(Translation)

Securities Code:June 5, 2013

6839

NOTICE OF THE 61ST ORDINARY GENERAL MEETINGOF SHAREHOLDERS

Dear Shareholders:
We would like to express our appreciation for your continued good offices.
Please take notice that the 61st Ordinary General Meeting of Shareholders of Funai
Electric Co., Ltd. (the “Company”) will be held as described below and you are cordiallyinvited to attend the meeting.
Since voting rights can be exercised in writing, even if you are not present at themeeting, please go over the Reference Document for the General Meeting of Shareholders set
forth below and send us by return mail the enclosed voting form indicating your approval ordisapproval of the propositions no later than 5 p.m. on June 20 (Thursday), 2013.

Yours very truly,

Tomonori Hayashi
Representative Director, President, andChief Executive Officer

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

Date and hour:
June 21 (Friday), 2013, 10:00 a.m.

2.

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

3.

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

Report on the business report, the consolidated financial statements, and theresults of audit of the consolidated financial statements by the accounting
auditors and the Board of Corporate Auditors for the 61st fiscal year (from
April 1, 2012 to March 31, 2013)

2.

Report on the non-consolidated financial statements for the 61st fiscal year
(from April 1, 2012 to March 31, 2013)

Matters to be resolved:
Proposition No. 1:

Election of six (6) Directors

Proposition No. 2:

Granting of retirement gratuities to retiring Directors- END -In attending the meeting, please present the enclosed voting form to a receptionist at the placeof the meeting.
In the event of the revision of any matter in the Reference Document for the General Meetingof Shareholders, the business report, the consolidated financial statements, and thenon-consolidated financial statements, it will be posted on our Internet website(http://www.funai.jp/).
Of the documents to be provided upon giving notice of this Ordinary General Meeting of
Shareholders, the notes to consolidated financial statements and the notes tonon-consolidated financial statements, which are posted on our Internet website(http://www.funai.jp/) in accordance with and as provided for in the applicable laws andordinances and Article 14 of the Articles of Incorporation of the Company, are not includedin the attached documents to the notice of this Ordinary General Meeting of Shareholders.
Therefore, the attached documents to the notice of this Ordinary General Meeting of
Shareholders are part of the consolidated financial statements and non-consolidated financial
statements that have been audited by the accounting auditors in preparing their account audit
reports.

-2-

(Attached documents)
BUSINESS REPORT(April 1, 2012 to March 31, 2013)
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, which is theFunai Group’s principal market, continued to grow gradually as it benefited from
improvements in the housing and job markets and a recovery in personal consumption. The
European economy remained sluggish, as the European Central Bank’s responses to the debt
crisis failed to dispel concerns entirely. In China, although economic performance showed
initial signs of decelerating, the new administration’s economic policies put businessconditions back on a positive track. In Japan, since the Abe administration came into office,the economic outlook has brightened as the prospect of monetary easing has prompted
corrections to yen appreciation and bolstered stock prices.
Within the consumer electronics industry, the monetary value of the digital consumer
electronics market continued the decline that has persisted since the Lehman Brothers
collapse. Under these difficult conditions, global shipments of liquid crystal display (LCD)
televisions fell below the previous year’s level for the first time, while demand forsmartphones and tablet devices has grown sharply, in a changing role of the products that are
driving the market.
As a result of the above factors, the Group posted net sales of ¥192,008 million, a
22.0% decrease compared with the same period of the previous fiscal year.
On the profit front, operating loss was ¥5,273 million (operating income for the same
period of the previous fiscal year was ¥461 million); ordinary loss was ¥355 million(ordinary income for the same period of the previous fiscal year was ¥174 million); and net
loss was ¥8,542 million (net loss for the same period of the previous fiscal year was ¥4,629
million).
Sales by product segment were as follows:
Audiovisual Equipment
In the audiovisual equipment sector, the DVD-related equipment field witnessed a
decline in revenue due to weakness in the domestic Blu-ray disc recorder market. Despite
an expansion in the Mexican market, the LCD TV market experienced an overall decline in
the wake of Japan’s transition to digital terrestrial broadcasting. As a result, net sales ofaudiovisual equipment were ¥155,686 million, a decrease of 15.2% year on year.
Information Equipment
In the information equipment sector, a decrease in printer orders resulted in net salesof ¥11,965 million, a decrease of 60.1% year on year.
-3-Other Products
Although the Philips-branded audio accessory products started selling in North
America, sales of other products declined because sales of electronic equipment related withreceivers halved in the wake of Japan’s transition to digital terrestrial broadcasting. As aresult, net sales were ¥24,356 million, a decrease of 25.3% year-over-year.
Consolidated net sales by product segment
Division
Audiovisual equipment
Information equipment
Others
Total(2)

Net sales(million yen)
155,686
11,96524,356
192,008

Component rate
(%)
81.1
6.2
12.7
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 ¥5,345 million, composed of ¥5,119 million by its manufacturing companies and¥226 million by its sales companies. The amount was spent principally to improve
manufacturing facilities.
(3)

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

(4)

Issues to be tackled:

Within the consumer electronics industry, the digital consumer electronics market
continued to shrink. Under these difficult conditions, demand for LCD TVs has slowed
down, while demand for smartphones and tablet devices has grown sharply, in a changing
role of the products that are driving the market.
Operating in this environment, the Group faces such issues as raising management
responsiveness while ensuring quality and price levels to effectively compete against rival
firms and at the same time expanding sales and recovering profitability by offering productsthat will sell. To achieve these aims, we will optimize our allocation of management
resources and further cultivate the Funai Production System, one of our core competencies.
We will also embark on the development of new businesses in the areas of environment,
network and device modules, which have a bright future.
We will endeavor to enhance the Group’s corporate value by implementing thepolicies outlined below:

-4-

(i)

