Annual Report

2011Contents

Corporate Profile
Business Areas

1

Corporate Profile

3

Financial Highlights

5

Special Feature:

Acquisition of hospitality
TV business expected tocontribute to stable earnings
7

Message from Management

11

Research & Development

13

Production & Sales

15

Corporate Governance19

Members of the Board and Corporate
Auditors and Officers

20Management Discussion and Analysis

28

Financial Section

Since its establishment, Funai Electric has earned considerable trust in the digitalconsumer electronics industry as a result of our dedication to providing superior
products focused on high-quality and cost-performance.
At present, we develop business in three areas, Audiovisual Equipment, whichhandles LCD TVs and DVD and Blu-ray Disc-related products, Information Equipment,
which handles printers and the Others Business, including DX ANTENNA CO., LTD., whichhandles receiver-related products.
Audiovisual Equipment, our main business, provides the market with six brands ofcompact to large LCD TVs sold in Japan and overseas, and has a full line of Blu-ray
Disc-related and other products. The reasonable price and high quality of these brands
has been well-received domestically and overseas.

Audiovisual
Equipment

Information
Equipment

Others• LCD TVs

• Printers• Receiver-related products• DVD/ Blu-ray Disc-related

products

Consolidated Balance Sheets
Consolidated Statements of Operations
Consolidated Statement of Comprehensive Income
Consolidated Statements of Changes in Equity
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
Independent Auditors’ Report

52

Corporate Data

Disclaimer regarding
Forward-looking Statements
This report contains forward-looking statements
regarding business indices, strategies andperformance representing the expectations andjudgments of the management, based on
information available to the Company andpublishable at the time this report was prepared.
When reading this report, please understand thatforward-looking statements involve potential risks
and uncertainties; actual future businessperformance and forecasts may therefore differ
materially from those contained in thesestatements, given the possible emergence of new
factors or changes in economic circumstancesand /or the business environment.

1

Annual Report 2011

Funai’s Strengths

1

Strength2

Strength

Production

The Funai Production System (FPS)
improves productivity throughcontinuous improvement by applying
stress to production lines to discoverwhere and how problems occur. We
also concentrate our production
function into the most appropriate
locations and enhance costcompetitiveness by purchasing
parts in bulk.

DesignWe promote in-house production of core items
and reducing the number of parts used at thedesign stage in an attempt to improve
productivity and cut costs. We also keep
development costs low by transferring partial
control of our development and design to ourfacilities in China and Southeast Asia.

3

Strength

Sales

We sell products under a variety ofbrands in Japan, North America,
Europe, and Asia. Funai Electric
maintains a top share in the North
American market, the largest in
the world, by creating close
relationships with major massretailers.

FPS

Annual Report 20112

Financial Highlights(Years ended March 31)
Millions of yen

2002

2003

2004

2005

Net Sales

236,797

331,463

342,133

383,034

Operating Income (Loss)

19,85935,12136,53433,348Net Income (Loss)

11,232

19,296

26,28025,723––––

Depreciation Expense

6,251

7,367

5,626

6,676

Capital Investment

8,101

6,375

7,577

15,227

Total Equity

124,474

128,648

149,748

174,044

Total Assets

190,248

196,866

223,191

255,326

Shareholders’ Equity

124,474

128,648

149,748

174,044

Comprehensive Income (Loss)

Shareholders’ Equity per Share(¥)

3,460.44

3,644.70

4,244.78

4,919.43

Net Income (Loss) per Share(¥)

312.38540.59744.13719.61

Diluted Net Income per Share(¥)

312.12538.65741.52716.95

Ratio of Operating Income to Net Sales

8.39%

10.60%

10.68%

8.71%

Shareholders’ Equity Ratio

65.43%

65.35%

67.09%

68.17%

Return on Equity

9.56%

15.25%

18.88%

15.89%

43.54

23.97

20.29

18.37

26,18337,94636,53822,019Net Cash Provided by (Used in) Investing Activities

8,352(10,531 )(9,497 )(32,508 )Net Cash Provided by (Used in) Financing Activities( 6,988 )(14,234 )

1,727(420 )Cash and Cash Equivalents, End of Year83,46891,998113,606

101,156

Number of Total Employees

2,914

3,572

3,899

3,882

( times )Price Earnings Ratio
Net Cash Provided by (Used in) Operating Activities

Note 1: The exchange rate of ¥83.15=U.S.$1.00 (as of March 31, 2011 in the Tokyo foreign exchange market) is used for the above calculations.
Note 2: The figure for number of total employees does not include those employees of consignment production plant located in China.

Net Sales

Operating Income (Loss)
Ratio of Operating Income to Net Sales

Net Income (Loss)
Comprehensive Income (Loss)( ¥millions )( ¥millions )(%)( ¥millions )30,000

6

20,0004

10,0002

0400,000

396,712302,778

300,000

314,912295,924

277,168

5.23

10,32920,766
3.54

20,00011,14810,000200,000( 1,170 )
0.47
1,410
0

100,000(3,666 )

0.26
772
0

-10,000-2-20,000(5,377 )( 10,252 )(2,406 )(0.87)-10,000

0

2007

2008

2009

2010

2011

2007

2008

Operating Income (loss)

2009

2010

2011

Ratio of Operating Income to Net Sales(17,365 )2007
Net Income (loss)

2008

2009

2010

2011

Comprehensive income (loss)( Years ended March 31)

3

Annual Report 2011

Thousands of
U.S. dollars

Millions of yen

2006

2007

2008

2009

2010

2011

2011

360,885396,712277,168

302,778

314,912295,924

3,558,918

23,305

20,766( 2,406 )1,410

11,148772

9,284

21,596( 3,666)( 5,377 )( 17,365 )

10,329( 1,170 )( 14,071 )

–

–

–

–

–

( 10,252 )( 123,295 )

7,097

7,178

4,836

3,670

4,300

4,867

58,533

3,758

5,485

4,980

5,013

4,310

6,062

72,892

197,871

187,362

158,356

135,596

142,780

131,229

1,578,220

288,524

272,811

224,415

199,883

204,058

193,910

2,332,051

197,871

186,981

157,871

135,135

141,992

130,088

1,564,498

5,752.92

5,484.38

4,630.58

3,963.72

4,164.86

3,813.57

45.86

620.02( 107.01)( 157.71 )( 509.33 )302.97( 34.31 )( 0.41 )619.08–––300.77

–

–

6.46%

5.23%

( 0.87% )

0.47%

3.54%

0.26%

–

68.58%

68.54%

70.35%

67.61%

69.58%

67.09%–

11.61%(1.90%)( 3.11% )( 11.85% )7.45%( 0.86% )

–

18.77

–

–

–

13.00

–

–

( 729 )

( 62,129 )

46,508( 13,714 )3,640( 5,166 )(47,611 )3,039( 9,476 )( 10,795 )( 2,714 )

4,071

48,9609,204( 26,564)( 8,142 )( 2,563 )( 7,871 )2,466

29,65758,58883,321

57,10040,18034,06333,745405,833

4,025

3,319

2,628

2,590

2,553

2,861

–

(14,195 )Shareholders’ Equity Ratio

Depreciation Expense

Capital Investment(%)( ¥millions )( ¥millions )

80

8,000

68.54

70.35

67.61

69.58

60

8,000

7,178

67.09
6,000

6,000

6,062
5,485
4,980

4,867

4,836

5,013

4,300
40

4,000

20

2,000

0

2007

2008

2009

2010

2011

4,310
4,000

3,670

2,000

0

2007

2008

2009

2010

2011

0

2007

2008

2009

2010

2011

( Years ended March 31)

Annual Report 20114

Special Feature

Acquisition of hospitality
TV business expected tocontribute to stable earnings
On October 1, 2010, we acquired a hospitality TV business that Philips had been cultivatingin the North American market. This business develops, produces and sells televisions forhotels and hospitals.
Although the scale of this market is small compared to the TV business for standard
consumers, demand and price are both stable.

5

Annual Report 2011

E

ntering a new market on
30 years of past achievementswith no major investment

For more than 20 years, Funai Electric has been
involved as an OEM of VTR and DVD-related
products for Philips with whom we haveestablished a close relationship. In
September 2008, we acquired exclusive
usage rights to their PHILIPS andMAGNAVOX brand TVs for standard
consumers in the U.S. and Canadian markets.
There are two main reasons why weacquired their hospitality business. The firstis the expected synergy with our standard
consumer TV business. The second is theinheriting of an existing business that was built
on Philips’ 30 years of past achievements.

Because of these two reasons, no special
new investment was required. And, unlike
the standard consumer TV market where
price competition is intense, both prices anddemand in the industrial TV market arestable, making it a very attractive proposition.
The industrial TV market in the UnitedStates, Canada and Mexico is an oligopoly,
occupied by Philips, Samsung and LG.
Philips has a 20% share in the U.S. market,
the largest, with most of its products there
going to large luxury hotel chains.

Anticipating a shift in demand
from CRT to LCD TVs

It is estimated that more than 50% of theTVs in the hotel/hospital TV market are still
CRT TVs. That is scheduled to change,
starting in fall 2011 and continuing through2013. For example, in the hotel industry,
several hotel groups are said to haveestablished a deadline, such as the end of
2011or 2012, for switching over to LCD TVs.
We see this as an excellent opportunity
to increase share using our strengths of highquality and cost performance.
With this goal in December 2010, weestablished a hospitality TV development
facility in Singapore, where development of
new products began in February 2011.
Going forward, we will continue to improve
cost competitiveness through in-housedevelopment.

Annual Report 20116

Message from Management

We will enhance our costcompetitiveness across theboard to return the TV
business to profitability as
quickly as possible
Tomonori Hayashi
President and CEO

7

Annual Report 2011

First, I would like to offer my sincere and heartfelt condolences to thevictims of the Great East Japan Earthquake and their families. All of us
here at Funai Electric hope for a quick recovery in all the regions
affected by the disaster. We are fortunate to report that there were no
injuries or damage to our Group employees or facilities, and that ourbusiness was faced with no major problems as a result of the disaster.

Performance in the Fiscal Year
Ended March 31, 2011
Operating income significantly lower
on poorly performing TV businessIn the LCD TV market, representing ourGroup’s core product, demand, particularly
in China and other developing countries,
began to surge and growth was evident inJapan in large part due to government
efforts to stimulate consumption. In Europe
and the United States, market growth isslowing, owing to already-high productpenetration. In these markets, sales ofhigh-priced new products such as LED and3D TVs were flat. This caused prices to fall
further, which, when combined withincreasing raw material costs, put downward
pressure on profits.
As a result of these conditions, in thefiscal year ended March 31, 2011, consolidated

Next year’s plan

net sales were ¥295.9 billion (down 6.0%
compared to last year), while operating
income was dramatically lower at ¥0.7 billion(down 93.1% compared to last year).
The poorly performing TV business
was the main factor behind the significant
decline in operating income. We prepared afull lineup of LED TVs in anticipation ofincreased demand for high-priced PHILIPS
brand products in the North American
market. However, as previously mentioned,
actual high-priced product sales were flat,
owing to severe market conditions andcausing another problem that forced us tosell off excess inventory at a loss. As aresult of the decline in sales and profits
from the LCD TV business, we recorded
significant losses in this area.
Sales of other products, including
Blu-ray Disc-related products, informationequipment and receiver-related products,
grew year on year; however, this growth
was not enough to cover the loss inrevenue sustained from LCD TVs.
Going forward, the Group will focus
efforts on returning the TV business to
profitability within this challenging
business environment.

Net sales

Operating income( ¥ billion )

500

400

300

8

0.8

0.7
295.9

10

310.0
0.6

200

0.4

100

0.2

0

This Year(Results as of March 31, 2011)

Next Year

0(Plan for March 31, 2012)

Annual Report 20118

Message from Management

Initiatives in the Next Fiscal Year
(Ending March 31, 2012)
Strengthening cost competitiveness toreturn TV business to profitability
2011 marks the 50th anniversary of our
founding. In what is already a memorable
year, I also want to make it the year when
we stage a turnaround offensive thatlaunches us on the path toward a new 50
years. To this end, the most critical issue isgetting the TV business back on track. We
aim to increase the number of units soldfrom 5.9 million this year to over 7 million
next year, but we plan to promote policies
that emphasize the improvement ofoperating income above all else. We will
make an effort to assemble a full lineup of

products at penetration price points, ourGroup strength, including PHILIPS brandproducts, and enhance LCD TV costcompetitiveness across the board.
Furthermore, reflecting on last year’s
excess inventory situation, we will maintainmore thorough inventory management
through closer communication withsales subsidiaries.
In October 2010, the Group acquired
the hospitality TV business from Philips,
which is focused on hotels and hospitals in
the North American region. Stable earnings
are expected in the hospitality business,where we will continue to expand sales
channels that we expect will contribute tosales and earnings.
There is further market growth forecast
in areas other than the TV business, most9

Annual Report 2011

notably in Blu-ray Disc-related products,
where sales continue at a brisk pace.
In light of the above initiatives,
earnings in the next fiscal year are forecast
for consolidated net sales of ¥310 billion(up 4.8% from the previous year) andoperating income of ¥8 billion (up 935.9%
from the previous year). This forecast isbased on an assumed exchange rate of
US$1 = ¥83.
Promote growth strategy and thefurther strengthening of ourmanagement base
The Funai Group’s basic policy is the strict
pursuit of manufacturing known for its
focus on consistency, speed and costcompetitiveness. Going forward, we will
carefully promote our growth strategy andfurther strengthen our management basein accordance with this policy.
Promoting an all-out effort to bolster
competitivenessIn terms of further strengthening ourmanagement base, to further enhance costcompetitiveness—our company’s
strength—we will launch various
companywide initiatives. First, we will
establish a new organization by integrating
the TV and DVD business divisions, as wellas promote efficiency in productdevelopment, design and sales. In addition,
we are attempting further cost cuts indevelopment design and partsprocurement. In development design, we

have already increased productivity
significantly through improvements inoperating efficiency within the production
process for new 2011 LCD TV products. We
established an audiovisual development
design facility in Shenzhen, China, thesecond after our facility in Malaysia. Core
technologies will be developed in Japan,
however, from now, the development ofother technologies will shift to regions withcheap labor costs. Regarding partsprocurement, with the Purchasing
Department working more closely with theother business divisions, we strengthened
the system that manages procurement
costs by focusing on market pricemovements. As a result, we think we can

now proceed with an even higher level ofcost competitive manufacturing.
We also believe PSI management is a
critical issue. PSI stands for “Purchase,
Sales and Inventory,” and we will foster
closer communication between the three
departments responsible for these functions,as well as the Production Department,
to strengthen the production volume andinventory adjustment methods. Some
products were unsuccessful this fiscal year,
and because PSI management did notfunction properly, we ended up holding too
much inventory. The speedy sharing of
information such as PSI data with Purchase,
Production, Sales and all other departments
will enable us to provide products that are
in step with market trends.

Basic Policy

Strengthening initiatives to promote
new business and the globalization of
production and sales
Promotion of our growth strategy involves
promotion of the globalization of our
production and sales.
From the perspective of production, in
China, it is becoming increasingly difficult tostably maintain a labor force, and any
future revaluation of the Chinese Yuan is
expected to cause a sudden spike in laborcosts. For this reason, rather than expand
our consignment production in China any
further, we will instead increase our
production system by introducing new
equipment at our facilities in Thailand. Also,
we are currently examining several
countries as possible candidates for theestablishment of a new production facility.
In terms of sales, our goals are toturnaround our situation in the European
market, where sales have been stagnant,and enter the promising emerging markets,
such as India.
New business initiatives will involve
the proactive creation of new products thatwill form the main pillar of the Group’s
future through daily R&D. Already, we aremoving forward with the development ofvarious products, including network-related
products, and device component. We think
that, going forward, these products willcontribute steady earnings. To further
advance this growth strategy, we will
aggressively pursue strategic alliancesand M&A opportunities in our aim forsustainable growth.

