(Translation)

Securities Code: 6839
June 8, 2018

NOTICE OF THE 66TH ORDINARY GENERAL MEETINGOF SHAREHOLDERS

Dear Shareholders:
We would like to express our appreciation for your continued good offices.
You are hereby notified that the 66th Ordinary General Meeting of Shareholders of Funai
Electric Co., Ltd. (the “Company”) will be held as described below, and you are cordiallyinvited to attend the meeting.
Since voting rights can be exercised in writing, even if you are unable to attend the meeting,please review the attached Reference Document for the General Meeting of Shareholders set
forth below and send to us by return mail the enclosed voting form indicating your approvalor disapproval of the propositions no later than 5:00 p.m. on June 26 (Tuesday) in Japan time,
2018.

Yours very truly,

Hideaki Funakoshi
Representative Director, President, andChief Executive Officer

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

Date and hour:
June 27 (Wednesday), 2018, 10:00 a.m.

2.

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

3.

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

The business report, the consolidated financial statements and the audit reportson the consolidated financial statements by the independent auditors and the
Audit and Supervisory Committee for the 66th fiscal year (from April 1, 2017
to March 31, 2018)2.

The nonconsolidated financial statements for the 66th fiscal year (from April 1,2017 to March 31, 2018)

Matters to be resolved:
Proposition No. 1:

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

Proposition No. 2:

Payment of condolence money to the family of the late
Mr. Tetsuro Funai, Director and Executive Advisor- END -・ In attending the meeting, please submit the enclosed voting form to a receptionist at theplace of the meeting.
・ Of the documents to be provided upon giving notice of this Ordinary General Meeting of
Shareholders, “Notes to the consolidated financial statements” and “Notes to thenonconsolidated financial statements”, which are posted on our website(http://www2.funai.co.jp/en/investors/) in accordance with and as provided for in theapplicable laws and ordinances and Article 14 of the Articles of Incorporation of theCompany, are not attached with this notice of the Ordinary General Meeting of
Shareholders. Therefore, the attached documents to this notice of the Ordinary General
Meeting of Shareholders are a part of the consolidated financial statements andnonconsolidated financial statements that have been audited by the independent auditors
to express their audit opinions.
・ In the event of the revision to any matters in the Reference Document for the General
Meeting of Shareholders, the business report, the consolidated financial statements andthe nonconsolidated financial statements, it will be posted on our website stated above.

Reference Document for the General Meeting of Shareholders
Propositions and reference information
Proposition No. 1: Election of five (5) Directors (excluding Directors who are Audit andSupervisory Committee Members)
The term of office of all four (4) directors (excluding directors who are Audit andSupervisory Committee members; the same applies hereinafter in this proposition) currently
in office will expire at the close of this Ordinary General Meeting of Shareholders. Mr.
Tetsuro Funai retired as director as he passed away on July 4, 2017.

Hence, it is hereby proposed that five (5) Directors, including one (1) outside Director,
be elected in order to accelerate decision-making and increase management efficiencies.
The candidates for Director are as follows:Candidate
No.

Name
(Date of birth)

Brief history, post in the Company and business incharge (and important concurrent office)April 1984
January 1993
April 2006
February 2008

June 2010

July 2011

May 2012

April 2013
1

Hideaki Funakoshi(September
30,
1965)
November 2014
April 2016

June 2016
May 2017

July 2017

Joined Mitsubishi ElectricEngineering Company, Limited
Joined the Company
General Manager of DVD Projectof the Company
Executive General Manager of
DVD Business Div. of theCompany
Director of the Company
Officer and General Manager of
DVD Business Div. of theCompany
Officer and Deputy General
Manager of AV Business
Headquarters of the Company
Officer, Deputy General Manager
of AV System Business
Headquarters and General Manager
of Digital Media Business Div. of
the Company
Officer, General Manager of AV
System Business Headquarters andGeneral Manager of Display
Business Div. of the Company
Officer and General Manager of
AV System Business Headquartersof the Company
Officer, General Manager of AV
System Business Headquarters andGeneral Manager of Display
Business Div. of the Company
Director of the Company
Representative Director of theCompany (To date)President & CEO of the Company(To date)
General Manager of AV System
Business Headquarters and General
Manager of Display Business Div.
of the Company
General Manager of Business
Headquarters and General Manager
of Products Reliability
Headquarters

Number ofshares of theCompany heldby Candidate

800 shares

Candidate
No.

Name
(Date of birth)

Brief history, post in the Company and business incharge (and important concurrent office)April 1982
April 2003

April 2005
2

Takeshi Ito(September 10,
1960)

August 2008
October 2009
April 2012
October 2014

June 2016
April 1977

September 1998

General Manager of Marketing
Promotion Dept., Overseas Sales
Div. of Victor Company of Japan,
LimitedFebruary 2003

Executive Vice President of JVC
Canada Inc.
General Manager of AVC
Accessory Dept. of Victor
Company of Japan, Limited

September 2006

3

Motoyoshi Adachi(January 26, 1955)

Joined the Company
Assumed the position of General
Manager of the Company
President of FUNAICORPORATION, INC.
Executive General Manager of theCompany
President of P&F USA, Inc.
Officer of the Company
President of Funai India Private
Limited
Officer and General Manager ofMaterials Headquarters of theCompany (To date)Director of the Company (To date)
Joined Victor Company of Japan,
Limited (currently JVC Kenwood
Corporation)

April 2007
June 2008

September 2008

September 2009
June 2011
May 2013

Associate Director of Victor
Company of Japan, Limited
Director of Victor Company ofJapan, Limited
Director, Executive Officer of JVC
Kenwood Holdings Inc. (currently,
JVC Kenwood Corporation)
Director, Managing Officer of
JVC Kenwood Holdings Inc.
Advisor of JVC Kenwood
Holdings Inc.
Joined the Company as Associate
Director in charge of sales
management

Number ofshares of theCompany heldby Candidate

1,000 shares- shareCandidate
No.

Name
(Date of birth)

Brief history, post in the Company and business incharge (and important concurrent office)April 2014

Associate Director and General
Manager of HV Business Div., AV
System Business Headquarters of
the Company

October 2014

Officer, General Manager of HVBusiness Div., AV System
Business Headquarters of theCompany

January 2015

Officer, General Manager ofDisplay System Business Div., AV
System Business Headquarters of
the Company

April 2016

President of Funai Corporation,
Inc.
President of P&F USA, Inc.

