(Translation)

Securities Code:June 10, 2016

6839

NOTICE OF THE 64TH ORDINARY GENERAL MEETINGOF SHAREHOLDERS

Dear Shareholders:
We would like to express our appreciation for your continued good offices.
You are hereby notified that the 64th Ordinary General Meeting of Shareholders of Funai
Electric Co., Ltd. (the “Company”) will be held as described below, and you are cordiallyinvited to attend the meeting.
Since voting rights can be exercised in writing, even if you are unable to attend the meeting,please review the attached Reference Document for the General Meeting of Shareholders set
forth below and send to us by return mail the enclosed voting form indicating your approvalor disapproval of the propositions no later than 5:00 p.m. on June 27 (Monday) in Japan time,
2016.

Yours very truly,

Tomonori Hayashi
Representative Director, President, andChief Executive Officer

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

Date and hour:
June 28 (Tuesday), 2016, 10:00 a.m.

2.

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

3.

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

The business report, the consolidated financial statements and the audit reportson the consolidated financial statements by the independent auditors and the
Audit and Supervisory Committee for the 64th fiscal year (from April 1, 2015
to March 31, 2016)2.

The nonconsolidated financial statements for the 64th fiscal year (from April 1,2015 to March 31, 2016)

Matters to be resolved:
Proposition No. 1:

Election of five (5) Directors (excluding Directors who
are Audit and Supervisory Committee Members)

Proposition No. 2:

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

Proposition No. 3:

Granting retirement benefits to the retiring Director

Proposition No. 4:

Issuance of stock acquisition rights as stock options- END -・ In attending the meeting, please submit the enclosed voting form to a receptionist at theplace of the meeting.
・ Of the documents to be provided upon giving notice of this Ordinary General Meeting of
Shareholders, “Notes to the consolidated financial statements” and “Notes to thenonconsolidated financial statements”, which are posted on our website(http://www.funai.jp/en/investors/) in accordance with and as provided for in theapplicable laws and ordinances and Article 14 of the Articles of Incorporation of theCompany, are not attached with this notice of the Ordinary General Meeting of
Shareholders. Therefore, the attached documents to this notice of the Ordinary General
Meeting of Shareholders are a part of the consolidated financial statements andnonconsolidated financial statements that have been audited by the independent auditors
to express their audit opinions.
・ In the event of the revision to any matters in the Reference Document for the General
Meeting of Shareholders, the business report, the consolidated financial statements andthe nonconsolidated financial statements, it will be posted on our website stated above.

(Attached documents)
BUSINESS REPORT(April 1, 2015 to March 31, 2016)
1.

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

Development and results of business activities:

In the fiscal year under review, in spite of the stable business conditions in general, there
were a few changes in the United States, which is the Group’s mainstay market, such as aslight slowdown in consumer spending and partial weakness in the overall increasing
employment. While the European economy experienced an improvement in consumer
spending, the slowdown of economic recovery in China has continued from the second halfof this fiscal year.
The economic slowdown in emerging economies, especially in China, is affecting
Japanese economy, particularly in exports, as indicated by weakness in machinery orders anda decline in the index of industrial production from the beginning of this fiscal year.
Under these circumstances, the Group reported net sales of ¥168,116 million, a 22.6%
decrease from the previous fiscal year. Operating loss was ¥13,061 million (operating
income for the previous fiscal year was ¥564 million), due to a decrease in orders for the
year-end shopping season and sluggish sales to regional mass merchandisers in the North
American market and increasing competition in the Mexican market especially in
LCD-TVs and termination expenses for the audio accessories business. Ordinary loss was¥16,146 million (ordinary income for the previous fiscal year was ¥1,924 million) mainly due
to foreign exchange losses generated from the Mexican Peso-denominated accounts
receivable due to the Mexican Peso being weak against Japanese yen, and the yen
appreciating against the U.S. dollar.
The Company received an arbitral award from the International Court of Arbitration on
April 26, 2016 with respect to the arbitration in the dispute between the Company andKoninklijke Philips N.V. As the Group recorded ¥18,502 million for this compensation fordamage and other expenses decided by the arbitral award as extraordinary losses, net loss
attributable to owners of the parent was ¥36,221 million (net income attributable to owners of
the parent for the previous fiscal year was ¥1,354 million).
The Group applied the Accounting Standard for Business Combinations (AccountingStandards Board of Japan Statement No. 21, September 13, 2013) and some other new
accounting standards from this fiscal year and changed “net income or net loss” to “netincome attributable to owners of the parent or net loss attributable to owners of the parent.”
Net sales by product sector were as follows:
Audiovisual Equipment
Sales of DVD-related products increased because of strong sales of DVD/VCR Combomodels. However the Group could not offset the sales decrease of LCD-TVs due to thereduction of orders in the year-end shopping season in the North American market with theincrease of sales throughout the fiscal year. In addition, sales to regional massmerchandisers were slow and the Mexican market became more competitive. As a result,net sales of this sector were ¥146,179 million, a decrease of 15.2% from the previous fiscal
year.
Information Equipment
Sales of in-house developed ink-jet printers, which were launched during this fiscal year,
could not offset a shortage due to the termination of OEM business. As a result, net sales ofthis sector were ¥5,000 million, a decrease of 60.4% from the previous fiscal year.
Other
Net sales of other were ¥16,936 million, a decrease of 47.2% from the previous fiscal year,
due to a decrease in sales of electronic reception devices and audio accessories.
<Consolidated net sales by product group>Group
Audiovisual equipment
Information equipment
Other
Total
(2)

Net sales(millions of yen)
146,179
5,000
16,936
168,116

Component rate
(%)
86.9
3.0
10.1
100.0

Investment in property, plant and equipment:

Investment in property, plant and equipment during the fiscal year under review totaled¥2,462 million, which comprised of ¥1,961 million by its manufacturing companies and ¥500
million by its sales companies. Such investments were mainly for the improvement of the
manufacturing facilities.
(3)

Finance:
Nothing to be reported.

(4)

Issues to be addressed:

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

Increase of net sales and recovery of profitability

The Group’s top priority is to increase net sales and recover profitability.
(Product strategy)
During the fiscal year under review, sales and profits decreased from the previous fiscal
year due to the decrease of orders for the year-end shopping season, sluggish sales to regional
mass merchandisers, delays in inventory clearance in the North American market,
increasing competition in the Mexican market and the termination expenses for the audio
accessories business.
To increase net sales, the Group aims to increase sales of LCD-TVs by offering 4K
models and multiple models developed for individual customers and secure orders for the
year-end shopping season mainly for the North American market. Regarding inkjet printers,
the Group is now working towards development of sales and new customers by offering
multiple model lineups.
(Market strategy)
As a short-term market strategy, the Group is offering high-value-added models such as
4K TVs to keep the competitive advantage of the products in the North American market.
As a medium- to long-term strategy, the Group is actively engaging in sales channel
expansion to eliminate, in stages, excessive concentration on the North American market, forinstance, by sales development of the Information Equipment Business in the European
market (e.g. U.K. and other areas) and of the Audiovisual Equipment Business in the Central
and South American market (e.g. Mexico).
To implement the above-mentioned strategies steadily, the Group is working towards thebusiness improvements to provide products that meet market needs in a timely manner byminimizing time lags in product planning, development, material procurement, production
and sales.
(ii)

Reinforcement of the manufacturing and development systems

The Group considers excessive reliance on production in China to be a risk factor for theGroup. To avoid this risk, the Group has been working to decentralize the Group’s
production sites, which resulted in a decrease of the product ratio in China. During thecurrent fiscal year, a new factory of Funai Electric Philippines Inc., a production subsidiaryestablished in the Philippines, went into operation. The Company is also continuing efforts
to improve development efficiency across the entire Group, including operations in China
and Asia.
(iii)

Training and appointment of human resources

The Group recognizes that it is important to bolster the Group’s capabilities by improving
each employee’s capabilities and more effectively leveraging its skills to win out against the
global competition in the new era and implementing the Group’s medium- to long-termbusiness strategy. Therefore, the Group is actively training and assigning employees,
regardless of their age and career, by strengthening and expanding its internal and external
training systems, such as language training.

(5)Property and income/loss:
61st(April 1, 2012 toMarch 31, 2013)

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

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

64th(April 1, 2015 toMarch 31, 2016)

Net sales(millions of yen)

192,008

234,042

217,088

168,116

Ordinary income(loss)(millions of yen)(355)

(2,253)

1,924(16,146)

Net income (loss)
attributable to ownersof the parent(millions of yen)

(8,542)(6,745)1,354(36,221)

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

39.70(1,061.62)

Total assets(millions of yen)

194,524

181,341

189,695

154,295

Equity(millions of yen)

121,398

117,684

127,881

86,569Equity per share(yen)

3,520.11

3,414.77

3,712.81

2,504.70

Fiscal year
Item

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

(6)

Major subsidiaries:

Capital stock

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

91.80

FUNAI CORPORTION, INC. US$68.5 million

100.00Trade name

DX ANTENNA Co., Ltd.

