(Translation)
This document is an English translation of the notice for the general meeting of shareholders originally
written in Japanese. This translation was made for reference purpose only and all warranties, and inparticular the accuracy of this translation, are hereby disclaimed.

(Securities Identification Code: 6703)
June 6, 2007

NOTICE OF 83RD ORDINARY GENERAL MEETING OF SHAREHOLDERS
Dear Shareholders,Oki Electric Industry Co., Ltd. (the “Company”) would hereby like to inform you that the 83rd
ordinary general meeting of shareholders will be held as follows. We would be grateful if you
could attend the meeting.
Those who will not be able to attend the meeting are kindly requested to consider the attached“Reference Documents for the General Meeting of Shareholders” and exercise their voting rights
in one of the following ways no later than 5:15 p.m., June 25 (Monday), 2007.

[Exercise of voting rights by postal mail]Please indicate your approval or disapproval for each of the proposals in the space provided on
the ballot and return the ballot to the Company. (There is no need to affix your signature or
registered seal.)[Exercise of voting rights by electronic means (Internet)]
Please read the appended “Instructions for the Exercise of Voting Rights via the Internet,” andindicate your approval or disapproval online via the designated website at http://www.itsoukai.com/. There is no need to mail the ballot if you choose to vote via Internet.

Yours faithfully,
Katsumasa Shinozuka,
President and Chief Executive Officer
Oki Electric Industry Co., Ltd.
1-7-12 Toranomon, Minato-ku, Tokyo-1-

(Translation)

1.
2.

Date and Time:
Location:

Tuesday, June 26, 2007, from 10:00 a.m.
Bellesalle Mita Conference Room, Sumitomo Fudosan Mita Twin
Bldg., West Wing, 1st Floor, 3-5-27 Mita, Minato-ku, Tokyo(The location is different from last year.)

3. Meeting Agenda
Items to be reported:
1. Business Report, Consolidated Financial Statements and audit results of theConsolidated Financial Statements by the Account Auditor and the Board of
Corporate Auditors for the 83rd fiscal year (from April 1, 2006 to March 31,
2007)
2. Non-consolidated Financial Statements for the 83rd fiscal year (from April 1,
2006 to March 31, 2007)
Items to be resolved:
Agenda 1:
Agenda 2:
Agenda 3:
Agenda 4:

Election of Four Directors
Election of One Corporate Auditor
Granting of Equity Warrants as Stock Options to Directors
Determining the Particulars of Offering Equity Warrants Granted as
Stock Options to Executive Officers Excluding Those Concurrently
Serving as Directors* If you are attending the meeting in person, please submit the enclosed ballot at the reception desk of themeeting.
* The Company has provided the Notice of 83rd Ordinary General Meeting of Shareholders on its Internet
website (http://www.oki.com/). Any amendment to the Company’s Reference Documents for the
General Meeting of Shareholders, the Business Report, and the Consolidated and Non-consolidated
Financial Statements will be announced on the website.

-2-

(Translation)

Business Report(From April 1, 2006 to March 31, 2007)
1.

Status of the OKI Group(1) Operating progress and results
During the fiscal year ended March 2007, the domestic economy remained on arecovery track as a whole thanks to improvements in corporate earnings and capital
expenditure. Business conditions worldwide also showed a recovery trend. In theGroup’s major business areas, sales in the financial system business increased reflecting
improved investment activities in the financial market, and color non-impact printers soldwell due to market expansion. Telecom carriers, however, curtailed investments in fixedline network facilities, sales of driver LSIs decreased due to prolonged inventory
adjustments of liquid crystal panels, and the Group was unable to reduce costscommensurate with price reductions due to tougher competition. Overall, the Group faceda difficult business environment.
As a result, consolidated sales for the term under review increased 5.6% year-on-yearto ¥718.8 billion. Consolidated operating income declined by ¥16.0 billion year-on-yearfrom ¥10.6 billion to a loss of ¥5.4 billion. Consolidated recurring income decreased by¥20.0 billion from ¥7.2 billion to a loss of ¥12.8 billion, and consolidated net income
dropped by ¥41.5 billion from ¥5.1 billion to a loss of ¥36.4 billion due to a reversal ofdeferred tax assets.
Non-consolidated results followed a trend similar to that for consolidated results.
Sales for the term under review stood at ¥406.9 billion, down 0.5% year-on-year.
Operating income declined by ¥20.4 billion year-on-year from ¥3.8 billion to a loss of¥16.6 billion. Recurring income decreased by ¥22.4 billion from ¥4.7 billion to a loss of¥17.7 billion, and net income dropped by ¥39.6 billion from ¥2.2 billion to a loss of ¥37.4
billion.
We deeply regret to say that there will be no payment of dividends to shareholders forthe fiscal year under review.
Consolidated sales by segment are as provided below.
- Net Sales(Unit: billions of yen)Segment
Info-telecom
systems
Semiconductors
Printers
Other
Total

FY2005 (reference:

FY2006 (the year

previous year)

under review)

Increase or
decrease

Compared to theprevious year (%)

338.0

352.7

14.7

4.3

150.7
160.5
31.3

145.5
187.1
33.5

(5.2)
26.6
2.2

(3.5)
16.6
6.9

680.5

718.8

38.3

5.6

The following provides a summary of each segment.

-3-

(Translation)
Info-telecom systems
During the fiscal year under review, telecom carriers curtailed investments in IP
networks and existing switching systems and sales of fixed-line network facilities decreased
from the previous fiscal year affected by delays in product development. At the same time,
we believe that full-scale operations of the next-generation network “NGN” will contributeto the Group’s earnings in and after the fiscal year ending March 2008.
In the financial market business, demand for ATMs targeting China and South Korea
and high-security ATMs was strong in the fiscal year under review, and sales of terminals
for Japan Post increased from a year earlier. Sales of wireless systems for government andmunicipal offices were robust due to consolidation of municipalities. In our enterprisemarket business, sales of systems, in particular, for the transportation and distribution
markets dropped. Investment in establishing sales channels for expanding sales ofcorporate IP telephony equipment increased.
As a result, consolidated sales to third parties increased 4.3% year-on-year to ¥352.7
billion. Operating income, affected by reduced sales and delays in cost-reduction,
declined by ¥12.4 billion from ¥10.9 billion to a loss of ¥1.5 billion.
Semiconductors
In the semiconductor business, inventory adjustments by liquid crystal display panel
manufacturers continued, resulting in decreasing sales of driver LSIs. System LSIs for
specific customers also declined. At the same time, sales of P2ROMs for the amusement
market remained strong as did the foundry business which employs differentiatedtechnologies such as high-voltage process.
As a result, consolidated sales to third parties stood at ¥145.5 billion, down 3.5%
from a year earlier. Operating income declined by ¥2.3 billion year-on-year from ¥3.0
billion to ¥0.7 billion.
Printers
In the printer business, sales of business-use, color, non-impact printers increased
steadily, and earnings benefited from the weak yen. However, competition in the printermarket has been intensifying among manufacturers seeking to expand market share.
As a result, consolidated sales to third parties increased 16.6% year-on-year to ¥187.1
billion. Delays in shifting to comparatively profitable, middle and top-end models,
produced a decline in operating income of ¥2.4 billion from ¥4.1 billion to ¥1.7 billion.

-4-

(Translation)(2) Capital expenditure
Capital expenditures for the fiscal year equaled ¥37.7 billion.
Investment amounts by segment were as follows.
(Unit: billions of yen)Segment

Amount ofcapitalexpenditure

Info-telecom systems

7.2

Semiconductors

22.1

Printers

4.9

Major investments
ATM products and cash management terminals for financial anddistribution markets; investments in research, development andproduction of new products for network service and network
infrastructure businesses
Investments in expansion, research and development of new
products relating to wafer process production lines, including
logic LSIs, system LSIs and system memories, etc.
Investments in R&D, development and production activities
relating to business-use printers

Other
3.5
Total
37.7
Note: The above amount includes ¥7.2 billion of leased assets.

(3) Financing
Funds required for the term under review were obtained from our own funds,
borrowed funds and corporate bonds.
On June 7, 2006, the Company issued its 31st issue of Unsecured Convertible Bonds
with Equity Warrants worth ¥18.0 billion and its 32nd issue of Unsecured Convertible
Bonds with Equity Warrants worth ¥12.0 billion. All of the 31st Unsecured Convertible
Bonds with Equity Warrants were converted into shares by November 17, 2006.
(4) Future challenges
Business conditions affecting the OKI Group are continuing to change more quickly
and dramatically than anticipated due to accelerated globalization, saturation of thedomestic market and increasingly common customer demand for investment efficiency.
Under such circumstances, we recognize that the Group unfortunately has failed to
sufficiently maintain its capability to promote business and product competitiveness.
Accordingly, we will implement the following measures without delay, in order tocompletely overhaul all of the Group’s business activities and reestablish strong
competitiveness.
(i) Acceleration in selection and concentration of businesses
The Group will clearly redefine business fields to be focused on, and accelerate theallocation of management resources to these core businesses. We will also accelerate
flexible operations by consolidating, splitting up and selling less profitable businesses,
while establishing new in-house companies for promising businesses. To this end, we
have launched four in-house companies and venture companies.
We have already decided to shift 1,700 personnel to the focused businesses. In
addition, we decided to consolidate business units by 10% or so, and will reduce 10% of
the business units during fiscal year ending March 2008.
(ii)

Change to more efficient management style-5-

(Translation)
In order to fully carry out its basic policies, the Group has clearly categorizedorganizational functions into policy direction, implementation and management. We havereorganized the info-telecom business group into the three business groups to engage infinancial, communications and information systems. We have also reduced the number ofsections to streamline our organization.
From now on, we will further accelerate the speed at which we conduct ourbusinesses, and improve flexibility in business operations, by trimming planning andclerical sections while shifting personnel to front-line activities such as sales, SE,
design/development and production.
(iii) “Strong businesses” based on “strong products”
We will reexamine the OKI Group’s resources (personnel, products, businesses,
technologies, etc.), “combine,” “integrate” and “harmonize” these resources by focusing on
their effective use, and form alliances with global partners, aiming to reestablish
differentiated competitiveness that only Oki can achieve.
In addition, we will strive in fiscal year ending March 2008 to convert ourorganization into a profitable entity through implementation of emergency measures suchas reductions in fixed costs.
(5) Trends in assets and profit/loss
Trends in assets and profit/loss for the fiscal year under review and the past three
years are as follows.

Sales

654.2

billion yen

688.5

billion yen

680.5

billion yen

83rd year(current year,
FY2006)718.8
billion yen

Net income

1,328

million yen

11,174

million yen

5,058

million yen(36.446)

million yen

Net income per share

2.17

yen

18.27

yen

8.27

yen

(56.27)yen

Total assets

609.6

billion yen

608.0

billion yen

618.9

billion yen

628.4

billion yen

Net assets

110.5

billion yen

124.8

billion yen

133.9

billion yen

116.0

billion yen

Net assets per share180.66yen

204.11yen

218.96yen

160.13yen

80th year (FY2003)

82nd year(FY2005)

81st year (FY2004)

Notes:
1. Parentheses indicate losses.
2. Net income per share is computed based on the average number of shares during the year
(weighted average). Net assets per share are computed based on the number of shares of common
stock outstanding during the year. These figures exclude treasury stocks.
3. Beginning in the 83rd year, the Company adopted “Accounting Standards for Presentation of Net
Assets in Balance Sheets” (Corporate Accounting Standards No. 5, December 9, 2005) and“Guidelines for the Application of Accounting Standards for Presentation of Net Assets in Balance
Sheets” (Guidelines for the Application of Corporate Accounting Standards No. 8, December 9,2005).

