(Translation)
June 8, 2005
This document is an English translation of the notice for the general meeting of shareholders
which is originally written in Japanese. This translation was made for reference purpose only
and any kinds of warranty, in particular, accuracy of this translation, are hereby disclaimed.
June 8,2005

NOTICE OF 81ST ORDINARY GENERAL MEETING OF SHAREHOLDERS
Dear Shareholder,
Oki Electric Industry Co., Ltd. (the “Company”) would hereby like to inform you that the 81st
ordinary general meeting of shareholders will be held as follows, and 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 Document for the Exercise of Voting Rights” (pages 33 through 39) and exercise yourvoting rights in one of the following ways.

[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, affix your signature or registered seal, and return the ballot to the Company.
[Exercise of voting rights by electronic means (Internet)]
Please read the appended “Instructions for the Exercise of Voting Rights via the Internet” (page40), and indicate your approval or disapproval online via the designated website at
http://www.it-soukai.com.
There is no need to mail the ballot if you choose to vote via the Internet.

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

1.
2.

Date and Time:
Venue:

Wednesday, June 29, 2005, from 10:00 a.m.
1st Floor, Conference Room, Building Complex No.5 (5-Gokan), Oki
Electric’s Business Center, 4-10-16 Shibaura, Minato-ku, Tokyo-1-

(Translation)
3.

Meeting Agenda

Items to be reported:
1. Business Report, Balance Sheets and Statements of Income for the 81st fiscal
year (from April 1, 2004 to March 31, 2005)
2. Consolidated Balance Sheets, Consolidated Statements of Income, audit resultsof consolidated financial statements by the Account Auditor and the Board of
Corporate Auditors for the 81st fiscal year (from April 1, 2004 to March 31,
2005)
Items to be resolved:
Agenda 1:
Agenda 2:

Agenda 3:
Agenda 4:
Agenda 5:

Approval of the proposed appropriation of unappropriated retained
earnings for the 81st fiscal year
Partial amendment to the Articles of Incorporation
The proposal is summarized in the “Reference Document for the
Exercise of Voting Rights” on page 34.
Election of three Directors
Revision of wages for Directors and Auditors
Issuance of stock acquisition rights as stock options
The proposal is summarized in the “Reference Document for the
Exercise of Voting Rights” on pages 37 through 39.

* If you are attending the meeting in person, please submit the enclosed ballot at the reception desk of themeeting.

-2-

(Translation)(Attachment)

Business Report(From April 1, 2004 to March 31, 2005)
1.

Operating Conditions(1) Operating progress and results of the Oki GroupOn the whole, this year has seen a gradual recovery in the market including a gradualincrease in capital expenditures despite a suspension in corporate profit improvement and adomestic slowdown in export growth. As for overseas conditions, economies are
expanding in Asia including China as well as the US. The economy was generally
recovering although there were some concerns such as a sharp appreciation of the yen andthe end of the digital economy.
The Oki Group's business position was favorable including active investment inmajor telecommunication carriers' broadband IP networks and an expanded market forbusiness-use color printers. Still, there were some concerns including cessation offinancial institution demand for ATMs to accommodate new Japanese banknotes, reductions
and delays in public investment due to natural disasters and a weakening of thesemiconductor market from the second half of the year.
In this market environment, the Oki Group's consolidated sales increased by 5.2% to¥688.5 billion from the previous year. In terms of profits, consolidated operating income
increased ¥5.6 billion to ¥27.2 billion from the previous year, consolidated recurringincome increased ¥8.7 billion to ¥21.2 billion, and consolidated net income increased ¥9.9
billion to ¥11.2 billion. Thus both sales and profits increased.
Our parent company's results are similar to the consolidated results. Oki Electricrecorded sales of ¥439.4 billion, an increase of 5.2% from the previous year. As forprofits and losses, operating income increased ¥3.8 billion to ¥8.0 billion from ¥4.2 billion
the previous year, and recurring income increased ¥7.3 billion to ¥8.3 billion from ¥1.0
billion. A net loss of ¥3.8 billion the previous year improved to net income of ¥3.2 billion
for this year, an increase of ¥7.0 billion.
To strengthen our compliance initiatives, Oki established a Group-wide Compliance
Committee in April 2004 to oversee all compliance activities and a Compliance andBusiness Ethics Division to plan, formulate and promote various compliance measures. In
addition, Oki appointed a Chief Compliance Officer in June.
Oki established a CSR Promotion Division in October 2004 to promote openness withstakeholders and improve our economic, environmental and social activities. Specifically,
Oki has endeavored to strengthen compliance, improve customer satisfaction, increase
environmental measures, promote respect for our employees, increase social welfare andensure effective IR activities.
Oki also established a Disclosure Committee in February 2005 to oversee disclosureof critical information to stakeholders.
Our consolidated sales by segment are as follows.

-3-

(Translation)- Sales(Unit: billions of yen)
Increase or
decrease

Compared tothe previous
year (%)

335.8(24.5)

93

104.6

135.3

30.7

129

Electronic
devices

132.2

150.7

18.5

114

Others

57.1

66.7

9.6

117

Total

654.2

688.5

34.3

105

FY2003

FY2004(reference:previous year)(the year underreview)Information
systems

360.3

Telecommunications
systems

Segment

Major factors forthe difference
Due to reduced ATM
sales and deferral of
IT investment
Due to increased
demand for IP
network-related
equipment
On account of stablesales of systemmemories

The business outline of each segment is as follows.
Information systems
Although sales increased due to rapid market expansion for business-use color
printers, demand for ATMs accommodating new Japanese banknotes virtually ceased in thefirst half of 2004 greatly reducing ATM sales. Similarly, government offices deferred IT
investments due to natural disasters. As a result, consolidated sales for external customers
declined by 6.8% to ¥335.8 billion from the previous year.
Operating income was ¥14.3 billion, a decrease of ¥9.7 billion from ¥24.0 billion theprevious year, on account of increased R&D costs for new printer products and nextgeneration financial systems and reduced prices for government, public office and financial
institution systems due to increasingly severe competition.
We expect financial institutions to shift their focus to investments in IT systems,
integrated networks and strengthened ATM security. The Oki Group aims to maintainsustainable growth by creating new products for these new requirements.
Telecommunications systems
Demand for regional IP network equipment and equipment to link existing public
networks to IP networks has greatly increased due to active expansion of broadband IP
networks by telecommunications carriers. In addition, companies have been increasing
their capital investment in info-telecom converged equipment. As a result, consolidated
sales increased by 29.3% to ¥135.3 billion from the previous year.
Operating income increased by ¥4.5 billion to ¥7.9 billion, from ¥3.4 billion theprevious year, due to the large sales increase.
Telecommunications carriers have announced long-term active investment in FTTH
and optical IP telephony. In addition, improved broadband IP networks will create
multiple applications and services. The Oki Group aims to capture these opportunities inorder to expand its business.

-4-

(Translation)
Electronic devices
Growth in the semiconductor market, which had been stable in the first half of theyear, slowed down in the second half. Demand for sound generator LSIs and PHS baseband LSIs has slowed, influenced by inventory adjustment for mobile terminals in China.
Additionally, demand for driver LSIs for use with liquid crystal display panels increased
due to coming on line of the panel manufacturers’ new plants, but revenue was affected by
reduced prices in the second half. On the other hand, sales for system memories forelectronic dictionaries and amusement market increased. As a result, consolidated sales
increased by 14.1% to ¥150.7 billion from the previous year.
Operating income improved by ¥9.7 billion to ¥12.0 billion, from ¥2.3 billion theprevious year, on account of the sales increase, cost reductions based on businessreorganization and recovery in the optical component business.
Although we expect the semiconductor market to recover from the middle of FY2005
onward, the Oki Group will continue to provide unique products for the personal andmobile markets, an area of strength for the Group, and will continue cost reductions toensure more stable profits.
(2) Capital expenditure of the Oki GroupThe capital expenditure for this year accounted for ¥37.8 billion.
The investment amount by segment was as follows.
(Unit: billions of yen)Segment

Amount ofcapitalexpenditure

Information systems

9.3

Telecommunications
systems

1.3

Electronic devices

23.1

Major investments
Investment for development and manufacturing of ATM
products for financial and logistics markets, cash management
systems and business-use printers
Investment for development and manufacturing of IPnetwork
telecommunication system products
Investment for development and manufacturing of logic LSIs,
system LSIs and system memories

Others
4.1
Total
37.8
Note: The above amount includes ¥3 billion of leased assets.

