(Translation)

Securities Code:June 4, 2010

6839

NOTICE OF THE 58TH ORDINARY GENERAL MEETINGOF SHAREHOLDERS

Dear Shareholders:
Please take notice that the 58th Ordinary General Meeting of Shareholders of theCompany will be held as described below and you are cordially invited to attend the meeting.
Since voting rights can be exercised in writing even if you are not present at themeeting, please go over the Reference Document for the General Meeting of Shareholders set
forth below and send us by return mail the enclosed voting form indicating your approval ordisapproval of the propositions no later than 5:00 p.m. on June 21 (Monday), 2010.

Yours very truly,

Tomonori Hayashi
Director, President and CEO

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

Date and hour:
June 22 (Tuesday), 2010, 10:00 a.m.

2.

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

3.

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

Report on the business report, the consolidated financial statements and theresults of audit of the consolidated financial statements by the accountauditors and the Audit Committee for the 58th fiscal year (from April 1, 2009
to March 31, 2010)

2.

Report on the non-consolidated financial statements for the 58th fiscal year
(from April 1, 2009 to March 31, 2010)

Matters to be resolved:
Proposition No. 1:

Amendment to the Articles of Incorporation

Proposition No. 2:

Election of 12 Directors

Proposition No. 3:

Election of three (3) Corporate Auditors

Proposition No. 4:

Election of one (1) Alternate Corporate Auditor

Proposition No. 5:

Granting of retirement gratuities to the retiring
Directors

Proposition No. 6:

Revision of remuneration of Directors and Corporate
Auditors- END -In attending the meeting, please present the enclosed voting form to a receptionist at the placeof the meeting.
In the event of the revision of any matter in the Reference Document for the General Meetingof Shareholders, the business report, the consolidated financial statements and thenon-consolidated financial statements, it will be posted on our Internet website-2-

(http://www.funai.jp/).

-3-

(Attached documents)
BUSINESS REPORT(April 1, 2009 to March 31, 2010)
1.

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

Development and results of business activities:

During the fiscal year under review, the economy of the United States, the prime
market for the Funai Group, remained clouded by uncertainty originating in factors such as
the job market, in spite of the number of part-time and temporary employees demonstrating
an upward trend, and the residential housing market. Nevertheless, as a result of large-scale
policy support, signs of improvement were evident after the start of the year 2010 in certain
economic indicators, including capital investment and personal consumption, and concernsthat the economy would deteriorate further were nearly dispelled and in general, the firstbuds of a business recovery are likely to be emerging.
For the consumer electronics appliances industry, demand for LCD televisions, one of
the Funai Group's leading products, expanded briskly not only in Japan, the U.S. and Europe,
which are already existing key markets, but also in the China market as well, where economic
growth is remarkable. On the other hand, there were no changes in the conditions that had
resulted in declining sales prices and hovering at high prices for LCD panels, a primary
component. LCD televisions that utilize LED backlight panels and support 3D (three
dimensional images) are expected to be introduced to the market and spread rapidly in the
future.
Under these conditions, the Funai Group exerted its efforts to reduce cost and further
increase sales. As a result, net sales for the fiscal year under review increased 4.0%
compared with the previous fiscal year to ¥314,911 million.
Operating income increased 690.9% compared with the previous fiscal year to ¥11,148
million, reflecting factors such as higher sales of LCD televisions in the North American
market. Ordinary income increased 852.9% compared with the previous fiscal year to¥11,684 million as a result of improvements in non-operating income and expenses. Net
income was ¥10,328 million, compared with a net loss of ¥17,364 million in the previous
fiscal year.
The following are consolidated sales by product:
Audiovisual equipment:
In the audio-visual equipment category, the Company expanded sales of LCD
televisions mainly in the North American market, despite the ongoing decline in market
prices because of increasingly severe competition and the freeze in consumer spending. In
DVD-related products, sales of Blu-ray disc-related products rose because of the anticipatedfuture growth of Blu-ray disc players, but total sales of DVD-related products fell
year-on-year because the Company sold fewer television set-top boxes* for the U.S. market-3-

after ending production in June 2009. As a result, net sales of audiovisual equipment
increase 1.3% compared with the previous fiscal year to ¥233,528 million.
(Note) Television set-top boxes are devices to convert digital signals into analog signals,
enabling viewers to watch terrestrial digital broadcasting on existing analog
televisions. Terrestrial analog broadcasting in the United States was ended in June
2009.
Information equipment:
Net sales of printers were higher because of an increase in orders from OEM
partners. As a result, net sales of information equipment increased 21.4% year-on-year to¥54,629 million.
Others:
Net sales of other electronic devices slipped 1.5% compared with the previous fiscal
year to ¥26,754 million.
<Consolidated net sales by product>
Division
Audiovisual equipment
Information equipment
Others
Total(2)

Net sales(million yen)

Component rate(%)

233,528
54,62926,754
314,911

74.2
17.3
8.5
100.0

Investment in plant and equipment by the Group:

Investment in plant and equipment by the Group during the fiscal year under review
totaled ¥4,309 million, comprised of ¥2,908 million by its manufacturing companies and¥1,400 million by its sales companies. The amount was spent principally to improve
manufacturing facilities.
(3)

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

(4)

Issued to be tackled:

In the home electronic appliances industry, the prevalence of digital products has madeproduct-life cycles shorter and prices fall rapidly. On the other hand, new products that
stimulate new consumer needs through the combination of hardware and network content havebegun to be launched into the market.
Under these circumstances, the foremost issue for the Group is to increase sales andprofitability. For that purpose, the Group will pursue the following business strategies:-4-

<Product strategy>
In the audio-visual equipment category, during the fiscal year under review, LCD
televisions benefited from the effect of higher sales centered in the North American market
which generated positive operating income after incurring losses in the previous fiscal year.
Nevertheless, the Funai Group must proceed without delay to develop and introduce to themarket LCD television products that utilize LED backlight panels and that are capable ofsupporting 3D and use of the Internet, demand for which is expected to expand rapidly inthe future. In addition, in Blu-ray disc-related products, during the fiscal year underreview, the Company launched players and recorders that are capable of supporting theInternet, and will seek to expand sales by further broadening this product line withproducts such as players capable of supporting 3D and portable players.
In information equipment as well, the Company will strive to increase sales bysupplying OEM partners with higher value-added products that take maximum advantagesof the mechatronics base that is the Company's area of expertise, in addition to its existingproducts.
<Market strategy>
The Company will achieve sales growth by expanding sales in the European andJapanese markets and by entry into emerging markets such as BRICs while the Company
also considers measures that would mitigate the effects from overemphasis on the
Company's largest market in the U.S., to minimize the impact of the January and February
slow season and smooth out production and sales over the course of the year. To be
specific, the Company is planning to introduce LCD televisions, its major products, to theChinese market.
<Sales channel strategy>
The Funai Group must respond proactively to customer satisfaction levels byachieving closer communications than it has in the past and by swiftly and accurately
taking into consideration market trends, not only with major existing customers but withnew customers as well. The Company also is preparing to launch new marketing inNorth America using the Internet, where it plans to broaden its customer coverage.
<Branding strategy>
In the audio-visual equipment category, the Company must direct closer attention to
the positioning of the four brands (Philips, Magnavox, Sylvania and Emerson brands) in
the North America market, and the Funai brand in Europe, based on existing,comparatively advantageous products as well as new product development. Brand
positioning in the Japanese market, where the Company plans to increase sales, and in the
China market, which the Company will newly enter, will also become a critical issue in the
future.

-5-

To pursue the above business strategies more effectively, the Funai Group will pushforward cost reduction more aggressively by utilizing its "FPS (Funai Production System)"to the fullest extent and also by further implementing its IT application to speed up cyclesof product planning to development, materials and parts purchasing, manufacturing andsales, all in an effort to enhance competitiveness.
(5)

Property and income/loss:
55th(April 1, 2006 to
March 31, 2007)

56th(April 1, 2007 to
March 31, 2008)

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

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

Net sales(million yen)

396,712277,167

302,777

314,911

Ordinary income (loss)(million yen)

26,591

(39)

1,226

11,684

Net income (loss)(million yen)

(3,665)(5,376)(17,364)

10,328Net income (loss) per
share (yen)(107.01)(157.71)(509.33)302.97

Total assets(million yen)

272,811

224,415

199,882

204,057

Net assets(million yen)

187,361

158,356

135,596

142,779

Net assets per share(yen)

5,484.38

4,630.58

3,963.72

4,164.86

Fiscal year
Item

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

Major subsidiaries:

Trade name

Ratio of equity
participation of theCompany(%)

Capital stock

DX ANTENNA Co., Ltd.

¥363 million

91.40

FUNAI CORPORTION, INC.

US$68.5 million

100.0

US$30 million

100.0

P&F USA, INC.

-6-

Main business
Manufacture and sale ofelectronic equipment relatedwith receivers
Sale of the Company's
products
Sale of the Company's
products

Ratio of equity
participation of theCompany(%)

Main business
Manufacture of the Company's
Funai Electric (HK) Ltd.
HK$115 million
100.0
products(Note) Each ratio of equity participation of the Company is obtained by calculating down to the third
decimal place and thereafter rounding upward or downward to the nearest second decimal
place, as the case may be.
Trade name(7)

Capital stock

Major businesses of the Group:
Division

Principal products

Audiovisual equipment

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

Information equipment

Printers, digital still cameras

OthersElectronic equipment related to receivers(8)

Major business sites of the Group:
Category

Funai Electric Co., Ltd.
Japan

Production and sales
subsidiary

Name

Location

Head Office

Daito City, Osaka

Tokyo Branch

Chiyoda-ku, Tokyo

DX ANTENNA Co., Ltd.

Hyogo-ku, Kobe City

FUNAI CORPORTION, INC. U.S.A.
Overseas

Sales subsidiary
Production subsidiary(9)

P&F USA, INC.

U.S.A.

FUNAI EUROPE GmbHGermany

Funai Electric (HK) Ltd.

Hong Kong

Employees of the Group:
Number of employees
2,553

As compared with the end of the previous fiscal year(+ or -) (persons)- 37(Notes) 1. The above number of employees represents those actually at work.
2. The number of employees of the consignment manufacturing factories for the fiscal year
under review was 15,385, which is not included in the above number of employees.

(10)

Major lenders
Nothing to be reported.

-7-

(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 issuable shares:

80,000,000 shares(2)

Total number of issued shares:

36,104,196 shares(including 2,011,531 shares of treasury stock)(3)

Number of shareholders:

10,153 persons(4)

Principal shareholders (top ten):

Name
Tetsuro Funai
Tetsuo Funai
Funai Information Science Promotion Foundation
Japan Trustee Services Bank, Ltd. (Trust account)
The Master Trust Bank of Japan, Ltd. (Trust account)
THE BANK OF NEW YORK. TREATY JASDEC ACCOUNT
Japan Trustee Services Bank, Ltd. (Trust account 9)
F2 Limited Liability Company
T&N Limited Liability Company
Trust & Custody Services Bank, Ltd. (Securities investment
trust account)(5)

Number ofshares held
(thousandshares)Shareholding
ratio (%)

12,709
1,739
1,540
1,536
1,081
678
418
355
355

37.28
5.10
4.52
4.51
3.17
1.99
1.23
1.04
1.04

318

0.93

(Notes) 1.