Manufacture and sale ofelectronic reception devices
Sale of the Company’s products

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

Funai Electric (HK) Ltd.
(Note)

Main business

HK$115 million

100.00(7)Major businesses of the Group:
Division

Principal products

Audiovisual equipment

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

Printers and ink cartridges

Other

Audio accessories and electronic reception devices(8)

Major business sites of the Group:
Category

Funai Electric Co., Ltd.
Production and sales
subsidiaryJapan

Sales subsidiaries
Overseas
Production subsidiaries

(9)

Name

Location

Head Office

Daito City, Osaka

Tokyo Branch

Chiyoda-ku, Tokyo

DX ANTENNA Co., Ltd.

Hyogo-ku, Kobe City

FUNAI CORPORATION, INC.

U.S.A.

P&F USA, Inc.

U.S.A.

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

MexicoFunai Electric (HK) Ltd.

Hong Kong

FUNAI (THAILAND) CO., LTD.

Thailand

Employees of the Group:
Number of employees(persons)

Change from the end of the previous fiscal year(+ or -) (persons)

3,318

-286

(Notes) 1. The above number of employees represents those actively at work.
2. The number of employees decreased due principally to the curtailment of production of
ink cartridges at FUNAI ELECTRIC CEBU, INC. a production subsidiary in thePhilippines.

(10)

Major lenders:

Nothing to be reported.
(11)

Other important matters concerning the current state of the Group:

Nothing to be reported.

2.

Matters concerning the shares of the Company(1)

Total number of shares authorized:

80,000,000 shares(2)

Total number of shares issued:

36,130,796 shares(Including 2,011,687 shares of treasury stock)(3)

Number of shareholders:

9,098 persons(4)

Principal shareholders (top 10):
Name

Tetsuro Funai
Funai Information Science Promotion Foundation
State Street Bank and Trust Company 505223
Tetsuo Funai
State Street Bank and Trust Company
The Bank of New York 133522
Japan Trustee Services Bank, Ltd. (Trust account)
Japan Trustee Services Bank, Ltd. (Trust account 9)
State Street Client Omnibus Account OM 44
The Master Trust Bank of Japan, Ltd. (Trust account)

Number of shares held
(thousands of share)
12,559
1,540
1,332
1,079
961
896
637
628
626
472

Shareholding
ratio (%)
36.81
4.51
3.91
3.16
2.82
2.63
1.87
1.84
1.84
1.38

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

(5)

Other important matters concerning shares:
Nothing to be reported.

3.

Matters concerning stock acquisition rights:(1)

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

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

2,837 rights

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

Class and number of shares to be 283,700 shares of common stock
issued or transferred upon exercise (100 shares per stock acquisition right)of the stock acquisition rights:(iii) Stock acquisition rights held by Directors by category:

(2)

Issue

Category

Numberof rights

HolderExercise priceper share

Exercise period

The first stockacquisition rights
for the year ended
March 31, 2009

Director(other than Audit and Supervisory
Committee Member)(other than Outside Director)

20

1¥1,609August 1, 2010 toJuly 31, 2017

The first stockacquisition rights
for the year ended
March 31, 2015

Director(other than Audit and Supervisory
Committee Member)(other than Outside Director)

90

2¥1,296

September 1, 2016
to August 31,
2023

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

(3)

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

4.

Matters concerning Officers of the Company:(1)

Directors (as of March 31, 2016)
Title

Name

Business in charge and importantconcurrent office

Representative Director
and Chairman

Tetsuro Funai

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

Representative Director
and Officer

Tetsuhiro Maeda

General Manager of Office Solution
Business Div. andGeneral Manager of New Business Div.

Director and Officer

Joji Okada

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

Outside Director

Mitsuo Yonemoto

Vice President and Director of T.P.S.
Laboratory Co., Ltd. andOutside Audit & Supervisory Board
Member of Oriental Chain Mfg. Co., Ltd.

Outside Director(Audit and Supervisory
Committee Member)

Shinichi Komeda

Outside Director(Audit and Supervisory
Committee Member)

Masahide Morimoto

Outside Director(Audit and Supervisory
Committee Member)

Yoshiaki Bannai(Notes)Chairman of Funai Information Science
Promotion Foundation; andChairman of Funai Scholarship Foundation

President and Representative Director ofBe.com corporation

1. As of June 25, 2015, the Company shifted to a company with an Audit andSupervisory Committee.
2. Director (Audit and Supervisory Committee Member) Hiroyuki Makiura resigned
from office as of February 15, 2016 and accordingly, Substitute Director (Audit
and Supervisory Committee Member) Yoshiaki Bannai assumed the office of(Outside) Director (Audit and Supervisory Committee Member) as of the samedate.
3. The Company has instituted a Secretariat to the Audit and Supervisory
Committee to support its duties and made the secretariat collect information byattending important meetings and conduct systematic audits through its internal
control system. Thus, the Company has secured the effectiveness of its audits
and therefore has not appointed any full-time Audit and Supervisory Committee
Members.

4. The Company has designated Outside Director Mitsuo Yonemoto and Outside
Director (Audit and Supervisory Committee Member) Shinichi Komeda as
Independent Officers in accordance with the rules of Tokyo Stock Exchange, Inc.
and registered them with the exchange.
5. The Company has established a Nomination Committee and a Compensation
Committee (both of which are voluntary committees). The composition of eachof the committees is as follows:• Nomination Committee: Joji Okada (Chairman), Tetsuro Funai, Tomonori
Hayashi and Tetsuhiro Maeda• Compensation Committee: Tetsuhiro Maeda (Chairman), Tetsuro Funai,Tomonori Hayashi, Joji Okada and Mitsuo Yonemoto(2)

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

Name

ReasonTitle, business in charge and importantconcurrent office upon retirement

Hiroshi Ishizaki

June 25, 2015

Expiration ofterm of office

Full-time Audit & Supervisory Board
MemberShinichi Komeda

June 25, 2015

Expiration ofterm of officeOutside Audit & Supervisory Board
MemberMasahide Morimoto

June 25, 2015

Expiration ofterm of officeOutside Audit & Supervisory Board
MemberHiroyuki Makiura

February 15,
2016

Resignation

Director as Audit and Supervisory
Committee Member (outside)

Yoshiaki Bannai

February 15,
2016

Transfer(Note)

1.
2.

Director (other than Director being
Audit and Supervisory Committee
Member) (outside)
Hiroyuki Makiura resigned from the office of Director (Audit andSupervisory Committee Member) to assume the office of Senior Officer.
Yoshiaki Bannai retired from the office of Director (other than Director being
Audit and Supervisory Committee Member) upon assuming the office of
Director as Audit and Supervisory Committee Member (outside).

(For reference)
The Company has adopted a “System of Officers” and the Officers as of March 31,
2016 who did not concurrently hold the offices of Directors were as follows:
Senior Officer
Officer
Officer
Officer
Officer
Officer
Officer

Hiroyuki Makiura
Hideaki Funakoshi
Kazuo Uga
Takeshi Ito
Kazuhiko Yamamoto
Motomi Adachi
Tsuneki Yoshida(3)Outline of liability limitation agreements:
In accordance with Article 427, paragraph 1 of the Companies Act of Japan, theCompany has entered into an agreement with Outside Directors Mitsuo Yonemoto,Shinichi Komeda, Masahide Morimoto and Yoshiaki Bannai to limit the liability forany damage as provided for in Article 423, paragraph 1 of said act within the aggregateof the amounts listed in the items of Article 425, paragraph 1 of said act.

(4)

Total amount of remuneration, etc. for Directors and Audit & Supervisory Board
Members
Total amount of remuneration, etc. for the fiscal year under review:
Category
Director (other than Director being
Audit and Supervisory Committee
Member)(Outside Director)
Director (Audit and Supervisory
Committee Member)(Outside Director)
Audit & Supervisory Board Member(Outside Audit & Supervisory Board
Member)
Total(Outside Director/Audit & Supervisory
Board Member)

Number ofrecipients
6

Amount of payments¥75,251 thousand(2)
4(¥10,291 thousand)¥11,896 thousand(4)(¥11,896 thousand)3(2)¥4,875 thousand(¥2,600 thousand)10(5)¥92,023 thousand(¥24,788 thousand)(Notes) 1. The above-listed amount of payments includes payments to the Directors andAudit & Supervisory Board Members who retired during the fiscal year underreview. The Company made a shift from a company with Corporate Auditors to
a company with Audit and Supervisory Committee as of June 25, 2015.
2. The above-listed amount of payments includes the following amount ofallowance for Officers’ retirement benefits recorded as expenses for the fiscal
year under review:• ¥6,911 thousand for six Directors (other than Directors being Audit andSupervisory Committee Members) (including ¥791 thousand for two outside
Directors)• ¥931 thousand for four Directors (Audit and Supervisory Committee
Members) (including ¥931 thousand for four outside Directors)• ¥375 thousand for three Audit & Supervisory Board Members (including ¥200
thousand for two outside Audit & Supervisory Board Members)
3. The above-listed amount of payments includes the following amount of
remuneration in stock options recorded as expenses for the fiscal year underreview:• ¥699 thousand for two Directors

(5)Other important matters concerning Officers:
Nothing to be reported.