-6-

(Translation)(6) Status of major subsidiaries(i) Status of major subsidiaries
Name

Company’s
voting rightratio

CapitalOki Wintech Co., Ltd.

2,001 million

yen

53%

Oki Data Corporation

14,500 million

yen

100

Oki Customer Adtech Co., Ltd.

800 million

yen

100

Miyagi Oki Electric Co., Ltd.

200 million

yen

100

Miyazaki Oki Electric Co., Ltd.

200 million

yen

100

Oki America, Inc.

14 million

U.S. dollars

100

Oki Europe Ltd.

33 million

UK Pond100

Oki (Thailand) Co., Ltd.

700 million

Thai baht

100

Major business
Design and electronic works andelectronic telecommunications
works
Manufacturing and sales of printers
Maintenance, construction andsales of information processing
equipment and telecommunications
equipment
Manufacturing and sales ofsemiconductors
Manufacturing and sales ofsemiconductors
Sales of semiconductors andelectronic component products
Sales of printers
Manufacturing and sales ofsemiconductors

Note: The Company absorbed consolidated subsidiary Oki Techno Creation Co., Ltd. on October 1, 2006.

(ii)
-

-

Major partners
Major technical partners:
Lucent Technologies GRL Corporation (US)International Business Machines Corporation (US)Texas Instruments Incorporated (US)Canon Inc.
Major business partners:
Hewlett-Packard Company (US)Cisco Systems, Inc.
United Microelectronics Corporation (Taiwan)
Peregrin Semiconductor Corporation (US)ACCESS Co., Ltd.

-7-

(Translation)(7) Major businesses
The OKI Group offers as its core businesses info-telecom systems/devices,semiconductors, and printers as well as related solutions and services through a businessstructure consisting of the Systems Network Business Group for info-telecom systembusiness, Semiconductor Business Group and Printer Business Group.
Major business items include the following.
Segment

Info-telecom systems

Semiconductors
Printers

Business items
Financial systems, automation equipment systems, ITS-related systems, electronic
government-related systems, ERP systems, computer network-related equipments,
information network-related equipments, informational network terminal
equipments, security systems, IP telephony systems, corporate telecommunications
systems, CTI systems, image delivery systems, electronic switching equipment,
digital transmission equipment, optical communication equipment, radio
communication equipment, broadband access equipment, network service, network
operational support service, etc.
System LSI, logic LSI, memory LSI, optical devices for high-speed communication,foundry services, etc.
Color NIPs, mono NIPs, SIDMs, MFPs, etc.

(8) Major offices
Our major offices are as follows.
Name

Classification

Location

Head office

Minato-ku, Tokyo
Hokkaido region (Sapporo, Hokkaido),
Tohoku region (Sendai, Miyagi),
Chubu region (Nagoya, Aichi),
Hokuriku region (Kanazawa, Ishikawa),
Kansai region (Osaka, Osaka),
Chugoku region (Hiroshima, Hiroshima),
Shikoku region (Takamatsu, Kagawa), andKyushu region (Fukuoka, Fukuoka)
Minato-ku (Tokyo), Hachioji (Tokyo), Warabi(Saitama), Honjo (Saitama), Takasaki (Gunma), andNumazu (Shizuoka)

Branch offices
Oki Electric Industry Co., Ltd.

Business offices
Research institutes

Hachioji (Tokyo) and Osaka (Osaka)

Oki Wintech Co., Ltd.

Head office

Shinagawa-ku, Tokyo

Oki Data Corporation

Head office

Minato-ku, Tokyo

Oki Customer Adtech Co., Ltd.

Head officeKoto-ku, Tokyo

Miyagi Oki Electric Co., Ltd.

Head office

Oohiramura, Kurokawa-gun, Miyagi

Miyazaki Oki Electric Co., Ltd.

Head office

Kiyotake-cho, Miyazaki-gun, Miyazaki

Oki America, Inc.

Head office

California, USA

Oki Europe Ltd.

Head office

Middlesex, UK

Oki (Thailand) Co., Ltd.

Head office

Ayutthaya, Thailand-8-

(Translation)(9) Employees(i) Employees of the OKI Group(ii)

Segment

Number of employees

Info-telecom systems

9,027

Semiconductors

4,984

Printers

5,758

Other

1,143

Company-wide (shared)

468

Total

21,380

Employees of Oki Electric Industry

Number of employees
5,579 (increased by 83 from the end of the previous year)

Average age
40.4

Average length of service
16.8(10) Major creditors
Major creditors of the OKI Group are as follows:
Creditor

Loan balanceBillion yen

Mizuho Corporate Bank, Ltd.
Sumitomo Mitsui Banking Corporation
Mizuho Trust & Banking Co., Ltd.
Development Bank of Japan
Meiji Yasuda Life Insurance Company

33.9
29.1
15.8
14.4
14.4

(11) Other significant events of the OKI Group
There were no noteworthy events.

-9-(Translation)
2.

Shareholders’ Equity
(1)
(2)
(3)
(4)
(5)

Number of shares authorized to be issued by the Company:
2,400,000 thousand shares
Number of outstanding shares:
684,256 thousand shares (including 1,021 thousand treasury stock)
Number of shareholders: 121,000
Shareholders holding 10% or more of outstanding shares (excluding treasury stock):
Not applicable
Major shareholders (Top 10):
Number ofshares held
(thousand shares)

Name of shareholder
Meiji Yasuda Life Insurance Company

34,000Japan Trustee Services Bank, Ltd. (trust account)

21,274The Master Trust Bank of Japan, Ltd. (trust account)

16,689Japan Trustee Services Bank, Ltd. (trust account 4)

15,251

Oki Denki Employees’ Shareholdings Committee

13,456

Mizuho Corporate Bank, Ltd.

13,000

Sompo Japan Insurance Inc.

12,986

The Dai-ichi Mutual Life Insurance Company

9,380

Mitsubishi UFJ Trust and Banking Corporation (trust account)

4,753

Nippon Life Insurance Company

4,537- 10 -

(Translation)
3. Equity Warrants(1) Equity warrants granted to the Company’s officers as consideration for theirperformance of duties(i) Number of equity warrants
1,049(ii) Type and number of shares subject to equity warrants
1,049,000 shares of the Company’s common stock (1,000 shares per equity warrant)(iii) Status of equity warrants held by the Company’s officers

Directors(excluding outside
directors)

AuditorsIssued Number

Exercise period

No.1 equity warrant (271 yen)
(Issued on July 18, 2002)
No. 2 equity warrant (354 yen)
(Issued on July 18, 2003)
No. 3 equity warrant (458 yen)
(Issued on July 20, 2004)
No. 4 equity warrant (406 yen)
(Issued on July 20, 2005)
No. 5 equity warrant (277 yen)
(Issued on July 28, 2006)
No. 3 equity warrant (458 yen)
(Issued on July 20, 2004)
No. 4 equity warrant (406 yen)
(Issued on July 20, 2005)

July 1, 2004
to June 30, 2007
July 1, 2005
to June 26, 2013
July 1, 2006
to June 28, 2014
July 1, 2007
to June 28, 2015
July 1, 2008
to June 28, 2016
July 1, 2006
to June 28, 2014
July 1, 2007
to June 28, 2015

Number ofequity warrants

Number ofholders

93

6

310

8

212

10

231

10

185

10

10

1

8

1

(2) Equity warrants issued to employees in consideration of work performance during the
fiscal year under review(i) Number of equity warrants issued
157 warrants(ii) Type and number of shares
Common stock: 157,000 shares (1,000 shares per right)(iii) Issue price of the rights
Granted free of charge(iv) Payment per share required to exercising the rights¥277(v) Exercise period
July 1, 2008 to June 28, 2016(vi) Status of granting equity warrants to the Company’s employees, etc.
Number of the rights
Employees of the Company (excluding officers of theCompany)
Officers of the Company’s subsidiaries(excluding officers of the Company)- 11 -

Number of
grantees

147

18

10

1

(Translation)(3) Other significant matters concerning equity warrants
Status of convertible bonds with equity warrants

Date of resolution for issuance
Number of equity warrants
Type and number of shares to beacquired by rights
Issue price of the rights
Exercise period

Equity warrants attached to Euro
Yen convertible bonds to beredeemed in 2008
(issued on November 26, 2004)
November 9, 2004
10,000No. 32 equity warrants attached toconvertible bonds without warranty(issued on June 7, 2006)
May 23, 2006
24

Common stock: 39,682,539 shares

Common stock: 41,237,113 shares

Granted free of charge
December 10, 2004 toNovember 12, 2008
¥504

Granted free of charge
June 8, 2006 toJune 6, 2011
¥291 (Note)

Exercise price
Balance of bonds with equity¥20 billion¥12 billion
warrants
Note: The conversion price will be revised after the trading day following the fourth Friday of March, June,
September and December (hereinafter the “determination date”) to an amount equivalent to 93% of theaverage closing price of our common stock in ordinary trading on the Tokyo Stock Exchange for the
successive five trading days up to the determination date. The revised conversion price shall not be
below ¥291.

- 12 -

(Translation)
4.

