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

(Securities Identification Code: 6703)
June 4, 2013

NOTICE OF 89TH ORDINARY GENERAL MEETING OF SHAREHOLDERS
Dear Shareholders,Oki Electric Industry Co., Ltd. (the “Company”) would hereby like to inform you that the 89th
ordinary general meeting of shareholders will be held as follows. We would be grateful if you
could attend the meeting.
Those who will not be able to attend the meeting are kindly requested to review “4. Exercise of
Voting Rights” on page 2 and exercise their voting rights no later than 5:15 p.m., June 25(Tuesday), 2013 (JST).
Yours faithfully,
Hideichi Kawasaki,
President, Representative Director
Oki Electric Industry Co., Ltd.
1-7-12 Toranomon, Minato-ku, Tokyo-1-

(Translation)

1.
2.

Date and Time:
Location:

Wednesday, June 26, 2013, from 10:00 a.m.
Nippon Seinen-kan Hall, 7-1 Kasumigaoka, Shinjuku-ku, Tokyo

3. Meeting Agenda
Items to be reported:
1. Business Report, Consolidated Financial Statements and audit results of theConsolidated Financial Statements by the Accounting Auditor and the Audit &Supervisory Board for the 89th fiscal year (from April 1, 2012 to March 31,
2013)
2. Non-consolidated Financial Statements for the 89th fiscal year (from April 1,2012 to March 31, 2013)
Items to be resolved:
Agenda 1:
Agenda 2:
Agenda 3:
4.

Appropriation of Surplus
Election of Two (2) Directors
Election of One (1) Audit & Supervisory Board Member

Exercise of Voting Rights(1) Attendance at the meeting in person
Please submit the enclosed ballot at the reception desk of the meeting.
(2) Exercise of voting rights via postal mailPlease indicate your approval or disapproval for each of the proposals in the spaceprovided on the ballot and return the ballot to the Company.
(3) Exercise of voting rights via electronic means (Internet)
Please read the appended “Instructions for the Exercise of Voting Rights via the Internet,”
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
Internet.

* The Company has provided the Notice of 89th Ordinary General Meeting of Shareholders on its Internet
website (http://www.oki.com/). Any amendment to the Company’s Reference Documents for the
General Meeting of Shareholders, the Business Report, and the Consolidated and Non-consolidated
Financial Statements (including the “Notes to the Consolidated Financial Statements” and “Notes to
Non-consolidated Financial Statements”) will be announced on the website.

-2-

(Translation)(Attachment)

Business Report(From April 1, 2012 to March 31, 2013)
1.

Status of the OKI Group(1) Operating progress and results
The OKI Group is sincerely sorry for having caused much inconvenience and anxiety
to its shareholders as a result of improper accounting at a Company’s overseas consolidated
subsidiary and the accompanying partial restatement of its past financial results from thefirst quarter of the Fiscal Year ended March 31, 2007 to the Fiscal Year ended March 31,
2012.
The OKI Group takes the case seriously and is committed to steadily implement andensure compliance with all officers and employees of the Group, taking preventive
measures in a unified manner so that such error will not occur again. We intend to makeardent efforts to restore the confidence of our stakeholders, and we would like to ask foryour continued support as we move forward.
The following statement of the Group’s financial results in the business report reflects
the amendments to the past financial results based on the Financial Instruments andExchange Act.
During fiscal year 2012, there was a sense of uncertainty toward economic recovery
against the backdrop of economic downturn caused by the prolonged financial crisis in
Europe and slowdown of economic growth in emerging countries. However, economic
climate is improving due to the avoidance of the fiscal cliff in the US and high expectations
for economic recovery based on measures taken by the new administration in Japan.
In this business environment, OKI Group’s net sales for all segments increased,
mainly in Info-telecom business, recording net sales of ¥455.8 billion, a ¥32.3 billion(7.6%) increase year-on-year. Operating income was ¥13.5 billion, a ¥1.5 billion increaseyear-on-year due to increase in marginal profit associated with rise in volume and reductionof variable costs which offset price decline, impact of currency exchange and increase in
fixed costs etc.
Ordinary income increased by ¥11.2 billion year-on-year to ¥20.3 billion, due torecording foreign exchange gain. Net income improved vastly by ¥12.0 billion to ¥13.6
billion, as the disaster loss caused by the flood in Thailand accrued in the last fiscal year
cleared and also gain on sale of property, plant and equipment was recorded which offset
loss on suspending sales activities of a Spanish consolidated subsidiary.
Looking at non-consolidated business performance, net sales were ¥226.0 billion, up¥20.9 billion (10.2%) from the previous fiscal year. This was because of an increase in-3-

(Translation)
net sales at the Info-telecom system business, mainly for social infrastructure systems andmechatronics systems. Operating income was ¥12.5 billion, a ¥6.2 billion increase year-onyear due to increase in marginal profit associated with rise in volume and reduction ofvariable costs etc.
Ordinary income increased ¥26.1 billion year-on-year to ¥32.8 billion, due mainly torecording of dividend income received from subsidiaries and affiliates and foreignexchange gain. Net income was up ¥17.4 billion to ¥20.8 billion from the previous fiscal
year because a provision for loss on business of subsidiaries and affiliates was recorded
following a deterioration of the financial conditions of subsidiaries and affiliates.
Regarding the dividends for the fiscal year under review, establishment of the basis toenable stable dividends continuously is not complete. For this reason, we deeply regret topass dividends to shareholders for the fiscal year ended March 31, 2013. As for preferredstock, we will distribute dividends in accordance with the terms and conditions for Class A
Preferred Stock stipulated at the time of issuance.
Net sales by segment are as provided below.
- Net Sales(Unit: billions of yen)Segment
Info-telecom
systems
Printers
EMS
OthersTotal

FY2011 (reference:

FY2011FY2012 (the year

Increase or
decrease

Compared to theprevious year (%)

previous year)(amended: previous
year)

267.2

267.2

293.0

25.8

9.7

112.0

107.4

111.4

0.4

3.7

31.3

31.3

32.7

1.4

4.5

under review)

17.6

17.6

18.7

1.1

6.4

428.1

423.5

455.8

32.3

7.6

Notes:
1.
Figures less than ¥100 million for each item are rounded to the nearest ¥100 million. The amounts of“increase or decrease” are calculated on the basis of figures in units of ¥100 million.
2.
“Increase or decrease” indicates changes from the previous year’s results that reflect the amendments ofpast financial results based on the Financial Instrument and Exchange Act.

The following provides a summary of each segment.

-4-

(Translation)
Info-telecom systems
Net sales to external customers were ¥293.0 billion, up ¥25.8 billion (9.7%) from theprevious fiscal year. The increase in sales included a ¥2.0 billion increase due to foreignexchange effect. Excluding this effect, net sales increased by ¥23.8 billion. Sales ofsolution & services were strong in projects for government offices and in the corporate
market. In the social infrastructure systems business, disaster-prevention projects
increased on the back of full-scale development of digital wireless communication systems
for fire prevention and demand for the post-earthquake reconstruction.
In themechatronics system business, sales of ATMs for China remained strong due to expansionof installation areas and sales of cash handling equipment were also robust. On the other
hand, overall sales of telecom systems fell, affected by a slowdown in demand for opticalaccess, despite an increase in sales of core networks and enterprise networks and robust
sales of maintenance and construction.
Operating income was ¥23.8 billion, a ¥5.1 billion increase year-on-year, owing to
improved marginal profit caused by the increase in volume and a decline in variable cost.
Printers
Net sales to external customers were ¥111.4 billion, up ¥4.0 billion (3.7%) from theprevious fiscal year. The increase in sales included a ¥0.80 billion increase due to foreignexchange effect, and excluding this effect the net sales grew by ¥3.2 billion yen. With
regards to sales by product, the unit sales of office color LED printers and monochrome
LED printers increased as a result of proactive investment in the printer business andenhancement of product line-ups, despite an increasingly tough market environment.
Sales of dot impact printers declined due to a fall in unit price although the unit sales
increased.
Operating loss amounted to ¥8.8 billion (a deterioration of ¥4.5 billion). This was
because of the impact of foreign exchange, price declines and an increase in fixed costs
caused by increases in investment in the printer business and transportation cost.
Electronics manufacturing services (EMS) and others
Net sales to external customers were ¥32.7 billion, up ¥1.4 billion (4.5%) from theprevious fiscal year, in EMS business and ¥18.7 billion, up ¥1.1 billion (6.4%) from theprevious fiscal year, in the Others businesses. The increase in sales of the EMS business
was attributable to new consolidation of OKI TANAKA Circuits Co., Ltd., despite adecrease in semiconductor equipment-related demand. In the Others business, sales of thecomponent-related business increased.
Operating income was ¥1.6 billion, a ¥0.1 billion increase in EMS, and ¥3.0 billion, a¥0.5 billion increase in the Others business, owing to improved marginal profit caused byvolume increase.

-5-(Translation)(2) Capital expenditure
Capital expenditures for the fiscal year equaled ¥13.1 billion.
Investment amounts by segment were as follows.
(Unit: billions of yen)Segment

Amount ofcapitalexpenditure

Info-telecom systems

5.0

Printers

6.3

EMS

0.5

Others
Total

Major investments
Investments in R&D, development of new products andproduction activities for financial systems, automationequipment systems, systems related to fire- and disasterprevention and optical access systems, etc.
Investments in R&D, development and production activities
relating to business-use printers
Investments in contract manufacturing activities of medical,
telecommunications and industrial equipment

1.3
13.1

(3) Financing
Funds required for the term under review were obtained from our own funds andborrowed funds.
Borrowing funds are mainly long-term borrowings principally from major banks.
(4) Future challenges
The uncertain economic climate, such as the prolonged financial crisis in Europe andslowdown of economic growth in China, will continue for fiscal year 2013. However,
economic climate is improving due to the avoidance of the fiscal cliff in the US and highexpectations for economic recovery based on measures taken by the new administration in
Japan.
Under such circumstances, the OKI Group has been implementing a series of
initiatives based on the mid-term business plan announced in October 2010. Specifically,
the Group is carrying out the Growth Program, in which it aims for growth of focus areas
through concentrated investment of resources and promotion of strategic alliances. We
have come out with the three directions in which to head for growth as policies: “move into
global markets,” “supporting management unencumbered by assets” and “new businessaiming for Smart Society.” Under these, the Group has been implementing various
measures at businesses such as solutions & services, mechatronics-systems, printers andelectronics manufacturing services (EMS), which the Group has set as the fields for growthunder the mid-term business plan. The Group will also achieve continuous growth from a
medium- and long-term viewpoint by promoting strategic alliances. It will do this bybuilding up mutually complementary relationships with partners with resources and knowhow that the OKI Group needs.
Through these initiatives, the Group was working to expand sales and enhance its
profitability and making progress in achieving the goals stated in the plan and the early
resumption of dividend payments. However, the OKI Group’s financial position was
significantly impaired by improper accounting at an overseas consolidated subsidiary,
announced in August 2012. We have been implementing the following preventive
measures, and announced in March 2013 the mid-term business plan for the printer-6-

(Translation)business, aiming to resuscitate it. The Group will strive to enhance the management baseof the printer business, as well as the Info-telecom systems business and EMS businesses
which maintain robust performance, to ensure steady earnings.
○ Outline of the measures for preventing improper accounting
In order to deal with the improper accounting at the overseas consolidated subsidiary,
the Company set up the Preventive Committee with the President as the chairman effective
September 11, 2012, and has drawn up preventive measures and monitored operations andimplementation of these measures.
In April 2013, the committee compiled an
improvement status report on the progress of implementation of preventive measures andsubmitted it to the Tokyo Stock Exchange and the Osaka Securities Exchange.
An outline of the preventive measures is as follows.
1) Thorough management of subsidiaries
Enhancement of consolidated management, review of personnel management,enhancement of check function through monitoring and such like by the Board of
Directors and management indicators, review of various authorities and propertarget setting and monitoring, etc.
2) Review of internal control and enforcement of internal audit function
Confirmation and review of internal control, enhancement of a lineup of the audit
division, review of the audit cycle and performance of audit, etc.
3) Enhancement of governance and improvement of compliance consciousness
Establishment and operation of the Risk Management Committee, adoption ofCompliance Commitment by the Company’s officers, revision and disseminationof the OKI Group Code of Conduct, provision of compliance education andreinforcement of the whistle-blowing system, etc.
We will consistently operate and further ensure that we implement various measures
such as continuous provision of compliance education and proper responses to businessrisks by the Risk Management Committee.
Following this development, as well as operation and implementation of thepreventive measures, we revised the basic policy for establishing an internal control system
as stated on page 20.