(6)

Matters concerning Outside Officers:(i)Concurrent holding of important offices of Executive Officers of othercorporations and their relationships with the Company:•

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

•

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

(ii)

Concurrent holding of important offices of Outside Officers of othercorporations and their relationships with the Company:•

Director Mitsuo Yonemoto is an Outside Audit & Supervisory Board Memberof Oriental Chain Mfg. Co., Ltd. The Company has no special relationshipwith Oriental Chain Mfg. Co., Ltd.

(iii)

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

(iv)
•

Major activities during the fiscal year under review:
Attendance and speeches at the meetings of the Board of Directors and the
Audit and Supervisory Committee:
Name

Director

Mitsuo Yonemoto

Attendance and Speeches
He attended 14 of the 15 meetings of the Board of
Directors held during the fiscal year under review andexpressed opinions principally from the standpoint of amanagement consultant, as well as an objective
standpoint as an Independent Officer.

Director (Audit and Supervisory He attended 15 of the 15 meetings of the Board ofCommittee Member)
Directors held during the fiscal year under review. He
assumed the office of Audit and Supervisory Committee
Member as a substitute for Mr. Hiroyuki Makiura upon
his resignation as of February 15, 2016 but did notattend any meeting of the Audit and Supervisory
Yoshiaki Bannai
Committee during the fiscal year under review. At themeetings of the Board of Directors, he expressed
opinions principally from the standpoint of a veteran top
executive.
Director (Audit and Supervisory He attended 15 of the 15 meetings of the Board ofCommittee Member)
Directors, four of the four meetings of the Audit &Supervisor Board and nine of the nine meetings of the
Audit and Supervisory Committee held during the fiscal
year under review, 2015 and expressed opinions
Shinichi Komeda
principally from the standpoint of a veteran top
executive, as well as an objective standpoint as an
Independent Officer.
Director (Audit and Supervisory He attended 15 of the 15 meetings of the Board ofCommittee Member)
Directors, four of the four meetings of the Audit &Supervisory Board and nine of the nine meetings of the
Audit and Supervisory Committee held during the fiscal
year under review and expressed opinions thereat
Masahide Morimoto
principally from the standpoint of a veteran top
executive, as well as a technical standpoint of financeand securities.
Director (Audit and Supervisory He attended eight of the eight meetings of the Board ofCommittee Member)
Directors and nine of the nine meetings of the Audit andSupervisory Committee held during the period after hisassumption of office on June 25, 2015 to his retirement
as of February 15, 2016, and expressed opinions
Hiroyuki Makiura
principally from the standpoint of a veteran top
executive.

(Notes)1.

The above list covers the attendance of Audit & Supervisory Board
Members before the Company made a shift to a company with an Audit
and Supervisory Committee.

2.

In addition to the number of meetings of the Board of Directors above,
written resolutions, which shall be deemed to have been adopted
pursuant to the provisions of Article 370 of the Companies Act andArticle 23 of the Articles of Incorporation of the Company, wereadopted on three occasions.
5.

Matters concerning independent auditors:(1)

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

Remuneration, etc., of the independent auditors for the fiscal
year under review:¥46 million

Total amount of cash and other proprietary benefits payable
to the independent auditors by the Company and its
subsidiaries:¥61 million(Notes) 1. The amount of remuneration, etc., for audits under the Companies Act of Japanand the amount of remuneration, etc., for audits under the Financial Instruments
and Exchange Act of Japan are not separated in the audit agreement between the
Company and the independent auditors and cannot actually be separated.
Hence, the amount in item (i) above includes both amounts.
2. Among the major subsidiaries of the Company, FUNAI CORPORATION, INC.
and one other company are subject to audits by audit firms (including persons
having qualifications in foreign countries equivalent to those of the independent
auditors of the Company) other than the independent auditors of the Company.

(3)

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

(4)

Reasons for the Audit and Supervisory Committee to consent to the remuneration, etc.,of the independent auditors
The Audit and Supervisory Committee, based on the “Practical Guidance on
Cooperation with Independent Auditors” issued by the Japan Audit & Supervisory
Board Members Association, verified the changes in audit hours and audit
remuneration by audit item and the status of audit plans and audit results for theprevious fiscal year and investigated whether the estimates of audit hours andremuneration for the fiscal year under review were appropriate. As a result, theAudit and Supervisory Committee consented to the remuneration, etc. of the
independent auditors pursuant to Article 399, paragraph 1 of the Companies Act.

(5)

Policy on the determination of dismissal or non-reappointment of the independent
auditors:
In the event that the independent auditors are found to fall under any event of
dismissal under the items of Article 340, paragraph 1 of the Companies Act and areconsidered appropriate to be dismissed, the Audit and Supervisory Committee shall,
upon unanimous consent of the Audit and Supervisory Committee Members, dismiss
the independent auditors. In addition, in the event that any problem is found to arise
with the performance by the independent auditors of their proper audits, the Audit andSupervisory Committee shall determine the content of a proposition for the dismissal
or non-reappointment of the independent auditors to be submitted to a General
Meeting of Shareholders.
(6)

Outline of liability limitation agreements:
Nothing to be reported.

6.

Systems and policies of the Company(1)

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

Systems to ensure that the Directors and employees perform their duties incompliance with laws, ordinances and the Articles of Incorporation
In the “Funai Group Charter of Conduct”, the “Regulations of Officers’
Compliance” and “Regulations of Compliance”, the Company shall specify
the acts to be taken by the Directors, Officers and employees to comply withlaws and ordinances and ensure that the Directors, Officers and employees
perform their duties in compliance with laws, ordinances and the Articles ofIncorporation. The Company has also formulated the “Whistleblower
Protection Regulations” to prohibit unfavorable treatment of whistleblowers.

(ii)

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

(iii)

Regulations and other system for management of risk of loss
The Company has instituted “Risk Management Regulations” for managementof risk of loss and appointed Officers responsible for risk management toproperly grasp and evaluate risks to the Company and manage risks related totheir respective operations in charge.

(iv)

Systems to ensure that the Directors perform their duties effectively
To ensure that the management performs decision-making swiftly andeffectively, the Company has introduced a “System of Officers”, and place

Officers under the control of the Executive Directors to ensure that theoperations determined by the Executive Directors are performed swiftly. In
addition, to enhance the transparency of the Board of Directors and strengthen
its supervisory functions, the Company has appointed outside Directors andinstituted an Audit and Supervisory Committee.
(v)

Systems to secure the propriety of business activities of the corporate groupcomposed of the Company and its subsidiaries(a)

Systems of reports to the Company on the matters concerning theperformance by Directors, etc. of its subsidiaries of their duties

To grasp the management of the subsidiaries appropriately, the Company has
instituted the “Affiliated Companies Management Regulations” to set themateriality thresholds and the matters to be reported for the subsidiaries.
Accordingly, the Company requires the subsidiaries to submit operating
results and financial reports on a monthly basis.
(b)

Regulations and other system to manage the subsidiaries’ risks of loss

To control and manage the operations and administration of its subsidiaries,
the Company has instituted the “Affiliated Companies Management
Regulations” and with regard to the matters that may affect the finance andadministration of the subsidiaries through the relationships of funding,technology, personnel, transactions, etc., set required matters to consult with
the Company, and establish a system of consultation between the Company
and its subsidiaries.
(c)

Systems to ensure that the Directors, etc. of the subsidiaries performtheir duties effectively

To ensure that the subsidiaries manage business effectively, the Company has
instituted corporate regulations and established a system in accordance withthe “Affiliated Companies Management Regulations” that allow thesubsidiaries to manage business in respect of their managerial autonomy andindependence.
(d)Systems to ensure that the Directors, employees, etc. perform theirduties in compliance with laws, ordinances and the Articles ofIncorporation

The Company has instituted the “Funai Group Charter of Conduct” as a codeof conduct for all Officers and employees of the Funai Group, as well as the“Funai Group Procurement Policies” and “Regulations of Compliance” basedon the Charter of Conduct, and clarified the acts to be taken by the Directors,
employees, etc. of the subsidiaries to comply with law, thereby ensuring thatthe performance of their duties complies with laws, ordinances and the
Articles of Incorporation.

(vi)Matters concerning the employees assisting the Audit and Supervisory
Committee to perform its duties
To allow the Audit and Supervisory Committee to properly perform its duties,
the Company shall institute a Secretariat to the Audit and Supervisory
Committee and assign employees to assist the Audit and Supervisory
Committee.

(vii)

Matters concerning the independence of the employees to assist the duties of
the Audit and Supervisory Committee, from the other Directors (other than
Directors being Audit and Supervisory Committee Members)
When the employees to assist the duties of the Audit and Supervisory
Committee are transferred to the Secretariat to the Audit and Supervisory
Committee, the Company shall assign employees who shall not be subjected todirect instructions and orders from other Directors (other than Directors being
Audit and Supervisory Committee Members) to secure their independence
from other Directors. The Company shall respect the opinions of the Audit
and Supervisory Committee with regard to their transfer and personnel
evaluations.