Increasing net sales and returning to profitability

The Group has positioned the increase of net sales and improvement of earnings as its
highest priority issue.
(Product strategy)
During the fiscal year under review, in the audiovisual equipment segment, theGroup’s sales of LCD TVs declined, owing to lackluster Japanese market demand in thewake of the transition to digital terrestrial broadcasting. In products related to Blu-ray discs,
domestic sales of recorders dropped precipitously, as these devices are typically purchased at
the same time as LCD TVs. In information equipment as well, orders of conventional
products from original equipment manufacturer customers were down, lowering revenues.
Consequently, segment sales and profits were down year on year for these mainstay products.
For this reason, the Group is enhancing its PSI management (PSI stands for “purchase,sales and inventory”). Through this approach, we will continue to make our products morecompetitive price-wise through redesigns and by restructuring our component sourcing
system, with a view to augment sales and profitability.
With regard to product development in new business areas, during the fiscal year
under review, we introduced LED lamps into the Chinese market, and these went on sale inJapan in October 2012. In July 2012, we concluded an exclusive agreement with Royal
Philips Electronics (“Philips”) involving the sale in the United States, Canada and Mexico ofPhilips-brand audio accessories and other lifestyle entertainment products.
Sales
commenced under this agreement in September 2012. In January 2013, we reached anagreement to acquire all shares in a new company that will assume operations involving theseproducts, and we intend to expand the business on a global scale going forward.
Furthermore, in February 2013, we entered into an alliance with KDDI Corporation tooffer a service linking smartphones and televisions provided via a stick-type compact set-top
box, and we began offering these products for sale.
(Market strategy)
The Group faces the challenges of reducing the risk of overemphasizing the U.S.
market, mitigating the effects of seasonality by smoothing production and sales throughout
the year, and increasing sales. To address these issues, we are considering ways to develop
our business in expansionary emerging markets in the ASEAN and Near and Middle East
regions as well as in our existing markets in Europe, Japan, Mexico, and other Latin
American countries. In February 2012, the Group established Funai India Private Limitedin India and started selling at this subsidiary. In addition, we started selling LCD TVs in
Thailand.

-5-

Through the steady implementation of the above-mentioned strategies, we plan tominimize the time lags between product planning, development, material procurement,
production, and sales, enabling us to provide products in a timely manner that meet market
needs precisely.
(ii)

Reinforcing manufacturing and development systems

The Group’s manufacturing structure is highly dependent on China, and we recognize
this as a risk that must be mitigated. Accordingly, since the previous fiscal year, we havecontinued to augment FUNAI (THAILAND) CO., LTD., a production base that will becomecore to our provision of products in the Indian market. We are also investigating thepossibility of manufacturing in other regions, including the Philippines where we haveacquired land and plan to build a plant.
To increase group-wide development efficiency, we are moving forward with efforts
to expand our development facilities in Asian countries, including establishing a development
facility in China during the previous fiscal year.
(iii)

Training and appointment of human resources

The Group recognizes that improving each employee’s capabilities and being able tomore effectively leverage the skill set of our workforce to bolster the strength of the Groupwill be critical for ensuring the Group stays in the lead in the new era of global competition
and implementing the Group’s medium- to long-term business strategy. Therefore, theCompany’s policy is to actively train and assign employees, without regard to whether they
are younger employees or mid-career staff, by strengthening and expanding its internal orexternal training systems, including language training, among other things.

-6-

(5)

Property and income/loss:
58th(April 1, 2009 to
March 31, 2010)

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

60th(April 1, 2011 toMarch 31, 2012)

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

Net sales(million yen)

314,911295,923

246,147

192,008

Ordinary (loss) income(million yen)

11,684

1,290

174

(355)

Net (loss) income(million yen)

10,328(1,169)(4,629)(8,542)

Net (loss) income pershare (yen)302.97(34.31)(135.69)(250.38)

Total assets(million yen)

204,057

193,910

176,607

194,524

Net assets(million yen)

142,779

131,228

123,843

121,398

Net assets per share(yen)

4,164.86

3,813.57

3,598.03

3,520.11

Fiscal year
Item

(Note) Net (loss) income per share is calculated based on the average of the total number ofshares issued and outstanding during the fiscal year. Book-value per share is
calculated 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
DX ANTENNA Co., Ltd.
FUNAICORPORATION, INC.

¥363 million

91.40

US$68.5 million

100.0

Main business
Manufacture and sale ofelectronic equipment related toreceivers
Sale of the Company’s products

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

Funai Electric (HK) Ltd.
(Note)

Capital stock

Ratio of equity
participation of theCompany(%)

HK$115 million

100.0

-7-

(7)

Major businesses of the Group:
Division

Principal products

Audiovisual equipment

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

Information equipment

Printers

OthersAudio accessories and electronic equipment related to receivers(8)

Major business sites of the Group:
Category

Name

Funai Electric Co., Ltd.
Production
subsidiary

Japan

and

Sales subsidiaries
Overseas

Production subsidiary
Production
subsidiary

(9)

and

sales

Location

Head Office

Daito City, Osaka

Tokyo Branch

Chiyoda-ku, Tokyo

DX ANTENNA Co., Ltd.

Hyogo-ku, Kobe City

FUNAI CORPORATION, INC.

U.S.A.

P&F USA, Inc.

U.S.A.

Funai Electric (HK) Ltd.

Hong Kongsales FUNAI ELECTRIC EUROPE
Sp. z o.o.

PolandEmployees of the Group:
Number of employees(persons)
4,776

As compared with the end of the previous fiscal year(+ or -) (persons)+ 786(Notes) 1. The above number of employees represents those actually at work.
2. The number of employees increased principally due to the commencement of operationsof Zhong Shan Funai Electron Co. incorporated during the previous fiscal year.

(10)

Major lenders:
Nothing to be reported.

(11)

Other important matters concerning the current state of the Group:

The Company, pursuant to the resolution adopted at the meeting of its Board of
Directors held on February 26, 2013, entered into an agreement with Lexmark International,
Inc., on April 2, 2013, to acquire its ink-jet patents, as well as related technologies and assets
which it acquired on April 30, 2013.