-7-

(Translation)(5) Trends in assets and profit/loss
Trends in assets and profit/loss for the fiscal year under review and the past three
years are as follows.

Sales

443.9

billion yen

432.7

billion yen

428.1

billion yen

89th year(the year underreview, FY2012)455.8
billion yen

Net income

3,619

million yen(27,001)

million yen

8,000

million yen

13,599Net income per share

5.30

yen

(37.35)

yen

9.14

yen

17.24

yen

Total assets

383.6

billion yen

372.2

billion yen

374.8

billion yen

349.3

billion yen

Net assets

64.8

billion yen

59.9

billion yen

67.5

billion yen

56.6

billion yen

Net assets per share

84.61

yen

40.15

yen

49.36

yen

34.40

yen

86th year(FY2009)

87th year(FY2010)88th year(FY2011)

million yen

Notes:
1. Parentheses indicate losses.
2. Net income per share is computed based on the average number of shares of common stock during the year
(weighted average). Net assets per share are computed based on the number of shares of common stock
outstanding at the year-end. These figures exclude treasury stocks.
3. Trends in business performances after amendments were made to past financial results based on the
Financial Instrument and Exchange Act are as follows.

Sales

86th year(FY2009)442.9
billion yen

87th year(FY2010)432.7
billion yen

88th year(FY2011)423.5
billion yen

Net income(3,836)

million yen(31,809)

1,555

Net income per share(5.62)

yen(44.00)

yen

0.32

yen

Total assets

377.9

billion yen

368.8

billion yen

368.1

billion yen

Net assets

47.6

billion yen

38.9

billion yen

41.3

billion yen

Net assets per share

59.40

yen

11.37

yen

13.42

yen

-8-

million yen

million yen

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

Oki Data Corporation

29,000 million yen

Company’s
voting rightratio (%)
100

Oki Customer Adtech Co., Ltd.

1,800 million yen

100

OKI Software Co., Ltd.

400 million yen

100

Oki Wintech Co., Ltd.

2,001 million yen

100

Oki Data Americas, Inc.
Oki Data Manufacturing(Thailand) Co., Ltd.
Oki Europe Ltd.
Oki Electric Industry(Shenzhen) Co., Ltd.

10 million U.S. dollars

100*

Manufacturing and sales of printers
Maintenance, construction andsales of information processing
equipment and telecommunications
equipment
Development and operation of
telecommunications system
softwareDesign and construction ofelectronic works and electronic
telecommunications works
Sales of printers

420 million baht

100*

Manufacturing of printers

33 million pound sterling

100*

Sales of printers

50 million Renminbi

100*

Manufacturing of information
processing equipment and printers

Name

CapitalMajor businessNote: Figures marked with an asterisk (*) indicate the ratio of voting rights held by subsidiaries of the Company.

(ii)
-

-

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

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

Info-telecom systems

Printers
EMS

Business items
Financial systems, automation equipment systems (ATM, cash handling equipments,
ticket reservations and issuing terminals, etc.), systems for government agencies(aviation, transportation, disaster prevention, firefighting, various info-telecom
systems, etc.), telecom carrier systems (switching, transmission, optical access, etc.),
IP telecommunication systems (PBX, call center, videoconferencing, etc.), various
information systems (travel, logistics, manufacturing, etc.), and IT services for thesaid business items (cloud computing service, system integration, support,
maintenance, etc.), etc.
Color LED printers, monochrome LED printers, dot impact printers, multi-purpose
printers, etc.
Designing & manufacturing services, printed circuit boards, etc.

-9-(Translation)(8) Major offices
Our major offices are as follows.
Name

Classification
Head office

Minato-ku, Tokyo

Branch offices

Kitanihon region (Sendai, Miyagi), Chubu region(Nagoya, Aichi),Kansai region (Osaka, Osaka),
Chushikoku region (Hiroshima, Hiroshima),
and Kyushu region (Fukuoka, Fukuoka)

Oki Electric Industry Co., Ltd.

Head office
Head office
Head office
Head office
Head office

Minato-ku (Tokyo), Warabi (Saitama), Honjo(Saitama), Takasaki (Gunma), Tomioka (Gunma)and Numazu (Shizuoka)
Warabi (Saitama), Osaka (Osaka) and Takasaki(Gunma)Minato-ku, Tokyo
Koto-ku, Tokyo
Warabi, Saitama
Shinagawa-ku, Tokyo
New Jersey, USA

Head office

Ayutthaya, Thailand

Head office

Surrey, UK

Head office

Guangdong, China

Business offices
Research institutes
Oki Data Corporation
Oki Customer Adtech Co., Ltd.
Oki Software Co., Ltd.
Oki Wintech Co., Ltd.
Oki Data Americas, Inc.
Oki Data Manufacturing(Thailand) Co., Ltd.
Oki Europe Ltd.
Oki Electric Industry (Shenzhen)Co., Ltd.

Location- 10 -

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

Number of employees

Info-telecom systems

8,688

Printers

5,564

EMS

1,104

Other

1,751

Company-wide (shared)

352

Total

(ii)

17,459

Employees of Oki Electric Industry
Number of employees

Average age

3,678 (increased by 305 from the end of the previous year)

42.1

Average years ofservice19.5(10) Major creditors
Major creditors of the OKI Group are as follows:
Creditor

Loan balanceBillion yen

Mizuho Corporate Bank, Ltd.
Sumitomo Mitsui Banking Corporation
Mizuho Trust & Banking Co., Ltd.
Aozora Bank, Ltd.
The Norinchukin Bank

29.5
19.7
8.3
4.4
4.1

(11) Other significant events of the OKI GroupThe OKI Group submitted amended reports to the securities reports and such like,effective September 14, 2012. In response to this, the Securities and Exchange SurveillanceCommission recommended that the Financial Services Agency issue an order for payment ofa surcharge of ¥16.8 million, on April 26, 2013.

- 11 -

(Translation)
2.

Shareholders’ Equity(1)

Number of shares authorized to be issued by the Company:
2,400,000 thousand shares

Total number of classified shares authorized to be issued
Common Stock:
2,400,000 thousand sharesClass A Preferred Stock:
30,000 shares(2) Number of outstanding shares:
Common Stock:731,438 thousand shares(including 3,192 thousand shares of treasury stock)
Class A Preferred Stock:
30,000 shares(3) Number of shareholders:Common Stock:88,516Class A Preferred Stock:
14(4) Major shareholders (Top 10):
1) Common Stock
Number ofshares held
(thousand shares)

Name of shareholder

Percentage ofshares held(%)

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

33,903

4.66

Japan Trustee Services Bank, Ltd. (trust account)

21,837

3.00

Oki Denki Group Employees’ Shareholdings Committee

19,127

2.63

Mizuho Corporate Bank, Ltd.

14,196

1.95

Meiji Yasuda Life Insurance Company

14,000

1.92

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

11,922

1.64

Japan Securities Finance Co., Ltd.

7,125

0.98

Sompo Japan Insurance Inc.

7,000

0.96

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

6,861

0.94

CBHK CBLDN-FUND 135 T&D ASSET
6,448
0.89
MANAGEMENT LIMITED
Note: The percentages of shares held are calculated after deducting treasury stock (3,192 thousand shares).

- 12 -

(Translation)2) Class A Preferred Stock
Percentage ofshares held(%)

Number ofshares held

Name of shareholder
Mizuho Corporate Bank, Ltd.

15,000

50.00

Meiji Yasuda Life Insurance Company

3,000

10.00

NTT Data Corporation

3,000

10.00

Hulic Co., Ltd.

2,500

8.33

Kiyo Bank, Ltd.

1,000

3.33

Sompo Japan Insurance Inc.

1,000

3.33

The Chiba Kogyo Bank, Ltd.

1,000

3.33

Fujitsu Limited

1,000

3.33

Fuyo General Lease Co., Ltd.

1,000

3.33

Yasuda Real Estate Co., Ltd.

600

2.00

- 13 -

(Translation)
3.

Equity Warrants(1) Equity warrants granted to the Company’s officers as consideration for theirperformance of duties(i) Number of equity warrants
259(ii) Type and number of shares subject to equity warrants
259,000 shares of the Company’s common stock (1,000 shares per equity warrant)(iii) Status of equity warrants held by the Company’s officers

Issued Number

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

Directors(excluding outside Directors)

Audit & Supervisory Board
Members

Number ofequitywarrants

Number ofholders

Number ofequitywarrants

Number ofholders

July 1, 2005 toJune 26, 2013

20

1

20

1

July 1, 2006 toJune 28, 2014

31

2

11

1

July 1, 2007 toJune 28, 2015

34

2

11

1

July 1, 2008 toJune 28, 2016

26

2

-

-

July 1, 2008 toJune 28, 2016

-

-

11

1

July 1, 2009 toJune 25, 2017

57

2

23

1

July 1, 2009 toJune 25, 2017

15

1

-

-

Exerciseperiod(2) Equity warrants issued to employees in consideration of performance during the fiscal
year under review
The Company did not issue equity warrants in the fiscal year under review.

- 14 -

(Translation)
4.

Corporate Officers(1) Names, etc. of Directors and Audit & Supervisory Board Members
Note
1
X

X

X

Position
President,
Representative
Director
Senior Executive Vice
President andMember of the Board,
Representative
Director
Executive Vice
President andMember of the Board

Name

Status or main duties

Hideichi Kawasaki

Supervision
Chief Financial Officer
In charge of Marketing & Sales Division, Secretarial
Office, Group Administration Division and General
Affairs Division

Naoki Sato

Chief Information Officer and Chief Technology
Officer
In charge of IT Solution & Services Business Division,
Government & External Relations Division, Human
Resources Division and Information Planning Division
In charge of Printer Business Division
President, Oki Data Corporation

Sei Yano

Senior Vice President
and Member of the
Takao Hiramoto
Board
Director
Takuma Ishiyama
Standing Audit & Supervisory
Shuichi Kawano
Board Member
Audit & Supervisory Board
Keiichi Fukumura
MemberAudit & Supervisory Board Kuninori
MemberHamaguchi
Audit & Supervisory Board
Kaoru Yoshida
MemberNotes:
1. X indicates executive officer.
2. Director Takuma Ishiyama is an Outside Director.
3. Audit & Supervisory Board Members Kuninori Hamaguchi and Kaoru Yoshida are Outside Audit &Supervisory Board Members.
4. Director Takuma Ishiyama, Audit & Supervisory Board Members Kuninori Hamaguchi and Kaoru Yoshidaare independent officers based on the terms of the Tokyo Stock Exchange and the Osaka Securities Exchange.
5. Audit & Supervisory Board Member Keiichi Fukumura served in positions such as Manager, Financial
Division, Manager, Accounting & Control Division and Officer in charge of the Accounting & Control
Division, and has extensive knowledge in finance and accounting.
X- 15 -

(Translation)
6.