The Company, which holds 2,011 thousand shares of treasury stock, is notincluded in the above-listed principal shareholders.

2.

Each shareholding ratio is obtained by deducting 2,011 thousand shares oftreasury 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.

Other important matters concerning shares:
Nothing to be reported.

-8-

3.

Matters concerning stock acquisition rights:(1)

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

14,838 rights

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

• Class and number of shares to beissued or transferred upon exercise of
the stock acquisition rights:
1,483,800 shares of common stock(100 shares per stock acquisition right)• Stock acquisition rights held by Directors and Corporate Officers by category:
Issue

Numberof rights

Holder30

1

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

Director
Outside Director

28

1

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

Director

28

1

Exercise price

Exercise period¥15,150

August 1, 2004 toJuly 31, 2011

¥13,646

August 1, 2005 toJuly 31, 2012

Outside Director

28

1

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

Director

42

1¥16,167

August 1, 2006 to
July 31, 2013

The first stock acquisitionrights for the year ended
March 31, 2006

Director

40

1¥12,369

August 1, 2007 to
July 31, 2014

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

Director

50

1¥1,609August 1, 2010 toJuly 31, 2017

(Note)(2)

Category

The category of Directors excludes outside Directors but includes Corporate Officers.

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

(3)

Other important matters concerning stock acquisition rights, etc.:
New share subscription rights granted as stock options during the year ended March 31,
2002 (new share subscription rights pursuant to Article 280-19 of the former Commercial
Code of Japan (the Commercial Code prior to amendment thereto in 2001)):•

Class and number of shares to be issued
upon exercise of new share subscription
rights:-9-311,600 shares of common stock••

Amount to be paid in upon exercise of newshare subscription rights:¥9,549 per share

Period for exercising new share subscription
rights:From January 1,
December 31, 2010

4.

Matters concerning officers of the Company:(1)

Directors and Corporate Officers
(i)

2004

to

Directors:
Title

Business in charge and important concurrent
officeName

Director

Tetsuro Funai

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

Director

Tomonori Hayashi

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

Outside Director

Mitsuo Yonemoto

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

Outside Director

Akira Miyazaki

Member of the Nomination Committee;
Member of the Audit Committee;
Member of the Compensation Committee;
President and Representative Director of
Dynamic Solutions Co., Ltd.

Outside Director

Shigemichi Asakura

Member (Chairman) of the Audit Committee

Outside Director

Yasuhisa Katsuta

Member of the Nomination Committee;
Member of the Audit Committee;
Member of the Compensation Committee;
Outside Corporate Auditor of Otsuka
Pharmaceutical Co., Ltd.;
Chairman of Osaka University of Economics

Outside Director

Hidetoshi Nishimura

Member of the Audit Committee; Member ofthe Audit Committee; Member of theCompensation Committee; Chairman of Sojitz
Foundation(Note)

Directors Tetsuro Funai and Tomonori Hayashi are concurrently serving as Corporate
Officers.

- 10 -

(ii) Corporate Officers:
Business in charge and representation of othercompanies
Chairman of Funai Information Science
Promotion Foundation;
Chairman of Funai Scholarship Foundation

Title

Name

Corporate
Officer andChairman

Tetsuro Funai

Representative
Corporate Officer,
President
andCEO

Tomonori Hayashi(For reference)
The Company has adopted a system of corporate officers and the Officers as ofMarch 31, 2010 are as follows:(2)

Senior Executive Officer

Takashi Kiyomoto

Senior Executive Officer
Executive Officer

Hideo Nakai
Shinji Seki

Executive Officer

Toshio Ohya

Officer
Officer

Masahiko Naito
Fumiaki Kidera

Officer

Nobuhisa Uchikawa

Officer

Kenji Sakata

Officer

Susumu Nojii

Officer

Kazuo Uga

OfficerTakeshi Ito

Officer

Yoshikazu Uemura

Officer

Joji Okada

Total amount of remuneration, etc. of Directors and Corporate Officers:

Director(Outside Director)

7(6)

Amount of payments(thousand yen)
37,650(33,225)

Corporate Officer
Total

2

108,0299

145,679

Category

Number of recipients(Notes) 1. No remuneration of Directors was paid to two Directors concurrently serving as
Corporate Officers. Hence, they are not included in the number of Directors
receiving remuneration of Directors.

- 11 -

2. The above-listed amount of payments includes the following amount as anallowance for retirement accounts for officers deducted as expenses for the fiscal
year under review:• ¥3,000 thousand for seven Directors (including ¥2,625 thousand for six
outside Directors)• ¥16,000 thousand for two Corporate Officers
3. The above-listed amount of payments includes the following amount of
remuneration in stock options deducted as expenses for the fiscal year underreview:• ¥829 thousand for one Corporate Officer
4. The above-listed recipients include two Directors (including one outside
Director) who retired from office at the close of the 57th Ordinary General
Meeting of Shareholders held on June 19, 2009.
5. In addition, retirement gratuities were paid to the officers who retired from officeat the close of the 57th Ordinary General Meeting of Shareholders held on June
19, 2009 as follows:• ¥6,000 thousand for one Director• ¥3,900 thousand for one outside Director(3)

Other important matters concerning officers:
Nothing to be reported.

(4)

Matters concerning Outside Directors:(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 Akira Miyazaki is Chairman and Director of Dynamic Solutions Co.,
Ltd. The Company has no special relationship with Dynamic Solutions Co.,Ltd.

•

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

•

Director Hidetoshi Nishimura is Chairman of Sojitz Foundation.
Company has no special relationship with Sojitz Foundation.

The

(ii)

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

Director Mitsuo Yonemoto is outside Director of The Sailor Pen Co., Ltd.
The Company has no special relationship with The Sailor Pen Co., Ltd.
- 12 -

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

(iii)

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

(iv)•

Major activities during the fiscal year under review:
Attendance at the meetings of the Board of Directors and the Audit Committee:
Board of Directors
Name
Mitsuo Yonemoto
Akira Miyazaki
Shigemichi Asakura
Yasuhisa Katsuta
Hidetoshi Nishimura

Number ofmeetings
10
10
10
10
10

Numberattended
10
10
10
10
9

Audit Committee
Number ofmeetings
6
10
10
10

Numberattended
6969(Note) As to Akira Miyazaki, the above represents the state of his attendance at themeetings of the Audit Committee since he assumed the office of a Member ofthe Audit Committee as of June 19, 2009.

•

Speeches at meetings of the Board of Directors and the Audit Committee:
Mitsuo Yonemoto attended meetings of the Board of Directors and expressed opinions
principally from the standpoint of a management consultant.
Akira Miyazaki attended meetings of the Board of Directors and the Audit Committee
and expressed opinions principally from the standpoint of a veteran top executive.
Shigemichi Asakura attended meetings of the Board of Directors and the Audit
Committee and expressed opinions principally from the standpoint of a veteran top
executive.
Yasuhisa Katsuta attended meetings of the Board of Directors and the Audit
Committee and expressed opinions principally from the standpoint of a veteran top
executive, as well as the standpoint of finance and treasury.
Hidetoshi Nishimura attended meetings of the Board of Directors and the Audit
Committee and expressed opinions principally from the standpoint of a veteran top
executive.

(v)

Outline of liability limitation agreements:
In accordance with Article 427, paragraph 1 of the Corporation Law of Japan,- 13 -

the Company has entered into an agreement with each of the five outside
Directors to limit the liability for any damage as provided for in Article 423,
paragraph 1 of said law within the aggregate of the amounts listed in the itemsof Article 425, paragraph 1 of said law.
5.

Matters concerning account auditors:(1)

Names of the account auditors:
Deloitte Touche Tohmatsu LLC(Note) Deloitte Touche Tohmatsu changed its category of audit corporations as of July 1,
2009 to be called Deloitte Touche Tohmatsu LLC.

(2)

Amount of remuneration, etc. of the account auditors for the fiscal year under review:
(i)
(ii)

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

Total amount of cash and other proprietary benefits payable
to the account auditors by the Company and its subsidiaries:¥78 million(Notes) 1. The amount of remuneration, etc. for audits under the Corporation Law of Japanand the amount of remuneration, etc. for audits under the Financial Instruments
and Exchange Law of Japan are not separated in the audit agreement between
the Company and the account auditors and cannot actually be separated.
Hence, the amount in item (i) above includes both amounts.
2. Among the major subsidiaries of the Company, FUNAI CORPORATION, INC.
and two other companies are subject to audits by audit firms (including persons
having qualifications in foreign countries equivalent to those of the accountauditors of the Company) other than the account auditors of the Company.

(3)

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

(4)

Policy on the determination of dismissal and non-reappointment of the accountauditors:
In the event that the account auditors are found to fall under any event of dismissal
under the items of Article 340, paragraph 1 of the Corporation Law, the Audit
Committee upon unanimous consent shall dismiss the account auditors. In addition,in the event that there arises any problem with the performance by the accountauditors of their duties or the Audit Committee considers it otherwise necessary, theAudit Committee shall determine the details of a proposition for the dismissal or
non-reappointment of the account auditors to be submitted to the General Meeting of
Shareholders.

- 14 -

(5)Outline of liability limitation agreements:
Nothing to be reported.

6.

Systems and policies of the Company(1)

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

Matters provided as necessary in the ordinances of the Ministry of Justice for
the Audit Committee to execute its duties•

Matters concerning the Directors and employees to assist the Audit Committee
to execute its duties
The Audit Office shall have employees to assist the Audit Committee to
execute its duties. The Directors who are not concurrently serving as
Corporate Officers shall cooperate with the Audit Committee in audits when
they are requested to do so.

•

Matters concerning the independence of the above-mentioned Directors andemployees from the Corporate Officers
In accordance with the "regulations concerning the employees to assist the
Audit Committee to execute its duties", the Company shall respect theopinions of the Audit Committee with regard to personnel changes in the
Audit Office and evaluations and disciplinary punishments thereof and ensure
their independence from the Corporate Officers.

•

System for reports by the Corporate Officers and employees to the Audit
Committee and other systems for reporting to the Audit Committee
The Company shall specify in the "regulations concerning reporting to the
Audit Committee" all matters to be reported to the Audit Committee andtiming, methods, etc. thereof, including facts that may inflict material damageon the Company and facts in violation of laws or ordinances or the Articles ofIncorporation.

•

Other systems to ensure effective audits by the Audit Committee
The Company shall allow the members of the Audit Committee to regularly
meet the executives, including President and CEO, and cooperate andexchange information with the account auditors or otherwise to ensure theeffective audits by the Audit Committee.

(ii)

Establishment of systems to secure the execution by the Corporate Officers of
their duties to comply with laws or ordinances and the Articles ofIncorporation and other systems provided as necessary in the ordinances of the
Ministry of Justice to secure the properness of business activities ofcorporations- 15 -

•

Systems concerning storage and management of information on the execution
by the Corporate Officers of their duties
Important information shall be stored and managed in accordance with the"document management regulations" and shall be made available forinspection by any member of the Audit Committee designated thereby at all
times.

•

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

•

Systems to secure efficient execution by the Corporate Officers of their duties
The Company shall have Officers under the auspices of the Corporate Officers
and ensure that the operations determined by the Corporate Officers are
performed swiftly.