-8-

2.

Matters concerning the shares of the Company(1)

Total number of issuable shares:

80,000,000 shares(2)

Total number of issued shares:

36,130,796 shares(including 2,011,615 shares of treasury stock)(3)

Number of shareholders:

11,474 persons(4)

Principal shareholders (top 10):

Name
Tetsuro Funai
Funai Information Science Promotion Foundation
Japan Trustee Services Bank, Ltd. (Trust account)
Tetsuo Funai
The Bank of New York, Treaty JASDEC AccountTrust & Custody Services Bank, Ltd. (Securities investment
trust account)
The Master Trust Bank of Japan, Ltd. (Trust account)
F2 Limited Liability Company
T&N Limited Liability Company
Funai Kosan Co., Ltd.

Number ofshares held
(thousandshares)12,709
1,540
1,311
1,079
613
562
487
470
470
470

Shareholding
ratio (%)
37.25
4.51
3.84
3.16
1.80
1.65
1.43
1.38
1.38
1.38

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

(5)

Other important matters concerning shares:
Nothing to be reported.

-9-

3.

Matters concerning stock acquisition rights:(1)

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

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

7,646 rights

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

Class and number of shares to beissued or transferred upon exerciseof the stock acquisition rights:
764,600 shares of common stock(100 shares per stock acquisition right)(iii) Stock acquisition rights held by Directors and Corporate Auditors by category:Category

Numberof rights

HolderExercise price

Exercise period

The first stock acquisition rights
for the year ended March 31, 2005

Director

82

4¥16,167

August 1, 2006
to July 31, 2013

The first stock acquisition rights
for the year ended March 31, 2006

Director

103

4¥12,369

August 1, 2007
to July 31, 2014

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

Director

176

5¥1,609August 1, 2010
to July 31, 2017

Issue

(2)

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

(3)

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

- 10 -

4.

Matters concerning officers of the Company:(1)

Directors and Corporate Auditors (as of March 31, 2013)
Title

Business in charge and important concurrent
officeName

Director and Chairman

Tetsuro Funai

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

Representative
Director; President; andChief Executive Officer(CEO)

Tomonori Hayashi

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

Director andToshio Ohtaku
Senior Executive Officer

General Manager of New Business Div.

Director andYoshikazu Uemura

General Manager of AV(Audiovisual) System
Headquarters; General Manager of Display
Business Div.; Member of the Nomination
Committee; and Member of the Compensation
Committee

Director and Officer

Joji Okada

General Manager of Development &Technology Headquarters; Member of theNomination Committee; and Member of theCompensation Committee

Director and Officer

Hideaki Funakoshi

Deputy General Manager of AV System
Headquarters; General Manager of DigitalMedia Business Div.; Member of theNomination Committee; and Member of theCompensation Committee

Director and Officer

Shigeki Saji

General Manager of New Business Preparatory
Office,Development&
Technology
Headquarters; Member of the Nomination
Committee; and Member of the Compensation
Committee

Outside Director

Mitsuo Yonemoto

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

Outside Director

Yoshiaki Bannai

Full-time Corporate
Auditor

Hiromu Ishizaki

Outside Corporate
AuditorShinichi Komeda

Executive Officer- 11 -

TitleBusiness in charge and important concurrent
officeName

Outside Corporate
Masahide Morimoto
Auditor(Notes) 1. As of April 1, 2013, the posts and businesses in charge of Directors were changed
as follows:• Director Yoshikazu Uemura assumed the office of Executive Officer in chargeof sales and marketing.
• Director Hideaki Funakoshi assumed the office of Officer, General Manager of
AV System Headquarters, and General Manager of Display Business Div.
• Director Shigeki Saji assumed the office of Officer and General Manager of
Digital Media Business Div.
2. Full-time Corporate Auditor Hiromu Ishizaki, who is qualified as a certified tax
accountant, has considerable knowledge of financing and accounting.
3. The Company has designated Outside Director Mitsuo Yonemoto and Outside
Corporate Auditor Shinichi Komeda as independent officers in accordance withthe rules of the Tokyo Stock Exchange and the Osaka Securities Exchange andregistered them with such exchanges.
4. The Company has established a Nomination Committee and a Compensation
Committee (both of which are voluntary committees).

(2)

Director and Corporate Auditor who retired during the fiscal year under review:
Name

Retirement
date

Yasuhisa Katsuta

June 22, 2012

Expiration ofterm of office

Title, business in charge, and importantconcurrent office upon retirement
Outside Director;
Chairman of Osaka University of
Economics; andOutside Corporate Auditor of Otsuka
Pharmaceutical Co., Ltd.

Akitaka Inoue

June 22, 2012

Resignation

Full-time Corporate Auditor

Reason(For reference)
The Company has adopted a system of officers, and the officers as of March 31,
2013, who did not concurrently hold the offices of directors were as follows:
Executive Officer

Hirofumi Nagaoka

Senior Officer

Hideo Nakai

Senior Officer

Susumu Nojii

Senior Officer
Officer

Hisao Tatsumi
Kazuo Uga

OfficerTakeshi Ito

Officer

Sei Kono

Hideo Nakai and Hisao Tatsumi retired from office as of March 31, 2013.