(3) Financing of the Oki GroupThe Oki Group financed its operations for the year through its own funds, borrowingsand corporate bonds. The company on November 26, 2004 issued ¥20 billion of Euro Yen
convertible bonds to be redeemed in 2008.
(4) Future challenges of the Oki GroupThe Oki Group has promoted various management innovation measures based on its
2002 mid-term management plan “Phoenix 21 Sky-High." As a result, our profit structure
has improved, and we have achieved a certain level of results in our initiative to strengthen
our management base. Having completed building a base by pursuing profits and speed,
the Oki Group in 2004 entered the second phase of the plan, which calls for aiming atfurther growth as a stable profit-earning company.

-5-

(Translation)
From 2005, the Oki Group has changed its organizational structure from a threebusinesses structure of information systems, telecommunications systems and electronic
devices to the following three business areas. The Oki Group will aim at profit expansion
and growth as a stable profit-earning company by focusing its management resources on its
core businesses to create “world leading technologies” and “strong products.”(i)

Info–Telecom System Business
The Oki Group believes that new applications in the field of information andtelecommunications convergence will expand and materialize as broadband IP
networks expand and information technology (IT) progresses. Based on this belief,
the Oki Group will engage in a broad spectrum of businesses ranging from
infrastructure to applications for broadband networks. In addition, the Oki Groupwill focus on creating and providing information and telecommunications
convergence solutions based on our information and telecommunications convergencesolution concept “AP@PLAT”.
We have systemized various solutions by
combining products and industry-specific applications based on core technologies
including VoIP, CTI, securities and networks, our areas of strength. In particular, theOki Group intends to provide comprehensive one-stop services from consultation tomaintenance for four markets - financial, telecom carrier, public sector (government,
public offices and local governments) and enterprise markets - where the Group has
traditionally had large numbers of customers.
1. Financial Institutions. In addition to strengthened security for ATM
business, for which the Group has the largest domestic share and full operations in
China, the Group will strengthen its back-office operation concentration systems
business, backyard solutions using image processing technologies, and provision offinancial IT solutions using the Internet and VoIP technologies.
2. Telecom Carriers. Responding to active investment in IP networks andoptical networks by carriers, the Group will improve its provision of IP network
systems, optical access systems such as GE-PON and systems to connect existing
fixed telephones to IP networks. Additionally, the Group will operate application
servers to realize triple play services integrating voice, video and data, for which we
expect future growth.
3. Public Sector. The Group will focus on a major project based on theJapanese government's e-Japan II Initiative. In particular, the Group will focus on(i) e-government solutions based on secure networks, (ii) ITS businesses such as ETC,
and (iii) disaster prevention networks for which we anticipate the application ofleading technologies such as ad hoc networks.
4. Enterprise Business. The Oki Group aims to create new opportunities by
providing IP-based solutions, drawing on Oki's leading VoIP and CTI technologies, to-6-(Translation)
realize seamless connections to company mission critical systems. In addition, forthe travel and transportation industry, where Oki has traditionally been strong, we
intend to provide high value-added solutions for existing ticketing systems based on
our superiority in mechatronics.
(ii)

Semiconductor BusinessIn addition to shifting from memory to logic LSI, the Oki Group has moved torealize a stable profit structure protected from demand changes due to the silicon
cycle by promoting structural innovations including establishment of a "fab-free"business model separating design, development and production into two companies
and effectively outsourcing as required. In addition, the Group has promoted
strategic alliances with high-quality overseas partners for both development andproduction.
Based on this business model, the Oki Group intends in the future tocontinue to focus its management resources on the personal mobile field where theGroup has multiple proprietary technologies including silicon on insulator (SOI),
silicon on sapphire (SOS), high voltage, high density packaging and ultra-low power
consumption technology. In particular, the Group will target three markets telecommunications, information appliances and in-vehicle systems - developing theGroup's unique product lines in system LSI, logic LSI and system memory. The Oki
Group will further improve its development of value-added products using its
strengths to increase profits.

(iii) Printer BusinessIn the printer business, the Oki Group intends to increase its focus on color
non-impact printers with an LED technology that enables high-speed, high –resolution color printing and compact size. The Group intends to develop new
products to strengthen this superiority. In addition, backed by its quality for value,
the Group intends to improve its product lineup to expand its global market share in
China, South East Asia and the Middle East.
In the serial impact dot matrix printer business, the Group will makeefforts to expand profits by further cost reductions and active business developmentin the Chinese, Eastern Europe and Latin American markets.

-7-

(Translation)(5) Operating results of the Oki Group and Oki Electric(i) Operating results of the Oki Group
Sales, income and assets for the fiscal year under review and the past three years are
as follows.
Sales

604.6

billion yen

585.5

billion yen

654.2

billion yen

81st year(current year, 2004)
688.5
billion yen

Net income(34,077)

million yen(6,560)

million yen

1,328

million yen

11,174

million yen

Net income per share(55.66)yen(10.72)

yen

2.17

yen

18.27

yen

Total assets

651.6

billion yen

622.9

billion yen

609.6

billion yen

608.0

billion yen

Net assets

109.1

billion yen

101.3

billion yen

110.5

billion yen

124.8

billion yen

Net assets per share

178.15yen

165.63yen

180.66yen

204.11yen

78th year (2001)

79th year (2002)

80th year (2003)

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 common shares
outstanding during the year. These figures exclude treasury stocks.
3. From the 79th year, net income per share is calculated subject to “Accounting Standards for Net
Income per Share” (Corporate Accounting Standard No.2) and “Application Guidelines for
Accounting Standards for Net Income per Share” (Corporate Accounting Standard Application
Guideline No.4)

Positioning the 78th year (2001) as the preparatory year for transformation intoa high-growth company by formulating “Phoenix 21 Sky-High,” the Oki Group has
made efforts in business selection and resource concentration. Changes in themarket environment, however, far surpassed those forecast, leading to a generaldecline in sales and large losses.
In the 79th year (2002), the Group formulated and implemented its Third
Structural Reform in October 2002 under a more severe business environment. As aresult, losses improved over the previous year despite declining sales.
In the 80th year (2003), while there were signs of improvement in the businessenvironment, the Group made efforts to complete implementation of the Third
Structural Reform. As a result, we recorded a profit with sales increased and losses
decreased compared with the previous year.
(ii)

Trends of operating results of Oki Electric
Sales, income and assets for the fiscal year under review and the past three years are
as follows.

Sales

404.4

billion yen

377.1

billion yen

417.5

billion yen

81st year(current year, 2004)
439.4
billion yen

Net income(43,059)

million yen(9,905)

million yen(3,800)

million yen

3,199

78th year (2001)

79th year (2002)

80th year (2003)

million yen

Net income per share(70.33)yen(16.18)yen(6.21)

yen

5.23

yen

Total assets

555.0

billion yen

515.1

billion yen

496.7

billion yen

488.0

billion yen

Net assets

128.9

billion yen

118.2

billion yen

123.5

billion yen

128.2

billion yen

Net assets per share

210.54yen

193.18yen

201.97yen

209.60yen

Notes:
1. Parentheses indicate losses.

-8-

(Translation)
2.

3.

4.

