(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 7, 2010

NOTICE OF 86TH ORDINARY GENERAL MEETING OF SHAREHOLDERS
Dear Shareholders,Oki Electric Industry Co., Ltd. (the “Company”) would hereby like to inform you that the 86th
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 review 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 28 (Monday), 2010 (JST).

[Exercise of voting rights via 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 via 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,
Hideichi Kawasaki,
President, Representative Director
Oki Electric Industry Co., Ltd.
3-16-11 Nishi-shinbashi, Minato-ku, Tokyo-1-

(Translation)

1.
2.

Date and Time:
Location:

Tuesday, June 29, 2010, from 10:00 a.m.
Nippon Seinen-kan Hall, 7-1 Kasumigaoka, Shinjuku-ku, Tokyo

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 86th fiscal year (from April 1, 2009 to March 31,
2010)
2. Non-consolidated Financial Statements for the 86th fiscal year (from April 1,2009 to March 31, 2010)
Items to be resolved:
Agenda 1:
Agenda 2:

Partial Amendment to the Articles of Incorporation
Election of Six (6) 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 86th 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, 2009 to March 31, 2010)
1.

Status of the OKI Group(1) Operating progress and results
In the current fiscal year ended March 2010, the world economy, conditions varying
from region to region, showed signs of slow but steady recovery from the worst effects ofthe downturn which was triggered by the financial crisis which took place in the latter halfof 2008. This recovery was promoted by economic stimulus measures implemented bygovernments worldwide and by improved corporate performance. While we observe
recovery in areas such as corporate investment and personal consumption in the domestic
market, prospects for a full-fledged recovery will take somewhat longer, given prevailingdeflationary trends and further aggravation of unemployment rate.
In this business environment, the OKI Group has been working to revamp its businessstructure so as to establish the strong management platform capable to generating stableprofits. As part of its measures for “acceleration of business selection and concentration,”
the Group spun off a semiconductor company in October 2008 and transferred 95% ofshares in that company to Rohm Co., Ltd. As a result, sales decreased ¥54.1 billion while
operating income rose ¥5.1 billion during the fiscal year under review compared to theprevious fiscal year.
As for the business performance excluding the effects of the semiconductor
operations, sales were ¥443.9 billion, down ¥47.7 billion (9.7%) compared to the previous
fiscal year. This decline was due to several factors, including saturated ATM replacement
demand in domestic retail markets as well as large projects for bank branch systems, theimpact of the strong yen, and the decline in sales for enterprises and component-related
businesses, caused by the weak economy. However, the Group was able to offset the
impact of the falling income from declining volumes, price reductions, and the high valueof the yen through its efforts in reducing production and procurement costs and optimizing
fixed costs. As a result, operating income was ¥14 billion, up ¥8.4 billion from theprevious fiscal year.
Ordinary income was ¥8.8 billion, up ¥15 billion compared to the previous fiscal year.
Net income was ¥3.6 billion, a significant improvement of ¥48.6 billion compared to theprevious fiscal year, when the Group recorded large extraordinary losses caused byrevamping its business structure and changing various systems.
Non-consolidated results of the Company were similar to consolidated results.
However, sales for the fiscal year under review stood at ¥200.5 billion, down 26.0% or¥70.6 billion, year-on-year; operating income was ¥3.5 billion, up ¥12 billion; ordinary
income was ¥5.1 billion, up ¥13.2 billion; and, net income was ¥2.7 billion, up ¥37.9
billion.

-3-

(Translation)

We deeply regret to say that there will be no payment of dividend to shareholders forthe fiscal year under review since it was unable to secure the resources needed for dividend
payment.
Net sales by segment are as provided below.
- Net Sales(Unit: billions of yen)under review)

Increase or
decrease

Compared to theprevious year (%)

302.3

274.9

(27.4)

(9.1)

160.7
28.5

145.2
23.8

(15.5)(4.7)(9.7)(16.4)

Sub-total

491.6

443.9

(47.7)(9.7)

Semiconductors

54.1

-

-

-

Segment
Info-telecom
systems
Printers
Others

FY2008 (reference:

FY2009 (the year

previous year)

Total
545.7
443.9
(101.8)(18.6)
Note: Figures less than ¥100 million for each item are rounded to the nearest ¥100 million. The amounts of“increase or decrease” are calculated on the basis of figures in units of ¥100 million.

The following provides a summary of each segment.
Info-telecom systems
Sales to external customers were ¥274.9 billion, down ¥27.4 billion (9.1%) comparedto the previous fiscal year. Total sales of the financial system business decreased from theprevious fiscal year due to saturated ATM replacement demand in domestic retail markets
as well as large projects for bank branch systems, despite sales growth of ATMs in China.
In the communication system business, total sales remained almost unchanged from theprevious fiscal year because the Group trimmed unprofitable products based on“acceleration of business selection and concentration” despite an increase in the shipmentsof GE-PON for telecom carriers. In addition, total sales of the info-telecom systembusiness decreased because business for private corporations was affected by reduced
investments mainly by manufacturing industries, despite growing sales to government
agencies.
Operating income was ¥14.6 billion, up ¥7.6 billion from the previous fiscal year
because decrease in marginal profit from volume decline was offset by reducing production
and procurement costs and optimizing fixed costs.

Printers
Sales to external customers totaled ¥145.2 billion, down ¥15.5 billion (9.7%)
compared to the previous fiscal year. These included a decrease of ¥9.5 billion due to theappreciation of the yen. With regard to sales by product, sales of business-use color
printers (color NIP) decreased from the previous fiscal year due to declining unit prices andtendency to restrain color printing resulting from the sluggish economy, although the unit-4-

(Translation)
sales of complex machines (MFP) increased due to the launch of a new model.
Sales of monochrome printers (monochrome NIP) increased from the previous fiscal
year because, despite a fall in unit price, the unit sales increased with support from sales
promotion activities in Europe, together with the effects of launching new products. Salesof dot impact printers (SIDM) decreased from the previous fiscal year due to an overall
contraction of the global market.
Operating income was ¥6.3 billion, down ¥1.5 billion from the previous fiscal year
due to the impact of currency exchange, decrease in marginal profit from volume decline
and price decline, while the Group made efforts to reduce production and procurement
costs and optimize fixed costs.
Other segments
Among the proprietary businesses of subsidiaries, the component-related businessremained sluggish due to the effects of the economic downturn that started in the latter halfof 2008.
As a result, sales to external customers were ¥23.8 billion, down ¥4.7 billion (16.4%)
from the previous fiscal year and operating loss was ¥0.4 billion, up ¥1 billion from theprevious fiscal year, because decrease in marginal profit from volume decline was offset by
optimizing fixed costs and other efforts.
(2) Capital expenditure
Capital expenditures for the fiscal year equaled ¥8.6 billion.
Investment amounts by segment were as follows.
(Unit: billions of yen)Segment

Amount ofcapitalexpenditure

Info-telecom systems

3.5

Printers

4.2

Others
Total

Major investments
ATM products and cash management terminals for financial andretail store markets; investments in research, development andproduction of new products for network service and network
infrastructure businesses
Investments in R&D, development and production activities
relating to business-use printers

0.9
8.6

(3) Financing
Funds required for the term under review were obtained from our own funds andborrowed funds.
Borrowing funds are mainly long-term borrowings, which are used for the scheduled
repayment of long-term borrowings and the redemption of corporate bonds.
(4) Future challenges
The global economy is now on a recovery track from a rapid and severe recession
following a financial crisis triggered by the Lehman Shock. However, circumstances suchas reduced corporate capital investment, a slowdown of consumer spending, and an
unemployment rate remaining at a high level do not promise an optimistic outlook.

-5-

(Translation)
Furthermore, there are also deflationary concerns in Japan. Given these circumstances, inFebruary 2010, the OKI Group announced a medium-term management plan to end in 2012.
Its basic concept is to establish a business structure that enables stable profits to begenerated without depending on sales expansion even under the severe businessenvironment.” The Group will carry out the following measures to achieve sales of ¥500
billion and operating income of ¥18 billion in 2012, the business targets specified in the
plan.
○

○
○

○

○

○

The Group will maximize profits on a group consolidated basis and will shift its
business management from a market base to a product base in conformity with its
organizational system to clarify business responsibility. Sales units included among
business divisions will be combined to establish the Sales Division and offer OKI
products to customers by one-stop solution.
Core business processes of Group companies will be incorporated in Oki ElectricIndustry to strengthen its ability to develop and manufacture products.
The Group will combine together group companies by function and horizontally
integrate them, aiming to reduce group management costs by 20% and to makecommon indirect operations more efficient by establishing a shared company.
Through these measures, the Group will achieve an appropriate personnel assignmentand reduce outsourcing costs and duplication of administration man-hour.
The Group will integrate procurement functions and establish the Group Procurement
Department to centralize procurement and improve procurement activities at thedevelopment stage and strengthen its overseas procurement capability. The Groupwill aim to reduce the total amount of goods procured by 10% through these measures
together with existing measures to reduce procurement costs.
The Group will improve productivity by enhancing profitability of software andreorganizing hardware production sites. For software, the Group will consolidate
common indirect divisions, operate projects together with Group companies, promote
self-manufacturing by making optimum use of resources, reduce outsourced unit pricethrough strict appraisals, and promote standardization of software structures andsystem designs. Furthermore, the overseas software design system will be reviewed.
For hardware, the Group will review the roles and positions of individual
production sites in Japan and overseas, and realign them to shorten TAT throughtotal manufacturing framework within the site, and to reduce logistics costs between
production sites. Duplicate functions and facilities of individual sites will be
removed to reduce fixed costs.
The Group will generate free cash flow (FCF) and improve its financial structure byaccumulating stable profits and improving working capital.

(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.
83rd year (FY2006)

84th year (FY2007)-6-

85th year (FY2008)

86th year

(Translation)

Sales

718.8

billion yen

719.7

billion yen

545.7

billion yen(current year,
FY2009)443.9billion yen

Net income(36,446)

million yen

567

million yen(45,011)

million yen

3,619

million yen

Net income per share(56.27)

yen

0.83

yen

(65.90)

yen

5.30

yen

Total assets

628.4

billion yen

570.8

billion yen

397.0

billion yen

383.6

billion yen

Net assets

116.0

billion yen

101.4

billion yen

58.7

billion yen

64.8

billion yen

Net assets per share160.13yen

138.55

yen

75.64

yen

84.61

yen

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 theyear. These figures exclude treasury stocks.
3. Assets and sales decreased significantly in the 85th year mainly because sales of the semiconductor businesshave not been recorded since the third quarter of the 85th year as a result of the transfer of the business.

