(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, 2018

NOTICE OF 94TH ORDINARY GENERAL MEETING OF SHAREHOLDERS
Dear Shareholders,Oki Electric Industry Co., Ltd. (the “Company”) would hereby like to inform you that the 94TH
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 “Instructions for
the Exercise of Voting Rights” on page 11 and exercise their voting rights no later than 5:15 p.m.,
June 21 (Thursday), 2018 (JST).
Yours faithfully,
Hideichi Kawasaki,
Chairman of the Board, Representative Director
Oki Electric Industry Co., Ltd.
1-7-12 Toranomon, Minato-ku, Tokyo-1-

(Translation)
1.

Date and Time:

Friday, June 22, 2018, from 10:00 a.m. (Reception will open at 9a.m.)Nikkei Hall, 3F Nikkei Building, 1-3-7 Otemachi, Chiyoda-ku, Tokyo

2.
Location:
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 94th fiscal year (from April 1, 2017 to March 31,
2018)
2. Non-consolidated Financial Statements for the 94th fiscal year (from April 1,2017 to March 31, 2018)
Items to be resolved:
Agenda Item 1:
Agenda Item 2:Appropriation of Surplus
Election of Seven (7) Directors

Instructions for Exercise of Voting Rights
Exercise of voting rights via attending the general meeting of shareholders:
Please bring the enclosed ballot and submit at the reception desk of the meeting.
Exercise of voting rights via postal mail:Please indicate your approval or disapproval in the space provided on the ballot and return theballot to the Company no later than 5:15 p.m., June 21 (Thursday), 2018 (JST).
Exercise of voting rights via the Internet:
Please read “Instructions for the Exercise of Voting Rights via the Internet” on page 11, andindicate your approval or disapproval no later than 5:15 p.m., June 21 (Thursday), 2018 (JST).
* The Company has provided the Notice of 94th Ordinary General Meeting of Shareholders on its Internet
website (http://www.oki.com/jp/). Any amendment to the Company’s Reference Documents for the
General Meeting of Shareholders, the Business Report, and the Consolidated and Non-consolidated
Financial Statements will be announced on the website.

-2-

(Translation)

Reference Documents for the General Meeting of Shareholders
Agenda Items and Reference Matters
Agenda Item 1:

Appropriation of Surplus

The Company has determined to pay the following year-end dividend for the fiscal year
under review with the emphasis on continuing stable distribution of profits to shareholders, after
giving consideration to its business results and business developments, etc. for the period underreview.
1.

Type of dividend asset
Cash

2.

Allocation of dividend assets and total amount of dividends
Common stock of the Company¥30 per share
Total dividends¥2,605,960,560

3.

Effective date of dividend of surplus
June 25, 2018-3-

(Translation)
Agenda Item 2: Election of Seven (7) Directors
The tenure of office of all seven Directors will expire at the conclusion of this general
meeting of shareholders.
Seven candidates for directors are shown as follows.
CandidatenumberName(Date of birth)

HideichiKawasaki(January 10, 1947)

Brief personal profile, position andresponsibility in the Company and significant concurrent positions
Apr. 1970

Joined Oki Electric Industry Co., Ltd.

Apr. 2001

Executive Officer

Apr. 2004

Senior Vice President

Jun. 2005
Managing Director
Number of years in
Apr. 2009
Senior Executive Vice President, Representative Director
office as Director:
13 yearsJun. 2009
President, Representative Director(as of the conclusion ofthis general meeting of Apr. 2016
Chairman of the Board, Representative Director (incumbent)
shareholders)[Re-election]
1
Number of attendance at Reason for the selection of candidate for Director
meetings of the Board Based on his past experience as President and Representative Director, Mr.
Hideichi Kawasaki has the knowledge and experience to decide importantof Directors(the year under review): matters and supervise the business execution of Directors and Executive Officers
in an appropriate, fair, and efficient manner. Since fiscal 2016, Mr. Kawasaki
15 out of 15 times
has been assisting and advising the management team as Representative Director(100%)and Chairman of the Board. He has been nominated as a candidate for Director
Number of Oki shares because it is expected that, as a member of the board and the Chairman, he willcontinue to enhance information sharing among directors and strengthen the
held:
Board of Director’s decision-making functions.
Common stock
16,000 shares

ShinyaKamagami(February 9, 1959)[Re-election]
2

Apr. 1981

Joined Oki Electric Industry Co., Ltd.