/ marketing viable products
1 Production
focusing on speed

Further strengthening ofmanagement basePromote growth strategy(Return to source of
core competence)

Execute organizational reforms tostrengthen management and efficiency

Group’s basic policy on profit distribution is
to maintain a stable dividend level while
ensuring the operating base of the Group is
continuously strengthened. The basic
measurement used to track the policy is thedividend-to-consolidated net assets ratio,with the current target figure being set at
Cash dividend per share(Years ended March 31)( yen )

60

About Dividends

50

Maintaining stable dividends andstrengthening the management base40

The Funai Electric Group is aware thatproviding returns to shareholders is oneof the most important issues thatmanagement faces. With this in mind, the2 Thorough pursuit of cost competitiveness

Execute measures to improve sales
and earnings focused on
medium- to long-term growth

1.0%. Based on this target, the Group plans
to implement a stable dividend policy while
taking into consideration the operating
environment facing the business.
Based upon the aforementioned
policy, the year-end dividend for the period
ended March 2011 was set at ¥40 per
share (annual dividend of ¥40 per share).
We look forward to receiving yourcontinued understanding and support as we
implement our strategies in the future.

55
50
40

40

40

Tomonori Hayashi

30

President and CEO

20
10
0

2007

2008

2009

2010

2011

Annual Report 201110

Research & Development

We aim for continuous review and improved production of ourmain product designs. We also attempt to create profits from
intellectual properties by promoting technological development
as the source of new growth potential.

Striving to Achieve Overwhelming Cost CompetitivenessLeveraging three design strengths
From the product design stage, Funai
Electric promotes in-house production ofcore items and reducing the number ofparts used at the design stage in an
attempt to improve productivity and cut
costs. Also, we established development
design facilities in Shenzhen, China, andMalaysia. We keep development costs

low by developing the base model inJapan, then designing the development
model overseas.
Major improvements to productivity
result from review of LCD TV design
Traditionally, labor costs had been cheap in
China, and even if there were many
processes involved in manufacturing there,

Overwhelming cost competitivenessIn-house production of core items

Overseas onsite design

11

Annual Report 2011

Reducing the number of parts

parts were cheap. This was the thinking
when it came to LCD TV design, but eachyear, labor costs in China continue to rise,and our thinking has changed. Our strategy
has shifted to one focused on automation
rather than human hands, to raisingproductivity and lowering costs.
Specifically, upon review of the designof TVs sold in 2011, we were able todramatically improve productivity by
optimizing the balance between processes
involving parts inserted by hand and thoseinserted automatically by machines.
Furthermore, we improved costcompetitiveness with advances in theminiaturization and reduction of parts.

Sowing Seeds for Future Growth
The R&D Division promotes technicaldevelopments involving the services andsoftware that will be required during theera of cloud services in a full-fledged
broadband environment. We are also
working on “ultra AV home electronics,”
which feature a superior human interface.
Network-related technology
The Group pursues development activities
over wide range, spanning fromfundamental technologies to products. We
were an early provider of products
compatible with VOD services and SNS invarious countries at an early date inBlu-ray Disc-related products and LCD TVs,
and take the lead in the development of

networked consumer electronics.
Furthermore, we have introduced productsthat take advantage of cloud-based services
and are pursuing the wireless networking
products. Our next step will be to develop
and launch into the market for mobile
devices and telecommunication devices
and services, and we strive to promote aleap forward the telecommunications field.
Human interface devices
We are moving ahead in the development ofdevice and application software based on
optical control technology, nanotechnology
and MEMS technology by creating products
to make our lives more rewarding andenjoyable by taking advantage of digitization.

Advanced technology development
FUNAI ELECTRIC ADVANCED APPLIEDTECHNOLOGY RESEARCH INSTITUTE INC.
was established to conduct practicalapplied research into material, elemental
and basic theories to develop advanced
technologies that will become fundamental
production technology in the future.
In addition to development focusedon strengthening intellectual property andour current core businesses of LCD TVs
and optical disks, we will continue toproactively develop standard devices
for electronic publishing and other new
growth markets.

Intellectual Property Strategy
Protect proprietary technology andproducts, generate profit from
intellectual properties

Formulating optimal strategies for
traditional main products andnew areas

As the digitization of consumer electronics
continues to advance, Funai Electric has
positioned intellectual property as animportant management theme.
We follow a quality-oriented policy on
patent filing, based on a policy of protecting
Funai products with our own patents,
working to acquire patents effectively andefficiently. We also attempt to differentiate
ourselves from other companies withtechnology while always being prepared for
an attack by the competition.

The competition for our main TV and DVD
and Blu-ray Disc-related products, major
global electronics manufacturers, have an
advantage regarding the development ofcore technologies. Because of this, Funai
Electric is engaged in building a portfolio
focused on related technologies to enhancethe value of existing products.
At the same time, we are also
standing at the same starting line as the
major manufacturers when it comes to thecultivation of new areas. We promote
the aggressive development of coretechnologies in new areas in pursuit of arobust portfolio that meets or exceedsthat of other companies.

Looking ahead, we will focus on
generating profits by providing ourpatented content to other companies andpromoting a sound intellectual property
strategy.
Patents registered(Year ended March 31, 2007 = 100)
200
150

100

102

2007

2008

154

152

2010

2011

116

100
50
0

2009

(Years ended March 31)

Annual Report 201112

Production & Sales

The Funai Production System (FPS) proprietary manufacturingsystem creates the world’s most price-competitive products,
which are provided through a diverse array of global brands.

Production
The Funai Production System (FPS)
is the realization of global top classprice-competitivenessWe make continual efforts to improve
productivity to provide high-quality,
user-friendly products at a reasonable
price. The focal point of these efforts is theFunai Production System (FPS) proprietary
manufacturing system.
Funai Production System

Apply stressto
production
line

Resolveproblem(Funai Production System)

Introduce
improvement

13

Annual Report 2011

Identify
problemThis system applies stress to the
production line, such as reducing thenumber of operators and increasing the
speed of the conveyor belt, until conditions
are created such that the production line
stops. The FPS creates these conditions toanalyze what causes the line to stop, thenimproves on those conditions that caused
the failure. By repeating this cycle, we
hopes to realize continuous improvements
to productivity.
Optimizing production facility
locations to further improve costcompetitivenessAlong with FPS, the source of Funai
Electric’s cost competitiveness is optimized
production facility locations.
Funai Electric concentrates its

production facilities into the mostappropriate locations and enhances costcompetitiveness by purchasing parts inbulk. In particular, our production facilities
are concentrated in the Asian region, where
we have the competitive ability to procure
raw materials and parts, and secure a
low-cost, good quality labor force.
However, the increasing trend toward
labor shortages and wage increases in
China in recent years has led us to enhance
our Thai facility to mitigate these risks.
We are also considering establishing new
facilities in other locations.

North America

EuropeJapan

We develop LCD TVs and DVD- andBlu-ray Disc-related products for the
PHILIPS, MAGNAVOX, SYLVANIA andEmerson brands, which are sold at
Walmart, Target, Kmart, Sears andother leading mass retailers.

The FUNAI brand sells LCD TVs andDVD, Blu-ray Disc-related products.

The DX BROADTEC brand sells LCD TVs
and DVD, Blu-ray Disc-related products.
The DX ANTENNA brand sellsreceiver-related products.

U.S.

MexicoChina

Poland

*

*

Japan

Thailand

Production subsidiaries

Sales subsidiaries* Consignment production plants (China accounts for 3 of 4 locations).

Sales
Developing a variety of brands withhigh recognition in North America
In North America, the world’s largest market
and Funai’s area of primary focus, ouraudiovisual brands PHILIPS, MAGNAVOX,SYLVANIA and Emerson enjoy high namerecognition. And, we maintain an top-classshare in this market through the creation ofclose relationships with leading mass retailers
such as Walmart.
Top 5 Companies by share of shipments inNorth America (Based on a 2010 survey by
DisplaySearch)

RankingCompany

Share (%)

1

A

18.2

2

B

17.5

3

FUNAI

12.0

4

C

10.4

5

D

9.7

In the giant European market,
comparable to North America, we havefacilities in Hamburg, Paris and Warsaw,
where we develop FUNAI brand LCD TVs andDVD, Blu-ray Disc-related products. We
also make an effort to build strong
relationships with leading mass retailers
in each country.
In Japan, we sell LCD TVs and DVD,
Blu-ray Disc-related products under the
DX BROADTEC brand. In fiscal 2010, weposted a significant increase in net sales
compared to the previous fiscal year due tospecial demand generated by governmental
policy to stimulate consumption.
In addition, sales of receiver-related
products sold under the DX ANTENNA
brand expanded substantially, owing to
the shift to terrestrial digital broadcasting.

Cultivating emerging markets
Economic and population growth in BRICs
and other emerging markets is increasing
at a rapid pace, fueling expectations overincreased audiovisual demand in thesepromising markets.
Recognizing the importance of
emerging markets, Funai Electric is moving
forward with preparations to enter the
Indian markets.

Annual Report 201114

Corporate GovernanceCorporate Governance
Policies and Organization
The Funai Electric Group’s basic philosophy
on corporate governance is to continuously
increase the value of the corporation by
being transparent to all stakeholders,both internal and external, ranging fromshareholders and customers to vendors,neighboring communities and employees;
ensuring the soundness and efficiency ofmanagement and responding to changing
operating environments through quick
decision-making capabilities.
Based on this philosophy, the Group
adopted an executive officer system in 2002,
and subsequently transitioned into a“Company with Committees” system in June
2005, with both moves aimed at separating
the management and execution functions of
its operations. However, with the aim tonurture internal management for the future of

the company and to strengthen the management
structure, a resolution to change theorganizational structure of the Group to a“Company with a Board of Corporate Auditors”
was passed at the Annual General
Shareholders’ Meeting on June 22, 2010.
Also, to ensure objectivity andtransparency in every management process,we established a Nomination Committee, aCompensation Committee and an Internal
Investment and Loan Committee as advisory
bodies to the Board of Directors.
Furthermore, we attempt to maintainstrong corporate governance from theperspectives of transparency, health andefficiency by selecting highly independent
outside directors and auditors.

Internal directors are well-versed in Groupbusiness matters, enabling rapid
decision-making. At the same time,soundness and transparency of operations
is ensured through the independence of theoutside directors. Moreover, one of theoutside directors reports to the Tokyo Stock
Exchange and Osaka Securities Exchange
as an appointed independent officer of said
institutions. As a general rule, scheduled
Board of Directors meetings are held once
every three months. When necessary,
nonscheduled meetings are also held.
Additionally, to ensure that this systemremains flexible and clarifies the
responsibilities of the Board of Directors,
the director’s term of office is one year.

Board of Directors

Board of Corporate Auditors

The Funai Electric Group Board of Directors
consists of nine directors, of whom two arehighly independent outside directors.

The Board of Corporate Auditors consists ofthree corporate auditors, of whom two arehighly independent outside auditors. No

Ordinary General Meeting of Shareholders
ReportNominate/Dismiss

Nominate/Dismiss

Audit Committee

ReportReportNominate/Dismiss

Account Auditor

Audit

Audit

Nomination Committee

ReportBoard of Directors
ReportNominate/
Dismiss/
Director

Compensation Committee
Internal Investment and Loan Committee

President and Representative Director/Director Responsible for Business/Executive Director

ReportAudit Office15

Annual Report 2011

Internal audit

Commands/Orders

Respective business divisions/subsidiaries

special financial relationship exists between
these outside auditors and the Funai
Electric Group. Moreover, one of the outside
auditors reports to the Tokyo Stock
Exchange and Osaka Securities Exchange
as an appointed independent officer of said
institutions. Also, full-time Corporate Officer
and Certified Public Accountant Akitaka
Inoue has sufficient knowledge of financeand accounting. As a rule, the Board of
Corporate Auditors meets once each month.
Nomination Committee
An advisory body whose members areappointed by the Board of Directors torecommend candidates for the Board of
Directors and other bodies, and ensure thatthe director nomination and other selection
processes are transparent and objective.

minutes and other necessary information areprovided to outside directors and corporate
auditors unable to attend meetings. Further,outside directors and corporate auditors are
given the opportunity to meet regularly withthe heads of various sections and viewinternal documents that contain important
decision-making matters. In this manner, thesystem allows outside directors and corporate
auditors to sufficiently exhibit their respective
supervisory and audit functions.

Internal Control System
Enhancements
In accordance with resolutions passed by
the Board of Directors, our internal control
system will be enhanced to ensure
appropriate business activities as follows.

Compensation Committee
Appointed and authorized by the Board of
Directors to determine compensation for directors
and executive officers and ensure that thecompensation selection process is transparent
and objective. Auditor compensation is determinedthrough mutual consultation.
Furthermore, the amount of auditor
compensation is determined through mutual
consultation.
Internal Investment and Loan Committee
Appointed by the president to ensuretransparency and objectivity with respect tothe decision-making process regarding
major investment and loan projects throughcouncil providing an individualized,
companywide perspective.
Outside director (auditor) support system
The administration department sends out
reference materials to outside directors andcorporate auditors ahead of scheduled
Board of Directors and Board of Corporate
Auditors meetings. In addition, meeting

Systems for ensuring director execution ofbusiness duties is compliant with thelaw and articles of incorporation
The Funai Group Code of Conduct andExecutive Compliance Regulations clarify
proper conduct for directors and ensure
their business duty execution is compliant
with the law and articles of incorporation.
Systems for managing and storing
information relating to director
execution of business of duties
In accordance with the law and document
management regulations, we conduct theappropriate management and storage ofBoard of Director’s other important meeting
minutes, key documents and otherinformation necessary to ensure theappropriate execution of business duties.
Regulations concerning
management of exposure to
the risk of loss and other systems

with regard to the management of exposure
to the risk from loss. Each division or
department shall manage risks to its
operations and also take measures tomanage those risks systematically.
Systems to ensure that directors
execute business duties efficiently
We introduced an executive officer system
to promote quick and efficientdecision-making in management, placing
executive officers under the supervision ofmanaging directors to ensure quick executionof business duties as determined by the
managing director. To heighten transparency
and strengthen the supervisory function, we
also introduced outside directors.
Systems for ensuring employee
execution of business duties iscompliant with the law and
Articles of Incorporation
The Funai Group Code of Conduct andExecutive Compliance Regulations clarify
proper conduct for employees and ensure
their business duty execution is compliant
with the law and articles of incorporation.
We also strive to strengthen our compliancestructure with the establishment of aninternal reporting system independent fromnormal lines of communication.
Systems to ensure appropriate
business practices acrossentire corporate GroupThe Funai Group Code of Conduct establishes
standards of conduct for all Group executives
and employees. The Affiliate Management
Regulations are intended to address important
issues facing Group companies, while
respecting the independence and clarifying
the rights and responsibilities of thosecompanies, to ensure appropriate businesspractices across the entire Group.

We institute risk management regulations

Annual Report 201116

Corporate GovernanceMatters relating to auditor request
for employee assistance withexecution of business duties

Corporate Social
Responsibility (CSR)

In the event auditors request employee
assistance with execution of auditor businessduties, upon deliberation of the Board of
Corporate Auditors, the Office of Corporate
Auditors shall assign an employee to assist theBoard of Corporate Auditors.

We formulated the Funai Group Code of
Conduct and the Environmental,
Occupational Health and Safety Charter tocontribute to the development of asustainable society an comply with laws
and regulations.