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

CapitalCompany’s
voting rightratio

Oki Wintech Co., Ltd.

2,001 million yen

53%

Oki Data Corporation

19,000 million yen

100

Oki Customer Adtech Co., Ltd.

2,050 million yen

100

Oki Networks Co., Ltd.

490 million yen

100

Oki Data America, Inc.
Oki Europe Ltd.
Oki Electric Industry(Shenzhen) Co., Ltd.

10 million U.S. dollars
33 million pound sterling

100*
100

50 million Renminbi

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
Marketing in thetelecommunications business fieldand planning, development, andsale of products
Sales of printers
Sales of printers
Manufacturing of information
processing equipment and printers

Notes:
1. Figures marked with an asterisk (*) indicate the ratio of voting rights held by subsidiaries of the Company.
2. Oki Supply Center Co., Ltd., a consolidated subsidiary of the Company, ceased to exist with the merger of
Oki Customer Adtech Co., Ltd., a consolidated subsidiary of the Company, on July 1, 2009.
3. Oki Wintech Co., Ltd. will become a wholly-owned subsidiary of the Company through a share exchangewith the Company on June 1, 2010.

(ii)
-

-

Major partners
Major technical partners:
Alcatel-Lucent (US)International Business Machines Corporation (US)Canon Inc.
Major business partners:
Hewlett-Packard Company (US)Cisco Systems G.K.
ACCESS Co., Ltd.

-7-

(Translation)(7) Major businesses
The OKI Group offers as its core businesses info-telecom systems/equipments, andprinters as well as related solutions and services.
Major business items include the following.
Segment

Info-telecom systems

Printers

Business items
Financial systems, automation equipment systems, ITS-related systems, electronic
government-related systems, ERP systems, computer 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, opticalcommunication equipment, radio communication equipment, broadband accessequipment, network service, network operational support service, etc.
Color printers, monochrome printers, dot impact printers, multi-purpose printers,
etc.

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

Classification
Head office

Branch offices
Oki Electric Industry Co., Ltd.
Business offices
Research institutes

Location
Minato-ku, Tokyo
Hokkaido region (Sapporo, Hokkaido),
Tohoku region (Sendai, Miyagi),
Chubu region (Nagoya, Aichi),Kansai region (Osaka, Osaka),
Chugoku region (Hiroshima, Hiroshima),
Shikoku region (Takamatsu, Kagawa), andKyushu region (Fukuoka, Fukuoka)
Minato-ku (Tokyo), Warabi (Saitama), Honjo(Saitama), Takasaki (Gunma), and Numazu(Shizuoka)
Warabi (Saitama), Osaka (Osaka) and Takasaki(Gunma)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

Oki Networks Co., Ltd.

Head office

Minato-ku, Tokyo

Oki Data America, Inc.

Head office

New Jersey, USA

Oki Europe Ltd.

Head office

Surrey, UK

Oki Electric Industry (Shenzhen)Co., Ltd.

Head office

Guangdong, China-8-

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

Number of employees

Info-telecom systems

9,923

Printers

6,653

Other

1,187

Company-wide (shared)

348

Total

(ii)

18,111

Employees of Oki Electric Industry
Number of employees

Average age

3,170 (decreased by 12 from the end of the previous year)

41.3

Average length ofservice19.1(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 Inc.
The Bank of Tokyo-Mitsubishi UFJ, Ltd.

36.3
26.4
10.9
10.6
10.5

(11) Other significant events of the OKI Group
There are no relevant items.

-9-(Translation)
2.

Shareholders’ Equity
(1)
(2)
(3)
(4)

Number of shares authorized to be issued by the Company:
2,400,000 thousand shares
Number of outstanding shares:
684,256 thousand shares (including 1,785 thousand shares of treasury stock)
Number of shareholders: 107,917
Major shareholders (Top 10):
Number ofshares held
(thousand shares)

Name of shareholder

Percentage ofshares held(%)

Meiji Yasuda Life Insurance Company

34,000

4.98

Japan Trustee Services Bank, Ltd. (trust account)

19,952

2.92

Oki Denki Group Employees’ Shareholdings Committee

14,5382.13

Mizuho Corporate Bank, Ltd.

13,0001.90

Sompo Japan Insurance Inc.

12,986

1.90

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

12,551

1.84

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

10,327

1.51

Dai-ichi Life Insurance Company, Limited

4,690

0.69

Japan Trustee Services Bank, Ltd. (trust account 1)

4,592

0.67

Japan Trustee Services Bank, Ltd. (trust account 6)

4,578

0.67

Notes:
1. The ratios of shares held are calculated after deducting treasury shares (1,785 thousand shares).
2. Dai-Ichi Mutual Life Insurance Company changed its name to The Dai-ichi Life Insurance Company,
Limited on April 1, 2010.

- 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
872(ii) Type and number of shares subject to equity warrants
872,000 shares of the Company’s common stock (1,000 shares per equity warrant)(iii) Status of equity warrants held by the Company’s officers

Issued Number

No. 2 equity warrant (384yen)(Issued on July 18, 2003)
No. 3 equity warrant (458yen)(Issued on July 20, 2004)
No. 4 equity warrant (406yen)(Issued on July 20, 2005)
No. 5 equity warrant (277yen)(Issued on July 28, 2006)
No. 6 equity warrant (277yen)(Issued on July 28, 2006)
No. 7 equity warrant (248yen)(Issued on July 27, 2007)
No. 8 equity warrant (248yen)(Issued on July 27, 2007)

ExerciseperiodDirectors(excluding outside Directors)

Corporate Auditors

Number ofequitywarrants

Number ofholders

Number ofequitywarrants

Number ofholders

July 1, 2005 toJune 26, 2013

200

5

20

1

July 1, 2006 toJune 28, 2014

133

6

21

2

July 1, 2007 toJune 28, 2015

139

6

19

2

July 1, 2008 toJune 28, 2016

89

4

-

-

July 1, 2008 toJune 28, 2016

18

2

11

1

July 1, 2009 toJune 25, 2017

166

4

23

1

July 1, 2009 toJune 25, 2017

33

2

-

-

(2) Equity warrants issued to employees in consideration of performance during the fiscal
year under review
The Company did not issue equity warrants in the fiscal year under review.
(3) Other significant matters concerning equity warrants
The Company resolved to make early redemption of 32nd Unsecured Convertible-BondType-Bonds with Stock Acquisition Rights at the meeting of Board of Directors held on
April 28, 2009, and made an early redemption of the outstanding balance of ¥12 billion on
June 5, 2009.

- 11 -

(Translation)
4.

Corporate Officers(1) Names, etc. of Directors and Corporate Auditors
Note 1
X
X

X
X

Position
Chairman of the Board
President,
Representative Director
Senior Executive Vice
President and Memberof the Board,
Representative Director
Director and SeniorVice President
Director and SeniorVice President

Director
DirectorStanding Corporate Auditor
Standing Corporate Auditor
Standing Corporate Auditor
Corporate Auditor

Name
Katsumasa Shinozuka
Hideichi Kawasaki

Status or main duties
Supervision
Chief Financial Officer, Chief Compliance Officer
In charge of Management Planning Division, Group
Administration Division, General Affairs Division, and Human
Resources Division.
In charge of Information Systems Division and Sales &Marketing Administration Division
Chief Technology Officer
In charge of Systems Hardware Business Division andResearch & Development Center
President & CEO, Oki Data Corporation

Naoki Sato

Masao Miyashita
Yutaka Asai
Harushige Sugimoto
Minoru Morio
Keiichi Fukumura
Yoshikatsu Shiraishi
Noriyuki Kandori
Seiji Nishi

Notes:
1. X indicates executive officer.
2. Director Katsumasa Shinozuka resigned as Representative Director on June 25, 2009 and retained the officeas Director.
3. Director Minoru Morio is an outside Director.
4. Corporate Auditors Noriyuki Kandori and Seiji Nishi are Outside Corporate Auditors.
5. Directors and a Corporate Auditor who resigned during the fiscal year under review are as follows:- Mr. Keiichi Fukumura, Mr. Masayoshi Matsushita, and Mr. Hironori Kitabayashi resigned as Directors on
April 1, 2009.
Mr. Keiichi Fukumura was elected and took office as Corporate Auditor at the 85th
Ordinary General Meeting of Shareholders held on June 25, 2009.
- Mr. Takahisa Inagawa resigned as Corporate Auditor at the conclusion of the 85th Ordinary General
Meeting of Shareholders held on June 25, 2009.
6. Executive officers as of March 31, 2010 are as follows (excluding those who concurrently serve as
Directors).
Position

Name

Senior Vice President

Masasuke Kishi

Senior Executive Officer

Kazuhiro Iritani

Senior Vice President

Sei Yano

Senior Vice President

Hisao Suzuki

Executive Officer
Executive Officer
Executive Officer
Executive Officer
Executive Officer
Executive Officer

Hideto Morizono
Hidetoshi Saigo
Takao Hiramoto
Shuichi Kawano
Yasunori Shibata
Toshiya Hatakeyama

Executive Officer

Masahiko Morioka

Executive Officer
Executive Officer
Executive Officer

Kazunari Kobayashi
Toshinao Takeuchi
Yasushi Kiriku

Principal duty
In charge of Telecom Business Group
President of OKI Networks Co., Ltd.
In charge of Financial Business Group, Public Relations
Division
Chief Information Officer
Manager, Management Planning Division
In charge of CSR Division, Accounting & Control
Division and Audit Office
In charge of Systems Network Plant
Manager, Carriers Business Division
Manager, System Hardware Business Division
Manager, CSR
Manager, Financial Systems Business Division
Manager, Accounting & Control Division
Assistant Manager, Management Planning Division
Assistant Manager, Sales & Marketing Administration
Division
Director, Vice President, Oki Data Corporation
Manager, Human Resources Division
Manager, Financial Systems Division
Manager, Enterprise Business Division- 12 -

(Translation)(2) Compensation paid to Directors and Corporate Auditors
Title
Directors
Corporate Auditors
Total

Number of persons
75
12

Amount of payment¥177 million¥64 million¥241 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 arealso employees.
2.
The number of Directors and Corporate Auditors as of the end of the fiscal year under review is different
because they include those who resigned at the conclusion of the 85th Ordinary General Meeting of
Shareholders held on June 25, 2009.

