(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, inparticular, accuracy of this translation, are hereby disclaimed.

(Securities Identification Code: 6703)
June 8, 2006

NOTICE OF 82ND ORDINARY GENERAL MEETING OF SHAREHOLDERS
Dear Shareholder,
Oki Electric Industry Co., Ltd. (the “Company”) would hereby like to inform you that the 82nd
ordinary general meeting of shareholders will be held as follows, and would be grateful if you
could attend the meeting.
Those who will not be able to attend the meeting are kindly requested to consider the attached“Reference Documents for the General Meeting of Shareholders” (pages 36 through 53) andexercise your voting rights in one of the following ways.

[Exercise of voting rights by postal mail]Please indicate your approval or disapproval for each of the proposals in the space provided on
the ballot and return the ballot to the Company. (There is no need to affix your signature or
registered seal.)[Exercise of voting rights by electronic means (Internet)]
Please read the appended “Instructions for the Exercise of Voting Rights via the Internet” (page54), and indicate your approval or disapproval online via the designated website at
http://www.it-soukai.com.
There is no need to mail the ballot if you choose to vote via the Internet.

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

1.
2.

Date and Time:
Venue:

3.

Meeting Agenda

Thursday, June 29, 2006, from 10:00 a.m.
1st Floor, Conference Room, Building Complex No.5 (5-Gokan), Oki
Electric’s Business Center, 4-10-16 Shibaura, Minato-ku, Tokyo-1-

(Translation)
Items to be reported:
1. Business Report, Balance Sheets and Statements of Income for the 82nd fiscal
year (from April 1, 2005 to March 31, 2006)
2. Consolidated Balance Sheets, Consolidated Statements of Income, audit resultsof consolidated financial statements by the Account Auditor and the Board of
Corporate Auditors for the 82nd fiscal year (from April 1, 2005 to March 31,
2006)
Items to be resolved:
Agenda 1:
Agenda 2:
Agenda 3:
Agenda 4:
Agenda 5:
Agenda 6:
Agenda 7:

Approval of the Proposed Appropriation of Unappropriated Retained
Earnings for the 82nd Fiscal Year
Partial Amendment to the Articles of Incorporation
Election of Eight Directors
Election of One Corporate Auditor
Revision of Wages for Directors and Auditors
Granting of Equity Warrants as Stock Options to Directors
Determining Particulars of Offering Equity Warrants Granted as Stock
Options to Executive Officers Excluding Those Concurrently Serving as
Directors

4.

Miscellaneous Matters
Only those shareholders who hold voting rights are entitled to exercise their voting rights by
proxy. The relevant proxy shall be one person per shareholder. Proxies will be asked to submit
documents attesting to their delegated authority.

* 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 82nd 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, Business Report, Balance Sheet, Income Statement and Consolidated
Financial Statements will be announced on the website.

-2-

(Translation)(Attachment)

Business Report(From April 1, 2005 to March 31, 2006)
1.

Operating Conditions(1) Operating progress and results of the Oki Group
During the term under review, the domestic economy turned relatively favorable due
to improvements in corporate earnings as well as increased capital expenditures and arecovery in consumer spending. Business conditions appear on track to recover
worldwide as well. In the business fields in which the Oki Group operates, however,prices for our products, including semiconductors and color printers, were affected bycontinuing digital deflation in the IT market as a whole, and there were delays in financial
institutions’ investments in security systems. However, growth of the color printer market
proved a favorable factor. Elsewhere, beginning with the latter half of the term,
telecommunication carriers’ investments in broadband IP networks ran their course, thereby
impacting market demand.
In this market environment, consolidated sales for the term under review declined
1.2% year-on-year to ¥680.5 billion. Consolidated operating income declined by ¥16.6
billion year-on-year from ¥27.2 billion to ¥10.6 billion. Consolidated recurring income
decreased by ¥14.0 billion from ¥21.2 billion to ¥7.2 billion, and consolidated net income
dropped by ¥6.1 billion from ¥11.2 billion to ¥5.1 billion.
Non-consolidated results followed a trend similar to that for consolidated results.
Sales for the term under review stood at ¥409.1 billion, down 6.9% year-on-year. As forprofits and losses, operating income declined by ¥4.2 billion year-on-year from ¥8.0 billion
to ¥3.8 billion. Recurring income decreased by ¥3.6 billion from ¥8.3 billion to ¥4.7
billion, and net income dropped by ¥1.0 billion from ¥3.2 billion to ¥2.2 billion.
We, at the Oki Group, have made clear the corporate social responsibility we expect
the Group to fulfill from long-term and global perspectives by establishing the “Oki Group
Charter of Corporate Conduct” laying out standards we expect to be shared by all officers
and employees of the Group.
In the area of compliance, we are endeavoring to prevent any scandals by establishingthe “Oki Electric Codes of Conduct” requiring officers and employees to comply with all
relevant laws, regulations and internal rules, increasing awareness of compliance issues,and enhancing the compliance structure throughout the Group. In conjunction with this,
we are striving to detect any misconduct at its earliest stages by developing internally apublic-interest disclosure system.
Consolidated sales by segment are as provided below.
As we have changed our segments starting this past terms, amounts for the previous
term have been revised to reflect the reclassified segments.

-3-

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

Compared tothe previous
year (%)

Major factors for thedifference
Due to declines in
ATM sales,
investments in IT, etc.

FY2004

FY2005(reference:previous year)(the year underreview)

Info-telecom
systems

373.1

338.0

(35.1)

91

Semiconductors

150.7

150.7

0

100

Printers

137.7

160.5

22.8

117

Segment

Other

27.0

31.3

4.3

116

Total

688.5

680.5

(8.0)

99

Due to favorable salesof color non-impact
printers

The following provides a summary of each segment.
Info-telecom systems
Sales of financial market-use info-telecom systems were affected by reduced demandfor bank branch terminals and delays in investments in high-security ATMs, the latter being
a product for which we had high hopes. Although financial institutions are recovering awillingness to invest in administrative efficiency improvements, including centralized dataprocessing and back-office systems, we were unable to see as much demand develop as we
had previously hoped for.
In the telecommunications carrier market, investments in fixed-line telephoneequipment declined as carriers’ investments in broadband IP networks began losing somesteam from the latter half of the term under review and their investments in fixed-line
telephone services offered through their own networks ran their course. As for the capital
expenditures of enterprises, these businesses had a strong need for systems to integrate
information with telecommunications based on IP telephony, but a full-scale diffusion ofthese systems has is still only in its early phases.
As a result, consolidated sales to third parties decreased 9.4% year-on-year to ¥338.0
billion. Operating income, affected by these reduced sales, declined by ¥4.9 billion from
¥15.8 billion to ¥10.9 billion.
Semiconductors
The semiconductor market was on a recovery trend but, in general, semiconductor
prices have been falling. We attempted to enhance the value of the Oki Group’s main
products such as P2ROMs and drivers through cost-reduction initiatives and introduction ofhigher-capacity and new products. Increased market entry, however, and intensifying
competition have caused prices to continue falling at a rate outpacing the valueenhancement. At the same time, in the system LSI field, there was some delay indevelopment of new products.
As a result, consolidated sales to third parties stood at ¥150.7 billion, remaining
virtually unchanged from the previous term. Affected by increasing competition andfalling prices, operating income declined by ¥9.0 billion year-on-year from ¥12.0 billion to¥3.0 billion.

-4-

(Translation)

Printers
The market for business-use color non-impact printers is continuing to expand rapidly.
The Oki Group has expanded sales by introducing multifunctional printers and reinforcing
its sales and production bases on the strength of high-speed, high-resolution printers andcompact, lightweight LED systems. However, competition is intensifying further among
manufacturers seeking to expand market share primarily in the color printer market.
As a result, consolidated sales to third parties increased 16.5% year-on-year to ¥160.5
billion. However, due to price declines centered on color printers, deterioration in themodel mix and active investments in sales and production activities, operating income
declined by ¥3.7 billion from ¥7.8 billion to ¥4.1 billion.
(2) Capital expenditure of the Oki Group
Capital expenditures for this year equaled ¥33.5 billion.
The investment amount by segment was as follows.
(Unit: billions of yen)Segment

Amount ofcapitalexpenditure

Info-telecom systems

5.6

Semiconductors

17.7

Printers

7.1

Major investments
ATM products and cash processing systems for financial anddistribution markets; investments in development andproduction of products for network service and network
infrastructure
Investments in development and production of logic LSI, system
LSI, system memory, etc.
Investments in development and production of business-use
printers

Other
3.1
Total
33.5
Note: The above amount includes ¥4.4 billion of leased assets.

(3) Financing of the Oki Group
Funds required for the term under review were allocated from our own funds andfrom borrowed funds. The borrowed funds were procured mainly in the form of longterm borrowings from leading banks.
(4) Future challenges of the Oki GroupThe IT industry, forming the principal operating platform for the Oki Group, is one
marked by rapid technological innovation and radical changes. In particular, in recent
years ubiquitous services offering information, products and services on-demand to users,
any time and anywhere have been rapidly gaining popularity, in step with the spread ofphotonic broadband networks and the development of new services integrating sound,visual images and data. These developments have brought about significant changes inthe business environment in which our customers operate. In conjunction with thesechanges, prices continue to fall due to the digital deflation that is becoming widespread inall segments of the IT industry.
Bearing this in mind, we at the Oki Group are striving to become a key player in “eSociety” by building a “strong business structure” capable of responding quickly and-5-(Translation)
flexibly to what have been far-greater-than-expected changes in our customers’ businessenvironment. Specifically, we believe the following three areas are the principal
challenges we must cope with:(i)

Flexible and expeditious business operation
We have identified the fiscal year ending March 2007 (Fiscal 2006) as the year
for revamping investment and business structures. We are looking to concentrate
our management resources in relevant businesses by clarifying once again, throughre-examination of our business processes, the business fields where we havecompetitive advantage and differentiated technology. We aim to offer “strong
products” that satisfy our customers by “manufacturing” on the strength of oursolution and mechatronics technologies, fusing together the Oki Group’s infotelecom expertise. To this end, we are enhancing the autonomy of our internal
companies by reinforcing the network-type company management we have beenpromoting, promptly launching new venture businesses, and driving the creation of
new synergistic effects in our internal companies and the companies within theGroup.
At the same time, we recognize that our human resources are what in fact build
a strong business structure for an enterprise of stable profitability capable of adapting
itself flexibly to an age of change. The development of such human resources willcontinue to be among our important management challenges. Bearing this in mind,
we are striving to bolster our specialty certification system by actively promoting
junior employees to higher positions, establishing operational consulting
qualifications and reinforcing our coaching staff in order to ensure that individual
know-how is accumulated and passed on within our organization.