Matters relating to independence
from director’s previous employ

Environmental activities

In the event the employee assigned to theBoard of Corporate Auditors by the Office ofCorporate Auditors in the previous matter isrecalled, to ensure independence from thedirector, the Board of Corporate Auditors will
respect the change of employees and/orchange in personnel evaluations.
Systems for directors andemployees to report tocorporate auditors
Corporate auditors attend Board of Directors
and other important meetings, hear about
the execution of executives’ business duties
from directors and view related documents.
Also, In accordance with the Regulations for
Reporting to the Board of Corporate Auditors,
directors, executive officers and employees
report important matters that they determine
have the potential to impact the ability toperform job duties to corporate auditors.
Other systems to ensurecorporate auditors conduct
their duties effectively
To ensure corporate auditors conduct theirduties effectively, corporate auditors
maintain a close relationship withaccounting auditors and regularly meet withthe president to exchange opinions
regarding risk and management policies.

17

Annual Report 2011

In terms of environmental activities, we aremaking an effort to receive ISO 14001
certification at all our facilities outside
Japan. We also aim to contribute toenvironmental protection activities throughstrict compliance Furthermore, in
accordance with the Home Appliance
Recycling Law, we have increased the ratioof recyclable materials in our products.
We engage in Green Procurement,
which uses fewer materials and lessens theimpact on the environment, and strive to
reduce the amount of toxic substances inFunai Group Code of Conduct

All members of the Funai Group (hereinafter “We”) pledge to make a sincere effort to observe thefollowing code of conduct.
Senior management recognizes that it is their role to embody this code of conduct, and that theymust take the initiative and set an example for others in the company to follow. In the event their conduct
is in opposition to this code, it will be their responsibility to correct themselves publicly and ensure suchconduct is never repeated.

1 We shall develop and provide products and services useful to society with sufficient consideration forthe safety and privacy of personal and customer information, and strive to earn the trust and satisfy
the needs of consumers and customers while ensuring the healthy development of society.
2 We shall engage in fair, transparent and free competition and transactions while maintaining ahealthy and proper and relationship with politicians and political administrations.
3 We shall ensure management transparency and health through the timely, proactive and fairdisclosure of Company information aimed at widening the communication channel withshareholders and greater society.
4 We shall maintain a safe and comfortable work environment where employee diversity, characterand individuality are respected.
5 We shall voluntarily engage in initiatives aimed at mitigating environmental problems, which we see

as common challenge facing all humanity, and recognize as a necessary activity of all corporations.
6 We shall aggressively promote social contribution activities as a good corporate citizen.
7 We shall firmly oppose anti-social forces or groups.
8 We shall observe international law and local ordinances in terms of our international businessactivities, always respecting local cultures and customs to develop business efficiently.
June 22, 2006

our products. In addition, we are moving
forward with activities aimed at reducing
the amount of waste generated fromproduction, as well as the amount of energy
consumed during production, in order toreduce our environmental impact.
Socially responsible activities
We formulated compliance rules in an
attempt to improve compliance awarenessamong all group employees.
Funai Electric is aggressively engaged ininitiatives to ensure improved product quality
as well as higher health and safety standard
for our employees. We promote obtaining
certification of an international management
system at all our facilities as well as those of
our vendors around the world.
Given that the need for a system protecting
transaction, trade, customer and stock
information is increasing critical, we also create
and maintain an information security system.
In an effort to disclose what we determine
to be material information to facilitate

Environmental and Occupational Health and Safety Charter

understanding of the Company in a fair andtimely manner, we have a disclosure policy toprovide shareholders and investors withstandardized information in accordance with
the Financial Instruments and Exchange Act
and securities exchanges.

Third party certification acquisition status
Certification acquisition facility
Standard

Basic Ideas
In keeping with our corporate commitment “to adopt continual product improvements, to continuallypromote ever deeper trust, and to seek further harmony and mutual prosperity,” all employees of
Funai pledge to remain aware of the need to protect the environment and to operate our business inan environment-friendly manner. We shall provide our customers with simple, high-quality products
and shall make an effort to use resources effectively, minimize waste, and reduce our environmental
impacts. In short, we remain committed to contributing to a society that remains in harmony with nature.

Environmental
management
system
ISO 14001

Environmental Policies

FUNAI ELECTRIC
CO., LTD., andGroup company
facilities

FUNAI ELECTRIC(H.K.), LTD.
consignment
production
plantsHQ
FUNAI (THAILAND) CO., LTD.
FUNAI ELECTRIC EUROPE Sp.zo.o.
Zhong Yue Funai Electron Co.
CHUGOKU FUNAI ELECTRIC CO., LTD.
FUNAI SERVICE CO., LTD.
DX ANTENNA CO., LTD.*DONG GUANPLANT
ZHONG SHAN
PLANT
HUANG JIANG
PLANT

1 We shall practice ethical management and comply with all laws and regulations.

Quality
management
system
ISO 9001HQ
FUNAI (THAILAND) CO., LTD.
FUNAI ELECTRIC EUROPE Sp.zo.o.
Zhong Yue Funai Electron Co.
CHUGOKU FUNAI ELECTRIC CO., LTD.
FUNAI SERVICE CO., LTD.
DX ANTENNA CO., LTD.*

Occupational
health andsafetymanagement
systemOHSAS 18001

HQ
FUNAI ELECTRIC EUROPE Sp.zo.o. ZHONG SHAN
PLANT
Zhong Yue Funai Electron Co.

Information
security
Management
systemISO/IEC 27001:
2005
JIS Q 27001:
2006

Information System
Department in HQ
Personnel and Administration
Department in HQ
Business Administrative
Department in HQ
Investor and Public Relations
Department in HQ

2 We shall take the initiative in voluntarily eliminating the use of hazardous substances and shalloffer environment-friendly products.
3 We shall establish goals for environmentally conscious design and shall offer

environment-friendly products.
4 We shall implement initiatives to attain zero emissions.

DONG GUANPLANT
ZHONG SHAN
PLANT
HUANG JIANG
PLANT

5 We shall establish environmental goals, conduct periodic reviews, and implement

continual improvements.
6 We shall provide all employees with environmental education and shall strive to adopt

environmental improvements.
Occupational Health and Safety Policies
1 We shall practice ethical management and comply with all laws and regulations with respect

to occupational health and safety.
2 We shall look into occupational health and safety risks in the workplace to prevent injury andillness to employees and visitors.
3 We shall make ongoing improvements to occupational health and safety management, while

making an effort to improve occupational health and safety performance.
June 22, 2010

* Only DX ANTENNA was certified by the JQA

Annual Report 201118

Members of the Board and Corporate Auditors and Officers

Members of the Board

Officers

Chairman

Senior Officer

President andChief Executive Officer

Senior Officer
Officer

Director andSenior Executive Officer

Officer

Director and Officer

Officer

Director and Officer

Officer

Director and Officer

Officer

Director and Officer

Officer

Outside Director

Officer

Outside Director

Corporate Auditors
Full-time Corporate Auditor
Outside Corporate Auditor
Outside Corporate Auditor

19

Annual Report 2011

Management Discussion and Analysis

Management Policies
Basic management policy
Funai Electric’s basic management policy is
to pursue its business activities by building
strong trust and seeking the mutual
prosperity of all parties related to theGroup, by creating the most efficientdevelopment, production and salesorganization possible and by providing
stable supplies of high-quality andreasonably priced products to global
markets, based on a corporate creed ofcontinual product improvements, promotionof deeper trust and further harmony andmutual prosperity.

Target management indicators
The Group prioritizes the operating
margin as its Group management indicator,
seeking to achieve an operating marginof at least 5% at all companies over the
medium term.

Basic policy on the distribution of profits
The Group recognizes the return of
earnings to shareholders as an importantmanagement issue, and considers its
fundamental policy to be the maintenanceof stable dividends while strengthening theGroup’s management base. The Group
employs a proactive dividend policy thattakes into consideration factors such as theoperating environment and uses a dividend
ratio of 1.0% of consolidated net assets as
its standard.
Based on this policy, for the fiscal year
ended March 31, 2011, the Group hasannounced a year-end dividend of ¥40 per
share. The Group also projects a dividendof ¥40 per share for the fiscal year ending
March 31, 2012.
The Group plans to implement
dividend payments as a year-end dividend(once a year).

in an effort to enhance groupwide efficiency.
In this environment, we will endeavor
to enhance the Group’s corporate value byimplementing the policies outlined below.

Medium- to long-term management
strategies and issues to be addressed

Product strategy:
In audiovisual equipment, a decline in
consumer purchasing propensity in our
mainstay North America market put sharp
downward pressure on prices, causing
category sales to fall year on year andresulting in losses. To address this situation,
we are working to make our products morecompetitive pricewise through redesigns
and by restructuring our component
sourcing system. We also recognize theneed to strengthen and stabilize ourrevenue and profit base through more
stringent purchase, selling and inventory(PSI) management. We will develop asystem for launching products more
flexibly in response to shifts in demandfor high-value-added LCD TVs, such as
those with LED and 3D and Internetequipped models. For Blu-ray Disc-related
products, in addition to launching 3D,
Internet-equipped and portable players,
we plan to round out our product lineup
with 3D recorders and other items. Throughsuch efforts, we will work to expand sales

In the consumer electronics industry, as
digital products have become moreprevalent, product life cycles have grownshorter and prices have continued to
decline rapidly. At the same time,competition has grown fiercer in line withthe launch of products integrating
hardware, networks and content, meetingcustomer needs but blurring conventional
product and industry boundaries.
The Funai Group will address thechallenges presented by this stringent
competition by concentrating on
management speed, while striving tobolster sales and return to profitability via
thoroughgoing efforts to deliver popular
products. To achieve these aims, we will
optimize our allocation of management
resources and further cultivate the Funai
Production System (FPS), one of our corecompetencies. At the same time, we will
make better use of information technologies

Increasing net sales and returning
to profitability
The Funai Group has positioned theincrease of net sales and improvement of
earnings as its highest priority issue.

Annual Report 201120

Management Discussion and Analysis

and recover profitability.
In information equipment as well, theGroup will strive to increase sales byproactively introducing high-value-added
products that take advantage of theGroup’s base of expertise inmechatronics, as well as Internet- andtelecommunications-related products.

Market strategy:
We will endeavor to raise the Group’s net
sales by boosting our sales in Europe andJapan and by entering BRICs and otheremerging markets. At the same time, wewill strive to reduce the risk ofoveremphasizing the U.S. market and tosmooth production and sales throughout theyear, mitigating the effects of seasonality.
Although we had planned to introduce
LCD TVs into the Chinese market during the
fiscal year under review, excessivecompetition and difficult market conditions
caused us to reconsider. In contrast, wehave begun building a system that will
enable us to develop these operationsin India and other emerging markets.

Sales channel strategy:
In addition to maintaining or expanding
business with important Japanese andoverseas customers, we recognize that to
attract new customers we must enhance
our communications, respond more quickly
and precisely to market needs and pay
closer attention to customer requirements.
In October 2010, we acquired fromRoyal Philips Electronics their hospitality

21

Annual Report 2011

business, which involves the provision of
LCD TVs to hotels and hospitals in North
America. We expect this new businesschannel to be highly profitable.
Through the steady implementation of
the above-mentioned strategies, we plan
to minimize the time lags between
product planning, development, material
procurement, production and sales,enabling us to provide products in a timely
manner that meet market needs precisely.

Reinforcing production anddevelopment systems
The Funai Group’s production structure ishighly dependent on China, and we
recognize this as a risk that must be
mitigated. To diversify production, we will
increase capacity at FUNAI (THAILAND) CO.,LTD., and have begun studying the possibilityof production in other locations.
To increase groupwide development
efficiency, as well as to reduce development
costs, we are also moving forward withefforts to expand our development facilities
in China and other Asian countries.

Training and appointment of
human resources
The Group recognizes that improving
employee capabilities and linking thisprogress to bolstering the Group’s strengthis critical to ensure that the Group
maintains its lead in the era of global
competition and successfully implements

its medium- to long-term business strategy.
Accordingly, our policy is to proactively
train and assign employees, without regard
to their age or position, and we arestrengthening and expanding our internaland external training systems to this end.

Business Performance
The year in review
During the fiscal year ended March 31,
2011, the economy of the United States,
which is the Funai Group’s principal market,
was characterized by a gradual overall
recovery. Government initiatives, coupledwith quantitative easing, bolstered stock
market performance, supporting personal
consumption. On the other hand, thehousing market was lackluster,
unemployment remained high, and gasoline
prices surged, causing uncertainty about
future consumption levels.
In the consumer electronics market,
sales of mainstay LCD TVs were strong in
China and other emerging markets. Sales
also increased in Japan, spurred bygovernment efforts to stimulate
consumption (the home electronics
eco-point system). In Europe and the UnitedStates, market growth is slowing, owing toalready-high product penetration. In thesemarkets, sales failed to increase, asconsumers held back on purchasing
high-priced new products, such as LED and3D TVs, out of income uncertainty. These
circumstances put downward pressure on
prices, while raw materials costs continued
to escalate, squeezing profits.

Net sales:
In the preceding fiscal year, net sales
totaled ¥314,912 million. During the year
under review, net sales decreased 6.0%, to¥295,924 million.

( ¥millions )15,000( ¥millions )400,000

300,000

Net income (loss):
The Group recorded a net loss of ¥1,170
million, compared with net income of¥10,329 million in the preceding fiscal year.

10,32910,000302,778

314,912295,9245,000
0-1,170-5,000200,000-10,000-15,000

100,000-20,000-17,365
2009

0

2009

2010

2011

2010

2011
( Years ended March 31 )( Years ended March 31 )Operating income:In the preceding fiscal year, operating
income totaled ¥11,148 million. During
the year under review, operating income
decreased 93.1%, to ¥772 million.
( ¥millions )15,00011,14810,000

5,000

1,410

772

0

2009

2010

2011
( Years ended March 31 )Annual Report 201122

Management Discussion and Analysis

Performance by geographical area
North America:
During the year, the Group generated nosales of TV set-top boxes* (STBs) targeting
the U.S. market, as production of suchdevices was halted in June 2009. In
addition, sales of DVD-related products fell
year on year, as demand for DVD players
and Blu-ray Disc players remained weak.
Furthermore, the decline in consumer
demand for LCD TVs—the Group’s coreproduct in the market—and the consequent
fall in the unit price for such products
resulted in a 28.0% decline in net sales inthis region, to ¥155,755 million.
* These products convert digital signals to analog signals,
allowing users to view digital terrestrial broadcasts on analog
televisions. In the United States, analog terrestrial
broadcasting ended in June 2009.

Europe:Difficult economic conditions caused sales
of LCD TVs and DVD-related products tofall, prompting a 21.8% decline in net
sales, to ¥23,837 million.

of Blu-ray Disc recorders that werelaunched onto the market during the third
quarter of the previous fiscal year, sales fellsignificantly. This was mainly due to theabsence of sales of TV STBs targeting the
U.S. market, as the Group’s halted theirproduction in June 2009. Sales of DVD
players and Blu-ray Disc players fell, as
well. Consequently, net sales in this productsegment were down 15.0% year on year, to¥198,607 million.

¥8,505 million, down 3.6% from thepreceding fiscal year.
In other market, the Group posting net
sales of ¥13,630 million, up 26.6% fromthe preceding fiscal year.

Japan:In addition to the growth in sales of LCD
TVs as a result of the positive effect of thegovernment efforts to stimulate
consunption, sales of antennas and related
products increased as a result of thetransition to digital terrestrial broadcasting.
Moreover, robust sales of Blu-ray Disc
recorders introduced by the Group in thethird quarter of the previous fiscal year.
Consequently, the Group posted net sales of¥94,197 million, up 94.7% from thepreceding fiscal year.

Information equipment:
In the information equipment segment, an
increase in orders for printers resulted in
net sales of ¥56,405 million, up 3.3% fromthe preceding fiscal year.

