ANNUAL REPORT 2015

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Message from Business
Management Strength

Contents

1 Message from Management

SocialActivities /Topics5 Business Strength
15 Socal Activities/Topics

Corporate
Governance17 Corporate Governance

24 Financial Section

Disclaimer
This document contains forward-looking statements and projections regarding-

52 Corporate Databusiness performance which are not historical facts. Please note that these statements are based on information relating to factors that may impact future businessperformance that was available for analysis at the time this document was printed.
Electric Co., Ltd. or the Funai Group, such as audio-visual devices and information
communication equipment, the economic conditions of both domestic and inter-

Financial
Section

These factors include industry trends relating to the business areas of Funai

Management Discussion
and Analysis

19 Management Discussion and Analysis

national markets, and fluctuations in currency exchange rates. Actual performance
impacts of uncertainty in such areas as the competitive conditions of the electronics industry, market trends, currency exchange rate, introduction and success of
new products, and various other global conditions that may affect the tax systemand other systems.

Corporate
Data

may greatly differ from projections included in this document because of theMessage from Management

Financial
SectionCorporate
Data

1

Management Discussion
and Analysis

Tomonori Hayashi

Corporate
Governance

Representative Director, President and CEO

In recent years, the consumer electric products market has undergone tremendous transformation as a result of factors including intensifying international price competition, shortening of product life cycles, competition todevelop new technologies and functions, and increased demand for smart
devices fueled by the spread of the Internet.
In this environment, Funai commenced group-wide initiatives to achieve global
earnings improvement. These included introducing new products in response to
the trend toward larger LCD TVs, the Group’s mainstay product, reinforcing sales
activities up to and during the peak year-end sales period, increasing efficiency
through selective reduction of the range of audio accessories to high-selling items,
increasing the efficiency of the distribution and service systems of overseas sales
subsidiaries, and strengthening global inventory control.
In the audiovisual equipment category, sales of mainstay LCD TVs were
mostly unchanged from the previous fiscal year as a result of a decline insales of TVs with integrated DVD players, despite the trend toward larger
screen sizes and strong TV sales leading up to the peak year-end sales
period. In addition, sales of DVD and Blu-ray Disc-related products fell as aresult of market contraction. In the information equipment category, althoughsales of ink cartridges increased, printer sales declined. In the Others category, while sales of audio accessories increased slightly, sales of receiverrelated equipment declined.

SocialActivities /TopicsBusiness Environment and Operating Results

Message from Business
Management Strength

Global operational reforms
group-wide brought a returnto profitability for the first timein five years.

Message from Management

Marketdevelopment
Three elements of thebusiness strategy
Strengthening
ourorganization

Development of
new products

Brand-specific sales
strategies Rebuilding ofbusinesses in Central andSouth America and Europe

Using accumulated
technologies Screen size
expansion and 4K support

New orders
for OEM production

Printer-related applied
technologies

Bolstering the printer line

Strengthening
our organization

Sales function integration
Central service management
Consolidation of distribution
and warehouses

2

Corporate
Data*TVs with display panels offering four times the resolution of 1,080-pixel full high-definition TVs

Financial
SectionFunai is implementing a number of strategic measures to make it possible tomaintain sustained growth while coping with future changes in the businessenvironment.
First of all, we will develop the business portfolio and implement a new
product strategy. While securing sales and profits by strengthening existing
businesses, mainly LCD TVs, we will undertake expansion of the printer business and aim to establish new businesses.
As a key measure to strengthen the competitiveness of existing businesses, we will increase the type of large LCD TVs and add value to LCD

Management Discussion
and Analysis

Initiatives under the Growth Strategy

Corporate
GovernanceTVs. In the North American market, where we will offer TVs 60 inches and up
and support 4K TV*, we plan to introduce new products on the market in theautumn of 2015.
In March 2015, we assumed the North American television operations of
SANYO Electric Co., Ltd., a subsidiary of Panasonic Corporation. We havecommenced sales of the SANYO brand in this market, focusing mainly on
major mass merchandisers. At the same time, we extended the brand licensing agreement for Philips LCD TVs and video equipment with Netherlandsbased Koniklijke Philips for three years until December 31, 2018.
In the printer business, in fiscal 2013 we commenced sales of inkjet
printers developed in-house, leveraging the technologies and assets
acquired from U.S.-based Lexmark International in April 2013. We also concluded a global comprehensive license agreement for Kodak brand consumer and small-office printer products and related consumable supplies in
February 2015.
In efforts to establish new businesses, practical application of wirelesscharging devices and in-vehicle displays developed by applying technologies Funai has accumulated over the years is expected before long. In
addition, we are proceeding with joint development in the field of medical
image processing.

As a result of these initiatives, consolidated net sales in the fiscal year
ended March 31, 2015 (fiscal 2014) declined 7.2% year on year to ¥217.0
billion. Nevertheless, operating income and net income were¥0.5 billion and¥1.3 billion, respectively, and the Group returned to profitability for the firsttime in five years as a result of profitability improvement achieved throughcost control and inventory management group-wide.
I believe that we have built a foundation for further growth and development through our efforts to create a business structure that can steadily andreliably generate earnings.

SocialActivities /TopicsDevelopmentof newproducts

Marketdevelopment

Message from Business
Management Strength

Future Growth Strategy

Message from Management

Corporate
Data

3

Financial
SectionFunai considers sales growth and recovery in profitability its most importantpriorities. In the fiscal year ending March 31, 2016 (fiscal 2015), we will strive
to increase revenue in each business by steadily implementing the abovementioned business strategies. At the same time, we will undertake earnings
improvement through further strengthening of purchasing, sales, and inventory management, development of a structure for supplying cost competitive
products, further improvement of the Funai Production System (FPS), rigorous cost cutting, promotion of computerization, business process improvement, and strengthening of risk management.
By promptly and steadily implementing such measures, we will aim toachieve fiscal 2015 targets of net sales of ¥220,000 million (up 1.3% year onyear), operating income of ¥1,600 million (up 183.5%), and net income of¥400 million (down 70.5%).

Management Discussion
and Analysis

Outlook for the Fiscal Year Ending March 31, 2016

Corporate
Governancestrengthening and increasing the efficiency of the sales structure in the North
American market. The holding company will work to increase sales utilizing
the sales network of each sales subsidiary and increase Funai’s competitive
advantage in the North American market by reducing administrative costs bymeans including consolidation of distribution and warehouses.

Funai will focus enterprise resources on the three elements of the futurebusiness strategy: “market development,” “development of new products,”
and “strengthening our organization.”
Funai’s market development initiatives will include implementation of new
brand-specific sales strategies in each market, rebuilding of businesses inCentral and South America and Europe, and efforts to obtain new orders for
OEM production.
New product development efforts in the TV business will focus on screen
size expansion and support for 4K as well as strengthening networking content and improving compatibility with smartphones and tablets. We will also
meticulously respond to needs in the global market, such as regional preferences and the start of terrestrial digital broadcasting in emerging countries.
In the printer business, we will aim for earnings growth over the medium tolong term by bolstering our product lines, expanding beyond the consumer,
business, and industrial printer markets into 3D printers and the field of medical and biological printing, while at the same time engaging in productdevelopment that leverages printer-related applied technologies.
A key initiative to strengthen the organization was the decision to establish during fiscal 2015 of a holding company over Funai’s U.S. sales subsidiaries FUNAI CORPORATION, INC. and P&F USA, Inc. for the purpose ofSocialActivities /TopicsFuture Business Strategy

Message from Business
Management Strength

The Funai Electric Group is implementing
a number of strategic measures to make itpossible to maintain sustained growth.

Message from Management
Cash Dividends per Share(¥)
Years ended March 31

Results for fiscal
2014

Forecast for fiscal
2015

234,042

217,088

220,000

Operating Income(Loss)(5,465)

564

1,600

Net Income (Loss)(6,745)

1,354

400

Net Sales

40

2011

2012

35

35

35

2013

2014

2015

SocialActivities /TopicsResults for fiscal
2013(Years ended March 31)

50

Millions of Japanese Yen

Message from Business
Management Strength

Key Operating Results and Forecasts

Corporate
Governance

Basic Policy on Profit Distribution and Dividends

Management Discussion
and Analysis

Funai considers providing returns to shareholders an important management
priority and has adopted a basic policy of maintaining stable dividends whilestrengthening the business foundation. In implementing the dividend policy,
we consider factors such as the business environment and use as a specificcriterion a ratio of dividends to consolidated net assets of 1.0%. In principle,
Funai pays a year-end dividend once a year. If we pay an interim dividend,
we make a public announcement in advance.
In accordance with the above policy, Funai declared an ordinary dividendof ¥35 per share as the year-end dividend for fiscal 2014, the same as theprevious term. Although the dividend for fiscal 2015 has not yet been determined, we will continue to strive to enhance corporate value and provide
returns to the shareholders.
We look forward to receiving the continued support of our stakeholders
in the coming years.

Financial
SectionCorporate
Data

Representative Director, President and CEO

Tomonori Hayashi
4What’s Funai?

79%

Constantly Evolving Business Operations

DVD • BD

65% 14%

Information
Equipment

Consolidated Net Sales ¥217 billion(March 31, 2015)

Since its founding in 1961, Funai has accurately identified the constantly changing needs of the times andcombine superb cost performance with high quality.
Today we do business worldwide in three general product fields. The Audiovisual equipment segment consists of the

Financial
Sectionapplied a unique perspective to create digital home electronic appliances thatManagement Discussion
and Analysis

15%

Corporate
Governance

OthersSocialActivities /Topics6%

BusinessStrength

Business Areas

TV

Audiovisual Equipment

Message fromManagement

Sales Composition by Products

Display Business, which manages our main products, LCD TVs, and the Digital Media Business,
Office Solutions Business, which focuses on inkjet printers, laser beam printers, and peripheral equipment.
The Others segment, includes receiver-related products and other products.
We will seek greater growth to transform Funai into a globally outstanding business group by continuing to
supply the world with products that meet the needs of the times and renewing our focus on speedin business activities, a trademark of the company since its founding.
5

Corporate
Data

which handles products related to DVDs and Blu-ray Discs (BDs). The Information equipment segment comprises theWhat’s Funai?
Message fromManagement

Strength 1

DesignBusinessStrength

Business Strengths
Unique Strengths that Define Funai Electric GroupStrength 1

Production

Pursuit of Cost Performance throughInnovations from the Design Stage

Strength 3

Marketing Products around the World under
Multiple Brands Meeting Global Needs

Management Discussion
and Analysis

Continuous Productivity Improvement
through the Funai Production System (FPS)

Sales

Corporate
Governance

Strength 2Strength 3

SocialActivities /TopicsStrength 2

Financial
SectionCorporate
Data

6

What’s Funai?
Message fromManagement
BusinessStrength

Brand Competence
A Global Brand

SocialActivities /TopicsCorporate
GovernanceManagement Discussion
and Analysis

Sales area:	North America, Europe,
India, Thailand

Sales area: Woldwide

Philips *2

Magnavox *3

Sales area: North America,
Central andSouth America

Sales area: North America

Timeless

Corporate
Data*1

Proven.
TrustedFinancial
SectionUserFriendly

Simple*4
Sales area: North America

Sales area: North America*1, 2, 3, 4: See P52 “Important Contracts”
7

Sales area: Japan

Sales area: Japan

What’s Funai?

Japan

Europe3%1%Consolidated Net Sales ¥217 billion(March 31, 2015)

Corporate
Governance

Americas*3

Global Operations

81%

Brands and Operations that Span the GlobeEuropeAsia
andothersFinancial
SectionAmericas*3*3 Including sales of Central and South America

Management Discussion
and Analysis*1,2: See P52 “Important Contracts”

Japan

SocialActivities /TopicsSales Composition byGeographical Area

BusinessStrength

Funai supplies markets and customers around the world with products that deliver excellent
cost performance and high quality. We have seven brands that we selectively deploy
according to individual market situations and product characteristics. We are developing arobust global business structure in which domestic and overseas group companies develop,
manufacture, and market products around the world, supported by our competitive brands.
We market LCD TVs, our mainstay product, under six brands (FUNAI, Philips,
Magnavox, SANYO, Emerson, and DX BROADTEC)*1 and DVD/BD-related products underfive brands (FUNAI, Philips, DX BROADTEC, Magnavox and SANYO) worldwide. In addition,
we sell antennas and other receiver-related products under the DX ANTENNA brand andLED sensor lights and other products under the DX DELCATEC brand. We also manufacture products under customers’ brands under OEM agreements.
We intend to accelerate full-scale development of the printer business, which we
strengthened in 2013 by acquiring inkjet-related assets. In June 2015, we began selling
Kodak brand*2 inkjet printers and related consumable supplies under a license agreement
concluded in February 2015. In addition, we plan to begin production of laser printersdeveloped in-house around the summer of 2015.

15%

Message fromManagement

Asiaand others

Corporate
Data

8

Design
Message fromManagement
BusinessStrength

Overseas R&D members
now 39% of total R&D staff

SocialActivities /TopicsCorporate
Governance

Global Development Bases

Financial
SectionRatio of Overseas R&D Staff

32%

37%

39%

2013

2014

2015

9

Corporate
Data

Singapore(Years ended March 31)

Management Discussion
and Analysis

China
Malaysia

USA

Japan

Design
Message fromManagement

SocialActivities /TopicsDesign Capabilities that Generate World-Class Cost CompetitivenessIn-house
production ofcore items

Financial
SectionImproving Cost
Competitiveness
Reducing
the numberof parts

Overseas
onsite design

Corporate
Data

10Management Discussion
and Analysis*OLB: Outer Lead Bonding

Three Unique Strengths in Design

Corporate
GovernanceFunai’s world-class cost performance is the result of three unique strengths: in-house production of core
items, reducing the number of parts, and overseas onsite design. Our engineers are passionately committed to designing products that are easy to assemble and rigorously engage in design activities withproductivity improvement in mind, such as reviews of parts and materials used, investigation of procurement methods, and process reduction.
One example of this is in-house production of LCD modules, a key component of LCD TVs.
Specifically, we have achieved parts reduction by procuring LCD-cell panels without backlights andengaging in design rationalization to integrate drive circuit design, backlight design, and chassis design.
Furthermore, we perform OLB* processing (production of liquid crystal modules) in our plants. In thisway, we pursue rationalization for the overall optimization of everything from parts to finished products.
In addition, we are transferring design work previously performed in Japan to development bases in
Malaysia, China, Singapore, the U.S., and other countries and proceeding with offshoring of development by strengthening collaboration among these business sites. Development with short lead times
and early adoption of local parts has contributed significantly to cost performance improvement.
Funai will continue to pursue world-class cost competitiveness by applying a global perspective torecruitment and development and continuing our tireless efforts and innovations to reduce product cost.

BusinessStrength

Achieving formidable global cost competitivenessProduction
Message fromManagement
BusinessStrength

SocialActivities /TopicsSix manufacturing facilities
in Five countries

Corporate
Governance

Global Development BasesManagement Discussion
and Analysis

Overseas Production Ratio(March 31, 2015)• LCD TVs
• DVDs, BDs• Printers

Japan

China*
Thailand• LCD TVs

Financial
Section

1%
Japan

Other

• Other

Philippines (Luzon)• Printers

Philippines (Cebu)

Mexico*China• LCD TVs

62%
Overseas99%• Ink Cartridges*Consignment production plants

11

Corporate
Data

37%

Production
Message fromManagement
BusinessStrength

Optimized quality, cost and delivery

SocialActivities /TopicsOur Quest to Improve Productivity with FPS and Optimize Production

Management Discussion
and Analysis

Apply stressto production
line

Resolve

FPS

Corporate
Data

Introduce
improvement

Identify
problemFinancial
Section

12

Funai Production System (FPS)

Corporate
GovernanceFunai constantly strives to improve productivity to ensure that our products offer high quality, ease ofuse, and excellent cost performance. At the heart of this effort is the Funai Production System (FPS), ourproprietary manufacturing system. With the FPS, we deliberately stress the production line, such as
reducing the number of operators or increasing conveyor belt speed, to identify problems by causing
the line to stop and implement improvements. By repeating this cycle, we strive for continuous productivity improvement. We consider the FPS a core group competence to be further developed and perfected in the coming years.
Since fiscal 2011, we have been shifting production capacity from production bases in China, where
we had been producing 90% of our products, to other locations in Asia. At first, we have concentrated
production activities in China into a plant in Huang Jiang (a consignment production plant), andexpanded our Number 3 Plant in Thailand, increasing production capacity in that country. In addition, a
new plant constructed on Luzon Island in the Philippines as a new production base is preparing to start
operation during 2015. In April 2013, we acquired from Lexmark an ink cartridge plant located on Cebu
Island and have begun in-house production of ink cartridges.
By reorganizing our production bases and increasing the local procurement ratio by concentratingproduction in optimal locations, we will work to achieve end-to-end production efficiency improvement
and cost reduction in processes extending from procurement of parts and materials to delivery of finished products to our customers.