•

Systems to secure the execution by the Corporate Officers and employees of
their duties to comply with laws or ordinances and the Articles ofIncorporation
In the "corporate charter of conduct" and "compliance regulations", theCompany shall clearly demonstrate how the Corporate Officers and employees
should act to comply with law to secure the execution by the Corporate
Officers and employees of their duties to comply with laws or ordinances andthe Articles of Incorporation.

•

Systems to secure the appropriateness of business activities of the corporategroup comprising a relevant corporation and its parent company andsubsidiaries
In accordance with the "related company control regulations", the Audit
Office and the Operations Control Department of the Company shall audit andgive guidance to its group companies to secure the properness of businessactivities of its corporate group.

(2)

Policies on the determination of remuneration, etc. of individual Corporate Officers,etc.
To make the determination of remuneration of Corporate Officers, etc. of theCompany appear objective and transparent to its shareholders and employees, such
remuneration is categorized into monthly remuneration payable in a fixed amounteach month, performance-linked remuneration (bonuses) payable based on- 16 -

performance, year-end allowances, stock options and retirement gratuities payable
upon retirement.
(i)Remuneration, etc. of Directors
The principal duty of Directors, who are not involved directly in execution ofindividual business, is supervision. Hence, their remuneration, etc. iscomprised of monthly remuneration, year-end allowances, stock options andretirement gratuities.
•

Monthly remuneration is determined in consideration of full-time/part-time
distinctions, standards of other companies, etc.

•

The amount of year-end allowances is determined within the upper limit on
25% of annual remuneration based on monthly remuneration, for the Directors(internal Directors) who are not outside Directors.

•

Stock options are determined by the Compensation Committee to afford
incentives to contributing to higher stock prices and much improved results.

•

Retirement gratuities are paid in an amount calculated in accordance with the"regulations of officers' retirement gratuities" established by theCompensation Committee.
Remuneration of Directors is not payable to any Director concurrently serving
as a Corporate Officer.

(ii)

Remuneration, etc. of Corporate Officers
Remuneration, etc. of Corporate Officers is comprised of monthly
remuneration, performance-linked remuneration (bonuses), stock options andretirement gratuities.

(3)•

Monthly remuneration is determined by taking into account the position andresponsibility of each Corporate Officer, the business conditions and operating
results of the Company, standards of other companies, etc.

•

Performance-linked remuneration (bonuses) is determined according to theoperating results of the Group, the results of the operations each Corporate
Officer is responsible for, etc.

•

Stock options are determined by the Compensation Committee to afford
incentives to contributing to higher stock prices and much improved results.

•

Retirement gratuities are paid in an amount calculated in accordance with the"regulations of officers' retirement gratuities" established by theCompensation Committee.

Policy on the determination of distribution of retained earnings, etc. by the Board of- 17 -

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

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

- 18 -

CONSOLIDATED BALANCE SHEET(As of March 31, 2010)(million yen)
ASSETS:
Current assets:

167,155

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

86,04535,15420,8501,510
16,057
4,131
3,586
(179)
36,902

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

15,654
6,129
1,363
2,543
5,180
411
24

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

4,874
3,665
1,208

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

16,373
6,134
4,803
6,210
(775)
204,057

TOTAL ASSETS- 19 -

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

56,20831,305
6,338
162
11,035
1,799
1
400
1,899
3,266

Long-term liabilities:

5,069

Long-term loans payable ......................................................................
Lease liabilities.....................................................................................
Deferred tax liabilities ..........................................................................
Deferred tax liabilities on revaluation of land ....................................
Liabilities for retirement benefits .......................................................
Liabilities for directors’ retirement benefits .......................................
Other .....................................................................................................
TOTAL LIABILITIESNET ASSETS:

566
387
21
285
1,386
1,042
1,379
61,277

Shareholders' equity:

159,457

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

31,280Capital surplus .......................................................................................

33,245Retained earnings...................................................................................

119,272

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

(24,340)

Valuation and translation adjustments:(17,465)

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

470

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

(17,936)

Stock options :62

Minority interests:

726

TOTAL NET ASSETS

142,779

TOTAL LIABILITIES AND NET ASSETS

204,057- 20 -

CONSOLIDATED STATEMENT OF INCOME(April 1, 2009 through March 31, 2010)(million yen)
Net sales
Cost of sales
Gross profit
Selling, general and administrative expenses
Operating income
Non-operating income:

314,911257,442
57,46946,321
11,148Interest and dividend income
Other
Non-operating expenses:

689
401

Interest expense
Exchange losses
Loss on investments in partnership
Other
Ordinary income
Extraordinary gain:
Gain on sales of investment securities
Other
Extraordinary loss:
Loss on disposal of fixed assets
Loss on bad debt
Loss on impairment of fixed assets
Import customs duties in past years
Other

83
103
204
164

105

95
105
64
575
71

911
10,8772,520(2,205)

Net income

555
11,684

97
7

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

1,091

314
234
10,328- 21 -

CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY(April 1, 2009 through March 31, 2010)(million yen)
Shareholders' equity
Commonstock
Balance as of March 31, 2009

Capitalsurplus31,280Retainedearnings

33,245

Treasury stock

110,047(24,340)

Total
shareholders'equity150,233

Changes of items during the
fiscal year
Cash dividends(1,363)
10,328Net income(1,363)
10,328Purchase of treasury stock(0)

Increase due to merger of anon-consolidated subsidiary bya consolidated subsidiary

259

(0)

259

Net changes of items other thanshareholders' equity
Total changes of items during
the fiscal year--

Balance as of March 31, 2010

31,28033,245

Balance as of March 31, 2009

9,224
119,272

Valuation and translation adjustments
Unrealized
Foreign
Totalloss oncurrency valuation andavailable-for- translationtranslation
sale securities adjustments adjustments(98)(14,999)(15,098)(0)(24,340)

9,223
159,457

Stock
optionMinority
interests

Total net
assets17443

135,596

Changes of items during the
fiscal year
Cash dividends(1,363)

Net income

10,328Purchase of treasury stock(0)

Increase due to merger of anon-consolidated subsidiary bya consolidated subsidiary259

Net changes of items other thanshareholders' equity

569(2,937)(2,367)44282(2,040)Total changes of items during the
fiscal year569

(2,937)(2,367)

44

282

7,183

Balance as of March 31, 2010

470

(17,936)(17,465)62

726

142,779- 22 -NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Notes on Matters Forming the Basis of Presentation of Consolidated Financial
Statements
1.

Matters concerning the scope of consolidation(1)

Number of consolidated subsidiaries:(2)

Names of major consolidated subsidiaries:

14

DX ANTENNA Co., Ltd., FUNAI CORPORATION, INC. and Funai Electric (HK)Ltd.
P&F MEXICANA, S.A.DE C.V., a subsidiary incorporated during the fiscal year
under review, is newly included in consolidation.
(3)

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

2.

Matters concerning the application of equity method(1)

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

1

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

Highsonic Industrial Ltd.

(2)

As from the fiscal year under review, Highsonic Industrial Ltd., an affiliate to which
the equity method was applicable, has become a non-consolidated subsidiary towhich the equity method is applicable as the Company's shareholding ratio therein
has increased.
(3)

Number of affiliates to which the equity method
is applicable:
1(4)

Names of affiliates to which the equity method
is applicable:

PT. DISPLAY DEVICESINDONESIAAs Highsonic Industrial Ltd. has become a non-consolidated subsidiary as from thefiscal year under review, it is excluded from the category of affiliates to which the- 23 -

equity method is applicable.
(5)

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

FGS Co., Ltd.
Digitec Industrial Ltd.

(Reason for exclusion from the equity method)
The non-consolidated subsidiary and affiliate have no material impact on net income(based on the Company's equity interest) and retained earnings (based on the
Company's equity interest) and generally, they are not material.
(6)
The equity-method subsidiary and affiliate whose fiscal year-ends differ from theend of the consolidated fiscal year-end, the financial statements for their fiscal years are
used.
(7)

Fiscal years of consolidated subsidiaries

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

Fiscal year-end

DX ANTENNA Co., Ltd.

February 28

FUNAI ELECTRIC (MALAYSIA) SDN. BHD.

December 31

FUNAI ASIA PTE LTD.

December 31

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

December 31

For the above-listed consolidated subsidiaries, financial statements compiled as of
their respective fiscal year-ends are used to tabulate consolidated results. However,significant transactions that occur between that time and the fiscal year-end arereflected in the consolidated financial statements as so required.
3.

Matters concerning accounting policies(1)

Valuation basis and methods for major assets(i)Securities:
Available-for- sale securities:•

Marketable securities:
Stated at fair value on the balance sheet date of the fiscal year (Unrealized
gain or loss and net of applicable taxes reported in a seperate component of- 24 -

equity. Costs of securities sold are determined by the moving averagemethod.)•Non-marketable securities:
Stated at cost determined by the moving average method(ii)

Inventories:
As to the Company and its consolidated subsidiaries in Japan, merchandiseand finished goods and work in process are stated principally at cost under the
average method (however, inventories are written down in case theprofitability becomes lower significantly).
Raw materials are statedprincipally at cost by the first-in, first-out method (however, inventories are
written down in case the profitability becomes lower significantly).
As to the overseas consolidated subsidiaries, merchandise and finished goods,
work in process and raw materials are stated principally at the lower of cost or
market determined by the first-in, first-out method.

(2)

Method of depreciation of major fixed assets:(i)

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

3–50 years
3–7 years
1–20 years(ii) Intangible assets (excluding lease assets):
Stated by the straight-line method by the Company and its consolidated
subsidiaries in Japan. However, depreciation of goodwill is made equally forfive years; depreciation of patent rights is made by the straight-line method basedon the estimated economically usable period; and depreciation of software forinternal use is made by the straight-line method based on the internal usable years(five years).
(iii) Lease assets:
Lease assets related to finance lease transactions that do not transfer ownershipare depreciated by the straight-line method, based on the assumption that the- 25 -

useful life equals to the lease term and the residual value equals to zero.
Any finance lease transaction that does not transfer ownership, which became
effective prior to the fiscal year during which the "Accounting Standard for Lease
Transactions" (Accounting Standards Board of Japan ("ASBJ") Statement No. 13)
first became applicable, is treated similarly to the manner in which ordinary leasetransactions are treated.
(3)Standards for providing important allowances(i)

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

(ii) Accrued bonuses:
To meet the payment of bonuses to employees, some consolidated subsidiaries set
aside the portion for each fiscal year of an estimated amount of bonuses to be paidin the future.
(iii) Reserve for product warranty :To meet expenses of after-sales services with regard to the products sold, theCompany sets aside an estimated amount based on the past sales record.
(iv) Liabilities for retirement benefits:
To meet the payment of retirement benefits to employees, the Company provides
an amount, based on estimated retirement benefit obligations and plan assets as of
the close of the fiscal year.
The total transitional obligation, determined as of April 1, 2000, was charged toincome when adopted, except that of certain domestic subsidiaries which isamortized over 15 years.
Prior service cost is amortized by the straight line method over a period within the
average remaining years of service of the employee (10 years).
Actuarial gains or losses are amortized by the straight line method over a period
within the average remaining years of service of the employee (10 years) startingfrom the following period.
(Change in accounting policies)
Effective from the year ended March 31, 2010, the Company and its Japanese- 26 -

consolidated subsidiaries applied the "Partial Amendment to 'AccountingStandard for Retirement Benefits' (Part 3)" (ASBJ Statement No. 19 (July 31,2008)).
There was no effect of change on operating income, ordinary income and income
before income taxes and minority interests.
(v) Liabilities for directors’ retirement benefits:
To provide for the payment of retirement gratuities to officers, an amount payableat the end of the fiscal year under the Company's internal rules is reserved.
(4)Standard for recognizing important revenue and costs
Standard for recognition of revenue and costs total contract revenue and total contract

costs:(i)