(viii) Matters concerning the securing of the propriety of directions by the Audit andSupervisory Committee to employees assisting the Audit and Supervisory
Committee
The Audit and Supervisory Committee shall directly give instructions andorders to, and receive reports from, the employees to assist the Audit andSupervisory Committee to secure the propriety of directions.
(ix)

Matters concerning reports to the Audit and Supervisory Committee(a)System of reporting by the Directors (other than Directors being Audit
and Supervisory Committee Members), Officers and employees of theCompany to the Audit and Supervisory Committee

If the Directors (other than Directors being Audit and Supervisory Committee
Members), Officers and employees of the Company find any fact that has
inflicted or may inflict material damage on the Company, they shallimmediately report the fact to the Audit and Supervisory Committee.
(b)System of reporting by the Directors, Audit & Supervisory Board
Members, Officers and employees of the subsidiaries to the Audit andSupervisory Committee of the Company

In the event that the Directors, Officers and employees of the subsidiaries arerequested to give reports on business by the Director being Audit andSupervisory Committee Member appointed by the Audit and Supervisory
Committee of the Company, they shall immediately do so unless there is any
justifiable reason to the contrary. If the Directors, Audit & Supervisory

Board Members, Officers and employees of the subsidiaries find any violationof law or any fact that has inflicted or may inflict material damage on the
Company, they shall report the fact to the Audit and Supervisory Committeeof the Company.
(x)

Systems to ensure that any party who has given a report to the Audit andSupervisory Committee will not suffer unfavorable treatment because ofgiving such report
By instituting the “Regulations of Compliance” and the “Whistleblower
Protection Regulations”, the Company prohibits unfavorable treatment ofwhistleblowers. The Company shall also ensure that any party who hasgiven a report to the Audit and Supervisory Committee will not suffer
unfavorable treatment because of giving such report.

(xi)

Matters concerning policies on the treatment of expenses to be incurred in theperformance by Audit and Supervisory Committee Members of their duties
In the event that Audit and Supervisory Committee Members request
payments for expenses in performing their duties, the Company shall makesuch payments unless such expenses are not necessary for the performance of
their duties.

(xii)

Other systems to ensure that the Audit and Supervisory Committee performs
its audits effectively
To ensure that the Audit and Supervisory Committee performs its audits
effectively, the Audit and Supervisory Committee shall closely cooperate with
the independent auditors, and regularly meet the Representative Directors,
Directors of the subsidiaries, etc. to confirm the management policy andexchange opinions on the risks and issues surrounding the Company.

(xiii) System to ensure the reliability of financial reporting
The Company shall establish a “Basic Policy for Internal Control overFinancial Reporting” to ensure the reliability of financial reporting and theeffective and appropriate disclosure of “Internal Control Reports”. In
accordance with the Basic Policy, the Company shall establish an “Internal
Control Committee”, which shall be chaired by the Representative Director,
President, and CEO, and shall be responsible for continuous improvement,
administration and evaluation of internal control over financial reporting andpromptly implement a correction when any defect is found.
(xiv)

System for the exclusion of antisocial forces
The Company shall have a fundamental policy of having no relation with any
antisocial force and refusing any unjust claim.

In the event that a client is found to be an entity, enterprise, individual, etc.
having any relation with such antisocial force, the Company shall promptly
terminate a business relationship with it.
The Company shall designate its Personnel and General Affairs Department asa principal division in charge of dealing with antisocial forces and control theinformation centrally. To make its Officers and employees comply with its
fundamental policy, the Company shall also define it clearly in its related rules
and regulations and establish an education system therefor. In addition, theCompany shall prepare countermeasures to prevent damages from antisocial
forces, if necessary.
In the event that any unjust claim is requested by an antisocial force, theCompany shall work closely with external specialized agencies, including thepolice and its legal counsel, and establish a cooperative system for emergency
situations.
(2)

Summary of the operation status of the systems to secure the propriety of businessactivities:(i)

Compliance
By instituting the “Funai Group Charter of Conduct” as a code of conduct, as
well as the “Regulations of Compliance” and keeping all Officers andemployees informed about compliance, the Company has clarified thefundamental policy on compliance with law and ensured their performance of
duties conducted in compliance with laws, ordinances and the Articles ofIncorporation. The Company has also established a whistleblower system toprevent violations of law and swiftly detect problems.

(ii)

Risk management
To minimize losses and disadvantages in business activities, the Company has
made continuous risk management by instituting the “Risk Management
Regulations”, developing the system for risk management and monitoring
periodically.

(iii)

Directors’ performance of duties
The Board of Directors, which consists of eight Directors (three of whom are
Directors being Audit and Supervisory Committee Members), including four
outside Directors, makes decisions on the matters required by laws orordinances and important matters concerning management, and supervises theexecution of business. During the fiscal year under review, the Board of
Directors held 15 meetings. In addition, the Investment and Loan Committee
held three sessions, the Nomination Committee held two sessions and theCompensation Committee held four sessions.

(iv)The Audit and Supervisory Committee Members’ performance of duties
The Audit and Supervisory Committee Members attend meetings of the Boardof Directors, as well as monthly financial reporting meetings. During the
fiscal year under review, on or after June 25, 2015, nine meetings of the Audit
and Supervisory Committee were held.

(3)

Policies for the determination of Directors’ remuneration, etc.:
Remuneration for Directors (other than Directors being Audit and Supervisory
Committee Members) and Directors being Audit and Supervisory Committee
Members shall be determined within the range of their respective maximum total
amounts of remuneration determined by resolution of the General Meeting of
Shareholders.
The amount of monthly remuneration for Directors (other than Directors being Audit
and Supervisory Committee Members) shall be determined by the Compensation
Committee upon authorization by the Board of Directors based on the Company’s
rules. The amount of monthly remuneration of Directors being Audit andSupervisory Committee Members shall be determined upon consultation among the
Directors being Audit and Supervisory Committee Members.
Bonuses for Directors (other than Directors being Audit and Supervisory Committee
Members) shall be determined by the Compensation Committee upon authorizationby the Board of Directors based on the Company’s rules. Bonuses for Directors
serving as Audit and Supervisory Committee Members shall be determined upon
consultation among the Directors being Audit and Supervisory Committee Members.
Regarding the retirement benefits for Directors, upon the approval of granting such
benefits to Directors (other than Directors serving as Audit and Supervisory
Committee Members) and Directors being Audit and Supervisory Committee
Members by resolution of the General Meeting of Shareholders and based on the
Company’s rules, the benefits for Directors (other than Directors serving as Audit andSupervisory Committee Members) shall be determined by the Compensation
Committee upon authorization by the Board of Directors, and the benefits for
Directors serving as Audit and Supervisory Committee Members shall be determinedby consultation among the Directors being Audit and Supervisory Committee
Members.

(4)

Policy for the determination of distribution of retained earnings, etc., by the Board of
Directors:
The Company recognizes the return of earnings to its shareholders as one of the mostimportant missions of management and strives to maintain a steady dividend as well
as reinforcement of its management base.
In specific indexes, the Company plans to pay a dividend with a dividend on equity
ratio of 1.0% on a consolidated basis, considering business conditions and otherfactors.

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

CONSOLIDATED BALANCE SHEET(As of March 31, 2016)(millions of yen)
ASSETS:
Current assets:

123,214

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

57,60924,092
22,768
1,196
13,212
664
4,071
(400)
31,080

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

18,203
8,343
1,781
1,166
6,331
493
87

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

4,964
3,297
1,666

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

7,912
2,418
206
1,555
4,003
(271)

TOTAL ASSETS

154,295

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

57,79815,604
5,118
33,359
251
783
236
689
18
1,735

Long-term liabilities:

9,927

Long-term bank loans ...........................................................................
Long-term lease obligations .................................................................
Deferred tax liabilities ..........................................................................
Deferred tax liabilities on revaluation of land ......................................
Liabilities for Directors’ and Audit & Supervisory Board Members’
retirement benefits ................................................................................
Liabilities for retirement benefits .........................................................
Other .....................................................................................................
TOTAL LIABILITIESEQUITY:

6,009
737
811
205

Shareholders’ equity:

1,106
395
662
67,72596,613

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

31,307

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

33,301Retained earnings ...................................................................................