April 2018

Officer, General Manager ofBusiness Headquarters of theCompany (To date)

Number ofshares of theCompany heldby Candidate

Candidate
No.

Name
(Date of birth)

Brief history, post in the Company and business incharge (and important concurrent office)April 1986
October 2003
April 2006

June 2007

July 20094

Makoto Ueshima(February 27,
1963)

July 2010

April 2014
August 2015
April 2017
July 2017

Candidate for
Outside Director

April 2018
May 2018

Joined the Company
Officer of the Company (Todate)

July 1995

Vice President and Director of
T.P.S. Laboratory Co., Ltd. (Todate)
Outside Director of the Company(To date)
Outside Director of THE SAILORPEN CO., LTD.
Outside Audit & Supervisory
Board Member of Oriental Chain
Mfg. Co., Ltd. (To date)

September 1998
5

Mitsuo Yonemoto(March 18, 1939)

Joined Daiwa Bank, Limited(now Resona Bank, Limited)
General Manager of Senri
Branch of Resona Bank
Department Manager of theSeventh Osaka Sales
Department, Osaka Sales
Office, Resona Bank
Department Manager of the
Sixth Tokyo Sales Department,
Tokyo Sales Office, Resona
Bank
Department Manager of theSecond Sales Department,
Toranomon Branch, Resona
Bank
General Manager of Amagasaki
Kita Branch and Amagasaki
Area Manager, Resona Bank
General Manager of Osaka
Nishi Branch, Resona Bank
General Manager of Pension
Sales Department, Resona Bank
Loaned to the Company,
Associate Director
General Manager of
Administration Headquarters of
the Company (To date)

March 2009
June 2012

Number ofshares of theCompany heldby Candidate- share100 shares

Candidate
No.

Name
(Date of birth)

Brief history, post in the Company and business incharge (and important concurrent office)Number ofshares of theCompany heldby Candidate(Vice President and Director of T.P.S. Laboratory Co.,Ltd.)
(Outside Audit & Supervisory Board Member ofOriental Chain Mfg. Co., Ltd.)(Notes) 1. None of the candidates for Director have any special interests with the Company.
2. Candidate for Director, Mr. Mitsuo Yonemoto, is a candidate for Outside Director.
3. Reasons for the selection of the candidates for Director or Outside Director:
・The Management expects Mr. Hideaki Funakoshi to use the wide range of knowledge andcapabilities accumulated from his broad expertise and experience as a manager of the AV
business, one of the Company’s core businesses.
・The Management expects Mr. Takeshi Ito to use the wide range of knowledge andcapabilities accumulated from his diverse business experience within the Company andextensive overseas business experience in the management of the Company.
・The Management expects Mr. Motoyoshi Adachi to make full use of the abilities andinsight that he has developed from his abundant experience and achievements in the areaof business management for many years in his previous career and at this Company.
・The Management expects Mr. Makoto Ueshima to make full use of his abilities andabundant insight in the area of banking and finance in the management of the Company.
・The Management expects Mr. Mitsuo Yonemoto to offer advice based on his broad
experience as a management consultant and also enhance the transparency ofmanagement by participating in the Board of Directors as an independent officer.

4. Years of service of Outside Director of the Company:
Mr. Mitsuo Yonemoto will have served as an outside director for 19 years and ninemonths at the close of this Ordinary General Meeting of Shareholders.
5. Designation of independent officer:
The Company has designated Mr. Mitsuo Yonemoto as an independent officer inaccordance with the rules of Tokyo Stock Exchange, Inc. and registered him with suchexchange.
6. Conclusion of limited liability agreement:
The Company has entered into an agreement with Non-executive Directors Mr. Tetsuro
Funai and Mr. Mitsuo Yonemoto to limit their liability for any damage as provided for in
Article 423, paragraph 1 of the Companies Act of Japan within the aggregate amount asprovided for in the items of Article 425, paragraph 1 of the said Act, pursuant to Article
427, paragraph 1 of the said Act. If they are reelected, such agreement will be renewed.

Proposition No. 2:

Payment of condolence money to the family of the late Mr. Tetsuro
Funai, Director and Executive Advisor

Mr. Tetsuro Funai, who was a director and executive advisor of the Company, passed
away on July 4, 2017. We propose to offer condolence money to his bereaved family, withina reasonable extent in accordance with the predetermined standards of the Company, as aretirement bonus as a reward for his achievements during his service with the Company.
We also propose that the specific amount, timing and method of payment and otherdetails for the condolence money be determined by the Compensation Committee under the
direction of the Board of Directors.

The career of the late Mr. Tetsuro Funai is outlined as follows:
Name
Tetsuro
Funai

CareerAugust 1961 Established the Company, Representative Director andPresident
June 2005
President & CEO, Representative Director of the Company
June 2008
Chairman of BOD & Executive Officer of the Company
June 2010
Chairman of BOD & Officer of the Company
June 2012
Chairman of BOD of the Company
October 2014 Chairman and Representative Director of the Company
June 2016
Executive Advisor and Director of the Company
July 2017
Passed away

- END -

(Attached documents)
BUSINESS REPORT(April 1, 2017 to March 31, 2018)
1.

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

Development and results of business activities:

In the United States, which is the Group’s mainstay market, the economy has slowed
down moderately. Although employment in the U.S. continued to be strong, supported by thesolid performance of businesses, the growth of wages was modest, retail sales were weak andconsumer spending declined. In Europe, the expansion of the economy has slowed down due
to the shortage of facilities and labor, with a general weakness in production, export andconsumer spending. In China, the economy grew steadily, supported by the improvement in
employment while consumer spending slowed down moderately.
In Japan, the economy continued its modest recovery with strong employment andincomes, while exports and production activities slowed down.
Under these circumstances, the Group reported net sales of 130,130 million yen, a
2.8% decrease from the previous year, affected by the decline in sales prices and the sales
volume of LCD TVs in the U.S. This was mainly because demand for LCD TVs in the U.S.
decreased from the previous year, which resulted in an oversupply and further intensified
price competition. The Group reported an operating loss of 10,885 million yen (operating lossof 6,775 million yen in the previous year). This decrease was mainly due to the decrease insales of LCD TVs. Other factors contributing to the decrease were the increased purchasecost of LCD panels and the increase in sales promotion expenses for selling inventories of
LCD TVs produced by using these LCD panels before the prices fell in the year-end
shopping season; the failure to provide price-competitive products to the market in a timely
manner at a time when LCD panel prices were declining; and the high cost of memory andother components. Ordinary loss was 11,909 million yen (ordinary loss of 7,726 million yen
in the previous year) affected by the foreign exchange loss from the appreciation of the yen
against the U.S. dollar. Net loss attributable to owners of parent ended at 24,709 million yen(net loss of 6,745 million yen in the previous year) because we reported impairment loss.
Net sales by product sector were as follows:
Audiovisual Equipment
Sales of LCD TVs and BD recorders increased, which were partially offset by thedecrease in the sales of DVD products. Consequently, the Audiovisual Equipment business
reported net sales of 122,569 million yen, a 6.3% increase from the previous year.
Information Equipment
Net sales of the Information Equipment business were 3,334 million yen, a 34.3%
decrease from the previous year, mainly due to the decrease in sales of ink jet printers and ink
cartridges.

OtherNet sales of the Other business were 4,225 million yen, a 68.7% decrease from theprevious year. This decrease was mainly because sales of the electronic reception devices of
DX Antenna Co., Limited were not included in the consolidated sales results of the current
year as the Company assigned all shares of DX Antenna, which was a consolidated
subsidiary of the Company in the previous year, to ELECOM Co., Ltd.
<Consolidated net sales by product group>Group
Audiovisual equipment
Information equipment
Other
Total
(2)

Net sales(millions of yen)
122,569
3,334
4,225
130,130

Component rate
(%)
94.2
2.6
3.2
100.0

Investment in property, plant and equipment:

Investment in property, plant and equipment during the fiscal year under review
totaled ¥2,155 million, which comprised of ¥1,576 million by its manufacturing companiesand ¥579 million by its sales companies. Such investments were mainly for the improvementof the manufacturing facilities.
(3)

Finance:
Nothing to be reported.

(4)

Status of major organizational restructuring, etc.
Nothing to be reported.

(5)

Issues to be addressed:

The business environment for the consumer electronics industry remained severe,with declining demand for LCD TVs in the United States, which is the mainstay market for
the Group, intensified competition among suppliers, and the shrinking of the DVD/BD
market due to the expansion of the online distribution of video content
Under these circumstances, the issues and the measures to be taken are as follows:(i)

Increase of net sales and recovery of profitability
The Group’s top priority is to increase net sales and recover profitability.

In the audiovisual equipment business, we will develop and expand sale channels in the
U.S. market by affiliating with large retail chains, following the affiliation with Walmart. We
will also introduce high value-added products, such as AI TVs, to expand our share in theU.S. market. In the Japanese market, where growth is expected, the Company will strive toenhance its product lineup, including OEL TVs, and promote further expansion of the
FUNAI brand by strengthening advertising activities and improving customer satisfaction.
In the Information Equipment business, we will recover the costs of our achievements inresearch and development as profit by actively marketing high value-added special printers
and ink cartridges for industrial use.
We will also actively work on new businesses such as microfluidics (micro fluid control
technology)-applied products, video equipment for industrial use, healthcare/medical
equipment, and EVs (electric vehicles) and automotive related products.
To steadily implement the above-mentioned strategies, the Group is working towards
business improvements to provide products that meet market needs in a timely manner byminimizing time lags between functions, from product planning, development, material
procurement, and production to sales.
(ii)

Reinforcement of the manufacturing systems

The Group has production sites in China, Thailand, the Philippines and Mexico. By
concentrating production activities in the most optimal regions, the Group makes concerted
efforts to enhance the local content ratio, improve production efficiency and reduce costs
throughout all processes up to the delivery of end products.
(iii)

Training and appointment of human resources

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

Significant events concerning the assumptions of the going concern

Following the previous year in which the Group recorded a significant operating loss,
ordinary loss, net loss attributable to owners of the parent and negative operating cash flow,
the Group continued to record an operating loss, ordinary loss, net loss attributable to ownersof the parent and negative operating cash flow in the current year, which ended March 31,
2018. There have been events or circumstances that raise material doubts about theassumptions of the going concern.
However, there are no material financial concerns as the balance of cash and deposits
currently held by the Group are sufficient to cover operating capital for the time being.
Moreover, the Group is confident that the matter in question can be resolved in light of thefact that the Group has reviewed and modified the medium-term management policy
formulated in the previous year and take the following actions gradually based on themodified policy.

(A) Display business (LCD-TV business)
・Expand sales to existing customers in the U.S. market and seek to acquire newcustomers
・Concentrate management resources on the development of FUNAI brand products
and OEM products in the Japanese market(B) Digital media business (DVD and BD business)
・Implement a niche strategy in the U.S. market focusing on certain products
・Expand FUNAI brand products and acquire new customers for OEM in theJapanese market.
(C) Office solution business (information equipment-related business)
・Improve profitability by expanding sales of high value-added printer products
・Implement a derivative business by making use of microfluidics (micro fluid
control technology)(D) New businesses
・Expand sales by developing and releasing new products related to healthcare,
medical and in-vehicle devices

As a result of the foregoing, it has been determined that significant uncertainty concerning
the assumptions of the going concern is not deemed to exist as of the end of the fiscal year
under review.
(6)

Property and income/loss:
63rd(April 1, 2014 toMarch 31, 2015)

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

65th(April 1, 2016 to
March 31, 2017)

66th(April 1, 2017 toMarch 31, 2018)

Net sales(millions of yen)

216,553

170,041

133,838

130,130

Ordinary income(loss)(millions of yen)600

(13,653)(7,726)(11,909)

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

31

(33,839)(6,745)(24,709)

Net income (loss)
per share (yen)0.92(991.81)(197.70)(724.21)

Total assets(millions of yen)

188,902

154,191

108,685

80,270Equity(millions of yen)

123,218

84,43976,65650,717

Equity per share(yen)

3,576.14

2,442.28

2,242.38

1,485.96

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

(7)

Major subsidiaries:
Ratio of equity
participation of
the Company(%)

Main business

FUNAI CORPORTION, INC. US$68.5 million

100.00

Sale of the Company’s products

Funai Electric (HK) Ltd.