Construction work the outcome of which is deemed certain during the course ofactivity by the end of the fiscal year:
By the percentage-of-completion method (The percentage of completion at theend of the fiscal year shall be estimated by the method of comparison of incurredcosts to date with estimated total contract costs.)(ii) Other construction work:
By the completed-contract method(Change in accounting policies)
For recognizing revenue from construction contracts, the completed-contract method
has been applied. Effective from the year ended March 31, 2010, the Company has
applied the "Accounting Standard for Construction Contracts" (ASBJ Statement No.
15 (December 27, 2007)) and the "Guidance on Accounting Standard for Construction
Contracts" (ASBJ Guidance No. 18 (December 27, 2007)). Consequently, thepercentage-of-completion method should be applied to the construction contracts thathave started during this fiscal year, when the outcome of a construction contract at thebalance sheet date can be measured reliably(the percentage of completion at the end of
the fiscal year shall be estimated by the method of comparison with total contract
costs); and otherwise the completed-contract method has been applied.
The change has no significant effect on net sales and income/loss.
(5) Other significant accounting policies forming the basis of preparation of consolidated
financial statements
Accounting for consumption taxes, etc.:
4.

By the tax-exclusive method

Matters concerning valuation of assets and liabilities of consolidated subsidiaries- 27 -

Assets and liabilities of consolidated subsidiaries are valued by fully fair value fully
market.

Notes to Consolidated Balance Sheet:1.

Accumulated depreciation of assets
Accumulated depreciation of tangible fixed assets:

2.

¥59,517 million

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

3.
In accordance with the Law of Land Revaluation (Law No. 34, promulgated on March
31, 1998) of Japan, one of the consolidated subsidiaries revaluated its land used for business.
The applicable taxes of the revaluation difference was ¥285 million as revalued deferred tax
liabilities. Also the revaluation difference is eliminated in consolidation, and so it is notpresented in net assets.
4.
Disposition of supplementary tax assessment based on the application of tax system for
dealing with tax havens
On June 28, 2005 and June 16, 2008, the Company received notices of supplementary
tax assessment from the Osaka Regional Taxation Bureau of aggregate taxation on the profits
of its subsidiary in Hong Kong for the three fiscal years ended from March 31, 2002 to
March 31, 2004 and the three fiscal years ended from March 31, 2005 to March 31, 2007,
respectively, as the subsidiary in Hong Kong did not satisfy the conditions for exclusionfrom the application of the tax system for dealing with tax havens. The Company disagreed
with the assessment and considered it to be unacceptable. The Company has contested thevalidity in court.
The additional tax payment amounts were ¥16,651 million (¥19,184 million including
incidental taxes) and ¥15,038 million (¥16,838 million including incidental taxes),
respectively, including corporate income taxes, inhabitant taxes and enterprise taxes. They
were respectively recognized as "income taxes for prior periods" for the fiscal year ended
March 31, 2007 and the fiscal year ended March 31, 2009 in accordance with the "Treatmentof Accounting and Presentation of Taxes for the Purpose of Audits" (JICPA Audit andAssurance Practice Committee Report No. 63).
The taxation is judged based on the status of any relevant foreign company at the endof each fiscal year thereof. Hence, for your reference, the effects of the taxation on theincome of the subsidiary in Hong Kong for the fiscal year ended March 31, 2008, which wasimmediately after the fiscal year during which the investigation by the Bureau was last made,and thereafter are estimated at approximately ¥700 million in total in corporate, inhabitantand enterprise taxes for the fiscal year ended March 31, 2008 and the fiscal year ended
March 31, 2009. The Company has not accounted for the effects due to the aforementioned- 28 -

reasons.
Notes to Consolidated Statement of Changes in Shareholders' Equity
1.
Matters concerning the classes and total number of issued shares and the classes andnumber of shares of treasury stocks(thousand shares)
Number ofshares as ofMarch 31, 2009

Increase in thenumber ofshares during
the year

36,104
36,104--

36,104
36,104

2,011

0

-

2,011

2,011

0

-

2,011

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

Decrease in thenumber of
Number ofshares during
shares as of
the yearMarch 31, 2010

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

2.

Matters concerning dividends from surplus(1)

Amount of dividends paid:

Resolution

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

Effective
date

Meeting of theBoard of Directors
held on June 1,
2009

Shares ofcommon
stock

1,363

40

March 31,2009

June 4, 2009- 29 -

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

Resolution

Class ofsharesTotalamount ofdividends(million yen)

Source ofdividendsAmount ofdividend
per share(yen)

Recorddate

Effective
date

Meeting of theBoard of Directors
held on May 31,
2010

Shares ofcommon
stock

1,363

Retainedearnings

40

March 31,2010

June 11,2010

3.

Matters concerning stock acquisition rights
Description of stock options,Class of shares to be issued ortransferred upon exercise ofstock options

Number of shares for stock
options (share)
As of March 31, 2010

The first stock options for the year
ended March 31, 2002

Shares of common stock

311,600

The first stock options for theyear ended March 31, 2003

Shares of common stock399,600

The first stock options for theyear ended March 31, 2004

Shares of common stock

378,500

The first stock options for theyear ended March 31, 2005

Shares of common stock

359,900

The second stock options for theyear ended March 31, 2005

Shares of common stock

25,600The first stock options for theyear ended March 31, 2006

Shares of common stock

346,400

Total-

1,821,600(Notes) 1. The first stock options for the year ended March 31, 2002 are new share subscription
rights under Article 280-19 of the former Commercial Code of Japan (the Commercial
Code prior to the amendment thereto in 2001).
2. Any options for which the period of exercise thereof has not yet arrived is notincluded in the above table.

Notes to financial instruments
As from the fiscal year under review, the Company has applied the "AccountingStandard for Financial Instruments" (ASBJ Statement No. 10 (March 10, 2008)) and"Implementation Guidance on Disclosures about Fair Value of Financial Instruments" (ASBJ
Guidance No.19 (March 10, 2008)).
1.

Matters relating to the status of financial instruments
The Group raises funds by bank loans and invests funds by short-term deposits. In- 30 -

principle, the Group has a policy of not using derivatives.
With regard to clients' credit risks relating to notes and accounts receivable-trade, theGroup has stipulated its sales management rules to manage trading terms and credit lines byclient.
Investment securities are exposed to market risks. With regard to such risks, themarket values and the financial positions of the issuers are reviewed periodically andreported to the Investment and Loan Committee, an internal organ.
Notes and accounts payable-trade shall all become due and payable within one year.
Both short-term loans payable and long-term loans payable are funds procured inrelation to business transactions. The Group has a policy of not using derivatives.
However, as floating-rate loans are exposed to interest rate risk, the Group may utilize
derivatives (interest rate swap agreements) as hedging instruments according to individualloan contracts. To trade in derivatives, such derivatives are executed and managed inaccordance with the internal rules. To avert credit risk, the Group enters into transactions
solely with financial institutions receiving high ratings.
2.

Matters concerning fair values, etc. of financial instruments

The following chart shows amounts for items recorded in the consolidated balance
sheet as of March 31, 2010, along with their fair values and the variances:(million yen)

(1)
(2)
(3)

Cash and deposits
Notes and accounts receivable-trade
Investment securities:

(4)
(5)
(6)
(7)

Notes and accounts payable-trade
Short-term loans payable
Long-term loans payable
Derivatives

Balancesheet
amount*86,04535,154

Available-for- sale securities

2,909(31,305)(6,338)(566)-

Fair value*

Variance

86,04535,154-

2,909(31,305)(6,338)(566)--* The items recognized as liabilities are shown in the parentheses.
(Notes)1. Matters concerning the calculation method of the fair values of financial
instruments, as well as marketable securities and derivatives:(1) Cash and deposits and (2) Notes and accounts receivable-trade:
The book value is used for these items, as the fair value is nearly equal to thebook value as a result of their short settlement periods.

- 31 -

(3) Investment securities:
The fair value of stocks is determined by the prices of the stocks traded on an
exchange.
(4) Notes and accounts payable-trade and (5) Short-term loans payable:
The book value is used for these items, as the fair value is nearly equal to thebook value as a result of their short settlement periods.
(6) Long-term loans payable:
The fair value of these items is calculated from the present value of the total
principal and interest discounted at a rate supposing newly conducted similarborrowing.
(7) Derivatives:
The Group does not utilize any derivatives.
applicable.
2.

Hence, this item is not

Unlisted shares (¥3,225 million on the balance sheet):

These items have no market price and it is impossible to estimate their future cash
flow. As determining the market value is recognized as being extremely difficult, they
are not included in "(3) Investment in securities – Available-for- sale securities".

Notes on the information per share
Net assets per share:¥4,164.86

Net income per share:

302.97========================================================================(Note)All figures in the consolidated balance sheet, consolidated statement of income,consolidated statement of changes in shareholders' equity and notes toconsolidated financial statements are shown by disregarding any fractions of therelevant units, respectively. Net assets per share and net income per share areshown by rounding upward the five-thousandths of one yen or more to the nearest
one-hundredth of one yen.
- 32 -

Copy of Account Auditors' Audit Report on Consolidated Financial Statements(TRANSLATION)
INDEPENDENT AUDITORS' REPORTMay 20, 2010
To the Board of Directors of
Funai Electric Co., Ltd.:
Deloitte Touche Tohmatsu LLC
Designated Unlimited Liability
Partner,Engagement Partner,
Certified Public Accountant:
Fumihiko Kimura
Designated Unlimited Liability
Partner,Engagement Partner,
Certified Public Accountant:
Hiroshi Shirai
Designated Unlimited Liability
Partner,Engagement Partner,
Certified Public Accountant:
Masaki Mizoguchi

Pursuant to the fourth paragraph of Article 444 of the Companies Act, we have audited theconsolidated financial statements, namely, the consolidated balance sheet as of March 31,
2010 of Funai Electric Co., Ltd. (the "Company"), and the related consolidated statements ofincome and changes in net assets, and the related notes for the 58th fiscal year from April 1,2009 to March 31, 2010. These consolidated financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audit.
We conducted our audit in accordance with auditing standards generally accepted in Japan.
Those standards require that we plan and perform the audit to obtain reasonable assurance
about whether the consolidated financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and disclosures in- 33 -

the consolidated financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as evaluating theoverall consolidated financial statement presentation. We believe that our audit provides areasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in allmaterial respects, the financial position of the Company and consolidated subsidiaries as ofMarch 31, 2010, and the results of their operations for the year then ended in conformity withaccounting principles generally accepted in Japan.
Additional Information
As described in the notes to consolidated balance sheet, disposition of a supplementary tax
assessment based upon the application of the tax system for dealing with tax havens isdisclosed.
Our firm and the engagement partners do not have any financial interest in the Company forwhich disclosure is required under the provisions of the Certified Public Accountants Act.