56,345

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

(24,341)

Accumulated other comprehensive income (loss):(11,155)

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

160

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

(11,630)

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

314

Stock acquisition rights:

145

Non-controlling interests:

965

TOTAL EQUITYTOTAL LIABILITIES AND EQUITY

86,569154,295

CONSOLIDATED STATEMENT OF OPERATIONS(from April 1, 2015 to March 31, 2016)(millions of yen)
Net sales
Cost of sales
Gross profit
Selling, general, and administrative expenses
Operating loss
Non-operating income:

168,116
145,210
22,90635,96813,061

Interest and dividend income

287

Rental income on fixed assets

208

Gain on investments in partnership
Other
Non-operating expenses:

218
79

Interest expense
Foreign exchange losses
Other
Ordinary loss
Extraordinary income:Gain on sales of fixed assets
Settlement received
Refund of customs duty
Other
Extraordinary loss:
Loss on disposal of fixed assets
Impairment loss on fixed assets
Compensation for damage
Other

296
3,277
303

3,878
16,146

18
902
485
155

1,562

475
557
18,502
303

19,838Loss before income taxes
Income taxes – current
Income taxes – deferred
Net loss
Net loss attributable to non-controlling interests
Net loss attributable to owners of the parent

793

34,422
514
1,322

1,836
36,25837
36,221CONSOLIDATED STATEMENT OF CHANGES IN EQUITY(from April 1, 2015 to March 31, 2016)(millions of yen)
Shareholders’ equity
Common stock

Capital surplus

31,30733,272

Balance as of April 1, 2015
Changes of items during theperiodDividends from surplus
Loss attributable to owners of
the parent
Purchase of treasury stock
Change of scope of
consolidation
Change in treasury shares ofparent arising fromtransactions with
non-controlling interests
Net changes of items otherthan shareholders' equity
Total changes of items during the
fiscal year
Balance as of March 31, 2016

Retainedearnings

Treasury stock

93,840(24,341)

Total
shareholders’equity134,079(1,194)(1,194)(36,221)(36,221)
(0)

(0)

(79)

(79)

29

-

29

31,30733,301

29(37,495)
56,345(0)(24,341)(37,465)
96,613

Accumulated other comprehensive income (loss)
Unrealized
gain onavailablefor-salesecurities
Balance as of April 1, 2015
Changes of items during theperiodDividends from surplus
Loss attributable to owners of
the parent
Purchase of treasury stock
Change of scope of
consolidation
Change in treasury shares ofparent arising fromtransactions with
non-controlling interests
Net changes of items otherthan shareholders' equity
Total changes of items during the
fiscal year
Balance as of March 31, 2016

(Note)

421

Stock
Total
Foreignaccumulated acquisition Non-controll- Total equity
Defineding interests
currency
otherretirement comprehenrights
translation benefit
plans
adjustments
sive income(loss)(8,188)365(7,401)142
1,061
127,881(1,194)(36,221)
(0)
(79)
29

(260)

(3,442)(51)(3,753)2(95)(3,846)(260)
160(3,442)(11,630)(51)
314(3,753)(11,155)

2
145

(95)
965

(41,312)86,569In the consolidated balance sheet and the consolidated statements of operations andchanges in equity, all figures are shown by discarding any fractions of the relevant
units.

NONCONSOLIDATED BALANCE SHEET(As of March 31, 2016)(millions of yen)
ASSETS:
Current assets:
Cash and deposits .............................................................................
Notes receivable-trade .......................................................................
Accounts receivable-trade ...................................................................
Merchandise and finished goods .........................................................
Raw materials and supplies .................................................................
Prepaid expenses .................................................................................
Short-term loans receivable.................................................................
Other ....................................................................................................
Allowance for doubtful accounts ........................................................
Fixed assets:
Property, plant and equipment:
Buildings .............................................................................................
Structures.............................................................................................
Machinery and equipment...................................................................
Motor vehicles .....................................................................................
Tools, furniture, and fixtures...............................................................
Land.....................................................................................................
Lease assets .........................................................................................
Other ....................................................................................................
Intangible assets:
Patents .................................................................................................
Software ..............................................................................................
Other ....................................................................................................
Investments and other assets:
Investment securities ...........................................................................
Investment in subsidiaries and associated companies.........................
Long-term loans receivable.................................................................
Long-term prepaid expenses ...............................................................
Prepaid pension cost ............................................................................
Other ....................................................................................................
Allowance for doubtful accounts ........................................................
TOTAL ASSETS

70,657
26,142
20
25,510
63
1,470
1,002
19,155583(3,292)
50,693
7,272
2,639
37
4
0
81
4,034
473
2
3,697
3,297
117
282
39,722
233
33,718
13,632
2,124
1,722
196
(11,904)
121,350

(millions of yen)
LIABILITIES:Current liabilities:
Accounts payable-trade ........................................................................
Current portion of long-term lease obligations.....................................
Accounts payable-other ........................................................................
Accrued expenses .................................................................................
Income taxes payable............................................................................
Deposits received..................................................................................
Reserve for product warranty ...............................................................
Forward exchange contracts .................................................................
Other .....................................................................................................
Long-term liabilities:
Long-term bank loans ...........................................................................
Long-term lease obligations .................................................................
Deferred tax liabilities ..........................................................................
Liabilities for Directors’ retirement benefits ........................................
Other .....................................................................................................
TOTAL LIABILITIES

37,692
8,291
134
22,715
5,987
74
218
208
18
43
8,328
5,634
375
786
1,079
451
46,020EQUITY
Shareholders’ equity
Common stock
Capital surplus:
Capital reserve ......................................................................................
Other capital surplus .............................................................................
Retained earnings:
Legal reserve .........................................................................................
Other retained earnings .........................................................................
Reserve for advanced depreciation of fixed assets.......................
General reserve .............................................................................
Retained earnings brought forward ..............................................
Treasury stock
Valuation and translation adjustments:
Unrealized gain on available-for-sale securities
Stock acquisition rights
TOTAL EQUITYTOTAL LIABILITIES AND EQUITY

75,12431,30733,272
32,833438
34,886
209
34,676518
23,40010,758(24,341)
59
59
145
75,329121,350NONCONSOLIDATED STATEMENT OF OPERATIONS(from April 1, 2015 to March 31, 2016)(millions of 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 expense
Foreign exchange loss
Other
Ordinary income
Extraordinary income:Gain on sales of fixed assets
Settlement received
Other
Extraordinary loss:
Loss on disposal of fixed assets
Impairment loss on fixed assets
Compensation for damage
Other

133,632
122,295
11,337
20,4709,132
26,169
400
70
3,131
530

Net loss

3,732
13,704

5
902
52

959

134
87
18,502468

19,192

Loss before income taxes
Income taxes – current
Income taxes – deferred

26,569

4,528
18
1,339

1,357
5,886

NONCONSOLIDATED STATEMENT OF CHANGES IN EQUITY(from April 1, 2015 to March 31, 2016)(millions of yen)
Shareholders’ equity
Retained earnings

Capital surplus
Commonstock

Balance as of April 1, 2015
Changes of items during the
fiscal year
Reserve for advanced
depreciation of fixed
assets
Reversal of reserve foradvanced depreciationof fixed assets
Cash dividends
Net loss
Acquisition of treasury stock
Net changes of items otherthan shareholders’equityOther
capitalsurplusCapitalreserve

31,307

32,833438

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

33,272

209

513

23,400

9

(4)

Total
shareholders’equityTreasury
stock

Total
retainedearnings

17,843

41,966(9)-(24,341)

82,204-

4--(1,194)(1,194)(1,194)(5,886)(5,886)(5,886)(0)(0)

Total changes of items during
the fiscal year

-

-

-

-

-

5

-

(7,085)(7,080)(0)(7,080)

Balance as of March 31, 2016

31,307

32,833438

33,272

209

518

23,40010,75834,886(24,341)

75,124

(millions of yen)

Balance as of April 1, 2015
Changes of items during the
fiscal year
Reserve for advanced
depreciation of fixed assets
Reversal of reserve for advanced
depreciation of fixed assets
Cash dividends
Net loss
Acquisition of treasury stock
Net changes of items other thanshareholders’ equity
Total changes of items during the
fiscal year
Balance as of March 31, 2016

(Note)

Valuation and translation adjustments
Unrealized gain
Total valuationonand translation
available-for-saleadjustments
securities
282
282

Stock acquisitionrights142

Total equity

82,629(1,194)(5,886)
(0)
(222)

(222)

2

(219)

(222)

(222)

2

(7,300)

59

59

145

75,329In the nonconsolidated balance sheet and the nonconsolidated statements of operations and changes in equity, all figures areshown by discarding any fractions of the relevant units.

Copy of Independent Auditor’s Report on Consolidated Financial Statements(TRANSLATION)
INDEPENDENT AUDITOR'S REPORTMay 18, 2016
To the Board of Directors
Funai Electric Co., Ltd.:
Deloitte Touche Tohmatsu LLC
Designated Unlimited Liability Partner,
Engagement Partner,
Certified Public Accountant:Motoo Nakamura
Designated Unlimited Liability Partner,
Engagement Partner,
Certified Public Accountant:
Akira Nakata
Designated Unlimited Liability Partner,
Engagement Partner,
Certified Public Accountant:
Akihiro Okada
Pursuant to the fourth paragraph of Article 444 of the Companies Act, we have audited theconsolidated financial statements, namely, the consolidated balance sheet as of March 31,
2016 of Funai Electric Co., Ltd. (the “Company”) and its consolidated subsidiaries, and therelated consolidated statements of operations and changes in equity for the fiscal year from
April 1, 2015 to March 31, 2016, and the related notes.
Management's Responsibility for the Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of these consolidated
financial statements in accordance with accounting principles generally accepted in Japan,
and for such internal control as management determines is necessary to enable thepreparation of consolidated financial statements that are free from material misstatement,
whether due to fraud or error.
Auditor's Responsibility
Our responsibility is to express an opinion on these consolidated financial statements basedon 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 obtainreasonable assurance about whether the consolidated financial statements are free frommaterial misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts anddisclosures in the consolidated financial statements. The procedures selected depend on theauditor's judgment, including the assessment of the risks of material misstatement of theconsolidated financial statements, whether due to fraud or error. In making those risk
assessments, the auditor considers internal control relevant to the entity's preparation and fairpresentation of the consolidated financial statements in order to design audit procedures thatare appropriate in the circumstances, but not for the purpose of expressing an opinion on theeffectiveness of the entity's internal control. An audit also includes evaluating theappropriateness of accounting policies used and the reasonableness of accounting estimates
made by management, as well as evaluating the overall presentation of the consolidated
financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide abasis for our audit opinion.
Audit Opinion
In our opinion, the consolidated financial statements referred to above present fairly, in allmaterial respects, the financial position of Funai Electric Co., Ltd. and its consolidated
subsidiaries as of March 31, 2016, and the results of their operations for the year then endedin accordance with accounting principles generally accepted in Japan.
Interest
Our firm and the engagement partners do not have any interest in the Company for which
disclosure is required under the provisions of the Certified Public Accountants Act.
The above represents a translation, for convenience only, of the original report issued in theJapanese language.
-END-