(ii)

Reforming core businesses to build a “strong business structure”
In carrying out reforms of the Oki Group’s core businesses, we seek to expand
our earnings by focusing on:
Concentration of our management resources in business fields where we havecompetitive advantage and differentiated technologies, and further clarification ofhigh-priority businesses based on enhanced alliances:
Organizational development aimed at upgrading technological, productplanning and developmental capabilities; andSales expansion through reinforced marketing and sales capabilities.
With respect to our main businesses, we are moving ahead with the following
specific measures:
Signs of recovery and growth are visible in our financial markets businesswithin our info-telecom system business segment. In the ATM business, we areaiming to expand earnings by implementing further structural reform, upgrading newfeatures including security, reducing costs and developing overseas business. At thesame time, in the area of financial ubiquitous services applying expanding Internet
technologies, we are laying the framework for responding quickly and accurately to-6-(Translation)customer needs through enhanced alliances.
In our telecommunications carrier market business, given the fact that existing
networks are currently giving way to next-generation networks (NGNs), we haveidentified Fiscal 2006 as the developmental period for next generation applications
and are focusing on developing competitive products. As for home devices andoptical access equipment competitive in the photonic broadband network market, weare developing our business with a view to expanding our earnings by developing
overseas operations.
In our business segment aimed at the enterprise market, we have advantages insystems realizing a true-to-life sound, triple play IP telephony and contact center-use
computer telephony integration (CTI). We are setting out to expand our sales andearnings by launching even more value-added products, which will help realize stateof-the-art ubiquitous services. We are also striving to offer a lineup of thesecompetitive products aggressively to customers and increase our sales by continuing
to strengthen our distribution channels and step up our global operations, notably in
China.
In our semiconductor business segment, we are seeking to enhance our costcompetitiveness by bolstering our “fab-free” strategy through reinforcing allianceswith our manufacturing partners in the areas of production, technology and productdevelopment, while simultaneously building a flexible business structure allowing us
to develop high value-added products. In particular regarding system LSIs, we areendeavoring to launch new products by taking advantage of the Oki Group’s
advanced telecommunications technology. We are also seeking to boost ourbusiness by concentrating our management resources in areas we excel in, such as
low-power-consumption, high-voltage and silicon-on-sapphire (SOS) technologies,
and by building a business structure centered on their competitive advantage.
In the printer business segment, we are endeavoring to further expand our color
non-impact printer (NIP) business whose market continues to grow. In particular,
we are aiming to enhance our sales by driving a full-scale penetration of the Japanesemarket. Given the nature of the printer business where earnings rely heavily on thevolume of expendable parts and supplies, we are endeavoring to improve our
profitability by shifting our priority to medium-level and high-end models that
consume a greater volume of expendable parts and supplies. We are also focusing
on offering solutions that can encourage using a greater volume of expendable partsand supplies. In conjunction with this, we are striving to maximize earnings fromsales of serial impact dot matrix (SIDM) printers and mono NIPs, which form thepillar of our printer business.
(iii) Improving profitability through expansion of new businesses
For new businesses, we are focusing on creating profits by expanding ourservice and software and overseas businesses and accelerating the creation of new
cross-sectional businesses.
With respect to the service and software business, as in the past, we are aiming
to expand areas related to our core businesses. We are focusing on providing a-7-

(Translation)
service and software business that is useful for business operations by taking
advantage of the technologies, knowledge, know-how and assets that the Oki Grouppossesses and by accumulating, utilizing and expanding greater business know-how
than our customers possess, so that we may help them concentrate on their own corebusinesses. For example, we are seeking to increase our sales by providing financial
institutions with ATMs and maintenance services as our core business as well as
providing them with total ATM-related services ranging from staff dispatch to ATM
operation.
With respect to our overseas business development, we are drasticallyoverhauling our business structure involving products and technologies such as ATMs,
IP telephony servers and contact centers in which the Oki Group has a competitive
advantage. In particular, for the rapidly growing Chinese market, we areestablishing a China-based business structure covering marketing, product planningand development, rather than continuing to rely upon operations out of Japan as we
did in the past. As for our semiconductor business, we are striving to strengthen our
existing distribution channels in China, South Korea and Taiwan. In our printerbusiness, we are aiming to strengthen our distribution structure for the rapidly
growing BRICs markets.
We are striving to accelerate creation of new businesses in ubiquitous networks
and ubiquitous services by establishing a cross-sectional project within the Oki Groupand integrating the business strengths of the Group. We are also seeking toinvigorate and accelerate creation of new businesses by increasing the number of inhouse venture companies and venture units.

-8-

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

Sales

585.5

billion yen

654.2

billion yen

688.5

billion yen

82nd year(current year,
FY2005)680.5
billion yen

Net income

6,560

million yen

1,328

million yen

11,174

million yen

5,058

79th year (FY2002)

80th year (FY2003)

81st year (FY2004)

million yen

Net income per share

10.72

yen

2.17

yen

18.27

yen

8.27

yen

Total assets

622.9

billion yen

609.6

billion yen

608.0

billion yen

618.9

billion yen

Net assets

101.3

billion yen

110.5

billion yen

124.8

billion yen

133.9

billion yen

Net assets per share

165.63yen

180.66yen

204.11yen

218.96yen

Notes:
1. Parentheses indicate losses.
2. Net income per share is computed based on the average number of shares during the year
(weighted average). Net assets per share are computed based on the number of common shares
outstanding during the year. These figures exclude treasury stocks.

As the business environment had become more severe, we formulated andimplemented a “Third Structural Reform” in October of the 79th term (Fiscal 2002).
Consequently, in spite of the decreased sales, we managed to cut losses substantially.
In the 80th term (Fiscal 2003), we saw some promising signs in the businessenvironment, so we endeavored to follow through with our “Third Structural
Reform.” As a result, we were able to increase sales and substantially cut losses
compared with the previous term, thereby returning to net profit.
In the 81st term (Fiscal 2004), amid a generally favorable businessenvironment, we made efforts to push forward with the second phase aimed at further
growth as an enterprise of stable profitability. As a result, both sales and net income
increased from the previous term.
(ii)

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

Sales

377.1

billion yen

417.5

billion yen

439.4

82nd year(current year,
FY2005)billion yen 409.1
billion yen

Net income

9,905

million yen(3,800)

million yen

3,199

million yen 2,217

79th year (FY2002)

80th year (FY2003)

81st year (FY2004)

million yen

Net income per share

16.18

yen

(6.21)

yen

5.23

yen 3.63

yen

Total assets

515.1

billion yen

496.7

billion yen

488.0

billion yen 487.6

billion yen

Net assets

118.2

billion yen

123.5

billion yen

128.2

billion yen 134.9

billion yen

Net assets per share

193.18yen

201.97yen

209.60yen 220.63

yenNotes:
1. Parentheses indicate losses.
2. Net income per share is computed based on the average number of shares during the year
(weighted average). Net assets per share are computed based on the number of common shares
outstanding during the year. These figures exclude treasury stocks.
3. As these financial documents have been prepared in accordance with the Commercial Code-9-

(Translation)
Enforcement Regulations as revised from the 80th year by “Ministry Ordinance for Partial Revisionof Commercial Code Enforcement Regulations” (February 28, 2003 Ministry of Justice Ordinance
No. 7 and September 22, 2003 Ministry of Justice Ordinance No. 68), “income” and “income pershare” are now indicated as “net income” and “net income per share.”- 10 -

(Translation)
2.

Overview of the Oki Group and Oki Electric(as of March 31, 2006)(1) Major businesses of the Oki GroupThe Oki Group offers as its core businesses info-telecom systems, devices,semiconductors, and printers as well as related solutions and services through a businessstructure comprising System Network Business Group for the info-telecom system business,
Semiconductor Business Group and Printer Business Group.
Major business items include the following.
Segment

Info-telecom systems

Semiconductors
Printers

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

(2) Shareholders’ equity
Current shareholding is as follows.
(i) Number of shares authorized to be issued by the Company:
2,400,000 thousand shares(ii) Number of outstanding shares: 612, 371 thousand shares(iii) Number of shareholders: 111,379(iv) Major shareholders (Top 10)
Investment in major
shareholders by Oki
Number ofshares held
Investment(thousandratio
shares)-%Number ofshares held
(thousandshares)Votingright ratio

Meiji Yasuda Life Insurance Company

34,000

5.63%

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

25,375

4.20--

Japan Trustee Services Bank, Ltd. (trust account)

24,373

4.04--

Mizuho Corporate Bank, Ltd.

13,0002.15- (Note 1)

Sompo Japan Insurance Inc.

12,986

2.15

500

0.05

Japan Trustee Services Bank, Ltd.
(four trust accounts)

11,074

1.84--

Japan Securities Finance Co., Ltd.

10,8591.80--

The Dai-ichi Mutual Life Insurance Company

9,380

1.55

-

-

State Street Bank and Trust Co. 505019

8,720

1.45

-

-

Oki Denki Employees’ Shareholdings Committee

8,472

1.40

-

-

Name of shareholder-

Notes:
1. The Company does not hold shares of Mizuho Corporate Bank, Ltd., but it does hold five thousand
ordinary shares of Mizuho Financial Group, Inc., the holding company of the Mizuho Group.
2. The Company has been notified that Mizuho Corporate Bank, Ltd. and its joint shareholders hold32,778 thousand shares (investment ratio: 5.35%) as of July 31, 2005 in accordance with thedisclosure system for large shareholdings in the Securities Exchange Law.

- 11 -

(Translation)
The Company has been notified that Meiji Yasuda Life Insurance Company and its joint
shareholders hold 36,905 thousand shares (investment ratio: 6.03%) as of January 31, 2006.
The Company has been notified that Alliance Capital Asset Management Co., Ltd. and its joint
shareholders hold 33,739 thousand shares (investment ratio: 5.51%) as of February 28, 2006.
The Company has been notified that Nomura Securities Co., Ltd. and its joint shareholders
hold 35,342 thousand shares (investment ratio: 5.71%) as of February 28, 2006.
The Company has been notified that Morgan Stanley Securities Preparation Co., Ltd.
(currently Morgan Stanley Japan Securities Co., Ltd.) and its joint shareholders hold 44,454
thousand shares (investment ratio:7.24%) as of March 31, 2006.
The Company has been notified that Barclays Global Investors Japan Trust & Banking Co.,
Ltd. and its joint shareholders hold 31,281 thousand shares (investment ratio: 5.11%) as ofMarch31, 2006.

(v)

Acquisition, disposal and holding of shares- Number of shares acquired during this fiscal year:
Ordinary shares: 160,507 shares
Total acquisition value: 62,809 thousand yen- Number of shares disposed during this fiscal year:
None- Number of shares held during this fiscal year:
Ordinary shares: 868,052 shares(3) Major offices of the Oki GroupThe major offices are as follows.
Name

Classification

Location

Head office

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

Branch offices
Oki Electric Industry Co., Ltd.

Business offices
Research institutes

Hachioji (Tokyo) and Osaka (Osaka)

Oki Wintech Co., Ltd.

Head office

Shinagawa-ku, Tokyo

Oki Data Corporation

Head office

Minato-ku, Tokyo

Oki Customer Adtech Co., Ltd.

Head officeKoto-ku, Tokyo

Miyagi Oki Electric Co., Ltd.

Head office

Oohiramura, Kurokawa-gun, Miyagi

Miyazaki Oki Electric Co., Ltd.

Head office

Kiyotake-cho, Miyazaki-gun, Miyazaki

Oki America, Inc.

Head office

California, USA

Oki Europe Ltd.

Head office

Middlesex, UK

Oki (Thailand) Co., Ltd.

Head office

Ayutthaya, Thailand(4) Employees of the Oki Group and Oki Electric(i) Employees of the Oki Group- 12 -

(Translation)(ii)

Segment

Number of employees

Info-telecom systems

8,975

Semiconductors

5,011

Printers

5,684

Other

1,020

Company-wide (shared)

485

Total

21,175

Employees of Oki Electric

Number of employees
5,496 (increased by 107 from the end of the previous year)

Average age
40.0

Average length of service
17.5(5) Status of consolidation(i) Status of major subsidiaries
Name

Company’s
voting rightratio

CapitalOki Wintech Co., Ltd.

2,001 million

yen

53%

Oki Data Corporation

14,500 million

yen

100

Oki Customer Adtech Co., Ltd.

800 million

yen

100

Miyagi Oki Electric Co., Ltd.

200 million

yen

100

Miyazaki Oki Electric Co., Ltd.

200 million

yen

100

Oki America, Inc.

14 million

U.S. dollars

100

Oki Europe Ltd.

33 million

UK Pond100

Oki (Thailand) Co., Ltd.

700 million

Thai baht

100

(ii)

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

Status of major affiliated companies
Name

Oki Electric Cable Co., Ltd.

Capital4,304 million

yenCompany’s
voting right

Major business

35%

Manufacturing and sales of cables
and electric discharge machine
electrode wires(iii) Results of consolidation
The Company has 84 consolidated subsidiaries including 8 major subsidiaries
mentioned above and 2 equity method affiliates including one major affiliated company
mentioned above. Consolidated net sales were ¥680.5 billion (¥688.5 billion in theprevious year), and consolidated net income was ¥5.1 billion (¥11.2 billion in the previousyear).