- 12 -

As of April 1, 2013, the designation of Senior Officer was abolished and changed
to Officer. As of the same day, the following two persons newly assumed office:••(3)

Officer
Officer

Kiyoshi Chinzei
Tetsuhiro Maeda

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

Number ofrecipients
10
(3)
4
(2)
14
(5)

Amount of payments¥213,810 thousand(¥12,200 thousand)¥21,937 thousand(¥10,400 thousand)¥235,747 thousand(¥22,600 thousand)(Notes) 1. The above-listed amount of payments includes the following amount as anallowance for officers’ retirement gratuities deducted as expenses for the fiscal
year under review:• ¥24,666 thousand for 10 Directors (including ¥1,000 thousand for threeoutside Directors)• ¥1,687 thousand for four Corporate Auditors (including ¥800 thousand for twooutside Corporate Auditors)
2. The above-listed amount of payments includes the following amount of
remuneration in stock options deducted as expenses for the fiscal year underreview:• ¥543 thousand for five Directors
3. The above-listed amount of payments includes the payments to one (outside)
Director and one Corporate Auditor who retired from office, respectively, at theend of the 60th Ordinary General Meeting of Shareholders held on June 22, 2012.
4. In addition, the officers’ retirement gratuities paid to the Director and Corporate
Auditor who retired from office respectively, at the end of the 60th Ordinary
General Meeting of Shareholders held on June 22, 2012, are as follows:• ¥4,400 thousand for one (outside) Director• ¥2,000 thousand for one Corporate Auditor(4)

Other important matters concerning officers:
Nothing to be reported.

- 13 -

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

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

(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., andOutside Director of Oriental Chain Mfg. Co., Ltd. The Company has no
special relationship with The Sailor Pen Co., Ltd., and 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 at the meetings of the Board of Directors and the Board of
Corporate Auditors:
Board of Directors
Name

Board of Corporate
Auditors
NumberNumberofattendedmeetings-

Director

Mitsuo Yonemoto

Numberofmeetings
11

Director

Yoshiaki Bannai

9

8

-

-

Corporate Auditor

Shinichi Komeda
Masahide
Morimoto

11

11

12

12

11

11

12

12

Corporate Auditor(Note)

Numberattended11

1.

With regard to Director Yoshiaki Bannai, who newly assumed officeas Director on June 22, 2012, the situations of the meetings of theBoard of Directors held on or after the date of his assumption of office
are related.

2.

In addition to the number of the 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,
were adopted on six occasions.

- 14 -

•

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

Director

Director

Corporate Auditor

Corporate Auditor(v)

Speeches
He attended meetings of the Board of Directors andexpressed opinions principally from the standpoint
Mitsuo Yonemotoof a management consultant, as well as thestandpoint of an independent officer.
He attended meetings of the Board of Directors andYoshiaki Bannai expressed opinions principally from the standpointof a veteran top executive.
He attended meetings of the Board of Directors andthe Board of Corporate Auditors and expressed
Shinichi Komeda opinions principally from the standpoint of aveteran top executive, as well as the standpoint of
an independent officer.
He attended meetings of the Board of Directors andthe Board of Corporate Auditors and expressed
Masahide
opinions principally from the standpoint of a
Morimoto
veteran top executive, as well as the standpoint offinance and securities.

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

5.

Matters concerning accounting auditors:(1)

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

Remuneration, etc., of the accounting auditors for the fiscal
year under review:¥44 million

Total amount of cash and other proprietary benefits payable
to the accounting auditors by the Company and its
subsidiaries:¥66 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 accounting auditors and cannot actually be separated. Hence,- 15 -

the amount in item (i) above includes both amounts.
2. Among the major subsidiaries of the Company, FUNAI CORPORATION, INC.,
and one other company are subject to audits by audit firms (including persons
having qualifications in foreign countries equivalent to those of the accounting
auditors of the Company) other than the accounting auditors of the Company.

(3)

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

(4)

Policy on the determination of dismissal and non-reappointment of the accounting
auditors:
In the event that the accounting auditors are found to fall under any event of dismissal
under the items of Article 340, paragraph 1 of the Companies Act, the Company shall,
upon unanimous consent of the Corporate Auditors, dismiss the accounting auditors.
In addition, in the event that there arises any problem with the performance by theaccounting auditors of their duties or otherwise considered necessary, the Company
shall, upon consent of the Board of Corporate Auditors or upon request from theBoard of Corporate Auditors, prepare a proposition for the dismissal or
non-reappointment of the accounting auditors as an agenda item of a General Meetingof Shareholders.

(5)

Outline of liability limitation agreements:
Nothing to be reported.

6.

Systems and policies of the Company(1)

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

Systems to secure the execution by the Directors of their duties to comply
with laws, ordinances and the Articles of Incorporation.
In the “Funai Group Charter of Conduct” and the “regulations of officers’
compliance,” the Company shall specify the acts to be taken by the Directors
to comply with laws and ordinances and secure the execution by the Directorsof their duties to comply with laws, ordinances, and the Articles ofIncorporation.

(ii)

Systems concerning storage and management of information on the execution
by the Directors of their duties.
With regard to the storage and management of information on the execution
by the Directors of their duties, minutes of meetings of the Board of Directors,
and other important meetings, circular decision documents and other- 16 -

documents and information necessary to secure the properness of businessactivities shall be stored and managed pursuant to laws, ordinances, and the“document management regulations.”(iii)

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

(iv)

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

(v)

Systems to secure the execution by employees of their duties to comply withlaws, ordinances, and the Articles of Incorporation
In the “Funai Group Charter of Conduct” and the “compliance regulations,”
the Company shall specify the acts to be taken by the employees and secure
the execution by the employees of their duties to comply with laws,
ordinances, and the Articles of Incorporation.
In addition, the Company shall establish a whistleblowing system independentof its regular reporting channels and strengthen its compliance system.

(vi)

Systems to secure the properness of business activities of the corporate groupcomposed of the Company, its parent company, and its subsidiaries
The "Funai Group Charter of Conduct" shall be the rule of conduct of theofficers and employees of the Group.
In addition, in the “affiliated companies management regulations,” theCompany shall clearly define authorities and responsibilities of its groupcompanies while giving regard to their autonomy and independence, andsecure the properness of business activities of the whole Group.

