and Presentation of Taxes for the Purpose of Audits" (JICPA Audit andAssurance Practice Committee Report No. 63).
The taxation is judged based on the status of any relevant foreign company at the endof each fiscal year thereof. Hence, for your reference, the effects of the taxation on theincome of the subsidiary in Hong Kong for the fiscal year ended March 31, 2008, which wasimmediately after the fiscal year during which the investigation by the Bureau was last made,and thereafter are estimated at approximately ¥3,000 million in total in corporate, inhabitantand enterprise taxes for the fiscal year ended March 31, 2008 and the fiscal year ended
March 31, 2009. The Company has not accounted for the effects due to the aforementioned
reasons.
Notes to Consolidated Statement of Changes in Shareholders' Equity- 31 -

1.
Matters concerning the classes and total number of issued shares and the classes andnumber of shares of treasury stocks(thousand shares)
Number ofshares as ofMarch 31, 2010

Increase in thenumber ofshares during
the year

36,10419-

36,12336,10419-

36,123

2,011

0

-

2,011

2,011

0

-

2,011

Issued shares
Shares of common stock(Note 1)
Total
Shares of treasury stock
Shares of common stock(Note 2)
Total

Decrease in thenumber of
Number ofshares during
shares as of
the yearMarch 31, 2011

(Notes) 1. The number (19 thousand) of shares of common stock issued by the Company increased
as a result of the exercise of stock acquisition rights (stock options).
2. The number (0 thousand) of shares of common stock held by the Company increased asa result of the purchase of less-than-one-unit shares.

2.

Matters concerning dividends from surplus(1)

Amount of dividends paid:

Resolution

Class ofsharesTotal amountof dividends(million yen)Amount ofdividend pershare (yen)Record date

Effective
date

Meeting of theBoard of Directors
held on May 31,
2010

Shares ofcommon
stock

1,363

40

March 31,2010

June 11,
2010(2)

Dividends for which the record date falls during the fiscal year under review but theeffective date falls during the next fiscal year:

Resolution

Class ofsharesTotalamount ofdividends(million yen)

Source ofdividendsAmount ofdividend
per share(yen)

Recorddate

Effective
date

Meeting of theBoard of Directors
held on May 23,
2011

Shares ofcommon
stock

1,364

Retainedearnings

40

March 31,2011

June 14,2011- 32 -

3.

Matters concerning stock acquisition rights
Description of stock option

Class of shares to be issued ortransferred upon exercise ofstock option

Number of shares for stock
option (share)
As of March 31, 2011

The first stock option for the year
ended March 31, 2003

Shares of common stock399,600

The first stock option for the year
ended March 31, 2004

Shares of common stock

378,500

The first stock option for the year
ended March 31, 2005

Shares of common stock

359,900

The first stock option for the year
ended March 31, 2005

Shares of common stock

25,600The second stock option for theyear ended March 31, 2006

Shares of common stock

346,400

The first stock option for the year
ended March 31, 2009

Shares of common stock

386,200

Total-

1,896,200

Notes to financial instruments
1.

Matters relating to the status of financial instruments

The Group raises funds by bank loans and invests funds by short-term deposits. In
principle, the Group has a policy of not using derivatives.
With regard to customers' credit risks relating to notes and accounts receivable-trade,the Group has stipulated its sales management rules to manage trading terms and credit lines
by client.
Investment securities are exposed to market risks. With regard to such risks, themarket values and the financial positions of the issuers are reviewed periodically andreported to the Investment and Loan Committee, an internal organ.
Notes and accounts payable-trade shall all become due and payable within one year.
Both short-term loans payable and long-term loans payable are funds procured inrelation to business transactions. The Group has a policy of not using derivatives.
However, as floating-rate loans are exposed to interest rate risk, the Group may utilize
derivatives (interest rate swap agreements) as hedging instruments according to individualloan contracts. To trade in derivatives, such derivatives are executed and managed inaccordance with the internal rules. To avert credit risk, the Group enters into transactions
solely with financial institutions receiving high ratings.

- 33 -

2.