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 common shares
outstanding during the year. These figures exclude treasury stocks.
From the 79th year, net income per share is calculated subject to “Accounting Standards for Net
Income per Share” (Corporate Accounting Standard No.2) and “Application Guidelines for
Accounting Standards for Net Income per Share” (Corporate Accounting Standard Application
Guideline No.4)
As these financial documents have been prepared in accordance with the Commercial Code
Enforcement Regulations as revised from the 80th year by “Ministry Ordinance for Partial Revisionof Commercial Code Enforcement Regulations” (February 28, 2003 Ministry of Justice Ordinance
No. 7 and September 22, 2003 Ministry of Justice Ordinance No. 68), “income” and “income pershare” are now indicated as “net income” and “net income per share.”Overview of the Oki Group and Oki Electric(as of March 31, 2005)(1) Major businesses of the Oki GroupThe Oki Group's major businesses include manufacturing and sales of electronic
communications products, information processing, semiconductor and softwaredevelopment and related systems development and solutions provision, as well as
construction, maintenance and other services.
Major business items include the following.
Segment

Business items

Information systems

Financial systems, automated equipment systems, ITS-related systems, electronic
government-related systems, ERP systems, computer network-related equipment,
information network terminals, security systems, printers, etc.

Telecommunications
systems

IP telephone systems, corporate communication systems, CTI systems, visualcommunication systems, electronic converters, digital communication equipment,
optical communication equipment, wireless communication equipment, LAN/WAN,
broadband access equipment, network services, network operation support systems,
etc.

Electronic devices

System LSI, logic LSI, memory LSI, optical modules, optical devices, GaAs ICs,
foundry services, etc.

-9-(Translation)(2) Shareholders’ equity
Current shareholding is as follows.
(i) Number of shares authorized to be issued by the Company: 2,400,000 thousand
shares(ii) Number of outstanding shares: 612, 335 thousand shares(iii) Number of shareholders: 99,735(iv) Major shareholders (Top 10)
Investment in major
shareholders by Oki
Number ofshares held
Investment(thousandratio
shares)-Number ofshares held
(thousandshares)Investment
ratio

Japan Trustee Services Bank, Ltd. (trust account)

58,441

9.54%

Meiji Yasuda Life Insurance Company

34,000

5.55--

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

32,2185.26--

Mizuho Corporate Bank, Ltd.

13,0002.12- (Note 1)

Sompo Japan Insurance Inc.

12,987

2.12

500

0.05

Shinsei Bank, Ltd.

10,641

1.74--

The Dai-Ichi Mutual Life Insurance Company

9,380

1.53

-

-

Oki Denki Employees’ Shareholdings Committee

8,537

1.39

-

-

The Sumitomo and Trust Banking Co., Ltd. (trust B)

8,384

1.37

-

-

Investors Bank West Pension Fund Clients

8,383

1.37

-

-

Name of shareholder-

Notes:
1.
The Company does not hold shares of Mizuho Corporate Bank, Ltd., but it holds 12 thousand
ordinary shares of Mizuho Financial Group, Inc., the holding company of the Mizuho Group.
2.
The Company has been notified that Mizuho Corporate Bank, Ltd. and its joint shareholders
hold 39,613 thousand shares (investment ratio: 6.47%) as of January 31, 2005 in accordance withthe disclosure system for large shareholdings in the Securities Exchange Law.
The Company has been notified that Meiji Yasuda Life Insurance Company and its joint
shareholders hold 34,935 thousand shares (investment ratio: 5.71%) as of January 31, 2005.
The Company has been notified that The Ashikaga Bank, Ltd. and its joint shareholders hold30,647 thousand shares (investment ratio: 5.01%) as of February 28, 2005.
The Company has been notified that Barclays Global Investors and its joint shareholders hold55,728 thousand shares (investment ratio: 9.10%) as of January 31, 2005.

(v)

Acquisition, disposal and holding of shares- Number of shares acquired during this fiscal year:
Ordinary shares: 179,377 shares
Total acquisition value: 75,409 thousand yen- Number of shares disposed during this fiscal year:
None- Number of shares held during this fiscal year:
Ordinary shares: 707,545 shares- 10 -

(Translation)(3) Major offices of the Oki GroupThe 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(4) Employees of the Oki Group and Oki Electric(i) Employees of the Oki Group(ii)

Segment

Number of employees

Information systems

10,685

Telecommunications systems

2,571

Electronic devices

4,988

Others1,642Company-wide (shared)

524

Total

20,410

Employees of Oki Electric

Number of employees
5,389 (increased by 10 from the end of the previous year)- 11 -

Average age
39.5

Average length of service
17.1

(Translation)(5) Status of consolidation(i) Status of major subsidiaries
Name

Investment
ratio

CapitalOki Wintech Co., Ltd.

2,001 million

yen

53%

Oki Data Corporation

12,000 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 Bharts

100

(ii)

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 ofelectronic devices
Manufacturing and sales ofelectronic devices
Sales of electronic devices and IP
network products
Sales of printers
Manufacturing and sales ofelectronic devices

Status of major affiliated companies
Name

Oki Electric Cable Co., Ltd.

Capital4,304 million

yen

Investment
ratio

Major business

34%

Manufacturing and sales of cables
and electric discharge machine
electrode wires(iii) Results of consolidation
Oki has 80 consolidated subsidiaries including 8 major subsidiaries mentioned above
and 2 equity method affiliates including one major affiliated company mentioned
above. Consolidated net sales were ¥688.5 billion (¥654.2 billion in the previousyear), and consolidated net income was ¥11.2 billion (¥1.3 billion in the previousyear).
(6) Major partners of the Oki Group(i) Major technical partners:
Lucent Technologies GRL Corporation (US)International Business Machines Corporation (US)Texas Instruments Incorporated (US)Canon Inc.
(ii) Major business partners:
Hewlett-Packard Company (US)Cisco Systems, Inc.
United Microelectronics Corporation (Taiwan)
Peregrin Semiconductor Corporation (US)- 12 -

(Translation)(7) Major creditors of Oki Electric are as follows:
Year-end loanbalance

Creditor

Billion yen

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

17.0
16.8
13.4
11.2
5.9

Shares held by the creditor
Number of shares

Investment ratio

Thousand shares

13,00034,000
4,410
4,065

%

2.12
5.55
0.72
0.66

(8) Directors and corporate auditors
Note 1*X

Position
President

Name
Katsumasa Shinozuka*X

Executive Vice President

Katsuhiko Sano*X

Executive Vice President

Kazuo Tanaka

X

Senior Vice President

Yutaka Maeda

X

Senior Vice President

Tadao Murase

X

Senior Vice President

Nobuhide Hara

X

Senior Vice President

Takashi Hattori

X

Senior Vice President

Naoki SatoX

Senior Vice President

Harushige Sugimoto

DirectorStanding Auditor
Standing Auditor
Standing Auditor
Auditor

Minoru Morio
Takahisa Inagawa
Yoshiyuki Honjo
Hiroyuki Katagiri
Ieji Yoshioka

Principal duty or main job
CEOChairman, Silicon Solutions Company,
Chairman, Silicon Manufacturing Company,
Chairman, Optical Components Company
CCO
Management supervising (in charge of Corporate Planning
Office, CSR Promotion Division, Accounting & Control
Division, Human Resources Division, Human Resources
Division HQ, Compliance and Business Ethics Division,
Internal Auditing Division)
Technical supervising (Global Environment Division, Legal &Intellectual Property Division), in charge of Corporate
Research and Development Center, Government and Industry
Relations and Development Promotion Division, and General
Affairs Division, Chairman, China Business Support Division
Chairman, Financial Solutions Company,
Chairman, Network Systems Company,
Chairman, Enterprise System Solutions Company
In charge of sales and branch offices
General Manager, Marketing Planning Division
CIO
In charge of Network Applications Division and Information
Planning Division
Chairman, System Solutions Company,
Chairman, IP Solutions Company
President, Financial Solutions Company,
Chairman, NetBusiness Solutions Company,
Chairman, Broadband Media Company
In charge of Affiliates Administration Division, support forsales, in charge of financing
CTO
In charge of Corporate Production Planning Division,
General Manager, Corporate Research and Development
Center,Chairman & President, Manufacturing Service Company,
Chairman, Multimedia Messaging Company
Advisor to Sony Corporation

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

Notes:
1. Asterisk indicates Representative Director. X indicates executive officer.
2. Director Minoru Morio is an external director appointed under Item 7-2, Paragraph 2, Article 188of the Commercial Code.
3. Standing Auditors Hiroyuki Katagiri and Ieji Yoshioka are external auditors as stipulated in
Paragraph 1, Article 18 of the Law for Special Exceptions to the Commercial Code concerning
Corporate Audits.