SalesMessage fromManagement
BusinessStrength

SocialActivities /TopicsHigh LCD TV sharein North America

Corporate
Governance

Global Sales Bases
North America
Worldwide

PolandShare of LCD TV Shipments
in North America(CY2014)

*1
2
USA*

MexicoIndia

Financial
SectionJapan

EuropeManagement Discussion
and Analysis

Philips
MagnavoxJapan

A (Korea)
OthersThailandand India

25%

B (U.S.)FUNAI( Japan)

17%

C (Korea)

10% 10%*1: See P52 “Important Contracts”*2: Establishment of a holding company over sales subsidiaries FUNAI CORPORATION, INC.
and P&F USA, Inc. during fiscal 2015 is planned.

Philips
Source: IHS DisplaySearch

13

Central andSouth America

Corporate
Data

38%

SalesMessage fromManagement
BusinessStrength

Pointing to future success in emerging markets

SocialActivities /TopicsA Global Multi-Brand Strategy
Sales by Geographical Area
(Years ended March 31)

234.0
38.1
3.2
7.7

217.0
32.2
2.1
6.1

176.6

Americas*

EuropeCorporate
Data

2014

2015
Asia and others

Financial
Section

185.0

Management Discussion
and Analysis(¥ Billion)*1, 2: See P52 “Important Contracts”

Japan*Including sales of Central and South America

14

Corporate
GovernanceFunai has established six major sales companies in Japan and overseas which implement sound sales
strategies adapted to the individual characteristics of markets around the world.
North America is the world’s largest market and our most important geographical area, where ourPhilips, Magnavox, Emerson and SANYO brands*1 enjoy high name recognition. We have establishedclose business relationships with leading mass merchandisers and have captured large market share forour products, especially LCD TVs.
In Mexico, we offer the Philips brand, where we captured the number-three share of LCD TV shipments in 2014.
We have also begun sales under the FUNAI brand in Thailand and India. While continuing to emphasize North America, currently our main market, we will expand sales in emerging markets that continue
to show rapid growth, particularly Central and South America.
In addition, we plan to leverage Lexmark’s inkjet-related assets to not only sell printers developed inhouse under the Kodak brand*2, but also to produce and supply commercial and industrial ink cartridges
and peripheral equipment to printer manufacturers.

Social Contribution Activities

Support for the Make-A-Wish Foundation(Sponsored by a Leading U.S. Mass Merchandiser)

Management Discussion
and Analysis
Financial
SectionThe Red Sox Foundation is a charitable organization operated by the Boston Red Sox Major League
Baseball club that was founded in 2002. The primary focus of the foundation is in serving the health,education, recreation, and social service needs of children and families in the New England region.

Corporate
Governance

Red Sox Foundation

SocialActivities /TopicsSince 2002, the Funai Group has supported the Make-A-Wish Foundation, which is sponsored by a leading mass merchandiser in the United States. The Make-A-Wish Foundation
has enriched the lives of children with life-threatening medical conditions through its wishgranting work since 1980. The Foundation’s mission reflects the life-changing impact thata Make-A-Wish experience has on children, families, referral sources, donors, sponsors,and entire communities.
In 2014, we hosted the Make-A-Wish hospitality event at two NASCAR races at
Richmond International Raceway: the ToyotaCare 250 in April, and the Virginia 529
College Savings 250 in September. Each event hosted 50 excited Make-A-Wish children,
parents, and guests at a pre-race hospitality area complete with food, games and fun. In
the evening after the races, the children were invited as special NASCAR guests to grant
their wish of meeting with their favorite drivers!
We also support social contribution activities sponsored by major national and local
retail chains and engage in sponsorship activities in New York and Los Angeles, where
Funai Group sales subsidiaries are located.

BusinessStrength

Funai supports the US-Japan Youth Baseball
Exchange, a program organized by the Red Sox
Foundation, the official team charity of the
Boston Red Sox.
From July 26 to August 4, 2014, twelve
youths and two coaches selected from youth
baseball teams in Kyoto and Chiba visited
Boston to engage in an international cultural
exchange and experience home stay with local
host families. The youths participated in a baseball clinic held by baseball coaches from
US-Japan Youth Baseball Exchange
Harvard University and Northeastern University
and played friendly games with local youth baseball teams. In addition, a welcoming ceremony was held for directors of a Funai U.S. subsidiary, the twelve Japanese youths, andtheir host families on August 1 at Fenway Park, the home field of the Red Sox. Red Sox
pitchers Junichi Tazawa and Koji Uehara, manager John Farrell, and coach Pat Sandora
actively participated in the event, taking time from the busy mid-season practice schedule
to meet with the participants.

Message fromManagement

US-Japan Youth Baseball Exchange

Partnership Agreement with the Boston Red Sox

Virginia 529 College Savings 250

15

Corporate
Data

Funai has signed a partnership agreement with the Boston Red Sox that is beneficial in public relations. Under the terms of the agreement, the Funai logo was displayed in areas including the signboard below the backstop net and other locations during regular season games at Fenway Park,and Funai advertised in the Boston Red Sox magazine.

Topics

Attendance at a Cluster Meeting Heldby President Aquino of the Philippines

Philippines President Benigno Aquino (center left)
and Funai President and CEO Tomonori Hayashi(center right)

16

A KODAK Verité brand printerCorporate
Data

Funai President and CEO Tomonori Hayashi
attended a cluster meeting held in June 2015
at Hotel New Otani Tokyo by President
Benigno Aquino of the Philippines. Funai has
production plants on Cebu Island and Luzon
Island in the Philippines. Funai and nine otherJapanese companies with business operationsin the Philippines were invited to the meeting,where we engaged in discussion aimed at
expanding trade with the government and investment from the perspective of private-sector
companies, and continuing to contribue to theeconomic development of the Philippines.

Financial
SectionFunai entered into a brand license agreementwith Eastman Kodak Company in February
2015 under which Funai will handle supply,transport, sales activities, and after-sale service
for Kodak brand consumer and small officeprinter products and related consumable supplies worldwide.
The Kodak brand has a history of over 120
years and is familiar to people of all ages
around the world. Funai aims to strengthen its
printer business by expanding the Kodak brandpresence and to increase sales and profits byattracting new customers.

Management Discussion
and Analysis

Conclusion of a License Agreement for the KODAK Brand

Corporate
GovernanceFunai reached an agreement with Panasonic
Corporation to succeed television business ofPanasonic subsidiary SANYO Electric Co., Ltd.
in North America. In March 2015, Funai succeeded supply and sales activities for SANYO
brand televisions, DVD and Blu-ray Disc-related
equipment, and sound bar products in North
America. SANYO Electric had been supplying
A SANYO brand large LCD TV
major U.S. retailer Wal-Mart Stores withapproximately one million LCD TVs per year in
North America under the SANYO brand. Funai also sells LCD TVs through Wal-Mart in
North America under the Emerson brand and other brands. (See page 7.)
Succeeding the SANYO brand business will enable Funai to further strengthen its
brand strategy and increase its share of the North American LCD TV market.

SocialActivities /TopicsFunai entered into a medical device businessalliance with XTrillion, Inc. in November 2014
for the purpose of utilizing technologies developed over many years by the two companies
and maximizing synergies in two categories:
dental CT diagnostic equipment and photoacoustic imaging systems. Funai has alreadysupplied XTrillion with components used indental CT diagnostic equipment, and throughthe alliance the partners will expand this supply
relationship and engage in joint development of
Exhibition of the photoacoustic imaging technology at
BiOS Expo 2015 in February 2015
a high-speed, high-definition CT image reconstruction technology and other elemental technologies for dental CT diagnostic equipment.
In the photoacoustic imaging field, the companies have succeeded in joint technical development of a core elemental technology: the world’s first LED excitation-based photoacoustic imaging system that utilizes the photoacoustic effect. They aim to pursue further
research on this technology for application in the medical field.

BusinessStrength

Funai Electric Succeeds the SANYO Brand Television
Business in North America

Message fromManagement

Successful Joint Technical Development of the World’s First
LED-Based Photoacoustic Imaging System with XTrillion, Inc.

Corporate Governance
Message fromManagement

1) Basic Philosophy on Corporate GovernanceCorporate Governance Organization
Ordinary General Meeting of Shareholders
Nominate/Dismiss/Non-reappointment

Nominate/Dismiss

Nominate/Dismiss
Accounting audit report

BusinessStrength

The Funai Electric Group’s basic philosophy on corporate governance is tocontinuously increase corporate value by increasing the transparency ofmanagement to shareholders, consumers, vendors, local communities,
employees, and other internal and external stakeholders and by responding
to changes in the business environment by ensuring management soundness and efficiency and striving for prompt decision-making.
On the basis of this philosophy, the Group has introduced an executive
officer system to ensure expeditious decision-making and establish a systemfor prompt business execution. The Group is also strengthening CSR activities. We have formulated the Funai Group Code of Conduct, which regulates
the conduct of all officers and employees of the Funai Group, and the Funai
Group Procurement Policy, which is based upon the Code of Conduct, andestablished the CSR Committee as an organization to promote corporatesocial responsibility.

Account Auditor

Coordination(Optional Committees)
Deliberations/
ReportBoard of Directors

Nomination Committee
Compensation Committee

Audit/Direction

ReportCoordination

Internal Investment and
Loan Committee

Internal Control
Committee

President andRepresentative Director
Director Responsiblefor Business/Executive Director

ReportReportAudit OfficeInternal Audit

Command/Order

Respective business divisions/subsidiaries

Financial
SectionPursuant to a resolution at the ordinary general meeting of shareholders heldon June 25, 2015 to amend the Articles of Incorporation to provide for atransition to an audit and supervisory committee governance structure, theGroup transitioned from a board of corporate auditors governance structure
to an audit and supervisory committee governance structure effective June25, 2015. The purpose of the transition is to further strengthen the supervisory function of the Board of Directors and enhance corporate governanceby granting to directors who are Audit and Supervisory Committee members
voting rights on the Board of Directors. The Group has also introduced an
executive officer system to establish a system for prompt business execution. We have also ensured objectivity and transparency in important decision-making processes by establishing the Nomination Committee,
Compensation Committee, and Internal Investment and Loan Committee as
discretionary advisory bodies to the Board of Directors other than the Audit
and Supervisory Committee.

Management Discussion
and Analysis2) Description of the Management Organization in the
Fiscal Year under Review

ReportNominate/
Dismiss/
Direction

Corporate
Governance

Audit Committee

SocialActivities /Topics

Account audit

Coordination

17

Corporate
Data

a. Board of Directors
The Funai Electric Group Board of Directors consists of nine members: six
directors who are not Audit and Supervisory Committee members (including
two outside directors) and three directors who are Audit and Supervisory
Committee members (all of whom are outside directors). At the same time as
the Group strives for prompt decision-making by inside directors

Corporate GovernanceElectric Group. In principle, the Audit and Supervisory Committee meetsonce a month.

3) Status of Implementation of an Internal Control System

Management Discussion
and Analysis

a. Systems for ensuring that execution of duties of directors and employeescompiles with laws and regulations and the Articles of Incorporation The
Funai Group Code of Conduct and Executive Compliance Regulations clearly
define proper conduct for directors and ensure that the execution of duties
of directors and employees complies with laws and regulations and the
Articles of Incorporation.
In addition, the Group has prepared Whistleblower Protection Regulations
and prohibits disadvantageous treatment of employees who report compliance violations.

• Compensation Committee
The Compensation Committee consists of directors who are not Audit andSupervisory Committee members appointed by the Board of Directors. It
ensures the transparency and objectiveness of the compensation decision
process by deciding compensation and other payments for directors who
are not Audit and Supervisory Committee members and executive officers
under authority delegated by the Board of Directors. Compensation andother payments for corporate auditors are determined by consultation
among the corporate auditors.

Corporate
Governance

The Board of Directors has resolved the following with respect to an internal
control system for the Funai Electric Group as a “System for ensuring theappropriateness of operations” and has implemented the system as follows.

SocialActivities /TopicsAdvisory Bodies• Nomination Committee
The Nomination Committee consists of directors who are not Audit andSupervisory Committee members appointed by the Board of Directors. Asan advisory body to the Board of Directors, it ensures the transparency andobjectiveness of the candidate selection process by recommending candidates for director to the Board of Directors.

BusinessStrengthc. Independent Auditors
The Company has appointed Deloitte Touche Tohmatsu LLC as independent
auditors. The status of accounting audits is recorded in “4) Status of
Statutory Audits, Internal Audits, and Accounting Audits e. Status of
Accounting Audits.”

Message fromManagement

knowledgeable about the Group’s business matters, participation in Board of
Directors decision-making by outside directors with no special interest in theGroup ensures management soundness and transparency. Meetings of theBoard of Directors are held, in principle, at least once every three months,
and extraordinary meetings are held as necessary.

Financial
SectionCorporate
Data• Internal Investment and Loan Committee
The Internal Investment and Loan Committee consists of directors and executive officers appointed by the president. It ensures the transparency andobjectiveness of the decision-making process regarding major investment
and loan projects by discussing the details of individual projects from agroup-wide perspective.
b. Audit and Supervisory Committee
The Audit and Supervisory Committee consists of three outside directors.
No special interest exists between these outside directors and the Funai
18

Management Discussion and Analysis

improved thanks to efforts to increase efficiency through rigorous inventory
control.
Net Income
The Company reported a gain on sales of investment securities under
extraordinary income and an impairment loss under extraordinary loss. As aresult, net income was ¥1,354 million and increased year on year.

Japan
Lower sales of DVD/BD-related products contributed to a 15.5% decrease insales from the previous fiscal year to ¥32,211 million.

Operating Income
The Company reported operating income of ¥564 million as profitability
Net Sales

Operating Income (Loss)Net Income (Loss)(¥ billion)(¥ million)(¥ million)

234.0

564

217.0

1,354

192.0

Sales Composition
by Geographical Area
(Year ended March 31, 2015)

3%

15%

(5,273)
2014

2015

2013

(5,466)
2014(8,543)
2013

2015
19

2014

2015

Japan
EuropeAmericas*
Asia and others*Including sales of Central and South America

Corporate
Data

81%

(6,745)
2013

1%

Management Discussion Financial
Sectionand Analysis

Net Sales
Net sales decreased by 7.2% to ¥217,088 million. Although sales declined
year on year in all regions, they fell only slightly in the Americas region, theGroup’s principal market.

Corporate
Governance

Americas
Sales of LCD TVs were nearly unchanged because of a decline in sales of
TVs with integrated DVD players, despite an increase in screen size andstrong sales during the peak year-end sales period. Sales of DVD/BD-related
products fell due to market contraction, and sales of home theaters declined
as well. As a result, sales were ¥176,644 million, down 4.5% year on year.

SocialActivities /TopicsNet Sales by Geographical Area

BusinessStrength

In the Fiscal Year ended March 31, 2015, the economy of the United States,
the Funai Group’s principal market, showed an overall recovery trend fromthe turn of the year, despite a slowdown in growth due to such factors aslabor disputes at West Coast ports and a cold wave. The European economy showed a modest recovery trend centered on Germany, despite theslowing Russian economy and a rekindling of the Greek debt crisis.
Economic growth slowed in China, mainly as a result of deterioration of the
housing market. The pace of recovery in Japan was sluggish because of areaction to last-minute demand accompanying the consumption tax increase
and bad weather.

Message fromManagement

Business Performancein the Fiscal Year ended March 31, 2015

Management Discussion and Analysis

Asia and Other
Sales were ¥2,109 million, down 36.4% year on year, on lower sales of LCD
TVs and printers.

Financial Position

Investments and Other Assets
Investments and other assets as of March 31, 2015 decreased by ¥1,781milSales by Geographical Area

Sales Composition by Products

Sales by Products(¥ billion)(Year ended March 31, 2015)(¥ billion)

2014

185.0

38.1 234.0

12.0 24.4

15%

2013

6%

155.7

192.0
18.9

2.6

176.6

79%

32.2 217.0

2014

183.1
12.6

1.9
2015
Americas

EuropeAsia

OthersJapan*See Notes to Consolidated Financial Statement, Note 22.

32.1 234.0

Audiovisual equipment
Information equipment
others20

172.3

Audiovisual equipment

32.0 217.0

Information equipment

othersCorporate
Data

6.1 0.2
2015

Management Discussion Financial
Sectionand Analysis

Property, Plant, and Equipment
Net property, plant, and equipment as of March 31, 2015 decreased by¥599 million to ¥21,306 million from the end of fiscal 2014.

Information Equipment
In the information equipment sector, despite higher sales of ink cartridges, adecline in sales of printers led to net sales of ¥12,634 million, down 33.1%
year on year.