Others:Sales of other products other than those in
the above categories increased, owing tostrong demand for antennas and related
products as a result of the transition fromanalog to digital terrestrial broadcasting.
Consequently, the Group posted net sales of¥40,912 million, a 52.9% increase.

Sales by product category

Asia and others:
In Asia, the Group posting net sales of

Audiovisual equipment:
In the audiovisual equipment segment, theGroup was able to increase the volume of
LCD TV units sold, but sales fell due tointense price competition. In DVD-related
products, despite the top-line contribution

Sales composition by geographical area
(Year ended March 31, 2011)

Sales by geographical area (Years ended March 31)( ¥millions )Others

Japan

4.6%

31.8%

0

100,000

2.9%

37,064

8,822

10,766

2010

216,454

30,4908,505
23,837

94,197

8.1%
North America

EuropeAsia

Others

302,778

48,380314,912

13,630155,755

EuropeAnnual Report 2011

6,312

36,372

2011

23

6,880
216,15052.6%

400,000

300,000

2009

North America
Asia

200,000

Japan

295,924

Financial condition

Total assets

decrease in long-term accounts payable,
included in the others line item, from
¥1,264 million to ¥492 million. This was
attributable principally to a decrease inpatent royalties payable.

( ¥millions )Current assets:
As of March 31, 2011, total current assets
stood at ¥158,821 million, down ¥8,335
million from ¥167,156 million one year earlier.
Major changes in this category
included cash and deposits, which fell
¥15,969 million, from ¥86,045 million to¥70,076 million, whereas merchandise andfinished goods increased ¥2,715 million,
from ¥20,850 million to ¥23,565 million,
and raw materials and supplies grew
¥2,420 million, from ¥16,057 million to¥18,477 million. As such, the decline in
cash and deposits stemmed primarily fromincreases in receivables and inventories.
Sluggish sales were the primary reason forrises in merchandise and finished goods
and raw materials and supplies.

Fixed assets:
Fixed assets totaled ¥35,089 million at
year-end, falling ¥1,813 million from¥36,902 million one year earlier. The main
reason was a ¥879 million decline inpatents, from ¥3,666 million to ¥2,787
million, stemming from the amortizationof patent rights.

300,000

199,883

200,000

204,058

193,910Equity:Total equity at the end of the fiscal year was
down ¥11,551 million from the end of thepreceding term, from ¥142,780 million to¥131,229 million.
Major factors included a ¥2,534 million
decrease in retained earnings, from ¥119,273
million to ¥116,739 million, as well as foreign
currency translation adjustments, which fell afurther ¥9,551 million, from a negative¥17,936 to a negative ¥27,487 million.

100,000

0

2009

2011

2010

( Years ended March 31 )Current liabilities:
Total current liabilities as of March 31,
2011, were up ¥2,718 million from a year
earlier, rising from ¥56,208 million to¥58,926 million. Major factors included a¥3,758 million increase in short-term loans
payable, from ¥6,339 million to ¥10,097
million, owing mostly to bank borrowings
employed as working capital.

Total equity( ¥millions )150,000

135,596

142,780

131,229

100,000

Long-term liabilities:
Long-term liabilities decreased ¥1,315
million during the year under review, from¥5,070 million to ¥3,755 million. The main
reason for this fall was a ¥772 million

50,000

0

2009

2010

2011
( Years ended March 31 )Sales composition by product category(Year ended March 31, 2011)

Sales by product category (Years ended March 31)( ¥millions )Information Equipment

19.1%

0

Others100,000

200,000

300,000

400,000

13.8%
2009

230,600

2010

233,528

45,00654,62927,172 302,778

26,755 314,912

Audiovisual
Equipment

67.1%
2011

198,607

Audiovisual Equipment

Information Equipment

56,40540,912 295,924

OthersAnnual Report 201124

Management Discussion and Analysis

Cash flows
Cash and cash equivalents amounted to¥33,745 million as of March 31, 2011,
down ¥317 million, or 0.9% from one year
previously. The main reasons for this change
was a decrease in income before income
taxes and minority interests, the purchaseof property, plant and equipment and anincrease in short-term loans payable.
Cash flows during the fiscal year
under review and the factors behind thesechanges are described below.
Cash flows from operating activities:
Net cash used in operating activities during
the year came to ¥5,166 million, comparedwith ¥3,640 million provided by these
activities during the preceding term. This
reversal stemmed from a decrease in income
before income taxes and minority interestsand increases in receivables and inventories.

the preceding term. Primarily responsible
was an increase in short-term loans payable.

Capital investment:
During the fiscal year under review, Group
capital investment totaled ¥6,062 million.
Of this amount, investment in Japan totaled¥749 million, in North America ¥31 million,
in Asia ¥5,239 million and in Europe ¥41
million. This capital investment was mainly
for the expansion of production facilities.
The Group did not dispose of or sell any
major facilities during the year under review.
Cash and cash equvalents, end of yaer
( ¥millions )60,00040,00040,18034,06333,74520,000Cash flows from investing activities:
Net cash provided by investing activitieswas ¥4,071 million, compared with ¥2,714
million used in these activities during the
fiscal year ended March 31, 2010. Although
the purchase of property, plant andequipment increased, a decrease inpayments into time deposits was behind
this change.

Cash flows from financing activities:
Net cash provided by financing activities
came to ¥2,466 million, compared with
¥7,871 million used in these activities in25

Annual Report 2011

0

2009

2010

2011
( Years ended March 31 )Business Risk

Risks that may have a significant impact on
the Group’s financial situation and operating
results are outlined below. Forward-looking
statements in this text are based on decisions
made by the Group as of June 22, 2011.

Funai Group management policy
The Group has adopted a policy of providing
high-quality, low-cost products to
consumers based upon optimized
production and sales systems on a global
scale. We manufacture and sell our
principal products, such as audiovisualequipment (DVD-related products, LCD TVs,etc.) and information equipment (printers,etc.), in addition to other products(receiver-related products, etc.).
Price competition in these product areas
is intense. Additionally, the life cycle ofdigital products is short and the competition
to develop new technologies and functions
is also growing more severe. Accordingly,
these factors may affect the Group’s
financial situation and operating results.
1. Product cost and market prices
The Group’s primary target is customers ofmass merchandisers such as Walmart andtherefore we must deliver low prices.
Consequently, the Group is working to cut
costs through measures such as
establishing production systems in optimal
locations, pursuing further application of theFunai Production System (FPS), the uniqueproductivity improvement system developedby Funai, and utilizing internal production ofparts and centralized purchasing.
However, competition in the homeelectronic appliance industry is intense andwhen the cost of parts and raw materials
rise, cost pressures may affect the Group’s
financial situation and operating results
regardless of the fact that we have
implemented these measures.
2. Product supply through OEM(producing partner brands)
As part of our effort to collaborate with
distributors and electronic appliancemanufacturers, particularly overseas, OEMaccounted for 37.0% of the Group’s
production supply during the fiscal year
under review.
While our OEM strategy is toefficiently increase our market share andimprove productivity through mass
production, entrusting the sales strategy to
our partners may also result in unforeseenchanges. Additionally, individual OEM
contracts are relatively short in duration andFunai must be able to accurately respondto the needs of its partners. We muststrengthen our OEM strategy and, at thesame time, strengthen marketing in order tocomplement that strategy from a long-term
perspective, and create a proposal-based
sales strategy through the establishment of
the Funai brand. The progress of thesemeasures may affect the Group’s financial
situation and operating results.
3. New technologies
As the number of digital products in thehome electronic appliance industry
increases and the needs of the market
become more diverse, Funai must improve
the quality, volume and speed of its new
product development.
The Group must be able to respond tosuch issues and we will improve ourtechnical capabilities, primarily in thedigital product area, by collaborating withother companies, industry and academia,
and through personnel training. We also
will consider mergers and acquisitions
among our options. However, a diversificationof market needs or technologicalinnovation beyond our expectations may
affect the Group’s financial situation andoperating results.
4. Defects relating to products and services
The Group efforts to increase quality are
centered on the departments that are
responsible for quality management andtechnologies. In addition, a service platform
consisting of service companies in both
domestic and international markets has
been established. However, if there is a
defect in a product that requires the Groupto respond by repairing or replacing suchproduct, the impact of the warranty and/or
the resultant decrease in corporate
reputation may have negative implications
for the Group’s financial situation andoperating results.

Impact of overseas market trends
1. Dependence on the North American market
A large portion of the Group’s net sales

originates in overseas markets. The North
American market in particular accounted
for 52.6% of net sales in the current
consolidated fiscal year. Should the North
American economy rapidly enter arecession, this may affect the Group’s
financial situation and operating results.
2. Dependence on Chinese production
The Group is working to improve the costcompetitiveness of its products byconcentrating production in positive
cost-benefit regions and purchasing partsin bulk. In the current consolidated fiscal
year 98.7% of our products were produced
overseas, with 85.2% produced underconsignment fabrication in China. Changes
in the Chinese government, the outbreak ofconflict or natural disasters or other unforeseen
circumstances may affect the Group’s
financial situation and operating results.
3. Foreign currency risk
The Funai Group selects production sites
for its principal products after giving
consideration to optimal production sites
and sales systems.
DVD-related products, LCD TVs, andprinters are produced in China, LCD TVs
and DVD-related products are producedin Poland, and LCD TVs are produced in
Thailand.
Funai purchases products fromoverseas subsidiaries in these countries
and sells them in overseas markets,particularly North America, either throughFunai’s overseas sales subsidiaries or
through direct sales to OEM supply
partners. Domestic sales are also

Annual Report 201126

Management Discussion and Analysis

conducted through direct sales and sales
subsidiaries.
Purchases from overseas subsidiaries
in these countries accounted for 84.0% ofgross purchases during the current
consolidated fiscal year. Likewise, overseas
net sales accounted for 68.2% of net
sales. The majority of our purchasing
and sales are conducted in U.S. dollars.
We believe this reduces the risks that
accompany currency fluctuations.
However, it is impossible to completely
eliminate foreign currency risk, and large
currency fluctuations may affect the Group’s
financial situation and operating results.

Tax assessment based on the anti-tax
haven system
Information concerning the supplementary
tax assessment based on application of theanti-tax haven system for the current period
is provided below. There is a possibility thisassessment will affect the Group’s financial
situation and operating results if theassertions made by Funai are notrecognized as a result of legal procedures.
1. Funai received a rectification notice fromthe Osaka Regional Taxation Bureau on
June 28, 2005. The Bureau determined that
Funai’s Hong Kong subsidiary does not meetthe requirements for exclusion under theanti-tax haven system and the Hong Kong
subsidiary’s income for the three fiscal years
from March 2002 through March 2004 will
be considered, and taxed as, Funai’s income.
Funai objected to this supplementary tax

27

Annual Report 2011assessment, and filed a petition seeking areview of the decision with the Osaka
Regional Tax Tribunal on July 25, 2006, andfiled a suit in the Osaka District Court on
November 16, 2006 to overturn the
supplementary tax assessment order.
On July 3, 2008, Funai received thewritten ruling of the Osaka Regional Tax
Tribunal stating it will dismiss the Group’s
assertion. Funai believes this judgment is
indeed regrettable and is not a ruling towhich it can agree. Currently, Funai isasserting the validity of its arguments tothe tribunal.
The additional tax of ¥16,651 million(¥19,184 million including incidental taxes)
includes corporate, enterprise andresidence taxes. Because the “Accounting
Practices, Disclosure and Audit Treatment
for Various Taxes” (Japanese Institute ofCertified Public Accountants, Auditing andAssurance Practice Committee, Audit
Committee Report No. 63) was revised on
March 8, 2007 and the accounting
treatment for supplementary tax
assessments was clarified in writing, Funai
charged the tax assessment to income as“prior year’s taxes” in the fiscal year ended
March 31, 2007.
2. Funai received a rectification notice fromthe Osaka Regional Taxation Bureau on
June 16, 2008. The Bureau determined that
Funai’s Hong Kong subsidiary does notmeet the requirements for exclusion under
the anti-tax haven system and the Hong
Kong subsidiary’s income for the threefiscal years from March 2005 throughMarch 2007 will be considered, and taxedas Funai’s income.
Funai strongly objects to thesubmission of another claim and for thisreason submitted an appeals application to
the Osaka Regional Taxation Bureau’s Boardof Tax Appeals on August 6, 2008. In
addition, Funai filed a request to the Osaka
District Court for the rescission of the
supplementary tax assessment order on
November 14, 2008. On July 23, 2009,
Funai received a written ruling from the
Osaka Regional Taxation Bureau stating it
will dismiss the Group’s assertion. Funai
believes this judgment is regrettable and is
not a ruling to which it can agree. In the
future, the Group plans to continue toassert the validity of its arguments to thecourts. Currently, the Osaka District Court isreviewing both the current request made on
November 14, 2008, along with theprevious one filed on November 16, 2006.
The additional tax of ¥15,038 million(¥16,838 million including incidental taxes)
includes corporate, enterprise andresidence taxes. Funai charged the tax
assessment to income as “prior year’staxes” in the fiscal year ended March 2009.

Financial Section

Contents

Consolidated Balance Sheets............................................................... 29
Consolidated Statements of Operations .............................................. 31
Consolidated Statement of Comprehensive Income ........................... 32
Consolidated Statements of Changes in Equity................................... 32
Consolidated Statements of Cash Flows ............................................. 33
Notes to the Consolidated Financial Statements................................. 34
Independent Auditors’ Report ............................................................... 51

Annual Report 201128

Consolidated Balance Sheets
FUNAI ELECTRIC CO., LTD. and Consolidated Subsidiaries
March 31, 2011 and 2010

(Millions of yen)(Thousands of
U.S. dollars)(Note 1)March 31,

March 31,

2011

2010

2011

¥ 33,745¥ 34,063$ 405,833

36,331

51,982436,933

Trade (Note 13)

36,36735,154437,366

Other

2,249

942

27,048

Allowance for doubtful accounts

(139)

(179)

(1,672)Inventories (Note 3)

43,83838,418527,216

Deferred tax assets (Note 12)

3,722

4,131

44,762

Prepaid expenses and other current assets

2,708

2,645

32,568

158,821167,156

1,910,054

Land

5,136

5,181

61,768

Buildings and structures

13,704

13,870164,811

Machinery, equipment and other

50,20755,519603,812

651

537

7,829

ASSETS
CURRENT ASSETS:
Cash and cash equivalents (Note 13)
Time deposits (Note 13)
Receivables:

Total current assets
PROPERTY, PLANT AND EQUIPMENT:

Lease assets (Note 11)

8

25

96

69,70675,132

838,316(53,416)(59,478)(642,405)

16,29015,654

195,911

Investment securities (Notes 4 and 13)

4,151

4,064

49,922

Investments in unconsolidated subsidiaries and associated companies

2,117

2,238

25,460Patents

2,787

3,666

33,518

363

248

4,366

2,477

3,208

29,790

34

66

409

Deferred tax assets (Note 12)

4,239

4,804

50,980

Other assets

2,984

3,729

35,886

Allowance for doubtful accounts

(353)

(775)

(4,245)

18,79921,248226,086¥193,910¥204,058$2,332,051

Construction in progress
Total
Accumulated depreciation
Net property, plant and equipment
INVESTMENTS AND OTHER ASSETS:

Long-term loans
Long-term prepaid expenses
Goodwill

Total investments and other assets
TOTAL

29

Annual Report 2011

LIABILITIES AND EQUITY(Millions of yen)(Thousands of
U.S. dollars)(Note 1)March 31,

March 31,

2011

2011

2010

CURRENT LIABILITIES:
5,806$ 115,009

739

695

8,887

Trade (Note 13)

28,93931,305

348,034

Other (Note 13)

12,556

11,035151,004

2,072

1,799

24,919

Short-term bank borrowings (Notes 5 and 13)
Current portion of long-term debt (Notes 5,11 and 13)

¥

9,563

¥

Payables:Income taxes payable (Note 12)
Other current liabilities
Total current liabilities

5,057

5,568

60,81858,92656,208708,671

LONG-TERM LIABILITIES:Long-term debt (Notes 5,11and 13)

402

954

4,835

Liability for retirement benefits (Note 6)

2,393

2,429

28,779

492

1,264

5,917

Long-term payables other
Deferred tax liabilities (Note 12)

63

22

758

Other

405

401

4,871

3,755

5,070

45,16031,30031,280376,428

33,26533,245400,060

Total long-term liabilities
COMMITMENTS AND CONTINGENT LIABILITIES (Notes 11 and 12)
EQUITY (Notes 7, 8 and 16):
Common stock,authorized, 80,000,000 shares; issued,
36,123,596 shares in 2011 and 36,104,196 shares in 2010
Capital surplus

88

62

1,058

116,739

119,273

1,403,957(24,341)(24,341)(292,736)

612

471

7,360

Foreign currency translation adjustments(27,487)(17,936)(330,571)

Total

130,176

142,054

1,565,556

Stock acquisition rights
Retained earnings
Treasury stock – at cost
2,011,607 shares in 2011 and 2,011,531 shares in 2010
Accumulated other comprehensive income (loss)
Unrealized gain on available-for-sale securities

Minority interests

1,053

726

12,664

Total equity

131,229

142,780

1,578,220¥193,910¥204,058$2,332,051

TOTAL
See notes to consolidated financial statements.