Executive officers as of March 31, 2013 are as follows (excluding those who concurrently serve as
Directors).
Position

Name

Executive Vice President

Hisao Suzuki

Senior Vice President

Hidetoshi Saigo

Senior Vice President

Yasunori Shibata

Senior Vice President

Toshinao Takeuchi

Senior Vice President
Senior Vice President

Yoshiyuki Gondou
Shinya Kamagami

Senior Vice President

Kouichirou Shimizu

Executive Officer

Toshiya Hatakeyama

Executive Officer
Executive Officer

Masahiko Morioka
Kazunari Kobayashi

Executive Officer

Kenichi Tamura

Executive Officer

Akira Komatsu

Executive Officer

Yoshikazu Matsuoka

Executive Officer

Yoshiyuki Nakano

Executive Officer

Seiji Mouri

Principal duty
Chief Compliance Officer
In charge of CSR Division, Accounting & Control
Division, Public Relations Division, Audit Office andEnterprise Systems Marketing & Sales Division
In charge of Telecom Systems Business Division andCarriers Systems Marketing & Sales Division
In charge of Financial Systems Marketing & Sales
Division, Government & Public Systems Marketing &Sales Division and Partner Business Marketing & Sales
Division
In charge of Corporate Planning Division, Corporate
Research & Development Center and Production &Manufacturing Safety Office
In charge of Public Systems Business Division
In charge of Systems Hardware Business Division
In charge of Electronics Manufacturing Services Business
DivisionManager, Group Administration Division and Accounting& Control Division
Director, Vice President, Oki Data Corporation
Director, Vice President, Oki Customer Adtech Co., Ltd.
Manager, Planning Division in Marketing & Sales
DivisionManager, Government & Public Systems Marketing &Sales Division
Manager, Carriers Systems Marketing & Sales Division
In charge of Procurement Center
Manager, Mechatronics Systems Plant in Systems
Hardware Business Division
Manager, IT Solution & Services Business Division(2) Compensation paid to Directors and Audit & Supervisory Board Members
Title
Number of persons
Amount of payment
Directors
8¥172 million
Audit & Supervisory Board
6¥50 million
Members
Total
14¥222 million
Notes:
1.
The amounts of compensation approved by the 82nd Ordinary General Meeting of Shareholders held on
June 29, 2006 are within ¥600 million per year for Directors and ¥100 million per year for Audit &Supervisory Board Members. The amount of compensation for Directors excludes employee wages for
Directors who are also employees.
2.
The number of Directors and Audit & Supervisory Board Members as of the end of the fiscal year underreview is different from the number shown above, and the above number includes those who resigned at
the conclusion of the 88th Ordinary General Meeting of Shareholders held on June 28, 2012.

- 16 -

(Translation)(3) Outside Directors and Audit & Supervisory Board Members(i) Major activities in the fiscal year under review(a) Attendance at meetings of the Board of Directors and the Audit & Supervisory
Board
Board of Directors meeting(number of meetings in parenthesis)
Attendance
Attendance ratefrequency

Audit & Supervisory Board meeting(number of meetings in parenthesis)
Attendance
Attendance ratefrequency

Takuma Ishiyama,
16 (17)94%
Director
Kuninori
Hamaguchi,
13 (13)100%
11 (11)
100%
Audit & Supervisory
Board Member
Kaoru Yoshida,
Audit & Supervisory
13 (13)100%
11 (11)
100%
Board Member
Notes: The number of meetings for Audit & Supervisory Board Members Kuninori Hamaguchi and Kaoru
Yoshida represents the number of meetings held since they took office in June 2012.

(b) Major activities
a. Takuma Ishiyama, Director
Making objective statements mainly as a specialist in corporate law, heprovided advice and made proposals for the appropriateness and propernessof decision making by the Board of Directors. While he had not recognizedin advance that there had been improper accounting at an overseas
consolidated subsidiary, he proactively provided advice and guidance on
investigation by the internal investigative committee and formulation of
preventive measures from an independent viewpoint, and helped to enhancecompliance by using his initiative in management.
b. Kuninori Hamaguchi, Audit & Supervisory Board Member
With regard to deliberations of the Board of Directors, he determined thecorrectness of Directors’ managerial decisions. Using his many years ofextensive experience and knowledge as a director at other companies, hemade efforts to formulate the Company’s appropriate audit opinions bymaking proper statements and carrying out, when necessary, adequate
activities concerning performances of the Audit & Supervisory Board.
While he had not recognized in advance that there had been improperaccounting at an overseas consolidated subsidiary, after the fact was identified,
he proactively expressed opinions on preventive measures and monitored thestate of their implementation. Therefore, he appropriately carried out his
duties.
c. Kaoru Yoshida, Audit & Supervisory Board Member
With regard to deliberations of the Board of Directors, he determined thecorrectness of Directors’ managerial decisions. Using his many years ofextensive experience and knowledge as a director at other companies, hemade efforts to formulate the Company’s appropriate audit opinions by- 17 -

(Translation)
making proper statements and carrying out, when necessary, adequate
activities concerning performances of the Audit & Supervisory Board.
While he had not recognized in advance that there had been improperaccounting at an overseas consolidated subsidiary, after the fact was identified,
he proactively expressed opinions on preventive measures and monitored thestate of their implementation. Therefore, he appropriately carried out his
duties.
(ii) Outline of Liability Limitation Agreements
The Company concluded agreements to limit liabilities with outside officers(Director Takuma Ishiyama, and Audit & Supervisory Board Members Kuninori
Hamaguchi and Kaoru Yoshida) under the provisions of Article 427 of the Companies
Act. The outline of the agreements is as follows:- In cases where outside officers are liable for any damages arising from theirnegligence to the Company, they shall compensate for such damages only to theextent of the minimum liabilities as stipulated in Article 427, Paragraph 1 of theCompanies Act.
- The above limitation of liability shall be applied only when the relevant outside
officers have executed their duties that caused the liabilities in good faith and withoutgross negligence.
(iii) Total amount of compensation, etc.
¥24 million (for the five individuals)- 18 -

(Translation)
5.

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

(3) Policy regarding decision to dismiss or not reappoint the accounting auditor
The Audit & Supervisory Board will dismiss the accounting auditor if the auditor falls
under provisions of Article 340 of the Companies Act. In addition, if it is deemed unlikelythat the accounting auditor will be able to perform audits properly, the Company, upon theconsent or request of the Audit & Supervisory Board, the Board of Directors will discuss
whether to submit a proposal to the general meeting of shareholders for dismissal or nonreappointment of the accounting auditor.

- 19 -

(Translation)
6.

Policies and procedures of the Company
Procedures to ensure that Directors and employees comply with applicable laws,
regulations and the Articles of Incorporation in conducting their business, as well asother procedures of the Company, in order to assure the appropriateness of theCompany’s operations(1) Procedures to ensure that Directors and employees comply with applicable laws,
regulations and the Articles of Incorporation in conducting their business(i) As the foundation for ensuring compliance, the Company has established the “OKIGroup Charter of Corporate Conduct” and “OKI Group Code of Conduct.” In
addition, officers take the initiative in compliance activities in conformance with the“Compliance Commitment.”(ii) The Company has established a Compliance Committee chaired by the Chief
Compliance Officer to decide on and examine basic policies regarding complianceprograms.
(iii) In accordance with the basic policies formulated by the Compliance Committee, thedivision responsible for compliance plans, draws up, and promotes specific measures
such as education and training for Directors and employees. In education andtraining, we aim to raise employee awareness about compliance by utilizing means
such as e-learning.
(iv) The Company provides rules on public-interest disclosure and provides a contact
point for reporting and consultation, aiming to detect any misconduct at its earliest
stages.
(v) The Company stands firmly against antisocial groups that threaten the order andsafety of civil society in cooperation with the police and related organizations, andrefuses to have any relationship with them as a whole.
(2) Procedures to retain and manage information relating to Directors’ conduct ofbusiness
The Company retains and stores information relating to the conduct of business byDirectors as appropriate in accordance with applicable laws, regulations and internal rules.
(3) Rules concerning risk management and other procedures(i) The Company has established a Risk Management Committee and promotes
measures for appropriately grasping risks that may occur in relation to its businessactivities and preventing such risks from emerging.
(ii) Pursuant to risk management rules, each section of the Company manages risks that
may occur in relation to its main duties. At the same time, the Company has
established a supervisory section to deal with risks needing company-wide
management. This section assesses risks, draws up policies for risk countermeasuresand develops appropriate structures based on such policies.
(iii) If any risk occurs, the Company will set up an emergency countermeasure
headquarters to handle the risk.

- 20 -

(Translation)(4) Procedures to secure efficient business performance by Directors(i) The Company holds regular meetings of the Board of Directors once a month todecide important matters and supervise the work of Directors.
(ii) The Company holds meetings of the Board of Executive Officers consisting ofexecutive officers etc. to provide for flexible decision making on fundamental andsignificant matters in managing the business.
(iii) The Company assigns Directors responsibilities and authority pursuant to rules on
division of duties and authorities.
(5) Procedures to secure appropriate Group (Company and subsidiaries) operations(i) To ensure that Group companies run their operations properly, the Company has
established the “OKI Group Charter of Corporate Conduct” which sets out the values
for the entire Group. In addition, the Company has established the “OKI Group
Code of Conduct” as the code of conduct which all officers and employees of Group
companies should comply with, and is striving to make the code known to all of them.
(ii) The division responsible for compliance implements various measures for promoting
compliance common to the Group through each Group company’s compliance officer.
The Division also determines, through regular monitoring, the implementation statusof such measures by each Group company and reports to the Compliance Committee
on the results.
(iii) The Company, in accordance with Group management rules, determines the status ofeach Group company’s management activities and provides advice and guidance.
(iv) To secure the reliability of financial reporting, the Company and Group companies
establish an internal control system for financial reporting in accordance with related
laws and regulations, and strive to maintain and improve that system.
(6) Procedures for employees who assist Audit & Supervisory Board Members;
independence of employees from Directors(i) The Company assigns employees, who are not subject to Directors’ instructions andorders, as staff to assist Audit & Supervisory Board Members.
(ii) Any change in such staffing requires the prior consent of the Audit & Supervisory
Board.

- 21 -

(Translation)(7) Procedures for Directors and employees to report to Audit & Supervisory Board
Members; procedures for Audit & Supervisory Board Members to receive otherreports(i) If Directors discover anything that may cause significant damage to the Company,
they are required to report the matter immediately to the Audit & Supervisory Board
Members pursuant to applicable laws and regulations.
(ii) Standing Audit & Supervisory Board Members attend meetings of the Board of
Directors and meetings of the Board of Executive Officers in order to understandimportant decision-making processes and the status of business operations, as well as
to inspect important documentation.
(iii) Audit & Supervisory Board Members receive reports on the status of establishinginternal control systems and their operations from Directors and employees on aregular basis, and may request Directors and employees to report on matters deemednecessary.
(8) Other procedures to secure effective audits by Audit & Supervisory Board Members(i) In conducting inspections on the Company’s operations and assets and performing
other audit duties, Audit & Supervisory Board Members shall conduct audits
efficiently and effectively in close cooperation with the internal audit section.
(ii) Audit & Supervisory Board Members implement efficient audits by closelycooperating with the accounting auditor. To this end, Audit & Supervisory Board
Members hold meetings with the accounting auditor on a regular basis, attend on-site
audits by the accounting auditor, and request reports from the accounting auditor on
the progress of audits when necessary.