(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(number of meetings in parenthesis)
Attendance
Attendance ratefrequency
Minoru Morio,
Director
Noriyuki Kandori,Corporate Auditor
Seiji Nishi,
Corporate Auditor

Board of Corporate Auditors meeting(number of meetings in parenthesis)
Attendance
Attendance ratefrequency

13 (13)

100%

-

-

13 (13)100%

16 (16)100%

13 (13)100%

16 (16)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. Noriyuki Kandori, 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 within-house audit sections.
c. Seiji Nishi, 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 at other companies over many years, he madeefforts to formulate the Company’s appropriate audit opinions by making
proper statements and implementing, when necessary, adequate activities- 13 -

(Translation)(ii)

concerning performances of the Board of Corporate Auditors.
Total amount of compensation, etc.
¥32 million (for the three individuals)- 14 -

(Translation)
5.

Status of Accounting Auditor(1) Name: Ernst & Young ShinNihon LLC(2) Compensation, etc.
Amount of payment
1. Compensation, to be paid to the accounting auditor for the fiscal year under review
120 million yen
2. Total sum of cash and profits on other assets that the Company and its subsidiaries
201 million yen
should pay to the accounting auditor
Notes:
1. The Company does not distinguish between auditor compensation regarding (i) auditing in accordance with
the Companies Act, and (ii) auditing in accordance with the Financial Instruments and Exchange Law. The
total of these amounts is recorded above.
2. Among major subsidiaries, Oki Europe Ltd. and Oki Electric Industry (Shenzhen) Co., Ltd. have undergone
statutory audits by accounting auditors other than the accounting auditor of the Company.

(3) Contents of non-audit services
The Company has also hired the accounting auditor for “advisory services on thetransition, etc. to International Financial Reporting Standards,” which is a service otherthan the audits specified in Article 2, Paragraph 1 of the Certified Public Accountants Law,and pays the auditor compensation for that 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 Companies Act. 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.

- 15 -

(Translation)
6.

Policies and procedures of the Company
System to ensure that Directors in the conduct of their business comply with applicablelaws, regulations and the Articles of Incorporation, as well as other procedures of theCompany, in order 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 ensuring compliance, the Company has established the “OKIGroup Charter of Corporate Conduct” and “OKI Group Code of Conduct.”(ii) The Company has established a Compliance Committee chaired by the Chief
Compliance Officer to decide on and examine basic policies regarding complianceprograms.
(iii) In accordance with the basic policies formulated by the Compliance Committee, thedivision responsible for compliance plans, draws up, and promotes specific measures
such as education and training for Directors and employees. In education andtraining, 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.
(v) The Company stands firmly against antisocial groups that threaten the order andsafety of civil society in cooperation with the police and related organizations, andrefuses to have any relationship with them as a whole.
(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.

- 16 -

(Translation)(iii) The Company assigns Directors responsibilities and authority pursuant to rules on
division of duties and authorities.
(5) Procedures to secure appropriate Group (Company and subsidiaries) operations(i) To ensure that Group companies run their operations properly, the Company has
established the “OKI Group Charter of Corporate Conduct” which sets out the values
for the entire Group. In addition, the Company has established the “OKI Group
Code of Conduct” as the code of conduct which all officers and employees of Group
companies should comply with, and is striving to make the code known to all of them.
(ii) The division responsible for compliance implements various measures for promoting
compliance common to the Group through each Group company’s compliance officer.
The Division also determines, through regular monitoring, the implementation statusof such measures by each Group company and reports to the Compliance 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.
(iv) To secure the reliability of financial reporting, the Company and Group companies
establish an internal control system for financial reporting in accordance with related
laws and regulations, and strive to maintain and improve that system.
(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.

- 17 -

(Translation)(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.

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.

- 18 -

(Translation)

Consolidated Balance Sheet(as of March 31, 2010)(Unit: millions of yen)Account title

AmountAccount title(Assets)

Amount(Liabilities)

Current assets

Current liabilities

Cash and deposits

57,844

Notes and accounts payable

54,930Notes and accounts receivable

118,324

Short-term borrowings

127,430

Securities

17,314

Other accrued expenses

23,213Finished goods

21,751Others

24,191Work in process

16,436

Raw materials and supplies

24,638

Total current liabilities

229,765

Long-term liabilities

Deferred tax assets

4,008

Long-term borrowings

45,036

Others9,387

Retirement benefits

39,655

Allowance for doubtful receivables(1,588)Provision for Directors’ retirement benefits

268,117

OthersTotal current assets
Fixed assets
Property, plant and equipment

620
3,752

Total long-term liabilities

89,064

Total liabilities

318,829

Buildings and structures

23,234

Machinery, equipment and delivery equipment

10,648Tool, furniture and fixtures

10,131

Common stock

76,940Land

12,084

Additional paid-in capital

46,744Retained earnings(63,534)

Construction in progress
Total property, plant and equipment
Intangible assets

56
56,155
10,060Shareholders’ equity

Treasury stock
Total shareholders’ equity(408)
59,741

Valuation, translation adjustments and others

Investments and other assets
Investments in securities(Net Assets)

37,369Net unrealized holding gain on other securities

2,095

Long-term loans

1,964

Loss on deferred hedges(660)

Others13,401

Translation adjustments(3,440)Allowance for doubtful receivables(3,427)

Total valuation, translation adjustments and others

Total investments and other assets

49,306Equity warrants

Total fixed assets

115,523

Minority interests in consolidated
subsidiaries

Total assets

383,640- 19 -(2,005)79
6,994

Total net assets

64,810Total liabilities and net assets

383,640

(Translation)

Consolidated Statement of Operations(From April 1, 2009 to March 31, 2010)(Unit: millions of yen)Account title

AmountNet sales

443,949

Cost of sales

322,560

Gross profit

121,388

Selling, general and administrative expenses

107,431

Operating income

13,957

Non-operating income
Interest income

232

Dividend income

877

Corporate brand royalty income

596

Other

698

2,403

Non-operating expenses
Interest expense

4,919

Foreign exchange loss

1,251

Other

1,422

Ordinary income

7,592
8,768

Extraordinary profit
Gain on prior periods adjustment

113

Gain on sales of property, plant and equipment

10

Gain on sales of investments in securities

25

Gain on extinguishment of tie-in shares

26

Gain on transfer of business

298

474

Extraordinary loss
Loss on sales and disposition of property, plant andequipment

1,312

Loss on impairment of fixed assets

702

Loss on sales of investments in securities

20

Write-downs of investments in unconsolidated
subsidiaries and other securities

987

Provision of allowance for doubtful receivables

178

Special retirement payments

689

Expenses for business restructuring

222

Income before income taxes, minority interests andequity in earnings of affiliates

4,113
5,130

Income taxes

1,859

Income taxes deferred(451)

Minority interests

1,407
103

Net income

3,619- 20 -

(Translation)

Consolidated Statement of Changes in Shareholders’ Equity(From April 1, 2009 to March 31, 2010)(Unit: Millions of yen)
Shareholders’ equity
Common stock
Balance as of March 31, 2009
Changes during the term under review
Net changes during the term under review
Balance as of March 31, 2010

76,94076,940Additional paid-in capital
Balance as of March 31, 2009
Changes during the term under review
Net changes during the term under review
Balance as of March 31, 2010

46,744
46,744Retained earnings
Balance as of March 31, 2009
Changes during the term under review
Net income
Net changes during the term under review
Balance as of March 31, 2010

(67,153)
3,619
3,619
(63,534)

Treasury stock
Balance as of March 31, 2009
Changes during the term under review
Purchases of treasury stock
Net changes during the term under review
Balance as of March 31, 2010

(362)
(46)
(46)
(408)

Total shareholders’ equity
Balance as of March 31, 2009
Changes during the term under review
Net income
Purchases of treasury stock
Net changes during the term under review
Balance as of March 31, 2010

56,168
3,619
(46)
3,573
59,741

Valuation, translation adjustments and others
Net unrealized holding gain on other securities
Balance as of March 31, 2009
Changes during the term under review
Changes in items other than shareholders’ equity during the term under review (net)Net changes during the term under review
Balance as of March 31, 2010- 21 -

(593)

2,689
2,689
2,095

(Translation)
Loss on deferred hedges
Balance as of March 31, 2009
Changes during the term under review
Changes in items other than shareholders’ equity during the term under review (net)Net changes during the term under review
Balance as of March 31, 2010
Translation adjustments
Balance as of March 31, 2009
Changes during the term under review
Changes in items other than shareholders’ equity during the term under review (net)Net changes during the term under review
Balance as of March 31, 2010
Total valuation, translation adjustments and others
Balance as of March 31, 2009
Changes during the term under review
Changes in items other than shareholders’ equity during the term under review (net)Net changes during the term under review
Balance as of March 31, 2010
Equity warrants
Balance as of March 31, 2009
Changes during the term under review
Net changes during the term under review
Balance as of March 31, 2010

(467)
(192)
(192)
(660)

(3,450)10
10(3,440)(4,511)
2,506
2,506(2,005)79
79

Minority interests
Balance as of March 31, 2009
Changes during the term under review
Changes in items other than shareholders’ equity during the term under review (net)Net changes during the term under review
Balance as of March 31, 2010
Total Net Assets
Balance as of March 31, 2009
Changes during the term under review
Net income
Purchases of treasury stock
Changes in items other than shareholders’ equity during the term under review (net)Net changes during the term under review
Balance as of March 31, 2010- 22 -

6,948
46
46
6,994

58,683
3,619
(46)
2,553
6,126
64,810(Translation)

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

Scope of consolidation(1) Number of consolidated subsidiaries: 75 companies
Names of major consolidated subsidiaries:
Oki Data Corporation; Oki Customer Adtech Co., Ltd.; Oki Wintech Co., Ltd.;Oki Software Co., Ltd.; Oki Telecommunication Systems Co., Ltd.; Oki
Networks Co., Ltd.; Oki Data Americas, Inc.; Oki Data Manufacturing(Thailand) Co., Ltd.; Oki Europe Ltd.; Oki Electric Industry (Shenzhen) Co.,Ltd.
(2) Names of major non-consolidated subsidiaries:
Adachi Protechno Co., Ltd. and 23 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 Data Holdings (Australia) Pty. Ltd. and Oki Data Service (Australia) Pty.
Ltd. were included within the scope of consolidation as they were newly
established; Oki Data (Australia) Pty. Ltd. was included within the scope of
consolidation because it became a subsidiary after Oki Data Corporation, a
consolidated subsidiary of the Company acquired shares of that company.
Furthermore, Oki Supply Center Co., Ltd. was excluded from the scope of
consolidation because it was merged with Oki Customer Adtech Co., Ltd., aconsolidated subsidiary of the Company; Oki System Mate Co., Ltd. and MKG
Imaging Solutions Inc. were excluded from the scope of consolidation because
they were liquidated.