Annual Report 201130

Consolidated Statements of Operations
FUNAI ELECTRIC CO., LTD. and Consolidated Subsidiaries
Years Ended March 31, 2011 and 2010

(Millions of yen)(Thousands of
U.S. dollars)(Note 1)Years Ended
March 31,

Year Ended
March 31,

2011

2010

2011

NET SALES¥295,924¥314,912$3,558,918

COST OF SALES (Note 10)

255,615

257,4423,074,143

40,30957,470484,775

39,537

46,322475,491

772

11,1489,284Interest and dividend income

399

690

4,799

Interest expense

(133)

(84)

(1,600)Foreign exchange gain (loss) , net

197

(103)

2,369

Provision for doubtful receivables

(9)

(1)

(108)

Loss on impairment of investment securities

(1)

(10)

(12)

Gain on sales of investment securities, net

283

88

3,403

Other – net

(55)

(850)

(661)

681

(270)

8,190

1,453

10,87817,474Current

1,642

2,520

19,747

Deferred634(2,205)

7,625

2,276

315

27,372NET INCOME (LOSS) BEFORE MINORITY INTERESTS(823)

10,563(9,898)MINORITY INTERESTS

(347)

(234)

(4,173)¥ (1,170)¥ 10,329

Gross profit
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES (Notes 9 and 10)
Operating income
OTHER INCOME (EXPENSES):

Other income (expenses) – net
NET INCOME BEFORE INCOME TAXES AND MINORITY INTERESTSINCOME TAXES (Note 12):

Total income taxes

NET INCOME (LOSS)

(Yen)

$

(14,071)(U.S. dollars)

PER SHARE OF COMMON STOCK (Notes 2.u and 15):
Basic net income (loss)¥ (34.31)

Diluted net income
Cash dividends applicable to the year
See notes to consolidated financial statements.

31

Annual Report 2011

¥ 302.97$(0.41)

300.77
40.00

40.00

0.48

Consolidated Statement of Comprehensive Income
FUNAI ELECTRIC CO., LTD. and Consolidated Subsidiaries
Year Ended March 31, 2011

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

Year Ended
March 31,

Year Ended
March 31,

2011

2011

(823)

$

(9,898)NET LOSS BEFORE MINORITY INTERESTSOTHER COMPREHENSIVE INCOME (LOSS) (Note 14)
Unrealized gain on available-for-sale securities
Foreign currency translation adjustments
Share of other comprehensive income in associates
Total other comprehensive income (loss)¥

143(9,662)90(9,429)1,720(116,199)
1,082(113,397)

COMPREHENSIVE INCOME (LOSS) (Note 14)¥(10,252)$(123,295)

TOTAL COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO (Note 14):
Owners of the parent
Minority interests¥(10,578)
326$(127,216)
3,921

See notes to consolidated financial statements.

Consolidated Statements of Changes in Equity
FUNAI ELECTRIC CO., LTD. and Consolidated Subsidiaries
Years Ended March 31, 2011 and 2010

(Thousands)(Millions of yen)
Accumulated othercomprehensive income (loss)

Number of
Shares ofCommon Stock
Outstanding
Common Stock Capital Surplus

BALANCE, APRIL 1,2009
Net Income
Cash dividends, ¥ 40.00 per share
Purchase of treasury stock
Take-over of retained earning formerger of the unconsolidated
subsidiaries
Net change in the year
BALANCE, MARCH 31, 2010
Net loss
Cash dividends, ¥40.00 per share
Purchase of treasury stock
Exercise of stock options
Net change in the year
BALANCE, MARCH 31, 2011

34,093¥31,280¥33,245

Stock
Acquisition
Rights¥18

Retained
Earnings¥110,048
10,329(1,364)(0)Treasury Stock

Unrealized
Gain (loss) on
Available-forsale Securities¥(24,340)¥ (99)(1)

260
34,09331,28033,24519

20

20

34,112¥31,300¥33,2654462119,273(1,170)(1,364)(24,341)

570
471

(0)
26
¥88

¥116,739¥(24,341)

141
¥612

Foreign
Currency
Translation
Adjustments

Total¥(14,999) ¥135,153
10,329(1,364)(1)

260(2,323)142,054(1,170)(1,364)(0)
40(9,551)(9,384)¥(27,487) ¥130,176(2,937)(17,936)

Minority
Interests¥ 443

Total Equity¥135,596
10,329(1,364)(1)327¥ 1,053260(2,040)142,780(1,170)(1,364)(0)
40(9,057)¥131,229

Minority
Interests

Total Equity

283
726

(Thousands of U.S. dollars)(Note.1)
Accumulated othercomprehensive income (loss)

Common Stock Capital Surplus

BALANCE, MARCH 31, 2010
Net loss
Cash dividends, $0.48 per share
Purchase of treasury stock
Exercise of stock options
Net change in the year
BALANCE, MARCH 31, 2011

$376,188$399,820240

240$376,428$400,060

Stock
Acquisition
RightsRetained
Earnings

Treasury Stock$ 746 $1,434,432 $(292,736)(14,071)(16,404)(0)312$1,058 $1,403,957 $(292,736)

Unrealized
Gain (loss) on
Available-forsale Securities

Foreign
Currency
Translation
Adjustments

Total$5,664 $(215,707) $1,708,407(14,071)(16,404)(0)480
1,696 (114,864) (112,856)$7,360 $(330,571) $1,565,556$ 8,731 $1,717,138(14,071)(16,404)(0)480
3,933 (108,923)$12,664 $1,578,220

See notes to consolidated financial statements.

Annual Report 201132

Consolidated Statements of Cash Flows
FUNAI ELECTRIC CO., LTD. and Consolidated Subsidiaries
Years Ended March 31, 2011 and 2010

OPERATING ACTIVITIES:Net income before income taxes and minority interests
Adjustments for:
Income taxes – paid
Income taxes – refund
Depreciation and amortization
Loss (gain) on sale or disposal of property, plant and equipment
Equity in losses (gains) of unconsolidated subsidiaries and associated companies
Gain on sales of investment securities – net
Changes in assets and liabilities:
Increase in trade accounts receivable
Increase in inventories
Increase in trade accounts payable
Increase (decrease) in liability for employees’ retirement benefits
Other – net
Total adjustments
Net cash provided by (used in) operating activities
INVESTING ACTIVITIES:Payments for time deposits
Proceeds from 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
Payments for loans receivable
Proceeds from collection of loans receivable
Other – net
Net cash provided by (used in) investing activities
FINANCING ACTIVITIES:
Increase (decrease) in short-term bank loans – net
Repayments of long-term debt
Purchase of treasury stock
Dividends paid
Other – net
Net cash provided by (used in) financing activities
FOREIGN CURRENCY TRANSLATION ADJUSTMENTS ON CASH AND
CASH EQUIVALENTS
NET DECREASE IN CASH AND CASH EQUIVALENTS
CASH AND CASH EQUIVALENTS INCREASED BY MERGERDECREASE IN CASH AND CASH EQUIVALENTS DUE TO EXCLUSION OF
SUBSIDIARIES FROM CONSOLIDATIONCASH AND CASH EQUIVALENTS, BEGINNING OF YEAR
CASH AND CASH EQUIVALENTS, END OF YEAR
See notes to consolidated financial statements.

33

Annual Report 2011

(Millions of yen)(Thousands of
U.S. dollars)(Note 1)Years Ended
March 31,

Year Ended
March 31,

2011

2010

2011

¥ 1,453¥ 10,878$ 17,474(2,970)
246
6,367
(1)
(28)
(283)

(2,266)
1,504
5,757
1
34
(88)

(35,719)
2,959
76,572(12)(337)(3,403)(5,248)(8,950)
2,289
(32)
1,991
(6,619)(5,166)(7,103)(8,587)5,308
43(1,841)(7,238)3,640(63,115)(107,637)
27,529(385)
23,945(79,603)(62,129)(71,744)82,00844(6,400)
(235)
482
(139)
(3)
45
13
4,071

(98,887)
100,157
9(3,547)
(791)
540
(439)
(17)
93
168
(2,714)(862,826)
986,266
529(76,969)(2,826)
5,797(1,672)
(36)
541
156
48,960

4,496
(533)
(0)
(1,364)
(133)
2,466

(6,280)(700)(1)(1,364)474(7,871)54,071(6,410)(0)(16,404)(1,600)29,657(1,629)(258)

461(6,484)367(19,591)(3,103)(60)
34,063¥ 33,745

40,180¥ 34,063(721)
409,657$ 405,833

Notes to Consolidated Financial Statements
FUNAI ELECTRIC CO., LTD. and Consolidated Subsidiaries
Years Ended March 31, 2011 and 2010

1. BASIS OF PRESENTING CONSOLIDATED FINANCIAL STATEMENTS
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 conformity with accounting principles generally
accepted in Japan, (“Japanese GAAP”) which are different in certain respects as to application and disclosure requirements of International
Financial Reporting Standards.
Under Japanese GAAP, a consolidated statement of comprehensive income is required from the fiscal year ended March 31, 2011and has been presented herein. Accordingly, accumulated other comprehensive income is presented in the consolidated balance sheet
and the consolidated statement of changes in equity. Information with respect to other comprehensive income for the year ended March
31, 2010 is disclosed in Note 14. In addition, “net loss before minority interests” is disclosed in the consolidated statement of operations
from the year ended March 31, 2011.
In preparing these consolidated financial statements, certain reclassifications and rearrangements have been made to the consolidated
financial statements issued domestically in order to present them in a form which is more familiar to readers outside Japan. In addition, certain
reclassifications have been made in the 2010 consolidated financial statements to conform to the classifications used in 2011.
The consolidated financial statements are stated in Japanese yen, the currency of the country in which FUNAI ELECTRIC CO., LTD.
(the "Company") is incorporated and operates. The translations of Japanese 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 ¥ 83.15 to $1, the approximate rate of exchange at
March 31, 2011. 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.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIESa. Consolidation—The consolidated financial statements as of March 31, 2011 include the accounts of the Company and its 14 significant(14 in 2010) subsidiaries (together, the “Group”).
Under the control or influence concept, those companies where the Company, directly or indirectly, is able to exercise control over
operations are fully consolidated, and those companies over which the Group has the ability to exercise significant influence are accounted
for by the equity method.
Investments in 1 (1 in 2010) unconsolidated subsidiary and no (1 in 2010) associated companies are accounted for by 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 eliminated.
b. Unification of Accounting Policies Applied to Foreign Subsidiaries for the Consolidated Financial Statements—In May 2006,
the Accounting Standards Board of Japan (the “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:(1) the accounting policies and procedures applied to a parent company and its subsidiaries for similar transactions and events undersimilar circumstances should in principle be unified for the preparation of the consolidated financial statements, (2) financial statements
prepared by foreign subsidiaries in accordance with either International Financial Reporting Standards or the generally accepted
accounting principles in the United States of America tentatively may be used for the consolidation process, (3) however, the following
items should be adjusted in the consolidation process so that net income is accounted for in accordance with Japanese GAAP unlessthey are not material: 1) amortization of goodwill; 2) scheduled amortization of actuarial gain or loss of pensions that has been directly
recorded in the equity; 3) expensing capitalized development costs of R&D; 4) cancellation of the fair value model accounting forproperty, plant and equipment and investment properties and incorporation of the cost model accounting; 5) recording the prior years'
effects of changes in accounting policies in the income statement where retrospective adjustments to financial statements have been
incorporated; and 6) exclusion of minority interests from net income, if contained.
c. 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 made to 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 in applying the equity method unless
it is impracticable to determine adjustments. In addition, financial statements prepared by foreign associated companies in accordancewith either International Financial Reporting Standards or the generally accepted accounting principles in the United States tentatively
may be used in applying the equity method if the following items are adjusted so that net income is accounted for in accordance withJapanese GAAP unless they are not material: 1) amortization of goodwill; 2) scheduled amortization of actuarial gain or loss of pensions
that has been directly recorded in the equity; 3) expensing capitalized development costs of R&D; 4) cancellation of the fair value model

Annual Report 201134

accounting for property, plant and equipment and investment properties and incorporation of the cost model accounting; 5) recording
the prior years' effects of changes in accounting policies in the income statement where retrospective adjustments to financial statements
have been incorporated; and 6) exclusion of minority interests from net income, if contained. This standard was applicable to the equity
method of accounting for fiscal years beginning on or after April 1, 2010.
The Company applied this accounting standard effective April 1, 2010.
d. Cash Equivalents—Cash equivalents are short-term investments that are readily convertible into cash and that are exposed toinsignificant risk of changes in value.
Cash equivalents include time deposits, certificates of deposit, commercial paper and bond funds, all of which mature or become due
within three months of the date of acquisition.
e. Allowance for Doubtful Accounts—The allowance for doubtful accounts is stated in amounts considered to be appropriate basedon the companies' past credit loss experience and an evaluation of potential losses in the receivables outstanding.
f. Inventories—Inventories of the Company and its consolidated domestic subsidiaries are mainly stated at the lower of cost, determinedby the average method for finished products and work in process, and by the first-in, first-out method for law materials, or net selling
value.
Inventories of the consolidated foreign subsidiaries are mainly stated at the lower of cost, determined by the first-in, first-out method,or net selling value.
g. 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 and losses, net of applicable taxes, reported ina separate component of equity.
Non-marketable available-for-sale securities are stated at cost determined by the moving-average method. For other than temporary
declines in fair value, investment securities are reduced to net realizable value by a charge to income.
h. Property, Plant and Equipment—Property, plant and equipment are stated at cost. Depreciation of property, plant and equipment of
the Company and its consolidated domestic subsidiaries is computed substantially by the declining-balance method while the straightline method is applied to buildings acquired after April 1, 1998, at rates based on the estimated useful lives of the assets. Depreciationof property, plant and equipment of consolidated foreign subsidiaries is principally computed by the straight-line method at rates basedon the estimated useful lives of the assets. The range of useful lives is principally from 3 to 50 years for buildings and structures and from
1 to 20 years for machinery, equipment and other.
Equipment held for lease is depreciated by the straight-line method over the respective lease periods.
i. Patents—Patents are carried at cost less accumulated amortization, which is computed by the straight-line method over the estimateduseful lives.
j. Goodwill—Cost in excess of the net assets of subsidiaries acquired is amortized on a straight-line basis over 5 years.
k. Long-lived assets—The Group reviews its long-lived assets for impairment whenever events or changes in circumstance indicate thecarrying amount of an asset or asset group may not be recoverable. An impairment loss would be recognized if the carrying amount ofan asset or asset group exceeds 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 at the amount by which the carrying amount of theasset exceeds its recoverable amount, which is the higher of the discounted cash flows from the continued use and eventual dispositionof the asset or the net selling price at disposition.
l. Retirement and Pension Plans—The Company and certain consolidated subsidiaries have non-contributory 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 theliability for retirement benefits based on the projected benefit obligations and plan assets at the 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 by the straight line method over a period within the average remaining years of service of theemployees (10 years) starting from the following period. Prior service cost is amortized by the straight line method over a period within
the average remaining years of service of the employees (10 years).
Retirement allowances for directors, corporate auditors and executive officers are recorded to state the liability at the amount thatwould be required if all directors, corporate auditors and executive officers retired at each balance sheet date.