- 13 -

(Translation)(6) Major partners of the Oki Group(i) Major technical partners:
Lucent Technologies GRL Corporation (US)International Business Machines Corporation (US)Texas Instruments Incorporated (US)Canon Inc.
(ii) Major business partners:
Hewlett-Packard Company (US)Cisco Systems, Inc.
United Microelectronics Corporation (Taiwan)
Peregrin Semiconductor Corporation (US)ACCESS Co., Ltd.
(7) Major creditors of Oki Electric
Major creditors of Oki Electric are as follows:
Year-end loanbalance

Creditor

Billion yen

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

19.8
14.3
13.1
12.3
7.8

Shares held by the creditor
Number of shares

Voting rightratio

Thousand shares

13,0003,381
34,000
4,065

%

2.15
0.56
5.63
0.67

(8) Directors and corporate auditors
Note 1*X

Position
President

Name
Katsumasa Shinozuka*X

Executive Vice President

Kazuo Tanaka*X

Executive Vice President

Yutaka Maeda

X

Senior Vice President

Tadao Murase

X

Senior Vice President

Nobuhide Hara

X

Senior Vice President

Takashi Hattori

X

Senior Vice President

Naoki SatoX

Senior Vice President

Harushige Sugimoto

X

Senior Vice President

Hideichi Kawasaki

DirectorStanding Auditor
Standing Auditor
Standing Auditor
Auditor

Minoru Morio
Takahisa Inagawa
Yoshiyuki Honjo
Hiroyuki Katagiri
Ieji Yoshioka

Status or main duties
CEO
CFO & CCOManagement supervising (in charge of Corporate Planning
Office, Accounting & Control Division, Human Resources
Division, Internal Auditing Division)
Technical supervising (in charge of Government and Industry
Relations and Development Promotion Division)
Division Head, China Business Support Division
Chairman, System Network Business Group
Sales supervising (in charge of Marketing Promotion Division)
CIO in charge of Information Planning Division, CSR
Promotion Division, Compliance & Business Ethics Division
GOO in charge of System Network Business GroupIn charge of Affiliates Administration Division, General
Affairs Division, sales and financing operations
CTO in charge of Corporate Research & Development Center,
Corporate Production Planning Division, Global Environment
Division, Legal & Intellectual Property Division
In charge of Public Relations Division, Human Resources
Support Division HQ
In charge of sales and branch operations
Division Head, Marketing Promotion Division
Advisor to Sony Corporation

CEO: Chief Executive Officer
CFO: Chief Financial Officer
CCO: Chief Compliance Officer- 14 -

(Translation)
CIO: Chief Information Officer
GOO: Group Operating Officer
CTO: Chief Technology Officer

Notes:
1. Asterisk indicates Representative Director. X indicates executive officer.
2. Director Minoru Morio is an external director appointed under Item 7-2, Paragraph 2, Article 188of the Commercial Code.
3. Standing Auditors Hiroyuki Katagiri and Ieji Yoshioka are external auditors as stipulated in
Paragraph 1, Article 18 of the Law for Special Exceptions to the Commercial Code concerning
Corporate Audits.
4. Retiring Directors and retiring Auditors during this fiscal year
Directors who retired on June 29, 2005 are as follows:
Katsuhiko Sano, Director
5. Changes of Representative Directors after the fiscal year
None
6. Executive officers as of March 31, 2006 are as follows(excluding those who concurrently serve as Directors).
Position
SeniorExecutive officer

Name
Kazushige Matsui

SeniorExecutive officer

Hironori Kitabayashi

Executive officer

Keiichi Fukumura

Executive officer

Masayoshi Matsushita

Executive officer

Masataka Sase

Executive officer

Yutaka Asai

Executive officer

Shigeru Yamamoto

Executive officer

Kiyoharu Miyatake

Executive officer

Akira Kamo

Executive officer

Masao Miyashita

Executive officer
Executive officer

Hiroshi Enomoto
Kichiro Akino

Principal duty
SOO, System Network Business Group
Senior Manager, Strategic Planning Office
GOO, Semiconductor Business Group
Supporting officer in charge of Corporate Production
Planning Division, Global Environment Division
General Manager, Accounting & Control Division
SOO, System Network Business Group
Division Head, Network Application Division
In charge of Global Environment Division, Legal &Intellectual Property Division
Supporting officer in charge of Government and Industry
Relations and Development Promotion Division
SOO, System Network Business Group
Deputy Division Head, Marketing Promotion Division
SOO, System Network Business Group
President, Financial Solutions Company
SOO, Semiconductor Business Group
Senior Manager, Strategic Planning Office
SOO, Semiconductor Business Group
President, Silicon Solutions Company
SOO, Information & Telecommunications Business Group
President, Network Systems Company
General Manager, Corporate Planning Office
EVP, Network Systems Company
SOO: Senior Operating Officer
EVP: Executive Vice President

The following changes were made to the executive officers during the fiscal year
under review and from April 2006.
Retirement
Name
Date
Kazushige Matsui
March 31, 2006
Kiyoharu Miyatake
March 31, 2006

- 15 -

Appointment
Name
Date
Kazuhiro Iritani
April 1, 2006
Masasuke Kishi
April 1, 2006

(Translation)(9) Stock acquisition rights (hereinafter referred to as “equity warrants”)(i) Equity warrants issued(a) Equity warrants in accordance with Articles 280-20 and 280-21 of the Commercial
CodeType and
Payment per
number ofshare required
Number of
Exercise period
shares to be
to exercise
equity warrants
acquired by therightsrightsJuly 1, 2004
Common shares:
No.1 equity warrant
271 yen153
to June 30, 2007
153,000 shares(Issued on July 18, 2002)
July 1, 2005
Common shares:
No. 2 equity warrant
384 yen815
to June 26, 2013
815,000 shares(Issued on July 18, 2003)
July 1, 2006
Common shares:
No. 3 equity warrant
458 yen452
to June 28, 2014
452,000 shares(Issued on July 20, 2004)
July 1, 2007
Common shares:
No. 4 equity warrant
406 yen442
to June 28, 2015
442,000 shares(Issued on July 20, 2005)
Note: Equity warrants were issued free of charge for the purpose of granting stock options.

(b) Convertible bonds in accordance with Article 341-2 of the Commercial Code

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

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

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

Equity warrants issued to non-shareholders under privileged conditions during the
fiscal year under review(a) Number of equity warrants issued
442 rights(b) Type and number of shares to be acquired by the rights
Common shares: 442,000 shares (1,000 shares per right)(c) Issue price of the rights
Granted free of charge(d) Payment per share required to exercising the rights¥406(e) Exercise period
July 1, 2007 to June 28, 2015(f) Conditions for the exercise of rights
a. The following restrictions apply to the exercise of equity warrants.
1) Period from July 1, 2007 to June 30, 2008:- 16 -

(Translation)
A maximum of 34% of the allotted number may be exercised.
2) Period from July 1, 2008 to June 30, 2009:
A maximum of the number calculated by deducting the number exercised in1) above from 67% of the allotted number may be exercised.
3) Period from July 1, 2009 to June 28, 2015:
A maximum of the number calculated by deducting the number exercised in
1) and 2) above from the allotted number may be exercised.
Fractions shall be rounded off for calculation purposes.
b. The heir of the holder of the equity warrants upon the holder’s death shall beallowed to exercise the rights as follows.
In case of inheritance before June 30, 2009, the rights may be exercised byJune 30, 2010.
In case of inheritance after July 1, 2009, the rights may be exercised for one
year from the date of inheritance; provided, however, that the rights may not be
exercised after June 28, 2015.
c. Other conditions regarding exercise of rights shall be subject to the equity-warrant
allocation agreement concluded between the Company and holders of the rights.
(g) Cancellation of equity warrants
Equity warrants may be cancelled free of charge when the rights holder no longer
falls under any of the conditions for exercise set forth in the previous paragraph.
(h) Restrictions on transfer of equity warrants
Transfers of equity warrants shall be subject to the approval of the Board of
Directors.
(i) Details of privileged conditions
The Company has issued equity warrants free of charge to Directors engaged in thebusiness execution of the Company, executive officers, senior staff members
participating in management and Directors of certain subsidiaries.
(j) Names of persons to whom rights were allotted and the number of rights allotted.
- Directors of Oki Electric
Name
Katsumasa Shinozuka
Kazuo Tanaka
Yutaka Maeda
Tadao Murase
Nobuhide Hara
Takashi Hattori
Naoki Sato
Harushige Sugimoto
Hideichi Kawasaki
9 persons in total

Number of rights
66
26
26
17
17
17
17
17
17
220

- 17 -

Type and number of shares to be acquiredby the rights
Common shares:
66,000 shares
Common shares:
26,000Common shares:
26,000Common shares:
17,000Common shares:
17,000Common shares:
17,000Common shares:
17,000Common shares:
17,000Common shares:
17,000220,000(Translation)- Employees of Oki Electric and Directors of subsidiaries (top 10 persons)
Name
Kazushige Matsui
Hironori Kitabayashi

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

14

Common shares:

14,000Hiroshi Konishi

14

Common shares:

14,000Keiichi Fukumura
Masayoshi Matsushita
Masataka Sase
Yutaka Asai
Shigeru Yamamoto
Kiyoharu Miyatake

11
11
11
11
11
11

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

11,00011,00011,00011,00011,00011,000Remarks
Executive officer of Oki
Executive officer of Oki
President and CEO of
Oki Data Corporation
President and CEO of
Oki Customer Adtech
Co., Ltd
Executive officer of Oki
Executive officer of Oki
Executive officer of Oki
Executive officer of Oki
Executive officer of Oki
Executive officer of Oki- Total rights issued to Oki Electric employees and Directors of subsidiaries

Employees of Oki
Directors of subsidiaries

Number ofrights186
36

Type and number of shares to beacquired by the rights
Common shares:
186,000 shares
Common shares:
36,000sharesNumber of
persons granted203(10) Compensation paid to accounting auditors
The amount of compensation that the Company and its subsidiaries pay to the accounting
auditors shall be as follows.
Amount of payment
1. Total sum of compensation to be paid to accounting auditors by Oki and its
109 million yen
subsidiaries
2. Total sum of compensation to be paid for the audit certificate services provided in
Paragraph 1, Article 2 of the Certified Public Accountants Law, which is included
109 million yen
in the total sum of 1 above
3. Compensation, etc. to be paid to accounting auditors by Oki, which is included in
64 million yen
the total sum of 2 above
Note: The Company does not distinguish auditor compensation per (i) auditing in accordance with the Law forSpecial Exceptions to the Commercial Code concerning Corporate Audits, and (ii) auditing inaccordance with the Securities Exchange Law. The total of these amounts is recorded in 3 above.

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

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

- 18 -

(Translation)

Consolidated Balance Sheet(as of March 31, 2006)(Unit: millions of yen)Account title

AmountAccount title(Assets)
I.

Amount(Liabilities)

Current assets

I.

Current liabilities

1. Cash and deposits

34,618

1. Notes and accounts payable

96,6302. Notes and accounts receivable

150,841

2. Short-term borrowings

116,078

4,301

3. Accrued income taxes

1,182

166,899

4. Other accrued expenses

44,3505. Deferred tax assets

6,508

5. Allowance for completed

6. Other current assets

18,011construction compensation

3. Marketable securities
4. Inventories

7. Allowance for doubtful

II.

Receivables(1,842)

Total current assets

379,339

Fixed assets(1) Buildings and structures

Total current liabilities

295,865

Long-term liabilities
29,50041,653

2. Long-term borrowings

102,729

3. Retirement benefits

42,52544,694

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

22,501(4) Land

15,940(5) Construction in progress

37,615

1. Bonds(2) Machinery, equipment anddelivery equipment

6. Other current liabilities

II.

1. Property, plant and equipment

7371

5. Other Long-term liabilities

7,644

Total Long-term liabilities

182,770431

Total liabilities

478,636

Total property, plant andEquipment

125,223(Minority interests)
Minority interests

2. Intangible assets

6,335

16,068

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

66,524(2) Long-term loans

5,474(3) Long-term deferred tax assets

11,294I.

Common stockII.

Additional paid-in capital

37,801

20,516

III.

Retained earnings

16,580IV.

Net unrealized holding gain on(4) Other investments and other
Assets(5) Allowance for doubtful
Receivables(5,581)

Total investments and otherassets98,227

Total fixed assets

239,520

Total assets(Shareholders’ equity)

618,859

Securities

19,113

V.

Translation adjustments(7,210)VI.

Treasury stock(280)

Total shareholders’ equity

133,887

Total liabilities, minority interestsand shareholders’ equity

618,859

Notes:
1. Accumulated depreciation on property, plant and equipment: 498,030 million yen
2. Assets pledged
Property, plant and equipment:
2,232 million yen
3. Guarantee liabilities:
3,873 million yen
4. Transfer of notes receivable by endorsement:
11 million yen- 19 -

67,882

(Translation)

Consolidated Statement of Operations(From April 1, 2005 to March 31, 2006)(Unit: millions of yen)Account title

AmountI.

Net sales

680,526

II.

Cost of sales

514,483

Gross profitIII.

166,043

Selling, general and administrative expenses

155,449

Operating incomeIV.

10,593Non-operating income

1. Interest income

492

2. Dividend income

1,345

3. Foreign exchange gain

1,403

4. Other

1,393

V.

Non-operating expenses

1. Interest expense

6,171

2. Other

1,816

Ordinary income
VI.