Corporate Officers(1) Names, etc. of Directors and corporate auditors
Note 1*X

Position
President

Name
Katsumasa Shinozuka*X

Executive Vice President

Kazuo Tanaka*X

Executive Vice President

Yutaka Maeda

X

Executive Vice President

Tadao Murase

X

Senior Vice President

Nobuhide Hara

X

Senior Vice President

Naoki SatoX

Senior Vice President

Harushige Sugimoto

X

Senior Vice President

Hideichi Kawasaki

X

Senior Vice President
Director
DirectorStanding Auditor
Standing Auditor
Standing Auditor
AuditorHironori Kitabayashi
Mikihiko Maeno
Minoru Morio
Takahisa Inagawa
Yoshikatsu Shiraishi
Hiroyuki Katagiri
Ieji Yoshioka

Status or main duties
CEO
CFO & CCOManagement supervision (in charge of the Corporate Planning
Office, Human Resources Division, Internal Auditing
Division)
Technical and overseas operations supervision
Chairman, Systems Network Business Group
President, Oki Consulting Solutions Co., Ltd.
Sales supervision
President, Oki Alpha Create, Inc.
CIO
In charge of Software Service
In charge of the Information Planning Division
President, Oki Network Integration Co., Ltd.
In charge of sales and financing operations at Affiliates,
Administration Division, General Affairs Division
CTO in charge of the Technological Planning Division,
Corporate Research & Development Center, Corporate
Production Planning Division
Division Head, China Business Promotion Division
In charge of sales and branch operations, the Public Relations
Division, Human Resources Support Division HQ
Division Head, Marketing Promotion Division
Chairman, Semiconductor Business Group
President & CEO, Oki Data Corporation

CEO: Chief Executive Officer
CFO: Chief Financial Officer
CCO: Chief Compliance Officer
CIO: Chief Information Officer
CTO: Chief Technology Officer

Notes:
1. Asterisk indicates Representative Director. X indicates executive officer.
2. Director Minoru Morio is an outside director.
3. Standing Auditors Hiroyuki Katagiri and Ieji Yoshioka are outside auditors.
4. Changes of Representative Directors after the fiscal year
In accordance with a resolution of the Board of Director meeting held on May 23, 2007, Naoki
Sato will be appointed Representative Director on June 26, 2007, and Yutaka Maeda will retire as
Director on June 26, 2007.
5. Executive officers as of March 31, 2007 are as follows (excluding those who concurrently serve as
Directors).
Position

Name

Senior Executive officer

Keiichi Fukumura

Executive officer

Masayoshi Matsushita

Executive officer

Masataka Sase

Executive officer

Yutaka Asai

Executive officer

Shigeru Yamamoto

Executive officer

Masao Miyashita

Principal duty
In charge of the Accounting & Control Division, CSR
Promotion Division and Compliance Promotion Division
SOO, Systems Network Business Group
Division Head, Strategic Planning Division
Division Head, Network Application Division
In charge of the Legal & Intellectual Property Division,
Global Environment Division
SOO, Systems Network Business Group
Division Head, Overseas Business Promotion Division
SOO, Systems Network Business Group
President, Financial Solutions Company
SOO, Systems Network Business Group
President, Network Systems Company- 13 -

(Translation)
Position
Executive officer

Name
Hiroshi Enomoto

Executive officer

Kichiro Akino

Executive officer

Kazuhiro Iritani

Executive officer

Masasuke Kishi

Principal duty
General Manager, Corporate Planning Office
SOO, Systems Network Business Group
President, Network Systems Company
Head, Kansai Branch
SOO, Systems Network Business Group
EVP, Network Systems Company
Division Head, Network Systems Division
SOO: Senior Operating Officer
EVP: Executive Vice President(2) Compensation paid to Directors and Corporate Auditors
Title

Number of persons
11
4
15

Directors
Corporate Auditors
Total

Amount of payment¥387 million¥70 million¥457 million

Notes:
1. The amounts of compensation approved by the 82nd Ordinary General Meeting of Shareholders held on
June 29, 2006 are within ¥600 million per year for Directors and ¥100 million per year for Corporate
Auditors. The amount of compensation for Directors excludes employee wages for Directors who are also
employees. In the fiscal year under review, there were no Directors who were also employees.
2. The amount of payment includes Directors’ compensation through stock options amounting to ¥17 million.

(3) Outside Directors and Corporate Auditors(i) Major activities in the fiscal year under review(a) Attendance at meetings of the Board of Directors and Board of Corporate
Auditors
Board of Directors meeting(held 14 times in total)
Attendance
Attendance ratefrequency
Minoru Morio,
Director
Hiroyuki Katagiri,
Corporate Auditor
Ieji Yoshioka,
Corporate Auditor

Board of Corporate Auditors meeting(held 17 times in total)
Attendance
Attendance ratefrequency

13

93%

-

14

100%

17

100%

14

100%

17

100%

(b) Major activities
a. Minoru Morio, Director
Making statements mainly based on extensive experience in the electronics
industry, he provided advice and proposals for the Board of Directors tosecure the soundness and appropriateness of decision-making.
b. Hiroyuki Katagiri, Corporate Auditor
With regard to deliberations of the Board of Directors, he determined thecorrectness of Directors’ managerial decisions. As Standing Outside
Corporate Auditor, he made efforts to formulate appropriate audit opinions for
the Company by attending important meetings, inspecting important approval
documents, conducting on-site audits of major sections, and cooperating with- 14 -

(Translation)(ii)

in-house audit sections.
c. Ieji Yoshioka, Corporate Auditor
With regard to deliberations of the Board of Directors, he determined thecorrectness of Directors’ managerial decisions. Using extensive experienceand knowledge as a Director and Standing Corporate Auditor at othercompanies over many years, he made efforts to formulate the Company’s
appropriate audit opinions by making proper statements and implementing,when necessary, adequate activities concerning performances of the Board of
Corporate Auditors.
Total amount of compensation, etc.
¥37 million (for the three individuals)- 15 -

(Translation)
5.

Status of Accounting Auditor(1) Name: Ernst & Young ShinNihon(2) Compensation, etc.
Amount of payment
1. Compensation, to be paid to the accounting auditor for the fiscal year under review
64 million yen
2. Total sum of cash and profits on other assets that the Company and its subsidiaries
125 million yen
should pay to the accounting auditor
Notes:
1. The Company does not distinguish auditor compensation per (i) auditing in accordance with the Company
Law, and (ii) auditing in accordance with the Securities Exchange Law. The total of these amounts isrecorded above.
2. Among major subsidiaries, Oki Europe Ltd. and Oki (Thailand) Co., Ltd. have undergone statutory audits byaccounting auditors other than the accounting auditor of the Company.

(3) Contents of non-audit services
The Company has also hired the accounting auditor for “internal management project
advice,” which are services other than the audits provided in Article 2, Paragraph 1 of theCertified Public Accountants Law, and pays the auditor compensation for the service.
(4) Policy regarding decision to dismiss or not reappoint the accounting auditor
The Board of Corporate Auditors will dismiss the accounting auditor if the auditor
falls under provisions of Article 340 of the Company Law. In addition, if it is deemed
unlikely that the accounting auditor will be able to perform audits properly, the Company,
upon the consent or request of the Board of Corporate Auditors, the Board of Directors will
discuss whether to submit a proposal to the general meeting of shareholders for dismissal or
non-reappointment of the accounting auditor.

- 16 -

(Translation)
6.

Policies and procedures of the Company
System to ensure that Directors in the conduct of their business comply with applicable laws,
regulations and the Articles of Incorporation, as well as other procedures of the Company, inorder to assure the appropriateness of the Company’s operations(1) Procedures to ensure that Directors and employees comply with applicable laws,
regulations and the Articles of Incorporation in conducting their business(i) As the foundation for its compliance structure, the Company has established a Group
charter of corporate conduct and its own code of conduct.
(ii) The Company has established a Compliance Committee chaired by the CCO (chiefcompliance officer) to decide on and examine basic policies regarding complianceprograms.
(iii) In accordance with the basic policies formulated by the Compliance Committee, theCompliance & Business Ethics Division plans, draws up, and promotes specificmeasures such as education and training for Directors and employees. In educationand training, we aim to raise employee awareness about compliance by utilizing
means such as e-learning.
(iv) The Company provides rules on public-interest disclosure and provides a contact
point for reporting and consultation, aiming to detect any misconduct at its earliest
stages.
(2) Procedures to retain and manage information relating to Directors’ conduct ofbusiness
The Company retains and stores information relating to the conduct of business byDirectors as appropriate in accordance with applicable laws, regulations and internal rules.
(3) Rules concerning risk management and other procedures(i) Pursuant to risk management rules, each section of the Company manages risks that
may occur in relation to its main duties. At the same time, the Company has
established a supervisory section to deal with risks needing company-wide
management. This section assesses risks, draws up policies for risk countermeasuresand develops appropriate structures based on such policies.
(ii) If any risk occurs, the Company will set up an emergency countermeasure
headquarters to handle the risk.
(4) Procedures to secure efficient business performance by Directors(i) The Company holds regular meetings of the Board of Directors once a month todecide important matters and supervise the work of Directors.
(ii) The Company holds management meetings, in which executive officers, such as
managing directors and other high-ranking officers participate, to provide for flexible
decision making on fundamental and significant matters in managing the business.
(iii) The Company assigns Directors responsibilities and authority pursuant to rules on
division of duties and authorities.

- 17 -

(Translation)(5) Procedures to secure appropriate Group (Company and subsidiaries) operations(i) To assure that Group companies run their operations properly, the Company has
established a Group charter of corporate conduct to serve as guidelines for the entire
Group, while each Group company lays down its own code of conduct.
(ii) The Compliance & Business Ethics Division implements various measures forpromoting compliance common to the Group through each Group company’s
compliance officer. The Division also determines, through regular monitoring, theimplementation status of such measures by each Group company and reports to theCompliance Committee on the results.
(iii) The Company, in accordance with Group management rules, determines the status ofeach Group company’s management activities and provides advice and guidance.
(6) Procedures for employees who assist Corporate Auditors; independence of employees
from Directors(i) The Company assigns employees, who are not subject to Directors’ instructions andorders, as staff to assist Corporate Auditors.
(ii) Any change in such staffing requires the prior consent of the Board of Corporate
Auditors.
(7) Procedures for Directors and employees to report to Corporate Auditors;
procedures for Corporate Auditors to receive other reports(i) If Directors discover anything that may cause significant damage to the Company,
they are required to report the matter immediately to the Corporate Auditors pursuant
to applicable laws and regulations.
(ii) Standing Corporate Auditors attend meetings of the Board of Directors andmanagement meetings in order to understand important decision-making processes
and the status of business operations, as well as to inspect important documentation.
(iii) Directors receive reports on the status of establishing internal control systems andtheir operations from Directors and employees on a regular basis, and may request
Directors and employees to report on matters deemed necessary.
(8) Other procedures to secure effective audits by Corporate Auditors(i) In conducting inspections on the Company’s operations and assets and performing
other audit duties, Corporate Auditors shall conduct audits efficiently and effectively
in close cooperation with the internal audit section.
(ii) Corporate Auditors implement efficient audits by closely cooperating with theaccounting auditor. To this end, Corporate Auditors hold meetings with theaccounting auditor on a regular basis, attend on-site audits by the accounting auditor,
and request reports from the accounting auditor on the progress of audits whennecessary.

- 18 -

(Translation)
Note: indication of amounts
Figures in this business report are indicated as follows.
1. Units of ¥1 million: Figures less than one unit are disregarded.
2. Units of ¥100 million: Figures less than one unit are rounded to the nearest unit.

- 19 -

(Translation)

Consolidated Balance Sheet(as of March 31, 2007)(Unit: millions of yen)Account title

AmountAccount title(Assets)
I.

(Liabilities)

Current assets
1. Cash and deposits

AmountI.

Current liabilities

45,995

1. Notes and accounts payable

101,358

2. Notes and accounts receivable

164,794

2. Short-term borrowings

125,809

3

Inventories

167,513

3. Accrued income taxes

1,749

4

Other current assets

28,762

4. Other accrued expenses

47,339Allowance for doubtful receivables(1,904)

5. Other current liabilities

42,739Total current assets

405,161

Total current liabilities

318,996

5

II.

Fixed assets

II.

1. Property, plant and equipment

Long-term liabilities

1. Bonds

32,000(1) Buildings and structures

42,228

2. Long-term borrowings

110,530(2) Machinery, equipment and delivery equipment

47,955

3. Retirement benefits

45,218(3) Tool, furniture and fixtures

22,914

4. Reserve for Directors’ retirement benefits(4) Land

15,7605. Other long-term liabilities

5,239

837

Total long-term liabilities

193,428

129,696

Total liabilities

512,425(5) Construction in progress
Total property, plant and equipment
2. Intangible assets

17,593

3. Investments and other assets(1) Investments in securities

440(Net Assets)
54,484I.