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

- 22 -

(Translation)

Consolidated Balance Sheet(as of March 31, 2013)(Unit: millions of yen)Account title

AmountAccount title(Assets)

Amount(Liabilities)

Current assets

Current liabilities

Cash and deposits

29,904

Notes and accounts payable

63,416

Notes and accounts receivable

123,886

Short-term borrowings

75,192

Securities

6,502

Other accrued expenses

31,666

Finished goods

31,215

Other current liabilities

26,855Work in process

18,856

Raw materials and supplies

24,890

Deferred tax assets

6,634

Long-term borrowings

45,332Other current assets

12,704

Lease obligations

3,626(7,600)Retirement benefits

19,823

246,994

Provision for Directors’ retirement benefits

Allowance for doubtful receivables
Total current assets

Total current liabilities
Long-term liabilities

Long-term accounts payable-other
Other long-term liabilities
Fixed assets
Property, plant and equipment
Buildings and structures

23,595

Machinery, equipment and delivery
equipment

11,170

197,129386
21,864
4,534

Total long-term liabilities

95,567

Total liabilities

292,697(Net Assets)
Shareholders’ equity

Tools, furniture and fixtures

9,090

Common stockLand

12,343

Additional paid-in capital

21,554

Construction in progress

1,629

Retained earnings(7,788)57,829Treasury stock at cost

Total property, plant and equipment
Intangible assets

7,655

Investments and other assets

Total shareholders’ equity

44,000(399)
57,366

Accumulated other comprehensive income

Investments in securities

28,570Net unrealized holding gain/loss on othersecurities

2,192

Other investments and other assets

9,209

Loss on deferred hedges(656)

Allowance for doubtful receivables(936)

Translation adjustments

Total investments and other assets

36,843

Total fixed assets

102,328

Total assets

349,322- 23 -

Total accumulated other comprehensive
income(2,829)(1,293)Equity warrants

79

Minority interests in consolidated subsidiaries

473

Total net assets

56,625

Total liabilities and net assets

349,322

(Translation)

Consolidated Statement of Operations(From April 1, 2012 to March 31, 2013)(Unit: millions of yen)Account title

AmountNet sales

455,824

Cost of sales

337,406

Gross profit

118,417

Selling, general and administrative expenses

104,942

Operating income

13,475Non-operating income
Interest income

161

Dividend income489

Foreign exchange gain

8,792

Other

1,378

10,822Non-operating expenses
Interest expense

3,003

Other

989

Ordinary income

3,993
20,304Extraordinary profit
Gain on sale of property, plant and equipment

2,783

Gain on sale of investments in securities

678

3,461

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

674

Loss on impairment of fixed assets

219

Write-downs of investments in unconsolidated
subsidiaries and other securities

225

Loss on liquidation of subsidiary

4,011

Income before income taxes and minority interests

5,131
18,634

Income taxes

4,106

Income taxes deferred

656

Income before minority interests

4,762
13,872
273

Minority interests in earnings of consolidated
subsidiaries
Net income

13,599- 24 -

(Translation)

Consolidated Statement of Changes in Net Assets(Year ended March 31, 2013)(Unit: Millions of yen)
Shareholders’ equity
Common stock
Balance at April 1, 2012

44,000Changes during the term under review
Net changes during the term under review-

Balance at March 31, 2013

44,000Additional paid-in capital
Balance at April 1, 2012

21,554

Changes during the term under review
Net changes during the term under review-

Balance at March 31, 2013

21,554Retained earnings
Balance at April 1, 2012

9,034

Accumulated effect of correction of errors(30,003)

Balance at April 1, 2012 after retroactive adjustment(20,968)

Changes during the term under review
Dividends from surplus(1,321)

Net income

13,599Change of scope of consolidation

902

Net changes during the term under review

13,179Balance at March 31, 2013

(7,788)Treasury stock at cost
Balance at April 1, 2012

(38)

Changes during the term under review
Purchases of treasury stock(361)

Net changes during the term under review(361)

Balance at March 31, 2013

(399)

Total shareholders’ equity
Balance at April 1, 2012

74,551

Accumulated effect of correction of errors(30,003)

Balance at April 1, 2012 after retroactive adjustment

44,547

Changes during the term under review
Dividends from surplus(1,321)

Net income

13,599Purchases of treasury stock(361)

Change of scope of consolidation

902

Net changes during the term under review

12,818

Balance at March 31, 2013

57,366- 25 -

(Translation)
Accumulated other comprehensive income
Net unrealized holding gain/loss on other securities
Balance at April 1, 2012

(1,815)

Changes during the term under review
Net changes in items other than shareholders’ equity during the term under review

4,008

Net changes during the term under review

4,008

Balance at March 31, 2013

2,192

Loss on deferred hedges
Balance at April 1, 2012

(973)

Changes during the term under review
Net changes in items other than shareholders’ equity during the term under review
Net changes during the term under review

317
317

Balance at March 31, 2013

(656)

Translation adjustments
Balance at April 1, 2012

(4,363)

Accumulated effect of correction of errors

3,730

Balance at April 1, 2012 after retroactive adjustment(632)

Changes during the term under review
Net changes in items other than shareholders’ equity during the term under review(2,196)

Net changes during the term under review(2,196)

Balance at March 31, 2013

(2,829)Total accumulated other comprehensive income
Balance at April 1, 2012

(7,153)

Accumulated effect of correction of errors

3,730

Balance at April 1, 2012 after retroactive adjustment(3,422)

Changes during the term under review
Net changes in items other than shareholders’ equity during the term under review
Net changes during the term under review

2,128
2,128

Balance at March 31, 2013

(1,293)Equity warrants
Balance at April 1, 2012

79

Changes during the term under review
Net changes during the term under review-

Balance at March 31, 2013

79

Minority interests in consolidated subsidiaries
Balance at April 1, 2012

46

Changes during the term under review
Net changes in items other than shareholders’ equity during the term under review

426

Net changes during the term under review

426

Balance at March 31, 2013473

- 26 -

(Translation)
Total net assets
Balance at April 1, 2012

67,524

Accumulated effect of correction of errors(26,272)

Balance at April 1, 2012 after retroactive adjustment

41,251

Changes during the term under review
Dividends from surplus(1,321)

Net income

13,599Purchases of treasury stock(361)

Changes of scope of consolidation

902

Net changes in items other than shareholders’ equity during the term under review
Net changes during the term under review

2,554
15,373

Balance at March 31, 2013

56,625- 27 -

(Translation)

Notes to Consolidated Financial Statements
Principles for Preparing Consolidated Financial Statements and Notes to Changes in Scopeof Consolidation and Scope of Equity Method Application
1.

Scope of consolidation(1) Number of consolidated subsidiaries: 86 companies
Names of major consolidated subsidiaries:
Oki Data Corporation; Oki Customer Adtech Co., Ltd.; Oki Wintech Co., Ltd.;OKI Software Co., Ltd.; Japan Business Operations Co., Ltd.; Nagano Oki Co.,
Ltd.; Oki Proserve Co., Ltd.; Oki Data Americas, Inc.; Oki Data Manufacturing(Thailand) Co., Ltd.; Oki Europe Ltd.; Oki Electric Industry (Shenzhen) Co.,
Ltd.; and Oki Banking Systems (Shenzhen) Co., Ltd.
(2) Names of major non-consolidated subsidiaries:
Awaya Denki Kogyo K.K. and 5 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:
Beginning from the fiscal year under review, OKI Micro Engineering (DG) Co.,
Ltd. was included within the scope of consolidation as it was newly
established; TIE Co., Ltd., OKI TANAKA Circuits Co., Ltd. were included
within the scope of consolidation because they became subsidiaries following
new acquisition of shares by the Company; JIPTechno Co., Ltd., Tomioka
Electric Co., Ltd., TRUSTEC Co., Ltd. and OKI Hytech Co., Ltd. were
included within the scope of consolidation because they became subsidiaries
following additional acquisition of shares by the Company; and Adachi
Protechno Co., Ltd., Oki Advanced Communications Co., Ltd, OK Enterprise
Corporation, OTEM Co., Ltd., OBC Works Co., Ltd., OKI Software Expert
Service Co., Ltd., OKI WorkWel Co., Ltd., JNO Co., Ltd., Shibaura OKI
Electric Construction Co., Ltd., OKI Proassist Co., Ltd., OKI Printed Circuits(Changzhou) Co., Ltd., Oki Power Trading (Shenzhen) Co., Ltd. and Oki MicroEngineering (HK) Co., Ltd. were included within the scope of consolidation
because of an increase in the relative importance of these subsidiaries.
Meanwhile, OKI Networks Co., Ltd. was excluded from the scope of
consolidation because it merged with the Company.

- 28 -

(Translation)
2.

Application of equity method(1) Number of affiliated companies to which the equity method is applied: 4Name of major company to which the equity method is applied:Oki Electric Cable Co., Ltd.
(2) Names of major non-consolidated subsidiaries and affiliated companies to which theequity method is not applied:
Non-consolidated subsidiaries:
Awaya Denki Kogyo K.K. and 5 other companies
Affiliated companies: Oki Denki Bohsai Co., Ltd. and 2 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 significant assets(i) Negotiable securities
The Company and its domestic consolidated subsidiaries value securities inaccordance with how they are held as indicated below. Overseas consolidated
subsidiaries apply the lower of cost or fair value.
Other negotiable securities:
Marketable securities:
Stated at fair value based on the market price at the end of the
fiscal year
(Any difference between book value and fair value is included in
net assets; sales costs are calculated by the moving averagemethod.)Non-marketable securities:
Stated at cost based on the moving average method(ii) Inventories
The Company and its domestic consolidated subsidiaries evaluate inventories asfollows, and overseas consolidated subsidiaries primarily apply the lower of cost or fairvalue.
Finished goods:
Principally stated at cost based on the moving average method(Balance sheet values are measured by the method of devaluing
the book price to reflect declines in profitability.)Work in process:Principally stated at cost based on the specific identification
method. (Balance sheet values are measured by the method ofdevaluing the book price to reflect declines in profitability.)
Raw materials and supplies:
Principally stated at cost based on the moving average method.
(Balance sheet values are measured by the method of devaluing
the book price to reflect declines in profitability.)- 29 -

(Translation)(iii) Derivatives
Stated at fair value(2) Depreciation and amortization(i) Property, plant and equipment (excluding lease assets)
The Company and its domestic consolidated subsidiaries primarily apply the
declining-balance method; overseas consolidated subsidiaries primarily apply thestraight-line method.
(ii) Intangible assets (excluding lease assets)
The Company and its domestic consolidated subsidiaries apply the straight-line
method.
For software sold in the market, amortization is based on the estimated amounts ofsales in the estimated number of years for sales (three years). For software forinternal use, the straight-line method, based on the estimated durable years (five years),
is used.
Overseas consolidated subsidiaries primarily apply the straight-line method.
(iii) Lease assets
Lease assets relating to finance lease transactions that do not transfer ownershipare depreciated over the lease contract’s lifetime by the straight-line method, assuming
the residual value is zero.
In addition, out of the finance lease transactions that do not transfer ownership,lease transactions whose lease transaction commencement date was on or prior to
March 31, 2008 are accounted for on a basis similar to ordinary rental transactions.
(3) Basis for provision of reserves(i) Allowance for doubtful receivables
To prepare for any losses of accounts receivable and loans, the Company and its
domestic consolidated subsidiaries calculate the amount of potential loss by using thehistorical loss ratio for non-classified loans/receivables and individual assessment forclassified loans/receivables. Overseas consolidated subsidiaries calculate the amountof potential losses by individually assessing the possibility of collection for specificloans/receivables.
(ii) Retirement benefits
To prepare for payment of retirement benefits to employees, the Company and its
consolidated subsidiaries register the amount recognized to accrue at the end of the
fiscal year based on estimated values of retirement benefit obligations and pension
assets.
Differences caused by changes in accounting standards are amortized over 15
years except for consolidated subsidiaries that amortize the difference in the first yearof application and some overseas consolidated subsidiaries that directly deduct thedifference from retained earnings.