HK$115 million

100.00

THB1,568
million100.00Trade name

Capital stock

FUNAI (THAILAND) CO.,
LTD.

(8)

Manufacture of the Company’s
products
Manufacture of the Company’s
products

Major businesses of the Group:
Division

Principal products

Audiovisual equipment

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

Printers and ink cartridges

Other

Other equipment(9)

Major business sites of the Group:
Category

Funai Electric Co., Ltd.

Sales subsidiaries

Production subsidiaries(10)(Note)

Name

Location

Head Office

Daito City, Osaka

Tokyo Branch

Chiyoda-ku, Tokyo

FUNAI CORPORATION, INC.

U.S.A.

P&F USA, Inc.

U.S.A.

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

MexicoFunai Electric (HK) Ltd.

Hong Kong

FUNAI (THAILAND) CO., LTD.

Thailand

Employees of the Group:
Number of employees(persons)

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

2,408

-879

1. The above number of employees represents those actively at work.
2. The number of employees decreased from the previous fiscal year mainly due to thedecrease in the number of Group companies as a result of the assignment of shares of

DX Antenna Co., Ltd. and the streamlining of the workforce at Funai (Thailand) Co.,
Ltd., a production subsidiary.

(11)

Major lenders:

Nothing to be reported.
(12)

Other important matters concerning the current state of the Group:

Nothing to be reported.

2.

Matters concerning the shares of the Company(1)

Total number of shares authorized:

80,000,000 shares(2)

Total number of shares issued:

36,130,796 shares(Including 2,011,829 shares of treasury stock)(3)

Number of shareholders:

9,949 persons(4)

Principal shareholders (top 10):
Name

Tetsuo Funai
State Street Bank and Trust Company 505223
Funai Information Science Promotion Foundation
State Street Bank and Trust Company
GOLDMAN SACHS INTERNATIONALEFUTSU Co., Ltd.
T&N Co., Ltd.
Funai Kosan Co., Ltd.
Funai Shougakukai
The Bank of New York 133522

Number of shares held
(thousands of share)
13,438
1,942
1,740
1,281
740
470
470
470
462
457

Shareholding
ratio (%)
39.39
5.69
5.10
3.75
2.17
1.38
1.38
1.38
1.35
1.34

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

(5)

Other important matters concerning shares:
Nothing to be reported.

3.

Matters concerning stock acquisition rights:(1)

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

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

3,091 rights

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

Class and number of shares to be 309,100 shares of common stock
issued or transferred upon exercise (100 shares per stock acquisition right)of the stock acquisition rights:(iii) Stock acquisition rights held by Directors by category:

(2)

Issue

Category

Numberof rights

HolderExercise priceper share

Exercise period

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

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

50

1¥1,296

September 1, 2016
to August 31,
2023

The first stockacquisition rights
for the year ended
March 31, 2017

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

150

2¥1,019September 1, 2018
to August 31,
2023

The first stockacquisition rights
for the year ended
March 31, 2018

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

150

2

¥947

September 1, 2019
to August 31,
2024

Stock acquisition rights allotted during the fiscal year under review:
Stock acquisition rights issued on November 29, 2017:(i) Number of stock acquisition rights:

1,700 rights(ii) Class and number of shares to be 170,000 shares of common stock
issued or transferred upon exercise (100 shares per stock acquisition right)of the stock acquisition rights:(iii) Amount of property to be paid in upon ¥94,700 per right (¥947 per share)
exercise of the stock acquisitionrights:(iv) Exercise period of stock acquisition September 1, 2019 to August 31, 2024
rights:(v) Stock acquisition rights allotted:

Category

Number of rights

Directors of the Company
Employees of the Company

150
1550

(3)

Number of shares to beissued or transferred
15,000155,000

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

Number of holders
2
124

4.

Matters concerning Officers of the Company:(1)

Directors (as of March 31, 2018)
Title

Name

Business in charge and important concurrent
officeRepresentative Director andPresident & CEO

Hideaki
Funakoshi

General Manager of Business Headquarters
and General Manager of Products
Reliability Headquarters

Director and Officer

Takeshi Ito

General Manager of Materials
Headquarters

Director and Officer

Hiroyuki
MakiuraMitsuoYonemoto

General Manager of Sales Headquarters

Outside Director

Director (Audit andSupervisory Committee
Member, full time)
Outside Director (Audit andSupervisory Committee
Member)Outside Director (Audit andSupervisory Committee
Member)(Notes)Fumiaki
KideraExecutive Vice President and Director,
TPS Co., Ltd.
Outside Corporate Auditor, Oriental Chain
Mfg. Co., Ltd.
Chairman of the Audit and Supervisory
Committee

Masahide
Morimoto
Masakazu
Funaishi

1. The Company has appointed Fumiaki Kidera as a full-time member of the
Audit and Supervisory Committee with the aim of enhancing the effectiveness ofaudits through reinforcement of the Committee’s information gathering capability
and collaboration with internal audit units, etc. and by further strengthening its
audit and supervisory functions.
2. The Company has designated Outside Director Mitsuo Yonemoto as an
Independent Officer in accordance with the rules of the Tokyo Stock Exchange,
Inc. and registered him with the exchange.
3. The Company has established a Nomination Committee and a Compensation
Committee (both of which are voluntary committees). The composition of each of
the committees is as follows:・ Nomination Committee: Hideaki Funakoshi (Chairman), Takeshi Ito and
Hiroyuki Makiura
・ Compensation Committee: Hideaki Funakoshi (Charmian), Takeshi Ito,
Hiroyuki Makiura and Mitsuo Yonemoto

(2)Directors who retired during the fiscal year under review:
Name

Tetsuhiro
Maeda
Joji Okada

Retirement
date

ReasonHiroshiIshizakiJune 28,2017
June 28,2017
June 28,2017

Expiration ofterm of office
Expiration ofterm of office
Expiration ofterm of office