- 13 -

(Translation)
4.

5.

6.

Retiring Directors and retiring auditors during this fiscal year
Directors and auditors who retired on June 29, 2004 are as follows:
Hajime Maeda, Director
Masayoshi Ino, Director
Tatsuo Akutagawa, Auditor
Tetsuo Yoshie, Auditor
Changes of Representative Directors after the fiscal year
Katsuhiko Sano retired as Representative Director and Executive Vice President on March 31,
2005 by resolution of the Board of Directors dated February 28, 2005 retaining his position as
director. Yutaka Maeda became Representative Director and Executive Vice President on April 1,2005 by the same resolution.
Executive officers as of March 31, 2005 are as follows (excluding those who concurrently serve as
Directors).

Position
SeniorExecutive officer
Executive officer

Name
Hideichi Kawasaki

Executive officer

Kazushige Matsui

Executive officer

Hironori Kitabayashi

Executive officer

Masayoshi Matsushita

Executive officer

Masataka Sase

Executive officer

Yutaka Asai

Executive officer

Shigeru Yamamoto

Executive officer
Executive officer

Kiyoharu Miyatake
Akira Kamo

Executive officer

Masao Miyashita

Keiichi Fukumura

Principal duty
President, Network Systems Company, in charge oftelecommunication-related sales
General Manager, Accounting & Control Division
President, System Solutions Company, Chairman, Public
Systems Company
President, Silicon Manufacturing Company
EVP, System Solutions Company, General Manager,
Network Application Division
In charge of Global Environment Department, Legal andIntellectual Property Department
President, IP Solutions Company
EVP, Financial Solutions Company
General Manager, Financial Solutions Division-2
General Manager, Corporate Planning Office
President, Silicon Solutions Company
EVP, Network Systems Company
General Manager, Incumbent Carriers Business Division
EVP: Executive Vice President

The following changes were made to the executive officers during the fiscal year
under review and from April 2005.
Retirement
Name
Date
Kei Takenaka
June 30, 2004
Tatsuro Muraoka
November 10, 2004

- 14 -

Appointment
Name
Date
Hiroshi Enomoto
April 1, 2005
Kichiro Akino
April 1, 2005

(Translation)(9) Stock acquisition rights(i) Stock acquisition rights issued(a) Stock acquisition rights in accordance with Articles 280-20 and 280-21 of theCommercial CodeType and
Payment per
number ofshare required
Exercise period
shares to be
to exercise
acquired by therightsrightsJuly 1, 2004
Common shares:
No.1 stock acquisition right
271 yen189
to June 30, 2007
189,000 shares(Issued on July 18, 2002)
July 1, 2005
Common shares:
No. 2 stock acquisition right
384 yen815
to June 26, 2013
815,000 shares(Issued on July 18, 2003)
July 1, 2006
Common shares:
No. 3 stock acquisition right458 yen452
to June 28, 2014
452,000 shares(Issued on July 20, 2004)
Note: Stock acquisition rights were issued free of charge for the purpose of granting stock options.
Number of stockacquisitionrights(b) Convertible bonds in accordance with Article 341-2 of the Commercial Code

Date of resolution for issuance
Number of stock acquisition rights
Type and number of shares to be acquired by rights
Issue price of the rights
Exercise period
Exercise price
Balance of the bonds with stock acquisition rights

Stock acquisition rights attached to Euro Yen convertible
bonds to be redeemed in 2008
(issued on November 26, 2004)
November 9, 2004
10,000Common shares: 39,682,539 shares
Granted free of charge
December 10, 2004 to November 12, 2008¥504
¥20 billion

The details of preemptive rights in accordance with the provisions of Article 280-19of the former Commercial Code are described in Note 4 of the non-consolidatedbalance sheets.
(ii)

Stock acquisition rights issued to non-shareholders under privileged conditions during
the fiscal year under review(a) Number of stock acquisition rights issued
452 rights(b) Type and number of shares to be acquired by the rights
Common shares: 452,000 shares (1,000 shares per right)(c) Issue price of the rights
Granted free of charge(d) Payment per share required to exercising the rights¥458(e) Exercise period
July 1, 2006 to June 28, 2014(f) Conditions for the exercise of rights
a. The following restrictions apply to the exercise of stock acquisition rights.
1) Period from July 1, 2006 to June 30, 2007:
A maximum of 34% of the allotted number may be exercised.
2) Period from July 1, 2007 to June 30, 2008:- 15 -

(Translation)
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, 2008 to June 28, 2014:
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 stock acquisition rights upon the holder’s death shallbe allowed to exercise the rights as follows.
In case of inheritance before July 1, 2008, the rights may be exercised byJune 30, 2009; orIn case of inheritance on or after July 1, 2008, the rights may be exercisedfor one year from the date of inheritance; provided, however, that the rights may
not be exercised after June 28, 2014.
c. Other conditions regarding exercise of rights shall be subject to the stockacquisition-right allocation agreement concluded between Oki and holders of therights.
(g) Cancellation of stock acquisition rights
Stock acquisition rights may be cancelled free of charge when the rights holder nolonger falls under any of the conditions for exercise set forth in the previous
paragraph.
(h) Restrictions on transfer of stock acquisition rights
Transfers of stock acquisition rights shall be subject to the approval of the Board of
Directors.
(i) Details of privileged conditions
Oki has issued stock acquisition rights free of charge to Directors engaged in thebusiness execution of the Company, executive officers, senior staff members
participating in the management and Directors of certain subsidiaries.
(j) Name of the persons to whom the rights were allotted and the number of rights
allotted.
- Directors of Oki Electric
Name
Katsumasa Shinozuka
Katsuhiko Sano
Kazuo Tanaka
Yutaka Maeda
Tadao Murase
Nobuhide Hara
Takashi Hattori
Naoki Sato
Harushige Sugimoto
9 persons in total

Number of rights
63
25
25
17
17
17
17
17
17
215

- 16 -

Type and number of shares to be acquiredby the rights
Common shares:
63,000 shares
Common shares:
25,000Common shares:
25,000Common shares:
17,000Common shares:
17,000Common shares:
17,000Common shares:
17,000Common shares:
17,000Common shares:
17,000215,000(Translation)- Employees of Oki Electric and Directors of subsidiaries (top 10 persons)

Hideichi Kawasaki

Numberof rights
14

Mikihiko Maeno

14

Common shares:

14,000Kazuhiko Miyata

14

Common shares:

14,000Keiichi Fukumura
Kazushige Matsui
Hironori Kitabayashi
Masayoshi Matsushita
Masataka Sase
Yutaka Asai
Shigeru Yamamoto

11
11
11
11
11
11
11

Common shares:
Common shares:
Common shares:
Common shares:
Common shares:
Common shares:
Common shares:

11,00011,00011,00011,00011,00011,00011,000Name

Type and number of shares tobe acquired by the rights
Common shares:
14,000 shares

Remarks
Executive officer of Oki
President and CEO of
Oki Data Corporation
President and CEO of
Oki Electric Customer
AdtechExecutive officer of Oki
Executive officer of Oki
Executive officer of Oki
Executive officer of Oki
Executive officer of Oki
Executive officer of Oki
Executive officer of Oki- Total rights issued to Oki Electric employees and Directors of subsidiaries

Employees of Oki
Directors of subsidiaries

Number ofrights189
48

Type and number of shares to beacquired by the rights
Common shares:
189,000 shares
Common shares:
48,000sharesNumber of
persons granted214(10) Compensation paid to accounting auditors
The amount of compensation that Oki and its subsidiaries pay to the accounting auditors
shall be as follows.
Amount of payment
1. Total sum of compensation to be paid to accounting auditors by Oki and its
109 million yen
subsidiaries
2. Total sum of compensation to be paid for the audit certificate services provided in
Paragraph 1, Article 2 of the Certified Public Accountants Law, which is included
109 million yen
in the total sum of 1 above
3. Compensation, etc. to be paid to accounting auditors by Oki, which is included in
65 million yen
the total sum of 2 above
Note: Oki does not distinguish auditor compensation per (i) auditing in accordance with the Law for Special
Exceptions to the Commercial Code concerning Corporate Audits, and (ii) auditing in accordance with
the Securities Exchange Law. The total of these amounts is recorded in 3 above.