Corporate
Governance

Audiovisual Equipment
Sales of LCD TVs were flat, and sales of DVD/BD-related products fell due tomarket contraction. As a result, net sales were ¥172,367 million, down 5.9%
year on year.

SocialActivities /TopicsCurrent Assets
Total current assets as of March 31, 2015 increased by ¥10,734 million to¥154,775 million from the end of fiscal 2014.
The main changes included an increase of ¥18,273 million in time deposits but a decrease of ¥6,713 million in inventories, and a decrease of ¥579
million in prepaid expenses and other current assets from the end of fiscal
2014.

Net Sales by Product Group

7.7 0.6

BusinessStrength

OthersAlthough sales of electric reception device declined, sales of audio accessories and other products rose slightly. Net sales were ¥32,087 million, up 0.1%
year on year.

Message fromManagement

EuropeSales of printers and other products declined, and sales decreased by
20.9% year on year to ¥6,122 million.

Management Discussion and Analysis

Cash Flows from Operating Activities
Net cash used in operating activities was ¥16,897 million, (Net cash used inoperating activities for the previous fiscal year was ¥1,251 million).
The main changes included the report of net income before income taxes
and minority interests and decreases in trade payables and in inventories.

Total Assets

Total Liabilities

Total Equity(¥ billion)(¥ billion)(¥ billion)

194.5

181.3

189.6

73.1

121.4
61.8

2014

2015

117.6

127.8

(%)

61.7

64.2

2013

2014

66.8

Corporate
Data

63.6

Shareholders’ Equity Ratio

Management Discussion Financial
Sectionand Analysis

Long-Term Liabilities
Long-term liabilities as of March 31, 2015 increased by ¥471 million to¥10,435 million from the end of fiscal 2014.
The main changes included an increase of ¥789 million in long-term debt
from the end of fiscal 2014.

Corporate
GovernanceCash Flows
Cash and cash equivalents on a consolidated basis as of March 31, 2015
decreased by ¥621 million to ¥42,991 million from the end of fiscal 2014.
Cash flows during the fiscal year under review and factors affecting cash
flows are as follows.

SocialActivities /TopicsCurrent Liabilities
Total current liabilities as of March 31, 2015 decreased by ¥2,314 million to¥51,378 million from the end of fiscal 2014.
The main changes included a decrease of ¥514 million in short-termbank borrowings and a decrease of ¥1,317 million in trade payables from theend of fiscal 2014.

BusinessStrength

Total Equity
Total equity as of March 31, 2015 increased by ¥10,197 million to ¥127,881
million from the end of fiscal 2014.
The main changes included an increase of ¥644 million in retained earnings and an increase of ¥9,307 million in foreign currency translation adjustments from the end of fiscal 2014.

Message fromManagement

lion to ¥13,613million from the end of fiscal 2014.
The main changes included a decrease of ¥1,261 million in investment
securities and a decrease of ¥835 million in investments in and advances tounconsolidated subsidiaries and associated companies from the end of fiscal
2014.

2013

2014

2015

2013

2013
21

2014

2015

2015

Management Discussion and Analysis

Risks that may have a significant impact on the Group’s financial situationand operating results are outlined below.
(1) The Funai Group’s Management Policy
The Group manufactures and sells as our principal products audiovisualequipment, information equipment, and other equipment. Price competitionin these product areas is intense; product life cycles are short; and competition
to develop new technologies and functions is growing more severe.
Accordingly, these factors may affect the Group’s financial situation andoperating results.

2) Response to new technologies
To respond to various issues, the Group improves its technological capabilities,
focusing mainly on new business sectors, by means such as business allianceswith other companies, collaboration with academia, and personnel development, and also considers mergers and acquisitions as an option.

(2) Impact of Overseas Market Trends
1) Dependence on the North American market
Since a large portion of the Group’s net sales originates in the North American
market, should the North American economy rapidly go into recession, thismay affect the Group’s financial situation and operating results.
22

Corporate
Data1) Product cost and market prices
When the cost of parts and raw materials rises due to intense competition in
the home electronic appliance industry, even though we have implemented
various countermeasures, cost pressures may affect the Group’s financial
situation and operating results.

5) Corporate acquisitions and business alliances
At times the Group engages in corporate acquisitions and business alliances
to more efficiently increase sales and profits. However, if for various reasonsagreement is not reached on a corporate acquisition, initially expected acquisition synergies do not materialize, or an alliance partnership cannot be continued, this may affect the Group’s financial situation, operating results, andgrowth prospects.

Management Discussion Financial
Sectionand Analysis

4) Intellectual property rights
Recent years have seen an increase in activity by “patent trolls,” entities thatsell no products of their own, but rather attempt to generate income frompatent royalties by filing lawsuits using intellectual property rights acquired
from third parties. This is a worrisome trend for the manufacturing and sales
industry as a whole. Should the Group be compelled to make large compensation payments as a result of the activities of patent trolls, this may affect
the Group’s financial situation and operating results.

Corporate
GovernanceBusiness and Other Risks

SocialActivities /TopicsCash Flows from Financing Activities
Net cash used in financing activities was ¥2,725 million, (Net cash used infinancing activities for the previous fiscal year was ¥4,675 million). The mainchanges included a decrease in short-term bank loans and dividends paid.

BusinessStrength3) Defects relating to products and services
The Group’s departments responsible for quality management and technologies play a central role in an effort to maintain and improve quality. In addition, the Group have established service companies and put in place aservice system in Japan and overseas. However, if a product defect occursthat requires repair or replacement of products, the impact of warranties,
damage to the Group’s reputation, and other resulting factors may affect theGroup’s financial situation and operating results.

Message fromManagement

However, greater than expected diversification of market needs or technologicalinnovation may affect the Group’s financial situation and operating results.

Cash Flows from Investing Activities
Net cash used in investing activities was ¥17,360 million, (Net cash used ininvesting activities for the previous fiscal year was ¥2,730 million). The mainchanges included a decrease in time deposits and purchases of property,
plant and equipment.

Management Discussion and Analysis

5) Deferred tax assets
The Group bases its decisions on the recoverability of deferred tax assets on
various forecasts and assumptions about future taxable earnings. Should theforecasts and assumptions about future taxable earnings change or should
the Group determine that part or all of its deferred tax assets cannot berecovered, deferred tax assets will decrease, and this may affect the Group’s
financial situation and operating results.
6) Financing
The Group may be subject to restrictions on financing resulting in an
increase in financing costs due to deterioration in business performance, andthis may affect the Group’s financial situation and operating results.
In addition, a portion of the Group’s borrowings are subject to financial
covenants. Any infringement of the covenants may result in interest rateincreases or forfeiture of benefit of time and affect the Group’s financial situation and operating results.

23

Corporate
Data2) Litigation
Various litigation risks pertaining to the operation of the Group’s businesses
in Japan and overseas continuously exist. The filing of a major lawsuit may
affect the Group’s financial situation and operating results.

Management Discussion Financial
Sectionand Analysis(3) Other Risks
1) Statutory regulations
In the countries where it does business, the Group is subject to the applicationof various laws and regulations pertaining to areas such as commercial
transactions, import and export, antitrust, intellectual property rights, productliability, environmental protection, consumer protection, financial transactions, and taxation of business entities. Should these laws and regulations or
the interpretation of laws and regulations by the authorities become stricter,this may affect the Group’s financial situation and operating results.

Corporate
Governance4) Retirement benefit obligations
The Group and some Group companies have in place defined benefit corporate pension systems, and retirement benefit obligations are calculated
based on actuarial assumptions such as long-term expected rates of return anddiscount rates on pension assets. However, should it become necessary tochange those assumptions, should pension assets decrease due to deterioration in the investment environment or other factors, or should future retirement benefit costs increase due to changes in the pension system, this may
affect the Group’s financial situation and operating results.

SocialActivities /Topics3) Foreign currency risk
The majority of the Group’s purchasing and sales transactions are conductedin U.S. dollars. We believe this reduces the risks that accompany currency
fluctuations. However, since it is impossible to completely eliminate foreign
currency risk, and foreign currency-denominated assets and liabilities aretranslated to yen at the exchange rates on the settlement date, large currency
fluctuations may affect the Group’s financial situation and operating results.

BusinessStrength3) Management of information
Although the Group has implemented measures to prevent information leaks
and virus protection systems on its internal information systems, it may not
be possible to completely prevent information leaks or system crashes
caused by human error or new virus strains. The occurrence of such an
event may affect the Group’s financial situation and operating results.

Message fromManagement

2) Dependence on production in China
Since the Group has a high rate of production (consignment fabrication andown production) in China to take advantage of cost benefits, changes in thepolitical system in China, the occurrence of conflict or natural disaster, orother unforeseen circumstances may affect the Group’s financial situationand operating results.

Five-Year Summary

2015

1,809,071

772

461

(5,273)(5,465)

564

4,703

Net Income (Loss)(1,169)(4,629)(8,542)(6,745)

1,354

11,288

Total Equity

131,229

123,844

121,398

117,684

127,881

1,065,681

Total Assets

193,910

176,607

194,524

181,341

189,695

1,580,797

Shareholders’ Equity

130,088

122,762

120,103

116,509

126,677

1,055,647

Net Cash Provided by (Used in) Operating Activities(5,165)

16,416(8,022)(1,251)

16,897140,816

Net Cash (Used in) Provided by Investing Activities

4,070(6,434)

12,863(2,730)(17,360)(144,674)

Free Cash Flow*(1,095)

9,981

4,841

(3,981)(462)(3,851)

Capital Investment

6,061

3,931

5,345

5,094

3,275

27,294

Depreciation Expense

4,867

4,970

4,056

5,239

4,758

39,652Return on Assets (%)(0.59)(2.50)(4.60)(3.59)

0.73

Return on Equity (%)(0.86)(3.66)(7.03)(5.70)

1.11

Debt/Equity Ratio (%)

7.79

3.73

10.81

9.14

8.44

Operating Income (Loss)

Financial
Section2015

217,088

2012

Japanese yen
2013

2014

2015

Shareholders’ Equity per Share

3,813.57

3,598.03

3,520.11

3,414.77

3,712.81

30.94

Net Income (Loss) per Share(34.31)(135.69)(250.38)(197.70)

39.70

0.33

40

50

35

35

35

0.29

Notes: 1. From the current fiscal year, the Company rounded down Japanese yen figures less than a million to the nearest million yen and U.S. dollar figures less than a thousand to the nearest thousand dollars, except for per share data.
2. The exchange rate of ¥120.00=U.S.$1.00 (the approximate rate of exchange at March 31, 2015) is used for the above calculations.
*Net cash provided by operating activities plus net cash provided by investment activities.

24

U.S. dollars
2015
Corporate
Data

2011

Cash Dividends per ShareManagement Discussion
and Analysis

2014

234,042

Corporate
Governance2013

192,008

SocialActivities /Topics2012

246,147

Net Sales

BusinessStrength

2011

295,923

Years ended March 31

Message fromManagement

Thousands of U.S.
dollars (Note 1, 2)Millions of Japanese yen (Note 1)

Consolidated Balance Sheets

Millions of Japanese yen$ 358,259
198,574

38,1832,875(389)
42,562
2,245
2,476
154,775

37,681
2,567(210)
49,2752,504
3,055
144,041

318,195
23,964(3,242)354,690
18,713
20,6381,289,795

6,343
20,31439,748513
1966,939(45,633)
21,306

6,178
18,27836,126490
825
61,899(39,994)
21,90552,865
169,289
331,2364,281
159
557,832(380,277)
177,555

1,187

2,448

9,895

2,315

3,150

19,297

4,020
216
1,509
1,716
339
2,584
(276)
13,613¥189,695

4,654
185
1,976
335
400
2,539
(296)
15,394¥181,341

33,501
1,800
12,57814,306
2,832
21,534(2,300)113,447$1,580,797

¥

3,712
426

2015

2014
¥

4,226
388

$

30,933
3,555

31,625
11,944
485
3,184
51,37832,942
11,571414
4,149
53,692

263,542
99,5394,043
26,537428,152

6,974
1,642
193
1,345
280
10,435

6,185
1,863
469
1,153
292
9,964

58,12013,684
1,611
11,2092,337
86,96331,30731,307

260,896

Capital surplus
Stock acquisition rights
Retained earnings

33,272
142
93,84033,272
132
93,196277,270
1,190
782,003

Treasury stock—at cost 2,011,665 shares in 2015
and 2,011,615 shares in 2014

(24,341)(24,341)(202,844)

421(8,188)365
126,820
1,061
127,881¥189,695

672(17,495)(103)
116,641
1,042
117,684¥181,341

3,512(68,234)
3,043
1,056,838
8,842
1,065,681$1,580,797

Corporate
Data¥ 43,612
5,555

2015

Financial
SectionPatents
Long-term loans
Long-term prepaid expenses (Notes 5 and 6)
Asset for retirement benefits (Note 10)
Deferred tax assets (Note 16)
Other assets
Allowance for doubtful accounts
Total investments and other assets
TOTAL¥ 42,991
23,828LIABILITIES AND EQUITYCURRENT LIABILITIES:
Short-term bank borrowings (Notes 9 and 17)
Current portion of long-term debt (Notes 9, 15, and 17)
Payables:Trade (Note 17)
Other (Note 17)
Income taxes payable
Other current liabilities
Total current liabilities
LONG-TERM LIABILITIES:Long-term debt (Notes 9, 15, and 17)
Liability for retirement benefits (Note 10)Long-term payables—other
Deferred tax liabilities (Note 16)
Other
Total long-term liabilities
COMMITMENTS AND
CONTINGENT LIABILITIES (Notes 15 and 21)
EQUITY (Notes 11, 12, and 20):Common stock:
Authorized, 80,000,000 shares;
issued, 36,130,796 shares in 2015 and 2014

Accumulated other comprehensive income (loss):
Unrealized gain on available-for-sale securities
Foreign currency translation adjustments
Defined retirement benefit plans
Total
Minority interests
Total equity
TOTAL

See notes to consolidated financial statements.

25

Management Discussion
and Analysis

Investments in and advances to unconsolidated
subsidiaries and associated companies (Note 6)2015

Corporate
Governance

INVESTMENTS AND OTHER ASSETS:
Investment securities (Notes 8 and 17)

2014

Thousands of
U.S. dollars (Note 1)

SocialActivities /TopicsPROPERTY, PLANT, AND EQUIPMENT:Land (Note 5)
Buildings and structures (Note 5)
Machinery, equipment, and other (Notes 5 and 6)
Lease assets (Note 15)
Construction in progress
Total property, plant, and equipment
Accumulated depreciation
Net property, plant, and equipment

2015

Millions of Japanese yen

BusinessStrength

ASSETS
CURRENT ASSETS:
Cash and cash equivalents (Note 17)
Time deposits (Note 17)
Receivables:
Trade (Note 17)
Other
Allowance for doubtful accounts
Inventories (Notes 4 and 6)
Deferred tax assets (Note 16)
Prepaid expenses and other current assets
Total current assets

Thousands of
U.S. dollars (Note 1)

Message fromManagement

FUNAI ELECTRIC CO., LTD. and Consolidated Subsidiaries
March 31, 2015 and 2014

Consolidated Statements of Comprehensive Income (Loss)

FUNAI ELECTRIC CO., LTD. and Consolidated Subsidiaries
Years Ended March 31, 2015 and 2014

FUNAI ELECTRIC CO., LTD. and Consolidated Subsidiaries
Years Ended March 31, 2015 and 2014
Thousands of
U.S. dollars (Note 1)

Millions of Japanese yen

2015$1,809,071
1,495,959
313,11237,00938,052

308,408564(5,465)

4,703

311
(187)
1,570

268
(193)
3,477

2,594
(1,559)13,083

146

(45)

1,217

(144)

(125)

(1,206)

824

0

6,868

134

Unrealized gain on available-for-sale securities
Foreign currency translation adjustments
Defined retirement benefit plans
Share of other comprehensive income in associates
Total other comprehensive income
COMPREHENSIVE INCOME (LOSS)

Owners of the parent
Minority interests(1,230)(5,155)

(131)

(641)
14,0002,244(5,640)18,703

635
238
873
1,370
(16)
1,354

518
549
1,068
(6,708)(37)¥ (6,745)

5,292
1,988
7,281
11,422(134)
11,288

$

¥

39.70
35

¥ (197.70)
35

U.S. dollars$¥(6,708)$11,422

(246)
9,294
481
12
9,542

223
4,169
135
57
4,586

(2,053)77,452
4,016
108
79,523¥10,913¥(2,122)$90,945¥10,879
34¥(2,161)39$90,660285

Corporate
Data

(77)
1,680

¥ 1,370

Financial
Section¥(1,094)(1,165)(1,281)
199
(174)

2015

Management Discussion
and Analysis

(290)
(266)
(529)

2014

See notes to consolidated financial statements.