Shareholders’ equity(2) Long-term loans

3,220

1.

Common stock(3) Other investments and other assets

20,9552.

Additional paid-in capital

46,744(4) Allowance for doubtful receivables(2,712)

3.

Retained earnings(22,375)

Total investments and other assets

75,947

4.

Treasury stock

Total fixed assets

223,237

Total shareholders’ equity

76,940(320)
100,989

II. Valuation, translation adjustments and others

1.

Net unrealized holding gain on securities

2.

Deferral hedge profit/loss

(368)

3.

Translation adjustments(5,595)

Total valuation, translation adjustments and others

Total assets

628,398- 20 -

14,377

8,412

III. Equity warrants

32

IV. Minority interests

6,538

Total Net Assets

115,973

Total liabilities and net assets

628,398

(Translation)

Consolidated Statement of Operations(From April 1, 2006 to March 31, 2007)(Unit: millions of yen)Account title

AmountI.

Net sales

718,767

II.

Cost of sales

560,817Gross profitIII.

157,949

Selling, general and administrative expenses

163,359

Operating loss
IV.

5,410

Non-operating income

1. Interest income

656

2. Dividend income843

3. Other912

V.

1. Interest expense

6,820

2. Other

2,944

Ordinary loss
VI.

2,412

Non-operating expenses
9,764
12,762Extraordinary profit

1. Gain on sales of property, plant and equipment258

2. Gain on sales of investments in securities

3,362

3,621

VII. Extraordinary loss
1. Loss on sale and disposition of property, plantand equipment

1,044

2. Loss from securities revaluation

2,130

3. Bad debt expenses

670

4. Special retirement payments

884

5. Structural reform expenses

2,335

Net loss before taxes

7,065
16,206

Income taxes

2,152

Income taxes deferred

17,813

Minority Interest

19,966274

Net loss

36,446- 21 -

(Translation)

Consolidated Statement of Changes in Shareholders’ Equity(From April 1, 2006 to March 31, 2007)(Unit: Millions of yen)
Shareholders’ equity
Additional paid-in
capitalCommon stock
Balance as of March 31, 2006

Retained earnings

67,88237,801

9,057

8,942

Total shareholders’equityTreasury stock

16,580(280)

121,984

Changes during the term
under review
Issue of new shares
Distribution of retained
earnings*

18,000(1,834)

Net loss(1,834)(36,446)

Acquisition of treasury stock
Decrease due to increase inconsolidated subsidiaries(36,446)
(40)

(40)

(23)

(23)

Increase due to increase inequity-method affiliates

166

166

Decrease due to increase inequity-method affiliates(1,140)(1,140)322

322

Increase due to decrease in
unfunded pension liabilities
related to pension accounting
at overseas subsidiaries
Changes in items other thanshareholders’ equity during
the term under review (net)Total changes during the term
under review

9,057

8,942

(38,955)(40)(20,995)

Balance as of March 31, 2007

76,94046,744(22,375)(320)

100,989

Valuation, translation adjustments and others

Balance as of March 31, 2006

Net unrealized
holding gain
on securities

Deferral hedge
profit/loss

19,113-

Translation
adjustments(7,210)Total
valuation,translation
adjustments
and others
11,902Equitywarrants

Minority
interests

-

6,335

Total Net
Assets140,223

Changes during the term
under review
Issue of new shares
Distribution of retained
earnings*

18,000(1,834)

Net loss
Acquisition of treasury stock(36,446)(40)

Decrease due to increase inconsolidated subsidiaries(23)

Increase due to increase inequity-method affiliates

166

Decrease due to increase inequity-method affiliates(1,140)

Increase due to decrease in
unfunded pension liabilities
related to pension accounting
at overseas subsidiaries

322

Changes in items other thanshareholders’ equity during
the term under review (net)(4,735)(368)

Total changes during the term
under review(4,735)

Balance as of March 31, 2007

14,3771,614(3,489)32

202(3,254)

(368)

1,614

(3,489)(368)(5,595)

8,412

32

202

(24,250)

32

6,538

115,973

Note: Items with asterisk are those in proposed appropriation of retained earnings in the previous fiscal year.

- 22 -

(Translation)

Notes to Consolidated Financial Statements
Principles for Preparing Consolidated Financial Statements
1.

Scope of consolidation(1) Number of consolidated subsidiaries: 89 companies
Names of major consolidated subsidiaries:
Oki Data Corporation, Oki Customer Adtech Co., Ltd., Oki Wintech Co., Ltd.,Oki Software Co., Ltd., Nagano Oki Electric Co., Ltd., Miyagi Oki Electric Co.,
Ltd., Miyazaki Oki Electric Co., Ltd., Oki America, Inc., Oki Data Americas,
Inc., Oki Data Manufacturing (Thailand) Co., Ltd., Oki Europe Ltd., Oki(Thailand) Co., Ltd., Oki Electric Industry (Shenzhen) Co., Ltd.
(2) Names of major non-consolidated subsidiaries:
Adachi Protechno Co., Ltd. and 36 other companies
Reasons for excluding from consolidation:
Total assets, retained earnings, net sales and net income or loss are individually
and wholly immaterial and have no significant influence.
(3) Changes in scope of consolidation:
Oki Semiconductor Korea Co., Ltd., Oki Systems Korea Co., Ltd., Oki
Systems Taiwan Co., Ltd. and Oki Data Dalian Co., Ltd. were included within
the scope of consolidation in view of their relative importance. Oki Systems(Hong Kong) Pte. Ltd. and Oki Trading (Beijing) Co., Ltd. were also included
within the scope of consolidation in view of their new incorporation.
Oki Techno Creation Co., Ltd. was eliminated from the scope of consolidation
as it was merged.

2.

Application of equity method(1) Number of non-consolidated subsidiaries and affiliated companies to which the equity
method is applied: 13 companies(Number of non-consolidated subsidiaries to which the equity method is applied: 11)(Number of affiliated companies to which the equity method is applied: 2)
Name of major company to which the equity method is applied:Oki Electric Cable Co., Ltd.
(2) Names of major non-consolidated subsidiaries and affiliated companies to which theequity method is not applied:
Non-consolidated subsidiaries:
Adachi Protechno Co., Ltd. and 25 other companies
Affiliated companies: Alp Inc. and 21 other companies
Reason for not applying the equity method:
The companies individually have little influence and have no significance as awhole on net income or loss and retained earnings.

- 23 -

(Translation)(3) Changes in scope of application of the equity method:
The Company has included the following firms in scope of application of the equity
method due to an increase in their relative importance:
Oki-Kansai Service Co., Ltd., Oki Kanto Service Co., Ltd., Oki Kitakanto Service Co.,
Ltd., Oki Kyushu Service Co., Ltd., Oki Supply Center Co., Ltd., Oki Shikoku Service Co.,
Ltd., Oki Chugoku Service Co., Ltd., Oki Chubu Service Co., Ltd., Oki Development Co.,
Ltd., Oki Tohoku Service Co., Ltd., Oki Hokkaido Service Co., Ltd.
3.

Matters concerning account settlement dates of consolidated subsidiaries
The account settlement date of the following consolidated subsidiaries is December 31 eachyear and different from the account settlement date of the consolidated statements. In
preparing consolidated financial statements, the financial statements of these subsidiaries asof their account settlement date are used:
Changzhou Oki-GEG Telecoms Ltd., Oki Electric Industry (Shenzhen) Co., Ltd., Oki
Semiconductor Shanghai Co., Ltd., Oki Software Technology Co., Ltd., Oki ElectricTechnology (Kunshan) Co., Ltd., Oki Semiconductor Technology Shanghai Co., Ltd., Oki
Data Dalian Co., Ltd., Oki Trading (Beijing) Co., Ltd.

4.

Accounting standards(1) Valuation standards and methods for significant assets(i) Negotiable securities
The Company and its domestic consolidated subsidiaries value securities inaccordance with how they are held as indicated below. Overseas consolidated
subsidiaries apply the lower of cost or market value.
Held-to-maturity securities: amortized or accumulated to face value
Other negotiable securities:
Marketable securities:
Stated at fair value based on the market price at the end of the
fiscal year
(Any difference between book value and market value is included
in net assets; sales costs are calculated by the moving averagemethod).
Non-marketable securities:
Stated at cost based on the moving average method(ii) Inventories
The Company and its domestic consolidated subsidiaries apply the cost method, andoverseas consolidated subsidiaries primarily apply the lower of cost or market value.
(iii) Derivatives
Stated at market value(2) Depreciation and amortization(i) Property, plant and equipment
The Company and its domestic consolidated subsidiaries primarily apply the
declining-balance method; overseas consolidated subsidiaries primarily apply the- 24 -

(Translation)straight-line method.
(ii) Intangible assets
The Company and its domestic consolidated subsidiaries apply the straight-line
method.
For software sold in the market, depreciation is based on the estimated number ofyears for sales (3 years). For software for internal use, the straight-line method, basedon the estimated durable years (5years), is used.
Overseas consolidated subsidiaries primarily apply the straight-line method.
(3) Basis for provision of reserves(i) Allowance for doubtful receivables
To prepare for any losses of accounts receivable and loans, the Company and its
domestic consolidated subsidiaries calculate the amount of potential loss by using thehistorical loss ratio for non-classified loans/receivables and individual assessment forclassified loans/receivables. Overseas consolidated subsidiaries calculate the amountof potential losses by individually assessing the possibility of collection for specificloans/receivables.
(ii) Retirement benefits
To prepare for payment of retirement benefits to employees, the Company and its
consolidated subsidiaries register the amount recognized to accrue at the end of the
fiscal year based on estimated values of retirement benefit obligations and pension
assets.
Differences due to changes in accounting standards are amortized over 15 years
except for consolidated subsidiaries that amortize the difference in the first year of
application and some overseas consolidated subsidiaries that directly deduct thedifference from retained earnings.
Prior service costs are amortized by the straight-line method over a set number ofyears (14 years) within the average remaining years of service of employees.
Actuarial gains and losses are amortized by the straight line method over a set
number of years (13 to 14 years) within the average remaining years of service of
employees at the time of their accrual in each fiscal year. Amortization of such gains
and losses is deemed to be effective from the year after the one in which they arise.
(iii) Reserve for Directors’ retirement
Some domestic consolidated subsidiaries register the necessary amount at the endof the year in accordance with internal rules to prepare for the payment of Directors’
retirement allowance.
(4) Important accounting of lease transactions
The Company and its domestic consolidated subsidiaries apply the accounting method forordinary lease transactions to finance lease transactions other than those in which theownership of the leased property is considered to be transferred to the lessee.
Consolidated subsidiaries overseas primarily apply the accounting method for ordinarytransactions.