2.

Application of equity method(1) Number of affiliated companies to which the equity method is applied: 3Name 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 23 other companies
Affiliated companies: Alp Inc. and 8 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.

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:
Oki Banking Systems (Shenzhen) Co., Ltd.; Oki Electric Industry (Shenzhen) Co., Ltd.; Oki
Telecommunications Technology (Changzhou) Co., Ltd.; Oki Software Technology Co., Ltd.;Oki Electric Technology (Kunshan) 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 fair 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 fair 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 evaluate inventories asfollows, and overseas consolidated subsidiaries primarily apply the lower of cost or fairvalue.
Finished goods:
Principally stated at cost based on the moving average method.
(Balance sheet values are measured by the method of devaluing
the book price to reflect declines in profitability.)Work in progress:
Principally stated at cost based on the specific identification
method. (Balance sheet values are measured by the method ofdevaluing the book price to reflect declines in profitability.)
Materials and supplies:
Principally stated at cost based on the moving averagemethod.(Balance sheet values are measured by the method ofdevaluing the book price to reflect declines in profitability.)- 24 -

(Translation)(Change in accounting policies)
Effective the year ended March 31 2010, the raw materials and supplies of theCompany and some consolidated subsidiaries was changed from the previous lastpurchase price method to the moving average method, in order to appropriately reflect
the effect etc. of price fluctuations of raw materials on profit and loss and makeperiodic accounting of profit and loss more reasonable. The effect of this change andnet income is insignificant.
(iii) Derivatives
Stated at fair value(2) Depreciation and amortization(i) Property, plant and equipment (excluding lease assets)
The Company and its domestic consolidated subsidiaries primarily apply the
declining-balance method; overseas consolidated subsidiaries primarily apply thestraight-line method.
(ii) Intangible assets (excluding lease assets)
The Company and its domestic consolidated subsidiaries apply the straight-line
method.
For software sold in the market, amortization is based on the estimated amounts ofsales in the estimated number of years for sales (three years). For software forinternal use, the straight-line method, based on the estimated durable years (five years),
is used.
Overseas consolidated subsidiaries primarily apply the straight-line method.
(iii) Lease assets
Lease assets relating to finance lease transactions that do not transfer ownershipare depreciated over the lease contract’s lifetime by the straight-line method, assuming
the residual value is zero.
In addition, out of the finance lease transactions that do not transfer ownership,lease transactions whose lease transaction commencement date was on or prior to
March 31, 2008 are accounted for on a basis similar to ordinary rental transactions.
(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.

- 25 -

(Translation)(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 caused by changes in accounting standards are amortized over 15
years except for consolidated subsidiaries that amortize the difference in the first yearof 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) Provision 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) Basis for provision of income and expense
Basis for provision of income relating to contract work and software development
contracts
a. Income from those with certain results in progress before the end of the fiscal year
Percentage-of-completion method (The progress ratio of construction is estimatedby the cost proportion method.)b. Other income
Inspection basis (completed-contract method for some consolidated subsidiaries)(Changes in accounting policies)
Income relating to contract work and software development contracts had beenrecorded on an inspection basis (or by completed contract method by someconsolidated subsidiaries), except where income had been recorded by the percentage
of completion method with respect to construction works of some consolidated
subsidiaries, the amount of which was more than ¥200 million and the period of which
was more than 24 months. Effective the year ended March 31 2010, the Group
adopted the “Accounting Standard for Construction Contracts” (ASBJ Statement No.
15 of December 27, 2007) and “Guidance on Accounting Standard for Construction
Contracts” (ASBJ Guideline No. 18 of December 27, 2007). For construction
contracts etc. that started from April 1, 2009, in the consolidated fiscal year underreview, the percentage-of-completion method (whose ratio is estimated by the cost
proportion method) will apply for construction works whose outcome of theconstruction activity is deemed certain before the year ended March 31, 2010, and forother construction work etc., inspection criteria will apply (or completed contract
method for some consolidated subsidiaries).

- 26 -

(Translation)
The effect of this change on net sales and net income is insignificant.
(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 coverage
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) Hedging policy
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.

Valuation of assets and liabilities of consolidated subsidiaries
Assets and liabilities of consolidated subsidiaries are evaluated using the fair value.

6.

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

- 27 -

(Translation)
Notes to Consolidated Balance Sheet
1. Assets pledged as collateral
Buildings and structures
Land
Total
Liabilities collateralized by the above assets:Long-term borrowings:
2. Accumulated depreciation on tangible fixed assets
3. Liabilities for guarantee
Guarantee for borrowings by employees¥535 million¥138 million¥673 million¥670 million¥161,670 million¥1,047 million

Notes to Consolidated Statement of Changes in Shareholders’ Equity
1. Type and number of outstanding shares as of the end of the fiscal year
Common stock: 684,256 thousand shares
2. Number of shares to be issued upon exercise of equity warrants
Category

Breakdown of equity warrants

The Company

No. 2 Equity Warrants(issued on July 18, 2003)
No. 3 Equity Warrants(issued on July 20, 2004)
No. 4 Equity Warrants(issued on July 20, 2005)
No. 5 Equity Warrants(issued on July 28, 2006)
No. 6 Equity Warrants(issued on July 28, 2006)
No. 7 Equity Warrants(issued on July 27, 2007)
No. 8 Equity Warrants(issued on July 27, 2007)

Type of shares to be issued
upon exercise of equity
warrants

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

Common stock

815,000

Common stock

452,000

Common stock

442,000

Common stock

185,000

Common stock

157,000

Common stock

287,000

Common stock

222,000

Notes on Financial Instruments
1. Matters concerning the status of financial instruments
The OKI Group mainly uses short-term deposits and highly safe marketable securities forfund management, and raises its funds primarily through borrowings from financial institutions
and issuance of corporate bonds
The Group strives to mitigate its customers’ credit risks associated with notes and accounts
receivable, which are operating receivables, by carrying out customer credit investigations inaccordance with regulations for the management of accounts receivable of individual companies.
For borrowings, the Group raises short-term funds mainly for working capital and long-term
funds mainly for capital investment. For borrowings exposed to the interest rate risk, the Groupapplies derivative instruments (interest rate swap transactions) to hedge its risk.
The Group executes and manages derivative transactions in accordance with Oki Group’s- 28 -

(Translation)
policy.
2.

Disclosure concerning fair value of financial instruments
As of March 31, 2010 (consolidated balance sheet date), the amount recorded in the
consolidated balance sheet, fair value, and the amount of differences are as shown in the tablebelow. Any item whose fair value is deemed extremely difficult to assess is excluded from thetable. (See Note 2.)(Unit: millions of yen)Amount recorded inconsolidated balance
sheet

Fair value

Difference(1) Cash and deposits

57,844

57,844-(2) Notes and accounts receivable

118,324

118,324-(3) Securities and investments insecurities

42,34840,879

(1,469)(4) Notes and accounts payable(54,930)(54,930)-(5) Short-term borrowings (*1)

(66,122)(66,122)-(6) Other accrued expenses(23,213)(23,213)-(7) Long-term borrowings (*1)(106,344)(106,617)273(8) Derivative transactions
(864)
(864)
(*1) Long-term borrowings (¥61,307 million) that will be reimbursed within one year are classified as “short-termborrowings” in the consolidated balance sheet.
Notes:
1.
Disclosure concerning methods of calculation of fair value of financial instruments, securities and derivativetransactions(1) Cash and deposits and (2) Notes and accounts receivable
These items are settled over a short period of time and their fair value is virtually equally to their book value.
Hence, their fair value is based on the relevant book value.
(3) Marketable securities and investment securities
The fair value of equity securities is based on their prices determined at the financial instruments exchanges,
and the fair value of bonds is based on the quotations offered by the correspondent financial institution.
(4) Notes and accounts payable, (5) Short-term borrowings, and (6) Other accrued expenses
These items are settled over a short period of time and their fair value is virtually equally to their book value.
Hence, their fair value is based on the relevant book value.
(7) Long-term borrowings
The fair value of these items is based primarily on the method of calculation whereby the sum of principal
and interest is discounted by an assumed interest rate on the assumption that the said sum is freshly
borrowed in a similar manner. Some long-term borrowings with floating interest rates are prescribed to be
subject to special accounting treatment applicable to interest rate swaps (see (8) below). Hence, the fairvalue of a long-term borrowing is based on the method of calculation whereby the sum of principal andinterest, treated in combination with the said interest rate swap, is discounted by a reasonably estimableinterest rate on the assumption that the said amount is freshly borrowed in a similar manner.
(8) Derivative transactions
Derivative transactions subject to special accounting treatment applicable to interest rate swaps are treated in
combination with long-term borrowings as hedged items. Hence their fair value is included in that of longterm borrowings.
2.
Financial instruments whose fair value is considered extremely difficult to assess
Unlisted equity securities (¥12,223 million on the consolidated balance sheet) and investments in a limited
liability joint business partnership (¥110 million on the consolidated balance sheet) are not included in (3)Securities and investments in securities because they have no market price and it is deemed extremely difficult toassess their fair values.

Notes to Securities
1. Other securities (as of March 31, 2010)- 29 -

(Translation)(Unit: millions of yen)Amount recorded inconsolidated balance
sheet

Acquisition cost

Difference(Securities whose amounts recorded inconsolidated balance sheet exceed theiracquisition costs)
Equity Securities
Bonds
Other

10,519
1,624
220

2,678
1,604
220

7,841
19
0

Subtotal

12,364

4,503

7,860

(Securities whose amounts recorded inconsolidated balance sheet are not morethan their acquisition costs)
Equity Securities
Bonds
Certificates of deposit
Other

9,341
0
13,0004,487

13,5080
13,0004,495(4,166)(8)

Subtotal

26,82931,004(4,175)39,19335,507

3,685

Total
Note:

Unlisted securities (¥10,277 million in the consolidated balance sheet) and investments in a limited liability joint
business partnership (¥110 million in the consolidated balance sheet) are not included in “Other securities” in thetable above because they have no market price and it is deemed extremely difficult to assess their market values.