(vii)

Matters concerning the employees to assist the Corporate Auditors to execute
their duties when the Corporate Auditors request the assignment thereof.
When the Corporate Auditors request the assignment of employees to assist
them to execute their duties, the Board of Directors of the Company shall,
upon consultation with the Board of Corporate Auditors, establish a secretariat- 17 -

to the Board of Corporate Auditors and assign its employees to assist theBoard of Corporate Auditors.
(viii) Matters concerning the independence of the employees set forth in (vii) abovefrom the Directors
When employees hired upon the request of the Corporate Auditors to assist
their duties as set forth in item (vii) above are transferred to and/or from thesecretariat to the Board of Corporate Auditors, the Company shall respect theopinions of the Board of Corporate Auditors with regard to such transfer andpersonnel evaluations thereof and ensure his/her independence from the
Directors.
(ix)

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

(x)

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

(xi)

System to ensure reliability of financial reporting
The Company shall establish a “Basic Policy for Internal Control overFinancial Reporting” to ensure reliability of financial reporting and makeeffective and appropriate disclosure of “internal control reports.” Inaccordance with the basic policy, the Company shall establish an “Internal
Control Committee” with Representative Director, President, and CEO acting
as chairman thereof, which shall be responsible for continuous improvement,
administration, and evaluation of internal control over financial reporting andimplement a corrective measure when any defect is found.

(xii)

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

- 18 -

In the event that a client is found to be an entity, enterprise, individual, etc.,
having any relation with such antisocial force, the Company shall promptly
end a business relationship with it.
The Company shall designate its Personnel and General Affairs Department asa principal division in charge of dealing with antisocial forces to unify
management of information thereon. To make its officers and employees
comply with its fundamental policy, the Company shall also stipulate it clearly
in its related rules and regulations and establish an education system therefor.
In addition, the Company shall devise countermeasures to prevent damage
from antisocial forces, whenever necessary.
In the event that any undue claim is put forward by an antisocial force, theCompany shall work closely with external specialized agencies, including thepolice and its legal counsel, and establish a cooperative system for emergency
situations.
(2)

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

(3)

Policy on the determination of distribution of retained earnings, etc., by the Board of
Directors:
The Company recognizes the paying out of earnings to its shareholders as one of themost important missions of management and attaches basic importance tostrengthening its operating base and maintaining a constant payment of dividends.
In concrete terms, the Company will implement its dividend policy proactively, basedon the dividend on equity ratio 1% for net assets on a consolidated basis, while taking- 19 -

into consideration business conditions and other factors.
In accordance with the basic policy above, the Company will pay a year-end dividendof ¥35 per share for the fiscal year under review.

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

- 20 -

CONSOLIDATED BALANCE SHEET(As of March 31, 2013)(million yen)
ASSETS:
Current assets:

164,802

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...................................................

67,81333,19334,547
2,095
18,997
2,886
5,445
(178)
29,721

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

16,675
5,548
1,637
1,986
6,169
233
1,099

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

3,107
2,078
1,028

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

9,938
4,973
436
4,720
(192)
194,524TOTAL ASSETS- 21 -

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

69,452
39,17812,981
11,124
163
1,690
1
241
927
3,143

Long-term liabilities:

3,672

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

147
1,168
226
927
1,081
121
73,125

Shareholders’ equity:

141,374

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

31,307

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

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

101,135

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

(24,341)

Accumulated other comprehensive income (loss):(21,271)

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

451

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

(21,722)

Stock acquisition rights:

122

Minority interests:

1,173

TOTAL EQUITY

121,398

TOTAL LIABILITIES AND EQUITY- 22 -

194,524

CONSOLIDATED STATEMENT OF OPERATIONS(From April 1, 2012 to March 31, 2013)(million yen)
Net sales
Cost of sales
Gross profit
Selling, general, and administrative expenses
Operating loss
Non-operating income:Interest and dividend income

192,008
163,340
28,66733,9405,273
320Foreign exchange gains
Other
Non-operating expenses:

4,691
326

Interest expense
Loss on investments in partnership
Other
Ordinary loss
Extraordinary income:Gain on sales of fixed assets
Other
Extraordinary loss:
Loss on disposal of fixed assets
Loss on revaluation of investment securities
Impairment loss on fixed assets
Integration expenses of consignment production
base
Other

111
57
251

423
2

343
120

425

2,581
2,511

725
966
4,325

Net loss

420
355

89
413
1,614

Loss before income taxes and minority interests
Income taxes – current
Income taxes – prior years
Income tax – deferred
Net loss before minority interests
Minority interests in net income

5,338

6,017
8,528
13
8,542

- 23 -

CONSOLIDATED STATEMENT OF CHANGES IN NET ASSETS(From April 1, 2012 to March 31, 2013)(million yen)
Shareholders’ equity
Commonstock
Balance as of April 1, 2012

Capitalsurplus31,307Retainedearnings

33,272

Treasury stock

111,384(24,341)

Total
shareholders’equity151,623

Changes of items during the
fiscal year
Cash dividends(1,705)(8,542)Net loss(1,705)(8,542)Acquisition of treasury stock

(0)

(0)

(0)
(24,341)(10,248)
141,374

Net changes of items otherthan shareholders’ equity
Total changes of items during
the fiscal year
Balance as of March 31, 2013

Balance as of April 1, 2012--

31,30733,272(10,248)
101,135

Accumulated other comprehensive income(loss)
Stock
Total
acquisition
Unrealized
Foreignaccumulated
gain oncurrency
rightsotheravailable-for- translation comprehensive
sale securities adjustments income (loss)
56(28,917)(28,861)
106

Minority
interests

Total net
assets974

123,843

Changes of items during the
fiscal year
Cash dividends(1,705)(8,542)Net loss
Acquisition of treasury stock(0)

Net changes of items otherthan shareholders’ equity

394

7,195

7,589

15

198

7,803

Total changes of items during
the fiscal year
Balance as of March 31, 2013

394

7,195

7,589

15

198

(2,445)451(21,722)(21,271)

122

1,173

121,398========================================================================(Note)In the consolidated balance sheet, consolidated statement of operations andconsolidated statement of changes in net assets, all figures are shown by discarding any
fractions of the relevant units, respectively.