Apr. 2001

Manager, Hardware Development Department No. 2, Terminal
Systems Division, Systems Solution Company

Apr. 2005

Head of Systems Hardware Development Division, Systems
Hardware Company, Systems Networks Business Group

Number of years in
office as Director:
Apr. 2011
4 years(as of the conclusion of Apr. 2012
this general meeting ofJun. 2014
shareholders)

Executive Officer
Senior Vice President
Senior Vice President and Member of the Board

Apr. 2016
President, Representative Director (incumbent)
Number of attendance atmeetings of the Boardof Directors
Reason for the selection of candidate for Director(the year under review): Based on his past experience serving in business divisions and headquarters
15 out of 15 times
divisions, Mr. Shinya Kamagami has the knowledge and experience to decide(100%)
important matters and supervise the business execution of Directors andExecutive Officers in an appropriate, fair, and efficient manner.
Mr.
Number of Oki shares Kamagami has been engaging in management of OKI Group as President and
held:
Representative Director since fiscal 2016. He has been nominated as aCommon stock
candidate for Director because it is expected that, as a member of the board, he
6,700 shares
will continue to enhance information sharing among directors and strengthen the
Board of Director’s decision making functions.

-4-(Translation)
CandidatenumberName(Date of birth)

Brief personal profile, position andresponsibility in the Company and significant concurrent positions
Apr. 1982

Joined The Fuji Bank, Limited

Apr. 2007

General Manager of Global Trade Finance Division, Mizuho
Corporate Bank, Ltd.

Apr. 2009

Executive Officer, General Manager of Corporate Banking
Division No.17, Mizuho Corporate Bank, Ltd.

Apr. 2011

Managing Executive Officer, Head of Global Transaction Banking
Unit

Masayuki Hoshi(March 9, 1960)

Number of years in
office as Director:
Jun. 2014
2 years(as of the conclusion of May 2015
this general meeting ofApr. 2016
shareholders)[Re-election]
Number of attendance at Jun. 2016
3
meetings of the Board
Apr. 2017of Directors(the year under review):
15 out of 15 times
Apr. 2018(100%)
Number of Oki shares
held:
Common stock
2,800 shares

Managing Executive Officer
Senior Vice President, Oki Electric Industry Co., Ltd.
Chief Risk Management Officer
Head of Corporate Planning Group
Senior Vice President and Member of the Board
Executive Vice President and Member of the Board (incumbent),
Chief Financial Officer (incumbent)
Supervision of Corporate Administration (incumbent)

Reason for the selection of candidate for Director
Mr. Masayuki Hoshi has abundant experience gained as Managing Executive
Officer at Mizuho Financial Group, which the candidate comes from, and has a
deep understanding of governance and the Company’s aim to become a global
business. He is playing a core role in management by concurrently serving as
Executive Vice President and Member of the Board from since fiscal 2017. He
has been nominated as a candidate for Director because it is expected that, as amember of the board, he will enhance information sharing among directors andstrengthen the Board of Director’s decision-making functions.

-5-(Translation)
CandidatenumberName(Date of birth)

Brief personal profile, position andresponsibility in the Company and significant concurrent positions
Apr. 1963

Joined Sony Corporation

Jun. 1988

Director, Sony Corporation

Jun. 1993

Executive Deputy President, Sony Corporation

Jun. 2001

Outside Director, Oki Electric Co., Ltd.

Apr. 2006

Executive Alumnus, Sony Corporation (incumbent)

Number of years in
office as Director:
9 years(from 2001 to 2010)
3 years(from 2015)

Jun. 2010

Resigned as Director, Oki Electric Co., Ltd.

Jun. 2013

Outside Director, the Bank of Yokohama, Ltd. (incumbent)

Jun. 2015

Outside Director, Oki Electric Industry Co., Ltd. (incumbent)

Number of Oki shares
held:
Common stock
1,000 shares

Reason for the selection of candidate for Outside Director
Mr. Minoru Morio has a wealth of experience and knowledge cultivated throughhis career at Sony Corporation and high ethical standard. Based on his trackrecord at Oki Electric and other companies, the Company judges that he is able
to provide appropriate supervision on management, business, and governanceissues. He has been nominated as a candidate for Outside Director because it isexpected that, as a member of the board, he will continue to enhance information
sharing among directors and strengthen the Board of Director’s decision-making
functions.