(11) Significant events of the Oki Group after the end of the fiscal year
There were no noteworthy events.

Note: indication of the amountFigures 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.

- 17 -

(Translation)

Consolidated Balance Sheet(as of March 31, 2005)(Unit: millions of yen)Account title

AmountAccount title(Assets)
I.

Amount(Liabilities)

Current assets

I.

Current liabilities

1. Cash and deposits

46,6401. Notes and accounts payable

100,737

2. Notes and accounts receivable

145,952

2. Short-term borrowings

135,295

2,801

3. Accrued income taxes

2,327

149,298

4. Other accrued expenses

43,727

5. Deferred tax assets

10,6205. Allowance for completed

6. Other current assets

21,528construction compensation

3. Marketable securities
4. Inventories

7. Allowance for doubtfulII.

receivables(1,798)

Total current assets

375,043

Fixed assets

6. Other current liabilities

31,734

Total current liabilities

313,828

II.

1. Property, plant and equipment7

Non-current liabilities

1. Bonds

49,500122,528

2. Long-term borrowings

70,3603. Retirement benefits

37,427delivery equipment

346,935

4. Reserve for Directors’ retirement(3) Tool, furniture and fixtures

126,190(4) Land(1) Buildings and structures(2) Machinery, equipment and449

18,247

5. Other non-current liabilities

5,631(5) Construction in progress

985

Total non-current liabilities

163,369(6) Accumulated depreciation(488,416)

Total liabilities

477,198

Total property, plant andequipment

126,470(Minority interests)
Minority interests

2. Intangible assets

5,989

14,605

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

56,389(2) Long-term loans

4,802(3) Long-term deferred tax assets

15,212(4) Other investments and otherassets

20,944(5) Allowance for doubtfulreceivables

Common stock

67,877II.

Additional paid-in capital

37,797

III.

Retained earnings

14,854

IV.

Unrealized holding gain on(5,453)

Total investments and otherassets

91,895

Total fixed assets

232,972

Total assets(Shareholders’ equity)I.

608,015

Notes:
1. Assets pledged
Property, plant and equipment
2. Guarantee liabilities
3. Discounts of notes receivable
Transfer of notes receivable by endorsement- 18 -

securities

12,441

V.

Translation adjustments(7,925)

VI.

Treasury stock(217)

Total shareholders’ equity

124,827

Total liabilities, minority interestsand shareholders’ equity

608,015

2,354 million yen
4,337 million yen
73 million yen
76 million yen

(Translation)

Consolidated Statement of Income(From April 1, 2004 to March 31, 2005)(Unit: millions of yen)Account title

AmountI.

Net sales

688,542

II.

Cost of sales

504,340

Gross profitIII.

184,202

Selling, general and administrative expenses

156,982

Operating incomeIV.

27,220Non-operating income

1. Interest income

431

2. Dividend income

891

3. Foreign exchange gain561

4. Other832

V.

Non-operating expenses

1. Interest paid

6,724

2. Other

2,045

Ordinary income
VI.

2,717

8,769
21,168Extraordinary profit

1. Gain on sales of property, plant and equipment

1,188

2. Gain on sales of investments in securities

3,037

4,225

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

2,488

2. Loss from securities revaluation

1,193

3. Bad debt expenses

803

4. Special retirement payments

2,363

Net income before taxes
Income taxes

2,695

Income taxes deferred

4,377

Minority income

7,072
297

Net income

Note: net income per share

6,848
18,545

11,17418.27 yen

- 19 -

(Translation)
Principles for Preparing Consolidated Financial Statements
1.

Scope of consolidation(1) Number of consolidated subsidiaries: 80 companies
Names of major consolidated subsidiaries:
Oki Data Corporation, Oki Customer Adtech Co., Ltd., Oki Wintech Co., Ltd.,
Miyagi Oki Electric Co., Ltd., Miyazaki Oki Electric Co., Ltd., Oki America,
Inc., Oki Europe Ltd., Oki (Thailand) 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 Systems ve Yazici Cozumleri LS., and Oki Electric Technology (Kunshan)Co., Ltd. were newly established during the fiscal year under review andtherefore included in consolidation.
Oki Semiconductor (Asia) Pte. Ltd. was excluded from consolidation
upon its liquidation.

2.

Application of equity method(1) Number of subsidiaries to which the equity method is applied: 2 companies
Name of major subsidiary: 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 36 other companies
Affiliated companies: Alp Inc. and 23 other companies
Reason for not applying the equity method:
They individually have little influence and have no significance as a whole on
net income or loss and retained earnings.

3.

Accounting standards(1) Valuation standards and methods for assets(i) Negotiable securities
Oki and its domestic consolidated subsidiaries evaluate securities in accordancewith the purpose of holding as follows. Overseas consolidated subsidiaries apply thelower of cost or market value.
Held-to-maturity securities: amortized or accumulated to face value
Other negotiable securities:
Marketable securities:- 20 -

(Translation)
Stated at fair value based on the market price at the end of the
fiscal year
(A difference between the book value and the market value isincluded in capital, and sale cost is calculated by the moving
average method).
Non-marketable securities:
Stated at cost based on the moving average method(ii) Inventories
Oki and its domestic consolidated subsidiaries apply the cost method, and overseas
consolidated subsidiaries mainly apply the lower of cost or market value.
(iii) Derivatives
Stated at market value(2) Depreciation and amortization(i) Property, plant and equipment
Oki and its domestic consolidated subsidiaries mainly apply the declining-balancemethod; overseas consolidated subsidiaries mainly apply the straight-line method.
(ii) Intangible assets
Oki and its domestic consolidated subsidiaries apply the straight-line method.
For software for sale in the market, the depreciation is based on the estimatednumber of years for sales (3 years). For software for internal use, the straight-line
method, based on the estimated durable years(5years), is used.
Overseas consolidated subsidiaries mainly 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, Oki and its domestic
consolidated subsidiaries calculate the amount of potential loss by using the historicalloss ratio for non-classified loans/receivables and individual assessment for classified
loans/receivables.
Overseas consolidated subsidiaries calculate the amount ofpotential loss by individually assessing the possibility of collection for specificloans/receivables.
(ii) Retirement benefits
To prepare for payment of retirement benefits to employees, Oki 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.
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- 21 -

(Translation)
employees at the time of their accrual in each fiscal year, and the amortization of suchgains and losses is deemed to be effective from the year after the one in which theyarise.
(Additional information)
Oki and certain of its consolidated subsidiaries obtained approval for returning thepast substitutional portion by the Welfare Pension Fund on December 31, 2004 andstarted a point-type retirement benefit plan and cash balance plan-type pension plan on
January 1, 2005, shifting from the welfare pension fund system to a defined-benetfit
pension plan.
As a result of this shift, the projected benefit obligation has declined, and a profitof ¥15,361 million of prior service costs was accrued. This profit is amortized by thestraight-line method over 14 years within the average remaining years of service of
employees. As a result of this, operating income/ordinary income and net income
before taxes for this fiscal year increased by ¥248 million and ¥51 million, respectively.
In addition, certain domestic consolidated subsidiaries have discontinued theirapproved retirement annuity system and shifted to a defined contribution pension plan.
As a result, net income before tax adjustment for this fiscal year declined by ¥37
million.
(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.
Oki abolished the Directors’ retirement allowance system by resolution of thegeneral meeting of shareholders in June 2004. ¥348 million, equivalent to the
Directors' retirement allowance for the period up to this general meeting ofshareholders, is included in “other non-current liabilities.”(4) Accounting processing of consumption tax
The tax-exclusion method is used for accounting of consumption tax and local
consumption tax.
(5) Other
Application of consolidated tax payment:
The consolidated tax payment is applied.