- 25 -

(Translation)(5) Important hedge accounting methods(i) Method of hedge accounting
Deferred hedging is applied. Allocation treatment is applied for forward
exchange contracts eligible for allocation treatment. Special treatment is applied tointerest rate swaps that meet requirements for special treatment.
(ii) Means of hedging and targets of hedging
Forward exchange contracts are used to hedge fluctuations of exchange rates on
credits and debts in foreign currencies. Interest rate swaps are employed to hedge
fluctuations of market interest rates on variable-rate short-term borrowings and longterm borrowings.
(iii) Policies on hedging
Derivative transactions are used to hedge fluctuations of market rates on credits
and debts.
(iv) Assessment method of the effectiveness of hedges
To determine the effectiveness of hedges, the Company compares the cumulative
total of market fluctuations or cash flow fluctuations for the targets of hedging and thatof the market fluctuations or the cash flow fluctuations for the means of hedging,
during the period from the start of hedging to the assessment. The Company thenmakes a decision based on the changes of the two.
(6) Other important matters in preparation of consolidated financial statements(i) Accounting processing of consumption tax
The tax-exclusion method is used for accounting of consumption tax and local
consumption tax.
(ii) Application of consolidated tax payment
The consolidated tax payment is applied.
5.

Amortization of goodwill and negative goodwill
Goodwill is evenly amortized over its useful life (mainly five years).

Changes in Principles for Preparing Consolidated Financial Statements
1. Accounting standards for presentation of net assets in the balance sheet
Beginning in the fiscal year under review, the Company adopted “Accounting Standards
for Presentation of Net Assets in the Balance Sheet” (Corporate Accounting Standards No. 5,
December 9, 2005) and “Guidelines for the Application of Accounting Standards for
Presentation of Net Assets in the Balance Sheet” (Guidelines for the Application of Corporate
Accounting Standards No. 8, December 9, 2005).
The amount corresponding to conventional “total shareholders’ equity” is ¥109,771
million.
2.

Accounting standards for corporate consolidation
Beginning in the fiscal year under review, the Company adopted the accounting
standards for corporate consolidation (“Opinion Paper on the Establishment of Accounting- 26 -

(Translation)
Standards for Corporate Consolidation” [Corporate Accounting Council, October 31, 2003])
and “Guidelines for the Application of Accounting Standards for Corporate Consolidation andAccounting Standards for Corporate Separation.” (Guidelines for the Application of
Corporate Accounting Standards No. 10, December 27, 2005).
3.

Accounting standards for stock options.
Beginning in the fiscal year under review, the Company adopted the “AccountingStandards for Stock Options” (Corporate Accounting Standards No. 8, December 27, 2005)
and “Guidelines for the Application of Accounting Standards for Stock Options” (Guidelines
for the Application of Corporate Accounting Standards No. 11, May 31, 2006).
The adoption of these standards and guidelines resulted in a ¥32 million increase in theoperating loss, ordinary loss and net loss before taxes.

Notes to Consolidated Balance Sheet
1. Assets pledged as collateral
Buildings and structures:
Machinery and delivery equipment:
Tools, instruments and fixtures:
Land:
Total
Liabilities collateralized by the above assets:
Short-term borrowings:
Long-term borrowings:
2.
3.
4.
5.

¥1,224 million¥33 million¥59 million¥837 million¥2,154 million¥372 million¥858 million

Accumulated depreciation on tangible fixed assets¥510,985 million
Liabilities for guarantee
Guarantee for borrowings by employees and affiliated companies¥3,246 million
Repurchase of notes receivable endorsed¥2 million
Accounting for notes maturing at the end of the term under review
Notes maturing on the closing day of the fiscal year under review are settled on the clearing
day. Because the closing day of the year was a holiday for financial institutions, thefollowing notes maturing on the closing day are included in the balance of the notes as of theend of the year.
Notes receivable:¥472 million- 27 -

(Translation)
Notes to Consolidated Statement of Changes in Shareholders’ Equity
1. Type and number of outstanding shares

Type of share

Common stock

Number of shares asof March 31, 2006
(thousand shares)

Number of shares
added in the fiscal
year ended March
31, 2007 (thousand
shares)Number of shares
decreased in thefiscal year ended
March 31, 2007
(thousand shares)

Number of shares asof March 31, 2007
(thousand shares)

612,371

71,884―684,256

Note: The increase in the number of outstanding shares of common stock, amounting to 71,884 thousand shares, is dueto the issue of new shares following the exercise of equity warrants.

2. Distribution of retained earnings
Amount of dividends paid
Resolution

Type of shares

Amount(millions of yen)

Dividends per
share (yen)Record date

Effective dateOrdinary General
Meeting of
Shareholders(June 29, 2006)

Common stock

1,834

3.00

March 31, 2006

June 29, 2006

3.

Number of shares to be issued upon exercise of equity warrants
Category

Breakdown of equity warrants

The Company

No. 1 Equity Warrants(issued on July 18, 2002)
No. 2 Equity Warrants(issued on July 18, 2003)
No. 3 Equity Warrants(issued on July 20, 2004)

Type of shares to be issued
upon exercise of equity
warrants

Number of shares to beissued upon exercise of
equity warrants (shares)

Common stock

153,000

Common stock

815,000

Common stock

452,000

Notes to Per-share Information
1. Net assets per share:¥160.13
2. Net loss per share:¥56.27- 28 -

(Translation)

Transcript of Account Auditors’ Report on Consolidated Financial Statements

Independent Auditors’ Report
May 18, 2007
Mr. Katsumasa Shinozuka, President and Chief Executive Officer
Oki Electric Industry Co., Ltd.
Ernst & Young ShinNihon
Tatsunosuke Kagaya (seal),
Engagement Partner, Certified Public Accountant
Masato Tsukahara (seal),
Engagement Partner, Certified Public Accountant
Akira Sato (seal),
Engagement Partner, Certified Public Accountant

We have audited the consolidated financial statements – the consolidated balance sheets, theconsolidated statement of operations, the consolidated statement of changes in shareholders equity andnotes to the consolidated financial statements – of Oki Electric Industry Co., Ltd. for the 83rd termfrom April 1, 2006 to March 31, 2007 in accordance with Article 444 Paragraph 4 of the Company
Law. Oki Electric Industry’s management is responsible for preparing these consolidated financial
statements, and our responsibility is to express our independent opinion regarding these consolidated
financial statements.
We conducted our audit in accordance with auditing standards generally accepted in Japan. These
auditing standards require that we obtain reasonable assurance as to whether the consolidated financial
statements are free of material misstatement. Audits are conducted based on a test basis, and include
reviews of accounting policies and methods that management adopts, and evaluation of management
estimates and the presentation of the consolidated financial statements as a whole. We believe wehave obtained reasonable bases for the expression of our opinion as a result of our audit.
We concluded that the consolidated financial statements fairly present in all aspects Oki ElectricIndustry’s and its subsidiaries’ assets and income or loss in accordance with corporate accounting
standards generally accepted in Japan.
No conflict of interest as defined by the Accounting Law exists between Oki Electric Industry, our firm(Ernst & Young ShinNihon) and the respective engagement partners.

- 29 -

(Translation)

Non-Consolidated Balance Sheet(as of March 31, 2007)(Unit: millions of yen)Account title(Assets)
I. Current assets
1. Cash and deposits
2. Notes receivable
3. Accounts receivable, trade
4. Inventories
Finished goods
Semi-finished goods
Raw materials
Work in process
Supplies
5. Short-term prepaid expense
6. Short-term loan
7. Accounts receivable, others
8. Deferred tax assets
9. Other current assets
10. Allowance for doubtful receivables
Total current assets
II. Fixed assets
1. Property, plant and equipment(1) Buildings
Accumulated depreciation(2) Structures
Accumulated depreciation(3) Machinery and equipment
Accumulated depreciation(4)

Vehicle and delivery equipment
Accumulated depreciation(5) Tools, furniture and fixtures
Accumulated depreciation(6) Land(7) Construction in progress
Total property, plant and equipment
2. Intangible assets(1) Goodwill (noren)(2) Facility rights(3) Software
Total intangible assets
3. Investments and other assets(1) Investments in securities(2) Shares of affiliated companies(3) Contribution(4) Contribution to affiliated companies(5) Long-term loans to employees(6) Long-term loans to affiliated companies(7) Long-term prepaid expenses(8) Long-term doubtful receivables(9) Other investments and other assets(10) Allowance for doubtfulreceivables
Total investments and other assets
Total fixed assets
Total assets

Amount15,626
1,380
99,028
16,6807,411
12,83553,4362,312

94,444(64,490)
8,579(7,211)
298,808(267,249
)
138
(126)
88,405(73,530)

92,676583
18,533
19,545
2,491
1,187
(71)
250,983

29,954

Account title(Liabilities)
I. Current liabilities
1. Notes payable
2. Accounts payable, trade
3. Short-term borrowings
4. Commercial papers
5. Current portion of long-term borrowings
6. Current portion of bonds
7 Accounts payable, others
8. Other accrued expenses
9. Advances
10. Deposits
11. Other current liabilities
Total current liabilities
II. Long-term liabilities
1. Bonds
2. Long-term borrowings
3. Retirement benefits
4. Deferred tax liabilities
5. Other long-term liabilities
Total long-term liabilities
Total liabilities

Amount391
81,405
51,152
7,000
27,1099,500
9,306
25,627
1,151
1,945
488
215,077

32,00083,61029,854
5,928
1,789
153,183
368,261

1,367
31,55811
14,875
13,98251
91,801(Net Assets)
Shareholders’ equity

I.
1.
2.

3.

4.
537
228
10,478
11,244

II. Valuation, translation adjustments and others
1. Net unrealized holding gains on securities

122,756
225,802476,785- 30 -

76,94046,74425,92820,816(28,311)(28,311)(28,311)(314)
95,058

Total valuation, translation adjustments and others

13,802(369)
13,433

III. Equity warrants
Total net assets

32
108,523

2.
45,20348,308271
1,356
518,813
8,963
488
3,407
(4,062)

Common stock
Additional paid-in capital
Capital reserve
Other additional paid-in capital
Retained earnings
Other retained earnings
Retained earnings carried forward
Treasury stock
Total shareholders’ equity

Deferral hedge profit/loss

Total liabilities and net assets

476,785

(Translation)

Non-Consolidated Statement of Operations(From April 1, 2006 to March 31, 2007)(Unit: millions of yen)Account title

AmountI.

Net sales

406,922

II.

Cost of sales

345,238

Gross profitIII.

61,683

Selling, general and administrative expenses

78,273Operating lossIV.

16,590Non-operating income

1. Interest income

677

2. Interest income on securities

1

3. Dividend income

2,232

4. Brand royalty received

1,883

5. OtherV.

642

Non-operating expenses

1. Interest expense

3,168

2. Interest expense for bonds

608

3. Expenses related to litigations923

4. Other

1,843

Ordinary loss
VI.