Matters concerning fair values, etc. of financial instruments

The following chart shows amounts for items recorded in the consolidated balance
sheet as of March 31, 2011, along with their fair values and the variances:(million yen)
Balance sheet
amount*Fair value*

Variance(1)

Cash and deposits

70,07670,076-(2)

Notes and accounts receivable-trade

36,36736,367-(3)

Investment securities:

Available-for- sale securities

3,124

3,124

-

(4)

Notes and accounts payable-trade(28,938)(28,938)-(5)

Short-term loans payable(10,096)(10,096)-(6)

Long-term loans payable

(33)

(33)

-

(7)

Derivatives

-

-

-

* The items recognized as liabilities are shown in the parentheses.
(Notes)1. Matters concerning the calculation method of the fair values of financial
instruments, as well as marketable securities and derivatives:(1) Cash and deposits and (2) Notes and accounts receivable-trade:
The book value is used for these items, as the fair value is nearly equal to thebook value as a result of their short settlement periods.
(3) Investment securities:
The fair value of stocks is determined by the prices of the stocks traded on an
exchange.
(4) Notes and accounts payable-trade and (5) Short-term loans payable:
The book value is used for these items, as the fair value is nearly equal to thebook value as a result of their short settlement periods.
(6) Long-term loans payable:
The fair value of these items is calculated from the present value of the total
principal and interest discounted at a rate which is supposed for a newly
conducted similar borrowing.

- 34 -

(7) Derivatives:
The Group does not utilize any derivatives.
applicable.

Hence, this item is not

2. Unlisted shares (¥3,144 million on the balance sheet) have no market price and it is
impossible to estimate their future cash flow. As determining the market value isrecognized as being extremely difficult, hey are not included in "(3) Investment insecurities – Available-for- sale securities".

Notes on the information per share
Net assets per share:¥3,813.57

Net loss per share:

34.31========================================================================(Note)All figures in the consolidated balance sheet, consolidated statement of income,consolidated statement of changes in shareholders' equity and notes toconsolidated financial statements are shown by disregarding any fractions of therelevant units, respectively. Net assets per share and net loss per share are shownby rounding off to two decimal places.

- 35 -

Copy of Accounting Auditors' Audit Report on Consolidated Financial Statements(TRANSLATION)
INDEPENDENT AUDITORS' REPORTMay 20, 2011
To the Board of Directors of
Funai Electric Co.,Ltd.:
Deloitte Touche Tohmatsu LLC
Designated Unlimited Liability Partner,
Engagement Partner,
Certified Public Accountant:
Fumihiko Kimura

Designated Unlimited Liability Partner,
Engagement Partner,
Certified Public Accountant:
Hiroshi Shirai

Designated Unlimited Liability Partner,
Engagement Partner,
Certified Public Accountant:
Masaki Mizoguchi
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,
2011 of Funai Electric Co.,Ltd. (the “Company”), and the related consolidated statements ofincome and changes in net assets, and the related notes for the 59th fiscal year from April 1,2010 to March 31, 2011. These consolidated financial statements are the responsibility of
the Company's management. 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 of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and disclosures in
the consolidated financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as evaluating the- 36 -

overall consolidated financial statement presentation.
reasonable basis for our opinion.

We believe that our audit provides a

In our opinion, the consolidated financial statements referred to above present fairly, in allmaterial respects, the financial position of the Company and consolidated subsidiaries as ofMarch 31, 2011, and the results of their operations for the year then ended in conformity withaccounting principles generally accepted in Japan.
Additional Information
As described in the notes to consolidated balance sheet, disposition of a supplementary tax
assessment based upon the application of the tax system for dealing with tax havens isdisclosed.
Our firm and the engagement partners do not have any financial interest in the Company forwhich 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 theJapanese language.
- END –

- 37 -

NON-CONSOLIDATED BALANCE SHEET(As of March 31, 2011)ASSETS(million yen)

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 receivables .........................................................

55,474
12,368944
32,378
549
4,233
1,360
2,261
1,409
(32)

Fixed assets:
Tangible fixed assets:
Buildings ..................................................................................................
Structures .................................................................................................
Machinery and equipment .......................................................................
Motor vehicles .........................................................................................
Tools, furniture and fixtures ....................................................................
Land .........................................................................................................
Lease assets ............................................................................................
Intangible assets:
Patent .......................................................................................................
Software ...................................................................................................
Lease assets..............................................................................................
Other ........................................................................................................

54,088
8,189
3,286
71
30
0
462
4,086
252
3,488
2,786
641
47
12

Investments and other assets:
Investment securities................................................................................
Investment in subsidiaries and associated companies ...........................
Long-term loans receivable .....................................................................
Long-term prepaid expenses ....................................................................
Deferred tax assets ...................................................................................
Other ......................................................................................................
Allowance for doubtful receivables .........................................................

42,411
3,713
28,526
12,300
2,395
3,373
1,666
(9,563)TOTAL ASSETS

109,563(million yen)

LIABILITIESCurrent liabilities:
Accounts payable-trade................................................................................
Current portion of long-term lease obligations..............................................
- 38 -

29,87019,816143

Accounts payable-other .................................................................................
Accrued expenses ..........................................................................................
Deposit received ............................................................................................
Reserve for product warranty ......................................................................