4,634

7,987
7,240

Extraordinary profit

1. Gain on sales of property, plant and equipment

2,056

2. Gain on sales of investments in securities

8,043

3. Gain on recycling of transaction adjustments
related overseas subsidiary880

10,980VII. Extraordinary loss
1. Loss on sale and disposition of property, plantand equipment

1,011

2. Loss on impairment fixed assets

2,973

3. Bad debt expenses

1,315

4. Loss on earthquake

856

5. Special retirement payments

1,442

Net income before taxes
Income taxes

1,579

Income taxes deferred

3,773

Minority Interest

5,352
211

Net income

Note: net income per share:

7,599
10,621

5,058

8.27 yen- 20 -

(Translation)
Principles for Preparing Consolidated Financial Statements
1.

Scope of consolidation(1) Number of consolidated subsidiaries: 84 companies
Names of major consolidated subsidiaries:
Oki Data Corporation, Oki Customer Adtech Co., Ltd., Oki Wintech Co., Ltd.,
Miyagi Oki Electric Co., Ltd., Miyazaki Oki Electric Co., Ltd., Oki America,
Inc., Oki Europe Ltd., Oki (Thailand) Co., Ltd.
(2) Names of major non-consolidated subsidiaries:
Adachi Protechno Co., Ltd. and 37 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:
Advanced Wave Systems Co., Ltd., Oki Consulting Solutions Co., Ltd., Oki
Human Network Co., Ltd. and Oki Semiconductor Technology (Shanghai) Co.,
Ltd. were included within the scope of consolidation in view of their relative
importance. OKI ACCESS Technology Co., Ltd. and MKG Imaging
Solutions, Inc. were also included within the scope of consolidation in view of
their new incorporation.
Honjo Net Progress Co., Ltd. and Oki Telecom, Inc. were eliminated fromthe scope of consolidation as their corporate liquidations were completed.

2.

Application of equity method(1) Number of subsidiaries to which the equity method is applied: 2 companies
Name of major subsidiary: Oki Electric Cable Co., Ltd.
(2) Names of major non-consolidated subsidiaries and affiliated companies to which theequity method is not applied:
Non-consolidated subsidiaries:
Adachi Protechno Co., Ltd and 37 other companies
Affiliated companies: Alp Inc. and 22 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.

3.

Accounting standards(1) Valuation standards and methods for assets(i) Negotiable securities
The Company and its domestic consolidated subsidiaries evaluate securities inaccordance with the purpose of holding as follows.
Overseas consolidated
subsidiaries apply the lower of cost or market value.

- 21 -

(Translation)
Held-to-maturity securities: amortized or accumulated to face value
Other negotiable securities:
Marketable securities:
Stated at fair value based on the market price at the end of the
fiscal year
(Any difference between book value and market value is included
in capital; sales costs are calculated by the moving averagemethod).
Non-marketable securities:
Stated at cost based on the moving average method(ii) Inventories
The Company and its domestic consolidated subsidiaries apply the cost method, andoverseas consolidated subsidiaries mainly apply the lower of cost or market value.
(iii) Derivatives
Stated at market value(2) Depreciation and amortization(i) Property, plant and equipment
The Company and its domestic consolidated subsidiaries mainly apply the
declining-balance method; overseas consolidated subsidiaries mainly apply the straightline method.
(ii) Intangible assets
The Company and its domestic consolidated subsidiaries apply the straight-line
method.
For software for sale in the market, the depreciation is based on the estimatednumber of years for sales (3 years). For software for internal use, the straight-line
method, based on the estimated durable years (5years), is used.
Overseas consolidated subsidiaries mainly apply the straight-line method.
(3) Basis for provision of reserves(i) Allowance for doubtful receivables
To prepare for any losses of accounts receivable and loans, 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 loss by individually assessing the possibility of collection for specificloans/receivables.
(ii) Retirement benefits
To prepare for payment of retirement benefits to employees, the Company and its
consolidated subsidiaries register the amount recognized to accrue at the end of the
fiscal year based on estimated values of retirement benefit obligations and pension
assets.
Differences due to changes in accounting standards are amortized over 15 years
except for consolidated subsidiaries that amortize the difference in the first year of- 22 -

(Translation)
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 gain and loss is amortized by the straight line method over a set numberof years (13 to 14 years) within the average remaining years of service of employees at
the time of their accrual in each fiscal year, and the amortization of such gains andlosses is deemed to be effective from the year after the one in which they arise.
(iii) Reserve for Directors’ retirement
Some domestic consolidated subsidiaries register the necessary amount at the endof the year in accordance with internal rules to prepare for the payment of Directors’
retirement allowance.
(4) Accounting processing of consumption tax
The tax-exclusion method is used for accounting of consumption tax and local
consumption tax.
(5) Application of consolidated tax payment
The consolidated tax payment is applied.

Changes in Principles for Preparing Consolidated Financial Statements
1. Accounting standard for impairment of fixed assets
Effective from the consolidated fiscal year under review, the Company applies “theAccounting Standard for Impairment of Fixed Assets” (“Option concerning Setting According
for Impairment of Fixed Assets” issued by the Business Accounting Deliberation Council on
August 9, 2002) and “the Guideline on Accounting Standard for Impairment of Fixed Assets”(ASB Guideline No. 6 issued on October 31, 2003). As a result, net income before taxes
and other adjustments was reduced by ¥2,973 million.
The Company directly deducted accumulated losses on impairment of fixed assets fromthe amounts of the relevant assets.
2. Accounting standards concerning accrued retirement benefits for employees
Effective from the consolidated fiscal year under review, Oki Europe Ltd., Oki (UK)Ltd. and Oki Systems (Norway) AS have adopted their respective countries’ new accounting
standards concerning accrued retirement benefits for employees.
The differences in their profit and loss resulting from this are minor in comparison withthose that would have resulted if the previous accounting method had been applied.
Because differences due to changes in accounting standards and the actuarial gain
and loss were deducted directly from retained earning, the amount of retained earning
decreased by ¥1,805 million.

- 23 -

(Translation)

Transcript of Account Auditors’ Report on Consolidated Financial Statements

Independent Auditors’ Report
May 18, 2006
Mr. Katsumasa Shinozuka, President and Chief Executive Officer

Oki Electric Industry Co., Ltd.
Ernst & Young ShinNihon
Kazuaki Saito (seal),
Engagement Partner, Certified Public Accountant
Akira Sato (seal),
Engagement Partner, Certified Public Accountant
We have audited the consolidated financial statements - that is, the consolidated balance sheets and theconsolidated statements of operations - of Oki Electric Industry Co., Ltd. for the 82nd term from April
1, 2005 to March 31, 2006 in accordance with Article 19 Paragraph 2 Item 3 of the Law for Special
Exceptions to the Commercial Code Concerning Corporate Audits. Oki Electric Industry’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 these consolidated
financial statements are free of material misstatement. Audits are conducted based on a test basis, andinclude reviews of accounting policies and methods that the management adopts, and evaluation ofmanagement estimates and the presentation of the consolidated financial statements as a whole. We
believe we have obtained reasonable bases for the expression of our opinion as a result of our audit. In
addition, our audit includes auditing procedures that we considered necessary in order to conduct our
audit for Oki Electric Industry’s subsidiaries.
As a result of the audit, we concluded that the consolidated financial statements fairly present Oki
Electric Industry’s and its subsidiaries’ assets and income or loss in accordance with law and the Articles
of Incorporation.
As described in item 1 of “Changes in Principles for Preparing Consolidated Financial Statements,’’
effective from the consolidated fiscal year under review, Oki Electric Industry has adopted “theAccounting Standard for Impairment of Fixed Assets.” The foregoing change is in step with Oki
Electric Industry’s adoption of “the Opinions concerning Setting Accounting Standard for Impairmentof Fixed Assets” by the Business Accounting Deliberation Council on August 9, 2002 and “The
Guideline on Accounting Standard for Impairment of Fixed Assets” (ASB Guideline No. 6 issued on
October 31, 2003), which we find fair and reasonable.
As described in item 2 of “Changes in Principles for Preparing Consolidated Financial Statements,”
some of Oki Electric Industry’s overseas subsidiaries have changed their reporting standards concerning
accrued retirement benefits for employees. The foregoing change is in step with the adoption of theirrespective countries’ new accounting standards concerning accrued retirement benefits for employees,
which we find fair and reasonable.
No conflict of interest as defined by the Accounting Law exists between Oki Electric Industry, our firm(Ernst & Young ShinNihon) and the respective engagement partners.

- 24 -

(Translation)

Transcript of Corporate Auditors’ Report on Consolidated Financial Statements

Corporate Auditors’ Report on Consolidated Financial Statements
The Board of Corporate Auditors received reports from each Corporate Auditor on the methods
and results of their audit of the consolidated financial statements (the consolidated balance sheets
and the consolidated statements of operations) of Oki Electric Industry Co., Ltd. for the 82nd
fiscal year (from April 1, 2005 to March 31, 2006), and upon discussion, the Board prepared thisaudit report as follows.
1.

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

2.

Audit results
We find the audit methods and results by Ernst & Young ShinNihon, the Account Auditors, tobe appropriate.

May 22, 2006
The Board of Corporate Auditors, Oki Electric Industry Co., Ltd.
Takahisa Inagawa, Standing Auditor (seal)
Yoshiyuki Honjo, Standing Auditor (seal)
Hiroyuki Katagiri, Standing Auditor (seal)
Ieji Yoshioka, Auditor (seal)

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

- 25 -

(Translation)

Non-Consolidated Balance Sheet(as of March 31, 2006)
I.
1.
2.
3.
4.

Account title(Assets)
Current assets
Cash and deposits
Notes receivable
Accounts receivable, trade
Securities

5. .Inventories
Finished goods
Semi-finished goods
Raw materials
Work in process
Supplies

Amount7,153
1,632
92,925500

Amount318
76,15047,652
25,057

20,478
5,764
10,72654,052
4,304

6. Short-term prepaid expense
7. Short-term loan
8. Accounts receivable, others
9. Deferred tax assets
10. Other current assets
11. Allowance for doubtful
Receivables
Total current assets
II.
Fixed assets
1. Property, plant and equipment(1) Buildings
Accumulated depreciation(2) Structures
Accumulated depreciation(3) Machinery and equipment
Accumulated depreciation(4) Vehicle and delivery
equipment
Accumulated depreciation(5) Tools, furniture and fixtures
Accumulated depreciation(6) Land(7) Construction in progress
Total property, plant andEquipment
2. Intangible assets(1) Goodwill(2) Facility rights andleasehold(3) Software
Total intangible assets(Unit: millions of yen)Account title(Liabilities)
I.
Current liabilities
1. Notes payable
2. Accounts payable, trade
3 Short-term borrowings
4. Current Portion of long-termborrowings
5. Current Portion of bonds

95,326526
21,47817,987
4,709
1,847
(67)
244,022

92,218(62,450)
8,666(7,149)297,567(266,999)
150(135)
86,702(72,346)

6. Accounts payable, others

20,0007,559

7. Other accrued expenses
8. Advances
9. Deposits
10. Other current liabilities
Total current liabilities

25,550
1,091
1,723
349
205,452

II.
1.
2.
3
4.
5.

Long-term liabilities
Bonds
Long-term borrowings
Long-term deposits
Retirement benefits
Other long-term liabilities
Total long-term liabilities
Total liabilities

29,50082,821
5,000
27,741
2,124
147,187352,639

29,7681,517
30,567
14
14,35514,007
124
90,356
694
250
9,735
10,681

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

142,497
243,535

Total assets

487,557

55,656(Shareholders’ equity)
I.

Common stockII.
Additional paid-in capital
1. Capital reserve
2. Other additional paid-in
CapitalCapital reserve decline
ProfitTotal additional paid-in
Capital49,142
280

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

1,350

IV.

Net unrealized holding gains
on securities

67,882
16,985

20,816

20,81637,801

10,907
10,907
18,59910
23,193
8,209

V.
Treasury stock
Total shareholders’ equity(274)
134,917

Total liabilities andshareholders’ equity

487,557

2,043
5,212
3,417
(6,019)- 26 -

(Translation)
Notes:
1. Short-term monetary claims receivable from affiliated companies:
66,196 million yen
Long-term monetary claims receivable from affiliated companies:
24,469 million yen
Short-term monetary claims payable to affiliated companies:
48,021 million yen
2. Guarantee liabilities:
7,710 million yen
3. Net assets provided for in Article 124-3 of the Commercial Code Enforcement Regulations:
18,599 million yen
4. Stock preemptive rights in accordance with Article 280-19 of the former Commercial Code
Preemptive rights in accordance with the resolution of the ordinary general meeting of shareholders
on June 28, 2001:
Common shares
Type of shares:
Number of shares:
334,000 shares
Exercise price:¥613
Exercisable period: July 1, 2003 to June 30, 2006

- 27 -

(Translation)

Non-Consolidated Statement of Operations(From April 1, 2005 to March 31, 2006)(Unit: millions of yen)Account title

AmountI.