Yoshiaki
SakauchiJune 28,2017

Expiration ofterm of officeTetsuro
Funai

July 4,2017

Passed away

Title, business in charge and importantconcurrent office upon retirement

Director
Director, Officer, General Manager ofLegal/Intellectual Property Headquarters
Director (Audit and Supervisory
Committee Member, full time)
Chairman of the Audit and Supervisory
Committee
Outside Director (Audit and Supervisory
Committee Member)President and Representative Director,
Be.com, Co. Ltd.
Director and Executive Advisor
Chairman of Funai Foundation for
Information Technology
Chairman of Funai Shogakukai(For reference)
The Company has adopted a “System of Officers” and the Officers as of March 31,2018 who did not concurrently hold the offices of Directors were as follows:
Officer
Motoyoshi Adachi
Officer
Katsuo Tokuhara(3)

Outline of liability limitation agreements:
In accordance with Article 427, paragraph 1 of the Companies Act of Japan, theCompany has entered into an agreement with Non-executive Directors Mitsuo
Yonemoto, Fumiaki Kidera, Masahide Morimoto and Masakazu Funaishi to limit their
liability for any damage as provided for in Article 423, paragraph 1 of said act within
the aggregate of the amounts listed in the items of Article 425, paragraph 1 of said act.

(4)Total amount of remuneration, etc. for Directors
Total amount of remuneration, etc. for the fiscal year under review:

Category

Number ofrecipients(persons)

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

Amount of payments(thousand yen)

7
(1)

68,394(5,200)5(3)

19,337(10,400)

12(4)

87,732(15,600)(Notes) 1. The above-listed amounts include payments to three directors (excluding
directors who were members of the Audit and Supervisory Committee) and two
directors (who were members of the Audit and Supervisory Committee, including
one outside director) who retired during the fiscal year under review.
2. The above-listed amount of payments includes the following amount ofallowance for Officers’ retirement benefits recorded as expenses for the fiscal
year under review:• ¥5,479 thousand for seven Directors (other than Directors being Audit andSupervisory Committee Members) (including ¥400 thousand for one outside
Director)• ¥1,487 thousand for five Directors (Audit and Supervisory Committee
Members) (including ¥800 thousand for three outside Directors)
3. The above-listed amount of payments includes the following amount of
remuneration in stock options recorded as expenses for the fiscal year underreview:• ¥1,965 thousand for four Directors (other than Audit and Supervisory
Committee Members)(5)

Other important matters concerning Officers:
Nothing to be reported.

(6)

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

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

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

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

(iii)

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

(iv)•

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

Director

Mitsuo Yonemoto

Attendance and Speeches
He attended 14 of the 14 meetings (attendance rate:100%) of the Board of Directors held during the fiscal
year under review and expressed opinions principallyfrom the standpoint of a management consultant, andfrom an objective standpoint as an Independent Officer.

Director (Audit and Supervisory He attended 14 of the 14 meetings (attendance rate:
Committee Member)100%) of the Board of Directors and 11 of 11 meetings(attendance rate: 100%) of the Audit and Supervisory
Committee held during the fiscal year under review.

Masahide Morimoto

He expressed opinions at the meetings of the Board of
Directors and the Audit and Supervisory Committee
principally from the standpoint of a veteran top
executive, and from the technical standpoint of financeand securities.

Director (Audit and Supervisory On and after June 28, 2017 when he assumed the office,Committee Member)he attended 9 of the 9 meetings (attendance rate: 100%)of the Board of Directors and 7 of 7 meetings(attendance rate: 100%) of the Audit and Supervisory
Committee held during the fiscal year under review. He
Masakazu Funaishi
expressed opinions at the meetings of the Board of
Directors and the Audit and Supervisory Committee
principally from the standpoint of a veteran top
executive.

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

5.

Matters concerning independent auditors:(1)

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

Remuneration, etc., of the independent auditors for the
fiscal year under review:¥91 million

Total amount of cash and other proprietary benefits
payable to the independent auditors:¥91 million(Notes) 1. The amount of remuneration, etc., for audits under the Companies Act of Japanand the amount of remuneration, etc., for audits under the Financial Instruments
and Exchange Act of Japan are not separated in the audit agreement between the
Company and the independent auditors and cannot actually be separated.
Hence, the amount in item (i) above includes both amounts.
2. One major subsidiary of the Company is subject to audits by audit firms(including persons having qualifications in foreign countries equivalent to thoseof independent auditors of the Company) other than the independent auditors of
the Company.

(3)

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

(4)

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

(5)

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

Outline of liability limitation agreements:
Nothing to be reported.

6.

Systems and policies of the Company(1)

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

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

(ii)

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

(iii)

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

(iv)

Systems to ensure that the Directors perform their duties effectively
To ensure that the management performs decision-making swiftly andeffectively, the Company has introduced a “System of Officers”, and place
Officers under the control of the Executive Directors to ensure that theoperations determined by the Executive Directors are performed swiftly. In
addition, to enhance the transparency of the Board of Directors and strengthen
its supervisory functions, the Company has appointed outside Directors andinstituted an Audit and Supervisory Committee.

(v)

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

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

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

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

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

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

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

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

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

(vii)

Matters concerning the independence of the employees to assist the duties of
the Audit and Supervisory Committee, from the other Directors (other than
Directors being Audit and Supervisory Committee Members)

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

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

(ix)

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

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

In the event that the Directors, Officers and employees of the subsidiaries arerequested to give reports on business by the Director being Audit andSupervisory Committee Member appointed by the Audit and Supervisory
Committee of the Company, they shall immediately do so unless there is any
justifiable reason to the contrary. If the Directors, Audit & Supervisory
Board Members, Officers and employees of the subsidiaries find any violationof law or any fact that has inflicted or may inflict material damage on the
Company, they shall report the fact to the Audit and Supervisory Committeeof the Company.
(x)

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

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

(xii)

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

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

System for the exclusion of antisocial forces
The Company shall have a fundamental policy of having no relation with any
antisocial force and refusing any unjust claim.
In the event that a client is found to be an entity, enterprise, individual, etc.
having any relation with such antisocial force, the Company shall promptly
terminate a business relationship with it.
The Company shall designate its Personnel and General Affairs Department asa principal division in charge of dealing with antisocial forces and control theinformation centrally. To make its Officers and employees comply with its
fundamental policy, the Company shall also define it clearly in its related rules
and regulations and establish an education system therefor. In addition, theCompany shall prepare countermeasures to prevent damages from antisocial
forces, if necessary.
In the event that any unjust claim is requested by an antisocial force, theCompany shall work closely with external specialized agencies, including thepolice and its legal counsel, and establish a cooperative system for emergency
situations.
(2)

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

Compliance
By instituting the “Funai Group Charter of Conduct” as a code of conduct, as
well as the “Regulations of Compliance” and keeping all Officers andemployees informed about compliance, the Company has clarified thefundamental policy on compliance with law and ensured their performance of
duties conducted in compliance with laws, ordinances and the Articles ofIncorporation. The Company has also established a whistleblower system toprevent violations of law and swiftly detect problems.
During the fiscal year under review, the Company conducted two study
sessions for directors, three study sessions for division managers, and one
study session for all employees, as part of educational activities to raise thecompliance awareness of the Company’s officers and employees.