2.

Other securities sold during the consolidated fiscal year under review(From April 1, 2009 to March 31, 2010)
Type

Sales amount

Equity Securities(Unit: millions of yen)
Total loss on sales

Total gain on sales
24

3.

12

20

Impaired securities
Impairment loss of ¥822 million was applied to securities (other securities) for the year ended
March 31, 2010.
In the case of other securities with market values, the amounts for which impairment wasnecessary were impaired if their market values at the year ended March 31, 2010 under review
were remarkably lower than their acquisition costs. In the case of other marketable securities
with no market value, the amounts for which impairment loss was necessary were impaired if theirreal values were remarkably lower than their acquisition costs due to the deteriorated financial
positions of companies issuing securities etc. In both cases, impairment was based on acomprehensive judgment on whether values would rise or not.

Notes to Per-share Information
1. Net assets per share:¥84.61
2. Net income per share:¥5.30- 30 -

(Translation)
Additional Information
Shift of consolidated subsidiary to wholly-owned subsidiary through a share exchange
The Company resolved at the Board of Directors meeting held on February 3, 2010 to makethe Company a wholly-owning parent company and Oki Wintech Co., Ltd. (hereinafter referred toas “Oki Wintech”) a wholly-owned subsidiary of the Company through a share exchange(hereinafter referred to as “Share Exchange”) , and concluded a share exchange contract with Oki
Wintech on the same day.
(1) Purpose of Share Exchange
The Company is currently pursuing reforms within its own business structure andthose of its group companies to maximize corporate value as a consolidated group bybusiness segment.
As part of these structural reforms, the Company will make Oki Wintech a whollyowned subsidiary through the Share Exchange, in order to strengthen group management
and increase the agility of its communication business.
<Background>
The private-sector communications market, a key market for the Company thatprimarily entails supplying PBX devices, is not expected to show substantial growth due
to several factors, including increasingly fierce price competition in the market segment ofcommunications devices and the introduction of various new technological developments
such as IP and wireless networks and the merger of fixed-line and mobile telephone
networks. Therefore, the Company faces the challenge of expanding and strengthening
its sales channels to the market for small-to-medium-sized enterprises, in addition to themarket for large enterprises which has been an area of strength for the Company. The
Company also needs to improve its profitability by transforming its business that focuseson communications equipment to a system that provides comprehensive services
consisting of sales, installation, adjustment, maintenance, and operation monitoring ofequipment.
On the other hand, Oki Wintech cannot largely expect future business expansion whenengaging only in the existing electric equipment business and info-telecom systembusiness focusing on installation and maintenance of telephone exchange equipment. It is
inevitable to expand the business into new fields such as the environmental equipment
market as typified by solar photovoltaic systems in the case of the electric equipment
business and to expand the product lineup including info-telecom combined products
and create new products for maintenance services in the case of the info-telecom systembusiness.
After considering various possible responses to such challenges, the Company has
concluded that making Oki Wintech a wholly-owned subsidiary will expedite its decisionmaking, improve the ability to solve problems and perform tasks, and further expand its
business and increase profits.
The Company has the ability to develop systems, create service businesses, andrespond to customers. Oki Wintech has the ability to handle front-line operations (build
and maintain systems) and to offer products and services to small-to-medium-sizedenterprises. Closer integration of such abilities will make it possible to provide services toa wider range of customers. The Company will also seek to cultivate even wider markets- 31 -

(Translation)by providing one-stop service throughout the entire lifetime of its products - from sales ofequipment through system building to maintenance and operation - to a wide range ofcustomers from large enterprises to small-to-medium-sized enterprises.
(2) Summary of Share Exchange(i) Schedule of Share Exchange
February 3, 2010:
Resolution of share exchange at a meeting of Board of
Directors (both companies)
February 3, 2010:
Contract on share exchange was concluded (by bothcompanies)
February 4, 2010:
Public notice of record date of extraordinary general meetingof shareholders (Oki Wintech)February 18, 2010:
Record date of extraordinary general meeting of shareholders(Oki Wintech)
March 30, 2010:
Share exchange was approved at extraordinary general
meeting of shareholders (Oki Wintech)May 26, 2010 (scheduled): Last date of trade of shares (Oki Wintech)May 27, 2010 (scheduled): Date of delisting of shares (Oki Wintech)
June 1, 2010 (scheduled): Scheduled date of Share Exchange (effective date)Notes:
1. The Company plans to implement the Share Exchange without obtaining approval at the General Meetingof Shareholders in accordance with “simplified share exchange” procedures pursuant to Article 796,
Paragraph 3 of the Companies Act.
2. The scheduled date of the Share Exchange may be changed by the agreement of the Company and Oki
Wintech.

- 32 -

(Translation)(ii)

Details of allotment of shares in Share Exchange
Company nameOki Electric Industry
Co., Ltd. (whollyowning parent company)

Oki Wintech (whollyowned subsidiary)

Share exchange ratio
1
8.7
Notes:
1.
Ratio of share allotment
The Company will allot and deliver 8.7 common shares of the Company for 1 common share of Oki
Wintech. In the Share Exchange, however, no share will be allotted for Oki Wintech’s common shares
owned by the Company.
2.
Number of shares to be delivered in the Share Exchange
The Company will deliver 48,979,869 common shares for allotment in the Share Exchange. The Company
will appropriate treasury shares (common shares) it possesses (1,785,409 shares as of March 31, 2010) andtreasury shares (common shares) to be obtained through appraisal remedy of shares less than one unit on
or before the effective date of the Share Exchange and will issue new common shares to meet a shortage.
Oki Wintech will retire treasury shares it possesses by a resolution adopted at a meeting of the Boardof Directors to be held on or before the day preceding the effective date of Share Exchange. (The numberof treasury shares possessed by Oki Wintech as of March 31, 2010 was 45,930).
The number of shares to be allotted and delivered by the Company in the Share Exchange may bechanged from now due to the retirement etc. of Oki Wintech’s treasury shares.

(iii) Calculation method of share exchange ratio
For the ratio of the Share Exchange, the Company and Oki Wintech decided torespectively request third-party institutions that were independent of both companies
to calculate the share exchange ratio, in order to make the calculation fair andappropriate. The Company appointed Mizuho Securities Co., Ltd. and Oki Wintech
appointed Sumitomo Mitsui Banking Corporation as third-party institutions,
respectively. Both companies negotiated in good faith and consulted with each otherbased on the calculation results and, in the end, agreed that the abovementioned shareexchange ratio was appropriate.
(3) Outline of accounting procedure
The Company considers that the Share Exchange is classified as a transaction withminority shareholders under the “Transactions etc. Under Common Control” and isanticipated to generate negative goodwill as a result of the transaction, but its amount is
not fixed at present. Although this transaction will occur in the fiscal year ending March
31, 2011, the anticipated negative goodwill will be written off at the time it arises pursuant
to the amendments to “Accounting Standard for Business Combinations” (ASBJ Statement
No. 21 of December 26, 2008; final amendment).
(4) Outline of the other company in Share Exchange
Trade name:Oki Wintech Co., Ltd.
Location of head office: 1-19-4 Kitashinagawa, Shinagawa-ku, Tokyo
Name of representative: Tadao Murase, President and Representative Director
Amount of stated capital: ¥2,001 million (as of March 31, 2009)
Amount of net assets:¥14,815 million (consolidated) (as of March 31, 2009)¥13,909 million (non-consolidated) (as of March 31, 2009)- 33 -

(Translation)
Amount of total assets:
Main business:¥26,622 million (consolidated) (as of March 31, 2009)¥23,990 million (non-consolidated) (as of March 31, 2009)
Design, construction, and maintenance service etc., of infotelecom systems, electrical facilities, and other constructionwork- 34 -

(Translation)

Transcript of Account Auditors’ Report on Consolidated Financial Statements

Independent Auditors’ Report
May 18, 2010
To: Board of Directors
Oki Electric Industry Co., Ltd.
Ernst & Young ShinNihon LLC
Masato Tsukahara (seal),
Engagement Partner, Certified Public Accountant
Akira Sato (seal),
Engagement Partner, Certified Public Accountant
Yukiyasu Yamakawa (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 86th term from
April 1, 2009 to March 31, 2010 in accordance with Article 444 Paragraph 4 of the Companies Act. 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.
Additional Information
As described in Additional Information, Oki Electric Industry resolved at the Board of Directors
meeting held on February 3, 2010 to make the Company a wholly-owning parent company and Oki
Wintech Co., Ltd. (hereinafter referred to as “Oki Wintech”) a wholly-owned subsidiary company
through a share exchange (hereinafter referred to as “Share Exchange”) , and concluded a shareexchange agreement with Oki Wintech on the same day.
No conflict of interest as defined by the Accounting Law exists between Oki Electric Industry, our firm(Ernst & Young ShinNihon LLC) and the respective engagement partners.