The above represents a translation, for convenience only, of the original report issued in theJapanese language.

- END –

- 34 -

Copy of the Audit Committee's Audit Report on Consolidated Financial Statements
AUDIT REPORT ON CONSOLIDATED FINANCIAL STATEMENTS
We, members of the Audit Committee of the Company, audited the consolidated
financial statements (the consolidated balance sheet, the consolidated statement of income,the consolidated statement of changes in shareholders' equity and the notes to consolidated
financial statements) for the 58th fiscal year from April 1, 2009 to March 31, 2010. We
hereby report the method and results thereof as follows:1.

Method of Audit and the Content thereof:

The Audit Committee, in accordance with the audit policy, assignment of duties, etc.,
as determined by the Audit Committee, received from the Corporate Officers, etc. reports on
the consolidated financial statements and demanded their explanations whenever necessary.
We also monitored and verified whether the account auditors had maintained an
independent position and conducted adequate audits, and received from the account auditor’sreports on the state of performance of their duties and demanded their explanations whenevernecessary. In addition, we received from the account auditors a notice that the "systems tosecure adequate performance of duties" (as listed in the items of Article 131 of theRegulations on Corporate Accounts) had been established in accordance with the "Standard
for Quality Control Concerning Audits" (the Accounting Standards Board of Japan, October28, 2005) and demanded their explanations whenever necessary.
In accordance with such methods, we investigated the consolidated financial
statements for the fiscal year under review.
2.

Results of Audit:

We are of the opinion that the method and results of the audit made by the Company's
account auditors, Deloitte Touche Tohmatsu LLC, are proper.
May 26, 2010
Audit Committee
Funai Electric Co., Ltd.
Shigemichi Asakura(seal)
Chairman of the Audit Committee

Yasuhisa Katsuta
Member of the Audit Committee- 35 -(seal)

(Note)Hidetoshi Nishimura
Member of the Audit Committee(seal)

Akira Miyazaki
Member of the Audit Committee(seal)All members of the Audit Committee are outside directors as provided for in
Article 2, item 15 and Article 400, paragraph 3 of the Corporation Law of Japan.

- 36 -

NON-CONSOLIDATED BALANCE SHEET(As of March 31, 2010)ASSETS(million yen)

Current assets:
Cash and deposits.....................................................................................
Notes receivable-trade .............................................................................
Accounts receivable-trade........................................................................
Merchandise and finished goods..............................................................
Raw materials and supplies......................................................................
Prepaid expenses......................................................................................
Deferred tax assets ...................................................................................
Other ........................................................................................................
Allowance for doubtful receivables .........................................................

49,514
8,872
787
32,985
256
2,764
1,242
1,343
1,293
(32)

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

57,885
8,952
3,456
80
20
0
1,009
4,086
298
4,539
3,665
820
39
14

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

44,393
3,716
28,466
14,690
4,368
4,916(11,765)

TOTAL ASSETS

107,399- 37 -

LIABILITIES(million yen)

Current liabilities:
Accounts payable-trade................................................................................
Lease liabilities ..............................................................................................
Accounts payable-other .................................................................................
Accrued expenses ..........................................................................................
Income taxes payable.....................................................................................
Deposit received ............................................................................................
Reserve for product warranty ......................................................................
Other ..............................................................................................................

32,057
21,244
110
8,404
1,466
50
454
326
0

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

3,583
245
330
1,042
784
1,181

TOTAL LIABILITIES

35,640

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

71,25331,28033,24532,806438

Retained earnings:
Legal reserve..................................................................................................
Other retained earnings..................................................................................
Reserve reduction of fixed assets .....................................................
General reserve ..................................................................................
Retained earnings carried forward.....................................................

31,069209
30,860502
23,4006,958

Treasury stock(24,340)

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

442
442
62

TOTAL NET ASSETS

71,759TOTAL LIABILITIES AND NET ASSETS

107,399- 38 -

NON-CONSOLIDATED STATEMENT OF INCOME(April 1, 2009 through March 31, 2010)(million yen)
Net sales
Cost of sales
Gross profit
Selling, general and administrative expenses
Operating loss
Non-operating income:Interest and dividend income
Other
Non-operating expenses:
Interest expenses
Exchange losses
Loss of investments in partnership
Other
Ordinary loss
Extraordinary gain:
Gain on sales of investment securities
Reversal of allowance for doubtful receivable
Other
Extraordinary loss:
Loss on disposal of fixed assets
Provision for allowance for doubtful accounts ofassociated companies
Other

253,511226,239
27,272
27,611
339
131
148
6
85
204
91

40
52
6

280

386
445

99

60
920
24

Loss before income taxes

1,005
1,350

43
(287)

Income taxes - current
Income tax – deferred
Net loss

(244)
1,106

- 39 -

NON-CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY(April 1, 2009 through March 31, 2010)(million yen)
Shareholders' equity
Retained earnings

Capital surplus
Commonstock

Other retained surplus
Total capital
Retained
Reserve forLegal reserve reduction
surplusearnings
Generalcarriedreserveof fixed
forwardassetsOther
capitalsurplusCapitalreserve

Total
shareholders'equityTreasury
stock

Total
retainedearnings

Balance as of March 31,

2009

31,28032,806438

33,245209

514

23,4009,415

33,539(24,340)

73,724

Changes of items during the
fiscal year
Reversal of reserve fordeferred income tax on
fixed assets

12

-

-

Cash dividends(12)(1,363)(1,363)(1,363)Net loss(1,106)(1,106)(1,106)

Purchase of treasury stock

(0)

(0)

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

-

-

-

-

-

(12)

-

(2,457)(2,470)(0)(2,470)31,28032,806438

33,245

209

502

23,4006,958

31,069(24,340)

71,253

Balance as of March 31,

2010- 40 -

(million yen)
Valuation and translation adjustments
Unrealized gainon
Total valuation
available-for-saleand translation
securities
adjustments
Balance as of March 31, 2009(96)

Stock options

Total net assets

17

73,645(96)

Changes of items during the
fiscal year
Reversal of reserve for deferredincome tax on fixed assets-

Cash dividends(1,363)Net loss(1,106)

Purchase of treasury stock(0)

Net changes of items other thanshareholders' equity

539

539

44

583

Total changes of items during the
fiscal year

539

539

44

(1,886)

Balance as of March 31, 2010

442

442

62

71,759- 41 -NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS
Matters Concerning Significant Accounting Policies:
1.

Basis and method of valuation of assets(1) Basis and method of valuation of securities:
Investment in subsidiaries and associated companies:
Stated at cost determined by the moving average method.
Available-for-sale securities:
Marketable securities
Stated at fair value on the balance sheet date of the fiscal year (Unrealized gain orloss and net of applicable taxes reported in a seperate component of equity.
Selling costs are determined by the moving average method).
Non-marketable securities:
Stated at cost determined by the moving average method.

(2)

2.

Basis and method of valuation of inventories:
Finished goods:

Stated at cost, determined by the average method (however,inventories are written down in case the profitability becomes
lower significantly).

Raw materials:

Stated at cost, determined by the first-in, first-out method(however, inventories are written down in case theprofitability becomes lower significantly) .

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

- 42 -

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

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

3.

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

(Change in accounting policies)
Effective from the year ended March 31,2010, the Company applied the "Partial
Amendment to 'Accounting Standard for Retirement Benefits' (Part 3)" (ASBJ- 43 -

Statement No. 19 (July 31, 2008)).
There was no effect of change on operating income, ordinary income and income
before income taxes and minority interests.

(4) Liabilities for directors’ retirement benefits:
To provide for the payment of retirement gratuities to officers, an amount payable atthe end of the fiscal year under the Company's internal rules is reserved.
(5) Allowance for liquidation loss on affiliated company:
To provide for a loss on liquidation of any affiliated company, the Company setsaside the estimated amount of such loss.
4.

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

By the tax-exclusive method

Notes to Non-Consolidated Balance Sheet:1.

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

2.

Money debts due from and to associated companies:
Short-term monetary debts due from associated companies:
Long-term monetary debts due from associated companies:
Short-term monetary liabilities due to associated companies:

3.

¥9,895 million¥18,971 million¥14,474 million¥23,398 million

New share subscription rights granted as stock options:
New share subscription rights pursuant to Article 280-19 of the former Commercial Codeof Japan (prior to the amendment thereto in 2001):
Date of special resolution of the General
Meeting of Shareholders:June 27, 2001

Number of new share subscription rights:-

Class and number of shares to be issued ortransferred upon exercise of new sharesubscription rights:

311,600 shares of common stock

Amount to be paid in upon exercise of newshare subscription rights:¥9,549 per share- 44 -

Period of exercise of new share subscription
rights:From January 1, 2004 to December 31, 2010

4.
Disposition of supplementary tax assessment based on the application of tax system for
dealing with tax havens
On June 28, 2005 and June 16, 2008, the Company received notices of supplementary tax
assessment from the Osaka Regional Taxation Bureau of aggregate taxation on the profits of its
subsidiary in Hong Kong for the three fiscal years ended from March 31, 2002 to March 31,
2004 and the three fiscal years ended from March 31, 2005 to March 31, 2007, respectively, as
the subsidiary in Hong Kong did not satisfy the conditions for exclusion from the application of
the tax system for dealing with tax havens. The Company disagreed with the assessment andconsidered it to be unacceptable. The Company has contested for the validity in court.
The additional tax payment amounts were ¥16,651 million (¥19,184 million including
incidental taxes) and ¥15,038 million (¥16,838 million including incidental taxes), including
corporate income taxes, inhabitant taxes and enterprise taxes. They were respectively
recognized as "income taxes for prior periods" for the fiscal year ended March 31, 2007 and thefiscal year ended March 31, 2009 in accordance with the "Treatment of Accounting and
Presentation of Taxes for the Purpose of Audits" (JICPA Audit and Assurance PracticeCommittee Report No. 63).
The taxation is judged based on the status of any relevant foreign company at the end ofeach fiscal year thereof. Hence, for your reference, the effects of the taxation on the income ofthe subsidiary in Hong Kong for the fiscal year ended March 31, 2008, which was immediately
after the fiscal year during which the investigation by the Bureau was made, and thereafter are
estimated at approximately ¥700 million in total in corporate, inhabitant and enterprise taxes forthe fiscal year ended March 31, 2008 and the fiscal year ended March 31, 2009. The Company
has not accounted for the effects due to the aforementioned reasons.
Notes to Non-Consolidated Statement of Income:Amount of transactions with associated companies
Trading:
Sales amount:
Purchase amount:
Other operating expenses:
Amount of transactions other than trading:- 45 -¥175,377 million¥191,612 million¥2,272 million¥106 million

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

Number of shares Increase in shares Decrease in shares Number of shares
at March 31, 2009 during the year
during the year at March 31, 2010
Common stock (Note)

2,011

0

-

2,011

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

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

5,509
753
13,538(6,656)
6,882

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

(298)
(527)
(344)
(1,170)
5,711

134
424
1,127
3,768
420
264
1,135

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

Amounts equivalent to the acquisition prices, accumulated depreciation and balance at the- 46 -

end of the year:

Tools, furniture and fixtures
Other
Total:

2.