(ii)

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

(iii)

Directors’ performance of duties
The Board of Directors, which consists of 7 Directors (three of whom are
Directors being Audit and Supervisory Committee Members), including threeoutside Directors, makes decisions on the matters required by laws orordinances and important matters concerning management, and supervises theexecution of business. During the fiscal year under review, the Board of
Directors held 14 meetings. In addition, the Investment and Loan Committee
held three sessions, the Nomination Committee held two sessions and theCompensation Committee held four sessions.

(iv)

The Audit and Supervisory Committee Members’ performance of duties
The Audit and Supervisory Committee Members attend meetings of the Boardof Directors, as well as monthly financial reporting meetings. During the
fiscal year under review, 11 meetings of the Audit and Supervisory Committee
were held.

(3)

Policies for the determination of Directors’ remuneration, etc.:

Remuneration for Directors (other than Directors being Audit and Supervisory
Committee Members) and Directors being Audit and Supervisory Committee
Members shall be determined within the range of their respective maximum total
amounts of remuneration determined by resolution of the General Meeting of
Shareholders.
The amount of monthly remuneration for Directors (other than Directors being Audit
and Supervisory Committee Members) shall be determined by the Compensation
Committee upon authorization by the Board of Directors based on the Company’s
rules. The amount of monthly remuneration of Directors being Audit andSupervisory Committee Members shall be determined upon consultation among the
Directors being Audit and Supervisory Committee Members.
Bonuses for Directors (other than Directors being Audit and Supervisory Committee
Members) shall be determined by the Compensation Committee upon authorizationby the Board of Directors based on the Company’s rules. Bonuses for Directors
serving as Audit and Supervisory Committee Members shall be determined upon
consultation among the Directors being Audit and Supervisory Committee Members.
Regarding the retirement benefits for Directors, upon the approval of granting such
benefits to Directors (other than Directors serving as Audit and Supervisory
Committee Members) and Directors being Audit and Supervisory Committee
Members by resolution of the General Meeting of Shareholders and based on the
Company’s rules, the benefits for Directors (other than Directors serving as Audit andSupervisory Committee Members) shall be determined by the Compensation
Committee upon authorization by the Board of Directors, and the benefits for
Directors serving as Audit and Supervisory Committee Members shall be determinedby consultation among the Directors being Audit and Supervisory Committee
Members.
(4)

Policy for the determination of distribution of retained earnings, etc., by the Board of
Directors:
The Company recognizes the return of earnings to its shareholders as one of the mostimportant missions of management and strives to maintain a steady dividend as well
as reinforcement of its management base.
Specifically, the Company implements an active dividend policy, based on the plan topay dividends with a dividend on equity ratio of 1.0% on a consolidated basis,considering business conditions and other factors.
For the fiscal year under review, we regret to announce that the Company decided not
to pay year-end dividends. The Company will strive to resume dividend payments at
an early point by improving business performance and the Company’s financial
position.

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

CONSOLIDATED BALANCE SHEET(As of March 31, 2018)(millions of yen)
ASSETS:
Current assets:

67,779Cash and deposits .............................................................................
Notes and accounts receivable-trade .................................................
Merchandise and finished goods .......................................................
Work in process .................................................................................
Raw materials and supplies ...............................................................
Deferred tax assets .............................................................................
Other ..................................................................................................
Allowance for doubtful accounts .......................................................

32,390
9,953
13,251
516
9,841
468
2,379
(1,021)
12,491

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

8,193
4,406
1
25
3,479
263
17

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

93

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

4,203
1,285
225
1,840
1,090
(239)

TOTAL ASSETS

93

80,270(millions of yen)
LIABILITIES:Current liabilities:

26,842
Notes and accounts payable-trade ........................................................
11,808
Accounts payable-other ........................................................................
10,372Current portion of long-term lease obligations.....................................
236
Income taxes payable............................................................................
664
Reserve for product warranty ............................................................... 2,866 981
Other .....................................................................................................
2,780

Long-term liabilities:
Long-term lease obligations .................................................................
Deferred tax liabilities ..........................................................................
Liabilities for Directors’ and Audit & Supervisory Board Members’
retirement benefits ................................................................................
Liabilities for retirement benefits .........................................................
Other .....................................................................................................
TOTAL LIABILITIESEQUITY:
Shareholders’ equity:

2,711
282
655
1,025
3
744
29,55362,539Common stock ..........................................................................................

31,307

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

33,603Retained earnings .....................................................................................

21,970Treasury stock ..........................................................................................

(24,341)

Accumulated other comprehensive income (loss):(11,840)

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

13

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

(12,305)

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

451

Stock acquisition rights:

17

TOTAL EQUITY

50,717TOTAL LIABILITIES AND EQUITY

80,270CONSOLIDATED STATEMENT OF OPERATIONS(from April 1, 2017 to March 31, 2018)(millions of yen)
Net sales
Cost of sales
Gross profit
Selling, general, and administrative expenses
Operating loss
Non-operating income:

130,130
121,5298,600
19,485
10,885Interest and dividend income

248

Rental income on fixed assets
Other
Non-operating expenses:

62
196Interest expense
Foreign exchange losses
Compensation expenses
Other
Ordinary loss
Extraordinary income:Gain on sales of fixed assets
Gains from sales of shares of subsidiaries andassociates
Gain on reversal of subscription rights to shares
Extraordinary loss:
Loss on disposal of fixed assets
Impairment loss on fixed assets

67
1,107
225
130

1,530
11,909

2
29
146

178

17
12,586

12,604

Loss before income taxes
Income taxes – current
Income taxes – deferred
Net loss
Net loss attributable to owners of the parent