7,382
1,769
447
311

Long-term liabilities:
Long-term lease obligations...........................................................................
Liabilities for retirement benefits ................................................................
Liabilities for directors’ retirement benefits ................................................
Allowance for liquidation loss on affiliated company...................................
Other ..............................................................................................................

2,840
227
277
1,038
828
469

TOTAL LIABILITIES

32,711

NET ASSETS
Shareholders' Equity
Common stock
Capital surplus:
Capital reserve ...............................................................................................
Other capital surplus ......................................................................................

76,19731,30033,26532,826438

Retained earnings:
Legal reserve ................................................................................................
Other retained earnings..................................................................................
Reserve for advanced depreciation of fixed assets ..........................
General reserve ..................................................................................
Retained earnings carried forward.....................................................

35,973
209
35,763490
23,40011,872

Treasury stock(24,341)

Valuation and translation adjustments: ................................................................
Unrealized gain on available-for-sale securities........................................
Stock acquisition rights .........................................................................................

566
566
87

TOTAL NET ASSETS

76,851TOTAL LIABILITIES AND NET ASSETS

109,563- 39 -

NON-CONSOLIDATED STATEMENT OF INCOME(from April 1, 2010 to March 31, 2011)(million yen)
Net sales
Cost of sales
Gross profit
Selling, general and administrative expenses
Operating loss
Non-operating income:Interest and dividend income
Other
Non-operating expenses:
Interest expenses
Foreign exchange loss
Loss on investments in partnership
Commission to syndicate loan
Other
Ordinary income
Special gain:
Gain on sales of investment securities
Other
Special loss:
Provision for allowance for doubtful accounts ofassociated companies
Provision for allowance for liquidation loss onaffiliated company
Other

248,286
227,265
21,021
21,255
233
6,200
103
2
32
41
47
3

282
3

6,304

126
5,943

286

24
44
2

Income before income taxes

70
6,160

(97)
(9)

Income taxes - current
Income tax - deferred
Net income

(107)
6,267

- 40 -

NON-CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY(from April 1, 2010 to March 31, 2011)(million yen)
Shareholders' equity
Retained earnings

Capital surplus
Commonstock

Balance as of March 31, 2010

Other retained earnings
Reserve for
Total capital
Retained
Legal reserve advanced
surplusearnings
Generaldepreciatio
carriedreserven of fixed
forwardassetsOther
capitalsurplusCapitalreserve

31,28032,806

19

19

438

33,245

209

502

23,400

6,958

Total
shareholders'equityTreasury
stock

Total
retainedearnings

31,069(24,340)

71,253

Changes of items during the
fiscal year
Issuance of new stock19

39

Reversal of reserve fordeferred income tax on
fixed assets

(11)

11

-

-

Cash dividends(1,363)(1,363)(1,363)

Net income

6,267

6,267

6,267

Purchase of treasury stock

(0)

(0)

Net changes of items otherthan shareholders' equity
Total changes of items during
the fiscal year

19

19

-

19

-

(11)

-

4,914

4,903

(0)

4,943

Balance as of March 31, 2011

31,30032,826438

33,265209

490

23,40011,87235,973(24,341)

76,197- 41 -

(million yen)

Balance as of March 31, 2010

Valuation and translation adjustments
Unrealized gainon
Total valuation
available-for-saleand translation
securities
adjustments
442
442

Stock acquisitionrightsTotal net assets

62

71,759Changes of items during the
fiscal year
New issue of stock39

Reversal of reserve for deferredincome tax on fixed assets-

Dividends from surplus(1,363)

Net income

6,267

Purchase of treasury stock(0)

Net changes of items other thanshareholders' equity

124

124

25

Total changes of items during the
fiscal year

124

124

25

5,092

Balance as of March 31, 2011

566

566

87

76,851- 42 -

149

NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS
Matters concerning major accounting policies:
1.

Valuation basis and methods for assets(1) Valuation basis and methods for securities:
Investment in subsidiaries and associated companies :At cost, determined by the moving average method.
Available-for- sale securities:
Marketable securities
Stated at fair value on the balance sheet date of the fiscal year (Unrealized gainor loss and net of applicable taxes reported in a separate component of equity.
Selling costs are determined by the moving average method).
Non-marketable securities:
Stated at cost determined by the moving average method.
(2)

2.

Valuation basis and methods for inventories:
Finished goods:

Stated at cost, determined by the average method (Book value
is written down to net realizable value if not profitable).