Minoru Morio(May 20, 1939)

Apr. 2016
Outside Director, Concordia Financial Group, Ltd. (incumbent)[Outside][Independent](Significant concurrent positions)[Re-election] Number of attendance at Outside Director, Concordia Financial Group, Ltd.
meetings of the Board
4
Outside Director, the Bank of Yokohama, Ltd.
of Directors(the year under review): *The volume of transactions between the above companies and the Company
15 out of 15 times
accounts for less than 1% of each company’s net sales.
(100%)-6-

(Translation)
CandidatenumberName(Date of birth)

Shigeru Asaba

Brief personal profile, position andresponsibility in the Company and significant concurrent positions
Apr. 1992

Associate Professor, Faculty of Economics, Gakushuin University

Mar. 1994

Ph.D., Economics, University of Tokyo

Apr. 1997

Professor, Faculty of Economics, Gakushuin University

Apr. 2013

Professor, Graduate School of Commerce, Waseda University

Apr. 2016

Professor, Waseda Business School (Graduate School of Businessand Finance)

Jun. 2016

Outside Director, Nippon Beet Sugar Manufacturing Co., Ltd.
(incumbent)

Sep. 2016

Dean, Waseda Business School (Graduate School of Business andFinance) (incumbent)(May 21, 1961)
Number of years in
office as Director:
1 year[Outside] Number of attendance at Jun. 2017
Outside Director, Oki Electric Co., Ltd. (incumbent)[Independent] meetings of the Board(Significant concurrent positions)[Re-election]of Directors
5(the year under review): Outside Director, Nippon Beet Sugar Manufacturing Co., Ltd.
11 out of 11 times*The volume of transactions between the above company and the Company(100%)
accounts for less than 1% of each company’s net sales.
Number of Oki shares
held:
Common stock
0 shares

Reason for the selection of candidate for Outside Director
As a doctor of economics, Mr. Shigeru Asaba has academic expertise in businessin general though his specialist knowledge in the fields of industrialorganizations, corporate strategy, competitive strategy, ownership structures andstrategies, and family-run businesses as well as high ethical standards. He also
has experience as Outside Director at Nippon Beet Sugar Manufacturing Co.,
Ltd. He has been nominated as a candidate for Outside Director because it isexpected that, as a member of the board, he will enhance information sharing
among directors and strengthen the Board of Director’s decision-making
functions.

-7-(Translation)
CandidatenumberName(Date of birth)Tamotsu Saito(July 13, 1952)
Number of years in
office as Director:–

Brief personal profile, position andresponsibility in the Company and significant concurrent positions
Apr. 1975

Joined Ishikawajima-Harima Heavy Industries Co., Ltd.

Jun. 2006

Executive Officer, Vice President of Aero-Engine & Space
Operations

Apr. 2008

Director, Executive Officer, President of Aero-Engine & Space
Operations, IHI Corporation

Apr. 2011

Executive Vice President

Apr. 2012

President

Apr. 2016

Chairman of the Board (incumbent)

Jun. 2017
Outside Director, JAPAN POST INSURANCE Co., Ltd.
(incumbent)[Outside][Independent] Number of attendance at (Significant concurrent positions)[Newlymeetings of the Board
Chairman of the Board, IHI Corporation
nominated]of Directors
6OutsideDirector, JAPAN POST INSURANCE Co., Ltd.
(the year under review):–*The volume of transactions between the above companies and the Company
accounts for less than 1% of each company’s net sales.
Number of Oki shares
held:
Reason for the selection of candidate for Outside Director
Common stock
Mr. Tamotsu Saito currently serves as Chairman of the Board of IHI Corporation
0 sharesand has extensive experience as a business leader, not just in the industry but for
the whole of Japan, and the Company judges that he is able to provide
appropriate supervision over the business management at the Company. He
has been nominated as a candidate for Outside Director as the Company feelsthat it is able to rely on his appropriate opinions and advice from both a business
management perspective and a compliance perspective, and judges that he is asuitable candidate for Outside Director.