35

Annual Report 2011

m. Asset Retirement Obligations—In March 2008, the ASBJ published a new accounting standard for asset retirement obligations,
ASBJ Statement No. 18 “Accounting Standard for Asset Retirement Obligations” and ASBJ Guidance No. 21 “Guidance on AccountingStandard 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 results from the acquisition, construction, development and the normal operation of a tangible
fixed asset and is associated with the retirement of such tangible fixed asset.
The asset retirement obligation is recognized as the sum of the discounted cash flows required for the future asset retirement and isrecorded in the period in which the obligation is incurred if a reasonable 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 areasonable 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 by increasing 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 useful life of the asset. Over time, theliability is accreted to its present value each period. Any subsequent revisions to the timing or the amount of the original estimate ofundiscounted cash flows are reflected as an increase or a decrease in the carrying amount of the liability and the capitalized amount of
the related asset retirement cost. This standard was effective for fiscal years beginning on or after April 1, 2010.
The Group applied this accounting standard effective April 1, 2010. The effect of this change on the consolidated statements ofoperations is immaterial.
n. Stock Options—The ASBJ Statement No. 8 “Accounting Standard for Stock Options” and related guidance are applicable to stock
options granted on and after May 1, 2006.
This standard requires companies to recognize compensation expense for employee stock options based on the fair value at the dateof grant and over the vesting period as consideration for receiving goods or services. The standard also requires companies to accountfor stock options granted to non-employees based on the fair value of either the stock option or the goods or services received.
The Company has applied the accounting standard for stock options to those granted on and after May 1, 2006.
The Company recognizes compensation expense for directors, corporate auditors, executive officers and employee stock options
based on the fair value at the date of grant and over the vesting period as consideration for receiving goods or services. A certain
domestic subsidiary also measures options at their intrinsic value if they cannot reliably estimate the fair value. In the consolidatedbalance sheet, the stock option is presented as stock acquisition right as a separate component of equity until exercised.
o. Research and Development Costs—Research and development costs are charged to income as incurred.
p. Leases—In March 2007, the ASBJ issued ASBJ Statement No. 13 “Accounting Standard for Lease Transactions”, which revised theprevious accounting standard for lease transactions issued in June 1993. The revised accounting standard for lease transactions was
effective for fiscal years beginning on or after April 1, 2008.
Under the previous accounting standard, finance leases that were deemed to transfer ownership of the leased property to the lessee
were capitalized. However, other finance leases were permitted to be accounted for as operating lease transactions if certain “as if
capitalized” information was disclosed in a note to the lessee’s financial statements. The revised accounting standard requires that all
finance lease transactions be capitalized to recognize lease assets and lease obligations in the balance sheet. In addition, the revised
accounting standard permits leases which existed at the transition date and do not transfer ownership of the leased property to thelessee to continue to be accounted for as operating lease transactions.
The Group applied the revised accounting standard effective April 1, 2008. In addition, the Group continues to accounted for leases
which existed at the transition date and do not transfer ownership of the leased property to the lessee as operating lease transactions.
q. Construction Contracts—In December 2007, the ASBJ issued ASBJ Statement No. 15 “Accounting Standard for Construction
Contracts” and ASBJ Guidance No. 18 “Guidance on Accounting Standard for Construction Contracts”. Under the previous Japanese
GAAP, either the completed-contract method or the percentage-of-completion method was permitted to account for construction
contracts. Under this new accounting standard, the construction revenue and construction costs should be recognized by thepercentage-of-completion method, if the outcome of 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 can be reliably measured, the outcome ofa construction contract can be estimated reliably. If the outcome of a construction contract cannot be reliably estimated, the completedcontract method should be applied. When it is probable that the total construction costs will exceed total construction revenue, anestimated loss on the contract should be immediately recognized by providing for a loss on construction contracts. This standard wasapplicable to construction contracts and software development contracts and effective for fiscal years beginning on or after April 1, 2009.
The Group applied the accounting standard effective April 1, 2009.
r. Income Taxes—The provision for income taxes is computed based on the pretax income included in the consolidated statements ofoperations. The asset and liability approach is used to recognize deferred tax assets and liabilities for the expected future tax consequencesof temporary differences between the carrying amounts and the tax bases of assets and liabilities. Deferred taxes are measured byapplying currently enacted tax laws to the temporary differences.

Annual Report 201136

s. 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.
In the past, the Group applied TTS or TTB rates when carrying out foreign currency exchange conversions. However, as from the fiscal
year ended March 31, 2011, the Group has decided to use TTM rates instead of TTS or TTB.
This change to apply TTM rates across all exchange conversions was made in order to better reflect periodic income and loss as aresult of reviewing the circumstances where transactions in the Group's major operations were settled in foreign currencies and revenues
obtained were kept in foreign currencies for the purpose of settlement of trade accounts, on the occasion when foreign exchange rates
were fluctuating significantly.
The effect of this change was to increase net sales by ¥902 million ($10,848 thousand) and operating income by ¥1,112 million($13,373 thousand) and income before income taxes and minority interests by ¥241 million ($2,898 thousand), for the year ended March
31, 2011.
t. Foreign Currency Financial Statements—The balance sheet accounts of the consolidated foreign subsidiaries 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 were shown as “Foreign currency translation adjustments” under accumulated othercomprehensive income in a separate component of equity .
Revenue and expense accounts of consolidated foreign subsidiaries are translated into yen at the average exchange rate.
u. Per Share Information—Basic net income (loss) per share is computed by dividing net income available to common shareholders by
the weighted-average number of common shares outstanding for the period.
Diluted net income per share reflects the potential dilution that could occur if stock options were exercised into common stock. Diluted
net income per share of common stock assumes full exercise of outstanding warrants. Diluted net income per share is not disclosed
because of the Company’s net loss position in 2011.
Cash dividends per share presented in the accompanying consolidated statements of operations are dividends applicable to therespective years including dividends to be paid after the end of the year.
v. New Accounting Pronouncements
Accounting Changes and Error Corrections—In December 2009, 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 in Accounting Policies:
When a new accounting policy is applied with revision of accounting standards, the new policy is applied retrospectively unless therevised accounting standards include specific transitional provisions. When the revised accounting standards include specific transitional
provisions, a company shall comply with the specific transitional provisions.
(2) Changes in Presentations
When the presentation of financial statements is changed, prior period financial statements are reclassified in accordance with the newpresentation.
(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 isaccounted for prospectively if the change 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 are restated.
This accounting standard and the guidance are applicable to accounting changes and corrections of prior period errors which are
made from the beginning of the fiscal year that begins on or after April 1, 2011.

3. INVENTORIESInventories at March 31, 2011 and 2010 consisted of the following:

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

37

Annual Report 2011

(Millions of yen)(Thousands of
U.S. dollars)

March 31,

March 31,2011
¥23,565
1,796
18,477¥43,8382010¥20,850
1,510
16,058¥38,418

2011$283,403
21,600222,213$527,216

4. INVESTMENT SECURITIESThe costs and aggregate fair values of investment securities at March 31, 2011 and 2010 were as follows:(Millions of yen)
Cost

Unrealized
Gains

Unrealized
LossesFair
Value

March 31, 2011
Securities classified as:
Available-for-sale:
Equity securities¥1,975¥1,255¥(106)¥3,124

March 31, 2010
Securities classified as:
Available-for-sale:
Equity securities¥2,116¥ 869¥ (76)¥2,909(Thousands of U.S. dollars)

March 31, 2011
Securities classified as:
Available-for-sale:
Equity securities

Cost$ 23,752

Unrealized
Gains

Unrealized
Losses$15,093

Fair
Value

$(1,274)$37,571

Available-for-sale securities whose fair values are not readily determinable as of March 31, 2011 and 2010 were as follows:(Millions of yen)(Thousands of
U.S. dollars)

March 31,

March 31,

2011
Available-for-sale:
Equity securities
Investments in limited partnerships
Total

2010

¥ 595
432
¥1,0272011$ 7,156
5,195$12,351¥ 595
560¥1,155

Proceeds from sales of available-for-sale securities for the years ended March 31, 2011 and 2010 were ¥482 million ($5,797 thousand)and ¥216 million, respectively. Gross realized gains on these sales, computed on the moving average cost basis, was ¥283 million($3,403 thousand) for the year ended March 31, 2011. And such gains and losses were ¥40 million and ¥0 million, respectively, for theyear ended March 31, 2010.
The impairment losses on available-for-sale equity securities for the years ended March 31, 2011 and 2010 were ¥1 million ($12thousand) and ¥10 million, respectively.

5. SHORT-TERM BANK LOANS AND LONG-TERM DEBT
Short-term bank loans bore interest at annual average rates of 1.8% and 1.7% at March 31, 2011 and 2010, respectively.
Long-term debt at March 31, 2011 and 2010 consisted of the following:(Millions of yen)(Thousands of
U.S. dollars)

March 31,

March 31,2011
Unsecured loans from banks and other financial institutions,due serially to 2013 with average interest rates of 0.6% (2011) and 0.7% (2010):
Obligations under finance leases
Total
Less current portionLong-term debt, less current portion

¥ 567
574
1,141
(739)
¥ 402

2010
¥1,099
550
1,649
(695)
¥ 954

2011
$ 6,819
6,903
13,722(8,887)$ 4,835

Annual maturities of long-term debt, excluding finance leases (see Note 11), at March 31, 2011, were as follows:Year Ending March 31

2012
2013
Total

(Millions of yen)(Thousands of
U.S. dollars)

¥534
33
¥567

$6,422397$6,819Annual Report 2011

38

6. RETIREMENT AND PENSION PLANS
The Company and certain consolidated subsidiaries have severance payment plans for employees, directors, corporate auditors andexecutive officers. Under most circumstances, employees terminating their employment are entitled to retirement benefits determinedbased on the rate of pay at the time of termination, years of service and certain other factors. Such retirement benefits are made in theform of a lump-sum severance payment from the Company or from certain consolidated subsidiaries and annuity payments from atrustee. Employees are entitled to larger payments if the termination is involuntary, by retirement at the mandatory retirement age, bydeath, or by voluntary retirement at certain specific ages prior to the mandatory retirement age.
The Company and certain consolidated subsidiaries have non-contributory funded defined benefit pension plans and unfunded
retirement benefit plans for employees. Certain consolidated foreign subsidiaries also have defined contributed pension plans.
The liability for employees' retirement benefits at March 31, 2011 and 2010 consisted of the followings:

Projected benefit obligation
Fair value of plan assets
Unrecognized prior service cost
Unrecognized actuarial loss
Unrecognized transitional obligation
Prepaid pension cost
Net liability(Millions of yen)(Thousands of
U.S. dollars)

March 31,

March 31,2011
¥ 8,980(7,180)308(1,331)(684)
1,262¥ 1,355

2010¥ 8,580(7,100)
376
(986)
(808)
1,324
¥ 1,3862011$107,998(86,350)
3,704(16,007)(8,226)15,177$ 16,296

The components of net periodic benefit costs for the years ended March 2011 and 2010 are as follows:

Service cost
Interest cost
Expected return on plan assets
Amortization of prior service cost
Recognized actuarial loss
Amortization of transitional obligation
Net periodic benefit costs(Millions of yen)(Thousands of
U.S. dollars)

March 31,

March 31,

2011
¥ 478
176
(158)
(68)
206
125
¥ 759

2010
¥ 509
181
(135)
(68)
321
125
¥ 933

2011
$ 5,749
2,117(1,900)
(818)
2,477
1,503
$ 9,128

Assumptions used for the years ended March 31, 2011 and 2010 are set forth as follows:
Discount rate
Expected rate of return on plan assets
Amortization period of prior service cost
Recognition period of actuarial gain / loss

2011
1.4~2.0%
1.4~2.0%
10 years
10 years

2010
1.4~2.5%
1.4~2.5%
10 years
10 years

Retirement allowances for directors, corporate auditors and executive officers at March 31, 2011 and 2010 were ¥1,038 million($12,483 thousand) and ¥1,043 million, respectively, which were included in liability for retirement benefits. Retirement allowance fordirectors, corporate auditors and executive officers are paid subject to the approval of the Compensation Committee or shareholders’meeting.

7. EQUITY
Japanese 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:(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 meet certain criteria such as; (1) having the Board of Directors, (2) having
independent auditors, (3) having the 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 has prescribed so in its articles of incorporation. The Company meets all theabove criteria.

39

Annual Report 2011

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 oftreasury 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.
(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 a legal reserve (a component ofretained earnings) or as additional paid-in capital (a component of capital surplus) depending on the equity account charged upon thepayment of such dividends until the total of 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 the accounts under certain conditions upon resolution of the shareholders.
(c) Treasury stock and treasury stock acquisition rights
The Companies Act also provides for companies to purchase treasury stock and dispose of such treasury stock by resolution of theBoard of Directors. The amount of treasury stock purchased cannot exceed the amount available for distribution to the shareholders
which is determined by specific formula. Under the Companies Act, stock acquisition rights are presented as a separate component ofequity. The Companies Act also provides that companies can purchase both treasury stock acquisition rights and treasury stock. Suchtreasury stock acquisition rights are presented as a separate component of equity or deducted directly from stock acquisition rights.