Raw materials:

Stated at cost, determined by the first-in, first-out method(Book value is written down to net realizable value if not
profitable).

Method of depreciation of major fixed assets:(1) Tangible fixed assets (excluding lease assets):
Stated by the declining-balance method.
However, with regard to the buildings (excluding appurtenances thereto) acquired on
or after April 1, 1998, the straight-line method has been adopted.
(2) Intangible assets (excluding lease assets):
Stated by the straight-line method.
However, depreciation of goodwill is made equally for five years; depreciation of- 43 -

patent rights is made by the straight-line method based on the estimated economicallyusable period; and depreciation of software for internal use is made by thestraight-line method based on the internal usable years (five years).
(3)

Lease assets:
Lease assets related to finance lease transactions that do not transfer ownership are
depreciated by the straight-line method, based on the assumption that the useful life
equals to the lease term and the residual value equals to zero.
Any finance lease transaction that does not transfer ownership, which became
effective prior to the fiscal year during which the "Accounting Standard for Lease
Transactions"(Accounting Standards Board of Japan ("ASBJ") Statement No. 13)
first became applicable, is treated similarly to the manner in which ordinary leasetransactions are treated.

3.

Standards for providing allowances:(1) Allowance for doubtful receivables:
To meet losses from loan default, the Company sets aside an estimated uncollectible
amount, by taking into consideration the actual loss rate in respect of general credits
and the individual possibilities of collection in respect of possible non-performing
credits and other specific claims.
(2) Reserve for product warranty:
To meet expenses of after-sales services with regard to the products sold, theCompany sets aside an estimated amount based on the past sales record.
(3) Liabilities for retirement benefits:
To meet the payment of retirement benefits to employees, the Company provides anamount, based on estimated retirement benefit obligations and plan assets as of thebalance sheet date.
Prior service cost is amortized by the straight line method over a period within the
average remaining years of service of the employee (10 years).
Actuarial gains or losses are amortized by the straight line method over a period
within the average remaining years of service of the employee (10 years) startingfrom the following period.
(4) Liabilities for directors’ retirement benefits:
To provide for the payment of retirement gratuities to officers, an amount payable atthe end of the fiscal year under the Company's internal rules is reserved.
- 44 -

(5) Allowance for liquidation loss on affiliated company:
To provide for a loss on liquidation of any affiliated company, the Company setsaside the estimated amount of such loss.
4.

Other significant accounting policies for preparation of financial statements
Accounting for consumption taxes, etc.:

5.

By the tax-exclusive method

Change in important accounting policies(Application of the Accounting Standard for Asset Retirement Obligations)
As from the fiscal year under review, the "Accounting Standard for Asset Retirement
Obligations" (Accounting Standards Board of Japan (ASBJ) Corporate Accounting Standard
No.18, March 31, 2008) and the "Implementation Guidance on Accounting Standard for Asset
Retirement Obligations" (ASBJ Implementation Guidance No. 21, March 31, 2008) are applied.
The change has no effect on operating loss, ordinary income and income before income taxes.

(Change in Applicable Rates to Foreign Currency Exchange Conversions)
In the past, the Company applied TTS or TTB rates when carrying out foreign currency
exchange conversions. However, as from the fiscal year under review, the Company has
decided to use TTM rates instead.
This change to utilize TTM rates across all exchange conversions was made in order to better
recognize periodic income and loss as a result of reviewing the circumstances where transactionsin the Company's major operations were settled in foreign currencies and revenues obtained were
kept in foreign currencies for the purpose of settlement of trade accounts, on the occasion when
foreign exchange rates were changing sharply.
As a result, net sales increased by ¥1,990 million and operating income increased by ¥827
million. Ordinary income and income before income taxes increased by ¥761 million,
respectively.

- 45 -

Notes to Non-Consolidated Balance Sheet:1.

Accumulated depreciation of assets:
Accumulated depreciation of tangible fixed assets:

2.

¥11,114 million

Monetary debts due from and to subsidiaries and associated companies:
Short-term monetary debts due from associated companies:
Long-term money debts due from associated companies:
Short-term money liabilities due to associated companies:¥26,769 million¥12,096 million¥21,422 million