- 30 -

(Translation)
Prior service costs are amortized by the straight-line method over a set number ofyears (11 to 13 years) within the average remaining years of service of employees.
Actuarial gains and losses are amortized by the straight line method over a set
number of years (11 to 13 years) within the average remaining years of service of
employees at the time of their accrual in each fiscal year. Amortization of such gains
and losses is deemed to be effective from the year after the one in which they arise.
(iii) Provision for Directors’ retirement benefits
Some consolidated subsidiaries register the necessary amount at the end of theyear in accordance with internal rules to prepare for the payment of Directors’
retirement allowance.
(4) Basis for provision of income and expense
Basis for provision of income relating to contract work and software development
contracts
a. Income from those with certain results in progress before the end of the fiscal year
Percentage-of-completion method (The progress ratio of construction is estimatedby the cost proportion method.)b. Other income
Inspection basis (completed-contract method for some domestic consolidated
subsidiaries)(5) Important hedge accounting methods(i) Method of hedge accounting
Deferred hedging is applied. Allocation treatment is applied for forward
exchange contracts eligible for allocation treatment. Special treatment is applied tointerest rate swaps that meet requirements for special treatment.
(ii) Means of hedging and coverage
Forward exchange contracts are used to hedge fluctuations of exchange rates on
credits and debts in foreign currencies. Interest rate swaps are employed to hedge
fluctuations of market interest rates on variable-rate short-term borrowings and longterm borrowings.
(iii) Hedging policy
Derivative transactions are used to hedge fluctuations of market rates on credits
and debts.
(iv) Assessment method of the effectiveness of hedges
To determine the effectiveness of hedges, the Company compares the accumulated
total of market fluctuations or cash flow fluctuations for the targets of hedging and thatof the market fluctuations or the cash flow fluctuations for the means of hedging,
during the period from the start of hedging to the assessment. The Company thenmakes a decision based on the changes of the two.
(6) Amortization of goodwill and amortization period
Goodwill is evenly amortized over its useful life (mainly five years).

- 31 -

(Translation)(7) Other important matters in preparation of consolidated financial statements(i) Accounting processing of consumption tax
The tax-exclusion method is used for accounting of consumption tax and local
consumption tax.
(ii) Application of consolidated tax payment
The consolidated tax payment is applied.
Notes on correction of errors
In the fiscal year under review, OKI discovered improper accounting at an OKI Groupoverseas consolidated subsidiary, OKI SYSTEMS IBERICA, S.A.U., and made correction oferrors. The accumulated effect of this correction of errors has been reflected in the bookvalue of net assets at the beginning of the fiscal year under review. As a result, in theConsolidated Statement of Changes in Net Assets, the balance at April 1, 2012 of retained
earnings decreased by ¥30,003 million and that of translation adjustments increased by¥3,730 million.
Notes to Consolidated Balance Sheet
1. Assets pledged as collateral
Buildings and structures
Land
Investments in securities
Total
Liabilities collateralized by the above assets:
Short-term borrowings
Long-term borrowings
Total
2.

Accumulated depreciation on property, plant and equipment

3.

Liabilities for guarantee
Guarantee for borrowings by employees
Other
Total

- 32 -¥346 million¥138 million¥8,280 million¥8,765 million¥6,821 million¥467 million¥7,289 million¥152,008 million¥568 million¥34 million¥602 million

(Translation)
Notes to Consolidated Statement of Changes in Net Assets
1. Matters concerning class and total number of shares outstanding as of the end of FY2012
Common Stock731,438 thousand sharesClass A Preferred Stock
30 thousand shares
2.

Matters concerning appropriation of surplus(1) Dividends paid
Resolution

Class ofshares

Source ofdividends

Total
dividends(millions ofyen)

Dividends
per share(yen)

Recorddate

Effective
date

Ordinary General
Meeting of
Shareholders
on June 28, 2012

Class A
Preferred
Stock

Retainedearnings

1,321

44,047

March 31,2012

June 29,2012(2) Dividends for which the record date falls in the fiscal year under review and the effective
date falls in the following fiscal year.

3.

Resolution

Class ofshares

Source ofdividends

Total
dividends(millions ofyen)

Ordinary General
Meeting of
Shareholders
on June 26, 2013

Class A
Preferred
Stock

Retainedearnings

1,032

Dividends
per share(yen)

Recorddate

Effective
date

34,410March 31,2013

June 27,
2013

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

Breakdown of equity warrants

The Company

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

Type of shares to be issued
upon exercise of equity
warrants

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

Common stock

815,000

Common stock

452,000

Common stock

442,000

Common stock

185,000

Common stock

157,000

Common stock

287,000

Common stock

222,000- 33 -

(Translation)

Notes on Financial Instruments
1. Matters concerning the status of financial instruments
The OKI Group mainly uses short-term deposits and highly safe marketable securities forfund management, and raises its funds primarily through borrowings from financial institutions
and issuance of corporate bonds.
The Group strives to mitigate its customers’ credit risks associated with notes and accounts
receivable, which are operating receivables, by carrying out customer credit investigations inaccordance with regulations for the management of accounts receivable of individual companies.
For borrowings, the Group raises short-term funds mainly for working capital and long-term
funds for working capital and capital investment. For borrowings exposed to the interest rate risk,
the Group applies derivative instruments (interest rate swap transactions) to hedge its risk.
The Group executes and manages derivative transactions in accordance with Oki Group’s
policy.
2.

Disclosure concerning fair value of financial instruments
As of March 31, 2013 (consolidated balance sheet date), the amount recorded in the
consolidated balance sheet, fair value, and the amount of differences are as shown in the tablebelow. Any item whose fair value is deemed extremely difficult to assess is excluded from thetable. (See Note 2.)(Unit: millions of yen)Amount recorded inconsolidated balance
sheet(1) Cash and deposits

29,904(2) Notes and accounts receivable

123,886

Allowance for doubtful receivables (*1)

Fair value

Difference

29,904-

116,846-(7,040)116,846(3) Securities and investments in securities

26,27125,017(1,254)(4) Notes and accounts payable(63,416)(63,416)-(5) Short-term borrowings (*2)

(56,371)(56,371)-(6) Other accrued expenses(31,666)(31,666)-(7) Long-term borrowings (*2)(64,153)(64,147)(5)(8) Long-term accounts payable-other(21,864)(21,764)(99)(9) Derivative transactions(1,604)(1,604)(*1) Allowance for doubtful receivables specifically provided for notes and accounts receivable is deducted.
(*2) Long-term borrowings (¥18,821 million) that will be reimbursed within one year are classified as “short-termborrowings” in the consolidated balance sheet.
Notes:
1.
Disclosure concerning methods of calculation of fair value of financial instruments, securities and derivativetransactions(1) Cash and deposits and (2) Notes and accounts receivable
These items are settled over a short period of time and their fair value is virtually equally to their book value.
Hence, their fair value is based on the relevant book value.
(3) Securities and investments in securities
The fair value of equity securities is based on their prices determined at the financial instruments exchanges,
and the fair value of bonds is based on the quotations offered by the correspondent financial institution.
(4) Notes and accounts payable, (5) Short-term borrowings, and (6) Other accrued expenses
These items are settled over a short period of time and their fair value is virtually equally to their book value.

- 34 -

(Translation)
Hence, their fair value is based on the relevant book value.
Long-term borrowings
The fair value of these items is based primarily on the method of calculation whereby the sum of principal
and interest is discounted by an assumed interest rate on the assumption that the said sum is freshly
borrowed in a similar manner. Some long-term borrowings with floating interest rates are prescribed to be
subject to special accounting treatment applicable to interest rate swaps (see (9) below). Hence, the fairvalue of a long-term borrowing is based on the method of calculation whereby the sum of principal andinterest, treated in combination with the said interest rate swap, is discounted by a reasonably estimableinterest rate on the assumption that the said amount is freshly borrowed in a similar manner.
(8) Long-term accounts payable-other
Fair values of long-term accounts payable are calculated by dividing into a specific period of time todiscount at a reasonable rate.
(9) Derivative transactions
Derivative transactions subject to special accounting treatment applicable to interest rate swaps are treated in
combination with long-term borrowings as hedged items. Hence their fair value is included in that of longterm borrowings.
Financial instruments whose fair value is considered extremely difficult to assess
Unlisted equity securities (¥8,746 million on the consolidated balance sheet) and investments in a limited liability
joint business partnership (¥55 million on the consolidated balance sheet) are not included in (3) Securities andinvestments in securities because they have no market price and it is deemed extremely difficult to assess their fairvalues.
(7)2.

Notes to Per-share Information
1. Net assets per share:¥34.402. Net income per share:¥17.24

Notes to important subsequent events
Acquisition of a company through share acquisition
At the Board of Directors meeting held on May 14, 2013, the Company resolved to acquire a
70 percent stake in a company which will succeed the Automation and Services division of Itautec
S.A. –Grupo Itautec (“Itautec”) and turn the company into its subsidiary. The Company signed ashare transfer agreement effective May 15, 2013.
(1) Reasons for share acquisition
The Company developed the world’s first cash-recycling ATM in 1982 and, in 2011,
succeeded in developing an ATM capable of simultaneously handling deposits and withdrawals
of mixed banknotes in up to 128 denominations within one unit. Through its long history in
manufacturing ATMs, the Company has accumulated the industry’s leading mechatronics
technology and quality control technologies that allow it to manufacture high-quality productswith a short lead-time. The Company identifies development of its cash-recycling ATMs inmarkets outside of Japan as one of its key growth areas. The Company has achieved strong
track records in Japan and China, where it holds the leading market share, as well as in Russia
and Indonesia. Capitalizing on these achievements, the Company focuses on expanding sales inemerging countries, where rapid economic growth is expected.
In order to boost overseas business expansion, the Company considered it necessary toestablish business bases in Central and South America, where the ATM market is expected to
grow. Accordingly, the Company entered into a strategic partnership for the ATM business inCentral and South America with Itaúsa-Investimentos Itaú S.A. (the “ITAU Group”), the- 35 -

(Translation)
second largest conglomerate in Brazil that is engaged in the banking, chemical, electronics andhealthcare businesses. Itautec, which operates the ITAU Group’s computer business,
automation equipment business which deals in ATMs and cash dispensers, and maintenanceservices business, will transfer its automation equipment business and maintenance services
business to a new company set up by Itautec, and the Company will acquire the shares of thisnew company.
The Company and the ITAU Group has few overlapping areas in terms of technologies andregions in which they have advantages. The Company has assessed that it can expect tostrengthen and expand businesses by capitalizing on its strengths. The Company will develop
a solid business base in Brazil first and aim to develop business into the ATM market in Central
and South America.
(2) Counterparty of share acquisition
Itautec S.A. –Grupo Itautec
Itautec Participaçōes e Comércio S.A.
(3) Name of company to be acquired
BR Indústria e Comércio de Produtos e Tecnologia em Automação S.A.
(4) Exercise period of share acquisition
By the end of the fiscal year ending March 2014 (scheduled)(5) Acquisition cost and ownership ratio after share acquisition
Acquisition cost: Undetermined
Ownership ratio after share acquisition: 70%- 36 -

(Translation)