- 35 -

(Translation)

Non-Consolidated Balance Sheet(as of March 31, 2010)(Unit: millions of yen)Account title(Assets)

AmountCurrent assets
Cash and deposits
Notes receivable
Accounts receivable, trade
Lease investment assets
Marketable securities
Finished goods
Work in process
Raw materials and supplies
Prepaid expenses
Short-term loan
Advanced paid
Accounts receivable, others
Deferred tax assets
Other current assets
Allowance for doubtful receivables
Total current assets
Fixed assets
Property, plant and equipment
Buildings
Accumulated depreciation
Structures
Accumulated depreciation
Machinery and equipment
Accumulated depreciation
Vehicle and delivery equipment
Accumulated depreciation
Tools, furniture and fixtures
Accumulated depreciationLand
Total property, plant and equipment
Intangible assets
Goodwill
Facility rights
SoftwareTotal intangible assets
Investments and other assets
Investments in securities
Shares of affiliated companies
Contribution
Contribution to affiliated companies

Long-term loans to employees
Long-term loans to affiliated companies

Long-term prepaid expenses
Claims provable in bankruptcy,
rehabilitation and other
Lease and guarantee deposits
Other investments and other assets
Allowance for doubtful receivables
Total investments and other assets
Total fixed assets
Total assets

28,485797
52,223590
12,5004,268
11,746
5,977
246
13,401
2,912
8,487
1,746
73
(145)
143,31035,382(25,782)
2,578(2,250)15,102(12,850)
84(79)
32,700(27,614)

9,599
327
2,251
4
5,085
9,664
26,934
13
144
4,118
4,276
30,86453,42596
1,764
017,527
797
257
2,828
631
(6,708)
101,485
132,697
276,008- 36 -

Account title(Liabilities)
Current liabilities
Notes payable
Accounts payable, trade
Short-term borrowings
Current portion of long-term borrowings

Lease obligations
Accounts payable, others
Other accrued expenses
Advances
Deposits
Other current liabilities
Total current liabilities
Long-term liabilities
Long-term borrowings
Lease obligations
Deferred tax liabilities
Retirement benefits
Other long-term liabilities
Total long-term liabilities
Total liabilities(Net Assets)
Shareholders’ equity
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
Valuation, translation adjustments and others
Net unrealized holding gain on other securities

Amount513
41,45635,54649,286
108
3,959
11,416
1,998
3,638
662
148,585
39,222532
1,378
23,174829
65,137
213,723

76,94046,74425,92820,816(62,509)(62,509)(62,509)(403)
60,772

Total valuation, translation adjustments and others

2,092
(659)
1,433

Equity warrants
Total net assets

79
62,284

Loss on deferred hedges

Total liabilities and net assets

276,008

(Translation)

Non-Consolidated Statement of Operations(From April 1, 2009 to March 31, 2010)(Unit: millions of yen)Account title

AmountNet sales

200,530

Cost of sales

159,755

Gross profit

40,775

Selling, general and administrative expenses

37,237

Operating income

3,537

Non-operating income
Interest income

435Interest income on securities

32

Dividend income

2,443

Corporate brand royalty income

2,093

Other

342

5,347

Non-operating expenses
Interest expense

2,745

Other

1,034

Ordinary income

3,779
5,104

Extraordinary profit
Gain on sales of property, plant and equipment

15

Gain on sales of investments in securities

12

Gain on sales of subsidiaries and affiliates’ stocks

150

Gain on transfer of business

299

477

Extraordinary loss
Loss on sales and disposition of property, plant and equipment

1,045

Loss on impairment of fixed assets

295

Loss on sales of investments in securities

20

Write-downs of investments in securities

815

Write-downs of investments in shares of subsidiaries and affiliates
Provision of allowance for doubtful receivables

272
1,517

Special retirement payments

252

Net income before taxes

4,218
1,362

Income taxes(988)

Income taxes deferred(360)

Net income(1,348)2,711- 37 -

(Translation)

Non-consolidated Statement of Changes in Shareholders’ Equity(From April 1, 2009 to March 31, 2010)(Unit: millions of yen)
Shareholders’ equity
Common stock
Balance as of March 31, 2009
Changes during the term under review
Net changes during the term under review
Balance as of March 31, 2010
Additional paid-in capital
Capital reserve
Balance as of March 31, 2009
Changes during the term under review
Net changes during the term under review
Balance as of March 31, 2010
Other additional paid-in capital
Balance as of March 31, 2009
Changes during the term under review
Net changes during the term under review
Balance as of March 31, 2010
Total additional paid-in capital
Balance as of March 31, 2009
Changes during the term under review
Net changes during the term under review
Balance as of March 31, 2010
Retained earnings
Other retained earnings
Retained earnings carried forward
Balance as of March 31, 2009
Changes during the term under review
Net income
Net changes during the term under review
Balance as of March 31, 2010
Total retained earnings
Balance as of March 31, 2009
Changes during the term under review
Net income
Net changes during the term under review
Balance as of March 31, 2010
Treasury stock
Balance as of March 31, 2009
Changes during the term under review
Purchases of treasury stock
Net changes during the term under review
Balance as of March 31, 2010

- 38 -

76,94076,94025,92825,92820,816
20,816
46,744
46,744(65,220)
2,711
2,711
(62,509)(65,220)
2,711
2,711
(62,509)
(357)
(46)
(46)
(403)

(Translation)

Total shareholders’ equity
Balance as of March 31, 2009
Changes during the term under review
Net income
Purchases of treasury stock
Net changes during the term under review
Balance as of March 31, 2010
Valuation, translation adjustments and others
Net unrealized holding gain on other securities
Balance as of March 31, 2009
Changes during the term under review

58,107
2,711
(46)
2,664
60,772(430)(Net) changes other than shareholders’ equity during the term underreview

Net changes during the term under review
Balance as of March 31, 2010
Loss on Deferred hedges
Balance as of March 31, 2009
Changes during the term under review

2,523
2,523
2,092
(350)

(Net) changes other than shareholders’ equity during the term underreview

Net changes during the term under review
Balance as of March 31, 2010
Total valuation, translation adjustments and others
Balance as of March 31, 2009
Changes during the term under review

(308)
(308)
(659)
(781)

(Net) changes other than shareholders’ equity during the term underreview

Net changes during the term under review
Balance as of March 31, 2010
Equity warrants
Balance as of March 31, 2009
Changes during the term under review
Net changes during the term under review
Balance as of March 31, 2010
Total net assets
Balance as of March 31, 2009
Changes during the term under review
Net income
Purchases of treasury stock

2,214
2,214
1,433
79
79
57,405
2,711(46)(Net) changes other than shareholders’ equity during the term underreview

Net changes during the term under review
Balance as of March 31, 2010

2,214
4,879
62,284- 39 -

(Translation)

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

Standards and valuation methods for negotiable securities
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 fair 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
Derivatives: Stated at fair value

3.

Standards and valuation methods for inventories
Finished goods:
Stated at cost based on the moving average method (Balance sheet
values are measured by the method of devaluing the book price toreflect declines in profitability.)Work in process:Stated at cost based on the specific identification method (Balance
sheet values are measured by the method of devaluing the book priceto reflect declines in profitability.)
Materials and supplies:
Stated at cost based on the moving average method (Balance sheet
values are measured by the method of devaluing the book price toreflect declines in profitability.)(Changes in accounting policies)
Effective the year ended March 31 2010, the raw material and supplies was changed fromthe previous last purchase price method to the moving average method, in order toappropriately reflect the effects of price fluctuations of raw materials and supplies on the
profit and loss, and make the periodic accounting of profit and loss more reasonable.
The effect of this change on net income is insignificant.

4.

Depreciation and amortization
Property, plant and equipment (excluding lease assets): declining-balance method
The straight-line method is applied to buildings, excluding annexed structures,acquired on or after April 1, 1998.

- 40 -

(Translation)
Intangible assets (excluding lease assets)
Software for sale in the market:
Amortization method based on the estimated amounts of sales in the estimatednumber 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
Lease assets(Lease assets relating to finance lease transactions without transfer of ownership):
They are depreciated over the lease contract’s lifetime by the straight-line
method, assuming the residual value is zero.
In addition, out of the finance lease transactions that do not transfer
ownership, lease transactions whose lease transaction commencement date wason or prior to March 31, 2008 are accounted for on a basis similar to ordinary
rental transactions.
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 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 of years(14 years) within the average remaining years of service of employees.
The actuarial difference is amortized proportionately using the straight-line method overa certain number of years (13 to 14 years) within the average remaining service period of theemployees from the fiscal year after the difference is incurred.

6.

Hedge accounting methods(1) Method of hedge accounting
Deferred hedging is applied. With regard to interest rate swaps that meet therequirements for special treatment, special treatment is applied.
(2) Means of hedging and hedged item
Interest rate swaps are employed to hedge fluctuations of interest rates on short-termborrowings and long-term borrowings.
(3) Hedging policy
Derivative instruments are used to hedge fluctuations of market rates on credits and debts.

- 41 -

(Translation)(4) Assessment method of hedging effectivenessTo determine the effectiveness, the Company compares the cumulative total of themarket fluctuations or the cash flow fluctuations for the hedged item and that of themarket 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.
7.

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.

Notes to Non-consolidated Balance Sheets
1. Guarantee liabilities:
The Company provides guarantees for bank borrowings made by employees andaffiliated companies as shown below.
Oki Electric Industry (Shenzhen) Co., Ltd.
Employees (housing loans, etc.)
Nagano Oki Electric Co., Ltd.
Oki (UK) Ltd.
Oki Engineering Co., Ltd.
Two other entities:
Total:
2.

¥1,154 million(84,708 thousand yuan)¥855 million¥400 million¥241 million(1,717 thousand Sterling Pound)¥234 million¥192 million¥3,078 million

Monetary claims receivable from and payable to affiliates
Short-term monetary claims receivable from affiliated companies:
Long-term monetary claims receivable from affiliated companies:
Short-term monetary claims payable to affiliated companies:
Long-term monetary claims payable to affiliated companies:

Notes to Non-consolidated Statement of Operations
Transactions with affiliated companies
Sales:
Purchases:
Non-operating transactions:- 42 -¥33,436 million¥18,694 million¥30,814 million¥18 million¥22,238 million¥66,905 million¥5,878 million

(Translation)
Notes to Non-consolidated Statement of Changes in Shareholders’ Equity
Type and number of treasury stock as of the end of the fiscal year
Common stock:
1,785 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 doubtful accounts
Nondeductible loss on evaluation of affiliates’ stocks
Nondeductible loss on impairment of fixed assets
Nondeductible write-downs of inventories
Nondeductible write-downs of investments in securities
Nondeductible accrued bonuses
OthersSubtotal deferred tax assets
Valuation allowance
Total deferred tax assets
Deferred tax liabilities
Nondeductible unrealized gain on contribution of securities to thepension trust
Net unrealized holding gain on other securities
OthersTotal deferred tax liabilities
Net deferred tax liabilities¥22,095 million¥12,118 million¥2,748 million¥1,627 million¥1,263 million¥1,005 million¥812 million¥603 million¥1,716 million¥43,991 million¥(40,546) million¥3,444 million¥(1,567) million¥(1,454) million¥(55) million¥(3,077) million¥367 million

Notes to Leased Fixed Assets
Finance lease transactions that do not transfer ownership whose lease transaction commencement
date was on or prior to March 31, 2008 are accounted for on a basis similar to ordinary rental
transactions.
1.
2.
3.

Amount equivalent to acquisition cost of leased assets as of the end of the term under review¥612 million
Amount equivalent to accumulated depreciation of leased assets as of the end of the term
under review¥330 million
Amount equivalent to unexpired lease payment of leased assets as of the end of the term
under review¥293 million- 43 -

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

Subsidiary

Subsidiary

Subsidiary

Company nameOki Software Co., Ltd.