3.
Disposition of supplementary tax assessment based on the application of tax system for
dealing with tax havens
On June 28, 2005 and June 16, 2008, the Company received notices of supplementary tax
assessment from the Osaka Regional Taxation Bureau of aggregate taxation on the profits of its
subsidiary in Hong Kong for the three fiscal years ended from March 31, 2002 to March 31,
2004 and the three fiscal years ended from March 31, 2005 to March 31, 2007, respectively, as
the subsidiary in Hong Kong did not satisfy the conditions for exclusion from the application of
the tax system for dealing with tax havens. The Company disagreed with the assessment andconsidered it to be unacceptable. The Company has contested for the validity in court.
The additional tax payment amounts were ¥16,651 million (¥19,184 million including
incidental taxes) and ¥15,038 million (¥16,838 million including incidental taxes), respectively,
including corporate income taxes, inhabitant taxes and enterprise taxes. They were respectively
recognized as "income taxes for prior periods" for the fiscal year ended March 31, 2007 and thefiscal year ended March 31, 2009 in accordance with the "Treatment of Accounting and
Presentation of Taxes for the Purpose of Audits" (JICPA Audit and Assurance PracticeCommittee Report No. 63).
The taxation is judged based on the status of any relevant foreign company at the end ofeach fiscal year thereof. Hence, for your reference, the effects of the taxation on the income ofthe subsidiary in Hong Kong for the fiscal year ended March 31, 2008, which was immediately
after the fiscal year during which the investigation by the Bureau was made, and thereafter are
estimated at approximately ¥3,000 million in total in corporate, inhabitant and enterprise taxes
for the fiscal year ended March 31, 2008 and the fiscal year ended March 31, 2009. The
Company has not accounted for the effects due to the aforementioned reasons.

- 46 -

Notes to Non-Consolidated Statement of Income:Amount of transactions with subsidiaries and associated companies
Trading transaction:
Sales:
Purchase:
Other operating expenses:
Transactions other than trading:¥142,196 million¥207,088 million¥1,354 million¥6,087 million

Notes to Non-Consolidated Statement of Changes in Shareholders' Equity
Matters concerning the number of shares of treasury stock:（thousand shares）

Number of shares Increase in shares Decrease in shares Number of shares
at March 31, 2010 during the year
during the year at March 31, 2011
Common stock (Note)

2,011

0

-

2,011

(Note) The number (0 thousand) of shares of common stock held by the Company
increased as a result of the purchase of less-than-one-unit shares.

- 47 -

Notes on Accounting for Deferred Tax
Principal components of deferred tax assets and deferred tax liabilities(million yen)
Deferred tax assets
Liabilities for retirement benefits
Liabilities for directors’ retirement benefits
Accounts payable-other
Allowance for doubtful receivables
Accrued expenses (bonuses)
Impairment loss on investment securities
Impairment loss on investment in subsidiaries and associatedcompanies
Tax loss carryforwards
Other
Subtotal
Valuation allowance
Total

4,856
949
13,235(6,377)
6,858

Deferred tax liabilities
Unrealized loss on available-for-sale securities
Prepaid pension expense
Reserve for advanced depreciation of fixed assets
Subtotal
Deferred tax assets, net

(385)
(501)
(336)
(1,223)
5,635

113
422
1,211
3,842
440
264
1,135

Notes on the Fixed Assets Used by Lease
Finance lease agreements that do not transfer ownership, which became effective on or
before March 31, 2008, are treated similarly to the manner in which ordinary lease transactions
are treated.
1.

Amounts equivalent to the acquisition prices, accumulated depreciation and balance at theend of the year:

Tools, furniture and fixtures
Total:

2.

Amount equivalent
to the acquisition
costs
439
439

(million yen)Amount equivalent Amount equivalent
to accumulated
to balance at the end
depreciationof the year
396
42
396
42

Future lease payable at the end of the year
Balance of future lease payable at the end of the year
Due within one year:
Due after one year:¥41 million¥2 million

Total:¥44 million- 48 -

Transactions with Related Parties
Subsidiaries, etc.
(million yen)
Voting Rights
Held byCompany (orheld byothers)Relationship

Type

Name

SubsidiaryDX
ANTENNA
Co., Ltd.

Direct,91.40%

Subsidiary

Funai Electric(HK) Ltd.

Direct, 100%

Subsidiary

FUNAI
CORPORATIO Direct, 100%
N INC.

Sale ofproducts of
the Company;
interlocking
directorate

Subsidiary

P&F USA,
INC.

Direct, 100%

Sale ofproducts of
the Company;
interlocking
directorate

Subsidiary

FUNAI
ELECTRICEUROPE Sp.
z. o. o.

Direct, 100%

Sale ofproducts of
the Company;
interlocking
directorate

Subsidiary(Note)FUNAIEUROPEGmbH

Direct, 100%

Sale ofproducts of
the Company
Production of
products of
the Company;
interlocking
directorate

Sale ofproducts of
the Company;
interlocking
directorate

AmountAccount

Balance asof March
31, 2011

Sale ofelectronic
products

15,115

Accounts
receivabletrade

5,889

Purchase ofelectronic
products

185,639

Accounts
payable-trade17,074

Sale ofelectronic
products

81,527

Payment fordiscounts, etc.