506

24,335257
116

373
24,70924,709

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY(from April 1, 2017 to March 31, 2018)(millions of yen)
Shareholders’ equity

Balance as of April 1, 2017
Changes of items during theperiodDividends from surplus
Loss attributable to owners of
the parent
Purchase of treasury stock
Net changes of items otherthan shareholders' equity
Total changes of items during the
fiscal year
Balance as of March 31, 2018

Common stock

Capital surplus

31,30733,603--31,30733,603Retainedearnings

Treasury stock

47,020(24,341)

Total
shareholders’equity87,590

(341)

(341)

(24,709)(24,709)(25,050)
21,970

(0)

(0)

(0)
(24,341)(25,050)
62,539

Accumulated other comprehensive income (loss)

Balance as of April 1, 2017
Changes of items during theperiodDividends from surplus
Loss attributable to owners of
the parent
Purchase of treasury stock
Net changes of items otherthan shareholders' equity
Total changes of items during the
fiscal year
Balance as of March 31, 2018

(Note)

Unrealized
gain onavailablefor-salesecurities

Foreigncurrencytranslation
adjustments

Definedretirement
benefit plans

11(11,206)

111

Total
accumulated
othercomprehensive income(loss)(11,082)

StockacquisitionrightsTotal equity

149

76,656(341)(24,709)(0)
1(1,099)

340

(757)

(131)

(889)

1
13

(1,099)(12,305)

340
451

(757)
(11,840)(131)
17(25,939)
50,717In the consolidated balance sheet and the consolidated statements of operations andchanges in equity, all figures are shown by discarding any fractions of the relevant
units.

NONCONSOLIDATED BALANCE SHEET(As of March 31, 2018)(millions of yen)
ASSETS:
Current assets:
36,468Cash and deposits .............................................................................
19,350Accounts receivable-trade ...................................................................................
18,223Merchandise and finished goods .........................................................................977
Raw materials and supplies .................................................................................
1,653
Prepaid expenses .................................................................................................357
Other ....................................................................................................................791
Allowance for doubtful accounts ........................................................................
(4,885)
Fixed assets:
37,144
Property, plant and equipment:
4,520
Buildings .............................................................................................................
1,907
Structures .............................................................................................................23
Machinery and equipment ................................................................................... 1
Motor vehicles ..................................................................................................... 0
Tools, furniture, and fixtures ...............................................................................21
Land .....................................................................................................................
2,302
Lease assets .........................................................................................................263
Intangible assets:
83
Software ..............................................................................................................71
Other ....................................................................................................................12
Investments and other assets:
32,539Investment securities ...........................................................................................291
Investment in subsidiaries and associated companies .........................................
21,808Long-term loans receivable .................................................................................
21,386Long-term prepaid expenses ...............................................................................43
Prepaid pension cost ............................................................................................
1,311
Other ....................................................................................................................200
Allowance for doubtful accounts ........................................................................
(12,500)
TOTAL ASSETS
73,612

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

19,196
6,468
118
6,419
3,842
183
286
838
1,038
3,054
658
171
454
1,025
744
22,250EQUITY
Shareholders’ equity
51,331
Common stock
31,307
Capital surplus:
33,272
Capital reserve ......................................................................................
32,833
Other capital surplus .............................................................................
438
Retained earnings:
11,092
Legal reserve .........................................................................................
209
Other retained earnings .........................................................................
10,883
Reserve for advanced depreciation of fixed assets ................................ 120
General reserve ......................................................................................23,400
Retained earnings brought forward .......................................................
(12,637)
Treasury stock(24,341)
Valuation and translation adjustments:
13
Unrealized gain on available-for-sale securities
13
Stock acquisition rights
17
TOTAL EQUITY
51,362TOTAL LIABILITIES AND EQUITY
73,612NONCONSOLIDATED STATEMENT OF OPERATIONS(from April 1, 2017 to March 31, 2018)(millions of yen)
Net sales
Cost of sales
Gross profit
Selling, general, and administrative expenses
Operating loss
Non-operating income:Interest and dividend income

119,197
113,008
6,189
12,783
6,594
591

Reversal of allowance for doubtful accounts foraffiliates
Other
Non-operating expenses:
Interest expense
Foreign exchange loss
Provision to the allowance for doubtful accounts
for affiliates
Other
Ordinary loss
Extraordinary income:Gain on sales of fixed assets
Gain on sales of investment in nonconsolidated
subsidiaries and associated companies
Gain on reversal of subscription rights to shares
Extraordinary loss:
Loss on disposal of fixed assets
Loss on valuation of shares of subsidiaries andassociates
Impairment loss
Income before income taxes
Income taxes – current
Income taxes – deferred
Net income

91
98

780

4
1,548
780
267

2,600
8,414

1
20
146

168

17
3,661
7,564
13
(67)

11,243
19,489(53)
19,435NONCONSOLIDATED STATEMENT OF CHANGES IN EQUITY(from April 1, 2017 to March 31, 2018)(millions of yen)
Shareholders’ equity
Retained earnings

Capital surplus
Commonstock

Balance as of April 1, 2017
Changes of items during the
fiscal year
Reversal of reserve foradvanced depreciation of
fixed assets
Cash dividends
Net loss
Acquisition of treasurystock
Net changes of items otherthan shareholders’ equity

Other
capitalsurplusCapitalreserve

31,307

32,833438

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

33,272

209

128

23,400(7)

Total
retainedearnings

Total
shareholders’equityTreasury
stock

7,131

30,869(24,341)

71,107

7
(341)

(341)

(341)

(19,435)(19,435)(19,435)(0)(0)

Total changes of items during
the fiscal year

-

-

-

-

-

(7)

-

(19,769)(19,776)(0)(19,776)

Balance as of March 31, 2018

31,307

32,833438

33,272

209

120

23,400(12,637)

11,092(24,341)

51,331(millions of yen)

Balance as of April 1, 2017
Changes of items during the
fiscal year
Reversal of reserve foradvanced depreciation of fixed
assetsCash dividends
Net loss
Acquisition of treasury stock
Net changes of items otherthan shareholders’ equity
Total changes of items during the
fiscal year
Balance as of March 31, 2018

(Note)

Valuation and translation adjustments
Unrealized gain
Total valuationonand translation
available-for-saleadjustments
securities
11
11

Stock acquisitionrights149

Total equity

71,269(341)(19,435)
(0)
1

1

(131)

(129)

1

1

(131)

(19,906)

13

13

17

51,362In the nonconsolidated balance sheet and the nonconsolidated statements of operations and changes in equity, all figures areshown by discarding any fractions of the relevant units.