Net sales

409,100

II.

Cost of sales

332,576

Gross profitIII.

76,524

Selling, general and administrative expenses

72,773Operating income
IV.

3,751

Non-operating income

1. Interest income

602

2. Interest income on securities

6

3. Dividend income

2,550

4. Brand royalty received

1,665

5. Other

1,471

V.

1. Interest expense

2,999

2. Interest expense for bonds893

3. Other

1,480

Ordinary income
VI.

6,296

Non-operating expenses

5,372
4,674

Extraordinary profit

1. Gain on sales of investments in securities

8,249

8,249

VII. Extraordinary loss
1. Loss on sale and disposition of property, plant and equipment
2.

Loss on impairment fixed assets

771
2,973

3. Loss from securities revaluation

470

4. Bad debt expenses

1,158

5. Special retirement payments

588

Net income before taxes

5,961
6,962

Income taxes(701)

Income taxes deferred

5,446

Net income

4,745
2,217

Retained earnings carried over from the previous year

8,690

Unappropriated retained earnings

10,907

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

112,091 million yen
116,255 million yen
5,191 million yen
3.63 yen- 28 -

(Translation)
Significant Accounting Policies
1.

Valuation standards and methods for negotiable securities, etc.
Held-to-maturity securities: amortized or accumulated to face value
Shares of subsidiaries and affiliated companies:
Stated at cost based on the moving average method
Other negotiable securities:
Marketable securities:
Stated at fair value based on the market price at the end of the fiscal year
(The difference between book value and market value is included in capital,
and the sale cost is calculated by using the moving average method).
Non-marketable securities: Stated at cost based on the moving average method
Derivatives: Stated at market value

2.

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

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

4.

Basis for provision of reserves
Allowance for doubtful receivables
To prepare for any losses on accounts receivable and loans, the Company calculates theamount of potential loss by using the historical loss ratio in case of non-classified
loans/receivables and by individual assessment in case of classified loans/receivables.
Retirement benefits
To prepare for payment of retirement benefits to employees, 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.
Actuarial gains and losses are amortized by the straight-line method over a set number ofyears (13 to 14 years) within the average remaining years of service of employees at the time- 29 -

(Translation)of their accrual in each fiscal year, and the amortization of such gains and losses is deemed tobe effective from the year after the year in which they arise.
5.

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

6.

Application of consolidated tax payments
Consolidated tax payments are applied.

Changes in Significant Accounting Policies
Accounting standard for impairment of fixed assets
Effective from the consolidated fiscal year under review, the Company applies “theAccounting Standard for Impairment of Fixed Assets” (“Opinions concerning Setting Accounting
for Impairment of Fixed Assets” issued by the Business Accounting Deliberation Council on
August 9, 2002) and “the Guideline on Accounting Standard for Impairment of Fixed Assets”(ASB Guideline No. 6 issued on October 31, 2003). As a result, net income before taxes andother adjustment was reduced by ¥2,973 million.
Accumulated impairment losses were deducted directly from the amounts of the relevant
assets.

- 30 -

(Translation)

Proposed Appropriation of Retained Earnings(Unit: yen)
Item

AmountUnappropriated retained earnings at the end of the fiscal year

10,907,866,524

To be appropriated as follows:
Dividend

1,834,511,235(¥3 per share)
Retained earnings to be carried forward to the next fiscal year

- 31 -

9,073,355,289

(Translation)

Transcript of Account Auditors’ Report

Independent Auditors’ Report
May 18, 2006
Mr. Katsumasa Shinozuka, President and Chief Executive Officer
Oki Electric Industry Co., Ltd.
Ernst & Young ShinNihon
Kazuaki Saito (seal),
Engagement Partner, Certified Public Accountant
Akira Sato (seal),
Engagement Partner, Certified Public Accountant
We have audited the statutory report - that is, the balance sheets, the statements of operations, the business
report (limited to accounting matters), and the proposed appropriation of unappropriated retained earnings and its supporting schedules (limited to accounting matters) of Oki Electric Industry Co., Ltd.’s 82nd termfrom April 1, 2005 to March 31, 2006 in accordance with Article 2 Item 1 of the Law for Special Exceptions
to the Commercial Code Concerning Corporate Audits. With respect to the aforementioned business reportand supporting schedules, our audit was limited to those matters derived from the accounting books andrecords of Oki Electric Industry and its subsidiaries. The statutory report and supporting schedules are theresponsibility of Oki Electric Industry’s management. Our responsibility is to express an opinion on thestatutory report and supporting schedules based on our audit as independent auditors.
We conducted our audit in accordance with auditing standards generally accepted in Japan. These auditing
standards require that we obtain reasonable assurance as to whether these financial statements are free 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. In addition, our audit includes auditing
procedures that we considered necessary in order to conduct our audit for Oki Electric Industry’s subsidiaries.
As a result of the audit, our opinion is as follows:(1) The balance sheets and the statements of income fairly present the financial position and the resultsof operations of Oki Electric Industry in conformity with related laws and regulations and the
Articles of Incorporation.
As described in “Changes in Significant Accounting Policies,” effective from the consolidated
fiscal year under review, Oki Electric Industry has adopted “Accounting Standard for Impairment of
Fixed Assets.” The foregoing change is in step with Oki Electric Industry’s adoption of “theOpinions concerning Setting Accounting Standard for Impairment of Fixed Assets” by the BusinessAccounting Deliberation Council on August 9, 2002 and “The Guideline on Accounting Standard
for Impairment of Fixed Assets” (ASB Guideline No. 6 issued on October 31, 2003), which we findfair and reasonable.
(2) The business report (limited to accounting matters) fairly presents the status of Oki ElectricIndustry in conformity with related laws and regulations and the Articles of Incorporation.
(3) The proposal for appropriation of earnings has been prepared in conformity with related laws andregulations and the Articles of Incorporation of Oki Electric Industry.
(4) With respect to the supporting schedules (limited to accounting matters), there are no items to be
noted that are not in conformity with the provisions of the Commercial Code.
No conflict of interest as defined by the Accounting Law exists between Oki Electric Industry Co., Ltd., ourfirm (Ernst & Young ShinNihon) and the respective engagement partners.

- 32 -

(Translation)

Transcript of Corporate Auditors’ Report

Corporate Auditors’ Report
Each Corporate Auditor reported to the Board of Corporate Auditors on the business execution of
the Directors for the 82nd fiscal year (from April 1, 2005 to March 31, 2006), and upon discussion,
the Board prepared this audit report as follows.
1. Outline of Corporate Auditors’ audit methods
In accordance with auditing policies and auditing plans prescribed by the Board of Corporate
Auditors, in addition to participating in the Board of Directors and other important meetings, each
Corporate Auditor learned about the state of business operations from the Directors, the internal
auditing division and the Account Auditors, and requested business reports from subsidiaries ifnecessary. In addition, the Board of Corporate Auditors received reports and explanations fromthe Account Auditors for review of financial statements and their supporting schedules.
In addition to the audit method mentioned above, the Board of Corporate Auditors requested
reports from the Directors, if necessary, for detailed surveys with regard to the potential forcompetitive transactions by the Directors, conflicts of interest between the Directors and Oki
Electric Industry, uncompensated allocation of profits from the Company, uncommon transactions
with subsidiaries or shareholders, and acquisition and disposal of treasury stocks.
2. Audit results(1) We find the audit methods and results by Ernst & Young ShinNihon, the Account Auditors,
to be appropriate.
(2) We find that the business report correctly indicates corporate status in accordance with law
and the Articles of Incorporation.
(3) Considering the state of corporate assets and other circumstances, we find no items that
require special reporting with regard to the agenda item for appropriation of retained
earnings.
(4) We find no items that require special reporting with regard to the schedules of financial
statements, which correctly indicate the items to be stated.
(5) We find no illegal activities of the Directors with regard to business operations, and no
significant breaches of law or the Articles of Incorporation.
Further, we find no breach of obligations by the Directors with regard to competitivetransactions by the Directors, conflicts of interest between the Directors and the Company,
uncompensated allocation of profits by the Company, uncommon transactions withsubsidiaries or shareholders, and acquisition and disposal of treasury stocks.
May 22, 2006
The Board of Corporate Auditors, Oki Electric Industry Co., Ltd.
Takahisa Inagawa, Standing Auditor (seal)
Yoshiyuki Honjo, Standing Auditor (seal)
Hiroyuki Katagiri, Standing Auditor (seal)
Ieji Yoshioka, Auditor (seal)
Note: Standing Auditor Hiroyuki Katagiri and Auditor Ieji Yoshioka are external auditors inaccordance with Paragraph 1, Article 18 of the former Law for Special Exceptions to theCommercial Code Concerning Corporate Audits.

- 33 -

(Translation)

Material Facts concerning the Circumstances of the Oki Group Arising After
Preparation of Business Report
On the basis of the resolution of the meeting of the Board of Directors held on May 23, 2006,
the Company issued unsecured corporate bonds with convertible bond-type equity warrants on thefollowing issues terms:
1.

31st Unsecured Corporate Bonds with Convertible Bond-Type Equity Warrants
-

-

-

2.

Aggregate issue amount:¥18,000 million
Issue price:¥100 per face amount of ¥100
Coupon rate:
Not applicable
Paying-in date:June 7, 2006
Date of maturity:
June 5, 2009
Purpose:To appropriate for proactive investments in the business fields where growth is expected in
the future, as well as repayments for bond retirement and borrowings in future
Collateral or guarantee:
None
No. of equity warrants to be issued: 36
Period for exercise of equity warrants: From June 8, 2006 to June 4, 2009 inclusive
Amount to be paid in at the time of exercise of equity warrants:(1) The object of the capital subscription to be made upon the of exercise of one equity
warrant is the corporate bond related to such equity warrant, and the issuance valueof the relevant corporate bonds shall be the same as the redemption value of therelevant corporate bonds.
(2) The initial value of the capital subscription to be made at the time of exercise of anequity warrant shall be ¥376 per share.
Call provisions:(1) After issuance of the subject corporate bonds with equity warrants, the Company isentitled, at its sole option, to accelerate redemption of the whole (but not a part) of
the remaining portion of the subject corporate bonds to the bond holders at the priceof ¥100 per face amount of ¥100.
(2) After issuance of the subject equity warrant, and on or after the day on which theclosing price for the regular transactions of the Company’s common stocks falls
below ¥219.1, the holders of the corporate bonds with equity warrant shall become
entitled to demand of the Company accelerated redemption of the whole or a part ofthe subject corporate bonds they hold at the price of ¥100 per face amount of ¥100.

32nd Unsecured Corporate Bonds with Convertible Bond-Type Equity Warrant-

Aggregate issue amount:
Issue price:
Coupon rate:
Paying-in date:¥12,000 million¥100 per face amount of ¥100
Not applicable
June 7, 2006

- 34 -

(Translation)- Date of maturity:
June 7, 2009
- Purpose:
To appropriate for proactive investments in the business fields where growth is expected in
the future, as well as repayment for bond retirement and borrowings in future- Collateral or guarantee:
None- No. of equity warrants to be issued: 24- Period for exercise of equity warrant: From June 8, 2006 to June 6, 2011 inclusive- Amount to be paid in at the time of exercise of equity warrants:(1) The object of the capital subscription to be made upon the of exercise of one equity
warrant is the corporate bond related to such equity warrant, and the issuance valueof the relevant corporate bonds shall be the same as the redemption value of therelevant corporate bonds.
(2) The initial value of the capital subscription to be made at the time of exercise of anequity warrant shall be ¥376 per share.
- Call provisions:(1) The Company is entitled, at any time and at its sole option, to accelerate the whole(but not a part) of the remaining portion of the subject corporate bonds at the priceof ¥102 per face amount of ¥100 in respect of the period between June 8, 2006 andJune 7, 2007, and at the price of ¥103 per face amount of ¥100 in respect of theperiod between June 8, 2007 and June 6, 2011; provided, however, that if, afterissuance of the subject corporate bonds with equity warrant, the closing price of theCompany’s common stocks remains higher than 120% of the conversion priceapplicable to each relevant trading day for a consecutive period of 20 trading days,
the Company shall become entitled, at any time and at its sole option, to accelerate
redemption of the whole (but not a part) of the remaining portion of the subject
corporate bonds at the price of ¥100 per face amount of ¥100.
(2) If the closing price for the regular transactions of the Company’s common stocks
falls below ¥219.1 on or after June 8, 2009, the holders of the corporate bonds withequity warrant shall become entitled, at any time thereafter, to demand of theCompany accelerated redemption of the whole or a part of the subject corporate
bonds they hold at the price of ¥104 per face amount of ¥100.