8,016

Sale ofelectronic
products

36,007

Sale ofelectronic
products

5,799Transaction

Loan of funds-

Loan of funds-

Accounts
receivabletrade
Account
payableotherAccounts
receivabletrade
Accounts
receivabletradeLong-term
loans
receivable
Long-term
loans
receivable

8,327
1,212

9,688

805
2,233

9,585

Transaction terms and policies on the determination of transaction terms, etc.:
Like the terms of ordinary transactions, transaction terms are determined in consideration ofmarket prices and other factors.

Note on the Information per Share
Net assets per share:
Net income per share:¥2,250.35¥183.79========================================================================•All figures in the non-consolidated balance sheet, non-consolidate statement of income,non-consolidated statement of changes in shareholders' equity and notes tonon-consolidated financial statements are shown by disregarding any fractions of therelevant units, respectively. Net assets per share and net income per share are shown by
rounding off to two decimal places.
- 49 -

Copy of Accounting Auditors' Audit Report(TRANSLATION)
INDEPENDENT AUDITORS' REPORTMay 20, 2011
To the Board of Directors of
Funai Electric Co.,Ltd.:
Deloitte Touche Tohmatsu LLC
Designated Unlimited Liability Partner,
Engagement Partner,
Certified Public Accountant:
Fumihiko Kimura

Designated Unlimited Liability Partner,
Engagement Partner,
Certified Public Accountant:
Hiroshi Shirai

Designated Unlimited Liability Partner,
Engagement Partner,
Certified Public Accountant:
Masaki Mizoguchi

Pursuant to the first item, second paragraph of Article 436 of the Companies Act, we haveaudited the financial statements, namely, the balance sheet as of March 31, 2011 of Funai
Electric Co.,Ltd. (the “Company”), and the related statements of income and changes in net
assets, and the related notes for the 59th fiscal year from April 1, 2010 to March 31, 2011,
and the accompanying supplemental schedules . These financial statements and theaccompanying supplemental schedules are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements and theaccompanying 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 obtain reasonable assurance
about whether the financial statements and the accompanying supplemental schedules arefree of material misstatement. An audit includes examining, on a test basis, evidence- 50 -

supporting the amounts and disclosures in the financial statements and the accompanying
supplemental schedules. An audit also includes assessing the accounting principles usedand significant estimates made by management, as well as evaluating the overall financial
statement and the accompanying supplemental schedules presentation. We believe that our
audit provides a reasonable basis for our opinion.
In our opinion, the financial statements and the accompanying supplemental schedules
referred to above present fairly, in all material respects, the financial position of the Company
as of March 31, 2011, and the results of its operations for the year then ended in conformity
with accounting principles generally accepted in Japan.
Additional Information
As described in the notes to non-consolidated balance sheet, disposition of a supplementary
tax assessment based upon the application of the tax system for dealing with tax havens isdisclosed.
Our firm and the engagement partners do not have any financial interest in the Company forwhich 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 theJapanese language and "the accompanying supplemental schedules" referred to in this report
are not included in the attached financial documents.

- END -

- 51 -

Copy of Audit Report of the Board of Corporate Auditors
AUDIT REPORT
We, the Board of Corporate Auditors of the Company, after deliberation based upon
the audit report prepared by each Corporate Auditor on the execution by Directors andCorporate Officers of their duties during the 59th fiscal year from April 1, 2010 throughMarch 31, 2011, have prepared this audit and hereby report as follows.
The state for the period from April 1, 2010 through June 22, 2010 (at the close of the58th Ordinary General Meeting of Shareholders) are based on the reports transferred from theformer Audit Committee.
1.
Method of audit 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 accounting 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 execution of
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 theresolutions of the Board of Directors for establishing systems to secure 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 Corporation Law of Japan as necessary to secure 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 accounting auditors had maintained an
independent position and conducted adequate audits, and received from the accounting- 52 -

auditors reports on the state of execution of their duties and demanded their explanations
whenever necessary. In addition, we received from the accounting auditors a notice that the"systems to secure adequate execution of duties" (as listed in the items of Article 131 of theRegulations on Corporate Accounts) had been established in accordance with the "Standard
for Quality Control Concerning Audits" (the Accounting Standards Board of Japan, October28, 2005) and demanded their explanations whenever necessary.
In accordance with such methods, we investigated the non-consolidated financial
statements (the non-consolidated balance sheet, the non-consolidated statement of income,the non-consolidated statement of changes in shareholders' equity and the notes tonon-consolidated financial statements) and their accompanying detailed statements, as wellas the consolidated financial statements (the consolidated balance sheet, the consolidated
statement of income, the consolidated statement of changes in shareholders' equity and thenotes to consolidated financial statements), 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 and corporate officers of their duties concerning such internal
control systems contain nothing to be pointed out.
(2)

Results of audit of the non-consolidated financial statements and their accompanying
detailed statements:
We are of the opinion that the method and results of the audit made by the accounting
auditors, Deloitte Touche Tohmatsu LLC, are proper.