(222)

(147)
(618)

2015

TOTAL COMPREHENSIVE INCOME (LOSS)ATTRIBUTABLE TO:

1,124

Japanese yen

PER SHARE OF COMMON STOCK (Notes 2.u and 19):Basic net income (loss)
Cash dividends applicable to the year

NET INCOME (LOSS) BEFORE MINORITY INTERESTSOTHER COMPREHENSIVE INCOME (Note 18):Corporate
Governance2014¥234,042
201,456
32,586SocialActivities /Topics2015¥217,088
179,515
37,573Thousands of
U.S. dollars (Note 1)

BusinessStrength

NET SALESCOST OF SALES (Note 14)
Gross profit
SELLING, GENERAL, AND
ADMINISTRATIVE EXPENSES (Notes 13 and 14)
Operating income (loss)
OTHER INCOME (EXPENSES):Interest and dividend income
Interest expense
Foreign exchange gain—net
Gain (loss) on sale or disposal of property,
plant and equipment
Equity in losses of an unconsolidated subsidiary
and an associated company
Gain on sales of investment securities (Note 3)
Gain on sales of investments in unconsolidated
subsidiaries and associated companies
Loss on impairment of investment securities (Note 8)
Loss on impairment of investment in unconsolidated
subsidiaries and an associated company
Loss on disposal of inventories
Loss on impairment of long-lived assets (Note 5)Compensation expenses
Loss on closing of sales office
Advisory fees (Note 7)
Business structure improvement expenses (Note 6)
Other—net
Other income (expenses)—net
NET INCOME (LOSS) BEFORE INCOME TAXES AND
MINORITY INTERESTSINCOME TAXES (Note 16):Current
Deferred
Total income taxes
NET INCOME (LOSS) BEFORE MINORITY INTERESTSMINORITY INTERESTSNET INCOME (LOSS)

Millions of Japanese yen

Message fromManagement

Consolidated Statements of Operations

0.33
0.29

See notes to consolidated financial statements.

26

Consolidated Statements of Changes in Equity
Message fromManagement

FUNAI ELECTRIC CO., LTD. and Consolidated Subsidiaries
Years Ended March 31, 2015 and 2014
Thousands

Millions of Japanese yen
Accumulated
other comprehensive income (loss)
Stockacquisitionrights34,119¥31,307¥33,272¥122

Retainedearnings

Treasurystock

Unrealized
gain onavailable-for-salesecurities

Foreigncurrencytranslation
adjustments¥101,135(6,745)(1,194)¥(24,341)¥ 451¥(21,722)

221

4,227

(24,341)672(24,341)

10
34,11931,30733,272

132

34,11931,30733,272

132¥33,27210¥142

93,196483
93,6791,354(1,194)(0)34,119Definedretirement
benefit plans

Minority
interests

Total
equity¥1,173¥(103)¥120,225(6,745)(1,194)
4,355

(130)

¥121,398(6,745)(1,194)
4,225(17,495)(103)

116,641

1,042

117,684672(17,495)

(103)

(11)
1,031

(251)
¥ 421

9,307
¥ (8,188)

468
¥ 365

483
117,125
1,354(1,194)(0)
9,535¥126,82029¥1,061

472
118,156
1,354(1,194)(0)
9,564¥127,881(0)¥31,307¥ 93,840¥(24,341)

Total

Accumulated
other comprehensive income (loss)
StockacquisitionrightsRetainedearnings

Treasurystock

Unrealized
gain onavailable-for-salesecurities

Foreigncurrencytranslation
adjustments

Definedretirement
benefit plans

Total

Minority
interests

Total
equity$260,896$277,270$1,101$776,636$(202,843)$ 5,606$(145,794)$ (861)$ 972,011$8,691$ 980,703

260,896

277,270

1,101(202,843)

5,606(145,794)

(861)

(92)
8,598

$277,27088$1,190(2,094)$ 3,51277,560$ (68,234)

3,904$3,043

4,029
976,041
11,288(9,951)(0)79,460$1,056,838

3,937
984,640
11,288(9,951)(0)79,704$1,065,681

4,029
780,666
11,288(9,951)(0)$260,896

See notes to consolidated financial statements.

27$782,003$(202,844)

243$8,842

Corporate
Data

Cumulative effect of change in accounting policy
BALANCE, APRIL 1, 2014 (as restated)
Net income
Cash dividends, $0.29 per share
Acquisition of treasury stock
Net change in the year
BALANCE, MARCH 31, 2015

CapitalsurplusFinancial
Section

BALANCE, MARCH 31, 2014
(April 1, 2014, as previously reported)

CommonstockManagement Discussion
and Analysis

Thousands of U.S. dollars (Note 1)

Corporate
Governance

Cumulative effect of change in accounting policy
BALANCE, APRIL 1, 2014 (as restated)
Net income
Cash dividends, ¥35 per share
Acquisition of treasury stock
Net change in the year
BALANCE, MARCH 31, 2015

CapitalsurplusSocialActivities /TopicsBALANCE, MARCH 31, 2014
(April 1, 2014, as previously reported)

Commonstock

BusinessStrength

BALANCE, APRIL 1, 2013
Net loss
Cash dividends, ¥35 per share
Net change in the year

Number ofshares ofcommon stock
outstanding

Consolidated Statements of Cash Flows

Thousands of
U.S. dollars (Note 1)

Millions of Japanese yen

2015

Millions of Japanese yen

2015

2014

Net income (loss) before income taxes
and minority interests$ 18,703(1,205)31
5,855(2,421)
747
6,479(10,043)260
48,795(Gain) loss on sale or disposal ofproperty, plant, and equipment

(146)

45

(1,217)

Loss on impairment of long-lived assets

618

266

5,155

Equity in losses of an unconsolidated subsidiary
and an associated company

144

125

1,206

Gain on sales of investment securities

(824)

(0)

(6,868)Gain on sales of investments in unconsolidated
subsidiaries and associated companies(134)

Adjustments for:
Income taxes—paid
Income taxes—refund
Depreciation and amortization

Increase in loans receivable
Decrease in loans receivable
Other—net
Net cash used in investing activities(1,124)(261)
11,037(12,057)
(10)
(607)
4,388
(1,251)¥ (5,500)
18,37768(5,174)(4,320)0(362)$(325,576)
185,471
1,824(26,368)(2,864)
13,358(1,291)

Purchases of investments in subsidiaries resulting inchange in scope of consolidation

FINANCING ACTIVITIES:
Decrease in short-term bank loans—net
Repayments of long-term debt
Acquisition of treasury stock
Dividends paid
Other—net
Net cash used in financing activities

1,044
2,289
12,597(5,435)(157)
1,020
14,653
16,897¥(39,069)
22,256218(3,164)
(343)
1,603
(154)

19,083104,975(45,298)(1,312)
8,502
122,112140,816

CASH AND CASH EQUIVALENTS, END OF YEAR

28

(55)
7
63
(2,730)

(572)
5,707
5,635
(144,674)(1,404)(9,391)(525)(11,707)(0)(1,194)(126)(2,725)(1,194)
6,433(4,676)(0)(9,951)(1,057)(22,716)

2,567

2,032

21,393(621)(6,625)(5,181)

43,61250,238363,441¥ 42,991¥43,612$ 358,259
Corporate
Data

See notes to consolidated financial statements.

(68)
684
676
(17,360)

Financial
Section

FOREIGN CURRENCY TRANSLATIONADJUSTMENTS ON CASH AND
CASH EQUIVALENTS
NET DECREASE IN CASH AND CASH EQUIVALENTS
CASH AND CASH EQUIVALENTS,
BEGINNING OF YEAR

(5,832)

Management Discussion
and Analysis

Business structure improvement expenses
Changes in assets and liabilities
Decrease (increase) in trade receivables
Decrease in inventories
Decrease in trade payables
Decrease in liability for retirement benefits
Other—net
Total adjustments
Net cash provided by (used in) operating activities

2015

Corporate
Governance¥ (5,640)

2014

SocialActivities /Topics¥ 2,2442015

BusinessStrength

INVESTING ACTIVITIES:
Increase in time deposits
Decrease in time deposits
Proceeds from sale of property, plant, and equipment
Purchases of property, plant, and equipment
Purchases of intangible assets
Proceeds from sales of investment securities
Purchases of investment securities

OPERATING ACTIVITIES:

Thousands of
U.S. dollars (Note 1)

Message fromManagement

FUNAI ELECTRIC CO., LTD. and Consolidated Subsidiaries
Years Ended March 31, 2015 and 2014

Notes to Consolidated Financial Statements

1. BASIS OF PRESENTATION OF CONSOLIDATED FINANCIAL STATEMENTS

Corporate
Data

29

Financial
Sectiond.	Cash Equivalents—Cash equivalents are short-term investments that are readily convertible into
cash and exposed to insignificant risk of changes in value.
		
Cash equivalents include time deposits, certificates of deposit, commercial paper, and bondfunds, all of which mature or become due within three months of the date of acquisition.

Management Discussion
and Analysisa.	Consolidation—Consolidated financial statements as of March 31, 2015, include the accounts of
the Company and its 22 significant (21 in 2014) subsidiaries (collectively, the “Group”).
		
Under the control or influence concept, those companies over whose operations the Company,
directly or indirectly, is able to exercise control are fully consolidated and those companies overwhich the Group has the ability to exercise significant influence are accounted for using the equity
method.
		
In 2015, investments in one (one in 2014) unconsolidated subsidiary and one (one in 2014) associated company are accounted for using the equity method. Investments in the remaining unconsolidated subsidiaries and associated companies are stated at cost. If the equity method of accounting
had been applied to the investments in these companies, the effect on the accompanying consolidated financial statements would not be material.
		
All significant intercompany balances and transactions have been eliminated in consolidation. All
material unrealized profit included in assets resulting from transactions within the Group is also
eliminated.

Corporate
Governance

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIESSocialActivities /Topicsc.	Unification of Accounting Policies Applied to Foreign Associated Companies for the Equity
Method—In March 2008, the ASBJ issued ASBJ Statement No. 16, “Accounting Standard for
Equity Method of Accounting for Investments.” The new standard requires adjustments to be madeto conform the associate’s accounting policies for similar transactions and events under similar circumstances to those of the parent company when the associate’s financial statements are used inapplying the equity method, unless it is impracticable to determine such adjustments. In addition,
financial statements prepared by foreign associated companies in accordance with either IFRS or
the generally accepted accounting principles in the United States of America tentatively may be used
in applying the equity method if the following items are adjusted, so that net income is accounted forin accordance with Japanese GAAP, unless they are not material: (a) amortization of goodwill; (b)scheduled amortization of actuarial gain or loss of pensions that has been recorded in the equity
through other comprehensive income; (c) expensing capitalized development costs of R&D; (d) cancellation of the fair value model accounting for property, plant, and equipment and investment properties and incorporation of the cost model accounting; and (e) exclusion of minority interests from net
income, if included in net income.

BusinessStrengthb.	Unification of Accounting Policies Applied to Foreign Subsidiaries for the Consolidated
Financial Statements—In May 2006, the Accounting Standards Board of Japan (“ASBJ”) issued
ASBJ Practical Issues Task Force (PITF) No. 18, “Practical Solution on Unification of Accounting
Policies Applied to Foreign Subsidiaries for the Consolidated Financial Statements.” PITF No. 18 prescribes that the accounting policies and procedures applied to a parent company and its subsidiaries for similar transactions and events under similar circumstances should, in principle, be unified forthe preparation of the consolidated financial statements. However, financial statements prepared byforeign subsidiaries in accordance with either IFRS or the generally accepted accounting principles in
the United States of America tentatively may be used for the consolidation process, except for thefollowing items that should be adjusted in the consolidation process, so that net income is accounted
for in accordance with Japanese GAAP, unless they are not material: (a) amortization of goodwill; (b)scheduled amortization of actuarial gain or loss of pensions that has been recorded in the equity
through other comprehensive income; (c) expensing capitalized development costs of research anddevelopment (R&D); (d) cancellation of the fair value model accounting for property, plant, and equipment and investment properties and incorporation of the cost model accounting; and (e) exclusion ofminority interests from net income, if included in net income.

The accompanying consolidated financial statements have been prepared in accordance with the provisions set forth in the Japanese Financial Instruments and Exchange Act and its related accounting regulations and in accordance with accounting principles generally accepted in Japan (“Japanese GAAP”),
which are different in certain respects as to the application and disclosure requirements of International
Financial Reporting Standards (“IFRS”).
In preparing these consolidated financial statements, certain reclassifications and rearrangements
have been made to the consolidated financial statements issued domestically in order to present themin a form that is more familiar to readers outside Japan. In addition, certain reclassifications have been
made to the 2014 consolidated financial statements to conform to the classifications used in 2015.
The consolidated financial statements are stated in Japanese yen, the currency of the country inwhich Funai Electric Co., Ltd. (the “Company”), is incorporated and operates. The translations ofJapanese yen amounts into U.S. dollar amounts are included solely for the convenience of readers outside Japan and have been made at the rate of ¥120 to $1, the approximate rate of exchange at March
31, 2015. Such translations should not be construed as representations that the Japanese yen amounts
could be converted into U.S. dollars at that or any other rate.
From the current fiscal year, the Company rounded down Japanese yen figures less than a million to
the nearest million yen and U.S. dollar figures less than a thousand to the nearest thousand dollars,
except for per share data.
Due to this fraction treatment change, the Company also rounded down the figures for the year
ended March 31, 2014, that had been rounded in the prior year’s annual report.

Message fromManagement

FUNAI ELECTRIC CO., LTD. and Consolidated Subsidiaries
Years Ended March 31, 2015 and 2014

Notes to Consolidated Financial Statementsg.	Investment Securities—Investment securities are classified and accounted for depending on management’s intent. All investment securities are classified as available-for-sale securities.
		 Marketable available-for-sale securities are reported at fair value, with unrealized gains andlosses, net of applicable taxes, reported as a separate component of equity.
		 Nonmarketable available-for-sale securities are stated at cost determined by the moving-averagemethod. For other-than-temporary declines in fair value, investment securities are reduced to net
realizable value by a charge to income.

k.	Long-Lived Assets—The Group reviews its long-lived assets for impairment whenever events orchanges in circumstance indicate the carrying amount of an asset or asset group may not be
30

Corporate
Dataj.	Intangible Assets—Intangible assets are stated at cost. Amortization of intangible assets of theCompany and its consolidated subsidiaries is computed using the straight-line method. Amortizationof software for internal use is computed using the straight-line method over the estimated useful life
(five years).

Financial
Sectioni.	Patents—Patents are carried at cost, less accumulated amortization, which is computed using thestraight-line method over the estimated useful lives.

Management Discussion
and Analysish.	Property, Plant, and Equipment—Property, plant, and equipment are stated at cost. Depreciationof property, plant, and equipment of the Company and its consolidated domestic subsidiaries iscomputed substantially using the declining-balance method, while the straight-line method is applied
to buildings acquired after April 1, 1998, at rates based on the estimated useful lives of the assets.
Depreciation of property, plant, and equipment of consolidated foreign subsidiaries is principally
computed using the straight-line method at rates based on the estimated useful lives of the assets.
The range of useful lives is principally from three to 50 years for buildings and structures and from
one to 20 years for machinery, equipment, and other.
		 Lease assets are depreciated using the straight-line method over the respective lease periods.

Corporate
Governancel.	Retirement and Pension Plans—The Company and certain consolidated subsidiaries have noncontributory funded defined benefit pension plans and unfunded retirement benefit plans for employees. Certain consolidated foreign subsidiaries also have defined contributed pension plans.
		 Effective April 1, 2000, the Group adopted a new accounting standard for employees’ retirement
benefits and accounted for the liability for retirement benefits based on the projected benefit obligations and plan assets at the consolidated balance sheet date. The total transitional obligation determined as of April 1, 2000, was charged to income when adopted, except that of a certain domestic
subsidiary, which is being amortized over 15 years.
		 Actuarial gains or losses are amortized using the straight-line method over a period within the
average remaining years of service of the employees (10 years) starting from the following period.
Past service cost is amortized using the straight-line method over a period within the averageremaining years of service of the employees (10 years).
		 In May 2012, the ASBJ issued ASBJ Statement No. 26, “Accounting Standard for Retirement
Benefits” and ASBJ Guidance No. 25, “Guidance on Accounting Standard for Retirement Benefits,”
which replaced the accounting standard for retirement benefits that had been issued by the BusinessAccounting Council in 1998 with an effective date of April 1, 2000, and the other related practicalguidance, and were followed by partial amendments from time to time through 2009.
	(a)	Under the revised accounting standard, actuarial gains and losses and past service costs thatare yet to be recognized in profit or loss are recognized within equity (accumulated other comprehensive income), after adjusting for tax effects, and any resulting deficit or surplus is recognized as a liability (liability for retirement benefits) or asset (asset for retirement benefits).
	(b)	The revised accounting standard does not change how to recognize actuarial gains and losses
and past service costs in profit or loss. Those amounts are recognized in profit or loss over acertain period no longer than the expected average remaining service period of the employees.
However, actuarial gains and losses and past service costs that arose in the current period andhave not yet been recognized in profit or loss are included in other comprehensive income andactuarial gains and losses and past service costs that were recognized in other comprehensive
income in prior periods and then recognized in profit or loss in the current period shall be treatedas reclassification adjustments (see Note 18).
	(c)	The revised accounting standard also made certain amendments relating to the method of
attributing expected benefit to periods, the discount rate, and expected future salary increases.