Oki Networks Co., Ltd.

Oki Telecommunication
Systems Co., Ltd.

Location

Warabi,
Saitama Pref.

Minato-ku,
Tokyo

Warabi,
Saitama Pref.

Capital¥400
millionBusiness

Production and salesof software

Votingright ratio

Relationship withrelated party(Direct)100%

Production ofsoftware on acontract basis, etc.
lending of funds,
concurrent
assumption of officeof officer

Accruedexpenses

330

Lending of
funds

9,580

Short-term
loans

2,540

Purchase of
products andservices

9,660

Accounts
payable –
trade

6,678

Lending of
funds

4,830

Short-term
loans

2,670

Production ofsoftware on acontract basis, etc.
Lending of funds

Lending of
funds

4,030

Short-term
loans

160

(Direct)
100%

Purchase of services,lending of funds,
concurrent
assumption of officeof officer

Lending offunds

25,700--Lending of
funds

4,000

Short-term
loans

600

Lending of
funds

4,848

Short-term
loans

5,075

6,585

Long-termloans ofsubsidiaries& affiliates

2,685

Subsidiary

Subsidiary

Oki Network Integration
Co., Ltd.

Koto-ku,
Tokyo

¥100
millionNetwork integration
service business(Direct)
80%(Indirect)
20%

Hong Kong

60,000th
ou-sandHong
Kong
dollars

Holdings company,
material procurement(Direct)
57%(Indirect)
43%

Subsidiary

Oki Development Co.,Ltd.

Shinagawaku, Tokyo

¥180
millionSubsidiary

Oki Communication
Systems Co., Ltd.

Tokorozawa,
Saitama Pref.

¥300
millionSubsidiary

Oki Power Tech Co., Ltd.

Fukushima,
Fukushima
Pref.

¥100
millionSubsidiary

Oki Sensor Device
Corporation

Tachikawa,
Tokyo

¥200
millionOki Data Corporation

5,095(Direct)
100%¥2,050
millionSubsidiary

Accounts
payable –trade

Development andmanufacture of
telecommunications
software

Koto-ku,Tokyo

Minato-ku,
TokyoEndingbalance(mil. yen)¥200
millionOki Customer Adtech Co.,Ltd.

Oki Hong Kong, Ltd.

13,849Account
item(Direct)
100%

Maintenance,
construction,
monitoring, operation,
manufacture and saleof equipment andsystems

Subsidiary

Purchase ofservices

Transaction
amount(mil. yen)

Marketing in the fieldof telecommunications
business and planning,development, and saleof products¥490
million¥19,000

millionOwnership, sale,purchase, lease andbrokerage of realestate, contract for
construction work,
design, construction
management andbuilding management
Design, manufacture,development and saleof electronic,
information andtelecommunications
device and relatedparts
Development, design,
manufacture and saleof power supply units
for electric devices
Development, design,
manufacture and saleof electric parts

Sales of printers

Purchase of products
and services, lendingof funds, concurrent
assumption of officeof officer

Descriptionoftransactions

Purchase of products
and services, lendingof funds, concurrent
assumption of officeof officer
Supply products etc.,
lending of funds,
concurrent
assumption of officeof officer(Direct)
100%

Lease and brokerageof real estate, lendingof funds, concurrent
assumption of officeof officer

Lending of
funds(Direct)
100%

Purchase of products
and services, lendingof funds

Lending of
funds(Direct)
100%

Purchase of products
and services, lendingof funds

Lending of
funds

3,900

(Direct)
100%

Lending of funds,
concurrent
assumption of officeof officer

Lending of
funds

3,823

(Direct)
100%

Purchase of products,
concurrent
assumption of officeof officer

Underwritingof capitalincreaseconsideration
for use of thecorporatebrand- 44 -

6,180

Long-termloans ofsubsidiaries& affiliates

Long-termloans ofsubsidiaries& affiliates
Long-termloans ofsubsidiaries& affiliates

3,200

3,900

975

4,000

-

-

1,111

-

-

(Translation)
Notes:
1. The transactions amount excludes consumption tax, while the ending balance includes consumption tax.
2. Conditions of transactions and policy in determining conditions(1) The Company determines conditions regarding purchase of services and products based on market prices.
(2) The Company determines the interest rate for the lending of funds by taking the market rate of interest into
consideration.
(3) The Company determines the amount of consideration for the corporate brand royalty by reference to a
general model.
3. Underwriting of capital increase: The Company underwrote a capital increase carried out by Oki Data Corporation,purchasing new shares at ¥50,000 per share.
4. For the loans to nine subsidiaries, the Company recorded a loan loss reserve of ¥6,203 million in total. The
Company also recorded a provision for a loan loss reserve of ¥1,475 million in the fiscal year.

Notes to Per-share Information
1. Net assets per share: ¥91.15
2. Net income per share: ¥3.97
Additional Information
Shift of consolidated subsidiary to wholly-owned subsidiary through a share exchange
The Company resolved at the Board of Directors meeting held on February 3, 2010 to makethe Company a wholly-owning parent company and Oki Wintech Co., Ltd. (hereinafter referred toas “Oki Wintech”) a wholly-owned subsidiary of the Company through a share exchange(hereinafter referred to as “Share Exchange”) , and concluded a share exchange contract with Oki
Wintech on the same day.
(1) Purpose of Share Exchange
The Company is currently pursuing reforms within its own business structure and those ofits group companies to maximize the corporate value of the business segments within the
consolidated group.
As part of these structural reforms, the Company will make Oki Wintech a whollyowned subsidiary through the Share Exchange, in order to strengthen group management
and increase the agility of its communication business.
<Background>
The private-sector communications market, a key market for the Company thatprimarily entails supplying PBX devices, is not expected to show substantial growth due
to several factors, including increasingly fierce price competition in the market segment ofcommunications devices and the introduction of various new technological developments
such as IP and wireless networks and the merger of fixed-line and mobile telephone
networks. Therefore, the Company faces the challenge of expanding and strengthening
its sales channels to the market for small-to-medium-sized enterprises, in addition to themarket for large enterprises which has been an area of strength for the Company. The
Company also needs to improve its profitability by transforming its business that focuseson communications equipment to a system that provides comprehensive services
consisting of sales, installation, adjustment, maintenance, and operation monitoring ofequipment.
On the other hand, Oki Wintech cannot largely expect future business expansion when

- 45 -

(Translation)
engaging only in the existing electric equipment business and info-telecom systembusiness focusing on installation and maintenance of telephone exchange equipment. It is
inevitable to expand the business into new fields such as the environmental equipment
market as typified by solar photovoltaic systems in the case of the electric equipment
business and to expand the product lineup including info-telecom combined products
and create new products for maintenance services in the case of the info-telecom systembusiness.
After considering various possible responses to such challenges, the Company has
concluded that making Oki Wintech a wholly-owned subsidiary will expedite its decisionmaking, improve the ability to solve problems and perform tasks, and further expand its
business and increase profits.
The Company has the ability to develop systems, create service businesses, andrespond to customers. Oki Wintech has the ability to handle front-line operations (build
and maintain systems) and to offer products and services to small-to-medium-sizedenterprises. Closer integration of such abilities will make it possible to provide services toa wider range of customers. The Company will also seek to cultivate even wider markets
by providing one-stop service throughout the entire lifetime of its products - from sales ofequipment through system building to maintenance and operation - to a wide range ofcustomers from large enterprises to small-to-medium-sized enterprises.
(2) Summary of Share Exchange(i) Schedule of Share Exchange
February 3, 2010:
Resolution of share exchange at a meeting of Board of
Directors (both companies)
February 3, 2010:
Contract on share exchange was concluded (by bothcompanies)
February 4, 2010:
Public notice of record date of extraordinary general meetingof shareholders (Oki Wintech)February 18, 2010:
Record date of extraordinary general meeting of shareholders(Oki Wintech)
March 30, 2010:
Share exchange was approved at extraordinary general
meeting of shareholders (Oki Wintech)May 26, 2010 (scheduled): Last date of trade of shares (Oki Wintech)May 27, 2010 (scheduled: Date of delisting of shares (Oki Wintech)
June 1, 2010 (scheduled): Scheduled date of Share Exchange (effective date)Notes:
1. The Company plans to implement the Share Exchange without obtaining approval at the General
Meeting of Shareholders in accordance with “simplified share exchange” procedures pursuant to
Article 796, Paragraph 3 of the Companies Act.
2. The scheduled date of the Share Exchange may be changed by the agreement of the Company andOki Wintech.

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(Translation)(ii)

Details of allotment of shares in Share Exchange
Company nameOki Electric Industry
Co., Ltd. (whollyowning parent company)

Oki Wintech (whollyowned subsidiary)

Share exchange ratio
1
8.7
Notes:
1. Ratio of share allotment
The Company will allot and deliver 8.7 common shares of the Company for 1 common share of Oki Wintech.
In the Share Exchange, however, no share will be allotted for Oki Wintech’s common shares owned by theCompany.
2. Number etc. of shares to be delivered in the Share Exchange
The Company will deliver 48,979,869 common shares for allotment in the Share Exchange. The Company
will appropriate treasury shares (common shares) it possesses (1,785,409 shares as of March 31, 2010) andtreasury shares (common shares) to be obtained through appraisal remedy of shares less than one unit on or
before the effective date of the Share Exchange and will issue new common shares to meet a shortage.
Oki Wintech will retire treasury shares it possesses by a resolution adopted at a meeting of the Board of
Directors to be held on or before the day preceding the effective date of Share Exchange. (The number oftreasury shares possessed by Oki Wintech as of March 31, 2010 was 45,930.)
The number of shares to be allotted and delivered by the Company in the Share Exchange may bechanged from now due to the retirement etc. of Oki Wintech’s treasury shares.