- 24 -

Copy of Accounting Auditor’s Audit Report on Consolidated Financial Statements[TRANSLATION]
INDEPENDENT AUDITOR’S REPORTMay 20, 2013To:

The Board of Directors
Funai Electric Co., Ltd.
Deloitte Touche Tohmatsu LLC
Designated Unlimited Liability Partner,
Engagement Partner,
Certified Public Accountant
Motoo Nakamura
Designated Unlimited Liability Partner,
Engagement Partner,
Certified Public Accountant
Akira Nakata

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,
2013, of Funai Electric Co., Ltd. (the “Company”), and consolidated subsidiaries and therelated consolidated statements of income and changes in equity for the fiscal year from
April 1, 2012 to March 31, 2013, 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 conformity 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.

- 25 -

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 auditors consider 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
a basis 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 the Company and its consolidated subsidiaries asof March 31, 2013, and the results of their operations for the year then ended in conformity
with accounting principles generally accepted in Japan.
Emphasis of Matter
As described in the “Additional Information” (Acquisition of a Company by Acquisition of
Shares), the Company determined on January 29, 2013, to acquire from Royal Philips
Electronics (“Philips”) the entire shares of a company assuming operations of Philips’
Lifestyle Entertainment business during the fiscal year ending March 31, 2014, and enteredinto a share purchase agreement on the same day.
Our opinion is not qualified in respect of this matter.
Interest
Our firm and the engagement partners do not have any interest in the Company for which
disclosure is required under the provisions of the Certified Public Accountants Act.

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

- 26 -

NON-CONSOLIDATED BALANCE SHEET(As of March 31, 2013)(million yen)

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

73,86033,35653
30,988
352
2,355
1,421
1,722
2,829
809
(30)

Fixed assets:
Tangible fixed assets:
Buildings ..................................................................................................
Structures .................................................................................................
Machinery and equipment .......................................................................
Motor vehicles .........................................................................................
Tools, furniture, and fixtures ...................................................................
Lands........................................................................................................
Lease assets ............................................................................................
Intangible assets:
Patents ......................................................................................................
Software ...................................................................................................
Lease assets..............................................................................................
Software in process ..................................................................................
Other ........................................................................................................

45,291
7,587
3,048
54
38
0
244
4,037
164
2,498
2,078
285
9
111
12

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

35,2052,369
25,566
14,480
1,310
2,008(10,529)

TOTAL ASSETSLIABILITIES

119,151(million yen)

Current liabilities:
Accounts payable-trade................................................................................
Current portion of long-term lease obligations..............................................
- 27 -

27,793
14,948107

Accounts payable-other .................................................................................
Accrued expenses ..........................................................................................
Accrued income taxes ....................................................................................
Deposit received ............................................................................................
Reserve for products warranty.......................................................................
Other ..............................................................................................................

7,535
3,992
14
720
169
306

Long-term liabilities:
Long-term lease obligations...........................................................................
Deferred tax liabilities ...................................................................................
Liabilities for directors’ retirement benefits ..................................................
Other ..............................................................................................................

1,973
98
804
1,069
0

TOTAL LIABILITIES

29,766EQUITY
Shareholders’ equity
Common stock
Capital surplus:
Capital reserve ...............................................................................................
Other capital surplus ......................................................................................

88,87731,30733,272
32,833438

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

48,638209
48,428510
23,40024,518Treasury stock(24,341)

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

386
386
122

TOTAL EQUITY

89,385TOTAL LIABILITIES AND EQUITY

119,151- 28 -

NON-CONSOLIDATED STATEMENT OF INCOME(From April 1, 2012 to March 31, 2013)(million yen)
Net sales
Cost of sales
Gross profit
Selling, general, and administrative expenses
Operating loss
Non-operating income:Interest and dividend gains
Foreign exchange gains
Other
Non-operating expenses:
Interest expenses
Transfer to allowance for doubtful accounts ofrelated companies
Transfer pricing taxation adjustments
Other
Ordinary income
Extraordinary income:Gain on sales of fixed assets
Other
Extraordinary loss:
Loss on disposition of fixed assets
Loss on revaluation of investment securities
Impairment loss on fixed assets
Other

157,549
142,559
14,98920,594
5,604
26,974
4,888
115

31,977

0
980
6,046
110

7,137
19,235

331
2

333

9
399
1,614
92

2,115

Income before income taxes

17,45487
4,253

Income taxes - current
Income tax - deferred
Net income

4,340
13,113- 29 -

NON-CONSOLIDATED STATEMENT OF CHANGES IN NET ASSETS(From April 1, 2012 to March 31, 2013)(million yen)
Shareholders’ equity
Retained earnings

Capital surplus
Commonstock

Balance as of April 1, 2012

Other
capitalsurplusCapitalreserve

31,307

32,833438

Other retained earnings
Reserve for
Retained
advancedearnings
Generaldepreciation
carriedreserveof fixed
forwardassetsTotal capitalsurplusLegalreserve

33,272209

520

23,400Total
shareholders’equityTreasury
stock

Total
retainedearnings

13,10037,230(24,341)

77,4699--Cash dividends(1,705)(1,705)(1,705)

Net income

13,113

13,113

13,113

Changes of items during the
fiscal year
Reversal of reserve fordeferred income tax on
fixed assets(9)

Acquisition of treasury stock

(0)

(0)

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

-

-

-

-

-

(9)

-

11,407

11,407(0)

11,407

Balance as of March 31, 2013

31,307

32,833438

33,272209

510

23,40024,51848,638(24,341)

88,877- 30 -

(million yen)

Balance as of April 1, 2012

Valuation and translation adjustments
Unrealized gain
Total valuationonand translation
available-for-saleadjustments
securities
7
7

Stock acquisitionrightsTotal net assets

106

77,584

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

Cash dividends(1,705)

Net income

13,113Acquisition of treasury stock(0)

Net changes of items other thanshareholders’ equity

378

378

Total changes of items during the
fiscal year

378

Balance as of March 31, 2013

386

15

393

378

15

11,801386

122

89,385=========================================================================(Note)In the non-consolidated balance sheet, non-consolidated statement of income and non-consolidated statement of changes in net assets, allfigures are shown by discarding any fractions of the relevant units, respectively.