SocialActivities /Topicsf.	Inventories—Inventories of the Company and its consolidated domestic subsidiaries are mainly
stated at the lower of cost, determined using the average method for merchandise, finished products
and work in process and using the first-in, first-out method for raw materials, or net selling value.
		 Inventories of the consolidated foreign subsidiaries are mainly stated at the lower of cost, determined using the first-in, first-out method, or net selling value.

BusinessStrengthrecoverable. An impairment loss is recognized if the carrying amount of an asset or asset groupexceeds the sum of the undiscounted future cash flows expected to result from the continued use
and eventual disposition of the asset or asset group. The impairment loss would be measured as theamount by which the carrying amount of the asset exceeds its recoverable amount, which is thehigher of the sum of the discounted cash flows from the continued use and eventual disposition of
the asset, or the net selling price at disposition.

Message fromManagemente.	Allowance for Doubtful Accounts—Allowance for doubtful accounts is stated in amounts considered to be appropriate based on the companies’ past credit loss experience and an evaluation ofpotential losses in the receivables outstanding.

Notes to Consolidated Financial Statements

31

Corporate
Dataq.	Construction Contracts—In December 2007, the ASBJ issued ASBJ Statement No. 15, “AccountingStandard for Construction Contracts,” and ASBJ Guidance No. 18, “Guidance on AccountingStandard for Construction Contracts.” Under this accounting standard, construction revenue andconstruction costs should be recognized using the percentage-of-completion method if the outcomeof a construction contract can be estimated reliably. When total construction revenue, total construction costs, and the stage of completion of the contract at the balance sheet date are deemed to bereliably measured, the outcome of a construction contract can be estimated reliably. If the outcomeof a construction contract cannot be reliably estimated, the completed-contract method should beapplied. When it is probable that the total construction costs will exceed total construction revenue,

Financial
Sectionm.	Asset Retirement Obligations—In March 2008, the ASBJ published ASBJ Statement No. 18,“Accounting Standard for Asset Retirement Obligations” and ASBJ Guidance No. 21, “Guidance on
Accounting Standard for Asset Retirement Obligations.” Under this accounting standard, an asset
retirement obligation is defined as a legal obligation imposed either by law or contract that resultsfrom the acquisition, construction, development, and normal operation of a tangible fixed asset andis associated with the retirement of such a tangible fixed asset.
		 The asset retirement obligation is recognized as the sum of the discounted cash flows required
for the future asset retirement and is recorded in the period in which the obligation is incurred if areasonable estimate can be made. If a reasonable estimate of the asset retirement obligation
cannot be made in the period the asset retirement obligation is incurred, the liability should be recognized when a reasonable estimate of asset retirement obligation can be made. Upon initial recognition of a liability for an asset retirement obligation, an asset retirement cost is capitalized byincreasing the carrying amount of the related fixed asset by the amount of the liability. The asset
retirement cost is subsequently allocated to expense through depreciation over the remaining

Management Discussion
and Analysisp.	Leases—In March 2007, the ASBJ issued ASBJ Statement No. 13, “Accounting Standard forLease Transactions,” which revised the previous accounting standard for lease transactions. The
revised accounting standard for lease transactions was effective for fiscal years beginning on orafter April 1, 2008.
		 The revised accounting standard requires that all finance lease transactions be capitalized by recognizing lease assets and lease obligations in the balance sheet.

Corporate
Governanceo. R&D Costs—R&D costs are charged to income as incurred.

SocialActivities /Topicsn.	Stock Options—In December 2005, the ASBJ issued ASBJ Statement No. 8, “Accounting Standard
for Stock Options” and related guidance. The new standard and guidance are applicable to stock
options newly granted on and after May 1, 2006.
		 This standard requires companies to measure the cost of employee stock options based on thefair value at the date of grant and recognize compensation expense over the vesting period as consideration for receiving goods or services. The standard also requires companies to account for
stock options granted to nonemployees based on the fair value of either the stock option or the
goods or services received.
		 The Company recognizes compensation expense for stock options granted to directors, officers
and employees of the Company, and corporate officers and employees of the subsidiaries based on
the fair value at the date of grant and over the vesting period as consideration for receiving goods orservices. A domestic subsidiary also measures options at their intrinsic value if it cannot reliably estimate the fair value. In the consolidated balance sheets, the stock option is presented as “Stockacquisition right” as a separate component of equity until exercised.

BusinessStrength

useful life of the asset. Over time, the liability is accreted to its present value each period. Any subsequent revisions to the timing or the amount of the original estimate of undiscounted cash flows
are reflected as an adjustment to the carrying amount of the liability and the capitalized amount of
the related asset retirement cost.

Message fromManagement		 This accounting standard and the guidance for (a) and (b) above are effective for the end ofannual periods beginning on or after April 1, 2013, and for (c) above are effective for the beginning ofannual periods beginning on or after April 1, 2014, or for the beginning of annual periods beginningon or after April 1, 2015, subject to certain disclosure in March 2015, all with earlier application being
permitted from the beginning of annual periods beginning on or after April 1, 2013. However, no retrospective application of this accounting standard to consolidated financial statements in prior periods is required.
		 The Company applied the revised accounting standard and guidance for retirement benefits for (a)and (b) above, effective March 31, 2014, and for (c) above, effective April 1, 2014. With respect to (c)above, the Company changed the method of attributing the expected benefit to periods from thestraight-line basis to the benefit formula basis, the method of determining the discount rate fromusing the average period until the estimated benefit payment date to using a single weighted average
discount rate reflecting the estimated timing and amount of retirement benefit payment, and record
the effect of (c) above as of April 1, 2014, in retained earnings.
		 As a result, assets and liabilities for the retirement benefits increased by ¥934 million ($7,791
thousand), ¥200 million ($1,672 thousand), respectively, and retained earnings increased by ¥483
million ($4,029 thousand), while minority interests decreased by ¥11 million ($92 thousand) as ofApril 1, 2014, and operating income and income before income taxes and minority interests for theyear ended March 31, 2015, increased by ¥11 million ($92 thousand).
		 In addition, basic net income per share increased ¥0.20 ($0.00).
		 Retirement allowances for directors, corporate auditors, and executive officers are recorded as aliability at the amount that would be required if all directors, corporate auditors, and executive officers
retired at each consolidated balance sheet date.

Notes to Consolidated Financial Statements

3. CHANGE IN PRESENTATION

t.	Foreign Currency Financial Statements—The balance sheet accounts of the consolidated foreignsubsidiaries are translated into Japanese yen at the current exchange rate as of the balance sheet
date, except for equity, which is translated at the historical rate.
		 Differences arising from such translation are shown as “Foreign currency translation adjustments”
under accumulated other comprehensive income as a separate component of equity.
		 Revenue and expense accounts of consolidated foreign subsidiaries are translated into Japanese
yen at the average exchange rate.

4. INVENTORIESInventories at March 31, 2015 and 2014, consisted of the following:
Millions of Japanese yen

Merchandise and finished products
Work in process
Raw materials and supplies
Total

2015
¥26,398
1,455
14,708¥42,5622014¥31,665
1,182
16,427¥49,275

Thousands of
U.S. dollars

2015$219,990
12,126
122,573$354,690

Financial
Sectionu.	Per Share Information—Basic net income (loss) per share (“EPS”) is computed by dividing net
income (loss) available to common shareholders by the weighted-average number of commonshares outstanding for the period.
		 Diluted net income per share in 2015 is not disclosed because there are no latent shares with adilutive effect.
		 Diluted net income per share in 2014 is not disclosed because it was antidilutive due to theCompany’s net loss position.
		 Cash dividends per share presented in the accompanying consolidated statements of operations are dividends applicable to the respective years, including dividends to be paid after the endof the year.

Management Discussion
and Analysis

Prior to April 1, 2014, gain on sales of investment securities was included in the other—net among theother income (expenses) section of the consolidated statements of operations. Since fiscal year ended
March 31, 2015, the amount increased significantly and such amount is disclosed separately in theother income (expenses) section of the consolidated statements of operations for the year ended March
31, 2015. The amount included in other—net for the year ended March 31, 2014, was ¥0 million.

Corporate
Governances.	Foreign Currency Transactions—All short-term and long-term monetary receivables and payables
denominated in foreign currencies are translated into Japanese yen at the exchange rates at the balance sheet date. The foreign exchange gains and losses from translation are recognized in the consolidated statements of operations to the extent that they are not hedged by forward exchange
contracts.

SocialActivities /Topicsr.	Income Taxes—The provision for income taxes is computed based on pretax income and includedin the consolidated statements of operations. The asset and liability approach is used to recognize
deferred tax assets and liabilities for the expected future tax consequences of temporary differences
between the carrying amounts and the tax bases of assets and liabilities. Deferred taxes are measured by applying currently enacted income tax rates to the temporary differences.

BusinessStrength

in Accounting Policies—When a new accounting policy is applied after revision of an accounting
standards, the new policy is applied retrospectively, unless the revised accounting standard includes
specific transitional provisions, in which case the entity shall comply with the specific transitional provisions. (2) Changes in Presentation—When the presentation of financial statements is changed,
prior-period financial statements are reclassified in accordance with the new presentation. (3)Changes in Accounting Estimates—A change in an accounting estimate is accounted for in the
period of the change if the change affects that period only and is accounted for prospectively if thechange affects both the period of the change and future periods. (4) Corrections of Prior-Period
Errors—When an error in prior-period financial statements is discovered, those statements arerestated.

Message fromManagement

an estimated loss on the contract should be immediately recognized by providing for a loss on construction contracts.

Corporate
Data

v.	Accounting Changes and Error Corrections—In December 2009, the ASBJ issued ASBJ
Statement No. 24, “Accounting Standard for Accounting Changes and Error Corrections” and ASBJ
Guidance No. 24, “Guidance on Accounting Standard for Accounting Changes and Error
Corrections.” Accounting treatments under this standard and guidance are as follows: (1) Changes
32Notes to Consolidated Financial Statements

The Group recorded business structure improvement expenses in the fiscal year ended March 31, 2014.
Business structure improvement expenses were mainly expenses incurred due to shrinking of the overseas light emitting diode (“LED”) business, including an inventory valuation loss of ¥205 million, a loss onrevaluation of investment in nonconsolidated subsidiaries and associated companies of ¥651 million, andimpairment losses of ¥393 million.

Use

Location

Type

Business assets

FUNAI ELECTRIC EUROPE Sp.zo.o.
(Lubuskie, Poland)

Buildings and structures, land

(Impairment losses)
During the fiscal year ended March 31, 2014, the Group recorded losses on impairment in the following
asset groups:

Location

Type

Business assets

Zhong Yue Funai Electron Co.
(Guangdong, China)

Machinery, equipment and other, etc.

Business assets

Zhong Shan Funai Electron Co.
(Guangdong, China)

Machinery, equipment and other, etc.

Type

Business assets

Machinery, equipment and other, etc.

Business assets

Zhong Shan Funai Electron Co.
(Guangdong, China)

Machinery, equipment and other, etc.

Business assets

FUNAI Optical Electronics Co., Ltd.
(Guangdong, China)

Machinery, equipment and other, etc.

7. ADVISORY FEESThe Group recorded advisory fees in the fiscal year ended March 31, 2014. Advisory fees were paid as
specified compensation and fees to third-party advisors to determine an acquisition price for theintended acquisition of all shares in a company handling the Lifestyle Entertainment Business ofKoninklijke PHILIPS N.V. (“Philips”). However, the Company recorded these compensation and fees as
expenses since Philips terminated the sale and purchase agreement and filed a petition for arbitration
with the International Chamber of Commerce, and the Company filed a counterclaim in this regard (seeNote 21).

33

Corporate
Data

As the prospects for future profitability are expected to worsen due to factors, including a decrease inorders for information equipment during the fiscal year ended March 31, 2014, the Company reduced
the book value of manufacturing facilities, etc., to their recoverable amounts and recorded the decreasein value of ¥266 million as other income (expense). The details of the losses are ¥201 million for machinery, equipment, and other and ¥65 million for long-term prepaid expenses.
The recoverable amounts of the assets were determined at net realizable value. The net realizablevalue of long-term prepaid expenses and assets other than long-term prepaid expenses is determinedat zero and reasonable estimates based on market value, respectively.

Financial
SectionMainly, as a result of the decision to downsize the overseas LED business, during the fiscal year ended
March 31, 2014, the Company reduced the book value of manufacturing facilities, etc., with no prospects of future use to their recoverable amounts, and recorded the decrease in value of ¥393 million as
business structure improvement expenses in other income (expense) section. The details of the losses
are ¥337 million for machinery, equipment and other and ¥55 million for long-term prepaid expenses.
The recoverable amounts of the assets were determined at net realizable value. The net realizablevalue of long-term prepaid expenses and assets other than long-term prepaid expenses is determinedat zero and reasonable estimates based on market value, respectively.

Management Discussion
and Analysis

Use

Location

Zhong Yue Funai Electron Co.
(Guangdong, China)

Corporate
GovernanceDuring the fiscal year ended March 31, 2014, the Group recorded losses on impairment in the following
asset groups:

Use

SocialActivities /TopicsIn principle, on the impairment reviews, the Group categorizes business assets on the basis of a legal
entity whose cash inflows and outflows are continuously recorded. Idle assets are separated
individually.
The Company reduced the book values of the business assets for which profitability has declined
significantly to the recoverable amounts in the fiscal year ended March 31, 2015, and recorded a
decrease of ¥618 million ($5,155 thousand) as other income (expense). These losses include ¥596 million ($4,968 thousand) for buildings and structures and ¥22 million ($187 thousand) for land.
The recoverable amounts of the assets were determined at net realizable value and were calculated
based on the real estate revaluations.

BusinessStrength

6. BUSINESS STRUCTURE IMPROVEMENT EXPENSES

During the fiscal year ended March 31, 2015, the Group recorded losses on impairment in the following
asset groups:

Message fromManagement

5. LONG-LIVED ASSETS

Notes to Consolidated Financial Statements

The information for available-for-sale securities, which were sold during the years ended March 31,
2015 and 2014, was as follows:

The costs and aggregate fair values of investment securities at March 31, 2015 and 2014, were as
follows:

Millions of Japanese yen

Cost

¥722

¥0

¥6

Fair value¥ 794¥1,603¥1,603

¥824
¥824

2014
Available-for-sale:
Equity securities
Total

¥
¥

¥ 0
¥ 0

0
0

Realized losses¥1,872Thousands of U.S. dollars

Thousands of U.S. dollars
Cost$3,274

Unrealized gains$3,348

Unrealized losses$2

Fair value$6,868$6,868The impairment loss on available-for-sale equity securities for the year ended March 31, 2014, was¥222 million.