- 22 -

(Translation)

Transcript of Account Auditors’ Report on Consolidated Financial Statements

Independent Auditors’ Report
May 17, 2005
Mr. Katsumasa Shinozuka, President and Chief Executive Officer

Oki Electric Industry Co., Ltd.
Ernst & Young ShinNihon
Eisei Kaneda (seal),
Engagement Partner, Certified Public Accountant
Kazuaki Saito (seal),
Engagement Partner, Certified Public Accountant
Yasuhiro Imai (seal),
Engagement Partner, Certified Public Accountant
We have audited the consolidated financial statements, that is the consolidated balance sheets and theconsolidated statements of income, of Oki Electric Industry Co., Ltd. for the 81st term from April 1,
2004 to March 31, 2005 in accordance with Article 19 Paragraph 2 Item 3 of the Law for Special
Exceptions to the Commercial Code Concerning Corporate Audits. Oki Electric Industry Co., Ltd.’smanagement 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 these consolidated
financial statements are free of material misstatement. Audits are conducted based on a test basis, andinclude reviews of accounting policies and methods that the management adopts, and evaluation ofmanagement estimates and the presentation of the consolidated financial statements as a whole. We
believe we have obtained reasonable bases for the expression of our opinion as a result of our audit. In
addition, our audit includes auditing procedures that we considered necessary in order to conduct our
audit for Oki Electric Industry Co., Ltd.’s subsidiaries.
As a result of the audit, we concluded that the consolidated financial statements fairly present Oki
Electric Industry Co., Ltd.’s and its subsidiaries’ assets and income or loss in accordance with law and
the Articles of Incorporation.
No conflict of interest as defined by the Accounting Law exists between Oki Electric Industry Co., Ltd.,
our firm (Ernst & Young ShinNihon) and respective engagement partners.

- 23 -

(Translation)

Transcript of Corporate Auditors’ Report on Consolidated Financial Statements

Corporate Auditors’ Report on Consolidated Financial Statements
The Board of Corporate Auditors received reports from each Corporate Auditor on the methods
and results of their audit of the consolidated financial statements (the consolidated balance sheets
and the consolidated statements of income) of Oki Electric Industry Co., Ltd. for the 81st fiscal
year (from April 1, 2004 to March 31, 2005), and upon discussion, the board prepared this audit
report as follows.
1.

Outline of Corporate Auditors’ audit methods
In accordance with auditing policies and auditing plans prescribed by the Board of Corporate
Auditors, each Corporate Auditor received reports and explanations on the consolidated
financial statements from the Directors, the internal auditing division and the Account
Auditors.

2.

Audit results
We find the audit methods and results by Ernst & Young ShinNihon
to be appropriate.

the Account Auditors,

May 19, 2005
The Board of Corporate Auditors, Oki Electric Industry Co., Ltd.
Takahisa Inagawa, Standing Auditor (seal)
Yoshiyuki Honjo, Standing Auditor (seal)
Hiroyuki Katagiri, Standing Auditor (seal)
Ieji Yoshioka, Auditor (seal)

Note: Standing Auditor Hiroyuki Katagiri and Auditor Ieji Yoshioka are external auditors inaccordance with Paragraph 1, Article 18 of the Law for Special Exceptions to theCommercial Code Concerning Corporate Audits.

- 24 -

(Translation)

Non-Consolidated Balance Sheet(as of March 31, 2005)
Account title(Assets)
I.
Current assets
1. Cash and deposits
2. Notes receivable
3. Accounts receivable, trade
4. Inventories
Finished goods
Semi-finished goods
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 andequipment
2. Intangible assets(1) Goodwill(2) Facility rights andleasehold(3) Software
Total intangible assets

Amount18,297
1,682
86,785
20,7684,062
9,824
46,8994,570

86,124645
21,48922,659
7,898
3,240
(87)
248,736

91,455(60,370)8,534(6,996)
296,824(265,288)
165(147)
85,962(72,364)(Unit: millions of yen)Account title(Liabilities)
I.
Current liabilities
1. Notes payable
2. Accounts payable, trade
3 Short-term borrowings
4. Long-term borrowings to be
paid within a year
5. Bonds to beredeemed within a year
6. Accounts payable, others
7. Accrued income taxes
8. Other accrued expenses
9. Deposits
10. Other current liabilities
Total current liabilities

Amount260
91,08743,65245,771
10,0006,099
25,311
796
1,637
1,282
225,898

II.
1.
2.
3
4.
5.

Non-current liabilities
Bonds
Long-term borrowings
Long-term deposits
Retirement benefits
Other non-current liabilities
Total non-current liabilities
Total liabilities

31,08549,50053,7395,000
25,315364
133,919359,817

1,537
31,53517
13,598
16,110435(Shareholders’ equity)
I.

Common stock

67,877

94,319
926
273
9,065
10,265

3. Investments and other assets(1) Investments in securities(2) Shares of affiliatedCompanies(3) Contribution(4) Contribution to affiliatedCompanies(5) Long-term loans toemployees(6) Long-term loans toaffiliated companies(7) Long-term prepaid expenses(8) Long-term doubtfulreceivables(9) Long-term deferred tax
assets(10) Other investments and otherassets(11) Allowance for doubtfulreceivables
Total investments and otherassetsTotal fixed assets

134,695
239,280

Total assets

488,017II.
Additional paid-in capital
1. Capital reserve
2. Other additional paid-in
CapitalCapital reserve decline
ProfitTotal additional paid-in
Capital16,98020,816

20,816
37,797

46,47844,658283

III. Retained earnings
1. Unappropriated retained
Earnings
Total retained earnings

10,525
10,525

1,350
IV.
23
22,2107,400

Unrealized holding gains
on securities

12,211

V.
Treasury stock
Total shareholders’ equity(211)
128,199

Total liabilities andshareholders’ equity

488,017

3,238
11,9103,498(6,358)- 25 -

(Translation)
Notes:
1. Short-term monetary receivable from affiliated companies:
67,097 million yen
Long-term monetary receivable from affiliated companies:
23,376 million yen
Short-term monetary payable to affiliated companies:
52,838 million yen
2. Guarantee liabilities:
8,151 million yen
3. Net assets provided for in Article 124-3 of the Commercial Code Enforcement Regulations:12,211 million yen
4. Stock preemptive rights in accordance with Article 280-19 of the former Commercial Code
(1) Preemptive rights in accordance with the resolution of the general meeting of shareholders on June29, 2000:
Common shares
Type of shares:
Number of shares:
341,000 shares
Exercise price:¥866
Exercisable period: July 1, 2002 to June 30, 2005
(2) Preemptive rights in accordance with the resolution of the general meeting of shareholders on June
28, 2001:
Common shares
Type of shares:
Number of shares:
334,000 shares
Exercise price:¥613
Exercisable period: July 1, 2003 to June 30, 2006

- 26 -

(Translation)

Non-Consolidated Statement of Income(From April 1, 2004 to March 31, 2005)(Unit: millions of yen)Account title
I.

Net sales

439,355

II.

Cost of sales

348,907

Gross profitIII.

90,447

Selling, general and administrative expenses

82,444

Operating income
IV.

8,003

Non-operating income

1. Interest income

627

2. Interest income on securities

7

3. Dividend income

5,584

4. OtherV.

828

Non-operating expenses

1. Interest paid

3,310

2. Interest paid for bonds

1,375

3. Other

2,076

Ordinary income
VI.

7,048

6,763
8,288

Extraordinary profit

1. Gain on sales of investments in securities

3,025

3,025

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

2,193

2. Loss from securities revaluation

1,424

3. Bad debt expenses

941

4. Special retirement payments

762

Net income before taxes

5,322
5,990

Income taxes(4,393)

Income taxes deferred

7,184

Net income

2,791
3,199

Retained earnings carried over from the previous year

0

Profit reserve decline

7,326

Unappropriated retained earnings

10,525

Notes:
1. Transactions with affiliated companies
Sales:
Purchases:
Non-operating transactions:
2. Net income per share:

113,008 million yen
115,572 million yen
5,951 million yen
5.23 yen- 27 -

(Translation)
Significant Accounting Policies
1.

Valuation standards and methods for negotiable securities, etc.
Held-to-maturity securities: amortized or accumulated to face value
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 capital,
and the sale cost is calculated by using the moving average method).
Non-marketable securities: Stated at cost based on the moving average method
Derivatives: Stated at market value

2.