5,437

6,543
17,696Extraordinary profit

1. Gain on sales of investments in securities

3,347

3,347

VII. Extraordinary loss
1. Loss on sale and disposition of property, plant and equipment725

2. Loss from securities revaluation

2,329

3. Bad debt expenses

1,437

4. Special retirement payments

608

5. Structural reform expenses

2,335

Net loss before taxes

7,436
21,768

Income taxes(1,746)

Income taxes deferred

17,344

Net loss

15,59837,384- 31 -

(Translation)

Non-consolidated Statement of Changes in Shareholders’ Equity(From April 1, 2006 to March 31, 2007)(Unit: millions of yen)

Commonstock

Balance as of March
31, 2006
Changes in thefiscal year
Issue of new shares
Dividends ofretained earnings*
Net loss
Acquisition oftreasury stock(Net) changes otherthan shareholders’equity in the fiscal
year
Total changes in thefiscal year
Balance as of March
31, 2007

Shareholders’ equity
Additional paid-in capital
Retained earnings
Otherretained
Total
Other
Total
earnings
Additional
additional
Capitalretained
Retainedpaid-inpaid-inreserveearnings
earnings
capitalcapitalcarriedforward

67,882

16,985

9,057

8,942

20,81637,801

10,907

Total
shareholders’equity(274)

116,317

10,907

8,942

18,000(1,834)(37,384)(1,834)(37,384)(1,834)(37,384)
(40)

(40)

9,057

8,942

-

8,942

(39,219)(39,219)(40)(21,259)

76,94025,92820,816

46,744(28,311)(28,311)(314)

95,058Valuation, translation adjustments and others
Valuation,
Net unrealized
translation
Deferral hedge
holding gains on
adjustments andprofit/loss
securities
othersBalance as of March
31, 2006
Changes in thefiscal year
Issue of new shares
Dividends ofretained earnings*
Net loss
Acquisition oftreasury stock(Net) changes otherthan shareholders’equity in the fiscal
year
Total changes in thefiscal year
Balance as of March
31, 2007

Treasurystock

18,599-Equity warrants

18,599Total net assets-

134,917

18,000(1,834)(37,384)(40)(4,797)(369)(5,166)32(5,134)(4,797)(369)(5,166)32(26,393)

13,802(369)

13,433

32

108,523

Note: Items with asterisk are those in proposed appropriation of retained earnings in the previous fiscal year.

- 32 -

(Translation)

Note to Non-consolidated Financial Statements
Significant Accounting Policies
1.

Standards and valuation methods for negotiable securities, etc.
Shares of subsidiaries and affiliated companies:
Stated at cost based on the moving average method
Other negotiable securities:
Marketable securities:
Stated at fair value based on the market price at the end of the fiscal year
(The difference between book value and market value is included in net assets.
The sale cost is calculated by using the moving average method).
Non-marketable securities: Stated at cost based on the moving average method

2.

Standards and valuation methods for derivatives, etc.
Derivatives: Stated at market value

3.

Standards and valuation methods for inventories
Finished goods and semi-finished goods:
Stated at cost based on the moving average method
Work in process: Stated at cost based on the specific identification method
Materials and supplies: Stated at cost based on the last purchase price method

4.

Depreciation and amortization
Property, plant and equipment: declining-balance method
The straight-line method is applied to buildings, excluding annexed structures,acquired on or after April 1, 1998.
Intangible assets
Software for sale in the market:
Amortization method based on the estimated number of years for sales (3years)
Software for internal use:
Straight-line method based on the estimated durable years (5 years)
Others:Straight-line method

5.

Basis for provision of reserves
Allowance for doubtful receivables
To prepare for any losses on accounts receivable and loans, the Company calculates theamount of potential loss by using the historical loss ratio in the case of non-classified
loans/receivables and by individual assessment in the case of classified loans/receivables.
Retirement benefits
To prepare for payment of retirement benefits to employees, the Company records theamount recognized to accrue at the end of the fiscal year based on the estimated values of- 33 -

(Translation)
retirement benefit obligations and pension assets.
Differences for changes in accounting standards are amortized over 15 years.
Prior service cost is amortized by the straight-line method over a certain number of years(14 years) within the average remaining years of service of employees.
Actuarial gains and losses are amortized by the straight-line method over a set number ofyears (13 to 14 years) within the average remaining years of service of employees at the timeof their accrual in each fiscal year, and the amortization of such gains and losses is deemed tobe effective from the year after the year in which they arise.
6.

Accounting of lease transactions
The Company and its consolidated subsidiaries at home apply the accounting method forordinary lease transactions to finance lease transactions other than those in which the ownership ofthe leased property is considered to be transferred to the lessee.
7.

Hedge accounting methods(1) Method of hedge accounting
Deferred hedging is applied. As for forward exchange contracts eligible for allocation
treatment, allocation treatment is applied. With regard to interest rate swaps that meetthe requirements for special treatment, special treatment is applied.
(2) Means of hedging and targets of hedging
Forward exchange contracts are used to hedge fluctuations of exchange rates on credits
and debts in foreign currencies. Interest rate swaps are employed to hedge fluctuationsof interest rates in the markets on variable-rate short-term borrowings and long-termborrowings.
(3) Policies on hedging
Derivative transactions are used to hedge fluctuations of market rates on credits anddebts.
(4) Assessment method of the effectiveness of hedges
To determine the effectiveness of hedges, the Company compares the cumulative total ofthe market fluctuations or the cash flow fluctuations for the targets of hedging and that of
the market fluctuations or the cash flow fluctuations for the means of hedging, during theperiod from the start of hedging to the assessment. The Company then makes adecision based on the changes of the two.

8.

Other important matters in preparation of non-consolidated financial statements(1) Accounting processing of consumption tax
The tax-exclusion approach is applied for accounting of consumption tax and local
consumption tax.
(2) Application of consolidated tax payments
Consolidated tax payments are applied.

Changes in Accounting Policies- 34 -

(Translation)1.

Accounting standards for presentation of net assets in the balance sheet
Beginning in the fiscal year under review, the Company adopted “Accounting Standards
for Presentation of Net Assets in the Balance Sheet” (Corporate Accounting Standards No. 5,
December 9, 2005) and “Guidelines for the Application of Accounting Standards for
Presentation of Net Assets in the Balance Sheet” (Guidelines for the Application of Corporate
Accounting Standards No. 8, December 9, 2005).
The amount corresponding to conventional “total shareholders’ equity” is ¥108,860
million.

2.

Accounting standards for corporate consolidation
Beginning in the fiscal year under review, the Company adopted accounting standards
for corporate consolidation (“Opinion Paper on the Establishment of Accounting Standards
for Corporate Consolidation” [Corporate Accounting Council, October 31, 2003]) and the“Guidelines for the Application of Accounting Standards for Corporate Consolidation andAccounting Standards for Corporate Separation, etc.” (Guidelines for the Application of
Corporate Accounting Standards No. 10, December 27, 2005).

3.

Accounting standards for stock options, etc.
Beginning in the fiscal year under review, the Company adopted “Accounting Standards
for Stock Options, etc.” (Corporate Accounting Standards No. 8, December 27, 2005) and“Guidelines for the Application of Accounting Standards for Stock Options, etc.” (Guidelines
for the Application of Corporate Accounting Standards No. 11, May 31, 2006).
The adoption of these standards and guidelines resulted in a ¥32 million increase inoperating loss, ordinary loss and net loss before taxes.

Notes to Non-consolidated Balance Sheets
1. Guarantee liabilities:
Guarantee for borrowings from banks, etc. by employees and affiliated companies:¥8,474 million
2. Monetary claims receivable from and payable to affiliates
Short-term monetary claims receivable from affiliated companies:¥62,280 million
Long-term monetary claims receivable from affiliated companies:¥20,057 million
Short-term monetary claims payable to affiliated companies:¥49,823 million
Long-term monetary claims payable to affiliated companies:¥14 million
3.

Notes maturing at the end of the term under review
Notes maturing on the closing day of the fiscal year under review are settled on theclearing day. Because the closing day of the year was a holiday for financial institutions, thefollowing notes maturing on the closing day are included in the balance of the notes as of theend of the year.
Notes receivable:¥63 million

Notes to Non-consolidated Statement of Operations- 35 -

(Translation)
1.

Transactions with affiliated companies
Sales:
Purchases:
Non-operating transactions:¥93,059 million¥125,686 million¥8,985 million

Notes to Non-consolidated Statement of Changes in Shareholders’ Equity
Type and number of treasury stock as of the end of the fiscal year under review
Common stock:
1,021 thousand shares

Notes to Deferred Tax Accounting
Major factors giving rise to deferred tax assets and liabilities
Deferred tax assets
Loss carryforwards
Nondeductible retirement benefits
Nondeductible accrued bonuses
Nondeductible doubtful accounts
Loss on impairment of fixed assets
Disapproval on loss on valuation of inventories
OthersSubtotal deferred tax assets
Valuation allowance
Total deferred tax assets
Deferred tax liabilities
Unrealized holding gain/loss on securities
OthersTotal deferred tax liabilities
Net deferred tax liabilities¥18,545 million¥12,180 million¥1,991 million¥1,560 million¥1,197 million¥1,101 million¥2,032 million¥38,610 million¥(32,764) million¥5,845 million¥(9,210) million¥(73) million¥(9,283) million¥(3,437) million

Notes to Leased Fixed Assets
1. Amount equivalent to acquisition cost of leased assets as of the end of the term under review¥17,205 million
2. Amount equivalent to accumulated depreciation of leased assets as of the end of the term
under review¥6,745 million
3. Amount equivalent to unexpired lease payment of leased assets as of the end of the term
under review¥10,702 million- 36 -

(Translation)
Notes to Related Party Transactions
Subsidiaries, etc.
Attribute

Subsidiary

Subsidiary

Subsidiary

Subsidiary

Location

CapitalBusinessOki SoftwareCo., Ltd.

Warabi,
SaitamaPref.

¥400
million

Production
and sales ofsoftware(Direct)
100%

Oki
Microelectronics Co., Ltd.

Minatoku, Tokyo¥50
millionSales ofsemiconduc
tor products(Direct)
100%–

Miyagi Oki
Electric Co.,Ltd.

Ohiramura,
Kurokawa-gun,
MiyagiPref.

¥200
million

Production
and sales ofsemiconduc
tor products(Direct)
100%–

Oki (Thailand)Co., Ltd.

ThailandBaht
700
million

Production
and sales ofsemiconduc
tor products

Votingright ratio

Relationship
Businessrelationship

Company nameConcurrent
directors

Concurrent:1(Direct)100%–

Productionofsoftwareon acontractbasis, etc.
Sales oftheCompany’s products
Processingof theCompany’s products
on acontract
basis
Processingof theCompany’s products
on acontractbasis

Descriptionoftransactions

Purchase ofservices

Transaction
amount(mil. yen)Account
item

Endingbalance(mil.
yen)

Accounts
payable –
trade

7,205

Accruedexpenses177

19,730

Sales ofproducts

18,420Accounts
receivable– trade

5,675

Purchase of
semimanufactur
ed products

22,630Accounts
payable –
trade

6,948

Supply fora fee ofsemimanufactur
ed products

25,798

Accounts
receivable– other

4,887

Notes:
1. The transactions amount excludes consumption tax, while the ending balance includes consumption tax.
2. Conditions of transactions and policy in determining conditions
The Company determines conditions regarding purchase of services and purchase/sales of products and semimanufactured products based on market prices.