Thousands of
U.S. dollars

2015

2014

2015

¥314
78
¥393

¥252
322
¥575

$2,623651$3,275

Financial
SectionAvailable-for-sale:
Equity securities
Investments in limited partnerships
Total$13,360$13,360

Realized losses$6,619Available-for-sale securities whose fair values are not readily determinable as of March 31, 2015 and2014, were as follows:
Millions of Japanese yen

Realized gains

Management Discussion
and Analysis

2015
Securities classified as:
Available-for-sale:
Equity securities

2015
Available-for-sale:
Equity securities
Total

Proceeds

Corporate
Governance¥1,156¥401

Unrealized losses

Realized gains

2015
Available-for-sale:
Equity securities
Total

SocialActivities /Topics2014
Securities classified as:
Available-for-sale:
Equity securities¥ 392

Unrealized gains

Proceeds

BusinessStrength

Millions of Japanese yen

2015
Securities classified as:
Available-for-sale:
Equity securities

Message fromManagement

8. INVESTMENT SECURITIESCorporate
Data

34

Notes to Consolidated Financial Statements

Long-term debt at March 31, 2015 and 2014, consisted of the following:
Millions of Japanese yen

2015

2014

(1) The changes in defined benefit obligation for the years ended March 31, 2015 and 2014, were as
follows:

Thousands of
U.S. dollars

2015

417
7,401
(426)
¥6,974

152
6,573
(388)
¥6,185$58,195
3,479
61,675(3,555)$58,120

Annual maturities of long-term debt, excluding finance leases (see Note 15), at March 31, 2015, wereas follows:

2016
2017
2018
2019
Total

Millions ofJapanese yen

Thousands of
U.S. dollars

¥ 300
300
3,304
3,079
¥6,983$ 2,500
2,500
27,53525,660$58,195

2015¥9,186
(734)
8,452
516
105
(673)
156
25
¥8,5832014¥9,257
9,257
525
116
(747)
(213)
290
(41)
¥9,186,

2015$76,557(6,118)70,4394,304
882(5,610)1,302
212$71,531(2) The changes in plan assets for the years ended March 31, 2015 and 2014, were as follows:
Millions of Japanese yen

10. RETIREMENT AND PENSION PLANS

35

24¥9,752

2014¥8,012
91
(747)
755
661
37
(64)
¥8,747

2015$72,892
978(5,610)
6,015
6,785
206
$81,268

Corporate
Data

The Company and certain consolidated subsidiaries have severance payment plans for employees,
directors, corporate auditors, and officers. Under most circumstances, employees terminating theiremployment are entitled to retirement benefits determined based on the rate of pay at the time of termination, years of service, and certain other factors. Such retirement benefits are made in the form of a
lump-sum severance payment from the Company or from certain consolidated subsidiaries and annuity
payments from a trustee. Employees are entitled to larger payments if the termination is involuntary, by
retirement at the mandatory retirement age, by death, or by voluntary retirement at certain specific ages
prior to the mandatory retirement age.
The Company and certain consolidated subsidiaries have noncontributory funded defined benefit
pension plans for employees. Certain consolidated foreign subsidiaries also have defined contribution
pension plans.

2015¥8,747
117
(673)
721
814

Financial
SectionBalance at beginning of year
Expected return on plan assets
Benefits paid
Contributions from the employer
Actuarial gains
Increase in business combination
OthersBalance at end of year

Thousands of
U.S. dollars

Management Discussion
and Analysis

Balance at beginning of year (as previously reported)
Cumulative effect of change in accounting policy
Balance at beginning of year (as restated)
Current service cost
Interest cost
Benefits paid
Actuarial losses (gains)
Increase in business combination
OthersBalance at end of year

Corporate
GovernanceObligations under finance leases
Total
Less current portionLong-term debt, less current portion¥6,421SocialActivities /Topics¥6,983

Year ending March 31

Thousands of
U.S. dollars

Millions of Japanese yen

Unsecured loans from banks andother financial institutions, due serially through 2019with average interest rates of 1% (2015 and 2014)

BusinessStrength

The liability for retirement benefits at March 31, 2015 and 2014, for directors, corporate auditors,
and officers is ¥1,093 million ($9,114 thousand) and ¥1,088 million, respectively. The retirement benefits
for directors and Board of Corporate Auditors members are paid subject to the approval by theshareholders.

Short-term bank loans bore interest at an annual average rate of 1.8% and 1.6% at March 31, 2015
and 2014, respectively.

Message fromManagement

9. SHORT-TERM BANK LOANS AND LONG-TERM DEBT

Notes to Consolidated Financial Statements

Thousands of
U.S. dollars

2015¥ 7,941(6,225)¥ 1,7162014¥ 7,287(6,951)¥ 335

2015$ 66,182(51,876)$ 14,306

Funded defined benefit obligation
Plan assets
Liability for retirement benefits¥(2,358)
1,810¥ (548)¥(2,234)
1,459¥ (775)$(19,655)
15,085$ (4,569)

Unrecognized past service cost
Unrecognized actuarial gains (losses)
Others
Total

2014
¥ 525
116
(91)
(108)
108
124
12
¥ 687

Debt investments
Equity investments
Cash and cash equivalents
Others
Total

Thousands of
U.S. dollars

2015$4,304
882
(978)
(907)
607
1,040
(14)
$4,935(8) Assumptions used for the years ended March 31, 2015 and 2014, were set forth as follows:
Discount rate
Expected rate of return on plan assets
Expected rates of pay raises
Lump-sum election rate

2014
¥142
¥142

2015
$ (907)6,090
1,040$6,223

2014
1.3%
1.2%
4.9%
92.5%

Corporate
Data

2015
¥(108)
730
124
¥ 746

Thousands of
U.S. dollars

2015
1.2%
1.4%
4.6%
92.3%

Financial
Section

Past service cost
Actuarial gains
Others
Total

2014
51%
32%
2%
15%
100%

(b) Method of determining the expected rate of return on plan assets		The expected rate of return on plan assets is determined considering the long-term rates of returnthat are expected currently and in the future from the various components of the plan assets.

(5) Amounts recognized in other comprehensive income (before income tax effect) in respect of defined
retirement benefit plans as of March 31, 2015 and 2014, were as follows:
Millions of Japanese yen

2015
52%
31%
0%
17%
100%

Management Discussion
and Analysis

2015
¥ 516
105
(117)
(108)
72
124
(1)
¥ 592

2015
$ 2,525
3,507(1,532)$ 4,500

Corporate
Governance

Service cost
Interest cost
Expected return on plan assets
Amortization of past service cost
Recognized actuarial losses
Amortization of transitional obligation
OthersNet periodic benefit costs

2014
¥ 412
(309)
(308)
¥(206)(7) Plan assets(a) Components of plan assets
		 Plan assets as of March 31, 2015 and 2014, consisted of the following:(4) The components of net periodic benefit costs for the years ended March 31, 2015 and 2014, wereas follows:
Millions of Japanese yen

2015
¥ 303
420
(183)
¥ 540

Thousands of
U.S. dollars

SocialActivities /TopicsPlan assets
Funded defined benefit obligation
Asset for retirement benefits

Millions of Japanese yen

BusinessStrength

Millions of Japanese yen

Message fromManagement(6) Amounts recognized in accumulated other comprehensive income (loss) (before income tax effect) in
respect of defined retirement benefit plans as of March 31, 2015 and 2014, were as follows:(3) Reconciliation between the liability recorded in the consolidated balance sheets and the balances ofdefined benefit obligation and plan assets at March 31, 2015 and 2014, were as follows:36

Notes to Consolidated Financial Statements(1) The stock options outstanding as of March 31, 2015, are as follows:(The Company)
Persons granted

Number ofoptions granted

2005
stock option

Two directors
293 employees
Five other persons

346,400
sharesJuly 12,2005¥12,369 From August 1, 2007($103) to July 31, 2014

2008
stock option

One director officer
10 officers
315 employees

431,700
sharesNovember 20,
2008¥1,609($13)

From August 1, 2010
to July 31, 2017

2014
stock option

Three directors
Two officers
Two officers
of a subsidiary
One employee
of a subsidiary

120,000
shares

October 10,
2014¥1,296($11)

From September 1, 2016
to August 31, 2023

Date of grant

Exercise
price

Exercise period

Stock option

Persons granted

Number ofoptions granted

Date of grant

Exercise price

Exercise period

2010
stock option

Four directors
29 employees

152,000
sharesFebruary 13,
2010

¥384
($3)

From February 11, 2012
to February 10, 20192011
stock option

Two directors
39 employees

116,900
sharesMay 27, 2011

¥807
($7)

From May 27, 2013
to May 26, 2020

Management Discussion
and Analysis(DX ANTENNA CO., LTD.)(b) Increases/Decreases and Transfer of Common Stock, Reserve, and Surplus
	The Companies Act requires that an amount equal to 10% of dividends must be appropriated as alegal reserve (a component of retained earnings) or as additional paid-in capital (a component of
capital surplus) depending on the equity account charged upon the payment of such dividends, until
the aggregate amount of legal reserve and additional paid-in capital equals 25% of the common
stock. Under the Companies Act, the total amount of additional paid-in capital and legal reserve may
be reversed without limitation. The Companies Act also provides that common stock, legal reserve,
additional paid-in capital, other capital surplus, and retained earnings can be transferred among theaccounts within equity under certain conditions upon resolution by the shareholders.

Corporate
Governance

Stock option

SocialActivities /Topics(a) Dividends	Under the Companies Act, companies can pay dividends at any time during the fiscal year in addition to the year-end dividend upon resolution at the shareholders’ meeting. For companies that meetcertain criteria, such as (1) having a Board of Directors, (2) having independent auditors, (3) having a
Board of Corporate Auditors, and (4) the term of service of the directors is prescribed as one year
rather than two years of normal term by its articles of incorporation, the Board of Directors may
declare dividends (except for dividends in kind) at any time during the fiscal year if the company hasprescribed so in its articles of incorporation. The Company meets all the above criteria.
		 Semiannual interim dividends may also be paid once a year upon resolution by the Board of
Directors if the articles of incorporation of the company so stipulate. The Companies Act provides
certain limitations on the amounts available for dividends or the purchase of treasury stock. The limitation is defined as the amount available for distribution to the shareholders, but the amount of net
assets after dividends must be maintained at no less than ¥3 million.

BusinessStrength

12. STOCK OPTIONSJapanese companies are subject to the Companies Act of Japan (the “Companies Act”). The significant
provisions in the Companies Act that affect financial and accounting matters are summarized below:

Message fromManagement

11. EQUITY

Financial
SectionCorporate
Data(c) Treasury Stock and Treasury Stock Acquisition Rights
	The Companies Act also provides for companies to purchase treasury stock and dispose of suchtreasury stock by resolution of the Board of Directors. The amount of treasury stock purchased
cannot exceed the amount available for distribution to the shareholders, which is determined using a
specific formula. Under the Companies Act, stock acquisition rights are presented as a separate
component of equity. The Companies Act also provides that companies can purchase both treasury
stock acquisition rights and treasury stock. Such treasury stock acquisition rights are presented as aseparate component of equity or deducted directly from stock acquisition rights.

37

Notes to Consolidated Financial Statements

2005
stock option

2008
stock option

2014
stock option(Shares)(Shares)(Shares)

330,400

19,600310,800

VestedMarch 31, 2013—Outstanding
VestedExercised
Canceled
March 31, 2014—Outstanding

120,000
7,000

Year ended March 31, 2015
VestedMarch 31, 2014—Outstanding
VestedExercised
Canceled
March 31, 2015—Outstanding

113,000

346,400

346,400

310,800

40,300270,500

93,80093,80093,800122,500

14,000108,500

4,200
89,600108,500

89,6007,000
101,500

5,600
84,000Financial
Section

VestedMarch 31, 2014—Outstanding
VestedExercised
Canceled
March 31, 2015—Outstanding(Shares)Management Discussion
and Analysis

Year ended March 31, 2015
Unvested
March 31, 2014—Outstanding
GrantedCanceled
VestedMarch 31, 2015—Outstanding(Shares)Year ended March 31, 2014
Unvested
March 31, 2013—Outstanding
GrantedCanceled
VestedMarch 31, 2014—Outstanding

Corporate
Governance346,400

2011
stock option

SocialActivities /Topics346,400

2010
stock option

BusinessStrength

Year ended March 31, 2014
VestedMarch 31, 2013—Outstanding
VestedExercised
Canceled
March 31, 2014—Outstanding(DX ANTENNA CO., LTD.)

Message fromManagement(2) The stock option activity is as follows:a The number of stock options(The Company)

Corporate
Data38

Notes to Consolidated Financial Statements

2005
stock option

Exercise price¥12,369($103)

Average stock price at exercise
Fair value price at grant date (Exercise period)

Average stock price at exercise
Fair value price at grant date

Exercise price¥1,609($13)

c. From August 1, 2012 to July 31, 2017

¥454
($4)

d. From August 1, 2013 to July 31, 2017

¥458
($4)

e. From August 1, 2014 to July 31, 2017

¥475
($4)

f. From August 1, 2015 to July 31, 2017

¥487
($4)

g. From August 1, 2016 to July 31, 2017

¥510
($4)

¥280
($2)

c. From September 1, 2018 to August 31, 2023

¥330
($3)

d. From September 1, 2019 to August 31, 2023

¥353
($3)

e. From September 1, 2020 to August 31, 2023

¥359
($3)

f . From September 1, 2021 to August 31, 2023

¥359
($3)

g. From September 1, 2022 to August 31, 2023

¥356
($3)

(DX ANTENNA CO., LTD.)

Exercise price
Average stock price at exercise
Fair value price at grant date2010
stock option

2011
stock option

¥384
($3)

¥807
($7)

Financial
Sectionb. From August 1, 2011 to July 31, 2017

¥447
($4)

b. From September 1, 2017 to August 31, 2023

Management Discussion
and Analysis

a. From August 1, 2010 to July 31, 2017

¥440
($4)

¥236
($2)

Corporate
Governance

Average stock price at exercise
Fair value price at grant date (Exercise period)a. From September 1, 2016 to August 31, 2023

SocialActivities /Topics

2008
stock option¥1,296($11)

BusinessStrength

Exercise price2014
stock option

Message fromManagementb The price information of the stock option is as follows:(The Company)

Corporate
Data

39

Notes to Consolidated Financial Statements

Volatility of stock price
Estimated remaining
outstanding period

Risk-free interest rate

b

c

d

e

f

g

Millions of Japanese yen

5.394
years

5.892
years

6.393
years

6.891
years

7.392
years

7.893
years

8.392
years

Promotion fee
Royalty on patents
Depreciation
Amortization of goodwill
Net periodic retirement benefit costs

¥35
¥35
¥35
¥35
¥35
¥35
¥35
($0.29) ($0.29) ($0.29) ($0.29) ($0.29) ($0.29) ($0.29)
0.162% 0.178% 0.208% 0.241% 0.284% 0.331% 0.373%

2014¥ 1,229
10,327
1,473
3
376

2015
$ 9,92972,500
11,13972,811

14. R&D COSTS
R&D costs charged to income were ¥7,535 million ($62,793 thousand) and ¥8,490 million for the years
ended March 31, 2015 and 2014, respectively.

(4) Estimated Method of Number of Vested Options(The Company)
Estimated number of vested options of the Company is determined based on historical data.

15. LEASESThe Group leases certain machinery and vehicles.
Obligations under finance leases were as follows:
Millions of Japanese yen(DX ANTENNA CO., LTD.)
Estimated number of vested options of DX ANTENNA CO., LTD. is determined based on the actual
cancellation data because the number of options canceled in the future cannot be reasonably
estimated.

2015
¥126
290
¥417

2014
¥ 88
64
¥152

2015
$1,0552,424$3,479The minimum rental commitments under noncancelable operating leases at March 31, 2015 and 2014,
are as follows:
Millions of Japanese yen

40

2015
¥ 823
2,189
¥3,013

2014
¥ 768
2,013
¥2,781Thousands of
U.S. dollars

2015$ 6,866
18,249$25,116

Corporate
Data

Due within one year
Due after one year
Total

Financial
SectionDue within one year
Due after one year
Total

Thousands of
U.S. dollars

Management Discussion
and Analysis

The total intrinsic value of the stock options granted on February 13, 2010, for the year ended March
31, 2015, was ¥66 million ($552 thousand). The total intrinsic value of the stock options granted on May
27, 2011, for the year ended March 31, 2015, was ¥19 million ($160 thousand).

Corporate
Governance(DX ANTENNA CO., LTD.)As DX ANTENNA CO., LTD. was a nonpublic company, the fair value prices of the stock options were
measured at their intrinsic value.

2015¥1,191
8,700
1,336
0
337

Thousands of
U.S. dollars

SocialActivities /TopicsEstimated dividenda40.36% 44.58% 49.49% 51.35% 51.17% 50.46% 49.47%

BusinessStrength2014 stock option

Selling, general, and administrative expenses for the years ended March 31, 2015 and 2014, principallyconsisted of the following:

Message fromManagement

13. SELLING, GENERAL, AND ADMINISTRATIVE EXPENSES(3) The Assumption Used to Measure the Fair Value(The Company)
Estimate method: Black-Scholes option-pricing modelNotes to Consolidated Financial Statements

Millions of Japanese yen¥

Thousands of
U.S. dollars

2015

2014
$

4,553
14,30427,918
2,173
1,850
4,808
2,441
6,050
88,96018,139(148,878)
22,321

199
553
685
1,438
¥ 1,240

368
119
403
892
¥ 1,750

1,660
4,614
5,711
11,986$ 10,334

As a result of the “Act for Partial Revision of the Income Tax Act, etc.” (Act No. 9 of 2015) and the “Actfor Partial Revision of the Local Tax Act, etc.” (Act No. 2 of 2015) enacted on March 31, 2015, the corporate tax rate, etc., will be reduced from the fiscal year beginning on or after April 1, 2015. Accordingly,
the effective statutory tax rate to be used for the calculation of deferred tax assets and deferred tax liabilities will be reduced from 35.6% to 33.1% for the temporary differences expected to be reversed forthe fiscal year beginning on April 1, 2015, and to 32.3% for the temporary differences expected to bereversed for the fiscal year beginning on April 1, 2016, and thereafter.
The tax rate change decreased deferred tax assets (net of deferred tax liabilities) by ¥9 million ($78
thousand) and increased income taxes—deferred and unrealized gain on available-for-sale securities by¥22 million ($184 thousand) and ¥12 million ($105 thousand), respectively.