Izumi Kawashima(June 25, 1955)
Number of years in
office as Director:–

Mar. 1985

Left Graduate School of Law, Waseda University after completinga doctoral course

Apr. 1989

Associate Professor, Faculty of Economics, Gifu Keizai
University

Apr. 1996

Professor, School of Law, Senshu University

Sep. 2004

Professor, Faculty of Social Sciences, Waseda University(incumbent)

Jun. 2016
Outside Director, Oki Electric Cable Co., Ltd.
[Outside][Independent] Number of attendance at[Newlymeetings of the Board
Reason for the selection of candidate for Outside Director
nominated]of Directors
Ms. Izumi Kawashima is currently a professor of the Faculty of Social Sciences
7(the year under review):
at Waseda University. She specializes in commercial law (particularly the–Companies Act) and the Financial Instruments and Exchange Act, and she is one
of Japan’s top-level specialists in that field. She has been nominated as a
Number of Oki sharescandidate for Outside Director as the Company feels that it is able to rely on her
held:
appropriate opinions and advice and judges that she is a suitable candidate for
Common stock
Outside Director, owing particularly to her academic specialist knowledge
0 sharesrelating to corporate governance and the Companies Act. Although she has
never had experience of being involved in corporate management other than as
an outside officer, the Company determined that she will be able to carry out theduties of Outside Director appropriately for the aforementioned reason.
Notes:
1. There is no special conflict of interest between each candidate and the Company.
2. Mr. Minoru Morio, Mr. Shigeru Asaba, Mr. Tamotsu Saito, and Ms. Izumi Kawashima are candidates for outside
directors.
3. Mr. Minoru Morio was an outside director of the Company from June, 2001 to June, 2010.

-8-

(Translation)
4.

5.

The Company has entered into a liability limitation agreement with candidates for outside directors Minoru Morioand Shigeru Asaba. The outline of the agreement is provided in “Outline of Liability Limitation Agreements” (onpage 26) in the Business Report. If their reappointment is approved, the Company will continue this agreementwith them. If the appointment of Mr. Tamotsu Saito and Ms. Izumi Kawashima, candidates for outside director, isapproved, the Company will enter into the same agreement with them.
Mr. Minoru Morio and Mr. Shigeru Asaba are independent officers based on the terms of the Tokyo Stock
Exchange. If their reappointment is approved, they will continue to be independent officers. If the appointmentof Mr. Tamotsu Saito and Ms. Izumi Kawashima, candidates for outside director, is approved, they will be
independent officers.

-9-(Translation)(Reference)

The Company’s stance towards independence of Outside Directors and Outside Audit &Supervisory Board Members
The Company elects Outside Directors and Outside Audit & Supervisory Board Members based on the following
policies
1)
Persons who are not business executers*1 of the OKI Group2)
Parties for whom the OKI Group is not a major business partner (parties whose sales to OKI Group exceeds 2%of the total sales of the parties’ group) or business executers thereof
3)
Parties who are not major businesses partners of the OKI Group (parties to whom OKI Group’ sales exceeds 2%of the total sales of the OKI Group) or business executers thereof
4)
Parties who are not major shareholders of the Company (parties who holds 10% or more of the total voting
rights directly or indirectly) or business executers thereof
5)
Persons who are not business executers of parties of whom the OKI Group is a major shareholder
6)
Persons who are not consultants, accounting specialist such as certified public accountants, or legal experts suchas attorney-at-law receiving significant amount of money (more than ¥10 million annually) or other property(property worth more than ¥10 million annually), except for compensation paid to Directors and Audit &Supervisory Board Members, from the OKI Group (or if the entity receiving such property is an organization
including corporation and association, persons belonging to the organization)
7)
Persons who do not belong to the accounting firm conducting statutory audits of the Company
8)
Persons who have not fallen under any of items 1) through 7) in the past 10 years
9)
Persons who are not relatives within two degrees of kinship of the following personsa.
Persons who fall under any of the above 2) through 7) (however, for the “business executers” in 2) through 5),
this applies only to principal business executers*2, for the “persons belonging to the organization” in 6), thisapplies only to principal business executers thereof or persons with professional certificates or license such as
certified public accountants and attorney-at-law if the relevant organization is an audit firm or law firm, andfor “persons who belong to the accounting firm” in 7), this applies only to principal business executers thereofor persons with professional certificates or license such as certified public accountants.)b.
Principal business executers of the OKI Groupc.
Persons who have fallen under the above b in the past 10 years*1 “Business executers” refer to persons who perform business execution such as Directors (excluding Outside
Directors), Executive Officers, employees, etc.
*2 “Principal business executers” refer to persons who perform important business execution such as Directors(excluding Outside Directors), Executive Officers, General Managers, etc.
In addition to these policies, the Company elects Outside Directors and Outside Audit & Supervisory Board Members,on the ground of each candidate’s experience and knowledge in respective professional fields being beneficial to theCompany at present.