- 35 -

(Translation)

Reference Documents for the General Meeting of Shareholders

Agenda and Reference Matters
Agenda 1: Approval of the Proposed Appropriation of Unappropriated Retained
Earnings for the 82nd Fiscal Year
Details of the proposed appropriation of unappropriated retained earnings for the82nd fiscal year are as described in the attachment (page 31).
Our basic policy is to determine the amount of dividends by considering each year’s
profitability and retained earnings for future business development.
Based on this policy, we would like to set our dividend for this year as 3 yen per share.

- 36 -

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

Reasons for amendment
The existing Articles of Incorporation are being amended in the prescribed manner inaccordance with the enforcement on May 1, 2006 of the Companies Act (Law No. 86 of2005) and “Law concerning Development, etc. of Relevant Laws in Association with
Enforcement of the Companies Act (Law No. 87 of 2005).” The principal items ofamendment include: (1) establishment of regulations governing issuance of stock
certificates; (2) deletion of regulations governing specification of venues for general
meetings of shareholders; (3) establishment of regulations enabling Internet-based
disclosure of reference documents, etc.; (4) establishment of regulations enabling written
resolutions of the Board of Directors; (5) increase in the number of Corporate Auditors forthe purpose of meeting future requirements; and (6) development and incorporation ofphraseology and expressions which would fit in more properly with those of the new
Companies Act.
2.

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

Current Articles of Incorporation(Newly established)

Amendment Draft
Article 4. Institutional Positions
The Company shall have the following institutional
positions in addition to the General Meetings ofShareholders and Directors:(1) Board of Directors(2) Corporate Auditors(3) Board of Corporate Auditors(4) Accountant Auditors

Article 4. Method of Public Notice
The Company’s public notices shall be made byelectronic public notices; provided, however, that if
electronic public notices are not possible for any
compelling reason, the relevant public notices shall be
posted on the Nihon Keizai Shimbun.

Article 5. Method of Public Notice
The Company’s public notice method shall be electronic
public notice; provided, however, that if it is notpossible to deliver public notices by electronic public
notices for any compelling reason including accidents,
etc., the relevant public notices shall be posted on the
Nihon Keizai Shimbun.

Article 5. Aggregate Number of Stocks
The aggregate number of stocks issued by the Company
shall be two billion and four hundred million.

Article 6. Aggregate Number of Authorized Stocks
The aggregate number of authorized stocks of theCompany shall be two billion and four hundred million.

Article 6. Acquisition of Treasury Stocks
The Company, by way of the resolution of its Board of
Directors, may purchase treasury stocks pursuant to theprovisions of Article 211-3, Section 1, Item 2 of theCommercial Code.

Article 7. Acquisition of Treasury Stocks
The Company, by way of the resolution of its Board of
Directors, may acquire treasury stocks through market
transactions, etc. pursuant to the provisions of Article
165, Section 2 of the Companies Act.

(Newly established)

Article 8. Issuance of Stock Certificates
The Company shall issue stock certificates.

- 37 -

(Translation)
Current Articles of Incorporation
Article 7. Number of Stocks Forming One Stock Trade
Lot and Non-Issuance of Less-Than-Trade-Lot Stock
Certificates
1. The number of the Company’s stocks forming one
stock trade lot shall be 1,000.
2. The Company shall not issue stock certificates
numbering less than one stock trade lot(hereinafter referred to as “Less-Than-Trade-Lot
Stocks),” unless otherwise specifically prescribedin the Stock-Handling Regulations.

Amendment Draft
Article 9. Number of Stocks Forming Stock Trade Lot
and Non-Issuance of Less-Than-Trade-Lot Stock
Certificates
1. The number of the Company’s stocks forming a
stock trade lot shall be 1,000.
2. Notwithstanding the provisions of the preceding
Article, the Company shall not issue Less-ThanTrade-Lot Stocks unless otherwise specificallyprescribed in the Stock-Handling Regulations.

Article 8. Types of Stock Certificates
The types of stock certificates issued by the Company
shall be governed by the Stock-Handling Regulations
established by the Board of Directors.

(Deleted)(Newly established)

Article 10. Rights Associated with Less-Than-Trade-Lot
StocksThe Company’s shareholders (including beneficiaryshareholders; hereinafter the same) are not, in respect ofLess-Than-Trade-Lot Stocks they hold, entitled toexercise rights other than those specified below:(1) Right as prescribed in Article 189, Section 2 of theCompanies Act;
(2) Right for making a demand as prescribed in Article
166, Section 1 of the Companies Act; and(3) Right to receive allotment of offered stocks andallotment of offered equity warrants.

Article 9. Transfer Agent
1. The Company shall have a transfer agent in placein respect of its stocks.
2. The Company shall select the transfer agent andspecify the place for handling the relevant
operation by way of a resolution of its Board of
Directors, and shall make a public notice of theforegoing.
3. The Company shall keep its shareholders’ list,
beneficial shareholders’ list and register of
forfeiture of stock certificates in custody at thetransfer agent’s place for handling the relevant
operation, and shall have the transfer agent handle
operation related to the stocks including theirname transfers. The Company shall not directly
handle the aforementioned operation.

Article 11. Administrator of Shareholders’ List
1. The Company shall have a share register
administrator in place.
2. The Company shall appoint the administrator ofshareholders’ list and specify the place for handlingthe relevant operation by way of a resolution of its
Board of Directors, and shall make a public noticeof the foregoing.
3. The Company shall commission the administratorof shareholders’ list to handle operations related tothe shareholders’ list, equity warrant register andregister of forfeiture of stock certificates such as
preparation and keeping custody of the relevant
shareholders’list(including
beneficial
shareholders’ list; hereinafter the same). The
Company shall not directly handle theaforementioned operation.

Article 10. Handling of Stocks
Handling of stocks including name transfer, registrationof the right of pledge, indication of trust, re-issuance ofstock certificates and purchase of Less-Than-Trade-Lot
Stock, and fees associated with the said handling shallbe as prescribed in the Stock-Handling Regulations
established by the Board of Directors.

Article 12. Stock-Handling Regulations
Handling of the Company’s stocks and fees associatedwith the said handling shall be as prescribed in therelevant laws, provisions of the Articles hereof, and theStock-Handling Regulations established by the Board of
Directors.

- 38 -

(Translation)
Current Articles of Incorporation
Article 11. Reference Date
1. The Company shall identify those voting
shareholders (including beneficial shareholders;hereinafter the same) who are listed or otherwise
recorded on the final shareholders’ list andbeneficial shareholders’ list as of March 31 of eachyear as the shareholders who are entitled toexercise their rights at the ordinary general
meeting of shareholders for the relevant fiscal
year.
2. Where necessary, the Company shall, by way of aprior public notice subject to the resolution of its
Board of Directors, identify those shareholders or
registered pledgees who are listed or otherwise
recorded on the final shareholders’ list andbeneficial shareholders’ list as of a certain
specified date as the shareholders or registeredpledgees who are entitled to exercise their rights.

Amendment Draft(Deleted)

Article 12. Timing for and Place of Call
1. The Company’s ordinary general meeting ofshareholders shall be convened in June of eachyear, and an extraordinary general meeting ofshareholders shall be convened as needed.
2. A general meeting of shareholders shall be
convened in metropolitan Tokyo.

Article 13. Call
1. The Company’s ordinary general meeting ofshareholders shall be convened in June of eachyear, and an extraordinary general meeting ofshareholders shall be convened as needed.
(Deleted)(Newly established)

Article 14. Reference Date for Ordinary General
Meeting of Shareholders
The reference date for the voting rights in respect of theCompany’s ordinary general meeting of shareholders
shall be March 31 of each year.

Article 13. Convener and Chairman
1. The President shall convene and chair a general
meeting of shareholders pursuant to the resolutionof the Board of Directors unless otherwiseprescribed by law.
2. In the absence or in the event of disability of the
President, another Director shall replace thePresident in the order prescribed by the relevant
resolution of the Board of Directors.

Article 15. Authorized Convener and Chairman
1. The President shall convene and chair a general
meeting of shareholders.

(Newly established)

Article 16. Internet-Based Disclosure and Deemed
Delivery of Reference Documents for General Meetingof Shareholders
The Company, in convening a general meeting ofshareholders, is entitled to deem Reference Documents
for the General Meeting of Shareholders, Business
Report and information related to matters which should
be described or displayed in its financial statements andconsolidated financial statements, to have beendelivered to its shareholders by disclosure to them using
a method utilizing the Internet pursuant to the provisionsof the relevant ordinances of the Ministry of Justice.

2.

- 39 -In the absence or in the event of disability of the
President, another Director shall convene and chaira general meeting of shareholders in accordancewith the order prescribed in advance by the Boardof Directors.

(Translation)
Current Articles of Incorporation
Article 14. Resolution Method
1. A resolution of a general meeting of shareholders
shall be approved by majority vote of theshareholders in attendance unless otherwise
specifically prescribed by law or the provisions of
the Articles hereof.
2.

A special resolution prescribed in Article 343 of
the Commercial Code shall be made at a general
meeting attended by the shareholders holding one
third or more of the voting rights of the aggregate
shareholders, and shall be approved by a vote of
two thirds or more of the said voting rights.

Amendment Draft
Article 17. Resolution Method
1. A resolution of a general meeting of shareholders
shall be approved by majority vote of theshareholders in attendance who are entitled toexercise their voting rights unless otherwise
specifically prescribed by law or the provisions of
the Articles hereof.
2. A resolution prescribed in Article 309, Section 2 of
the Companies Act shall be made at a general
meeting attended by the shareholders holding one
third or more of the voting rights of theshareholders who are entitled to exercise theirvoting rights, and shall be approved by a vote of
two thirds or more of the said voting rights.

Article 15. Exercise of Voting Rights by Proxy
A shareholder is entitled to exercise his, her or its
voting rights by way of another voting shareholder of
the Company, in which event the said shareholder shallsubmit a suitable power of attorney to the Company inadvance.
(Newly established)

Article 18. Exercise of Voting Rights by Proxy
1. A shareholder is entitled to exercise his, her or its
voting rights by way of one other voting
shareholder of the Company.

Article 16. Minutes
The gist of the proceedings and outcome of a general
meeting of shareholders shall be recorded in theminutes, and the said minutes shall be retained by theCompany after the names and seals of the chairman and
Directors in attendance are placed thereon.

(Deleted)

Article 17. (Text omitted)

Article 19. (Text omitted)

Article 18. Election and Appointment of Directors

Article 20. Method of Election and Appointment of
Directors
1. Directors shall be elected at a general meeting ofshareholders.
2. The resolution to elect Directors shall be made at a
general meeting attended by the shareholders
holding one third or more of the voting rights of theshareholders who are entitled to exercise theirvoting rights, and shall be approved by a vote of
two thirds or more of the said voting rights.
3. The resolution to elect Directors shall not be bymeans of cumulative voting.

1.
2.

3.

Directors shall be elected at a general meeting ofshareholders.
The resolution to elect Directors shall be made at a
general meeting attended by the shareholders
holding one third or more of the voting rights of
the aggregate shareholders, and shall be approvedby a vote of two thirds or more of the said voting
rights.
The resolution to elect Directors shall not be bymeans of cumulative voting.

Article 19. Tenure of Directors
1. The tenure of a Director shall be up to the time of
conclusion of an ordinary general meeting ofshareholders covering the last fiscal term within
two years from the date of his/her inauguration.
2.

The tenure of a Director elected as an alternate forthe Director who has retired prior to the expirationof his/her tenure shall be up to the time at which
the tenure of the retired Director would otherwise
expire.

2.

A shareholder or the proxy of the shareholder shallsubmit to the Company documents attesting to theproxy’s delegated authority.