41

Corporate
Data

Further, with the change of the scheme of tax loss carryforwards, the deductible amount is limited to
65% of taxable income for the fiscal years beginning on or after April 1, 2015, and to 50% of taxable
income for the fiscal years beginning on or after April 1, 2017. Consequently, deferred tax assets
decreased by ¥68 million ($569 thousand) and income taxes—deferred increased by ¥68 million ($569
thousand).
On June 29, 2011, the Company received notices from the Osaka Regional Taxation Bureau suggesting that a subsidiary in Hong Kong did not satisfy the conditions for exclusion from application of
the tax system for dealing with tax havens and indicating its decision to incorporate the income generated by the subsidiary into the income of the Company for the duration of three years from April 1, 2007
to March 31, 2010, for taxation purposes. Because the Company objected to this corrective action, theCompany applied for assessments by the Osaka National Tax Tribunal on August 25, 2011. On July 18,
2012, the Company received written verdicts on this case indicating that our assertions had been

Financial
Section

625
1,475
3,842
380
422
817
289
352
11,500984(18,040)
2,642Management Discussion
and Analysis¥

Corporate
Governance

546
1,716
3,350
260
222
577
292
726
10,675
2,176(17,865)
2,678

2015
35.6%
4.8
2.3
1.8
22.3
2.3
9.5
(38.7)(1.0)
38.9%

SocialActivities /Topics2015
Deferred tax assets:
Liability for retirement benefits
Accounts payable—other
Allowance for doubtful accounts
Accrued employees’ bonuses
Loss on impairment of investment securities
Loss on impairment of inventories
Loss on impairment of long-lived assets
Transfer pricing adjustments
Tax loss carryforwards
Other
Less valuation allowance
Total deferred tax assets
Deferred tax liabilities:
Unrealized gain on available-for-sale securities
Asset for retirement benefits
Other
Total deferred tax liabilities
Net deferred tax assets

Normal effective statutory tax rate
Expenses not deductible for income tax purposes
Per capita inhabitants’ tax
Effect of reduction of income tax rates on deferred tax assets
Lower income tax rates applicable to loss in certain foreign countries
Equity in losses of an unconsolidated subsidiary and an associated company
Estimated tax expense from advance pricing agreement for transfer price taxation
Valuation Allowance
Other—net
Actual effective tax rate

BusinessStrength

Reconciliation between the normal effective statutory tax rate and the actual effective tax rate reflectedin the accompanying consolidated statements of operations for the year ended March 31, 2015, was asfollows (for the year ended March 31, 2014, was not presented because of the net loss for the period):

The Company and its domestic subsidiaries are subject to Japanese national and local income taxes,
which, in the aggregate, resulted in a normal effective statutory tax rate of approximately 35.6% for theyears ended March 31, 2015 and 2014.
The tax effects of significant temporary differences and tax loss carryforwards, which resulted indeferred tax assets and liabilities at March 31, 2015 and 2014, were as follows:

Message fromManagement

16. INCOME TAXESNotes to Consolidated Financial Statements		 Trade receivables and loans are exposed to liquidity risks. The Group manages these risks byhaving each company perform monthly financial planning.

Millions of Japanese yen

2014
Cash and cash equivalents
Time deposits
Receivables—trade
Investment securities
Total
Short-term bank loans (excluding finance lease obligation)
Payables—trade
Payables—other
Long-term debt (excluding finance lease obligation)
Total¥ 43,612
5,555
37,681
1,872¥ 88,722¥ 4,526
32,942
11,571
6,121¥ 55,160¥ 43,612
5,555
37,681
1,872¥ 88,722¥ 4,526
32,942
11,571
6,121¥ 55,160

Corporate
Data42¥ 42,991
23,82838,183794¥105,797¥ 4,01231,625
11,944
6,683¥ 54,265

Financial
Section(2)	Nature and Extent of Risks Arising from Financial Instruments and Risk Management for
Financial Instruments
Trade receivables, such as trade notes and trade accounts, are exposed to customer credit risk.
		 To avoid such risk, the Group has stipulated sales management rules and manages trading terms
and credit lines by each customer.
		 The Group has many receivables and payables in foreign currencies due to its overseas operations. Generally, the Group does not use forward foreign currency contracts because most of the
trades are denominated in U.S. dollar.
		 Investment securities, mainly equity instruments, are exposed to market risk. With regard to therisks, the market values and the financial positions of the issuers are reviewed periodically andreported to the Internal Investment and Loan Committee.
		 Payment terms of payables, such as trade notes and trade accounts, are less than one year.
		 Bank loans are principally for the Group’s operations. The Group has a policy of not using derivatives. However, as floating-rate loans are exposed to interest rate risk, the Group may utilize derivatives (interest rate swap agreements) as hedging instruments according to individual loan contracts.
To trade in derivatives, such derivatives are executed and managed in accordance with the internal
rules. To mitigate credit risk, the Group enters into transactions solely with financial institutions withhigh ratings.

¥ 42,991
23,82838,183794¥105,797¥ 4,01231,625
11,944
6,683¥ 54,265

Unrealized gain/loss

Management Discussion
and Analysis

1. Status of Financial Instruments(1) Group Policy for Financial Instruments
	The Group obtains financing from banks and invests funds in short-term deposits, etc. In principle,
the Group has a policy of not using derivatives.

Fair value

2015
Cash and cash equivalents
Time deposits
Receivables—trade
Investment securities
Total
Short-term bank loans (excluding finance lease obligation)
Payables—trade
Payables—other
Long-term debt (excluding finance lease obligation)
Total

Corporate
Governance

17. FINANCIAL INSTRUMENTS AND RELATED DISCLOSURES

Carrying amountSocialActivities /Topics(a) Fair value of financial instruments

BusinessStrength

2. Fair Value of Financial Instruments
Fair values of financial instruments are based on quoted prices in active markets. If quoted prices are
not available, another rational valuation technique is used instead. The list below does not contain financial instruments whose fair values are not readily determinable.

Message fromManagement

dismissed. The Company, unable to accept the verdicts, filed an appeal to have the action canceledwith the Tokyo District Court on January 17, 2013.
The additional tax, including corporate income taxes, inhabitant taxes, and enterprise taxes,
amounted to ¥825 million (¥935 million, including incidental taxes). This amount has been processed
as expenses under the category of “Income taxes—prior years” in the fiscal year ended March 31,
2012, in accordance with Japanese Institute of Certified Public Accountants Audit and Assurance
Practice Committee Report No. 63, “Treatment of Accounting and Presentation of Taxes for the purpose of Audits.”
The Company has recorded the amount that would be affected if the taxation were applied from thefiscal year ended March 31, 2011, which is the fiscal year following the fiscal year to which the assessment was applied.

Notes to Consolidated Financial Statements$358,259
198,574
318,195
6,619$881,649$ 33,433
263,542
99,53955,695$452,211

Millions of Japanese yen

Investments in equity instruments andinvestment in limited partnerships that do not have aquoted market price in an active market

Thousands of
U.S. dollars

2015

2014

2015

¥2,020¥2,491$16,835(c) Maturity analysis for financial assets and securities with contractual maturities
Millions of Japanese yen
Due in one year
or less

Liabilities
Short-term bank loans, payables—trade, and payables—other
The carrying value of short-term bank loans and payables approximates fair value because of their shortmaturities.

2014
Cash and cash equivalents
Time deposits
Receivables—tradeTotal¥ 43,612
5,555
37,681¥ 86,849
Thousands of U.S. dollars
Due in one year
or less

Derivatives
Not applicable.

43$358,259
198,574
318,195$875,029

Please see Note 9 for annual maturities of long-term debt and Note 15 for obligations under financeleases.

Corporate
Data

Long-term debt
The carrying value of long-term debt approximates the fair value because loans are those with floating
rates and they reflect the market interest rates timely.

Due after five years
Due after 10 years
through 10 years

Financial
Section2015
Cash and cash equivalents
Time deposits
Receivables—trade
Total

Due after one year
through five years

Management Discussion
and Analysis

Investment securities
Investment securities are measured at the quoted market prices on the stock exchange for the equity
instruments.

¥ 42,991
23,82838,183¥105,003

Due after five years
Due after 10 years
through 10 years

Corporate
Governance

AssetsCash and cash equivalents, time deposits, and receivables—trade
The carrying values of cash and cash equivalents, time deposits, and receivables—trade approximate
fair values because of their short maturities.

2015
Cash and cash equivalents
Time deposits
Receivables—trade
Total

Due after one year
through five years

SocialActivities /Topics$358,259
198,574
318,195
6,619$881,649$ 33,433
263,542
99,53955,695$452,211

Unrealized gain/loss

BusinessStrength

2015
Cash and cash equivalents
Time deposits
Receivables—trade
Investment securities
Total
Short-term bank loans (excluding finance lease obligation)
Payables—trade
Payables—other
Long-term debt (excluding finance lease obligation)
Total

Fair value

Message fromManagement(b) Financial instruments whose fair values cannot be reliably determined

Thousands of U.S. dollars
Carrying amountNotes to Consolidated Financial Statements

Information on basic net EPS for the years ended March 31, 2015 and 2014, was as follows:

Millions of Japanese yen

Thousands of
U.S. dollars

Unrealized gain on available-for-sale securities:
Gain arising during the year
Reclassification adjustments to profit or loss
Amount before income tax effect
Income tax effect
Total

¥ 409
(824)
(415)
169
¥ (246)

¥

262
87
349
(125)
¥ 223

$ 3,408(6,874)(3,466)1,412$ (2,053)

Foreign currency translation adjustments:
Adjustments arising during the year
Amount before income tax effect
Income tax effectTotal¥9,3249,324(30)¥9,294¥4,1634,163
5¥4,169$77,705
77,705(252)$77,452

Defined retirement benefit plans:
Adjustments arising during the year
Reclassification adjustments to profit or loss
Amount before income tax effect
Income tax effect
Total

¥ 657
88
746
(264)
¥ 481

¥ 142

$ 5,483740
6,223(2,207)$ 4,016¥ 12¥ 12¥9,542¥ 57¥ 57¥4,586

For the year ended March 31, 2014:
Basic EPS
Net loss available tocommon shareholders¥ 1,354

34,119¥¥ (6,745)

34,119¥(197.70)

Japanese yen

Dollars
EPS

39.70$ 0.33

Diluted net income per share in 2015 is not disclosed because there are no latent shares with a dilutive
effect.
Diluted net income per share in 2014 is not disclosed due to the loss position.

20. SUBSEQUENT EVENT
Appropriations of Retained Earnings
The following appropriation of retained earnings at March 31, 2015, was approved at the meeting of theCompany’s Board of Directors held on May 25, 2015:

Year-end cash dividends, ¥35 ($0.29) per share

$ 108
$ 108
$79,523

Millions ofJapanese yen

Thousands of
U.S. dollars¥1,194$9,951

Financial
SectionShare of other comprehensive income in associates:
Gain arising during the year
Total
Total other comprehensive income

142
(7)
¥ 135

For the year ended March 31, 2015:
Basic EPS
Net income available tocommon shareholders

Weighted-average
sharesManagement Discussion
and Analysis

2015

Net income(loss)

Corporate
Governance2014

Thousands ofsharesSocialActivities /Topics

2015

Millions ofJapanese yen

BusinessStrength

19. NET INCOME (LOSS) PER SHARE

The components of other comprehensive income for the years ended March 31, 2015 and 2014, wereas follows:

Message fromManagement

18. OTHER COMPREHENSIVE INCOME

Corporate
Data

44

Notes to Consolidated Financial Statements

Corporate
GovernanceManagement Discussion
and Analysis
Financial
SectionCorporate
Data

45

SocialActivities /Topics(Financial covenants)
With regard to bank loans, a syndicated loan agreement (balances at March 31, 2015 and 2014, were
¥6,008 million ($50,070 thousand) and ¥5,146 million, respectively) includes financial covenants; if theCompany breaches any of the following clauses, it shall forfeit the benefit of time in relation to the entire
obligation under the agreement and immediately pay the principal of and interest on the loan:

BusinessStrength(2) Outline of the counterclaim filed by the Company(a) Institution with which the counterclaim was filed and the date thereof:		 ( i ) Institution with which the counterclaim was filed: International Chamber of Commerce		 (ii) Date of the counterclaim: December 6, 2013(b) Party to the counterclaim filed:		 ( i ) Name: Koninklijke Philips N.V.
		 (ii) Location: Eindhoven, The Netherlands
		 (iii) Title and name of representative: Frans van Houten, Chief Executive Officer(c) Details of the counterclaim and claimed amount for damages:		 ( i ) Details of the counterclaim:
			 Claim for damages on the grounds of a breach of the agreement and undue action by Philips
		(ii) Claimed amount:
312.3 million, the amount of tax payable, conventional interest thereon and arbitration			
expenses.
		 An overview of the above-mentioned sale and purchase agreement is as follows:		 1. Name of other party and the content of the business to be acquired			 (1) Name of other party: Koninklijke Philips N.V.
			 (2) Content of business to be acquired: Lifestyle Entertainment Business			 (Note) The Lifestyle Entertainment Business involves the development, design, sales, and(partial) manufacture of the Philips-brand audio, video, and multimedia products;
home communication products; and accessories products.
		 2. Reasons for acquiring the shares			The transaction to assume the Lifestyle Entertainment Business from Philips will enable theGroup to expand the lineup of products that it handles and expand its sales region to include
Asia, South America, and other emerging markets, as well as advanced countries in Europe.
The Company decided to acquire shares based on the belief that the acquisition would foster
sustained growth of the Group’s business.
		 3. Acquisition price and the percentage of shares held after the acquisition
			Acquisition price: 150 million
			 Percentage of shares held after the acquisition: 100%

(Arbitration)
The Company resolved to acquire from Philips all shares in a company that would succeed the operation of Philips’ Lifestyle Entertainment Business and concluded a sale and purchase agreement on
January 29, 2013. However, Philips filed a petition against the Company a petition as of October 25,
2013, for arbitration to claim compensation for damages on the grounds of a breach of the agreementby the Company and the petition was served on the Company by the International Chamber ofCommerce on November 8, 2013.
With regard to this matter, the Company does not recognize a breach of the agreement on its part.
Consequently, on December 6, 2013, the Company filed with the International Chamber of Commercea counterclaim for claiming compensation for damages on the grounds of a breach of the agreement
and undue action by Philips.
On May 20, 2014, the Company was given notice of the amount of the claim for compensatory damages from Philips against the Company. Subsequently, on October 1, 2014, the Company filed a statement with the International Chamber of Commerce, including indication of the amount of compensatory
damages claimed against Philips.
On December 24, 2014, the Company received notice from Philips of a revised amount of compensatory damages claimed by Philips.
The results of these arbitral proceedings may have an effect on the operating results of the Group.
However, it is not possible to make a reasonable estimate of the effect of the arbitration proceedings asof the end of the fiscal year and the effect thereof, if any, on the operating results, and the financial position of the Group remains unclear.
The following is an outline of the petition for arbitration filed against the Company and counterclaim
filed by the Company:(1) Outline of the petition for arbitration filed against the Company(a) Institution and date of the petition for arbitration:		 ( i ) Institution with which the petition for arbitration was filed: International Chamber of Commerce		 (ii) Date of the petition for arbitration: October 25, 2013(b) Petitioner for arbitration:		 ( i ) Name: Koninklijke Philips N.V.
		 (ii) Location: Eindhoven, The Netherlands
		 (iii) Title and name of representative: Frans van Houten, Chief Executive Officer(c) Details of the petition and claimed amount for damages:		 ( i )	Details of the petition: A claim for damages on the grounds of a breach of the agreement by
the Company
		(ii)	
Claimed amount: 189.6 million (revised amount from the amount of 171.8 million filed byPhilips on May 20, 2014), statutory interest thereon and arbitration expenses

Message fromManagement

21. CONTINGENT LIABILITIESNotes to Consolidated Financial Statements

22. SEGMENT INFORMATION

Financial
Section(1) Description of Reportable Segments
The Group’s reportable segments are those for which separate financial information is available andregular evaluation by the Company’s management is being performed in order to decide how resources
are allocated among the Group. The Group is engaged in the manufacture and sale of consumer electronics products. Mainly, the Company and DX ANTENNA CO., LTD. cover the Japan region, FUNAICORPORATION, INC. and P&F USA, INC. cover the Americas region, FUNAI ELECTRIC (H.K.) LTD.
covers the Asia region, and FUNAI ELECTRIC EUROPE Sp.zo.o. covers the Europe region. Each ofoverseas subsidiaries is independent management units, which develops product strategies and business activities in their respective regions. Therefore, the Group consists of the geographic segments
based on the manufacturing and sales structures, which are identified four segments: “Japan,”“Americas,” “Asia,” and “Europe.”