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(Translation)

Instructions for the Exercise of Voting Rights via the Internet
1.

Matters concerning the exercise of voting rights via the Internet
We kindly request your consent to the following regarding exercise of voting rights via the Internet.
1) Exercise of voting rights via the Internet is only possible by accessing the voting site designated by theCompany (https://soukai.mizuho-tb.co.jp/) via a PC or a mobile phone. When exercising the voting rightusing this site, you are requested to log in to the site using your voting rights exercise code and password
provided in the right corner of the voting rights exercise form, enclosed with the Notice, then follow theguidance on the screen. To ensure security, you are requested to change the password when executing
the first log-in.
2) You are requested to complete entries by 5:15 p.m., June 21 (Thursday), 2018 (JST), which is the deadline
for execution. Please exercise your voting rights at your earliest convenience.
3) If you exercise your voting rights both in writing and via the Internet, we will regard the vote cast via theInternet to be effective.
4) If you exercise your voting rights more than once, we will regard the last vote you cast via the Internet tobe the effective one.
5) Cost relating to the Internet (service provider access fees, communication charges, etc.) will be borne by
the shareholders concerned.

2.

Technical specifications
1) Internet environment: an environment where the Internet can be used, such as by conclusion of a contract
with an Internet provider, is required.
2) Browser: Internet Explorer Ver. 7 or later3) Software
Adobe Reader Ver. 9 or later4) Screen resolution
800x600 dots (SVGA) or more

3.

Notes on information security
Please rest assured that you will be able to use our systems safely as we use cryptographic technology (SHA2) 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.

4.

Contact
1) For information concerning the operation of personal computers, etc. for the electronic exercise of voting
rights:Stock Transfer Agency Department, Mizuho Trust & Banking Co., Ltd.
Tel: 0120-768-524 (toll-free, only in Japan)
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, only in Japan)
From 9:00 a.m. to 5:00 p.m. excluding Saturdays, Sundays and national holidays

Internet Explorer is a registered trademark or trademark of Microsoft Corporation (U.S.).
Adobe Reader is a registered trademark or trademark of Adobe Systems Incorporated.

- 11 -

(Translation)(Attachment)

Business Report(From April 1, 2017 to March 31, 2018)
1.

Status of the OKI Group(1) Operating progress and results
Economic situation
Looking at the global situation in fiscal 2017, in the U.S., the economy underwent a steadyrecovery, due to factors such as an increase in private consumption and capital investment, andthe economy showed a gradual recovery in Europe and emerging countries, such as China. The
Japanese economy continued its modest recovery supported by factors such as increases in
employment and capital investment.
Operating results for the fiscal year under review
In this business environment, the OKI Group reported net sales of ¥438.0 billion, a ¥13.6
billion or 3.0% decrease year-on-year, due to weak sales of ATMs in the overseas market by themechatronics systems business, despite sales in the ICT business and the EMS businessgenerally remaining stable and the printer business benefiting from the effects of the weak yen.
Operating income was ¥7.7 billion, an increase of ¥5.2 billion year-on-year, due to the absenceof one-off losses recorded in the previous fiscal year, despite the impact of a decline in sales
volume.
Ordinary income was ¥8.5 billion, an improvement of ¥10.9 billion year-on-year, due tofactors such as the ¥4.8 billion foreign exchange loss recorded in the previous fiscal yearchanging to a foreign exchange gain of ¥0.2 billion in the fiscal year under review. Profit
attributable to owners of parent was ¥5.9 billion, an increase of ¥1.2 billion year-on-year.
Looking at non-consolidated business performance, net sales were ¥204.0 billion, down
¥8.2 billion (3.9%) from the previous fiscal year. Operating loss was ¥0.9 billion, adeterioration of ¥5.9 billion year-on-year. Ordinary income decreased by ¥8.0 billion year-onyear to ¥2.3 billion. Loss was ¥2.0 billion, a ¥16.7 billion up year-on-year.
Return of profit to shareholders
OKI’s top management priorities are to strengthen its financial position and ensure retained
earnings in order to continually improve the OKI Group’s corporate value, as well as to increase
shareholder returns so that shareholders are encouraged to hold its shares over the medium- tolong-term. OKI will reinforce its financial condition and management foundations by applying
retained earnings to investments in research & development and facilities that are critical to
future growth. In addition, OKI will attach the highest importance to maintaining stable profit
distributions to shareholders and decide dividends after taking business performance into
consideration. Based on this policy, OKI proposes to pay ¥30 per common stock as a dividend
from the surplus (year-end dividend) in the current fiscal year.