Valuation standards and methods for inventories
Finished goods and semi-finished goods: Stated at cost based on the moving averagemethodWork in process: Stated at cost based on the specific identification method
Materials and supplies: Stated at cost based on the last purchase price method3.

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 (3 years)
Software for internal use:straight-line method based on the estimated durable years (5 years)
Others: straight-line method

4.

Basis for provision of reserves
Allowance for doubtful receivables
To prepare for any losses on accounts receivable and loans, Oki calculates the amountof potential loss by using the historical loss ratio in case of non-classified
loans/receivables and by individual assessment in case of classified loans/receivables.
Retirement benefits
To prepare for payment of retirement benefits to employees, Oki records the amountrecognized to accrue at the end of the fiscal year based on the estimated values ofretirement 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 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- 28 -

(Translation)
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, and the amortization of suchgains and losses is deemed to be effective from the year after the year in which they arise.
(Additional information)
Oki obtained approval for returning the past substitutional portion by the Welfare
Pension Fund on December 31, 2004 and started the point-type retirement benefit plan andcash balance plan-type pension plan on January 1, 2005, shifting from the welfare pension
fund system to a defined-benefit pension plan.
As a result of this shift, projected benefit obligation has declined, and profit of¥10,428 million of prior service cost accrued. This profit is amortized by the straight-line
method over 14 years within the average remaining years of service of employees. As aresult of this, operating income/ordinary income and net income before taxes for this fiscal
year increased by ¥159 million.
Reserve for Directors' retirement
Oki abolished the Directors’ retirement allowance system by resolution of the general
meeting of shareholders in June 2004. ¥348 million, equivalent to the Directors'
retirement allowance for the period up to this general meeting of shareholders, is included
in “other non-current liabilities.”
5.

Accounting processing of consumption tax
The tax-exclusion approach is applied for accounting of consumption tax and local
consumption tax.

6.

OthersApplication of consolidated tax payments:
Consolidated tax payments are applied.

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(Translation)

Proposed Appropriation of Retained Earnings(Unit: yen)
Item

AmountUnappropriated retained earnings at the end of the fiscal year

10,525,590,894

To be appropriated as follows:
Dividend

1,834,884,756(¥3 per share)
Retained earnings to be carried forward to the next fiscal year

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8,690,706,138

(Translation)

Transcript of Account Auditors’ Report

Independent Auditors’ Report
May 17, 2005
Mr. Katsumasa Shinozuka, President and Chief Executive Officer
Oki Electric Industry Co., Ltd.

Ernst & Young ShinNihon
Eisei Kaneda (seal),
Engagement Partner, Certified Public Accountant
Kazuaki Saito (seal),
Engagement Partner, Certified Public Accountant
Yasuhiro Imai (seal),
Engagement Partner, Certified Public Accountant
We have audited the statutory report, that is the balance sheets, the statements of income, the business
report (limited to accounting matters), and the proposed appropriation of unappropriated retained
earnings, and its supporting schedules (limited to accounting matters) of Oki Electric Industry Co.,
Ltd.’s 81st term from April 1, 2004 to March 31, 2005 in accordance with Article 2 Item 1 of the Law
for Special Exceptions to the Commercial Code Concerning Corporate Audits. With respect to theaforementioned business report and supporting schedules, our audit was limited to those matters derived
from the accounting books and records of Oki Electric Industry Co., Ltd. and its subsidiaries. The
statutory report and supporting schedules are the responsibility of Oki Electric Industry Co., Ltd.’smanagement. Our responsibility is to express an opinion on the statutory report and supporting
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 of material misstatement. Audits are conducted based on a test basis, and include reviews ofaccounting policies and methods that management adopts, and evaluation of management estimates andthe presentation of financial statements and supporting schedules as a whole. We believe that we haveobtained reasonable bases for the expression of our opinion as a result of our audit. In addition, ouraudit includes auditing procedures that we considered necessary in order to conduct our audit for Oki
Electric Industry Co., Ltd.’s subsidiaries.
As a result of the audit, our opinion is as follows:(1) The balance sheets and the statements of income fairly present the financial position and theresults of operations of the Company in conformity with related laws and regulations and the
Articles of Incorporation of the Company.
(2) The business report (limited to accounting matters) fairly presents the status of the Company
in conformity with related laws and regulations and the Articles of Incorporation of theCompany.
(3) The proposal for appropriation of earnings has been prepared in conformity with related laws
and regulations and the Articles of Incorporation of the Company.
(4) With respect to the supporting schedules (limited to accounting matters) there are no items to
be noted that are not in conformity with the provisions of the Commercial Code.
No conflict of interest as defined by the Accounting Law exists between Oki Electric Industry Co., Ltd.,
our firm (Ernst & Young ShinNihon) and respective engagement partners.

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(Translation)

Transcript of Corporate Auditors’ Report

Corporate Auditors’ Report
Each Corporate Auditor reported to the Board of Corporate Auditors on the business execution of
the Directors for the 81st fiscal year (from April 1, 2004 to March 31, 2005), and upon discussion,
the Board prepared this audit report as follows.
1. Outline of Corporate Auditors’ audit methods
In accordance with auditing policies and auditing plans prescribed by the Board of Corporate
Auditors, in addition to participating in the Board of Directors and other important meetings, each
Corporate Auditor learned about the state of business operations from the Directors, the internal
auditing division and the Account Auditors, and requested business reports from subsidiaries ifnecessary. In addition, the Board of Corporate Auditors received reports and explanations fromthe Account Auditors for review of financial statements and their supporting schedules.
In addition to the audit method mentioned above, the Board of Corporate Auditors requested
reports from the Directors, if necessary, for detailed surveys with regard to the potential forcompetitive transactions by the Directors, conflicts of interest between the Directors and theCompany, uncompensated allocation of profits from the Company, uncommon transactions withsubsidiaries or shareholders, and acquisition and disposal of treasury stocks.
2. Audit results(1) We find the audit methods and results by Ernst & Young ShinNihon the Account Auditors,
to be appropriate.
(2) We find that the business report correctly indicates corporate status in accordance with law
and the Articles of Incorporation.
(3) Considering the state of corporate assets and other circumstances, we find no items that
require special reporting with regard to the agenda item for appropriation of retained
earnings.
(4) We find no items that require special reporting with regard to the schedules of financial
statements, which correctly indicate the items to be stated.
(5) We find no illegal activities of the Directors with regard to business operations, and no
significant breaches of law or the Articles of Incorporation.
Further, we find no breach of obligations by the Directors with regard to competitivetransactions by the Directors, conflicts of interest between the Directors and the Company,
uncompensated allocation of profits by the Company, uncommon transactions withsubsidiaries or shareholders, and acquisition and disposal of treasury stocks.
May 19, 2005
The Board of Corporate Auditors , Oki Electric Industry Co., Ltd.
Takahisa Inagawa, Standing Auditor (seal)
Yoshiyuki Honjo, Standing Auditor (seal)
Hiroyuki Katagiri, Standing Auditor (seal)
Ieji Yoshioka, Auditor (seal)
Note: Standing Auditor Hiroyuki Katagiri and Auditor Ieji Yoshioka are external auditors inaccordance with Paragraph 1, Article 18 of the Law for Special Exceptions to the Commercial Code
Concerning Corporate Audits.

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(Translation)

Reference Document for the Exercise of Voting Rights
1.

Number of voting rights held by all shareholders:2.

Agenda and reference matters603, 320

Agenda 1: Approval of the proposed appropriation of unappropriated retained earnings forthe 81st fiscal year
Details of the proposed appropriation of unappropriated retained earnings for the 81st
fiscal year are as described in the attachment (page 30).
Our basic policy is to determine the amount of dividends by considering each year’s
profitability and retained earnings for future business development.
Based on this policy, we would like to set our dividend for this year as 3 yen per share.

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(Translation)
Agenda 2: Partial amendment to the Articles of Incorporation
1.

Reasons for amendment
1) Following the execution of the “Law for Partial Revision of the Commercial Codefor the Introduction of the Electronic Announcement System” (No. 87, 2004) on
February 1, 2005, we will change our announcement method from placement in the
Nihon Keizai Shimbun to electronic announcements and establish procedures incase an electronic announcement is not possible due to unavoidable events.
2) We will reduce the number of the Directors upon establishment of an executive
system management structure.