Article 21. Tenure of Directors
1. The tenure of a Director shall be up to the time of
conclusion of an ordinary general meeting ofshareholders covering the last Business Year having
ended within two years from the date of his/herelection.
2. The tenure of a Director elected as an alternate forthe Director currently in office shall be up to thetime at which the tenure of the Director currently in
office would otherwise expire.

- 40 -

(Translation)
Current Articles of Incorporation
Article 20. Representative Director and Directors with
Specific Executive Duties
1. Representative Directors shall be decided upon by
a resolution of the Board of Directors.
2. The Board of Directors, by means of its resolution,
may decide upon a Chairman, a President, and acertain limited number of Deputy Presidents,
Executive Vice Presidents and Senior Vice
Presidents.
3. The President shall execute the resolutions of theBoard of Directors and exercise control overbusiness operations.
4. The Deputy Presidents, Executive Vice Presidents
and Senior Vice Presidents shall assist the
President and execute business operations.
5. In the absence or event of disability of the
President, another Director shall replace thePresident in the order prescribed by the relevant
resolution of the Board of Directors.

Amendment Draft
Article 22. Representative Director and Directors with
Specific Executive Duties
1. The Board of Directors shall elect a Representative
Director by means of its resolution.
2. The Board of Directors, by means of its resolution,
may elect a Chairman, a President, and a certain
limited number of Deputy Presidents, Executive
Vice Presidents and Senior Vice Presidents.

Article 21. Board of Directors
The Board of Directors shall make decisions onimportant matters concerning the Company, in addition
to those prescribed by law or the provisions of the
Articles hereof.

(Deleted)

Article 22. Authorized Convener and Chairman ofBoard of Directors
1. The Chairman of the Board of Directors shallconvene and chair a meeting of the Board of
Directors unless otherwise specifically prescribedby law or the provisions of the Articles hereof.
2. In the absence or in the event of disability of the
Chairman, another Director shall replace the
Chairman in the order prescribed by the relevant
resolution of the Board of Directors.

Article 23. Authorized Convener and Chairman ofBoard of Directors
1. The Chairman of the Board of Directors shallconvene and chair a meeting of the Board of
Directors unless otherwise specifically prescribedby law or the provisions of the Articles hereof.
2. In the absence or in the event of disability of the
Chairman, another Director shall convene and chaira meeting of the Board of Directors in accordancewith the order prescribed in advance by the Boardof Directors.

Article 23. Notice of Meeting of Board of Directors
1. The notice of a meeting of the Board of Directors
shall be issued to each Director and Corporate
Auditor at least three days prior to the date of themeeting; provided, however, that the relevant
notice time frame may be shortened in an
emergency.
(Newly established)

Article 24. Notice of Meeting of Board of Directors
1. The notice of a meeting of the Board of Directors
shall be issued to each Director and Corporate
Auditor at least three days prior to the date of themeeting; provided, however, that the relevant
notice time frame may be shortened if urgently
needed.
2. Provided all Directors and Corporate Auditors
concur, a meeting of the Board of Directors may be
convened without having to follow the establishedconvening procedures.

(Newly established)

Article 25. Omission of Resolution of Board of
Directors
If the requirements prescribed in Article 370 of theCompanies Act are fulfilled, the Company shall deem
the relevant agenda to have been duly resolved by the
Board of Directors.

(Deleted)(Deleted)(Deleted)- 41 -

(Translation)
Current Articles of Incorporation
Article 24. Regulations of Board of Directors
Matters concerning the Board of Directors shall be dealt
with in accordance with the provisions of law, theArticles hereof, and the Regulations of the Board of
Directors as established by the Board of Directors.

Amendment Draft
Article 26. Regulations of Board of Directors
Matters concerning the Board of Directors shall be dealt
with in accordance with the provisions of law, theArticles hereof, and the Regulations of the Board of
Directors as established by the Board of Directors.

Article 25. Complement of Corporate Auditors
The authorized number of the Company’s Corporate
Auditors shall be up to four.

Article 27. Complement of Corporate Auditors
The authorized number of the Company’s Corporate
Auditors shall be up to five.

Article 26. Election and Appointment of Corporate
Auditors
1. Corporate Auditors shall be elected at a general
meeting of shareholders.
2. The resolution to elect Corporate Auditors shall bemade at a general meeting attended by theshareholders holding one third or more of thevoting rights of the aggregate shareholders, andshall be approved by a majority voting of the said
voting rights.

Article 28. Method of Election and Appointment ofCorporate Auditors
1. Corporate Auditors shall be elected at a general
meeting of shareholders.
2. The resolution to elect Corporate Auditors shall bemade at a general meeting attended by theshareholders holding one third or more of thevoting rights of the shareholders who are entitled toexercise their voting rights, and shall be approvedby a majority voting of the said voting rights.

Article 27. Tenure of Corporate Auditors
1. The tenure of a Corporate Auditor shall be up to
the time of conclusion of an ordinary general
meeting of shareholders covering the last fiscal
term within four years from the date of his/her
inauguration.
2. The tenure of a Corporate Auditor elected as analternate for the Corporate Auditor who has retired
prior to the expiration of his/her tenure shall be up
to the time at which the tenure of the retired
Corporate Auditor should otherwise expire.

Article 29. Tenure of Corporate Auditors
1. The tenure of a Corporate Auditor shall be up to thetime of conclusion of an ordinary general meetingof shareholders covering the last Business Yearhaving ended within four years from the date of
his/her election.
2. The tenure of a Corporate Auditor elected as analternate for the Corporate Director who has retired
prior to the expiration of his/her tenure shall be up
to the time at which the tenure of the retied
Corporate Auditor would otherwise expire.

Article 28. Standing Corporate Auditor
A Standing Corporate Auditor shall be decided upon bymutual voting of Corporate Auditors.

Article 30. Standing Corporate Auditor
The Board of Corporate Auditors shall elect its Standing
Corporate Auditor by means of its resolution.

Article 29. Board of Corporate Auditors
The Board of Corporate Auditors shall be vested withthe powers prescribed by law and decide upon mattersconcerning Corporate Auditors’ execution of theirduties; provided, however, that the Board of Corporate
Auditors may not interfere with Corporate Auditors’
exercise of their powers.

(Deleted)

Article 30. Notice of Meeting of Board of Corporate
Auditors
1. The notice of a meeting of the Board of Corporate
Auditors shall be issued to each Corporate Auditor
at least three days prior to the date of the meeting;provided, however, that the relevant notice timeframe may be shortened in an emergency.
(Newly established)

Article 31. Notice of Meeting of Board of Corporate
Auditors
1. The notice of a meeting of the Board of Corporate
Auditors shall be issued to each Corporate Auditor
at least three days prior to the date of the meeting;provided, however, that the relevant notice timeframe may be shortened if urgently needed.
2. Provided all Corporate Auditors concur, a meetingof the Board of Directors may be convened without
having to follow the established convening
procedures.

- 42 -

(Translation)
Current Articles of Incorporation
Article 31. Regulations of Board of Corporate Auditors
Matters concerning the Board of Corporate Auditors
shall be dealt with in accordance with the provisions oflaw, the Articles hereof, and the Regulations of theBoard of Corporate Auditors as established by the
Board of Corporate Auditors.

Amendment Draft
Article 32. Regulations of Board of Corporate Auditors
Matters concerning the Board of Corporate Auditors
shall be dealt with in accordance with the provisions oflaw, the Articles hereof, and the Regulations of theBoard of Corporate Auditors as established by the Boardof Corporate Auditors.

Article 32. Operating Year
The Company’s Operating Year shall begin on April 1
and end on March 31 of the following calendar year,
and the last day of the said Operating Year shall be thefiscal closing date.

Article 33. Business Year
The Company’s Business Year shall be a period of one
year beginning on April 1 and ending on March 31 ofeach year.

Article 33. Dividends
Dividends shall be paid to the shareholders or registeredpledgees who are listed or otherwise recorded on the
final shareholders’ list and beneficial shareholders’ list
as of March 31 of each year.

Article 34. Reference Date for Distribution of Surplus
The reference date for the year-end distribution of theCompany’s surplus shall be March 31 of each year.

Article 34. Interim Dividends
The Company, subject to the relevant resolution of its
Board of Directors, may distribute interim dividends(distribution of monies prescribed in Article 293-5 of
the Commercial Code) to the shareholders or registeredpledgees who are listed or otherwise recorded on the
final shareholders’ list and beneficial shareholders’ list
as of March 31 of each year.

Article 35. Interim Dividends
The Company, subject to the relevant resolution of its
Board of Directors, may distribute interim dividend,with September 30 of each year as the relevant reference
date.

Article 35. Statute of Limitation on Dividends, etc.

Article 36. Statute of Limitation on Distribution of
Surplus, etc.
The Company shall be released from its obligations topay distributable assets in the form of money if they are
not received after the lapse of five years from therespective dates of commencement of payment.

The Company shall be released from its obligations topay dividends or interim dividends if they are notreceived after the lapse of five years from the respective
dates of commencement of payment.

- 43 -

(Translation)
Agenda 3: Election of Eight Directors
The tenure of Directors Katsumasa Shinozuka, Kazuo Tanaka, Yutaka Maeda, Tadao
Murase, Naoki Sato, Harushige Sugimoto and Takashi Hattori will expire at the end of thisgeneral meeting of shareholders.
We accordingly request that you elect eight Directors from among the following
candidates.
Candidates for Directors (Eight):
CandidatenumberName(Date of birth)

1

Katsumasa Shinozuka(Born November 28, 1940)

2

Kazuo Tanaka(Born December 20, 1944)

3

Yutaka Maeda(Born August 7, 1944)

4

Tadao Murase(Born August 10, 1944)

5

Naoki Sato
(Born October 27, 1948)

Brief personal profile andrepresentation of other companies
Joined Oki Electric
Apr. 1962
Division Manager, Computer System
Oct. 1988
Development Division
Director
Jun. 1990
Senior Vice President
Oct. 1992
Executive Vice President
Jun. 1997
President (incumbent)
Jun. 1998
CEO (incumbent)
Apr. 2000
Joined Oki Electric
Apr. 1968
General Manager, Accounting &Jun. 1995
Control Division
Director
Jun. 1998
Senior Vice President
Apr. 2000
CCO (incumbent)
Jun. 2004
Executive Vice President (incumbent)
CFO (incumbent)
Apr. 2005
Joined Oki Electric
Apr. 1968
Division Manager, Financial System
Jul. 1997
Business Division
Director
Jun. 1998
Senior Vice President
Apr. 2000
Executive Vice President (incumbent)
Apr. 2005
Chairman, Information &Telecommunications Business Group(incumbent)
Also serving as President, Oki
Consulting Solutions Co., Ltd.
Joined Oki Electric
Apr. 1968
Division Manager, Government Sales
Jul. 1997
Division
Director
Jun. 1999
Senior Executive Officer
Apr. 2001
Senior Vice President
Jun. 2002
Executive Vice President (incumbent)
Apr. 2006
Also serving as President, Oki Alpha
Create Co, Ltd.
Joined Fuji Bank, Ltd.
Apr. 1972
General Manager, Sales Division No.
May 1999
5, Fuji Bank
Executive Officer, Fuji Bank
Jun. 2001
Senior Executive Officer, Mizuho
Apr. 2002
Corporate Bank, Ltd.
Senior Executive Officer, Oki Electric
Apr. 2004
Senior Vice President (incumbent)
Jun. 2004- 44 -

Number of Oki
shares held

68,000 shares

38,000 shares

25,000 shares

22,000 shares

6,000 shares

(Translation)
CandidatenumberName(Date of birth)

6Harushige Sugimoto(Born February 22, 1948)

7

Hironori Kitabayashi(Born August 4, 1947)

8

Mikihiko Maeno(Born January 27, 1945)

Brief personal profile andrepresentation of other companies
Joined Oki Electric
Apr. 1970
General Manager, Technology
Jun. 1990
Department No. 1, Composite
Telecommunications Systems
Company, Electronic
Telecommunications Business Division
Executive Officer
Apr. 2000
CTO (incumbent)
Apr. 2004
Senior Executive Officer
Senior Vice President (incumbent)
Jun. 2004
Division Manager, China Business
Apr. 2006
Support Division
Joined Oki Electric
Apr. 1970
Superintendent, Process Technology
Jun. 1996
Center, Electronic Device Business
Division
Executive Officer
Apr. 2000
Senior Executive Officer (incumbent)
Apr. 2005
Chairman, Semiconductor Business
Apr. 2006
Group (incumbent)
Joined Oki Electric
Apr. 1967
Superintendent, Takasaki Production
Apr. 1999
Center, System Solution BusinessGroup
Director
Jun. 1999
Senior Vice President, Oki Customer
Apr. 2001
Adtech Co., Ltd.
Senior Vice President, Oki Data
Oct. 2002
Corporation
President, Oki Data Corporation
Apr. 2004(incumbent)

Number of Oki
shares held

17,000 shares

13,000 shares

3,000 shares

CEO: Chief Executive Officer
CCO: Chief Compliance Officer
CFO: Chief Financial Officer
CTO: Chief Technology Officer- 45 -

(Translation)
Agenda No. 4: Election of One Corporate Auditor
Mr. Yoshiyuki Honjo, Corporate Auditor, will retire effective at the end of thisgeneral meeting of shareholders.
We accordingly request that you elect one new Corporate Auditor. Particulars of the
proposed candidate are provided below.
The Board of Auditors has already approved this agenda.
Candidate for Corporate Auditor (1):Name
(Date of birth)

Brief personal profile andNumber of Oki
representation for other company
shares held
Joined Oki Electric
Apr. 1968
General Manager, Backbone Network
Apr. 1996
Department No. 1,
Telecommunications Network Business
Division
Director
Jun. 1997
Yoshikatsu Shiraishi
22,000 shares
Senior Executive Officer
Apr. 2000(Born October 15, 1944)
Senior Vice President
Jun. 2001
President, IPnet Co., Ltd.
Apr. 2002
Deputy President, Oki Customer
Apr. 2003
Adtech Co., Ltd.
Director, Oki Customer Adtech Co.,
Apr. 2006
Ltd. (incumbent)
Note: Mr. Yoshikatsu Shiraishi is scheduled to retire from the position of Director of Oki Customer Adtech Co.,
Ltd. on June 28, 2006.