Copy of Independent Auditor’s Report on Consolidated Financial Statements(TRANSLATION)
INDEPENDENT AUDITOR'S REPORTMay 18, 2018
To the Board of Directors
Funai Electric Co., Ltd.:
Deloitte Touche Tohmatsu LLC
Designated Unlimited Liability Partner,
Engagement Partner,
Certified Public Accountant:
Akira Nakata
Designated Unlimited Liability Partner,
Engagement Partner,
Certified Public Accountant:
Akihiro Okada
Pursuant to the fourth paragraph of Article 444 of the Companies Act, we have audited theconsolidated financial statements, namely, the consolidated balance sheet as of March 31,2018 of Funai Electric Co., Ltd. (the “Company”) and its consolidated subsidiaries, and therelated consolidated statements of operations and changes in equity for the fiscal year from
April 1, 2017 to March 31, 2018, and the related notes.
Management's Responsibility for the Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of these consolidated
financial statements in accordance with accounting principles generally accepted in Japan,
and for such internal control as management determines is necessary to enable thepreparation of consolidated financial statements that are free from material misstatement,
whether due to fraud or error.
Auditor's Responsibility
Our responsibility is to express an opinion on these consolidated financial statements basedon our audit. We conducted our audit in accordance with auditing standards generally
accepted in Japan. Those standards require that we plan and perform the audit to obtainreasonable assurance about whether the consolidated financial statements are free frommaterial misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts anddisclosures in the consolidated financial statements. The procedures selected depend on theauditor's judgment, including the assessment of the risks of material misstatement of theconsolidated financial statements, whether due to fraud or error. In making those risk
assessments, the auditor considers internal control relevant to the entity's preparation and fairpresentation of the consolidated financial statements in order to design audit procedures thatare appropriate in the circumstances, but not for the purpose of expressing an opinion on theeffectiveness of the entity's internal control. An audit also includes evaluating theappropriateness of accounting policies used and the reasonableness of accounting estimates
made by management, as well as evaluating the overall presentation of the consolidated
financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide abasis for our audit opinion.
Audit Opinion
In our opinion, the consolidated financial statements referred to above present fairly, in allmaterial respects, the financial position of Funai Electric Co., Ltd. and its consolidated
subsidiaries as of March 31, 2018, and the results of their operations for the year then endedin accordance with accounting principles generally accepted in Japan.
Interest
Our firm and the engagement partners do not have any interest in the Company for which
disclosure is required under the provisions of the Certified Public Accountants Act.
The above represents a translation, for convenience only, of the original report issued in theJapanese language.
-END-

Copy of Independent Auditor’s Report on Nonconsolidated Financial Statements(TRANSLATION)
INDEPENDENT AUDITOR'S REPORTMay 18, 2018
To the Board of Directors
Funai Electric Co., Ltd.:
Deloitte Touche Tohmatsu LLC
Designated Unlimited Liability Partner,
Engagement Partner,
Certified Public Accountant:
Akira Nakata
Designated Unlimited Liability Partner,
Engagement Partner,
Certified Public Accountant:
Akihiro Okada

Pursuant to the first item, second paragraph of Article 436 of the Companies Act, we haveaudited the financial statements, namely, the balance sheet as of March 31, 2018 of Funai
Electric Co., Ltd. (the “Company”), and the related statements of operations and changes inequity for the 66th fiscal year from April 1, 2017 to March 31, 2018, and the related notes
and the accompanying supplemental schedules.
Management's Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these financial
statements and the accompanying supplemental schedules in accordance with accounting
principles generally accepted in Japan, and for such internal control as management
determines is necessary to enable the preparation of financial statements and theaccompanying supplemental schedules that are free from material misstatement, whether due
to fraud or error.
Auditor's Responsibility
Our responsibility is to express an opinion on these financial statements and theaccompanying supplemental schedules based on our audit. We conducted our audit inaccordance with auditing standards generally accepted in Japan. Those standards require that

we plan and perform the audit to obtain reasonable assurance about whether the financial
statements and the accompanying supplemental schedules are free from material
misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts anddisclosures in the financial statements and the accompanying supplemental schedules. The
procedures selected depend on the auditor's judgment, including the assessment of the risks
of material misstatement of the financial statements and the accompanying supplemental
schedules, whether due to fraud or error. In making those risk assessments, the auditor
considers internal control relevant to the entity's preparation and fair presentation of thefinancial statements and the accompanying supplemental schedules in order to design audit
procedures that are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the entity's internal control. An audit also includes evaluating
the appropriateness of accounting policies used and the reasonableness of accounting
estimates made by management, as well as evaluating the overall presentation of the financial
statements and the accompanying supplemental schedules.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide abasis for our audit opinion.
Audit Opinion
In our opinion, the financial statements and the accompanying supplemental schedules
referred to above present fairly, in all material respects, the financial position of Funai
Electric Co., Ltd. as of March 31, 2018, and the results of its operations for the year thenended in accordance with accounting principles generally accepted in Japan.
Interest
Our firm and the engagement partners do not have any interest in the Company for which
disclosure is required under the provisions of the Certified Public Accountants Act.

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

Copy of Audit Report of the Audit and Supervisory Committee

AUDIT REPORT
We, the Audit and Supervisory Committee of Funai Electric Co., Ltd. (the “Company”),
have performed our audits on the execution by Directors of their duties during the 66th fiscal
year from April 1, 2017, through March 31, 2018. We hereby report the audit method andresults as follows.
1.

Methods of audits and the particulars thereof:

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

2.

Results of audit:(1)

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

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

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

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

(3)

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

May 21, 2018
Funai Electric Co., Ltd.
The Audit and Supervisory Committee
Fumiaki Kidera(seal)
Outside Audit and Supervisory Committee Member
Masahide Morimoto(seal)
Outside Audit and Supervisory Committee Member
Masakazu Funaishii(seal)
Outside Audit and Supervisory Committee Member- END -