Copy of Independent Auditor’s Report on Nonconsolidated Financial Statements(TRANSLATION)
INDEPENDENT AUDITOR'S REPORTMay 18, 2016
To the Board of Directors
Funai Electric Co., Ltd.:
Deloitte Touche Tohmatsu LLC
Designated Unlimited Liability Partner,
Engagement Partner,
Certified Public Accountant:Motoo Nakamura
Designated Unlimited Liability Partner,
Engagement Partner,
Certified Public Accountant:
Akira Nakata
Designated Unlimited Liability Partner,
Engagement Partner,
Certified Public Accountant:
Akihiro Okada

Pursuant to the first item, second paragraph of Article 436 of the Companies Act, we haveaudited the financial statements, namely, the balance sheet as of March 31, 2016 of Funai
Electric Co., Ltd. (the “Company”), and the related statements of operations and changes inequity for the 64th fiscal year from April 1, 2015 to March 31, 2016, and the related notes
and the accompanying supplemental schedules.
Management's Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these financial
statements and the accompanying supplemental schedules in accordance with accounting
principles generally accepted in Japan, and for such internal control as management
determines is necessary to enable the preparation of financial statements and theaccompanying supplemental schedules that are free from material misstatement, whether due
to fraud or error.
Auditor's Responsibility

Our responsibility is to express an opinion on these financial statements and theaccompanying supplemental schedules based on our audit. We conducted our audit inaccordance with auditing standards generally accepted in Japan. Those standards require thatwe plan and perform the audit to obtain reasonable assurance about whether the financial
statements and the accompanying supplemental schedules are free from material
misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts anddisclosures in the financial statements and the accompanying supplemental schedules. The
procedures selected depend on the auditor's judgment, including the assessment of the risks
of material misstatement of the financial statements and the accompanying supplemental
schedules, whether due to fraud or error. In making those risk assessments, the auditor
considers internal control relevant to the entity's preparation and fair presentation of thefinancial statements and the accompanying supplemental schedules in order to design audit
procedures that are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the entity's internal control. An audit also includes evaluating
the appropriateness of accounting policies used and the reasonableness of accounting
estimates made by management, as well as evaluating the overall presentation of the financial
statements and the accompanying supplemental schedules.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide abasis for our audit opinion.
Audit 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 Funai
Electric Co., Ltd. as of March 31, 2016, and the results of its operations for the year thenended in accordance with accounting principles generally accepted in Japan.
Interest
Our firm and the engagement partners do not have any interest in the Company for which
disclosure is required under the provisions of the Certified Public Accountants Act.

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

Copy of Audit Report of the Audit and Supervisory Committee

AUDIT REPORT
We, the Audit and Supervisory Committee of Funai Electric Co., Ltd. (the “Company”),
have performed our audits on the execution by Directors of their duties during the 64th fiscal
year from April 1, 2015, through March 31, 2016. We hereby report the audit method andresults as follows.
1.

Methods of audits and the particulars thereof:

With regard to the details of the resolutions of the Board of Directors on the mattersprovided in Article 399-13, paragraph 1, item 1 (b) and (c) of the Companies Act of Japanand the systems established pursuant to such resolutions (internal control systems), we
periodically received reports from the Directors and employees, etc., demanded their
explanations as necessary, and expressed our opinions, on the state of formulation andoperation thereof and conducted our audits in the following methods.
(i) Working in collaboration with the internal audit division, we attended important
meetings, received the execution of duties from the Directors and employees, etc.,
demanded their explanations as necessary, inspected important decision-making
documents, etc., and investigated the state of business operations and property at thehead office and principal business offices of the Company, pursuant to the audit policy,
task allocation, etc. determined by us. With regard to its subsidiaries, we maintained
constant communication and exchanged information with the directors, Audit &Supervisory Board Members, etc. and required the subsidiaries to report on theirbusiness operations as necessary.
(ii) In addition to monitoring and verifying whether the independent auditors had
maintained an independent position and conducted adequate audits, we received
reports on the state of execution of duties from the independent auditors and demanded
their explanations, as necessary. Moreover, we received from the independent
auditors a notice that a “system to secure adequate execution of duties” (as listed in theitems of Article 131 of the Ordinance on Accounting of Companies) has been
established in accordance with the “Quality Control Standards Concerning Audits” (theAccounting Standards Board of Japan, October 28, 2005) and demanded their
explanations, as necessary.
In accordance with such methods, we investigated the business report and its
accompanying supplemental schedules, the nonconsolidated financial statements (thenonconsolidated balance sheet, the nonconsolidated statements of operations and changes inequity, and the related notes) and their accompanying supplemental schedules, as well as theconsolidated financial statements (the consolidated balance sheet, the consolidated statementsof operations and changes in equity, and the related notes), for the fiscal year under review.

2.

Results of audit:(1)

Results of audit of the business report, etc.:(i)

We confirm that the business report and its accompanying supplemental schedules
present fairly the state of the Company in accordance with laws and ordinances andthe Articles of Incorporation.

(ii) We confirm that in connection with the execution of duties of the Directors, no
misconduct or material fact of violation of laws or ordinances or the Articles ofIncorporation was found.
(iii) We confirm that the details of the resolutions of the Board of Directors on internal
control systems are proper. We did not find anything that should be mentioned
with respect to the information in the business report and the execution of duties of
the Directors concerning such internal control systems.
(2)

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

(3)

Results of audit of the consolidated financial statements:
We confirm that the audit method and results performed by the independent auditors,
Deloitte Touche Tohmatsu LLC, are proper.

May 19, 2016
Funai Electric Co., Ltd.
The Audit and Supervisory Committee
Shinichi Komeda(seal)
Outside Audit and Supervisory Committee Member
Masahide Morimoto(seal)
Outside Audit and Supervisory Committee Member
Yoshiaki Bannai(seal)
Outside Audit and Supervisory Committee Member- END -

Reference Document for the General Meeting of Shareholders
Propositions and reference information
Proposition No. 1::Election of five (5) Directors (excluding Directors who are Audit andSupervisory Committee Members)
The term of office of all five (5) Directors (excluding Directors who are Audit andSupervisory Committee Members; the same applies hereinafter in this proposition) currently
in office will expire at the close of this Ordinary General Meeting of Shareholders. Hence,
it is hereby proposed that five (5) Directors, including one (1) outside Director, be elected.
The candidates for Director are as follows:

Candidate
No.

1

Name
(Date of birth)

Tetsuro Funai

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

Established Funai Sewing MachineCompany

Dec. 1952

Representative Director of Funai
Sewing Machine Co., Ltd.

August 1961

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

June 2005

Director of the Company;
President and CEO of the Company

June 2008

Director of the Company;
Chairman and Officer of theCompany

June 2010

Chairman and Officer of theCompany

June 2012

Chairman of the Company(January 24, 1927)

October 2014

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

Number ofshares of theCompany heldby Candidate

12,559,288
sharesCandidate
No.

Name
(Date of birth)

Brief history, post in the Company and business incharge (and important concurrent office)April 1980
October 1998

April 2002
April 2005

April 2006
April 2008

April 20112

Tetsuhiro Maeda

August 2012
January 2013

(July 4, 1954)

April 2013

April 2014

June 2014
October 2014
October 2015

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

Number ofshares of theCompany heldby Candidate- shareCandidate
No.

Name
(Date of birth)

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

April 2003

February 2004
December 2005
April 2007
3

Joji Okada(August 27, 1954)

October 2009

June 2010
June 2011

July 2014

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

Number ofshares of theCompany heldby Candidate

500 shares

Candidate
No.

Name
(Date of birth)[New]

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

Joined Nichimen Co., Ltd. (nowSojitz Corporation)

July 1981

General Manager of Machine
Dept., Los Angeles Branch of
Nichimen U.S.A.
General Manager of Car
Electronics Dept., Chicago
Branch of Nichimen U.S.A.
General Manager of Detroit
Branch of Nichimen U.S.A.

August 1988

April 1990
November 1994

4

Hiroyuki Makiura(June 1, 1947)

July 1999

General Manager of Dept. II of
Electronic Information Division,
Nichimen Corporation (nowSojitz Corporation)
Senior Trade Advisor (JETRO)
to the State of Ohio, U.S.A.

June 2004

Director of Foster ElectricCompany, Limited

April 2008

Officer of Foster ElectricCompany, Limited and Presidentof Fostex Company
Vice President of Foster Electric(Europe) GmbH

April 2010
June 2015

February 2016

Director (Audit and Supervisory
Committee Member) of theCompany
Senior Officer of the Company(To date)

Number ofshares of theCompany heldby Candidate- shareCandidate
No.