Amount equivalent
to the acquisition
prices675
7
682(million yen)Amount equivalent Amount equivalent
to accumulated
to balance at the end
depreciationof the year
560
115
6
1
566
116

Future lease payable at the end of the year
Balance of future lease payable at the end of the year
Lease payable within one
year:
Lease payable over one year:¥76 million

Total:¥120 million¥44 million

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

Type

Name

SubsidiaryDX
ANTENNA
Co., Ltd.

Direct,91.40%

Subsidiary

Funai Electric(HK) Ltd.

Direct, 100%

Subsidiary

FUNAI
CORPORATION
INC.

Direct, 100%

Subsidiary

P&F
INC.

Direct, 100%

Subsidiary

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

Direct, 100%

Subsidiary

FUNAI
EUROPEGmbH

Direct, 100%

Subsidiary

FUNAI ASIA
PTE LTD.

Direct, 100%

USA,

RelationshipTransaction

Amount oftransaction

Account
item

Sale ofelectronic
products
Purchase ofelectronic
products
Sale ofelectronic
products

172,955

Payment fordiscounts, etc.

10,847

Sale ofproducts of
the Company

Sale ofelectronic
products

59,442

Production of
products of
the Company

Sale ofelectronic
products

5,503

Trade
accounts
receivable

1,854

Loan of funds-

Long-term
loans
receivable

11,846

Loan of funds-

Long-term
loans
receivable

2,325

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

Sale ofproducts of
the Company;
interlocking
directorate
Sale ofproducts of
the Company- 47 -

12,314

95,812Tradeaccounts
receivable
Tradeaccounts
payableTradeaccounts
receivable
Other
accounts
payableTradeaccounts
receivable

Balance asof March
31, 2010
5,871
19,434
4,964
1,646
4,621

(Note)Transaction terms and policies on the determination of transaction terms, etc.:
Like the terms of ordinary transactions, transaction terms are determined inconsideration of market prices and other factors.

Note on the Information per Share
Net assets per share:
Net loss per share:¥2,103.00¥32.45========================================================================•All figures in the non-consolidated balance sheet, non-consolidate statement of income,non-consolidated statement of changes in shareholders' equity and notes tonon-consolidated financial statements are shown by disregarding any fractions of therelevant units, respectively. Net assets per share and net loss per share are shown by
rounding upward the five-thousandths of one yen or more to the nearest one-hundredth of
one yen.
Copy of Account Auditors' Audit Report- 48 -

(TRANSLATION)
INDEPENDENT AUDITORS' REPORTMay 20, 2010
To the Board of Directors of
Funai Electric Co., Ltd.:
Deloitte Touche Tohmatsu LLC
Designated Unlimited Liability
Partner,Engagement Partner,
Certified Public Accountant:
Fumihiko Kimura
Designated Unlimited Liability
Partner,Engagement Partner,
Certified Public Accountant:
Hiroshi Shirai
Designated Unlimited Liability
Partner,Engagement Partner,
Certified Public Accountant:
Masaki Mizoguchi
Pursuant to the first item, second paragraph of Article 436 of the Companies Act, we haveaudited the financial statements, namely, the balance sheet as of March 31, 2010 of Funai
Electric Co., Ltd. (the "Company"), and the related statements of income and changes in net
assets, and the related notes for the 58th fiscal year from April 1, 2009 to March 31, 2010,
and the accompanying supplemental schedules. These financial statements and theaccompanying supplemental schedules are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements and theaccompanying supplemental schedules based on our audit.
We conducted our audit in accordance with auditing standards generally accepted in Japan.
Those standards require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements and the accompanying supplemental schedules arefree of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements and the accompanying
supplemental schedules. An audit also includes assessing the accounting principles used
- 49 -

and significant estimates made by management, as well as evaluating the overall financial
statement and the accompanying supplemental schedules presentation. We believe that our
audit provides a reasonable basis for our opinion.
In our opinion, the financial statements and the accompanying supplemental schedules
referred to above present fairly, in all material respects, the financial position of the Company
as of March 31, 2010, and the results of its operations for the year then ended in conformity
with accounting principles generally accepted in Japan.
Additional Information
As described in the notes to non-consolidated balance sheet, disposition of a supplementary
tax assessment based upon the application of the tax system for dealing with tax havens isdisclosed.
Our firm and the engagement partners do not have any financial interest in the Company forwhich disclosure is required under the provisions of the Certified Public Accountants Act.

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

- END -

- 50 -

Copy of the Audit Committee' Audit Report
AUDIT REPORT
We, members of the Auditor Committee of the Company, audited the performance byDirectors and Corporate Officers of their duties during the 58th fiscal year from April 1, 2009
to March 31, 2010. We hereby report the method and results thereof as follows:1.

Method of Audit and the Content thereof:

We monitored and examined the contents of the resolutions of the Board of Directors
concerning the matters as listed in Article 416, paragraph 1, item 1, b. and e. of the
Corporation Law of Japan and the state of the internal control system established thereunder,
and in accordance with the audit policy, assignment of duties, etc., as determined by the
Audit Committee and in collaboration with the internal audit sections and other sections incharge of the internal control of the Company, attended important meetings, received fromthe Directors, Corporate Officers, etc. reports on matters concerning the performance of theirduties, demanded their explanations whenever necessary, inspected important decision
documents, etc., and made investigation into the state of activities and property at the head
office and principal business offices of the Company. With regard to its subsidiaries, we
maintained constant communication and exchanged information with the directors, corporate
auditors, etc. thereof and received from the subsidiaries reports on their business operations
whenever necessary.
We also monitored and verified whether the account auditors had maintained an
independent position and conducted adequate audits, and received from the account auditors
reports on the state of performance of their duties and demanded their explanations whenevernecessary. In addition, we received from the account auditors a notice that the "systems tosecure adequate performance of duties" (as listed in the items of Article 131 of theRegulations on Corporate Accounts) had been established in accordance with the "Standard
for Quality Control Concerning Audits" (the Accounting Standards Board of Japan, October28, 2005) and demanded their explanations whenever necessary.
In accordance with such methods, we investigated the business report, thenon-consolidated financial statements (the non-consolidated balance sheet, thenon-consolidated statement of income, the non-consolidated statement of changes inshareholders' equity and the notes to non-consolidated financial statements) and theiraccompanying detailed statements for the fiscal year under review.
2.

Results of Audit:(1) Results of audit of the business report, etc.:
We are of the opinion:(i)That the business report and its accompanying detailed statements present fairly thestate of the Company in accordance with laws or ordinances and the Articles of- 51 -

Incorporation;(ii) That in connection with the performance by the Directors and Corporate Officers of
their duties, no dishonest act or material fact of violation of laws or ordinances or the
Articles of Incorporation exists; and(iii) That the details of the resolutions of the Board of Directors on internal control
systems are proper and that the performance by the Directors and Corporate Officersof their duties concerning such internal control systems contains nothing to be
pointed out.
(2) Results of audit of the non-consolidated financial statements and their accompanying
detailed statements:
We are of the opinion that the method and results of the audit made by the accountauditors, Deloitte Touche Tohmatsu LLC, are proper.
May 26, 2010
Audit Committee
Funai Electric Co., Ltd.
Shigemichi Asakura(seal)
Chairman of the Audit Committee(Note)

Yasuhisa Katsuta
Member of the Audit Committee(seal)

Hidetoshi Nishimura
Member of the Audit Committee(seal)

Akira Miyazaki
Member of the Audit Committee(seal)All members of the Audit Committee are outside directors as provided for in
Article 2, item 15 and Article 400, paragraph 3 of the Corporation Law of Japan.
- END -

- 52 -

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

Amendment to the Articles of Incorporation

Reasons for the amendment:(1)
To enhance efficiencies of management and improve the execution of business, theCompany has determined to shift its management structure from a "company having
committees" to a "company having a board of corporate auditors". Accordingly, theCompany intends to establish new provisions for Corporate Auditors and a Board of
Corporate Auditors and make other required amendments.
(2)
To prepare in advance in case the number of Corporate Auditors falls below thenumber stipulated by law and save the trouble of electing an Alternate Corporate Auditor
annually, the Company intends to establish a new provision to make the election of an
Alternate Corporate Auditor continue to remain effective for four years.
(3)
To allow such Corporate Auditors to fully play their expected roles, the Company
intends to establish new provisions based on a system of indemnification of corporate officers
as provided for in Article 426 and Article 427 of the Corporation Law of Japan.
(4)With regard to the indemnification of Corporate Officers provided for in the existing
Articles of Incorporation, the Company intends to establish a transitional measure as asupplementary provision to keep the effectiveness of the indemnification thereof after theCompany shifts to a "company having a board of corporate auditors".
(5)
In accordance with the establishment and deletion of the provisions set forth above,
the Company intends to alter the numbers of the existing provisions.
2.

Particulars of the amendment:
The particulars of the proposed amendment are set forth below:(Underlines show amendment)

Existing Articles of Incorporation(Organs)

Proposed amendment(Organs)

Article 4.
The Company shallhave the following organs in addition to theGeneral Meeting of Shareholders and Directors:

Article 4.
The Company shallhave the following organs in addition to theGeneral Meeting of Shareholders, Directors andCorporate Auditors:(1)

The Board of Directors;

(1)

(2)

Committees; and(To be deleted)- 53 -The Board of Directors;

Existing Articles of Incorporation

Proposed amendment(To be newly established)(3)

Board of Corporate Auditors;
and

(3)

Account Auditors.

Account Auditors.

(Share registrar)
Article 9.
have a share registrar.

The

Companyshall

2.
The share registrar and its placeof business shall be designated by resolution of
the Board of Directors or a decision of the
Corporate Officers as authorized by resolutionof the Board of Directors and public notice shallbe given thereof.
3.

(2)(Share registrar)
Article 9.
have a share registrar.

The

Companyshall

2.
The share registrar and its placeof business shall be designated by resolution of
the Board of Directors and public notice shallbe given thereof.

(Description omitted)

3.

(Same as existing)(Share Handling Regulations)(Share Handling Regulations)

Article 10.
The procedures for the
exercise of shareholders' rights and otherhandling of the shares of the Company shall begoverned by the Share Handling Regulations tobe established by the Board of Directors or the
Corporate Officers as authorized by resolutionof the Board of Directors, in addition to laws orordinances or these Articles of Incorporation.

Article 10.
The procedures for the
exercise of shareholders' rights and otherhandling of the shares of the Company shall begoverned by the Share Handling Regulations tobe established by the Board of Directors, inaddition to laws or ordinances or these Articles
of Incorporation.

(Convener and chairman)
Article 13.
A General Meeting of
Shareholders shall be convened, in accordancewith a resolution of the Board of Directors, andpresided over, by the President and CEO, whoshall be Director.

(Convener and chairman)
Article 13.
A General Meeting of
Shareholders shall be convened, in accordancewith a resolution of the Board of Directors, andpresided over, by the Representative Director
specified by the Board of Directors.

2.
If the office of the President
and CEO, who shall be Director, is vacant or heis unable to act, one of the other Directors shallact in his place in the order previously
determined by the Board of Directors.