Notes to Per-share Information
1. Net assets per share:¥158.79
2. Net loss per share:¥57.72- 37 -

(Translation)

Transcript of Account Auditors’ Report

Independent Auditors’ Report
May 18, 2007
Mr. Katsumasa Shinozuka, President and Chief Executive Officer
Oki Electric Industry Co., Ltd.
Ernst & Young ShinNihon
Tatsunosuke Kagaya (seal),
Engagement Partner, Certified Public Accountant
Masato Tsukahara (seal),
Engagement Partner, Certified Public Accountant
Akira Sato (seal),
Engagement Partner, Certified Public Accountant

We have audited the non-consolidated financial statements – the non-consolidated balance sheets, the nonconsolidated statement of operations, the non-consolidated statement of changes in shareholders’ equity andnotes to non-consolidated financial statements – and its supporting schedules of Oki Electric Industry Co.,
Ltd.’s 83rd term from April 1, 2006 to March 31, 2007 in accordance with Article 436 Paragraph 2 Item 1 of
the Company Law. The financial statements and supporting schedules are the responsibility of Oki ElectricIndustry’s management. Our responsibility is to express an opinion on the financial statements andsupporting schedules based on our audit as independent auditors.
We conducted our audit in accordance with auditing standards generally accepted in Japan. These auditing
standards require that we obtain reasonable assurance as to whether these financial statements are free ofmaterial misstatement. Audits are conducted based on a test basis, and include reviews of accounting
policies and methods that management adopts, and evaluation of management estimates and the presentationof financial statements and supporting schedules as a whole. We believe that we have obtained reasonablebases for the expression of our opinion as a result of our audit.

We concluded that the non-consolidated financial statements fairly present in all aspects Oki ElectricIndustry’s assets and income or loss in accordance with corporate accounting standards generally
accepted in Japan.
No conflict of interest as defined by the Accounting Law exists between Oki Electric Industry Co., Ltd., ourfirm (Ernst & Young ShinNihon) and the respective engagement partners.

- 38 -

(Translation)

Transcript of Corporate Auditors’ Report

Corporate Auditors’ Report
We, the Board of Corporate Auditors, have prepared upon consultation this Audit Report based on reports compiled by each
Corporate Auditor with respect to Directors’ performance of their duties during the 83rd fiscal year from April 1, 2006 to
March 31, 2007, as follows:
1. Auditing methods used by Corporate Auditors and the Board of Corporate Auditors, and details of audit
The Board of Corporate Auditors specified an audit policy, compiled audit plans and received reports from each Corporate
Auditor on the status of implementation and results of audits and also received reports from Directors and accounting auditorson the status of the execution of their duties and asked them for explanations as needed.
Each Corporate Auditor, according to the audit standards, policy and plans set up by the Board of Corporate Auditors, has
maintained good communications with Directors, the internal audit division and other employees and strived to collectinformation and improve the audit environment as well as attending meetings of the Board of Directors and other meetings as
deemed important, received from Directors and employees reports on the execution of their duties, asked for explanations asnecessary, perused the documents whereby the important decisions were made, and examined business and financial
conditions at the head office and principal operating offices. In addition, we have monitored and verified the details of theresolution made by the Board of Directors concerning the establishment of systems defined in Article 100, Paragraph 1 andParagraph 3 of the Regulations for Enforcement of the Company Law as necessary for ensuring compliance with laws and theCompany’s Articles of Incorporation in the performance of duties by Directors and for ensuring appropriateness of duties of a
joint stock company. We have also monitored and verified the status of the systems established based on the said resolution(internal control systems). Also, we have maintained good communications and exchanged information with directors,
corporate auditors and others of the subsidiaries of the Company, and received from the subsidiaries reports on their businessconditions as needed. Based on the methods mentioned above, we have reviewed the financial statements for the said fiscal
year and their supplementary schedules.
We have also monitored and verified whether the auditors maintained their independence and properly implemented
audits, received from the auditors reports on the performance of their duties and asked them for explanations as necessary.
The accounting auditors reported to us that “systems for ensuring proper execution of duties” (listed in each item of Article
159 of the Corporate Calculation Regulations) have been established in accordance with the quality control standards
concerning audits (Business Accounting Council, October 28, 2005), and asked them for explanations as necessary. Based on
the methods mentioned above, we have reviewed financial statements for the said fiscal year (balance sheet, statement ofoperations, statement of changes in shareholders’ equity, and notes to non-consolidated financial statements), their
supplementary schedules and consolidated financial statements (consolidated balance sheet, consolidated statement ofoperations, consolidated statement of changes in shareholders’ equity, and notes to consolidated financial statements).
2. Results of Audit(1) Results of audit of the business report
1) We consider that the business report and its supplementary schedules fairly present the situation of the Company
in accordance with relevant laws and regulations and the Company’s Articles of Incorporation.
2) With respect to the Directors’ performance of their duties, we have found neither undue transactions nor material
facts that violate relevant laws and regulations or the Company’s Articles of Incorporation.
3) We consider that the details of the resolution made by the Board of Directors concerning internal control
procedures are proper. With respect to the Directors’ performance of their internal control duties regarding, wehave found no issues to be pointed out.
(2) Results of audit of financial statements and their supplementary schedules
We consider that the auditing methods and results of the Company’s Accounting Auditors, Ernst & Young ShinNihon,
are proper.
(3) Results of audit of consolidated financial statements
We consider that the auditing methods and results of the Company’s Accounting Auditors, Ernst & Young ShinNihon,
are proper.
May 21, 2007
The Board of Corporate Auditors, Oki Electric Industry Co., Ltd.
Takahisa Inagawa, Standing Auditor (seal)
Yoshikatsu Shiraishi, Standing Auditor (seal)
Hiroyuki Katagiri, Outside Standing Auditor (seal)
Ieji Yoshioka, Auditor (seal)- 39 -

(Translation)

Reference Documents for the General Meeting of Shareholders
Agenda and Reference Matters
Agenda 1: Election of Four Directors
The tenure of Directors Nobuhide Hara, Hideichi Kawasaki and Minoru Morio will
expire at the end of this general meeting of shareholders.
Also, Directors Yutaka Maeda and Tadao Murase will retire at the end of this general
meeting of shareholders.
We accordingly request that you elect four Directors from among the following
candidates.
Candidates for Directors (Four):CandidatenumberName(Date of birth)

Brief personal profile, position andNumber of Oki
representation of other companies
shares held
Joined Oki Electric
Apr. 1970
Manager, Sales Division-3, Financial
Nov. 1990
Systems Sales Division
Executive Officer
Apr. 2001
Hideichi Kawasaki
20,000 shares
1
Senior Executive Officer (incumbent)
Apr. 2004(January 10, 1947)
General Manager, Marketing Promotion
Apr. 2005
Division (incumbent)
Senior Vice President (incumbent)
Apr. 2005
Joined Oki Electric
Apr. 1970
Senior Manager, Finance DivisionJun. 1995
General Manager, Accounting & Control
Jun. 1998
Division
Keiichi Fukumura
18,000 shares
2
Executive Officer
Apr. 2000(April 16, 1947)
Senior Executive Officer (incumbent)
Apr. 2006
General Manager, CSR Promotion
Apr. 2007
Division (incumbent)
Joined Oki Electric
Apr. 1971
General Manager, Network SI Division
Apr. 1999
Executive Officer
Apr. 2001
Masayoshi Matsushita
20,000 shares
General Manager, Network Application
Apr. 2003
3(August 28, 1947)
Division
Senior Executive Officer (incumbent)
Apr. 2006
CIO (incumbent)
Apr. 2007
Joined Sony Corporation
Apr. 1963
Senior General Manager, Personal Video
Apr. 1988
Systems Group
Director
Jun. 1988
Minoru Morio
10,000 shares
Senior Managing Director
Jun. 1990
4(May 20, 1939)
Executive Deputy President
Jun. 1993
Technological Executive RepresentativeJun. 1999
Vice Chairman
Jun. 2000
Director of Oki Electric (incumbent)
Jun. 2001
Notes:
CIO: Chief Information Officer
1.
The candidate for Director Minoru Morio, currently Outside Director, will have served for six years at the end of
this general meeting of shareholders, since taking office as Outside Director.
2.
Reasons for appointing Minoru Morio as candidate for Outside Director:
Given his extensive experience in the electronics industry as well as his character and insight, we have concluded
that he is capable of appropriately making suggestions concerning the Company’s business situation andmanagerial issues, which will help strengthen the Board of Directors’ ability to oversee business operations.

- 40 -

(Translation)
Agenda No. 2: Election of One Corporate Auditor
Mr. Takahisa Inagawa, Corporate Auditor, will retire effective at the end of thisgeneral meeting of shareholders.
We accordingly request that you elect one new Corporate Auditor. Particulars of the
proposed candidate are provided below.
The Board of Auditors has already approved this agenda.
Candidate for Corporate Auditor (1):Name
(Date of birth)

Takahisa Inagawa(October 8, 1943)

Brief personal profile, position andrepresentation of other companies
Joined Oki Electric
Apr. 1967
General Manager, Sales Supervising
Jul. 1997
Division
Director
Jun. 1998
Senior Executive Officer
Apr. 2000
Senior Vice President
Jun. 2001
President & CEO, Oki Engineering
Apr. 2002
Co., Ltd.
Corporate Auditor of Oki Electric
Jun. 2003(incumbent)- 41 -

Number of Oki
shares held

42,000 shares

(Translation)
Agenda 3: Granting of Equity Warrants as Stock Options to Directors
We propose that approval of the shareholders be given to the Company’s granting its
Directors stock options in the form of equity warrants as “Non-Monetary Remuneration” asprescribed in Article 361 of the Company Law, for the following reason and in the following
manner, pursuant to the provisions of Articles 236, 238 and 240 of the Company Law (Law
No. 86 of 2005):
1.

Reason for granting equity warrants as stock options to Directors
Stock options in the form of equity warrants as “Non-Monetary Remuneration” areto be granted to Directors in order to enhance the relevant Directors’ incentives andmorale, improve the Company’s business performance and increase benefits to ourshareholders by augmenting our corporate value through those Directors’ management
efforts.
2.