Name
(Date of birth)
Candidate for
Outside Director

5

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

June 2012

Outside Audit & Supervisory
Board Member of Oriental Chain
Mfg. Co., Ltd. (To date)

Mitsuo Yonemoto(March 18, 1939)

Number ofshares of theCompany heldby Candidate

100 shares(Vice President and Director of T.P.S. LaboratoryCo., Ltd.)(Outside Audit & Supervisory Board Member ofOriental Chain Mfg. Co., Ltd.)(Notes) 1. None of the candidates for Director have any special interests with the Company.
2. Reasons for the selection of the candidates for Director:• Management expects Mr. Tetsuro Funai, who has long engaged in management of theCompany since its founding, to use a wide range of knowledge and capabilities
accumulated from his broad experiences for management of the Company.
・Management expects Mr. Tetsuhiro Maeda to use a wide range of knowledge andcapabilities accumulated from his career and many years of experience in the businessof the Company for management of the Company.
• Management expects Mr. Joji Okada to use a wide range of knowledge and capabilities
accumulated from his career and many years of experience in the business of theCompany for management of the Company.
• Management expects Mr. Hiroyuki Makiura, who has broad experiences in corporate
management for many years and has shown good results, to use his capabilities andknowledge for management of the Company.
• Management expects Mr. Mitsuo Yonemoto to offer advice based on his broad
experience as a management consultant and also enhance the transparency ofmanagement by participating in the Board of Directors as an independent officer.
3. Candidate for Director, Mr. Mitsuo Yonemoto, is a candidate for Outside Director.
4. Years of service of Outside Director of the Company:
Mr. Mitsuo Yonemoto will have served as Outside Director for 17 years and nine months
at the close of this Ordinary General Meeting of Shareholders.
5. Designation of independent officer:
The Company has designated Mr. Mitsuo Yonemoto as an independent officer inaccordance with the rules of Tokyo Stock Exchange, Inc. and registered him with suchexchange.

6. Conclusion of limited liability agreement:
The Company has entered into an agreement with outside Director Mr. Mitsuo Yonemoto
to limit his liability for any damage as provided for in Article 423, paragraph 1 of theCompanies Act of Japan within the aggregate amount as provided for in the items of
Article 425, paragraph 1 of the said Act, pursuant to Article 427, paragraph 1 of the said
Act. If he is reelected, such agreement will be renewed.

Proposition No. 2:

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

To prepare in advance for a vacancy in the statutory number of Directors who are
Audit and Supervisory Committee Members, it is hereby proposed that one (1) substitute
Director who is an Audit and Supervisory Committee Member be elected in advance inaccordance with the provision of Article 329, paragraph 3 of the Companies Act of Japan.
With regard to the effectiveness of the election, it may be repealed by resolution of
the Board of Directors upon consent thereto by the Audit and Supervisory Committee only
before he assumes office.
The Audit and Supervisory Committee has consented to this proposition.
The candidate for substitute Director who is an Audit and Supervisory Committee
Member is as follows:
Name(Date of birth)

Brief history, post in the Company and business incharge (and important concurrent office)September 1968

Joined the Company

June 1993

General Manager, Business
Administration Division,
Accounting Department of theCompany
General Manager, Administration
Division, Administration
Department of the Company
General Manager, Corporate
Planning Office of the Company
Director, New Dat Japan Inc.

October 2000

October 2005
Hiromu Ishizaki

June 2007(March 23, 1946)

October 2007
February 2011

May 2012
June 2012
June 2015

General Manager, Strategy
Planning Office of the Company
Outside Audit & Supervisory
Board Member, DX ANTENNA
Co., Ltd.
Advisor of the Company
Full-time Audit & Supervisory
Board Member of the Company
Special Advisor, Secretariat to the
Audit and Supervisory Committeeof the Company (To date)

Number of sharesof the Company
held by Candidate

100 shares

(Notes) 1. The candidate has no special interests with the Company.
2. Reason for the selection of candidate for substitute Director who is an Audit andSupervisory Committee Member:Management expects Mr. Hiromu Ishizaki, who has expertise in corporate accounting andtaxation, to use his capabilities for the audit systems of the Company.
3. Conclusion of limited liability agreement:
When Mr. Hiromu Ishizaki assumes the office of Director who is an Audit andSupervisory Committee Member, the Company will enter into an agreement with him to
limit his liability for any damage as provided for in Article 423, paragraph 1 of theCompanies Act of Japan within the aggregate amount as provided for in the items of
Article 425, paragraph 1 of the said Act, pursuant to Article 427, paragraph 1 of the said
Act.

Proposition No. 3:

Granting retirement benefits to the retiring Director

It is hereby proposed that retirement benefits be granted to Mr. Tomonori Hayashi,
who will retire as Director upon the expiration of term of office at the close of this Ordinary
General Meeting of Shareholders, in appreciation of services rendered by him while in office,within the extent of a reasonable amount in accordance with the established standards of theCompany and that determination of the actual amount, the time and method of presentation,etc. be left to the Compensation Committee upon authorization by the Board of Directors.
The brief history of the retiring Director is as follows:
Name

Brief history
June 2008

Director, President and Chief Executive Officer of
the Company

June 2010

Representative Director, President and Chief
Executive Officer of the Company

January 2014

Director and Vice Chairman of the Company

October 2014

Representative Director, President and Chief
Executive Officer of the Company (To date)Tomonori Hayashi

Proposition No. 4:

Issuance of stock acquisition rights as stock options

It is hereby proposed to the shareholders to approve that pursuant to the provisions ofArticle 236, Article 238 and Article 239 of the Companies Act of Japan, the determination of
the terms and conditions of the offering for subscription for stock acquisition rights to beissued as stock options to the Directors (excluding Directors who are Audit and Supervisory
Committee Members and outside Directors; the same applies hereinafter in this proposition),
Officers and employees of the Company and its subsidiaries be left to the Board of Directorsof the Company.
The issuance of stock acquisition rights to the Directors of the Company falls under
non-pecuniary remuneration, etc. Hence, pursuant to Article 361 of the Companies Act ofJapan, it is also proposed to the shareholders to approve the method of calculating the stockacquisition rights to be allotted to the Directors.
In the event that Proposition No. 1 (Election of five (5) Directors (excluding Directors
who are Audit and Supervisory Committee Members)) is approved, the number of Directors
to be allotted stock acquisition rights will be four (4) (excluding outside Director) and when
the stock acquisition rights are issued to the Directors of the Company, in consideration of the
purpose of the stock options, the level of remuneration for the Directors and other factors, themaximum number of stock acquisition rights to be allotted to them shall be 500 (themaximum number of stock acquisition rights to be allotted to the persons other than the
Directors shall be the residual number after allotting the number of stock acquisition rightsfrom the number listed in section 2. (2) below). The amount of remuneration, etc. for the
Directors of the Company in connection with the stock acquisition rights will be obtained bymultiplying the fair value of each stock acquisition right calculated by using theBlack-Scholes model based on the various conditions on the Allotment Date, by the total
number of stock acquisition rights to be allotted to the Directors of the Company (the amountshall be other categories from the maximum amount of Directors’ remuneration “¥550
million per year” approved at the 63rd Ordinary General Meeting of Shareholders of theCompany held on June 25, 2015). It is also proposed that the issuance timing and theallotting methods of the stock acquisition rights to each Director of the Company, etc. be left
to the Board of Directors.
1.
Reason for the necessity to make an offering for subscription for stock acquisitionrights to subscribers on specifically favorable conditions:
To afford incentives and raise the morale to achieving much improved results of theCompany on a consolidated basis, secure good human resources and enhance its corporate
value, management intends to issue stock acquisition rights as stock options.
2.
Content and the maximum number of the stock acquisition rights which terms andconditions can be determined upon authorization by resolution of this Ordinary General
Meeting of Shareholders:(1)Class and number of shares to be issued or transferred upon exercise of stockacquisition rights:
Not exceeding 180,000 shares of common stock of the Company.
In the event that the Company makes a stock split (which shall include scrip issues;
the same applies hereinafter) or stock consolidation which shall become effective
after the close of this Ordinary General Meeting of Shareholders, the said number ofshares to be issued or transferred upon exercise of the stock acquisition rights shall be
adjusted in accordance with the following formula. Such adjustment shall be madeonly to the number of shares which the said stock acquisition rights have not been
exercised then, with any fraction of one share occurring upon such adjustment
discarded.
Number of shares asadjusted=

Number of shares
before adjustment

×

Split (or consolidation) ratio

In addition, in the event that the Company makes an absorption-type merger, aconsolidation-type merger, an absorption-type company a split, incorporate-typecompany split, a share exchange or a share transfer which shall become effective after
the close of this Ordinary General Meeting of Shareholders or otherwise for any
inevitable reason, the said number of shares to be issued or transferred upon exerciseof the stock acquisition rights shall be adjusted to a reasonable extent.
(2)

Number of stock acquisition rights:
Not exceeding 1,800 rights.
The number of shares to be issued or transferred upon exercise of each stockacquisition right shall be 100 shares; provided, however, that in the event of an
adjustment to the number of shares as set forth in paragraph (1) above, the total
number of shares to be issued or transferred upon exercise of stock acquisition rights
shall also be adjusted similarly.