- 31 -

Copy of Accounting Auditor’s Audit Report(TRANSLATION)

INDEPENDENT AUDITOR’S REPORTMay 20, 2013
To: The Board of Directors
Funai Electric Co., Ltd.:
Deloitte Touche Tohmatsu LLC
Designated Unlimited Liability Partner,
Engagement Partner,
Certified Public Accountant:Motoo Nakamura
Designated Unlimited Liability Partner,
Engagement Partner,
Certified Public Accountant:
Akira Nakata
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, 2013, of Funai
Electric Co., Ltd. (the “Company”), and the related statements of income and changes inequity for the 61st fiscal year from April 1, 2012 to March 31, 2013, 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 conformity with accounting
principles generally accepted in Japan, and for such internal control as management
determines is necessary to enable the preparation of financial statements and theaccompanying supplemental schedules that are free from material misstatement, whether due
to fraud or error.
Auditor’s Responsibility
Our responsibility is to express an opinion on these financial statements and theaccompanying supplemental schedules based on our audit. We conducted our audit inaccordance with auditing standards generally accepted in Japan. Those standards require thatwe plan and perform the audit to obtain reasonable assurance about whether the financial
statements and the accompanying supplemental schedules are free from material
misstatement.

- 32 -

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 the Company
as of March 31, 2013, and the results of its operations for the year then ended in conformity
with accounting principles generally accepted in Japan.
Emphasis of Matter
As described in the “Additional Information” (Acquisition of a Company by
Acquisition of Shares), the Company determined on January 29, 2013, to acquire from Royal
Philips Electronics (“Philips”) the entire shares of a company assuming operations of Philips’
Lifestyle Entertainment business during the fiscal year ending March 31, 2014, and enteredinto a share purchase agreement on the same day.
Our opinion is not qualified in respect of these matters.
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 -

- 33 -

Copy of Audit Report of the Board of Corporate Auditor

AUDIT REPORT
We, the Board of Corporate Auditor of Funai Electric Co.,Ltd. (the “Company”), after
deliberation based upon the audit report prepared by each Corporate Auditor on the execution
by Directors of their duties during the 61st fiscal year from April 1, 2012 through March 31,
2013, have prepared this audit and hereby report as follows;1.
Method of audits by the Corporate Auditors and the Board of Corporate Auditor andthe particulars thereof:
The Board of Corporate Auditors determined the audit policy, audit plans, etc.,
received from each Corporate Auditor reports on the state of his performance of audits andthe results thereof, and also received from the Directors, etc., and the accounting auditors
reports on the state of execution of their duties and demanded their explanations whenevernecessary.
Each Corporate Auditor, in accordance with the auditing standards for the Corporate
Auditors determined by the Board of Corporate Auditors and pursuant to the audit policy,
audit plans, etc., maintained constant communication with the Directors, the internal audit
division and other employees, etc., in an effort to collect information and improve theenvironment for auditing; attended meetings of the Board of Directors and other important
meetings; received from the Directors and employees, etc., reports on the state of executionof their duties; demanded their explanations whenever necessary; inspected important
decision documents, etc.; and made investigations into the state of activities and property at
the head office and principal business offices of the Company. With regard to the details of
the resolutions of the Board of Directors for establishing systems to secure that the execution
by the Directors of their duties will comply with laws or ordinances and the Articles ofIncorporation and such other systems provided for in Article 100, paragraphs 1 and 3 of theRegulations to Enforce the Companies Act of Japan as necessary to secure the adequacy ofbusiness of joint-stock corporations, as well as the status of the systems (internal control
systems) established pursuant to such resolutions, which are described in the business report,
we periodically received from the Directors and employees, etc., reports, demanded their
explanations and expressed our opinions whenever necessary, on the state of formulation andoperation thereof. With regard to its subsidiaries, we maintained constant communicationand exchanged information with the Directors, Corporate Auditors, etc., thereof and required
the subsidiaries to render reports on their business operations whenever necessary. In
accordance with such methods, we investigated the business report and its accompanying
detailed statements for the fiscal year under review.
We also monitored and verified whether the accounting auditors had maintained an
independent position and conducted adequate audits, and received from the accounting
auditors reports on the state of execution of their duties and demanded their explanations
whenever necessary. In addition, we received from the accounting auditors a notice that the“systems to secure adequate execution of duties” (as listed in the items of Article 131 of the- 34 -

Regulations on Corporate Accounts) had been established in accordance with the “Standard
for Quality Control Concerning Audits” (ASBJ, October 28, 2005) and demanded their
explanations whenever necessary.
In accordance with such methods, we investigated the non-consolidated financial
statements (the non-consolidated balance sheet, the non-consolidated statement of income,the non-consolidated statement of changes in equity, and the notes to non-consolidated
financial statements) and their accompanying supplemental schedules, as well as theconsolidated financial statements (the consolidated balance sheet, the consolidated statementof operations, the consolidated statement of changes in equity and the related notes), for the
fiscal year under review.
2.