2.
If the Representative Director
set forth in the preceding paragraph is unable toact, one of the other Representative Directors or
Directors shall act in his place in the orderpreviously determined by the Board of
Directors.
(Representative Directors)(To be newly established)

Article 20.
By resolution of theBoard of Directors, the Company shall appoint
one (1) or more Representative Directors.

- 54 -

Existing Articles of Incorporation
Article 20.

Proposed amendment(Description omitted)

Article 21.

(Notice of meeting of the Board of Directors)(Same as existing)(Notice of meeting of the Board of Directors)

Article 21.
Notice for convening ameeting of the Board of Directors shall bedispatched to each Director not later than three(3) days prior to the date of the meeting;provided, however, that such period of notice
may be shortened in the case of urgent
necessity.

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

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

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

Article 22〜
Article 23

Article 23〜
Article 24(Descriptions omitted)(Same as existing)(Remuneration, etc.)(Remuneration, etc.)

Article 24.
Remuneration, bonuses
and other proprietary benefits ("remuneration,etc.") Directors may receive from the Company
in consideration of the execution of their duties
shall be determined by resolution of theCompensation Committee.

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

Article 25.
Chapter V.

(Descriptions omitted)
Corporate Officers

Article 26.

(Same as existing)(To be deleted)(Number)(To be deleted)

The Company shall
Article 26.
have no more than three (3) Corporate Officers.
(Method of election)(To be deleted)

Article 27.
Corporate
Officers
shall be elected by resolution of the Board of
Directors.

- 55 -

Existing Articles of Incorporation

Proposed amendment(Term of office)(To be deleted)

Article 28.
The term of office ofCorporate Officers shall expire at the close of
the first meeting of the Board of Directors held
after the close of the Ordinary General Meetingof Shareholders relating to the closing ofaccounts last to occur within one (1) year after
their assumption of office.
(Representative Corporate Officers andCorporate Officers with specific titles)(To be deleted)

By resolution of the
Article 29.
Board of Directors, there shall be appointed one(1) or more Representative Corporate Officers.
2.
By resolution of the Board of
Directors, the Company may appoint one (1)Chairman and Executive Officer, one (1)President and CEO, one (1) or more Executive
Vice Presidents, Executive Managing Officers
and Managing Officers.

(To be deleted)(To be deleted)(Regulations of Corporate Officers)
All matters concerning
Article 30.
Corporate Officers shall be governed by theRegulations of Corporate Officers to beestablished by the Board of Directors, inaddition as provided for in laws or ordinances,these Articles of Incorporation or the
Regulations of the Board of Directors.
(Remuneration)(To be deleted)

Remuneration, etc. of
Article 31.
Corporate Officers shall be determined byresolution of the Compensation Committee.

- 56 -

Existing Articles of Incorporation

Proposed amendment(Indemnification of Corporate Officers)(To be deleted)

The Company may, by
Article 32.
resolution of the Board of Directors, exempt
any Corporate Officer (including any former
Corporate Officer) from liabilities for any
damage as provided for in Article 423,
paragraph 1 of the Corporation Law of Japan, tothe extent allowable by law, pursuant to theprovision of Article 426, paragraph 1 of the saidLaw.

(To be newly established)

Chapter V. Corporate Auditors andBoard of Corporate Auditors(Number)(To be newly established)
The Company shall
Article 27.
have no more than three (3) Corporate Auditors.
(Method of election)(To be newly established)
Corporate
Auditors
Article 28.
shall be elected at General Meetings ofShareholders.
Resolutions for the election of2.
Corporate Auditors shall be adopted at a
General Meeting of Shareholders at whichshareholders holding one-third (1/3) or more of
voting rights of the shareholders entitled to voteshall be present, by a majority of the voting
rights of the shareholders so present.
In preparation for a vacancy in3.
such number of Corporate Auditors as provided
for in laws or ordinances, the Company may
elect an Alternate Corporate Auditor or
Auditors at a General Meeting of Shareholders
pursuant to the provision of Article 329,
paragraph 2 of the Corporation Law of Japan.
The resolution for the election
4.
of an Alternate Corporate Auditor or Auditors
under the preceding paragraph shall remain- 57 -

Existing Articles of Incorporation

Proposed amendment
effective until the commencement of theOrdinary General Meeting of Shareholders
relating to the last fiscal year to end within four(4) years after his/her/their election.
(Term of office)(To be newly established)

The term of office ofArticle 29.
Corporate Auditors shall expire at the close of
the Ordinary General Meeting of Shareholders
relating to the last fiscal year to end within four(4) years after their election.
The term of office of a2.
Corporate Auditor elected to fill a vacancy
created by the retirement of a Corporate Auditor
prior to the expiration of the term of office shall
expire at such time as the term of office of theretired Corporate Auditor would expire.
(Full-time Corporate Auditors)(To be newly established)

The Board of Corporate
Article 30.
Auditors shall, by its resolution, appoint one (1)or more full-time Corporate Auditors.
(Notice of meeting of the Board of Corporate
Auditors)(To be newly established)
Notice for convening a
Article 31.
meeting of the Board of Corporate Auditors
shall be dispatched to each Corporate Auditor
not later than three (3) days prior to the date of
the meeting; provided, however, that such
period of notice may be shortened in the case ofurgent necessity.
If consented to by all the2.
Corporate Auditors, a meeting of the Board of
Corporate Auditors may be held without
following the convocation procedure.
(Method of adopting resolutions of the Board of
Corporate Auditors)(To be newly established)

Resolutions of the
Article 32.
Board of Corporate Auditors shall be adopted
by a majority of the Corporate Auditors.

- 58 -

Existing Articles of Incorporation

Proposed amendment(Regulations
Auditors)(To be newly established)

of

the

Board of Corporate

All matters concerning
Article 33.
the Board of Corporate Auditors shall begoverned by the Regulations of the Board of
Corporate Auditors to be established by the
Board of Corporate Auditors, in addition asprovided for in laws or ordinances or in these
Articles of Incorporation.
(Remuneration, etc.)(To be newly established)(To be newly established)

Remuneration, etc. of
Article 34.
Corporate Auditors shall be determined byresolution of a General Meeting of
Shareholders.
(Indemnification of Corporate Auditors)
The Company may, by
Article 35.
resolution of the Board of Directors, exempt
any Corporate Auditor (including any former
Corporate Auditor) from liabilities for any
damage as provided for in Article 423,
paragraph 1 of the Corporation Law of Japan, tothe extent allowable by law, pursuant to theprovision of Article 426, paragraph 1 of the said
Law.

Article 33〜
Article 36(Descriptions omitted)

The Company may enter into2.
an agreement with any outside Corporate
Auditor to limit liabilities for any damage asprovided for in Article 423, paragraph 1 of the
Corporation Law of Japan to the aggregate
amount as provided for in the items ofparagraph 1 of Article 425 of the said Law,pursuant to the provision of Article 427,
paragraph 1 of the said Law.
Article 36〜(Same as existing)
Article 39(To be newly established)(To be newly established)

Supplementary Provisions
The Company may, by
Article 1.
resolution of the Board of Directors, exempt
any Corporate Officer (including any former- 59 -

Existing Articles of Incorporation

Proposed amendment
Corporate Officer) from liabilities for any
damage as provided for in Article 423,
paragraph 1 of the Corporation Law of Japan
which may be caused prior to thecommencement of the 58th Ordinary General
Meeting of Shareholders, to the extent
allowable by law, pursuant to the provision of
Article 426, paragraph 1 of the said Law.

- 60 -

Proposition No. 2:

Election of 12 Directors

The term of office of all the (7) Directors currently in office will expire at the close ofthis Ordinary General Meeting of Shareholders. Subject to the approval of Proposition No.
1 "Amendment to the Articles of Incorporation" by the shareholders, the Company will shift
from a "company having committees" to a "company having a board of corporate auditors".
Hence, to strengthen the management structure of the Company, it is hereby proposed that 12
Directors, including two (2) outside Directors, be elected, subject to the approval of
Proposition No. 1 "Amendment to the Articles of Incorporation" by the shareholders.
The candidates for Directors are as follows:

Cand
i-date
No.

1.

Name

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

Established Funai Sewing MachineCompany

December
1952

Representative Director of Funai
Sewing Machine Co., Ltd.

August 1961

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

June 2005

Director of the Company;
President and CEO of the Company

Tetsuro Funai(January 24, 1927)

Number ofshares of theCompany heldby Candidate

12,709,488
sharesJune 2008

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

2.

April 1969

Joined the Company

October 2002

Officer of the Company

June 2005

Executive Officer of the Company

March 2006

CEO of FUNAI CORPORATION
INC.

June 2007

Senior Executive Officer of theCompany

March 2008

General Manager of AV
Headquarters of the Company

June 2008

Director of the Company (Todate); President and CEO of theCompany (To date)Tomonori Hayashi(March 13, 1947)- 61 -

10,400 sharesCandi-date
No.

3.

Name

Brief history, post in the Company and business incharge (and important concurrent office)(Date of birth)
July 1995

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

September 1998

Outside Director of the Company(To date)

March 2009

Outside Director of The Sailor
Pen Co., Ltd. (To date)

Mitsuo Yonemoto(March 18, 1939)

Number ofshares of theCompany heldby Candidate

100 shares(Vice President and Director of T.P.S. LaboratoryCo., Ltd.)(Outside Director of The Sailor Pen Co., Ltd.)
April 1965

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

June 2001

President of The Daiwa Bank,
LimitedDecember 2001

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

Advisor of the Company

June 2005

Outside Director of the Company(To date)

June 2006

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

July 2008

Chairman of Osaka University of
Economics (To date)

Yasuhisa Katsuta
4.

(February 20,
1942)

-

(Outside Corporate Auditor of Otsuka
Pharmaceutical Co., Ltd.)(Chairman of Osaka University of Economics)

April 1968
5.

Joined Nakagawa Electronics Co.,

Takashi Kiyomoto

4,400 shares- 62 -

Candi-dateNo.

Name

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

Number ofshares of theCompany heldby Candidate

Ltd. (now Funai Electric Co.,Ltd.)

Hideo Nakai
6.

October 2002

President of Funai Electric (HK)Ltd. (To date);
Officer of the Company

June 2005

Executive Officer and General
Manager of Production
Headquarters of the Company

June 2007

Senior Executive Officer andGeneral Manager of Production
Headquarters of the Company (Todate)

April 1970

Joined the Company

October 2002

Officer and General Manager ofDevelopment & Technology
Headquarters of the Company

June 2005

Executive Officer and General
Manager of Development &Technology Headquarters of theCompany(November 1,
1947)
June 2007

Senior Executive Officer andGeneral Manager of Development& Technology Headquarters of
the Company (To date)

April 1968

Joined the Company

December 2006

Officer and General Manager of
DVD Business Div. of theCompany (To date)June 2008

Executive Officer and General
Manager of AV Headquarters of
the Company (To date);
President and Representative
Director of P&F USA, INC. (Todate)
Joined the Company
Officer and General Manager of
New Business Div. of theCompany
Executive Officer and General
Manager of New Business Div. of
the Company (To date)
Joined the Company

Shinji Seki
7.

(December 5,
1947)

April 1967
June 20078.