2.

Details of amendments
Details of amendments are as follows.
(Underlined portions are the amendments.)
Current Articles of Incorporation

Amendment Draft

Article 4. Announcement Method
Announcements of the Company shall be conductedby advertising in the Nihon Keizai Shimbun
published in Tokyo.

Article 4. Announcement Method
Announcements of the Company shall be conductedby electronic announcement. Provided, however,that they shall be done by advertising in the Nihon
Keizai Shimbun published in Tokyo in case electronic
announcement is not possible due to unavoidable
events.

Article 17. Number of Directors
The number of Directors of the Company shall be up
to twenty (20).

Article 17. Number of Directors
The number of Directors of the Company shall be up
to fifteen (15).

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(Translation)
Agenda 3: Election of three Directors
The tenure of Directors Katsuhiko Sano, Nobuhide Hara and Minoru Mori will
expire at the end of this general meeting of shareholders.
We accordingly request that you elect three Directors from among the following
candidates.
Candidates for Directors (three):CandidatenumberName(Date of birth)

Brief personal profile andrepresentation for other company
April 1969
March 1993

1

Nobuhide Hara
(February 16, 1947)

June 1989
April 1990
April 2002
June 2004

April 1970
Nov. 1990
2

3

Hideichi Kawasaki(January 10, 1947)

Minoru Morio(May 20, 1939)

April 2001
April 2004
April 2005

Number of Oki
shares held

Joined Oki
General Manager, Software Center,
Telecommunications Systems Business
Division
Director
Executive Officer
Senior Executive Officer (current)
CIO (current)
Senior Vice President (current)

20,000Joined Oki
General Manager, Sales Department 3,
Financial Systems Sales Division
Executive Officer
Senior Executive Officer (current)
General Manager, Sales Promotion
Division (current)

16,000April 1963
April 1988

Joined Sony
General Manager, Personal Video
Business Division, Sony

June 1988
June 1990
June 1993
June 1999
June 2000
June 2001
June 2004

Director, Sony
Senior Executive Director, Sony
Executive Vice President, Sony
Technical Representative, Sony
Executive Vice Chairman, Sony
Director, Oki (current)
Advisor, Sony (current)

10,000

CIO: Chief Information Officer
Note: Mr. Minoru Morio is an advisor to Sony Corporation. While Sony and Oki have sales transactions
for semiconductors, they are in a competitive relationship.
Mr. Morio fulfills the requirement for an external director set forth in Item 7-2, Paragraph 2, Article
188 of the Commercial Code.

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(Translation)
Agenda 4: Revision of wages for Directors and Auditors
Wages for Oki Directors were set at a maximum of 40 million yen per month at the
66th general meeting of shareholders held on June 28, 1990; wages for Corporate Auditors
were set at a maximum of 7 million yen per month at the 73rd general meeting ofshareholders held on June 27, 1997. To implement flexible operations, we would like torevise wages for Directors to up to 480 million yen per year, and wages for Corporate
Auditors to up to 84 million yen per year.
Such wages for Directors will not include any salaries Directors receive as employees.
Upon approval of Agenda 3 per our draft, the number of Directors will be ten. The
number of the Corporate Auditors is four.

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(Translation)
Agenda 5: Issuance of stock acquisition rights as stock options
Oki is to issue stock acquisition rights as stock options to Directors engaged in the business
operations of the Company, Executive Officers, senior staff members participating inmanagement and Directors of certain subsidiaries for the following reasons and per thefollowing methods in accordance with the provisions of Articles 280-20 and 280-21 of theCommercial Code. Accordingly, we request that you approve this matter.
1.

Reason for issuing stock acquisition rights under privileged conditions
The stock acquisition rights are to be issued as stock options, free of charge, toDirectors engaged in the business operations of the Company, Executive Officers,
senior staff members participating in management and Directors of certain subsidiaries,
to further enhance their motivation and willingness to improve corporate value throughtheir management efforts, which we believe will consequently bring profits to eachshareholder.

2.

Persons allotted stock acquisition rights
The stock acquisition rights are to be allotted to Directors engaged in the business
operations of the Company, Executive Officers, senior staff members participating in
the management and Directors of certain subsidiaries.

3.

Outline of the issuance of stock acquisition rights(1) Type and number of shares to be issued for the purpose of stock acquisition rights
The upper limit of new common shares to be issued is 442,000 shares.
In the event Oki splits or consolidates its common shares, the number of shares
to be issued for the purpose of the stock acquisition rights not yet exercised shall be
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) Number of stock acquisition rights to be issued
Up to 442
(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 stock acquisition rights
The rights are granted free of charge.

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(Translation)(4) Payment for shares on the exercise of the rights
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 Oki shares on theTokyo Stock Exchange during the month prior to the month that includes the issue
date of stock acquisition rights, 2) the closing price for Oki shares on the day prior
to the issue date of stock acquisition rights, or 3) the closing price for Oki 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 case that Oki issues new shares at a price less than the market
price (excluding the issuance of new shares by the exercise of stock acquisitionrights), the exercise price shall be adjusted in accordance with the formula shown
below, and fractions less than one yen shall be 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 Oki 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 of exercise of stock acquisition rights
From July 1, 2007 to June 28, 2015
(6) Conditions for exercise of stock acquisition rights
a. The following restrictions shall be established for exercise of stock acquisitionrights:1) Period from July 1, 2007 to June 30, 2008:
A maximum of 34% of the allotted number may be exercised.
2) Period from July 1, 2008 to June 30, 2009:
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, 2009 to June 28, 2015:
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 stock acquisition rights upon the holder’s death shallbe allowed to exercise the rights as follows:In case of inheritance before June 30, 2009, the rights may be exercised by June30, 2010; or- 38 -

(Translation)
In case of inheritance on or after July 1, 2009, the rights may be exercised for
one year from the date of inheritance; provided, however, that the rights may not
be exercised after June 28, 2015.
c. Other conditions regarding the exercise of rights shall be subject to the stockacquisition right allocation agreement concluded between Oki and the holders of
the rights.
(7) Cancellation of stock acquisition rights
Stock acquisition rights may be cancelled free of charge in case the rights holder nolonger falls under any of the conditions for exercise provided for in the previous
paragraph.
(8) Restrictions on transfer of stock acquisition rights
The transfer of stock acquisition rights is subject to the approval of the Board of
Directors.

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(Translation)
Appendix

Instructions for the Exercise of Voting Rights via the Internet

1.

Matters requiring your agreement concerning the exercise of voting rights via the Internet
We kindly request your consent to the following regarding exercise of voting rights via theInternet.
1) Exercise of voting rights via the Internet is only possible by accessing the voting site designatedby Oki (please refer to the following website address). Please note that cellular phones cannot
access this site. In case of voting via the Internet, you will need the voting rights exercise
code and password specified in the voting right exercise form enclosed in the notice of theordinary general meeting of shareholders. The voting right exercise code and the password
specified in this notice will be effective only for this general meeting of shareholders.
2) We will regard the exercise of rights via the Internet to be effective if you exercise your voting
rights both in writing and via the Internet.
3) We will regard the last exercise via the Internet to be the effective exercise in case you exercise
your voting rights more than once.
4) You will bear the expense in connection to use of the Internet (service provider access fees,
communication charges, etc.)

2.

Instructions for voting via the Internet
1) Access http://www.it-soukai.com.
(Please note that the above address (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.”(The voting rights exercise code and password are specified at the upper right hand side of theballot enclosed in the notice of the general meeting of shareholders.)
3) Proceed to vote in accordance with the site instructions.

3.

Technical specifications
1) Operating system: Windows or Macintosh operating systems(Cellular phones, PDAs and game terminals may not be used.)
2) Browser: Internet Explorer 5.5 or above, Netscape Communicator 4.7 or above
3) Internet connection: any service providing internet access

Contact:
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 Computer, Inc. (U.S.)
Netscape Communicator is the registered trademark of Netscape Communications Corporation (U.S.).

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