Management Discussion
and Analysis(Reportable Segment Name Change)
From this fiscal year, the Group changed the name of the reportable segment from “North America” to“Americas.” This change does not have any impact on the segment information except for the changeof the name. The information for the year ended March 31, 2014, is disclosed by the changed name.

Corporate
Governance

Under ASBJ Statement No. 17, “Accounting Standard for Segment Information Disclosures” and ASBJ
Guidance No. 20, “Guidance on Accounting Standard for Segment Information Disclosures,” an entity isrequired to report financial and descriptive information about its reportable segments. Reportable segments are operating segments or aggregations of operating segments that meet specified criteria.
Operating segments are components of an entity about which separate financial information is available
and such information is evaluated regularly by the chief operating decision maker in deciding how toallocate resources and in assessing performance. Generally, segment information is required to bereported on the same basis as is used internally for evaluating operating segment performance anddeciding how to allocate resources to operating segments.

SocialActivities /Topics(Application of Accounting Standard for Retirement Benefits)
The Company applied the revised accounting standard and guidance for retirement benefits, effective
April 1, 2014. The method of attributing estimated retirement benefits to each period has been changed
from the straight-line basis to the benefit formula basis. The method of determining the discount rate
has been changed from using the discount rate based on the average period until the estimated benefit
payment date to using a single weighted average discount rate reflecting the estimated timing andamount of retirement benefit payment.
As a result, segment loss of the Japan segment for the year ended March 31, 2015, decreased by¥11 million ($92 thousand).

BusinessStrength(2)	Methods of Measurement for the Amounts of Sales, Profit (Loss), Assets, and Other Items for
Each Reportable Segment
The accounting policies of each reportable segment are consistent with those disclosed in Note 2,“Summary of Significant Accounting Policies.” Sales price between the segments are set on arm’slength basis.

Message fromManagement(Clauses)(1)	The Company shall maintain the amount in the equity section in the consolidated balance sheets asof the end of each fiscal year at no less than ¥100 billion.
(2)	The Company shall, for two consecutive fiscal years, not report an operating loss in the consolidated
statements of operations for the fiscal year ending March 31, 2015, and for each fiscal year
thereafter.
(3)	The Company shall, for two consecutive fiscal years, not report an ordinary loss in the consolidated
statements of operations for the fiscal year ending March 31, 2015, and for each fiscal year
thereafter.

Corporate
Data

46

Notes to Consolidated Financial Statements
Message fromManagement(3) Information about Sales, Profit (Loss), Assets, and Other Items
Millions of Japanese yen

2015
EuropeTotal¥ 42,489
124,248¥166,738¥(938)
121,725¥165,887
969¥166,856¥ 1,200
62,605

4,894
130,273¥135,167¥(202)
69,025¥3,817¥217,088
255,491¥472,579¥
117
256,413

1,606
0
4
332

44

4,152

52

562

175
2,939

¥

¥3,817
¥ 57
3,057

6
618

5,855
0
180
3,840
618

Reconciliations(Note A)

Consolidated¥217,088¥(255,491)¥(255,491)¥446(66,717)(0)¥217,088¥
564
189,695
5,855
0
180
3,840
618

Corporate
Governance

Asia

SocialActivities /TopicsAmericas

BusinessStrength

Sales:
Sales to external customers
Intersegment sales or transfers
Total
Segment profit (loss) (Note B)
Segment assets
Other
Depreciation
Amortization of goodwill
Investment in equity method affiliate
Increase in property, plant, and equipment and intangible assets
Impairment losses of assets

Japan

Millions of Japanese yen

Asia

EuropeTotal¥ 56,493
135,566¥192,059¥ (1,328)
129,869¥169,698
0¥169,698¥ (3,786)
61,921

4,563
148,674¥153,237¥
408
70,795¥3,2860¥3,287¥ (425)
3,392¥234,042
284,241¥518,284¥ (5,130)
265,978

2,032
3
30
5,466

47

4,317

83

254

195
4,178
659

15

6,480
3
225
9,914
659

¥

Reconciliations(Note A)

Consolidated¥234,042¥(284,241)¥(284,241)¥(335)(84,637)(0)(54)¥234,042¥ (5,465)
181,341
6,479
3
225
9,860
659

Corporate
Data

47

AmericasFinancial
Section

Sales:
Sales to external customers
Intersegment sales or transfers
Total
Segment (loss) profit (Note B)
Segment assets
Other
Depreciation
Amortization of goodwill
Investment in equity method affiliate
Increase in property, plant, and equipment and intangible assets
Impairment losses of assets

Japan

Management Discussion
and Analysis

2014Notes to Consolidated Financial Statements
Message fromManagement

Thousands of U.S. dollars

2015

2015
¥ 899
(726)
274
¥ 446

2014
¥1,071(839)(567)¥ (335)

Millions of Japanese yen

2015¥ 26,306(1,990)40,786
1,085,609$1,126,395$(1,686)575,209$31,808$31,808$ 480
25,480$1,809,071
2,129,093$3,938,165$
980
2,136,779

13,386
7
41
2,771

369

34,605

433

4,685

1,464
24,495

$

56
5,155

$1,809,071$(2,129,093)$(2,129,093)$
3,722(555,982)

48,795
7
1,505
32,0085,155(0)$1,809,071$
4,703
1,580,797
48,795
7
1,505
32,0085,155

Note B—Segment profit (loss) is adjusted to operating income (loss) in the consolidated statements ofoperations.

Thousands of
U.S. dollars

2015$ 7,494(6,057)2,285$ 3,722(4) Related Information
1. Information about products and services
Millions of Japanese yen

2015
Sales to external customers

Thousands of
U.S. dollars

2015$ 219,216(16,591)

Audiovisualequipment

Informationequipment

Other

Total

¥172,367¥12,634¥32,087¥217,088

Millions of Japanese yen

2014
Sales to external customers(758,607)$(555,982)(*1) Corporate expenses are mainly general and administrative expenses not attributable to any reportable segments.
(*2) Corporate assets mainly consist of cash surpluses (cash and cash equivalents and time deposits) and long-term-investments (investment securities, etc.) that are not attributable to any reportable segment.

Audiovisualequipment

Informationequipment

Other

Total

¥183,108¥18,876¥32,058¥234,042
Corporate
Data(91,032)¥(66,717)

2014¥ 21,077(2,265)315(103,765)¥ (84,637)$1,382,394
8,077$1,390,472$ 10,007
521,709

Consolidated

Financial
SectionSegment assets
Corporate assets (*2)
Adjustment of inventory
Assets for retirement benefits
Elimination of intersegment balances etc.
Total

Total

Thousands of U.S. dollars

2015
Sales to external customers

48

Management Discussion
and Analysis

Segment profit (loss)
Elimination of intersegment transactions
Corporate expenses (*1)
Adjustment of inventory
Total

EuropeCorporate
GovernanceMillions of Japanese yen$ 354,082
1,035,405$1,389,487$(7,820)1,014,380

Reconciliations(Note A)

Asia

SocialActivities /Topics

Note A—Components of reconciliation are as follows:

Americas

BusinessStrength

Sales:
Sales to external customers
Intersegment sales or transfers
Total
Segment profit (loss) (Note B)
Segment assets
Other
Depreciation
Amortization of goodwill
Investment in equity method affiliate
Increase in property, plant, and equipment and intangible assets
Impairment losses of assets

Japan

Audiovisualequipment

Informationequipment

Other

Total

$1,436,394$105,284$267,392$1,809,071

Notes to Consolidated Financial Statements
Message fromManagement

2. Information about geographical areasa. SalesNote: Sales are classified by country or region based on the location of customers.

Millions of Japanese yen

2014
Asia
Japan

AmericasPhilippines

Thailand

Other

Europe

Total

2015

¥9,787¥115¥6,668¥2,663¥1,076¥1,593¥21,905

Americas
Japan

USA

Mexico

Other

Asia

Europe

Other

Total

¥32,211¥147,332¥22,460¥6,851¥1,870¥6,122¥239¥217,088

BusinessStrength

Millions of Japanese yen

Thousands of U.S. dollars

2015

Millions of Japanese yen

AmericasPhilippines

Thailand

Other

Europe

Total

2014

$78,914$1,125$62,071$20,076$8,398$6,969$177,555

SocialActivities /TopicsAsia
Japan

AmericasUSA

Mexico

Other

Asia

Europe

Other

Total

¥154,736¥20,409¥9,824¥2,635¥7,735¥591¥234,042

3. Information about a major customer
Sales
Thousands of
U.S. dollars

Millions of Japanese yen
Thousands of U.S. dollars

Name of Customer

2015

WAL-MART STORES, INC.

AmericasUSA

Mexico

Other

Asia

Europe

Other

Total

$57,098$15,588$51,019$1,998$1,809,071

2015$944,582

2014¥121,529

Related segment nameAmericas(5) Goodwill by reportable segment
Millions of Japanese yen

2015
Japan

Amortization of goodwill
Goodwill at March 31, 2015

Americas

Asia

EuropeElimination

¥0

Total

¥0

Millions of Japanese yen

2014
Japan

b. Property, plant, and equipment

Amortization of goodwill
Goodwill at March 31, 2014

Millions of Japanese yen

2015

Americas

Asia

EuropeElimination

¥3
0

Total

¥3
0

AmericasPhilippines

Thailand

Other

EuropeTotal¥9,469¥135¥7,448¥2,409¥1,007¥836¥21,306

Thousands of U.S. dollars

2015
Japan

Amortization of goodwill
Goodwill at March 31, 2015

49

$7

Americas

Asia

EuropeElimination

Total

$7

Corporate
Data

Asia
Japan

Financial
Section(Change in Presentation)
Prior to April 1, 2014, sales to Mexico and other Latin America were included in “Other.” Since fiscal year
ended March 31, 2015, the amount of the sales increased significantly, “North America” is changed to“Americas” and such amount is included in “Americas.” In accordance with this change, the amountincluded in “Other” ¥24,320 million ($202,668 thousand) is reclassified into “Mexico” ¥20,409 million and“Other” ¥3,319 million among “Americas,” and “Other” ¥591 million in the year ended March 31, 2014.

Management Discussion
and Analysis

Japan$268,426 $1,227,768 $187,171

2015¥113,349

Corporate
GovernanceJapan¥38,109

Independent Auditors’ Report

Message fromManagement

BusinessStrength

SocialActivities /TopicsCorporate
GovernanceManagement Discussion
and Analysis
Financial
SectionCorporate
Data

50

Corporate Data
Message fromManagement

History

2000

	FUNAI ELECTRIC CO., LTD. established in Osaka, capitalized at ¥20 million.

	Listed on the First Section of the Tokyo Stock Exchange and Osaka Securities Exchange.

1962

2001

Representative office established in Chicago,United States.

	Acquired stocks of DX ANTENNA CO., LTD.

1964

BusinessStrength

1961

2003
	FUNAI (THAILAND) CO., LTD. established as a production subsidiary in Thailand.
	Huang Jiang Plant started operation as a consignment production plant in China.

1968

2004

	FUNAI ELECTRIC COMPANY OF TAIWAN established as a production subsidiary in Taiwan.
	Construction of new headquarters building completed in the city of Daito, Osaka.

2006

1970

	FUNAI ELECTRIC (POLSKA) Sp. z o.o. (now a sales subsidiary, FUNAI ELECTRIC EUROPE
Sp. z o.o.) established as a production subsidiary in Poland.

	FUNAI AMERICA ELECTRIC SERVICE CORP. established in the United States as a sales
subsidiary.

Corporate
Governance	FUNAI ELECTRIC ADVANCED APPLIED TECHNOLOGY RESEARCH INSTITUTE INC.
established.

1969

SocialActivities /Topics	CHUGOKU FUNAI ELECTRIC CO., LTD. established as a production subsidiary in
Hiroshima Prefecture.

2007
	FUNAI SERVICE CORPORATION established as a service subsidiary in the United States.

	Training started which formed the basis for establishing the Funai Production System (FPS).

2008

1980

	P&F USA, Inc. established in the United States as a sales subsidiary for Philips-brand products.

	FUNAI ELECTRIC TRADING (EUROPE) GmbH established in Germany as a sales subsidiary.

	Founder Tetsuro Funai assumed post of chairman, Tomonori Hayashi became President and CEO.

1983

2009

Tokyo Branch Office opened.

	P&F MEXICANA, S.A. DE C.V. established in Mexico as a sales subsidiary for Philips-brandproducts.

1987

2012

1989

	Funai India Private Limited established as a sales subsidiary in India.

	FUNAI ELECTRIC (MALAYSIA) SDN. BHD. established as a production subsidiary in Malaysia.

2013

1991

Financial
Section	FUNAI AMSTRAD LIMITED established as a production joint venture in U.K.

Management Discussion
and Analysis

1977

	FUNAI ELECTRIC CEBU, INC. (formerly, Lexmark International (Philippines), Inc.) acquired
from Lexmark.

	FUNAI CORPORATION, INC. established as a sales subsidiary in the United States.

Tetsuro Funai became Representative Director and Chairman, Tomonori Hayashi Representative
Director, President and CEO, and Tetsuhiro Maeda Representative Director and Officer.

	HIGHSONIC INDUSTRIAL LTD. (now FUNAI ELECTRIC (H.K.), LTD.) established in Hong Kong.

1996
	FUNAI SERVICE CO., LTD. established as a domestic service subsidiary.

1999
	Listed on the Second Section of the Osaka Securities Exchange.
51

Corporate
Data

2014

1992

Corporate Data

Established

August 1961

Head Office

7-7-1 Nakagaito, Daito,
Osaka 574-0013

TEL+81-72-870-4303

URL

http//www.funai.jp/en/

Capital¥31,307 million(as of March 31, 2015)

Employees

868 (as of March 31, 2015)(non-consolidated)

Business
Category

Officers

Representative Director
Chairman. . . . . . . . . . . . . . . . . . . . Tetsuro Funai

Officer.. . . . . . . . . Hideaki Funakoshi

Representative Director
President and CEO. . . . . . . . . . . Tomonori Hayashi

Officer.. . . . . . . . . Takeshi Ito

Representative Director
and Officer.. . . . . . . . . . . . . . . . . . Tetsuhiro Maeda

Officer.. . . . . . . . . Kazuo Uga

Officer.. . . . . . . . . Kazuhiko Yamamoto
Officer.. . . . . . . . . Motoyoshi Adachi

Director and Officer. . . . . . . . . . . Jyoji Okada

Head OfficeOutside Director. . . . . . . . . . . . . . Mitsuo Yonemoto
Outside Director. . . . . . . . . . . . . . Yoshiaki Bannai

Outside Director(Audit and Supervisory Committee Members)

Electrical Equipment

Corporate
Governance+81-72-871-1112

Members of the Board

SocialActivities /TopicsFAX

Executives

BusinessStrength

FUNAI ELECTRIC CO., LTD.

Message fromManagement

Name

Outside Director. . . . . . . . . . . . . . Shinichi Komeda

Principal Businesses

Outside Director. . . . . . . . . . . . . . Hiroyuki Makiura

Display Business		 LCD TVs
Digital Media Business		 Blu-ray Disc Players/Recorders
Office Solutions Business		Printers
		 Ink Cartridges
Other Businesses*3:	Licensee for supply and sales activities for SANYO brand TVs, DVD/BD-related equipment,
and sound bar products in North America*4:	Use of Kodak trademarks and designs for Funai printers under a brand license agreementwith the Eastman Kodak Company

52

Corporate
Data*2:	Exclusive licensee for Magnavox consumer TVs, DVD/BD-related products and home theaterin North America

		Antennas

Financial
SectionImportant Contracts*1:	Exclusive licensee for Philips consumer TVs in North America, Mexico and select LATAM
countries. Exclusive licensee for Philips hospitality TVs in North America. Exclusive licensee forPhilips DVD/BD-related products and home theater in North America and Mexico.
		 P&F USA Inc. is the distributor for Philips-branded audio and video consumer
products, including home and portable audio products, headphones, portable DVD andother accessories.

		 DVD Players/Recorders

Management Discussion
and Analysis

Outside Director. . . . . . . . . . . . . . Masahide Morimoto

7-7-1 Nakagaito, Daito, Osaka 574-0013
TEL +81-72-870-4303 FAX +81-72-871-1112
http://www.funai.jp/en/

The copying or unauthorized reproduction of all or part of this publication in any form is prohibited.