Toshio Otaku(July 11, 1948)

June 2008

January 1992
9

Yoshikazu Uemura

4,000 shares

4,000 shares

700 shares

700 shares- 63 -

Candi-dateNo.

Name

Brief history, post in the Company and business incharge (and important concurrent office)(Date of birth)
July 2004
April 2007
October 2009
April 1977
April 1990
April 1999

April 2003

10.

Joji Okada(August 27, 1954)

February 2004
December 2005
April 2007

October 2009

April 1984

Hideaki Funakoshi
11.

(September 30,
1965)

January 1993
July 2003
April 2006
February 200812.

Shigeki Saji

General Manager of DVD
Marketing Dept. of the Company
COO of FUNAICORPORATION, INC. (To date)
Officer of the Company (To date)
Joined Hitachi, Ltd.
Chief Engineer, Hitachi, Ltd.
General Manager of Development
Office, System LSI Business
Dept., Semiconductor Group of
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 (To date)
Joined Mitsubishi ElectricEngineering Company Limited
Joined the Company
Chief Engineer, AV Project of theCompany
General Manager, DVD Project of
the Company
Executive General Manager of
DVD Business Div. of theCompany (To date)

April 1995

Joined the Company

July 2003

Manager, Funai Electric (HK)Ltd.

May 2006

Assistant General Manager of AV
Headquarters of the Company

October 2009

President and Representative
Director of FUNAI ELECTRIC(POLSKA) Sp.z.o.o. (To date)(April 13, 1972)

Number ofshares of theCompany heldby Candidate

500 shares

800 shares

1,000 shares(Notes) 1. None of the candidates for Directors has any special interests with the Company.

- 64 -

2. Candidates for Directors Messrs. Mitsuo Yonemoto and Yasuhisa Katsuta are candidates
for outside Directors.
3. Reasons for the selection of the candidate for outside Directors:
Management has judged that Mr. Mitsuo Yonemoto will be able to offer advice based on
his broad experience as a management consultant.
Management has judged that Mr. Yasuhisa Katsuta will be able to use his experience inand capabilities in corporate management and banking and financing in the managementof the Company.
4. Years of service of outside Directors of the Company:
Mr. Mitsuo Yonemoto will have served as outside Director for 12 years at the close ofthis Ordinary General Meeting of Shareholders.
Mr. Yasuhisa Katsuta will have served as outside Director for five years at the close ofthis Ordinary General Meeting of Shareholders.
5. Conclusion of liability limitation agreements:
The Company has entered into an agreement with each of the outside Directors Mitsuo
Yonemoto and Yasuhisa Katsuta to limit his liability for any damage as provided for in
Article 423, paragraph 1 of the Corporation Law of Japan within the aggregate amount asprovided for in the items of Article 425, paragraph 1 of the said law, pursuant to Article
427, paragraph 1 of the said law. If each of them is reelected, such agreement will berenewed.
6. Posts in the Company and business in charge of the candidates for Directors proposed tobe reelected:
As stated on page 10 of the business report.

- 65 -

Proposition No. 3:

Election of three (3) Corporate Auditors

Subject to the approval of Proposition No. 1 "Amendment to the Articles ofIncorporation" by the shareholders, the Company will shift from a "company having
committees" to a "company having a board of corporate auditors". Accordingly, theCompany is required to newly elect Corporate Auditors. Hence, it is hereby proposed thatthree (3) Corporate Auditors be elected, subject to the approval of Proposition No. 1"Amendment to the Articles of Incorporation" by the shareholders.
The candidates for Corporate Auditors are as follows:

Candidate
No.

Name

Brief history and post in the Company (andimportant concurrent office)(Date of birth)January 1973
September 1976

1.

Akitaka Inoue(September 25,
1944)

July 1991
July 1999
September 1999
June 2003

June 2004
June 2005
June 2009

Joined Mizuho Audit Corporation
Registered as Certified Public
Accountant
Partner, Mizuho Audit Corporation
Joined the Company;
Director of the Company
Officer and General Manager ofCorporate Planning Headquartersof the Company;
Outside Corporate Auditor of ITX
Corporation
Corporate Auditor of theCompany
Director and Chairman of Audit
Committee of the Company
Special Advisor of the Company(To date)- 66 -

Number ofshares of theCompany heldby Candidate

3,000 shares

Candidate
No.

Name

Brief history and post in the Company (andimportant concurrent office)(Date of birth)
April 1962
July 1987

September 1990
Shinichi Koneda2.

May 1991(May 15, 1937)
March 1995

March 2001

February 2006
May 2010

April 1967
June 1991

September 1995

3.

Masahide Morimoto

April 1999

(August 27, 1944)

June 2001

April 2007

Joined Nichimen Corporation(now Sojitz Corporation)
General Manager of Dept. I of
Electronic Information
Headquarters, Osaka Head Officeof Nichimen Corporation
Vice President and General
Manager of Chicago Branch of
Nichimen U.S.A.
Outside Director of Navigation
Technologies Corp. (now
NAVTEQ Corp.)
President and Representative
Director of Nichimen ElectricParts Co., Ltd.
President and Representative
Director of TOKYO DEN-ON
Co., Ltd.
Representative Director of
NAVTEQ Corp.
Director of NAVTEQ Corp. (Todate)(Director of NAVTEQ Corp.)
Joined Daiwa Securities Co. Ltd.
Director, General Manager ofHigashi-Tokyo Headquarters andGeneral Manager of Tokyo
Metropolitan-West Sales
Headquarters of Daiwa Securities
Co. Ltd.
Managing Director and General
Manager of Osaka-Kinki-Shikoku
Sales Headquarters of Daiwa
Securities Co. Ltd.
Representative Director andGeneral Manager of Osaka
Branch of Daiwa Securities
SMBC Co. Ltd. (now Daiwa
Securities Capital Markets Co.,Ltd.)
President and Representative
Director of Daiwa Tochi
Tatemono Co., Ltd. (now Daiwa
Property Co., Ltd.)Special Advisor of Daiwa
Property Co., Ltd.

- 67 -

Number ofshares of theCompany heldby Candidate- share1,000 shares

- 68 -

(Notes) 1. None of the candidates for Corporate Auditors has any special interests with theCompany.
2. Candidates for Corporate Auditors Messrs. Shinichi Yoneda and Masahide Morimoto are
candidates for outside Corporate Auditors.
3. Reasons for the selection of the candidate for outside Corporate Auditors:
Management has judged that Messrs. Shinichi Yoneda and Masahide Morimoto, whohave long engaged in corporate management, will be able to use their capabilities andknowledge for the audit systems of the Company.
4. Conclusion of liability limitation agreements:
When Messrs. Shinichi Yoneda and Masahide Morimoto are elected, the Company willenter into an agreement with each of them to limit his liability for any damage asprovided for in Article 423, paragraph 1 of the Corporation Law of Japan within theaggregate amount as provided for in the items of Article 425, paragraph 1 of the said law,pursuant to Article 427, paragraph 1 of the said law.

Proposition No. 4:

Election of one (1) Alternate Corporate Auditor

Subject to the approval of Proposition No. 1 "Amendment to the Articles ofIncorporation" by the shareholders, the Company will shift from a "company having
committees" to a "company having a board of corporate auditors". Accordingly, theCompany is required to newly elect Corporate Auditors. Hence, it is hereby proposed thatone (1) Alternate Corporate Auditor be elected in accordance with the provision of Article
329, paragraph 2 of the Corporation Law of Japan, to prepare in advance in case the numberof Corporate Auditors falls below the number stipulated by law, subject to the approval of
Proposition No. 1 "Amendment to the Articles of Incorporation" by the shareholders.
With regard to the effectiveness of the election, it may be repealed by resolution of
the Board of Directors upon consent thereto by the Board of Corporate Auditors only before
he assumes office.

- 69 -

The candidate for Alternate Corporate Auditor is as follows:

Name

Brief history (and important concurrent office)(Date of birth)
April 1961
March 1989

March 1992
Naganori Tanaka(November 13, 1938)

November 1993

October 2000

March 2002

Joined Nichimen Corporation (nowSojitz Corporation)
General Manager of Osaka ElectricAppliance Dept. II of Nichimen
Corporation
General Manager of Tokyo
Telecommunications Dept. I of
Nichimen Corporation
President and Representative
Director of Nichimen Telecom
Service, Inc.
President and Representative
Director of IT Telecom, Inc. (nowITX Corporation)
Chairman and Director of ITX
Corporation

Number of sharesof the Company
held by Candidate

100 shares(Notes) 1. Candidate for Alternate Corporate Auditor has no special interests with the Company.
2. Candidate for Alternate Corporate Auditor Mr. Naganori Tanaka is a candidate foralternate outside Corporate Auditor.
3. Reasons for the selection of the candidate for alternate outside Corporate Auditor:
Management has judged that Mr. Naganori Tanaka, who has long engaged in corporate
management, will be able to use his capabilities and knowledge for the audit systems of
the Company.
4. Conclusion of liability limitation agreements:
When Mr. Naganori Tanaka assume the office of Corporate Auditor, the Company willenter into an agreement with him to limit his liability for any damage as provided for in
Article 423, paragraph 1 of the Corporation Law of Japan within the aggregate amount asprovided for in the items of Article 425, paragraph 1 of the said law, pursuant to Article
427, paragraph 1 of the said law.

- 70 -

Proposition No. 5:

Granting of retirement gratuities to the retiring Directors

It is hereby proposed that retirement gratuities be granted to Messrs. Akira Miyazaki,
Shigemichi Asakura and Hidetoshi Nishimura, who will retire upon expiration of the term ofoffice as Directors at the close of this Ordinary General Meeting of Shareholders, inappreciation of services rendered by them while in office, within the extent of a reasonableamount in accordance with the established standards of the Company and that determinationof the actual amount, the time and method of presentation, etc. be left to the Board of
Directors subject to the approval of Proposition No. 1 "Amendment to the Articles ofIncorporation" by the shareholders.
The brief histories of the retiring Directors are as follows:
Name

Brief history

Akira Miyazaki

June 2004 Outside Director of the Company (To date)

Shigemichi Asakura

June 2005 Outside Director of the Company (To date)Hidetoshi Nishimura

June 2006 Outside Director of the Company (To date)

Proposition No. 6:

Revision of remuneration of Directors and Statutory Auditors

Subject to the approval of Proposition No. 1 "Amendment to the Articles ofIncorporation" by the shareholders, the Company will shift from a "company having
committees" to a "company having a board of corporate auditors". Accordingly,
management desires to newly fix the amounts of remuneration for Directors and Corporate
Auditors to allow itself to follow an agile remuneration policy. Hence, in consideration of
the current economic conditions and various other factors, it is hereby proposed that theamount of remuneration for Directors be no more than ¥550 million per year (including theamount of ¥30 million of remuneration for outside Directors per year) and the amount of
remuneration for Corporate Auditors be no more than ¥40 million per year, subject to theapproval of Proposition No. 1 "Amendment to the Articles of Incorporation" by theshareholders.
The amount of remuneration for Directors shall not include wages of employees
payable to employees concurrently serving as Directors.
Upon the approval and adoption of Proposition No. 2 and Proposition No. 3, there
will be 12 Directors (including two outside Directors) and three Corporate Auditors.

- END -

- 71 -