8. STOCK OPTIONSThe stock options outstanding as of March 31, 2011 are as follows:(The Company)
Stock Option

Persons Granted

Number of
Options Granted

Date of Grant

Exercise Price

Exercise Period

2001 Stock Option

4 directors
284 employees

421,400 shares

2001.7.26¥9,549($115)

From January 1, 2004
to December 31, 2010

2002 Stock Option

6 directors
381 employees
18 other persons

399,700 shares

2002.7.23¥15,150($182)

From August 1, 2004
to July 31, 20112003 Stock Option

4 directors
313 employees
6 other persons

378,500 shares2003.7.22¥13,646($164)

From August 1, 2005
to July 31, 20122004 Stock Option ①

2 directors
293 employees
5 other persons

359,900 shares2004.7.21¥16,167($194)

From August 1, 2006
to July 31, 20132004 Stock Option ②

20 employees
1 other person

25,600 shares2004.8.13¥16,836($202)

From August 1, 2006
to July 31, 20132005 Stock Option

2 directors
293 employees
5 other persons

346,400 shares2005.7.12¥12,369($149)

From August 1, 2007
to July 31, 20142008 Stock Option

1 director officer
10 executive officers
315 employees

431,700 shares2008.11.20¥1,609($19)

From August 1, 2010
to July 31, 2017

Number of
Options Granted

Date of Grant

Exercise Price

Exercise Period

152,000 shares2010.2.13

¥384
($5)

From February 11, 2012
to February 10, 2019

(DX ANTENNA CO., LTD.)
Stock Option

2010 Stock Option

Persons Granted

4 directors
29 employees

Annual Report 201140

The stock option activity is as follows:(The Company)
2001
Stock Option(Shares)

For the year ended March 31, 2010
Non-vested
March 31, 2009 − Outstanding
GrantedCanceled
VestedMarch 31, 2010 − Outstanding
VestedMarch 31, 2009 − Outstanding
VestedExercised
Canceled
March 31, 2010 − Outstanding
For the year ended March 31, 2011Non-vested
March 31, 2010 − Outstanding
GrantedCanceled
VestedMarch 31, 2011 − Outstanding
VestedMarch 31, 2010 − Outstanding
VestedExercised
Canceled
March 31, 2011 − Outstanding
Exercise price
Average stock price at exercise
Fair value price at grant date
From August 1, 2010 to July 31, 2017
From August 1, 2011 to July 31, 2017
From August 1, 2012 to July 31, 2017
From August 1, 2013 to July 31, 2017
From August 1, 2014 to July 31, 2017
From August 1, 2015 to July 31, 2017
From August 1, 2016 to July 31, 2017

Annual Report 20112004
Stock Option ①(Shares)

2004
Stock Option ②(Shares)2005
Stock Option(Shares)

2008
Stock Option(Shares)

417,700
311,600

399,600

378,500

359,900

25,600346,400

311,600

399,600

378,500

359,900

25,600346,400
417,700

417,700
311,600

399,600

378,500

359,900

25,600346,400

311,600¥9,549 ($115)

399,600¥15,150 ($182)

378,500¥13,646 ($164)

359,900¥16,167 ($194)

25,600¥16,836 ($202)

346,400¥12,369 ($149)

417,700
19,40012,100386,200¥1,609 ($19)¥2,677 ($32)¥440 ($5)¥447 ($5)¥454 ($5)¥458 ($6)¥475 ($6)¥487 ($6)¥510 ($6)

2010
Stock Option(Shares)41

2003
Stock Option(Shares)

421,900
4,200(DX ANTENNA CO., LTD.)For the year ended March 31, 2010
Non-vested
March 31, 2009 – Outstanding
GrantedCanceled
VestedMarch 31, 2010 – Outstanding
VestedMarch 31, 2009 - Outstanding
VestedExercised
Canceled
March 31, 2010 – Outstanding
For the year ended March 31, 2011Non-vested
March 31, 2010 – Outstanding
GrantedCanceled
VestedMarch 31, 2011 – Outstanding
VestedMarch 31, 2010 - Outstanding
VestedExercised
Canceled
March 31, 2011 – Outstanding
Exercise price2002
Stock Option(Shares)

152,000

152,000

152,000
2,000
150,000¥384 ($5)

The assumption used to measure fair value of the 2010 stock option.
(DX ANTENNA CO., LTD.)On February 13, 2010, DX ANTENNA CO., LTD., one of the subsidiaries granted stock options. As the company was a non-publiccompany, the fair unit value of the stock options was measured at their intrinsic value.
The total intrinsic values of the stock options at the year ended March 31, 2011 were ¥63 million ($ 758 thousand).
Estimated method of number of vested options.
(The Company)
Estimated number of vested options of the Company is determined based on the historical data.
(DX ANTENNA CO., LTD.)
Estimated number of vested options of the subsidiary is determined based on the actual cancellation data, because the number of
options cancelled in the future reasonably estimated.

9. SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses for the years ended March, 31 2011 and 2010 principally consisted of the following.

Depreciation
Amortization of goodwill
Provision for accrued pension and severance costs(Millions of yen)(Thousands of
U.S. dollars)

Years Ended March 31,

Year Ended March 31,

2011¥1,90331
382

2010¥1,865
119
434

2011
$22,886373
4,594

10. RESEARCH AND DEVELOPMENT COSTS
Research and development costs charged to income were ¥12,969 million ($155,971 thousand) and ¥13,486 million for the years
ended March 31, 2011 and 2010, respectively.

11. LEASESThe Group leases certain machinery, computer equipment, office space and other assets.
Obligations under finance leases were as follows:

Due within one year
Due after one year
Total

(Millions of yen)(Thousands of
U.S. dollars)

March 31,

March 31,

2011
¥205
369
¥574

2010
¥162
388
¥550

2011
$2,465
4,438$6,903ASBJ Statement No. 13, “Accounting Standard for Lease Transactions” requires that all finance lease transactions be capitalized torecognize lease assets and lease obligations in the balance sheet. However, the ASBJ Statement No. 13 permits leases that do not transfer
ownership of the leased property to the lessee and whose lease inception was before March 31, 2008 to be accounted for as operatinglease transactions if certain “as if capitalized” information is disclosed in the note to the financial statements. The Company applied the
ASBJ Statement No. 13 effective April 1, 2008 and continued to account for such leases as operating lease transactions.
Pro forma information of leased property whose lease inception was before March 31, 2008 and other information of finance leases that
do not transfer ownership of the leased property to the lessee on an “as if capitalized” basis were as follows:

Acquisition cost
Accumulated depreciation
Net leased property(Millions of yen)(Thousands of
U.S. dollars)

March 31,

March 31,

2011
¥596
528
¥ 68

2010
¥902
734
¥168

2011
$7,1686,350$ 818

Annual Report 201142

Obligations under finance leases:(Millions of yen)(Thousands of
U.S. dollars)

March 31,

March 31,

2011
¥59
11
¥70

Due within one year
Due after one year
Total

2011
$710
132
$842

2010
¥104
71
¥175

Depreciation expense, interest expense and other information under finance leases:(Millions of yen)(Thousands of
U.S. dollars)

Years Ended March 31,

Year Ended March 31,

2011
¥100
3
¥103
¥105

Depreciation expense
Interest expense
Total
Lease payments

2011$1,20336$1,239$1,263

2010
¥177
5
¥182
¥183

Depreciation expense and interest expense, which are not reflected in the accompanying statements of operations, are computed by
the straight-line method and the interest method, respectively.
The minimum rental commitments under noncancellable operating leases at March 31, 2011 and 2010 are as follows:(Millions of yen)(Thousands of
U.S. dollars)

March 31,

March 31,

2011
¥ 759
1,009
¥1,768Due within one year
Due after one year
Total

2011
$ 9,128
12,135$21,2632010¥1,162
1,361¥2,523

12. INCOME TAXESThe 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 40.7% for the years ended March 31, 2011 and 2010.
The tax effects of significant temporary differences and tax loss carryforwards which resulted in deferred tax assets and liabilities at
March 31, 2011 and 2010 were as follows:

Deferred tax assets :Liability for retirement benefits
Accounts payable
Allowance for doubtful accounts
Accrued employees’ bonuses
Impairment loss on investment securities
Inventories
Intercompany profit
Tax loss carryforwards
Other
Less valuation allowance
Total
Deferred tax liabilities:
Unrealized gain on available-for-sale securities
Prepaid pension cost
Other
Total
Net deferred tax assets

43

Annual Report 2011

(Millions of yen)(Thousands of
U.S. dollars)

March 31,

March 31,

2011

2010

2011

¥

973
1,276
3,910
604
292
917
8
10,514
1,764(10,944)¥ 9,314

¥

988
1,191
3,876
550
295
1,022
30
10,3501,691(9,864)¥10,129

11,702
15,34647,0237,264
3,512
11,02896
126,446
21,215(131,618)$ 112,014

¥

¥

$

385
514
518
¥ 1,417¥ 7,897

313
539
364
¥ 1,216¥ 8,913

$

$
$

4,630
6,182
6,230
17,042
94,972

A reconciliation between the normal effective statutory tax rate and the actual effective tax rates reflected in the accompanying
consolidated statement of operations for the years ended March 31, 2011 and 2010 were as follows:
Normal effective statutory tax rate
Expenses not deductible for income tax purposes
Elimination of dividend earned from subsidiaries
Reduction of earnings retained by tax haven company
Lower income tax rates applicable to income in certain foreign countries
Valuation Allowance
Other – net
Actual effective tax rates

2011
40.7%
13.5
(1.7)
3.6
96.7
3.9
156.7%

2010
40.7%
0.2
(1.5)
(7.0)
(18.5)(16.0)
4.9
2.8%

On June 28, 2005 and June 16, 2008, the Company received notices of supplementary tax assessment to the additional tax on theincome of its subsidiary in Hong Kong under the anti-tax haven rules for the three financial years ended March 31, 2002 to March 31,
2004 and the three financial years ended March 31, 2005 to March 31, 2007 from the Osaka Regional Taxation Bureau, as the subsidiaryin Hong Kong did not satisfy the conditions for exemption from the application of anti-tax haven rules. The Company has contested thevalidity in court, as the Company disagreed with this assessment and considered it to be unacceptable.
The additional tax assessments were ¥16,651 million (¥19,184 million including incidental taxes) and ¥15,038 million (¥16,838 million
including incidental taxes), including corporate income taxes, inhabitant taxes and enterprise taxes. They were recognized as “income
taxes for prior periods” for the fiscal years ended March 31, 2007 and March 31, 2009 in accordance with the “Treatment of Accounting
and Presentation of Taxes for the Purpose of Audits” (JICPA Audit and Assurance Practice Committee Report No. 63).
The taxation is claimed based on the status of any relevant foreign subsidiary at the end of each fiscal year end. Hence, for thereference, the effects of the application of these anti-tax haven rules on the income of a subsidiary in Hong Kong for the year ended
March 31, 2008 and subsequent years up to March 31, 2011, less dividend income received by the Company for the years ended March
31, 2008 and 2009 are estimated at approximately ¥3,000 million ($36,079 thousand) in total. The Company has not accounted for thiseffect due to the aforementioned reasons.

13. FINANCIAL INSTRUMENTS AND RELATED DISCLOSURESIn March 2008, the ASBJ revised ASBJ Statement No. 10 “Accounting Standard for Financial Instruments” and issued ASBJ GuidanceNo. 19 “Guidance on Accounting Standard for Financial Instruments and Related Disclosures”. This accounting standard and theguidance was applicable to financial instruments and related disclosures at the end of the fiscal years ending on or after March 31, 2010
with early adoption permitted from the beginning of the fiscal years ending before March 31, 2010. The Group applied the revised
accounting standard and the guidance effective March 31, 2010.
1. The situation of financial instruments(1) Group policy for financial instruments
The Group uses bank loans for fund raising and short-term deposits to fund operations. In principle, derivatives are not permitted.
(2) Nature and extent of risks arising from financial instruments and risk management for financial instruments
Receivables such as trade notes and trade accounts are exposed to customer credit risk.
To avoid such a risk, the Group sets up sales management regulations, and determines trading conditions and credit limit by eachcustomer.
The Company has many receivables and payables based on foreign currencies due to its overseas development. Basically the Group
doesn’t make forward foreign currency contracts because of its US dollar basis trading.
Investment securities and equity instruments are exposed to the market risk. Marketable and investment securities are managed bymonitoring market values and financial position of issuers on a regular basis. This risk should be reported to investment committee internally.
Payment terms of payables, such as trade notes and trade accounts are less than one year.
Loans, both short-term and long-term are financed for sales operations. In principle, derivatives are not permitted. Although the variableinterest rates of loans are exposed to market risks, those risks may be mitigated by using interest-rate swap derivatives. This derivativetransaction should be executed and managed by corporate regulations. To decrease credit risks, the Group only makes the relationships withhighly rated financial institutions.
Sales credit and loans are exposed to liquidity risks. The Group manages to have our associated companies make monthly financial
plans.
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, other rational
valuation techniques are used instead. The list below doesn’t contain financial instruments which fair value are difficult to recognize.

Annual Report 201144

(a) Fair Value of financial instruments(Millions of yen)March 31, 2011
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

Carrying
amountFair
Value¥ 33,745
36,33136,367
3,124¥109,567¥ 33,745
36,33136,367
3,124¥109,567¥ 10,097
28,93912,55633¥ 51,625¥ 10,097
28,93912,55633¥ 51,625

Unrealized
gain/loss(Millions of yen)March 31, 2010
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

Carrying
amountFair
Value¥ 34,063
51,98235,154
2,909¥124,108¥ 34,063
51,98235,154
2,909¥124,108

¥

¥

6,339
31,305
11,035567¥ 49,246

Unrealized
gain/loss

6,339
31,305
11,035567¥ 49,246(Thousands of U.S. dollars)

March 31, 2011
Cash and cash equivalents
Time deposits
Receivables Trade
Investment securities
Total

Carrying
amountFair
Value$ 405,833
436,933
437,366
37,571$1,317,703$ 405,833
436,933
437,366
37,571$1,317,703

Short-term bank loans (excluding finance lease obligation)
Payables Trade
Payables Other
Long-term debt (excluding finance lease obligation)
Total$ 121,431
348,034
151,004397$ 620,866$ 121,431
348,034
151,004397$ 620,866

Unrealized
gain/loss

Assets(1) Cash and cash equivalents (2) Time deposits (3) Receivables Trade
The carrying values of cash and cash equivalents (including time deposits) and receivables approximate fair values because of theirshort maturities.
(4) Investment securities
The investment securities are measured at the quoted market prices of the stock exchange for the equity instruments.
Liabilities(1) Short-term bank loans (2) Payables Trade (3) Payables Other
The carrying value of short-term bank loans and payables approximate fair value because of their short maturities.
(4) Long term debt
The carrying value of long-term debt approximate fair value because of loans based on floating rates reflect market interest rates overa short period of time, as long as the credit standing of the Group does not change significantly from the time of borrowing.
Derivatives
No comments is described because derivatives are not permitted in principle.
(b) Financial instruments whose fair values cannot be reliably determined(Millions of yen)(Thousands of
U.S. dollars)

March 31,

March 31,

2011
Investments in equity instruments that do not have a quoted market
price in an active market

45

Annual Report 2011

¥1,0272010¥1,155

2011$12,351

(c) Maturity analysis for financial assets and securities with contractual maturities(Millions of yen)March 31, 2011
Cash and cash equivalents
Time deposits
Receivables Trade
Total

Due inone yearor less

Due after
one yearthroughfive years

Due after
five years
throughten years

Due after
ten years¥ 33,745
36,33136,367¥106,443(Millions of yen)March 31, 2010
Cash and cash equivalents
Time deposits
Receivables Trade
Total

Due inone yearor less

Due after
one yearthroughfive years

Due after
five years
throughten years

Due after
ten years¥ 34,063
51,98235,154¥121,199(Thousands of U.S. dollars)

March 31, 2011
Cash and cash equivalents
Time deposits
Receivables Trade
Total

Due inone yearor less

Due after
one yearthroughfive years

Due after
five years
throughten years

Due after
ten years$ 405,833
436,933
437,366$1,280,132

Please See Notes 5 for annual maturities of long-term debt and Note 11 for obligations under finance leases, respectively.

14. COMPREHENSIVE INCOME
For the year ended March 31, 2010
Total comprehensive income for the year ended March 31, 2010 was the following:
Total comprehensive income (loss) attributable to:
Owners of the parent
Minority interests
Total comprehensive income (loss)

2010¥7,961
230¥8,191Other comprehensive income (loss) for the year ended March 31, 2010 consisted of the following:
Other comprehensive income (loss)
Unrealized gain on available-for-sale securities
Foreign currency translation adjustments
Share of other comprehensive income (loss) in associates
Total other comprehensive income (loss)

2010
¥ 573
(2,953)8¥(2,372)

15. NET INCOME PER SHARE
Reconciliation of the differences between basic and diluted net income (loss) per share (“EPS”) for the years ended March 31, 2011
and 2010 were as follows:

For the year ended March 31, 2011:
Basic EPS
Net loss available to common shareholders
For the year ended March 31, 2010:
Basic EPS
Net income available to common shareholders
Effect of Dilutive Securities
Stock options
Diluted EPS
Net income for computation

Millions of yen

Thousands ofsharesNet Income(Loss)

Weighted
averageshares

Dollars

Yen

EPS¥ (1,170)

34,100¥ (34.31)¥10,329

34,093¥302.97$(0.41)

249¥10,329

34,342¥300.77

Diluted net income per share in 2011 is not disclosed due to the loss position.