Persons to whom granted equity warrants would be allotted
We propose to allot the granted equity warrants to the Company’s Directors who arecharged with executing relevant operations.
3. Particulars of the equity warrants offering(1) Type and number of common stocks issued for the purpose of granting equity
warrants:
The upper limit of new common stock to be issued is 287,000 shares.
In the event the Company splits or consolidates its common stock, the numberof shares to be issued for the purpose of the equity warrants not yet exercised shallbe adjusted in accordance with the formula below:
Number of shares after adjustment =(Number of shares before adjustment) x (Ratio of split or consolidation)

Odd lots less than one share in this adjustment will be discarded.
(2) Aggregate number of equity warrants to be offered:
Up to 287
(Beneficiaries can acquire 1,000 shares for each right. However, if the number ofshares to be issued is adjusted as described above, the number of shares to beacquired will also be adjusted in the same manner.)(3) Issue price of equity warrants to be offered:
Issue price of equity warrants to be offered will be the fair price as calculated using
the Black-Scholes Option Pricing Model as of the date of allotment of equity
warrants; provided, however, that no payment shall be due at the time of allotmentof equity warrants as the said issue price would be offset, pursuant to the provisionsof Article 246, Section 2 of the Company Law, by the right of claim for- 42 -

(Translation)
remuneration that Directors as holders of equity warrants possess vis-à-vis theCompany.
(4) Amount to be paid in on the exercise of equity warrants prescribed in these offering
details (hereinafter referred to as “equity warrants”):
The amount paid per right is determined by multiplying the amount paid per share
determined as follows (“exercise price”) by the number of shares to be issued per
right as determined in (2) above. The exercise price will be the highest of thefollowing multiplied by 1.05: 1) the average closing price for the Company’s shareson the Tokyo Stock Exchange during the month prior to the month that includes theissue date of equity warrants, 2) the closing price for the Company’s shares on the
day prior to the issue date of equity warrants, and 3) the closing price for theCompany’s shares on the day prior to the date of this general meeting ofshareholders. Fractions less than one yen shall be rounded up to the nearest yen.
Further, in the event that the Company issues new shares at a price less than themarket price (excluding the issuance of new shares by the exercise of equity
warrants), the exercise price shall be adjusted in accordance with the formula shown
below, fractions less than one yen being rounded up to the nearest yen.
Exercise price after adjustment =(Number of newly issued shares × Amount paid per share)
Market price per share before new share issue
Number of outstanding shares + Increase in number of shares following new share issue

Number of outstanding shares +Exercise price before adjustment ×

In case the Company splits or consolidates its stock, the exercise price shall be
adjusted in accordance with the ratio of split or consolidation, and fractions less than
one yen as a result of the adjustment shall be rounded up to the nearest yen.
(5) Period during which equity warrants may be exercised and monetary payments may
be made:From July 1, 2009 to June 25, 2017(6) Conditions for exercise of equity warrants:
a. The following restrictions shall be established for exercising equity warrants:
1) Period from July 1, 2009 to June 30, 2010:
A maximum of 34% of the allotted number may be exercised.
2) Period from July 1, 2010 to June 30, 2011:
A maximum of the number calculated by deducting the number exercised in1) above from 67% of the allotted number may be exercised.
3) Period from July 1, 2011 to June 25, 2017:
A maximum of the number calculated by deducting the number exercised in
1) and 2) above from the allotted number may be exercised.
Fractions shall be rounded off for calculation purposes.
b. The heir of the holder of equity warrants upon the holder’s death shall be allowed
to exercise the rights as follows:- 43 -

(Translation)
In case of inheritance before June 30, 2011, the rights may be exercised by June30, 2012.
In case of inheritance after July 1, 2011, the rights may be exercised for one
year from the date of inheritance; provided, however, that the rights may not be
exercised after June 25, 2017.
c. Other conditions regarding the exercise of rights shall be subject to the equitywarrant allocation agreement concluded between the Company and the holders of
the rights.
(7) Acquisition of equity warrants:
Equity warrants may be acquired free of charge in case the rights holder no longer
falls under any of the conditions for exercise provided for in the previous paragraph.
(8) Restrictions on transfer of equity warrants:
Transfer of equity warrants is subject to the approval of the Board of Directors.
(9) Date of allotment of equity warrants:
Necessary items and matters pertaining to allotment shall be established byresolution of the Board of Directors.

- 44 -

(Translation)
Agenda 4: Determining the Particulars of Offering Equity Warrants Granted as Stock
Options to Executive Officers Excluding Those Concurrently Serving as
Directors
We propose that approval of the shareholders be given to the below-noted contents ofParticulars of Offering of equity warrants that the Company intends to grant as stock options
to its Executive Officers excluding those concurrently serving as Directors for the following
reasons and in the following manner, pursuant to the provisions of Articles 236, 238 and 239of the Company Law (Law No. 86 of 2005):
We request that this Agenda be approved, as in the past, as “an agenda for granting
equity warrants to parties other than the shareholders on particularly privileged terms.”
1.

Reason for granting equity warrants on particularly privileged terms
Equity warrants as stock options are to be allotted, free of charge, to Executive
Officers excluding those concurrently serving as Directors, senior managers participatingin managerial execution and certain directors of the Company’s subsidiaries, in order tofurther enhance their incentives and morale for improving the Company’s businessperformance and expand the interests of our shareholders by augmenting our corporate
value through the management efforts of those managers and officers.
2.

Persons to whom equity warrants are allotted
Equity warrants shall be allotted to the Company’s Executive Officers, senior
managers participating in managerial execution and certain directors of the Company’s
subsidiaries.
3. Particulars of equity warrants offering(1) Type and number of common stocks issued for the purpose of granting equity
warrants:
The upper limit of new common stock to be issued is 245,000 shares.
In the event the Company splits or consolidates its common stock, the numberof shares to be issued for the purpose of the equity warrants not yet exercised shallbe adjusted in accordance with the formula below:
Number of shares after adjustment =(Number of shares before adjustment) x (Ratio of split or consolidation)

Odd lots less than one share in this adjustment shall be discarded.
(2) Aggregate number of equity warrants to be offered:
Up to 245
(Beneficiaries can acquire 1,000 shares for each right. However, if the number ofshares to be issued is adjusted as described above, the number of shares to beacquired will also be adjusted in the same manner.)- 45 -

(Translation)(3) Issue price of equity warrants to be offered:Free of charge(4) Amount to be paid in on the exercise of equity warrants prescribed in theseparticulars of offering (hereinafter referred to as “equity warrants”)
The amount paid per right is determined by multiplying the amount paid per share
determined as follows (“exercise price”) by the number of shares to be issued per
right as determined in (2) above. The exercise price will be the highest of thefollowing multiplied by 1.05: 1) the average closing price for the Company’s shareson the Tokyo Stock Exchange during the month prior to the month that includes theissue date of equity warrants, 2) the closing price for the Company’s shares on the
day prior to the issue date of equity warrants, and 3) the closing price for theCompany’s shares on the day prior to the day of this general meeting of shareholders.
Fractions less than one yen shall be rounded up to the nearest yen.
Further, in the event that the Company issues new shares at a price less than themarket price (excluding the issuance of new shares by the exercise of equity
warrants), the exercise price shall be adjusted in accordance with the formula shown
below, fractions less than one yen being rounded up to the nearest yen.
Exercise price after adjustment =(Number of newly issued shares × Amount paid per share)
Market price per share before new share issue
Number of outstanding shares + Increase in number of shares following new share issue

Number of outstanding shares +Exercise price before adjustment ×

In case the Company splits or consolidates its stock, the exercise price shall be
adjusted in accordance with the ratio of split or consolidation, and fractions less than
one yen as a result of the adjustment shall be rounded up to the nearest yen.
(5) Period during which equity warrants may be exercised and monetary payments may
be made:From July 1, 2009 to June 25, 2017(6) Conditions for exercise of equity warrants:
a. The following restrictions shall be established for exercise of equity warrants:
1) Period from July 1, 2009 to June 30, 2010:
A maximum of 34% of the allotted number may be exercised.
2) Period from July 1, 2010 to June 30, 2011:
A maximum of the number calculated by deducting the number exercised in1) above from 67% of the allotted number may be exercised.
3) Period from July 1, 2011 to June 25, 2017:
A maximum of the number calculated by deducting the number exercised in
1) and 2) above from the allotted number may be exercised.
Fractions shall be rounded off for calculation purposes.
b. The heir of the holder of the equity warrants upon the holder’s death shall be- 46 -

(Translation)
allowed to exercise the rights as follows:In case of inheritance before June 30, 2011, the rights may be exercised by June30, 2012.
In case of inheritance after July 1, 2011, the rights may be exercised for one
year from the date of inheritance; provided, however, that the rights may not be
exercised after June 25, 2017.
c. Other conditions regarding the exercise of rights shall be subject to the equitywarrant allocation agreement concluded between the Company and the holders of
the rights.
(7) Acquisition of equity warrants:
Equity warrants may be acquired free of charge in case the rights holder no longer
falls under any of the conditions for exercise provided for in the previous paragraph.
(8) Restrictions on transfer of equity warrants:
The transfer of equity warrants is subject to the approval of the Board of Directors.
(9) Date of allotment of equity warrants:
Necessary items and matters pertaining to allotment shall be established byresolutions of the Board of Directors.

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(Translation)
Appendix

Instructions for the Exercise of Voting Rights via Internet

1.

Matters requiring your agreement concerning the exercise of voting rights via Internet
We kindly request your consent to the following regarding exercise of voting rights via Internet.
1) Exercise of voting rights via Internet is only possible by accessing the voting site designated by theCompany (please refer to the following URL). It is also possible to access this site via mobile phonebased Internet. Using these means of access will require you to enter your voting rights exercise codeand password (valid only for purposes of this general meeting) provided in the upper right corner of thevoting rights exercise form enclosed with the Notice.
2) We will regard the exercise of rights via Internet to be effective if you exercise your voting rights both inwriting and via Internet.
3) We will regard the last exercise via Internet to be the effective exercise in case you exercise your voting
rights more than once.
4) You will bear all connection charges for using the Internet (service provider access fees, communication
charges, etc.)

2.

Instructions for voting via the Internet
1) Access http://www.it-soukai.com/ or https://daiko.mizuho-tb.co.jp/.
(Please note that the above URL cannot be accessed from 3:00 a.m. to 5:00 a.m. during the voting period.)
2) Enter the voting rights exercise code and the password and click “log-in.”
3) Proceed to vote in accordance with the site instructions.

3.

Technical specifications
1) Operating system: Windows or Macintosh operating systems
2) Browser: Internet Explorer 5.5 or above, Netscape Communicator 4.7 or above
3) Internet connection: any service providing Internet access4) Mobile phones: Services should be available from any of “i-mode,” “EZweb” or “Yahoo! Keitai” (Certain
models cannot be used.) If you are using a cellular phone with bar-code scanner features we request thatyou use the QR Code provided in the margin.

4.

Notes on information security
Please rest assured that you will be able to use our systems safely as we use cryptographic technology (128-bitSSL) in order to prevent exercise-related information from being falsified or wiretapped.
The voting rights exercise code and password provided on your voting rights exercise form are an
important means of validating you as our shareholder. Please ensure that they are not disclosed to others.
The Company’s staff will never ask you to disclose your password.

5.

Contact
1) For information concerning the operation of personal computers for the electronic exercise of voting
rights:Internet Help Dial, Stock Transfer Agency Department, Mizuho Trust & Banking Co., Ltd.
Tel: 0120-768-524 (toll-free)
From 9:00 a.m. to 9:00 p.m. excluding Saturdays, Sundays and national holidays
2) For address changes and other matters other than (1) above:
Stock Transfer Agency Department, Mizuho Trust & Banking Co., Ltd.
Tel. 0120-288-324 (toll-free)
From 9:00 a.m. to 5:00 p.m. excluding Saturdays, Sundays and national holidays

Windows and Internet Explorer are registered trademarks of Microsoft Corporation (U.S.)
Macintosh is the registered trademark of Apple Inc. (U.S.)“Netscape” and “Netscape Communicator” are the trademark and registered trademark, respectively, of NetscapeCommunications Corporation (U.S.)“i-mode” is the registered trademark of NTT Mobile Communications Network, Inc. (NTT DoCoMo).
“EZweb” is the registered trademark of KDDI Corporation.
“Yahoo!” is the trademark of Yahoo! Inc. of the U.S.
“QR Code” is the registered trademark of Denso Wave Incorporated.

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