Transcript of Accounting Auditors’ Report on Consolidated Financial Statements

Independent Auditors’ Report
May 17, 2013
To: Board of Directors
Oki Electric Industry Co., Ltd.
Ernst & Young ShinNihon LLC
Yasutoyo Imai (seal),
Engagement Partner, Certified Public Accountant
Yasuhiro Tamura (seal),
Engagement Partner, Certified Public Accountant
Yukiyasu Yamakawa (seal),
Engagement Partner, Certified Public Accountant
We have audited the consolidated financial statements – the consolidated balance sheets, the consolidated statementof operations, the consolidated statement of changes in shareholders equity and notes to the consolidated financial
statements – of Oki Electric Industry Co., Ltd. for the 89th term from April 1, 2012 to March 31, 2013 inaccordance with Article 444 Paragraph 4 of the Companies Act.
Responsibility of management for preparing consolidated financial statements
Oki Electric Industry’s management is responsible for preparing and presenting fairly these consolidated financial
statements in accordance with corporate accounting standards generally accepted in Japan. This includes
designing and operating internal control that the management determines necessary to prepare and fairly present
these consolidated financial statements that are without material misstatement due to fraud or errors.
Responsibility of auditors
Our responsibility is to express our independent opinion regarding these consolidated financial statements based on
audits by Ernst & Young ShinNihon LLC. We conducted our audit in accordance with auditing standards
generally accepted in Japan. These auditing standards require that we prepare audit plans and implement audit
based on them to obtain reasonable assurance as to whether the consolidated financial statements are withoutmaterial misstatement.
The audit requires procedures to obtain audit evidence about amounts and disclosure of these consolidated financial
statements. The audit procedures are selected and applied based on evaluation of risks about material
misstatement of these consolidated financial statements due to fraud or errors. Although the purpose of the audit
is not to express our opinion about the effectiveness of internal control, we consider the internal control associatedwith preparation and fair presentation of these consolidated financial statements, in order to plan appropriate audit
procedures in line with actual situations at the time of risk evaluation. Also, our audit includes reviews ofaccounting policies, and methods that management adopts, and an evaluation of management estimates and thepresentation of the consolidated financial statements as a whole.
We believe we have obtained enough and appropriate audit evidence as the basis for our opinion.
Audit opinion
We concluded that the consolidated financial statements fairly present in all aspects Oki Electric Industry’s and its
subsidiaries’ assets and income or loss in accordance with corporate accounting standards generally accepted inJapan.
Matter to be emphasized
As stated in the notes to important subsequent events, OKI Electric Industry passed a resolution at its Board of
Directors held on May 14, 2013 to acquire a 70 percent stake in a company which succeeds the automatic
equipment business and maintenance service business of Itautec S.A. –Grupo Itautec and turn the company into its
subsidiary. The Company signed a share transfer agreement effective May 15, 2013.
The said matter does not affect our audit opinion.
Conflict of interest
No conflict of interest as defined by the Accounting Law exists between Oki Electric Industry, our firm (Ernst &Young ShinNihon LLC) and the respective engagement partners.

- 37 -

(Translation)

Non-Consolidated Balance Sheet(as of March 31, 2013)(Unit: millions of yen)Account title(Assets)

AmountCurrent assets
Cash and deposits
Notes receivable
Accounts receivable, trade
Lease investment assets
Securities
Finished goods
Work in process
Raw materials and supplies
Prepaid expenses
Short-term loans
Accounts receivable-other
Deferred tax assets
Other current assets
Allowance for doubtful receivables
Total current assets

13,578695
65,385
2,101
6,000
4,320
12,927
7,211
724
51,353
7,847
2,690
171
(45)
174,961

Fixed assets
Property, plant and equipment
Buildings
Accumulated depreciation
Structures
Accumulated depreciation
Machinery and equipment
Accumulated depreciation
Vehicle and delivery equipment
Accumulated depreciation
Tools, furniture and fixtures
Accumulated depreciation
Land
Construction in progress
Total property, plant and equipment
Intangible assets
Facility rights
SoftwareTotal intangible assets

37,333(27,085)
2,481(2,177)
14,282(12,160)
84(69)
32,522(27,130)

10,247
303
2,122
14
5,392
8,397
129
26,606
118
4,505
4,623

Investments and other assets
Investments in securities
Shares of subsidiaries and affiliates

22,27861,544Contribution
Contribution in subsidiaries andaffiliates
Long-term loans to subsidiaries andaffiliates
Long-term prepaid expenses
Claims provable in bankruptcy,
rehabilitation and other
Lease and guarantee deposits
Other investments and other assets
Allowance for doubtful receivables
Total investments and other assets
Total fixed assets
Total assets

94
1,764
5,938

Account title(Liabilities)
Current liabilities
Notes payable
Accounts payable, trade
Short-term borrowings
Current portion of long-term borrowings
Lease obligations
Accounts payable, others
Other accrued expenses
Advances received
Deposits received
Provision for loss on construction contracts
Asset retirement obligations
Other current liabilities
Total current liabilities

Amount227
42,93537,676
18,415527
8,579
15,054
1,592
1,605
41
8
677
127,341

Long-term liabilities
Long-term borrowings
Lease obligations
Deferred tax liabilities
Retirement benefits
Provision for loss on business of
subsidiaries and affiliates
Asset retirement obligations
Long-term accounts payable-otherTotal long-term liabilities
Total liabilities827
12,290102,080
229,421(Net Assets)
Shareholders’ equity
Common stock
Additional paid-in capital
Capital reserve
Other additional paid-in capital
Retained earnings
Other retained earnings
Retained earnings carried forward
Treasury stock at cost
Total shareholders’ equity

44,00021,55315,000
6,553
6,450
6,450
6,450
(386)
71,616

Valuation, translation adjustments and others
Net unrealized holding gain/loss on othersecurities
Loss on deferred hedges
Total valuation, translation adjustments
and others
Equity warrants

43,643
1,838
4,076
13,39626,008

1,718
(670)
1,048

79
Total net assets

72,744

Total liabilities and net assets

302,166

1,817
111
3,152
353
(1,080)95,974
127,205
302,166- 38 -

(Translation)

Non-Consolidated Statement of Operations(From April 1, 2012 to March 31, 2013)(Unit: millions of yen)Account title

AmountNet sales

225,953

Cost of sales

171,040

Gross profit

54,912

Selling, general and administrative expenses

42,395

Operating income

12,517

Non-operating income
Interest income

643

Interest income on securities

70

Dividend income

17,675

Royalty income from corporate brand

1,242

Foreign exchange gain

2,443

Other

1,031

23,107

Non-operating expenses
Interest expenses

2,202

Other

606

Ordinary income

2,808
32,816Extraordinary profit
Gain on sale of property, plant and equipment

2,772

Gain on sale of investments in securities

568

Gain on sale of subsidiaries and affiliates’ stocks

19

Gain on extinguishment of tie-in shares

223

3,582

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

340

Loss on impairment of fixed assets

133

Write-downs of investments in unconsolidated subsidiaries and othersecurities

217

Provision for loss on business of subsidiaries and affiliates

13,599

Income before income taxes

14,29022,108

Income taxes

980

Income taxes deferred

365

Net income

1,345
20,763- 39 -

(Translation)

Non-Consolidated Statement of Changes in Net Assets(Year ended March 31, 2013)(Unit: millions of yen)
Shareholders’ equity
Common stock
Balance at April 1, 2012

44,000Changes during the term under review
Net changes during the term under review-

Balance at March 31, 2013

44,000Additional paid-in capital
Capital reserve
Balance at April 1, 2012

15,000Changes during the term under review
Net changes during the term under review-

Balance at March 31, 2013

15,000

Other additional paid-in capital
Balance at April 1, 2012

6,553

Changes during the term under review
Net changes during the term under review-

Balance at March 31, 2013

6,553

Total additional paid-in capital
Balance at April 1, 2012

21,553

Changes during the term under review
Net changes during the term under review-

Balance at March 31, 2013

21,553Retained earnings
Other retained earnings
Retained earnings carried forward
Balance at April 1, 2012

5,159

Accumulated effect of correction of errors(18,150)

Balance at April 1, 2012 after retroactive adjustment(12,991)

Changes during the term under review
Dividends from surplus(1,321)

Net income

20,763

Net changes during the term under review

19,441

Balance at March 31, 2013

6,450

Total retained earnings
Balance at April 1, 2012

5,159

Accumulated effect of correction of errors(18,150)

Balance at April 1, 2012 after retroactive adjustment(12,991)

Changes during the term under review
Dividends from surplus(1,321)

Net income

20,763

Net changes during the term under review

19,441

Balance at March 31, 2013

6,450

- 40 -

(Translation)
Treasury stock at cost
Balance at April 1, 2012

(25)

Changes during the term under review
Purchases of treasury stock(361)

Net changes during the term under review(361)

Balance at March 31, 2013

(386)

Total shareholders’ equity
Balance at April 1, 2012

70,687

Accumulated effect of correction of errors(18,150)

Balance at April 1, 2012 after retroactive adjustment

52,536

Changes during the term under review
Dividends from surplus(1,321)

Net income

20,763Purchases of treasury stock(361)

Net changes during the term under review

19,080

Balance at March 31, 2013

71,616

Valuation, translation adjustments and others
Net unrealized holding gain/loss on other securities
Balance at April 1, 2012

(1,908)Changes during the term under review
Net changes in items other than shareholders’ equity during the term
under review

3,626

Net changes during the term under review

3,626

Balance at March 31, 2013

1,718

Loss on deferred hedges
Balance at April 1, 2012

(810)

Changes during the term under review
Net changes in items other than shareholders’ equity during the term
under review

139

Net changes during the term under review

139

Balance at March 31, 2013

(670)

Total valuation, translation adjustments and others
Balance at April 1, 2012

(2,718)Changes during the term under review
Net changes in items other than shareholders’ equity during the term
under review

3,766

Net changes during the term under review

3,766

Balance at March 31, 2013

1,048

Equity warrants
Balance at April 1, 2012

79

Changes during the term under review
Net changes during the term under review-

Balance at March 31, 201379

- 41 -

(Translation)
Total net assets
Balance at April 1, 2012

68,048

Accumulated effect of correction of errors(18,150)

Balance at April 1, 2012 after retroactive adjustment

49,897

Changes during the term under review
Dividends from surplus(1,321)

Net income

20,763Purchases of treasury stock(361)

Net changes in items other than shareholders’ equity during the term underreview
Net changes during the term under review

3,766
22,847

Balance at March 31, 2013

72,744- 42 -

(Translation)

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

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

2.

Standards and valuation methods for derivatives
Derivatives: Stated at fair value

3.

Standards and valuation methods for inventories
Finished goods:
Stated at cost based on the moving average method (Balance sheet
values are measured by the method of devaluing the book price toreflect declines in profitability.)Work in process:Stated at cost based on the specific identification method (Balance
sheet values are measured by the method of devaluing the book priceto reflect declines in profitability.)
Raw materials and supplies:
Stated at cost based on the moving average method (Balance sheet
values are measured by the method of devaluing the book price toreflect declines in profitability.)

4.

Depreciation and amortization
Property, plant and equipment (excluding lease assets): Declining-balance method
The straight-line method is applied to buildings, excluding annexed structures,acquired on or after April 1, 1998.
Intangible assets (excluding lease assets)
Software for sale in the market:
Amortization method based on the estimated amounts of sales in the estimatednumber of years for sales (3 years)
Software for internal use:
Straight-line method based on the estimated durable years (5 years)
Others:Straight-line method
Lease assets(Lease assets relating to finance lease transactions without transfer of ownership):
They are depreciated over the lease contract’s lifetime by the straight-line- 43 -

(Translation)
method, assuming the residual value is zero.
In addition, out of the finance lease transactions that do not transfer ownership,lease transactions whose lease transaction commencement date was on or prior
to March 31, 2008 are accounted for on a basis similar to ordinary rental
transactions.
5.