(3)

Cash to be paid in for stock acquisition rights:
No cash shall be required to be paid in for stock acquisition rights.

(4)

Amount of property to be contributed upon exercise of a stock acquisition right or the
method of determination thereof:
The amount of property to be contributed upon exercise of a stock acquisition rightshall be an amount obtained by multiplying the paid-in amount per share to be
determined below (the "Exercise Price"), by the number of shares to be issued ortransferred for each stock acquisition right as set forth in paragraph (2) above.
The Exercise Price shall be the higher of (i) an amount obtained by multiplying by
1.05 the average of the daily closing prices (the "Closing Price") (regular way) of theshares of common stock of the Company on the Tokyo Stock Exchange for the days
(exclusive of any day on which transactions are not validly made) of the month
immediately preceding the month under which the date on which the stock acquisitionrights shall be allotted (the "Allotment Date") falls (with any fraction of one yenrounded upward to the nearest one yen) and (ii) the Closing Price on the Allotment
Date (if the Closing Price is not available on that day, the Closing Price on any
trading day immediately preceding that day).
In the event that after the Allotment Date for the stock acquisition rights, theCompany makes a stock split or stock consolidation, the said Exercise Price shall be
adjusted in accordance with the following formula, with any fraction of one yen
occurring upon such adjustment rounded upward to the nearest one yen:

Exercise Price as adjusted=

Exercise Price
beforeadjustment

×1
Split (or consolidation) ratio

In the event that after the Allotment Date for the stock acquisition rights, theCompany issues new shares or disposes of its treasury shares at a price lower than thecurrent market price (excluding where the Company issues new shares or transfers its

treasury shares upon exercise of stock acquisition rights), the said Exercise Price shallbe adjusted in accordance with the following formula, with any fraction of one yen
occurring upon such adjustment rounded upward to the nearest one yen:

Exercise Price asadjusted=

Number of
newly issued
× Paid-in pricesharesper share
Number of+
Exercisealready issued
Current market price before thePricesharesissuance of new shares×
beforeNumber of+ Number of newly issued sharesadjustment
already issued
sharesIn the above calculation formula, "Number of already issued shares" is derived bydeducting the number of shares of treasury shares of common stock of the Company
from the total number of shares of common stock of the Company issued andoutstanding, and in the event that the shares of treasury stock of common stock of theCompany are disposed, "Number of newly issued shares" shall be replaced by"Number of treasury shares disposed" and "Paid-in price per share" shall be replacedby "Disposal price per share".
In addition, in the event that the Company makes an absorption-type merger, aconsolidation-type merger, an absorption-type company split, incorporate-typecompany split, a share exchange or share transfer or otherwise for any reason, the said
Exercise Price shall be adjusted to a reasonable extent.
(5)

Exercise period of the stock acquisition rights:
From September 1, 2018 to August 31, 2023. However, if the final day of such
period falls on a holiday of the Company, the immediately preceding business day
shall be the final day.

(6)

Terms and conditions of the exercise of stock acquisition rights:(i)

The number of stock acquisition rights exercisable by any person entitled toexercise stock acquisition rights in any given year (from September 1 throughAugust 31 of the following year) during the period for exercising stockacquisition rights shall be governed by the rule to be established by the Board of
Directors.
If any person entitled to exercise his/her stock acquisition rights does not
exercise all or any part of his/her rights exercisable in any given year during theperiod for exercising stock acquisition rights, the rights remaining unexercised insuch any given year may be carried over to any subsequent year until the period
for exercising stock acquisition rights expires.

(ii) Any person entitled to exercise stock acquisition rights cannot exercise his/herrights in any given year (from September 1 through August 31 of the followingyear) during the period for exercising stock acquisition rights unless he/she
obtains approval of the Company therefor in such any given year.

(iii) Any person entitled to exercise stock acquisition rights shall be a Director, Audit& Supervisory Board Member, Officer or employee of the Company or its
related companies when he/she exercise his/her stock acquisition rights.
(iv) No stock acquisition rights shall be transferred, offered as a pledge or any othercollateral or inherited.
(7)

(8)

Matters concerning capital and capital reserve to be increased in the event that theCompany issues shares upon exercise of the stock acquisition rights:(i)

In the event that the Company issues shares upon exercise of the stockacquisition rights, the amount of capital to be increased shall be a half of the
maximum increase amount of capital calculated pursuant to Article 17,
paragraph 1 of the Regulations on Corporate Accounts, with any fraction of
one yen rounded upward to the nearest one yen.

(ii)

In the event that the Company issues shares upon exercise of the stockacquisition rights, the amount of capital reserve to be increased shall be an
amount obtained by deducting the amount of capital to be increased as set forthin item (i) above from the maximum increase amount of capital set forth initem (i) above.

Restriction on acquisition of the stock acquisition rights by transfer:Any acquisition of the stock acquisition rights by transfer shall be subject to theapproval of the Board of Directors of the Company.

(9)

Events of acquisition of stock acquisition rights:(i)

In the event that before any person entitled to exercise stock acquisition rights
exercises his/her rights, a proposition for the approval of a merger agreement
under which the Company shall be merged, a share exchange agreement or ashare transfer plan under which the Company shall become a wholly-owned
subsidiary is approved at a General Meeting of Shareholders (or a resolution
therefor is adopted by the Board of Directors of the Company when such
resolution of the General Meeting of Shareholders is not required), theCompany may acquire the stock acquisition rights without compensation on a
day separately specified by its Board of Directors.

(ii)

In the event that before any person entitled to exercise stock acquisition rights
exercises his/her rights, he/she ceases to be entitled to do so due to any of theterms and conditions set forth in paragraph (6) above, the Company may
acquire the stock acquisition rights without compensation on a day separately
specified by its Board of Directors.

(iii)

In the event that any person entitled to exercise stock acquisition rights waives
all or any part of his/her rights, the Company may acquire the stock acquisitionrights without compensation on a day separately specified by its Board of
Directors.

(10)Treatment of stock acquisition rights upon reorganization by the Company:
In the event that the Company conducts a merger (limited to cases where theCompany shall be extinguished as a result of the merger), an absorption-typecompany split, an incorporation-type company split, a share exchange or a sharetransfer (collectively, "reorganization"), the Company shall deliver to any person
entitled to exercise the stock acquisition rights outstanding (the "Outstanding Rights")
on the day on which the reorganization becomes effective, stock acquisition rights ofrelevant corporations ("reorganizing companies") listed in Article 236, paragraph 1,
item 8 (a) through (e) of the Companies Act, in accordance with the following terms
and conditions. In such case, the Outstanding Rights shall become null and void andthe reorganizing companies shall issue new stock acquisition rights, only if and when
the delivery of stock acquisition rights of the reorganizing companies in accordancewith the following terms and conditions is stipulated in the relevant merger agreement,
an absorption-type company split agreement, a incorporate-type company split plan,share exchange agreement or share transfer plan:(i)

Number of stock acquisition rights of reorganizing company to be delivered:
The same number as that of the stock acquisition rights held by each person
entitled to exercise the Outstanding Rights.

(ii)

Class of shares of reorganizing company to be issued or transferred upon
exercise of stock acquisition rights:
Shares of common stock of the reorganizing company.

(iii)

Number of shares of reorganizing company to be issued or transferred upon
exercise of stock acquisition rights:
The number of shares shall be determined in accordance with paragraph (1)above, taking into account the terms and conditions of the reorganization.

(iv)

Amount of property to be contributed upon exercise of a stock acquisitionright:
The amount of property to be contributed upon exercise of each stockacquisition right to be delivered shall be an amount obtained by multiplying by
the number of shares of the reorganizing company to be issued or transferred
upon exercise of each such stock acquisition right determined as set forth initem (iii) above, the paid-in amount after the reorganization obtained byadjustment to the Exercise Price set forth in paragraph (4) above by taking into
account the terms and conditions of the reorganization.

(v)

Exercise period of stock acquisition rights:
From the latter of the first day of the exercise period of stock acquisition rights
set forth in paragraph (5) above and the day on which the reorganization
becomes effective, to the last day of the exercise period of stock acquisition

rights set forth in paragraph (5) above.
(vi)

Terms and conditions of the exercise of stock acquisition rights:
To be determined in accordance with paragraph (6) above.

(vii) Matters concerning capital and capital reserve to be increased in the event thatshares are issued upon exercise of the stock acquisition rights:
To be determined in accordance with paragraph (7) above.
(viii) Restriction on acquisition of stock acquisition rights by transfer:Any acquisition of stock acquisition rights by transfer shall be subject to theapproval of the reorganizing company.
(ix)

Events of acquisition of stock acquisition rights:
To be determined in accordance with paragraph (9) above.

(11)

Treatment of fractions of a share upon exercise of the stock acquisition rights:
In the case the number of shares to be delivered to any stock acquisition right holder
who exercises his/her rights includes any fraction of one share, such fraction shall bediscarded.

(12)

Other matters:
Other matters concerning the stock acquisition rights shall be determined byresolution of the Board of Directors.

- END -