(3)

Results of audit of the consolidated financial statements:- 53 -

We are of the opinion that the method and results of the audit made by the accounting
auditors, Deloitte Touche Tohmatsu LLC, are proper.
May 23, 2011
Funai Electric Co., Ltd.
The Board of Corporate Auditors
Akitaka Inoue
Full-time Corporate Auditor(seal)

Shinichi Komeda
Outside Corporate Auditor(seal)

Masahide Morimoto
Outside Corporate Auditor(seal)- END -

- 54 -

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

Election of 9 Directors

The term of office of all the (12) Directors currently in office will expire at the closeof this Ordinary General Meeting of Shareholders. Hence, to enhance the transparency of
the Board of Directors, it is hereby proposed that nine (9) Directors, including two (2) outside
Directors, be elected.
The candidates for Directors are as follows:

Cand
i-date
No.

1.

Name

Brief history, post in the Company and business incharge (and important concurrent office)(Date of birth)

Tetsuro Funai

April 1951

Established Funai Sewing MachineCompany

December
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 (To date);
Chairman and Corporate Officer of
the Company(January 24, 1927)

June 2010

Chairman and Officer of theCompany (To date)(Chairman of Funai Information Science Promotion
Foundation)(Chairman of Funai Scholarship Foundation)- 55 -

Number ofshares of theCompany heldby Candidate

12,709,288
sharesCandi-date
No.

2.

Name

Brief history, post in the Company and business incharge (and important concurrent office)(Date of birth)Tomonori Hayashi(March 13, 1947)

April 1969

Joined the Company

October 2002

Officer of the Company

June 2005

Executive Officer of the Company

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

June 2010

Representative Director of theCompany (To date);

Number ofshares of theCompany heldby Candidate

12,900 shares

President and CEO of theCompany (To date)3.

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. (To date)

Mitsuo Yonemoto(March 18, 1939)(Vice President and Director of T.P.S. LaboratoryCo., Ltd.)(Outside Director of The Sailor Pen Co., Ltd.)- 56 -

100 sharesCandi-dateNo.

Name

Brief history, post in the Company and business incharge (and important concurrent office)(Date of birth)
April 1965

Joined The Daiwa Bank, Limited(now Resona Bank, Limited)

June 2001

President of The Daiwa Bank,
LimitedDecember 2001

President and Representative
Director of Daiwa Gin Holdings,
Inc. (Now Resona Holdings, Inc.);
Director of Daiwa Gin Trust Bank
Co., Ltd. (Now, Resona Bank,
Limited)July 2004

Advisor of the Company

June 2005

Outside Director of the Company(To date)

June 2006

Outside Corporate Auditor of
Otsuka Pharmaceutical Co., Ltd.
(To date)

July 2008

Chairman of Osaka University of
Economics (To date)

Yasuhisa Katsuta
4.

(February 20,
1942)

Number ofshares of theCompany heldby Candidate-(Outside Corporate Auditor of Otsuka
Pharmaceutical Co., Ltd.)

5.

Toshio Ohtaku(July 11, 1948)(Chairman of Osaka University of Economics)
April 1967
Joined the Company
June 2007
Officer and General Manager of
New Business Div. of theCompany
June 2008
Executive Officer and General
Manager of New Business Div. of
the Company (To date)June 2010
Director of the Company (Todate)- 57 -

700 sharesCandi-dateNo.

Name

Brief history, post in the Company and business incharge (and important concurrent office)(Date of birth)January 1992
July 2004

6.

7.