Basis for provision of reserves
Allowance for doubtful receivables
To prepare for any losses on accounts receivable and loans, the Company calculates theamount of potential loss by using the historical loss ratio in the case of non-classified
loans/receivables and by individual assessment in the case of classified loans/receivables.
Provision for loss on construction contracts
To prepare for any losses on construction contracts, the estimated amount of losses forthe following fiscal years are calculated for some of the orders backlog as of the end of the
fiscal year under review, which are likely to incur losses and for which the amounts thereof
can be reasonably estimated.
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(13 years) within the average remaining years of service of employees.
The actuarial difference is amortized proportionately using the straight-line method overa certain number of years (13 years) within the average remaining service period of theemployees from the fiscal year after the difference is incurred.
Provision for loss on business of subsidiaries and affiliates
To prepare for any losses on business of subsidiaries and affiliates, the estimated amountof loss on business is calculated in consideration of the financial position and operating
results of the relevant subsidiaries and affiliates.

6.

Hedge accounting methods(1) Method of hedge accounting
Deferred hedging is applied. With regard to interest rate swaps that meet therequirements for special treatment, special treatment is applied.
(2) Means of hedging and hedged item
Interest rate swaps are employed to hedge fluctuations of interest rates on short-termborrowings and long-term borrowings.
(3) Hedging policy
Derivative instruments are used to hedge fluctuations of market rates on credits and debts.
(4) Assessment method of hedging effectivenessTo determine the effectiveness, the Company compares the accumulated total of themarket fluctuations or the cash flow fluctuations for the hedged item and that of themarket fluctuations or the cash flow fluctuations for the means of hedging, during the- 44 -

(Translation)
period from the start of hedging to the assessment.
decision based on the changes of the two.
7.

The Company then makes a

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

Notes on correction of errors
In the fiscal year under review, OKI discovered improper accounting at an OKI Groupoverseas consolidated subsidiary, OKI SYSTEMS IBERICA, S.A.U., and made correction oferrors. The accumulated effect of this correction of errors has been reflected in the bookvalue of net assets at the beginning of the fiscal year under review.
As a result, the balance at April 1, 2012 of retained earnings brought forward in the Nonconsolidated Statement of Changes in Net Assets decreased by ¥18,150 million yen.

Notes to Non-consolidated Balance Sheets
1. Guarantee liabilities:
The Company provides guarantees for bank borrowings made by employees, andsubsidiaries and affiliates as shown below.
Oki Data Corporation
Oki Data Americas, Inc.
Oki Hong Kong Ltd.
Oki Data Manufacturing (Thailand) Co., Ltd.
Oki Electric Industry (Shenzhen) Co., Ltd.
Eight other entities:
Total:
2.

¥3,439 million¥2,819 million($30,000 thousand)¥1,970 million($20,060 thousand, HK$7,030 thousand)¥1,120 million(350,000 thousand baht)¥721 million(47,636 thousand yuan)¥776 million¥10,847 million

Monetary claims receivable from and payable to subsidiaries and affiliates
Short-term monetary claims receivable from subsidiaries and affiliates: ¥66,381 million
Long-term monetary claims receivable from subsidiaries and affiliates: ¥7,099 million
Short-term monetary claims payable to subsidiaries and affiliates:¥24,065 million
Long-term monetary claims payable to subsidiaries and affiliates:¥7 million- 45 -

(Translation)
Notes to Non-consolidated Statement of Operations
Transactions with subsidiaries and affiliates
Sales:
Purchases:
Non-operating transactions:¥32,078 million¥59,319 million¥22,403 million

Notes to Non-consolidated Statement of Changes in Net Assets
Type and number of treasury stock as of the end of the fiscal year
Common stock:3,192 thousand shares

Notes to Deferred Tax Accounting
Major factors giving rise to deferred tax assets and liabilities
Deferred tax assets
Loss carry forwards
Nondeductible provision for loss on business of subsidiaries andaffiliates
Nondeductible retirement benefits
Nondeductible write-downs of shares of subsidiaries and affiliates
Nondeductible accounts payable-other due to changes in retirement
benefit plans
Adjustments of losses on transfers among consolidated subsidiaries
Nondeductible accrued bonuses
Nondeductible loss on impairment of fixed assets
Nondeductible write-downs of inventories
Nondeductible bad debts expenses
OthersSubtotal deferred tax assets
Valuation allowance
Total deferred tax assets
Deferred tax liabilities
Nondeductible unrealized gain on contribution of securities to thepension trust
Net unrealized holding gain/loss on other securities
OthersTotal deferred tax liabilities
Net deferred tax assets- 46 -¥17,819 million¥9,362 million¥9,180 million¥6,187 million¥5,137 million¥4,012 million¥1,387 million¥1,042 million¥867 million¥416 million¥2,590 million¥58,004 million¥(54,406) million¥3,597 million¥(3,830) million¥(952) million¥(200) million¥(4,983) million¥(1,385) million

(Translation)

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

Amount equivalent to acquisition cost of leased assets as of the end of the term under review¥34 million
Amount equivalent to accumulated depreciation of leased assets as of the end of the term
under review¥19 million
Amount equivalent to unexpired lease payment of leased assets as of the end of the term
under review¥16 million- 47 -

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

Subsidiary

Subsidiary

Subsidiary

Company name

OKI Software Co., Ltd.

Oki Hong Kong, Ltd.

Oki Data Corporation

Location

Warabi,
Saitama Pref.

Hong Kong

Minato-ku,
Tokyo

CapitalBusiness¥400
millionDevelopment, design,
manufacture andmaintenance ofsoftware, systembuilding services,
SI/solution services,
consulting outsourcing
and sales of
information equipment

HK$60,000
thousand¥29,000
millionVoting right
ratio(Direct)
100%

Holdings company,
material procurement(Direct)
100%(Direct)
100%

Sales of printers

Relationship withrelated party

Production ofsoftware on a contract
basis, etc.,
lending of funds

Supply products etc.,
lending of funds,
concurrent
assumption of officeof officer

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

Description oftransactions

Purchase ofservices

Transaction
amount(mil. yen)

19,760Account item

Endingbalance(mil. yen)Accounts
payable,
trade

6,296

Other
accruedexpenses906

Lending of
funds

4,400

Short-term
loans

2,300

Sales ofproducts

15,815

Accounts
receivabletrade

4,872

Lending offunds

13,889

Short-term
loans

15,597

Lending offunds

22,830

Short-term
loans

23,712

Underwritingof capitalincrease

20,000--Subsidiary

Oki Customer Adtech Co.,Ltd.

Koto-ku,Tokyo¥1,800
million

Maintenance,
construction,
monitoring, operation,
manufacture and saleof equipment andsystems(Direct)
100%

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

Lending offunds

17,970

Short-term
loans

1,000

Subsidiary

Oki Printed Circuits Co.,
Ltd.

Joetsu,Niigata Pref.

¥480
millionDevelopment,
designing,
manufacturing and saleof high-density
multilayer printed
circuit boards(Direct)
100%

Purchase of products
and services, lendingof funds

Lending of
funds

4,248

Short-term
loans

938

(Direct)
100%

Purchase of products
and services, lendingof funds

Lending of
funds

3,790

Short-term
loans

1,810

Subsidiary

Oki Communication
Systems Co., Ltd.

Tokorozawa,
Saitama Pref.

¥300
millionDesign, manufacture,development and saleof electronic,
information andtelecommunications
device and relatedparts

Subsidiary

Nagano Oki Electric Co.,Ltd.

Komoro,Nagano Pref.

¥400
million

Manufacture,inspection and repair
for boards and devices(Direct)
100%

Purchase of products
and services, lendingof funds

Lending of
funds

3,600

Long-termloans tosubsidiaries
and affiliates

2,280¥2,001
millionEquipment work,
designing, construction
and maintenance of
telecommunication,
firefighting and otherfacilities(Direct)
100%

Purchase of services,lending of funds

Lending of
funds

3,050

Short-term
loans

600

700

(Direct)
100%

Purchase of services,
lease and brokerageof real estate, lendingof funds

Short-term
loans

¥321
millionFacility business,
human resource
management, designbusiness, logistics
business

Long-termloans tosubsidiaries
and affiliates

2,800

Subsidiary

Subsidiary

Oki Wintech Co., Ltd.

Oki Proserve Co., Ltd.

Shinagawaku, Tokyo

Minato-ku,
TokyoLending of
funds

700

Notes:
1. The transactions amount excludes consumption tax, while the ending balance includes consumption tax.
2. Conditions of transactions and policy in determining conditions(1) The Company determines conditions regarding purchase of services and products based on market prices.
(2) The Company determines the interest rate for the lending of funds by taking the market rate of interest into
consideration.
3. Underwriting of capital increase: The Company underwrote a capital increase carried out by Oki Data Corporation,purchasing new shares at ¥32,000 per share.

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(Translation)
4.

For the loans to three subsidiaries, the Company recorded an allowance for doubtful receivables of ¥845 million in
total. The Company also recorded a reversal of allowance for doubtful receivables of ¥706 million in the fiscal
year under review.

Notes to Per-share Information
1. Net assets per share:¥57.17
2. Net income per share: ¥27.06

Notes to important subsequent events
Acquisition of a company through share acquisition
At the Board of Directors meeting held on May 14, 2013, the Company resolved to acquire a
70 percent stake in a company which will succeed the Automation and Services division of Itautec
S.A. –Grupo Itautec (“Itautec”) and turn the company into its subsidiary. The Company signed ashare transfer agreement effective May 15, 2013.
(1) Reasons for share acquisition
The Company developed the world’s first cash-recycling ATM in 1982 and, in 2011,
succeeded in developing an ATM capable of simultaneously handling deposits and withdrawals
of mixed banknotes in up to 128 denominations within one unit. Through its long history in
manufacturing ATMs, the Company has accumulated the industry’s leading mechatronics
technology and quality control technologies that allow it to manufacture high-quality productswith a short lead-time. The Company identifies development of its cash-recycling ATMs inmarkets outside of Japan as one of its key growth areas. The Company has achieved strong
track records in Japan and China, where it holds the leading market share, as well as in Russia
and Indonesia. Capitalizing on these achievements, the Company focuses on expanding sales inemerging countries, where rapid economic growth is expected.
In order to boost overseas business expansion, the Company considered it necessary toestablish business bases in Central and South America, where the ATM market is expected to
grow. Accordingly, the Company entered into a strategic partnership for the ATM business inCentral and South America with Itaúsa-Investimentos Itaú S.A. (the “ITAU Group”), thesecond largest conglomerate in Brazil that is engaged in the banking, chemical, electronics andhealthcare businesses. Itautec, which operates the ITAU Group’s computer business,
automation equipment business which deals in ATMs and cash dispensers, and maintenanceservices business, will transfer its automation equipment business and maintenance services
business to a new company set up by Itautec, and the Company will acquire the shares of thisnew company.
The Company and the ITAU Group has few overlapping areas in terms of technologies andregions in which we have advantages. The Company has assessed that it can expect tostrengthen and expand its businesses by capitalizing on its strengths. The Company willdevelop a solid business base in Brazil first and aim to develop business into the ATM market
in Central and South America.