Results of audit:(1)

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

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

(3)

Results of audit of the consolidated financial statements:- 35 -

We are of the opinion that the method and results of the audit made by the accounting
auditors, Deloitte Touche Tohmatsu LLC, are proper.
May 20, 2013
Funai Electric Co., Ltd.
The Board of Corporate Auditors
Hiromu Ishizaki
Full-time Corporate Auditor(seal)

Shinichi Komeda
Outside Corporate Auditor(seal)

Masahide Morimoto
Outside Corporate Auditor(seal)- END -

- 36 -

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

Election of six (6) Directors

The term of office of all the nine (9) Directors currently in office will expire at theclose of this Ordinary General Meeting of Shareholders. Hence, it is hereby proposed thatsix (6) Directors, including two (2) outside Directors, be elected to enhance the transparencyof the Board of Directors and allow it to make decisions with agility.
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
Machine Company

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 theCompany

Tetsuro Funai(January 24, 1927)

June 2008

Director of the Company (todate),
Chairman and Officer of theCompany

June 2010

Chairman and Officer of theCompany

June 2012

Chairman of the Company (todate)(Chairman of Funai Information Science Promotion
Foundation)(Chairman of Funai Scholarship Foundation)- 37 -

Number ofshares of theCompany heldby candidate

12,709,288
sharesCandi-date
No.

2.

Name

Brief history, post in the Company and business incharge (and important concurrent office)(Date of birth)
April 1969

Joined the Company

October 2002

Officer of the Company

June 2005

Executive Officer of the Company

March 2006

CEO of FUNAI CORPORATION
INC.

June 2007

Senior Executive Officer of theCompany

March 2008

General Manager of AV
Headquarters of the Company

June 2008

Director of the Company,
President and CEO of theCompany

June 2010

Representative Director of theCompany (to date),

Tomonori Hayashi(March 13, 1947)

Number ofshares of theCompany heldby candidate

15,400 shares

President and CEO of theCompany (to date)
Candidate for
Outside Director

3.

Mitsuo Yonemoto(March 18, 1939)

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)June 2012

Outside Corporate Auditor of
Oriental Chain Mfg. Co., Ltd. (todate)(Vice President and Director of T.P.S. LaboratoryCo., Ltd.)(Outside Director of The Sailor Pen Co., Ltd.)(Outside Corporate Auditor of Oriental Chain Mfg.
Co., Ltd.)- 38 -

100 sharesCandi-dateNo.

Name

Brief history, post in the Company and business incharge (and important concurrent office)(Date of birth)January 1992
July 2004
April 2007
October 2009
June 2010
September 2010

October 2010

December 20104.

Yoshikazu Uemura

April 2011

(June 27, 1958)
July 2011

May 2012

November 2012

April 2013

Joined the Company
General Manager of DVD
Marketing Dept. of the Company
COO of FUNAICORPORATION, INC.
Officer of the Company
Director of the Company (to date)
Chairman and Representative
Director of FUNAICORPORATION, INC.
Officer and General Manager of
TV Business Div. of theCompany
President and Representative
Director of P&F USA, Inc. (todate)
Officer and General Manager of
AV Headquarters of the Company
Officer and General Manager of
AV Business Div. of theCompany
Officer and General Manager of
AV System Business Div. andGeneral Manager of Display
Business Div. of the Company
Executive Officer and General
Manager of AV System BusinessDiv. and General Manager ofDisplay Business Div. of theCompany
Executive Officer of theCompany, in charge of sales andmarketing (to date)- 39 -

Number ofshares of theCompany heldby candidate

700 sharesCandi-dateNo.

Name

Brief history, post in the Company and business incharge (and important concurrent office)(Date of birth)
April 1977

Joined Hitachi, Ltd.

April 1990
April 1999

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
Director of the Company (to date)
Officer and General Manager ofDevelopment & Technology
Headquarters of the Company (todate)

April 2003

February 2004

5.

Joji Okada(August 27, 1954)

December 2005
April 2007

October 2009

June 2010
June 2011- 40 -

Number ofshares of theCompany heldby candidate

500 sharesCandi-dateNo.

Name(Date of birth)
Candidate for
Outside Director

6.

Brief history, post in the Company and business incharge (and important concurrent office)Yoshiaki Bannai(August 3, 1954)

April 1979

Joined TDK Corporation

June 2000

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

June 2005

January 2012
June 2012

Number ofshares of theCompany heldby candidate- shareOutside Director of the Company(to date)(Notes) 1. The Company has dealings with candidate for Director Mr. Tetsuro Funai with regard to
its lands, buildings, and shares. None of the other candidates for Directors has any
special interests with the Company.
2. Candidates for Directors Messrs. Mitsuo Yonemoto and Yoshiaki Bannai are candidates
for outside Directors.
3. Reasons for the selection of the candidates 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. Yoshiaki Bannai will be able to use his broad
knowledge and experience in corporate management and the creation of new businesses.
4. Years of service of outside Directors of the Company:
Mr. Mitsuo Yonemoto will have served as outside Director for 15 years at the close ofthis Ordinary General Meeting of Shareholders.
Mr. Yoshiaki Bannai will have served as outside Director for a year at the close of thisOrdinary 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 the Tokyo Stock Exchange and the Osaka Securities
Exchange and registered him with such exchanges.
6. Conclusion of liability limitation agreements:
The Company has entered into an agreement with each of outside Directors Mr. Mitsuo
Yonemoto and Mr. Yoshiaki Bannai to limit his liability for any damage as provided forin Article 423, paragraph 1 of the Companies Act of Japan within the aggregate amountas provided for in the items of Article 425, paragraph 1 of the said law, pursuant to
Article 427, paragraph 1 of the said law. If they are reelected, such agreements will berenewed.

- 41 -

Proposition No. 2:

Granting of retirement gratuities to retiring Directors

It is hereby proposed that retirement gratuities be granted to Messrs. Toshio Ohtaku,
Hideaki Funakoshi, and Shigeki Saji, who will retire upon expiration of the term of office as
Directors, respectively, 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 Compensation
Committee upon authorization by the Board of Directors.
The brief histories of the retiring Directors are as follows:
Name

Brief history

Toshio Ohtaku

June 2010 Director of the Company (to date)Hideaki Funakoshi

June 2010 Director of the Company (to date)

Shigeki Saji

June 2010 Director of the Company (to date)- END –

- 42 -