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(Translation)
The following provides a summary of each segment.
- Net Sales by Segments(Unit: Billions of yen)
FY2016 (reference:

FY2017 (Fiscal year

previous fiscal year)

under review)

ICT

177.4

Mechatronics
Systems

Segment

Changes (amount)

Changes (%)

172.7

(4.7)

(2.6)

100.9

93.5

(7.4)

(7.3)

Printers

112.4

108.9

(3.5)

(3.1)

EMS

43.2

47.7

4.5

10.5

Others

17.8

15.2

(2.6)

(14.5)

451.6

438.0

(13.6)

(3.0)

Total

Note: Figures less than ¥100 million for each item are rounded to the nearest ¥100 million. The amounts of“changes (amount)” are calculated on the basis of figures in units of ¥100 million. Accordingly, insome cases the sum of individual figures presented for each item may not equal the respective “total”
stated.

ICT
Net sales were ¥172.7 billion, down ¥4.7 billion (2.6%) from the previous fiscal year.
The decline resulted from factors such as moving NW-related projects to the following
fiscal year, despite some projects for public agencies returning favorable results.
Operating income was ¥13.5 billion, a decline of ¥0.9 billion, with the effect of adecrease in sales being compensated for by differences in product mix and reduced costs.
Mechatronics Systems
Net sales were ¥93.5 billion, down ¥7.4 billion (7.3%) from the previous fiscal year.
The decline largely resulted from the effect of the slump in ATM sales in the overseas
market, despite increased revenue due to the standardization of the fiscal periods ofBrazilian subsidiaries.
Operating loss was ¥5.1 billion, an improvement of ¥6.7 billion year-on-year, due tothe absence of the effect of the one-off loss recorded in the allowance for doubtfulreceivables in the previous fiscal year, despite the impact of a decline in sales volume.
Printers
Net sales were ¥108.9 billion, down ¥3.5 billion (3.1%) from the previous fiscal year.
The decline was due to the decline in sales in the office printing market, as part of theprocess of the shift to the industrial printing market, despite the effect of increased revenue
due to the weak yen.
Operating income was ¥2.7 billion, up ¥1.7 billion year-on-year, due to the effect ofbusiness structure reforms and the weak yen.
Electronics manufacturing services (EMS) and others
Net sales of the EMS business rose ¥4.5 billion, or 10.5%, year-on-year, to ¥47.7
billion, due to favorable results from the printed circuit board business, including for- 13 -

(Translation)
semiconductor-related devices. Operating income increased by ¥0.1 billion to ¥2.2 billion
owing to higher sales volume.
Net sales of the others business segment were ¥15.2 billion, down ¥2.6 billion or
14.5% year-on-year, due to the effect of reduced income resulting from the exclusion fromthe scope of consolidation of Oki Sensor Device Corporation for which a share transfer was
conducted in March 31, 2017, despite the effect of the consolidation of Oki Electric Cable
Co., Ltd. in the fourth quarter under review. Operating income declined by ¥1.4 billion to¥2.0 billion owing to lower sales volume.
(2) Capital expenditure
Capital expenditures for the fiscal year equaled ¥7.4 billion.
Investment amounts by segment were as follows.
(Unit: Billions of yen)Segment

Amount ofcapitalexpenditure

Major investments

ICT

2.2

Investments in R&D, development of new products andproduction activities for systems related to social
infrastructures, financial systems, network system, etc.