Annual Report 201146

16. SUBSEQUENT EVENTS(1) Appropriations of Retained Earning
The following appropriation of retained earnings at March 31, 2011 was approved at the Company's Board of Directors held on May
23, 2011:

Year-end cash dividends, ¥40.00 ($0.48) per share(Millions of yen)(Thousands of
U.S. dollars)¥1,364$16,404(2) Anti-tax haven rule
The Company had objected to the reassessment notice from the Regional Commissioner of the Osaka Regional Taxation Bureau
based on the decision that the Company’s Hong Kong-based subsidiary did not meet the conditions that would allow it to be coveredby the exceptions under the anti-tax haven taxation. The Company therefore filed an action with the Osaka District Court seeking therescission of such tax assessment notice, pursuant to applicable laws and regulations. With respect to this action, on June 24, 2011,
the court dismissed the claims of the Company. The Company will account for the effect of the application by this anti-tax haven rules
for the fiscal year ended March 31, 2012.
On June 29, 2011, the Company received notice of supplementary tax assessment to the additional tax on the income of its subsidiaryin Hong Kong under the anti-tax haven rules for the three financial years ended March 31, 2008 to March 31, 2010 from the Osaka
Regional Taxation Bureau. The additional tax assessment was ¥826 million (¥936 million including incidental taxes) including corporate
income taxes, inhabitant taxes and enterprise taxes. It will be recognized as “income taxes for prior periods” for the fiscal year ended
March 31, 2012 in accordance with the “Treatment of Accounting and Presentation of Taxes for the Purpose of Audits” (JICPA Audit andAssurance Practice Committee Report No. 63).

17. SEGMENT INFORMATION
For the years ended March 31, 2011 and 2010
In March 2008, the ASBJ revised ASBJ Statement No. 17 “Accounting Standard for Segment Information Disclosures” and issued
ASBJ Guidance No. 20 “Guidance on Accounting Standard for Segment Information Disclosures”. Under the standard and guidance,
an entity is required 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 to allocate resources and in assessing performance. Generally, segment information is required to be reported on the same
basis as is used internally for evaluating operating segment performance and deciding how to allocate resources to operating segments.
This accounting standard and the guidance are applicable to segment information disclosures for the fiscal years beginning on or after
April 1, 2010. The segment information for the year ended March 31, 2010 under the revised accounting standard is also disclosed
hereunder as required.
(1) Description of reportable segments
The Group’s reportable segments are those for which separate financial information is available and regular 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. The Company and DX ANTENNA CO., LTD.
cover Japan, and FUNAI CORPORATION, INC. covers North America, P&F USA, INC. covers North America, FUNAI ELECTRIC (H.K.)
LTD. covers Asia, FUNAI ELECTRIC EUROPE Sp.z o.o. covers Europe and other corporations also cover such areas. Each local
corporation is independent business unit and designs comprehensive strategy and performs each business.
The reportable segments of the Group are composed of four segments, “Japan”, “North America”, “Asia” and “Europe” which consistof geographic segments based on the manufacturing and selling system.
(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 to those disclosed in Note 2, “Summary of Significant Accounting
Policies”. Intersegment sales are based on arm’s length price.
In the past, the Group applied TTS or TTB rates when carrying out foreign currency exchange conversions. However, as from the fiscal
year ended March 31, 2011, the Group has decided to use TTM rates instead of TTS or TTB.
This change to apply TTM rates across all exchange conversions was made in order to make it appropriate to recognize periodic
income and loss as a result of reviewing the circumstances where transactions in the Group's major operations were settled in foreign
currencies and revenues obtained were kept in foreign currencies for the purpose of settlement of trade accounts, on the occasion when
foreign exchange rates were fluctuating significantly.
The effect of this change was to increase sales in “Japan” by ¥902 million ($10,848 thousand) and segment profit by ¥1,112 million($ 13,373 thousand) for the year ended March 31, 2011.

47

Annual Report 2011

(3) Information about sales, profit (loss), assets, and other items for each reportable segment for the years ended March
31, 2011 and 2010 were as follows:(Millions of yen)

2011
North
AmericaJapan

Sales:
Sales to external customers
Intersegment sales or transfers
Total
Segment profit (loss) (Note.2)
Segment assets
Other
Depreciation
Amortization of goodwill
Investment in equity method affiliate
Increase in property, plant and equipment
and intangible assets

Asia

Reconciliations(Note.1)
Consolidated

Total

Europe¥153,662
126,434
280,096¥ 7,220¥122,295¥133,079 ¥ 2,696
3
194,332
133,082
197,028¥ (6,663) ¥ 2,086¥ 38,857 ¥ 86,868¥ 6,487 ¥295,924 ¥¥295,924
8
320,777 (320,777)
6,495
616,701 (320,777) 295,924¥(1,749) ¥894¥(122) ¥772¥ 5,920 ¥253,940 ¥ (60,030) ¥193,910

¥

¥

¥

230

¥

6,368
31
272

¥

(1) ¥

6,367
31
272

¥

56

¥

6,631

¥

(200) ¥

6,431

Total

Reconciliations
Consolidated(Note.1)

2,866
31

132

¥

3,140
272

¥

1,189

¥

33

¥

5,353

(Millions of yen)

2010

Sales:
Sales to external customers
Intersegment sales or transfers
Total
Segment profit (loss) (Note.2)
Segment assets
Other
Depreciation
Amortization of goodwill
Investment in equity method affiliate
Increase in property, plant and equipment
and intangible assets

Japan

North
America¥114,180
163,001
277,181¥4,411¥120,425¥191,85530
191,885¥3,646¥ 35,735¥

1,049
183,813
184,862¥ 5,989¥102,814¥ 7,828 ¥314,912
3
346,847
7,831
661,759¥(1,205) ¥ 12,841¥ 9,966 ¥268,940¥¥314,912(346,847)(346,847) 314,912¥ (1,693) ¥ 11,148¥ (64,882) ¥204,058

¥

2,636
119
0

¥

¥

¥

260

¥

5,759
119
286

¥

(2) ¥

5,757
119
286

2,245

¥

¥

140

¥

5,148

¥

(405) ¥

4,743

¥

109

Asia

2,754

Europe

286
204

¥

2,559

(Thousands of U.S. dollars)

2011
Japan

Sales:
Sales to external customers
Intersegment sales or transfers
Total
Segment profit (loss) (Note.2)
Segment assets
Other
Depreciation
Amortization of goodwill
Investment in equity method affiliate
Increase in property, plant and equipment
and intangible assets

North
America

Asia

EuropeReconciliations
Consolidated(Note.1)

Total$1,848,010 $1,600,469 $ 32,423
1,520,553
36 2,337,126
3,368,563 1,600,505 2,369,549$ 86,831 $ (80,133) $ 25,087$1,470,776 $ 467,312 $1,044,714$ 78,016 $3,558,918 $$3,558,918
96 3,857,811 (3,857,811)
78,112 7,416,729 (3,857,811) 3,558,918$(21,034) $ 10,751 $(1,467) $9,284$ 71,197 $3,053,999 $ (721,948) $2,332,051$$ 2,766 $

76,584 $373
3,271(12) $

76,572
373
3,271

$

79,747 $(2,405) $77,342$

34,468 $373

1,587 $

14,299 $397 $37,7633,271
64,378673 $Note.1 Components of Reconciliation are as follows.

Segment profit (loss)
Elimination of intersegment transactions
Company-wide expenses(*1)
Adjustment of inventory
Total(Millions of yen)(Thousands of
U.S. dollars)

March 31,

March 31,

2011
¥
7
(995)
866
¥(122)

2010
¥
41
(991)
(743)
¥(1,693)

2011$
84(11,966)
10,415$ (1,467)

Annual Report 201148

Segment Assets
Company-wide asset(*2)
Adjustment of inventory
Elimination of intersegment assets and liabilities etc
Total(Millions of yen)(Thousands of
U.S. dollars)

March 31,

March 31,2011
¥ 17,934(117)(77,847)¥(60,030)

2010¥ 14,382(983)(78,281)¥(64,882)

2011$ 215,683(1,407)(936,224)$(721,948)(*1) Company-wide expenses are mainly general and administrative expenses not attributable to any reportable segments.
(*2) Company-wide asset mainly consists of cash surplus (cash and deposits) and long-term-investments (investment securities) that are not attributable to any
reportable segments.

Note.2 Segment profit (loss) is adjusted to operating income in consolidated statements of operations.
(4) Related information for the year ended March 31, 2011
1. Information about product or service(Millions of yen)

2011
Audiovisual
Equipment

Sales to external customers

Information
Equipment¥198,607¥56,405

Other

Total

¥40,912¥295,924(Thousands of U.S. dollars)

2011
Information
Equipment

Audiovisual
Equipment$2,388,539

Sales to external customers

Other$678,352$492,027

Total$3,558,918

2. Information about geographical areasa. Sales(Millions of yen)

2011
North AmericaJapan¥94,197

USA

Other

¥147,876

Asia¥7,879Europe¥8,505

Other¥23,837

Total¥13,630¥295,924(Thousands of U.S. dollars)

2011
North America
Japan

USA

$1,132,856$1,778,425

Other

Asia

$94,756

Europe$102,285

Other$286,675

Total$163,921$3,558,918

Other

Total

Note: Sales are classified in countries or regions based on location of customers.

b. Property, plant and equipment(Millions of yen)

2011
Asia
Japan

¥9,815

North America

¥159

China

EuropeOther¥3,438

Poland¥1,183¥1,686¥9¥16,290(Thousands of U.S. dollars)

2011
Asia
Japan

$118,040

North America$1,912China

EuropeOther$41,347

Poland$14,227$20,277

Other

Total

$108

3. Information about major customer
March 31, 2011
Name of Customers
WAL-MART STORES, INC.

49

Annual Report 2011

(Millions of yen)(Thousands of
U.S. dollars)

Sales¥79,107Sales$951,377

Related segment nameNorth America$195,911

(5) Goodwill by reportable segment(Millions of yen)

2011
North
AmericaJapan

Amortization of goodwill
Goodwill at March 31, 2011

Asia

EuropeElimination

Total

¥31
34

¥31
34
(Thousands of U.S. dollars)

2011
North
America

Japan

Asia

EuropeElimination

Total

$373
409

Amortization of goodwill
Goodwill at March 31, 2011

$373
409

For the year ended March 31, 2010(1) Industry Segments
The Group operates in a single business segment of manufacturing and sales of electrical products in Japan and overseas. Therefore,
industry segment information is not disclosed.
(2) Geographical Segments
The geographical segments of the Group for the year ended March 31, 2010 is summarized as follows:(Millions of yen)

2010

Sales:
Sales to outside customers
Inter-segment sales
Total
Operating expenses
Operating income (loss)
Identifiable assets

Japan

North
America¥114,180
163,001
277,181272,770¥ 4,411¥120,425¥191,85530
191,885
188,239¥ 3,646¥ 35,735

Asia

¥

1,049
183,813
184,862
178,873¥ 5,989¥102,814

Europe¥ 7,828
3
7,831
9,036
¥(1,205)¥ 9,966

Consolidated
total

Elimination¥

0(346,847)(346,847)(345,154)¥ (1,693)¥ (64,882)¥314,912
314,912303,764¥ 11,148¥204,058(3) Sales to Foreign Customers
Sales to foreign customers for the year ended March 31, 2010 is summarized as follows:(Millions of yen)

North America
Asia
Europe
Other
Total

2010
¥216,454
8,822
30,49010,766¥266,532

Annual Report 201150

Independent Auditors’ Report

51

Annual Report 2011

Corporate Data

OutlineName
Established
Head office
Phone
Fax
URL
CapitalNet Sales
Employees
Category

Business Operations

FUNAI ELECTRIC CO., LTD.
August 1961
7-7-1 Nakagaito, Daito,
Osaka 574-0013, Japan+81-72-870-4303+81-72-871-1112
http://www.funaiworld.com/¥31,300 million (March 31, 2011)¥295,923 million(Year ended March 31, 2011)
1,120(March 31, 2011 / Non-Consolidated)
Electrical Equipment

Audiovisual Equipment
LCD TVs
DVD Players / Recorders
Blu-ray Disc Players / Recorders
Information Equipment
Printers
Others
Receiver-related Products

History
Aug. 1961
Mar. 1964
Sep. 1976
May 1991
Mar. 1992
Apr. 1992
Aug. 1994
Jan. 1996
May 1996
Feb. 1999
Mar. 2000
Mar. 2001
Nov. 2001
Jul. 2003
Dec. 2003
Apr. 2004
Oct. 2006
Oct. 2007
Jun. 2008

Apr. 2009
Jul. 2010

FUNAI ELECTRIC CO., LTD. was established in Ikuno-ku, Osaka capitalized at ¥20 million.
CHUGOKU FUNAI ELECTRIC CO., LTD. was established as a production subsidiary in Fukayasu-gun (nowFukuyama), Hiroshima.
The head office was relocated to Daito, Osaka.
FUNAI CORPORATION, INC. was established as a sales subsidiary in New Jersey, U.S.
HIGHSONIC INDUSTRIAL LTD. (now FUNAI ELECTRIC (H.K.), LTD.) was established in Hong Kong, China.
DONG GUAN PLANT in Dongguan City, Guangdong Province started operations as a consignment production
plant in China.
ZHONG SHAN PLANT in Zhong Shan City, Guangdong Province started operations as a consignment production
plant in China.
FUNAI SERVICE CO., LTD. was established as a service subsidiary in Higashi-Osaka, Osaka.
HIGHSONIC INDUSTRIAL LTD. (now FUNAI ELECTRIC (H.K.), LTD.) established H.F.T. INDUSTRIAL LTD. by joint
investment with a Japan company.
FUNAI ELECTRIC CO., LTD. was listed on the Second Section of Osaka Securities Exchange.
FUNAI ELECTRIC CO., LTD. was listed on the First Section of Tokyo Stock Exchange and the First Section of
Osaka Securities Exchange.
Closing date for the fiscal year ending on June 15 was changed to March 31.
Acquired the majority stocks of DX ANTENNA CO., LTD. in Japan.
FUNAI (THAILAND) CO., LTD. was established as a production subsidiary in Nakornratchasima, Kingdom ofThailand.
HUANG JIANG PLANT in Dongguan City, Guangdong Province started operations as a consignment production
plant in China.
FUNAI ELECTRIC ADVANCED APPLIED TECHNOLOGY RESEARCH INSTITUTE INC. was established.
FUNAI ELECTRIC (POLSKA) Sp. z o.o. (now FUNAI ELECTRIC EUROPE Sp. z o.o.) was established as a
production subsidiary in the city of Nowa Sol, Poland.
FUNAI SERVICE CORPORATION was established as a service subsidiary in Ohio, U.S.
P&F USA, Inc. was established as a sales subsidiary in Georgia, U.S., for PHILIPS brand consumer TVs.
Tetsuro Funai, President and CEO, assumed the post of Chairman. Tomonori Hayashi, Senior Executive Officer,
assumed the post of President and CEO.
P&F MEXICANA, S.A. DE C.V. was established as a sales subsidiary in Mexico.
Zhong Yue Funai Electron Co. was established as a production subsidiary in Guangdong Province, China.

Annual Report 201152

7-7-1 Nakagaito, Daito, Osaka 574-0013, Japan
Phone +81-72-870-4303 Fax +81-72-871-1112
http://www.funaiworld.com/