(iii) Calculation method of share exchange ratio
For the ratio of the Share Exchange, the Company and Oki Wintech decided torespectively request third-party institutions that were independent of both companies
to calculate the share exchange ratio, in order to make the calculation fair andappropriate. The Company appointed Mizuho Securities Co., Ltd. and Oki Wintech
appointed Sumitomo Mitsui Banking Corporation as third-party institutions,
respectively. Both companies negotiated in good faith and consulted with each otherbased on the calculation results and, in the end, agreed that the abovementioned shareexchange ratio was appropriate.
(3) Outline of accounting procedure
The Company considers that the Share Exchange is classified as a transaction withminority shareholders under the “Transactions etc. Under Common Control” and isanticipated to generate negative goodwill as a result of the transaction, but its amount is
not fixed at present. Although this transaction will occur in the fiscal year ending March
31, 2011, the anticipated negative goodwill will be written off at the time it arises pursuant
to the amendments to “Accounting Standard for Business Combinations” (ASBJ Statement
No. 21 of December 26, 2008; final amendment).
(4) Outline of the other company in Share Exchange
Trade name:Oki Wintech Co., Ltd.
Location of head office: 1-19-4 Kitashinagawa, Shinagawa-ku, Tokyo
Name of representative: Tadao Murase, President and Representative Director
Amount of stated capital: ¥2,001 million (as of March 31, 2009)
Amount of net assets:¥14,815 million (consolidated) (as of March 31, 2009)¥13,909 million (non-consolidated) (as of March 31, 2009)- 47 -

(Translation)
Amount of total assets:
Main business:¥26,622 million (consolidated) (as of March 31, 2009)¥23,990 million (non-consolidated) (as of March 31, 2009)
Design, construction, and maintenance service etc., of infotelecom systems, electrical facilities, and other constructionwork- 48 -

(Translation)

Transcript of Account Auditors’ Report

Independent Auditors’ Report
May 18, 2010
To: Board of Directors
Oki Electric Industry Co., Ltd.
Ernst & Young ShinNihon LLC
Masato Tsukahara (seal),
Engagement Partner, Certified Public Accountant
Akira Sato (seal),
Engagement Partner, Certified Public Accountant
Yukiyasu Yamakawa (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 86th term from April 1, 2009 to March 31, 2010 in accordance with Article 436 Paragraph 2 Item 1 of
the Companies Act. 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.
Additional Information
As described in Additional Information, Oki Electric Industry resolved to carry out a share exchange(hereinafter referred to as “Share Exchange”) to make Oki Electric Industry a wholly-owning parent
company in the Share Exchange and make Oki Wintech Co., Ltd. (hereinafter referred to as “OkiWintech”) a wholly-owned subsidiary company in the Share Exchange at a meeting of the Board of
Directors held on February 3, 2010 and concluded a share exchange contract with Oki Wintech on thesame day.
No conflict of interest as defined by the Accounting Law exists between Oki Electric Industry Co., Ltd.,
our firm (Ernst & Young ShinNihon LLC) and the respective engagement partners.

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(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 86th fiscal year from April 1, 2009 to
March 31, 2010, 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 Companies Act as necessary for ensuring compliance with laws andthe Company’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 withdirectors, Corporate Auditors and others of the subsidiaries of the Company, and received from the subsidiaries reports on
their business conditions as needed. Based on the methods mentioned above, we have reviewed the financial statements forthe 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
131 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
LLC, 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
LLC, are proper.
May 20, 2010
The Board of Corporate Auditors, Oki Electric Industry Co., Ltd.
Keiichi Fukumura, Standing Auditor (seal)
Yoshikatsu Shiraishi, Standing Auditor (seal)
Noriyuki Kandori, Outside Standing Auditor (seal)
Seiji Nishi, Outside Auditor (seal)- 50 -

(Translation)

Reference Documents for the General Meeting of Shareholders
Agenda and Reference Matters
Agenda 1: Partial Amendment to the Articles of Incorporation
1. Reason for proposal
In order for outside directors and outside auditors to excel in the duties expected inthese roles, and for the Company to be able to invite outside directors and outside auditors
who have a wealth of insight and experience in the future, we propose to establish newprovisions thereof in the Articles of Incorporation in accordance with provisions concerning
the agreement to limit liabilities of Article 427, the Companies Act.
Each of the Corporate Auditors has already agreed to establish this new provision,
Article 26.
2. Details of proposed amendments
Details of the proposed amendments are as follows:(Underlined portions indicate the parts that are to be changed.)
Current Articles of Incorporation(Newly established)

Article 26 to 31 (provisions omitted)(Newly established)

Article 32 to 35 (provisions omitted)

Proposed Amendment
Article 26. (Exemption of liabilities for outside directors)
The Company may conclude with outside directors
agreements to limit liabilities for compensation fordamages due to any negligence of their duties, inaccordance with provision of Paragraph 1, Article 427 of
the Companies Act; Provided, however, that the amount oflimit for such liabilities for compensation based on suchagreements shall be the minimum amount provided for bylaws and regulations.
Article 27 to 32 (provisions omitted)
Article 33 (Exemption of liabilities for outside auditors)
The Company may conclude with outside auditors
agreements to limit liabilities for compensation fordamages due to any negligence of their duties, inaccordance with provision of Paragraph 1, Article 427 of
the Companies Act; Provided, however, that the amount oflimit for such liabilities for compensation based on suchagreements shall be the minimum amount provided for bylaws and regulations.
Article 34 to 37 (provisions omitted)- 51 -

(Translation)

Agenda 2: Election of Six (6) Directors
The tenure of office of Directors Katsumasa Shinozuka, Naoki Sato, Masao
Miyashita, Yutaka Asai and Harushige Sugimoto will expire at the end of this general
meeting of shareholders.
Also, Director Minoru Morio will resign as Director at the end of this general
meeting of shareholders.
We accordingly request that you elect six Directors from among the following
candidates.
Candidates for Directors (Six):
CandidatenumberName(Date of birth)

1

Naoki Sato
(October 27, 1948)

2

Masao Miyashita(December 23, 1949)

3

Masasuke Kishi(June 19, 1955)

Brief personal profile, position andresponsibility in the Company and significant concurrent
positions
Joined The Fuji Bank, Limited
Apr. 1972
Senior Manager, Sales Division No.5, Fuji
May. 1999
Bank
Executive Officer,
June. 2001
Senior Manager, Sales Division No.5, Fuji
Bank
Senior Executive Officer, Mizuho Corporate
Apr. 2002
Bank, Ltd.
Managing Executive Officer, Oki Electric
Apr.2004
Senior Vice President
Jun. 2004
Executive Vice President
Apr. 2007
Director and Vice President
Jun. 2008
Senior Executive Vice President and Member ofJun. 2009
the Board (incumbent)
Joined Oki Electric
Apr. 1973
Manager, Sales Department No. 1 GovernmentMar. 1993
Sales Division
Executive Officer
Apr. 2004
Managing Executive Officer
Apr. 2007
Senior Vice President
Jun. 2008
Senior Vice President and Member of the Board
Jun. 2009
Executive Vice President and Member of theApr. 2010
Board (incumbent)
Joined Oki Electric
Apr. 1980
Manager, Multimedia System Development
Oct. 1995
Department, Multimedia System Development
Center, Information System Business Division
Executive Officer
Apr. 2006
Senior Vice President (incumbent)
Apr. 2008
Chief Technology Officer (incumbent)
Apr. 2010(Significant concurrent position)
President, Oki Networks Co., Ltd.

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Number of Oki
shares held

74,000 shares

33,000 shares

37,000 shares

(Translation)
CandidatenumberName(Date of birth)

4

Sei Yano(April 28, 1955)

5

Harushige Sugimoto(February 22, 1948)

Brief personal profile, position andresponsibility in the Company and significant concurrent
positions
Joined Oki Electric
Apr. 1978
Manager, Business Promotion Department,
Jul. 1997
Open System Integration Center, System
Business Group
Executive Officer
Apr. 2007
Senior Vice President (incumbent)
Apr. 2009
Chief Information Officer (incumbent)
Jul. 2009Manager, Solution & Services Business
Apr. 2010(incumbent)
Joined Oki Electric
Apr. 1970
General Manager, Technology Department No.
Jun. 1990
1, Composite Telecommunications Systems
Department Electric Telecommunications
Business Division
Executive Officer
Apr. 2000
Managing Executive Officer
Apr. 2004
Director (incumbent)
Apr. 2008

Mar. 1975
Jul. 1978
6

Takuma Ishiyama(February 17, 1947)

Dec. 1985
Apr. 1986
Apr. 1991
May 2003
Apr. 2004(Significant concurrent positions)
President, Oki Data Corporation
Obtained scores for doctorate degrees andresigned from Graduate School of Law, Waseda
University
Assistant Professor, Faculty of Law, Aichi
Gakuin University
Obtained doctorate degree
Professor, Faculty of Law, Dokkyo University
Professor, School of Commerce, Waseda
University
Registered as lawyer (Dai-ichi Tokyo Bar
Association)
Professor, Law School, Nihon University(incumbent)

Number of Oki
shares held

22,000 shares

39,000 shares

0 shareNotes:
1.
Mr. Takuma Ishiyama is a candidate for outside director.
2.
The reason Mr. Takuma Ishiyama is proposed to be the candidate for outside director is as follows:
Although he has no experience of being directly engaged in corporate management, he has experience andprofessional knowledge as a lawyer and law professor, and the Company judged that he would be able toappropriately provide supervision of the Company’s corporate management, especially from the objective
standpoint as a professional in the Companies Act.
3.
In order for the Company to invite competent human resources as outside officers, it proposed partial amendment
to the Articles of Incorporation in the Agenda 1, so that the Company would be able to conclude agreements withthe outside officers to limit liabilities for compensation for damages to the Company within a certain amount. If
the Agenda 1 is approved as proposed, the Company plans to conclude agreements to limit liabilities forcompensation for damages with Mr. Takuma Ishiyama. The overview of the contents of the said agreement is asfollows:
In case he causes any damage to the Company due to any negligence as an outside director, he shall incur
responsibility – with the minimum liability amount as stipulated in Paragraph 1, Article 427 of theCompanies Act.
Liabilities for compensation for damage as above are limited only when there is no significant negligence
for any damage caused in executing duties as an outside director, and when he fulfills his responsibilities ingood faith.

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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 the 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 with a mobile phone.
You will need to enter your voting rights exercise code and password (valid only for purposes of thisgeneral meeting) provided in the lower right corner of the voting rights exercise form, enclosed with the
Notice.
2) If you exercise your voting rights both in writing and via the Internet, we will regard the vote cast via theInternet to be effective.
3) If you exercise your voting rights more than once, we will regard the last vote you cast via the Internet tobe the effective one.
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 URLs 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 onscreen instructions.

3.

Technical specifications
1) Operating system: Windows operating systems
2) Browser: Internet Explorer 5.5 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 that you 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.)
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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