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(Translation)(2) Counterparty of share acquisition
Itautec S.A. –Grupo Itautec
Itautec Participaçōes e Comércio S.A.
(3) Name of company to be acquired
BR Indústria e Comércio de Produtos e Tecnologia em Automação S.A.
(4) Exercise period of share acquisition
By the end of the fiscal year ending March 2014 (scheduled)(5) Acquisition cost and ownership ratio after share acquisition
Acquisition cost: Undetermined
Ownership ratio after share acquisition: 70%- 50 -

(Translation)

Transcript of Accounting Auditors’ Report

Independent Auditors’ Report
May 17, 2013
To: Board of Directors
Oki Electric Industry Co., Ltd.
Ernst & Young ShinNihon LLC
Yasutoyo Imai (seal),
Engagement Partner, Certified Public Accountant
Yasuhiro Tamura (seal),
Engagement Partner, Certified Public Accountant
Yukiyasu Yamakawa (seal),
Engagement Partner, Certified Public Accountant
We have audited the non-consolidated financial statements – the non-consolidated balance sheets, the nonconsolidated statement of operations, the non-consolidated statement of changes in shareholders equity and notes tothe non-consolidated financial statements – and its supporting schedules of Oki Electric Industry Co., Ltd. for the
89th term from April 1, 2012 to March 31, 2013 in accordance with Article 436 Paragraph 2 Item 1 of theCompanies Act.
Responsibility of management for preparing non-consolidated financial statements and its supporting schedules
Oki Electric Industry’s management is responsible for preparing and presenting fairly these non-consolidated
financial statements and its supporting schedules in accordance with corporate accounting standards generally
accepted in Japan. This includes designing and operating internal control that the management determines
necessary to prepare and fairly present these non-consolidated financial statements and its supporting schedules thatare without material misstatement due to fraud or errors.
Responsibility of auditors
Our responsibility is to express our independent opinion regarding these non-consolidated financial statements andits supporting schedules based on audits by Ernst & Young ShinNihon LLC. We conducted our audit inaccordance with auditing standards generally accepted in Japan. These auditing standards require that we prepare
audit plans and implement audit based on them to obtain reasonable assurance as to whether the non-consolidated
financial statements and its supporting schedules are without material misstatement.
The audit requires procedures to obtain audit evidence about amounts and disclosure of these non-consolidated
financial statements and its supporting schedules. The audit procedures are selected and applied based on
evaluation of risks about material misstatement of these non-consolidated financial statements and its supporting
schedules due to fraud or errors. Although the purpose of the audit is not to express our opinion about theeffectiveness of internal control, we consider the internal control associated with preparation and fair presentation ofthese non-consolidated financial statements and its supporting schedules, in order to plan appropriate audit
procedures in line with actual situations at the time of risk evaluation. Also, our audit includes reviews ofaccounting policies, and methods that the management adopts, and an evaluation of management estimates and thepresentation of the non-consolidated financial statements and its supporting schedules as a whole.
We believe we have obtained enough and appropriate audit evidence as the basis for our opinion.
Audit opinion
We concluded that the non-consolidated financial statements and its supporting schedules fairly present in all
aspects Oki Electric Industry’s assets and income or loss in accordance with corporate accounting standards
generally accepted in Japan.
Matter to be emphasized
As stated in the notes to important subsequent events, OKI Electric Industry passed a resolution at its Board of
Directors held on May 14, 2013 to acquire a 70 percent stake in a company which succeeds the automatic
equipment business and maintenance service business of Itautec S.A. –Grupo Itautec and turn the company into its
subsidiary. The Company signed a share transfer agreement effective May 15, 2013.
The said matter does not affect our audit opinion.
Conflict of interest
No conflict of interest as defined by the Accounting Law exists between Oki Electric Industry, our firm (Ernst &Young ShinNihon LLC) and the respective engagement partners.

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(Translation)

Transcript of Audit & Supervisory Board’s Report

Audit & Supervisory Board’s Report
We, the Audit & Supervisory Board, have prepared upon consultation this Audit Report based on reports compiled by each
Audit & Supervisory Board Member with respect to Directors’ performance of their duties during the 89th fiscal year from
April 1, 2012 to March 31, 2013, as follows:
1. Auditing methods used by Audit & Supervisory Board Members and the Audit & Supervisory Board, and details ofaudit
The Audit & Supervisory Board specified an audit policy, compiled audit plans and received reports from each Audit &Supervisory Board Member on the status of implementation and results of audits and also received reports from Directors andaccounting auditors on the status of the execution of their duties and asked them for explanations as needed.
Each Audit & Supervisory Board Member, according to the audit standards, policy and plans set up by the Audit &Supervisory Board, has maintained good communications with Directors, the internal audit division and other employees andstrived to collect information and improve the audit environment as well as attending meetings of the Board of Directors andother meetings as deemed important, received from Directors and employees reports on the execution of their duties, asked
for explanations as necessary, perused the documents whereby the important decisions were made, and examined businessand financial conditions at the head office and principal operating offices. In addition, we have periodically received reports
from Directors and employees, among others, required explanation when necessary, and made opinions with regard to thestatus of operations and the systems established thereon (internal control systems) made by the Board of Directors concerning
the establishment of systems defined in Article 100, Paragraph 1 and Paragraph 3 of the Regulations for Enforcement of theCompanies Act as necessary for ensuring compliance with laws and the Company’s Articles of Incorporation in theperformance of duties by Directors, described in the Business Report, and for ensuring appropriateness of duties of a joint
stock company. Also, we have maintained good communications and exchanged information with directors, audit &supervisory board members and others of the subsidiaries of the Company, and received from the subsidiaries reports on theirbusiness conditions as needed. Based on the methods mentioned above, we have reviewed the financial statements for thesaid fiscal year and their supplementary schedules.
We have also monitored and verified whether the accounting auditors maintained their independence and properly
implemented audits, received from the auditors reports on the performance of their duties and asked them for explanations asnecessary. The accounting auditors reported to us that “systems for ensuring proper execution of duties” (listed in each itemof Article 131 of the Corporate Calculation Regulations) have been established in accordance with the quality control
standards concerning audits (Business Accounting Council, October 28, 2005), and asked them for explanations as necessary.
Based on the methods mentioned above, we have reviewed financial statements for the said fiscal year (balance sheet,statement of operations, statement of changes in shareholders’ equity, and notes to non-consolidated financial statements),
their supplementary schedules and consolidated financial statements (consolidated balance sheet, consolidated statement ofoperations, consolidated statement of changes in shareholders’ equity, and notes to consolidated financial statements).
2. Results of Audit(1) Results of audit of the business report
1) We consider that the business report and its supplementary schedules fairly present the situation of the Company
in accordance with relevant laws and regulations and the Company’s Articles of Incorporation.
2) With respect to the Directors’ performance of their duties, we have found neither undue transactions nor material
facts that violate relevant laws and regulations or the Company’s Articles of Incorporation.
3) We consider that the details of the resolution made by the Board of Directors concerning internal control
procedures are proper. As for the findings of improper accounting at an overseas consolidated subsidiary, we
have confirmed that the Company has implemented preventive measures based on the results of an investigationby the External Investigative Committee and its recommendations, as stated in the business report. We have also
confirmed that the Company has made improvements.
(2) Results of audit of financial statements and their supplementary schedules
We consider that the auditing methods and results of the Company’s Accounting Auditors, Ernst & Young ShinNihon
LLC, are proper.
(3) Results of audit of consolidated financial statements
We consider that the auditing methods and results of the Company’s Accounting Auditors, Ernst & Young ShinNihon
LLC, are proper.
May 20, 2013
The Audit & Supervisory Board, Oki Electric Industry Co., Ltd.
Shuichi Kawano, Standing Audit & Supervisory Board Member (seal)
Keiichi Fukumura, Audit & Supervisory Board Member (seal)
Kuninori Hamaguchi, Outside Audit & Supervisory Board Member (seal)
Kaoru Yoshida, Outside Audit & Supervisory Board Member (seal)- 52 -

(Translation)

Reference Documents for the General Meeting of Shareholders
Agenda and Reference Matters
Agenda 1: Appropriation of Surplus
The Company places returning profits stably and continuously to our shareholders as themost paramount task and determines the dividend amount for common stock based on the
Company’s performance. However, we have not completed establishing a financial base thatenables us to stably and continuously pay dividends. For this reason, we deeply regret to say that
there will be no payment of dividends for the fiscal year under review.
As for Class A Preferred Stock dividends, the Company proposes the following inaccordance with the terms and conditions for Class A Preferred Stock stipulated at the time ofissuance.
1.

Type of dividend asset
Cash

2.

Allocation of dividend assets and total amount of dividends¥34,410 per Class A Preferred Stock
Total amount of dividends is ¥1,032,300,000.

3.

Effective date of dividend of surplus
June 27, 2013

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(Translation)

Agenda 2:
Election of Two (2) Directors
The tenure of office of Director Hideichi Kawasaki will expire at the end of thisgeneral meeting of shareholders.
Two candidates for directors are shown as follows.
Candidates for Directors (Two):
CandidatenumberName(Date of birth)1

Hideichi Kawasaki(January 10, 1947)

2

Hisao Suzuki(April 14, 1952)

Brief personal profile, position andresponsibility in the Company and significant concurrent
positionsApr. 1970
Joined Oki Electric Industry Co., Ltd.
Nov. 1990
Director, Sales 3 Team, Financial Systems Sales
Division
Apr. 2001
Executive Officer
Apr. 2004
Senior Vice President
Jun. 2005
Managing Director
Apr. 2009
Senior Executive Vice President and Memberof the Board
Jun. 2009
President, Representative Director (incumbent)
Apr. 1975
Joined The Fuji Bank, Limited
May 2000
Manager, First Global Credit Department, The
Fuji Bank, Limited
Apr. 2002
Manager, Second Credit Department, Mizuho
Corporate Bank, Ltd.
Jun. 2004
Director, Oki Wintech Co., Ltd.
May 2005
Managing Director, Oki Wintech Co., Ltd.
Apr. 2008
Executive Officer, Oki Electric Industry Co.,Ltd.
Apr. 2009
Senior Vice President
Apr. 2012
Executive Vice President (incumbent)
Apr. 2012
Chief Compliance Officer (incumbent)- 54 -

Number of Oki
shares held

Common stock
110,000 shares

Common stock
60,800 shares

(Translation)
Agenda 3: Election of One (1) Audit & Supervisory Board Member
The tenure of office of Audit & Supervisory Board Member Keiichi Fukumura will
expire at the end of this general meeting of shareholders. One candidate for audit &supervisory board member is shown as follows.
This agenda has been approved by the Audit & Supervisory Board.
Candidate for Audit & Supervisory Board Member (One):
Name(Date of birth)

Tsutomu Tai(May 20, 1954)

Brief personal profile, position in the Company andsignificant concurrent positions
Apr. 1977
Joined Oki Electric Industry Co., Ltd.
Apr. 2002
Manager, Accounting Division,
Systems Solutions Company
Apr. 2006
Manager, Group Administration
Division
Apr. 2010
Executive Officer
Apr. 2010
Manager, Corporate Planning
Division
Apr. 2011
President and Representative Director,
OKI Software Co., Ltd. (incumbent)

Number of Oki
shares held

Common stock
51,000 shares

Notes:
1.
The candidate Tsutomu Tai is scheduled to resign as President and Representative Director of OKI Software Co.,
Ltd. on June 25, 2013.
2.
The candidate Tsutomu Tai has many years of experience working in the Company’s accounting divisions, andhas extensive knowledge in finance and accounting.

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(Translation)
Appendix

Instructions for the Exercise of Voting Rights via the Internet

1.

Matters requiring your agreement concerning the exercise of voting rights via the Internet
We kindly request your consent to the following regarding exercise of voting rights via the Internet.
1) Exercise of voting rights via Internet is only possible by accessing the voting site designated by theCompany (please refer to the following URL). It is also possible to access this site with a mobile phone.
You will need to enter your voting rights exercise code and password (valid only for purposes of thisgeneral meeting) provided in the lower right corner of the voting rights exercise form, enclosed with the
Notice.
2) If you exercise your voting rights both in writing and via the Internet, we will regard the vote cast via theInternet to be effective.
3) If you exercise your voting rights more than once, we will regard the last vote you cast via the Internet tobe the effective one.
4) You will bear all connection charges for using the Internet (service provider access fees, communication
charges, etc.)

2.

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

3.

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

4.

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

5.

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

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

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