Joined the Company
General Manager of DVD
Marketing Dept. of the Company
April 2007
COO of FUNAICORPORATION, INC. (To date)
October 2009
Officer and General Manager of
TV Business Div. of theCompany (To date)June 2010
Director of the Company (Todate)
Yoshikazu Uemura September 2010 Chairman and Representative
Director of FUNAI(June 27, 1958)
CORPORATION, INC. (To date)
December 2010 President and Representative
Director of P&F USA, INC. (Todate)
April 2011
Officer and General Manager of
AV Headquarters of the Company(To date)(Chairman and Representative Director of FUNAICORPORATION, INC.)(Chairman and Representative Director of P&F USA,
INC.)
April 1977
Joined Hitachi, Ltd.
April 1990
Chief Engineer, Hitachi, Ltd.
April 1999
General Manager of Development
Office, System LSI Business
Dept., Semiconductor Group of
Hitachi, Ltd.
April 2003
General Manager of Global
Marketing Dept. of Renesas
Technology Corp.
February 2004
Representative Director ofJoji Okada
Applause Technologies Co., Ltd.
(August 27, 1954) December 2005 Joined the Company
April 2007
Executive Manager ofDevelopment & Technology
Headquarters of the Company
October 2009
Officer and Deputy General
Manager of Development &Technology Headquarters of theCompany (To date)June 2010
Director of the Company (Todate)

Number ofshares of theCompany heldby Candidate- 58 -

700 shares

500 sharesCandi-dateNo.

Name

Brief history, post in the Company and business incharge (and important concurrent office)(Date of birth)

April 1984
January 1993
July 2003
April 2006
Hideaki Funakoshi
8.

(September 30,
1965)

February 2008

June 20109.

Shigeki Saji

Joined Mitsubishi ElectricEngineering Company Limited
Joined the Company
Chief Engineer, AV Project of theCompany
General Manager, DVD Project of
the Company
Executive General Manager of
DVD Business Div. of theCompany (To date)Director of the Company (Todate);
Officer and General Manager of
DVD Business Div. of theCompany (To date)

April 1995

Joined the Company

July 2003

Manager, Funai Electric (HK)Ltd.

May 2006

Assistant General Manager of AV
Headquarters of the Company

October 2009

President and Representative
Director of FUNAI ELECTRIC(POLSKA) Sp.z.o.o. (To date)Director of the Company (Todate);
Officer of the Company(April 13, 1972)
June 2010

September 2010

Number ofshares of theCompany heldby Candidate

800 shares

1,400 shares

Officer and Deputy General
Manager of TV Business Div. of
the Company(Notes) 1. Candidate for Director Mr. Yoshikazu Uemura is concurrently serving as Chairman and
Representative Director of FUNAI CORPORATION, INC. and President andRepresentative Director of P&F USA, INC., both of which have dealings in electronic
appliances with the Company.
2. None of the other candidates for Directors has any special interests with the Company.
3. Candidates for Directors Messrs. Mitsuo Yonemoto and Yasuhisa Katsuta are candidates
for outside Directors.
4. Reasons for the selection of the candidate for outside Directors:
Management has judged that Mr. Mitsuo Yonemoto will be able to offer advice based on
his broad experience as a management consultant.

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Management has judged that Mr. Yasuhisa Katsuta will be able to use his experience inand capabilities in corporate management and banking and financing in the managementof the Company.
5. Years of service of outside Directors of the Company:
Mr. Mitsuo Yonemoto will have served as outside Director for 13 years at the close ofthis Ordinary General Meeting of Shareholders.
Mr. Yasuhisa Katsuta will have served as outside Director for six years at the close of thisOrdinary General Meeting of Shareholders.
6. Conclusion of liability limitation agreements:
The Company has entered into an agreement with each of the outside Directors Mitsuo
Yonemoto and Yasuhisa Katsuta to limit his liability for any damage as provided for in
Article 423, paragraph 1 of the Corporation Law of Japan within the aggregate amount asprovided for in the items of Article 425, paragraph 1 of the said law, pursuant to Article
427, paragraph 1 of the said law. If each of them is reelected, such agreement will berenewed.
7. Posts in the Company and business in charge of the candidates for Directors proposed tobe reelected:
As stated on page 11 of the business report.

Proposition No. 2:

Granting of retirement gratuities to the retiring Directors

It is hereby proposed that retirement gratuities be granted to Messrs. Takashi
Kiyomoto, Hideo Nakai and Shinji Seki, who will retire upon expiration of the term of officeas Directors at the close of this Ordinary General Meeting of Shareholders, in appreciation ofservices rendered by them while in office, within the extent of a reasonable amount inaccordance with the established standards of the Company and that determination of theactual amount, the time and method of presentation, etc. be left to the Compensation
Committee upon authorization by the Board of Directors.
The brief histories of the retiring Directors are as follows:
Name

Brief history

Takashi Kiyomoto

June 2010 Director of the Company (To date)Hideo Nakai

June 2010 Director of the Company (To date)

Shinji Seki

June 2010 Director of the Company (To date)- END -

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