- 46 -

(Translation)
Agenda 5: Revision of Wages for Directors and Auditors
The amount of remuneration for the Company’s Directors, which had remained at a
maximum of ¥40 million per month since 1990, was revised and set at a maximum of ¥480
million per year at the 81st ordinary general meeting of shareholders held on June 29, 2005.
Meanwhile, the system of retirement bonuses for Directors was abolished in 2004. Given
the amendment in the handling of bonuses and stock options in compliance with theCompanies Act (Law No. 86 of 2005), and in order to exercise effective management bylinking the amount of remuneration to the Company’s business performance, we proposethat the amount of remuneration for Directors be revised up to a maximum of ¥600 million
per year. This amount will not include the portion paid as employees’ salaries to those
Directors who concurrently serve as employees.
As in the case of Directors, the amount of remuneration for the Company’s Corporate
Auditors, which had remained at a maximum of ¥7 million per month since 1997, wasrevised and set at a maximum of ¥84 million per year at the 81st ordinary general meeting ofshareholders held on June 29, 2005. Likewise, the system of retirement bonuses for
Corporate Auditors was abolished in 2004. In order to provide for reinforcement of the
future audit structure, including the increased complement of Corporate Auditors as
proposed in Agenda 2, we propose that the amount of remuneration for Corporate Auditors
be revised and set at a maximum of ¥100 million.
Provided that Agenda 3 and Agenda 4 are approved as originally presented, thenumbers of Directors and Corporate Auditors would be eleven and four, respectively.

- 47 -

(Translation)
Agenda 6: Granting of Equity Warrants as Stock Options to Directors
We propose that approval of the shareholders be given to the Company’s granting its
Directors stock options in the form of equity warrants as “Non-Monetary Remuneration”
prescribed in Article 361 of the Companies Act, for the following reason and in thefollowing manner, pursuant to the provisions of Articles 236, 238 and 240 of the Companies
Act (Law No. 86 of 2005):
1.

Reason for granting equity warrants as stock options to Directors
Stock options in the form of equity warrants as “Non-Monetary Remuneration” areto be granted to Directors for the purposes of further enhancing the relevant Directors’
incentives and morale for improving the Company’s business performance andexpanding the interests of our shareholders by augmenting our corporate value throughtheir management efforts.
2.

Persons to whom granted equity warrants would be allotted
We propose to allot the granted equity warrants to the Company’s Directors who arecharged with executing the relevant operations.
3. Particulars of offering of equity warrants to be granted(1) Type and number of common stocks issued for the purpose of granting equity
warrants
The upper limit of new common shares to be issued is 185,000 shares.
In the event the Company splits or consolidates its common shares, the numberof shares to be issued for the purpose of the equity warrants not yet exercised shallbe adjusted in accordance with the formula below:
Number of shares after adjustment =(Number of shares before adjustment) x (Ratio of split or consolidation)

Odd lots less than one share in this adjustment shall be discarded.
(2) Aggregate number of equity warrants to be offered
Up to 185
(Beneficiaries can acquire 1,000 shares for each right. However, if the number ofshares to be issued is adjusted as described above, the number of shares to beacquired will also be adjusted in the same manner.)(3) Issue price of equity warrants to be offered
Issue price of equity warrants to be offered shall be the fair price as calculated using
the Black-Scholes Option Pricing Model as of the date of allotment of equity
warrants; provided, however, that no payment shall be due at the time of allotmentof equity warrants as the said issue price would be offset, pursuant to the provisionsof Article 246, Section 2 of the Companies Act, by the right of claim for- 48 -

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

Number of outstanding shares +Exercise price before adjustment ×

In case the Company splits or consolidates its stock, the exercise price shall be
adjusted in accordance with the ratio of split or consolidation, and fractions less than
one yen as a result of the adjustment shall be rounded up to the nearest yen.
(5) Period during which equity warrants may be exercised and monetary payments may
be madeFrom July 1, 2008 to June 28, 2016
(6) Conditions for exercise of equity warrants
a. The following restrictions shall be established for exercise of equity warrants:
1) Period from July 1, 2008 to June 30, 2009:
A maximum of 34% of the allotted number may be exercised.
2) Period from July 1, 2009 to June 30, 2010:
A maximum of the number calculated by deducting the number exercised in1) above from 67% of the allotted number may be exercised.
3) Period from July 1, 2010 to June 28, 2016:
A maximum of the number calculated by deducting the number exercised in
1) and 2) above from the allotted number may be exercised.
Fractions shall be rounded off for calculation purposes.
b. The heir of the holder of the equity warrants upon the holder’s death shall beallowed to exercise the rights as follows:- 49 -

(Translation)
In case of inheritance before June 30, 2010, the rights may be exercised by June30, 2011.
In case of inheritance after July 1, 2010, the rights may be exercised for one year
from the date of inheritance; provided, however, that the rights may not be
exercised after June 28, 2016.
c. Other conditions regarding the exercise of rights shall be subject to the equitywarrant allocation agreement concluded between the Company and the holders of
the rights.
(7) Cancellation of equity warrants
Equity warrants may be cancelled free of charge in case the rights holder no longer
falls under any of the conditions for exercise provided for in the previous paragraph.
(8) Restrictions on transfer of equity warrants
The transfer of equity warrants is subject to the approval of the Board of Directors.
(9) Date of allotment of equity warrants, etc.
Necessary items and matters pertaining to allotment, etc. shall be established byresolution of the Board of Directors.

- 50 -

(Translation)
Agenda 7: Determining Particulars of Offering Equity Warrants Granted as Stock
Options to Executive Officers Excluding Those Concurrently Serving as
Directors
We propose that approval of the shareholders be given to the below-noted contents ofParticulars of Offering of equity warrants that the Company intends to grant as stock options
to its Executive Officers excluding those concurrently serving as Directors for the following
reason and in the following manner, pursuant to the provisions of Articles 236, 238 and 239of the Companies Act (Law No. 86 of 2005):
We request that this Agenda be approved, as in the past, as “an agenda for granting
equity warrants to parties other than the shareholders on particularly privileged terms.”
1.

Reason for granting equity warrants on particularly privileged terms
Equity warrants as stock options are to be allotted, free of charge, to Executive
Officers excluding those concurrently serving as Directors, senior managers participatingin managerial execution and certain directors of the Company’s subsidiaries, for the
purposes of further enhancing their incentives and morale for improving the Company’sbusiness performance and expanding the interests of our shareholders by augmenting ourcorporate value through their management efforts.
2.

Persons to whom equity warrants are allotted
Equity warrants shall be allotted to the Company’s Executive Officers, senior
managers participating in managerial execution and certain directors of the Company’s
subsidiaries.
3. Particulars of offering of equity warrants to be granted(1) Type and number of common stocks issued for the purpose of granting equity
warrants
The upper limit of new common shares to be issued is 162,000 shares.
In the event the Company splits or consolidates its common shares, the numberof shares to be issued for the purpose of the equity warrants not yet exercised shallbe adjusted in accordance with the formula below:
Number of shares after adjustment =(Number of shares before adjustment) x (Ratio of split or consolidation)

Odd lots less than one share in this adjustment shall be discarded.
(2) Aggregate number of equity warrants to be offered
Up to 162
(Beneficiaries can acquire 1,000 shares for each right. However, if the number ofshares to be issued is adjusted as described above, the number of shares to beacquired will also be adjusted in the same manner.)- 51 -

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

Number of outstanding shares +Exercise price before adjustment ×

In case the Company splits or consolidates its stock, the exercise price shall be
adjusted in accordance with the ratio of split or consolidation, and fractions less than
one yen as a result of the adjustment shall be rounded up to the nearest yen.
(5) Period during which equity warrants may be exercised and monetary payments may
be madeFrom July 1, 2008 to June 28, 2016
(6) Conditions for exercise of equity warrants
a. The following restrictions shall be established for exercise of equity warrants:
1) Period from July 1, 2008 to June 30, 2009:
A maximum of 34% of the allotted number may be exercised.
2) Period from July 1, 2009 to June 30, 2010:
A maximum of the number calculated by deducting the number exercised in1) above from 67% of the allotted number may be exercised.
3) Period from July 1, 2010 to June 28, 2016:
A maximum of the number calculated by deducting the number exercised in
1) and 2) above from the allotted number may be exercised.
Fractions shall be rounded off for calculation purposes.
b. The heir of the holder of the equity warrants upon the holder’s death shall be- 52 -

(Translation)
allowed to exercise the rights as follows:In case of inheritance before June 30, 2010, the rights may be exercised by June30, 2011.
In case of inheritance after July 1, 2010, the rights may be exercised for one year
from the date of inheritance; provided, however, that the rights may not be
exercised after June 28, 2016.
c. Other conditions regarding the exercise of rights shall be subject to the equitywarrant allocation agreement concluded between the Company and the holders of
the rights.
(7) Cancellation of equity warrants
Equity warrants may be cancelled free of charge in case the rights holder no longer
falls under any of the conditions for exercise provided for in the previous paragraph.
(8) Restrictions on transfer of equity warrants
The transfer of equity warrants is subject to the approval of the Board of Directors.
(9) Date of allotment of equity warrants, etc.
Necessary items and matters pertaining to allotment, etc. shall be established byresolutions of the Board of Directors.

- 53 -

(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 the Internet is only possible by accessing the voting site designated by theCompany (please refer to the following URL). It is also possible to access this site via mobile phonebased Internet. Using these means of access will require you to enter your voting right exercise code andpassword (valid only for purposes of this general meeting) provided in the upper right corner of the voting
rights exercise form enclosed with the Notice.
2) We will regard the exercise of rights via the Internet to be effective if you exercise your voting rights bothin writing and via the Internet.
3) We will regard the last exercise via the Internet to be the effective exercise in case you exercise yourvoting rights more than once.
4) You will bear all connection charges for using the Internet (service provider access fees, communication
charges, etc.)

2.

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

3.

Technical specifications
1) Operating system: Windows or Macintosh operating systems
2) Browser: Internet Explorer 5.5 or above, Netscape Communicator 4.7 or above
3) Internet connection: any service providing Internet access4) Mobile phones: Services should be available from any of “i-mode,” “EZweb” or “Vodafone live!”(Certain models cannot be used.) If you are using a cellular phone with bar-code scanner features werequest 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 5:00 p.m. excluding Saturdays, Sundays and national holidays
2) For address changes and other matters other than (1) above:
Stock Transfer Agency Department, Mizuho Trust & Banking Co., Ltd.
Tel. 0120-288-324 (toll-free)
From 9:00 a.m. to 5:00 p.m. excluding Saturdays, Sundays and national holidays

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

- 54 -