Mechatronics Systems

1.1

Investments in R&D, development of new products andproduction activities related to automation equipment systems

Printers

1.6

Investments in R&D, development and production activities
relating to business-use printers

EMS

1.1

Investments in entrusted manufacturing services fortelecommunications and industrial equipment

Others

1.5
Total

7.4

(3) Financing
Funds required for the current term were obtained from our own funds and borrowed
funds.
(4) Future challenges
The information communication market in which the OKI group operates isconstantly evolving, and at an ever-faster rate. To respond to such changes in the businessenvironment, we recognize that we face major challenges to develop new products,
accelerate advances into growth fields, and improve profitability.
Faced with these challenges, the OKI Group aims to secure stable earnings andsustained improvement in corporate value. In existing businesses, we will strive to maintainand improve profitability through efforts centering on strengthening cost competitiveness.
In addition, we intend to expand our business by actively promoting strategic investmentsin the development of new products and businesses. Besides developing business making
use of the OKI Group’s key strengths in networks and sensing and our highly reliable
manufacturing technologies, we aim also actively to use business alliances and M&A
investments to support growth. While enhancing products and services that respond todiversifying market needs, we intend to expand sales by improving quality and productivity,- 14 -

(Translation)
strengthening collaboration between production and sales bases in Japan and overseas, andbolstering our service structure. At the same time, we will strive to raise capital efficiency
by improving asset efficiency and realize stable shareholder returns.
From the perspective of corporate social responsibility, we regard environmental
issues as a vital management issue. We are actively pressing forward with initiatives onenergy-saving, resource conservation, reducing and recycling waste, and reducing theenvironmental load.
To meet the expectations from all stakeholders, we are also striving to ensure reliablebusiness continuity by strengthening internal control systems through reinforcing corporate
governance, compliance systems, and risk management systems.
(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.
91st year(FY2014)92nd year(FY2015)

93rd year(FY2016)

94th year(Fiscal year underreview, FY2017)

Sales

540.2

billion yen 490.3

billion yen 451.6

billion yen 438.0

billion yen

Profit attributableto owners of parent

33,091

million yen 6,609

million yen 4,691

million yen 5,891

million yen

Basic earnings per
share

400.34yen 76.10

yen 54.03

yen 67.86

yenTotal assets

439.4

billion yen 411.8

billion yen 360.7

billion yen 371.8

billion yen

Net assets

121.4

billion yen 107.4

billion yen 97.2

billion yen 102.1

billion yen

Net assets
share

per

1,377.44

yen 1,229.09

yen 1,115.68

yen 1,154.03

yenNotes:
1.
Basic earnings per share is computed based on the average number of shares during the year (weighted
average). Net assets per share are computed based on the number of shares outstanding at the year-end.
These figures exclude treasury stocks.
2.
The Company consolidated ten shares of common stock into one share of common stock as of October 1,
2016. Basic earnings per share and net assets per share are calculated assuming that the shares wereconsolidated at the beginning of the 91st fiscal year ended March 31, 2015.

- 15 -

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

CapitalCompany’s
voting rightratio (%)

Major business

Oki Data Corporation

19,000 million yen

100

Manufacturing and sales of printers

Oki Customer Adtech Co., Ltd.

1,800 million yen

100

Maintenance, construction and sales of
information processing equipment andtelecommunications equipment

OKI Software Co., Ltd.

400 million yen

100

Development and operation of
telecommunications system software

Oki Wintech Co., Ltd.

2,001 million yen

100

Design and construction of electronic
works and electronic
telecommunications works

Oki Data Americas, Inc.

10 million U.S. dollars

100*

Sales of printers

Oki Data Manufacturing(Thailand) Co., Ltd.

420 million baht

100*

Manufacturing of printers

Oki Europe Ltd.

141 million euro

100*

Sales of printers

8 million U.S. dollars

100*

Manufacturing of information
processing equipment and printers

Oki Electric Industry(Shenzhen) Co., Ltd.

Note: 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.

(7) Major businesses
The OKI Group develops its core businesses in the fields of ICT, Mechatronics
Systems, Printers and EMS (entrusted manufacturing services).
Major business items in each business include the following.
Segment

Business items

ICT

Traffic infrastructure-related systems, Disaster-related systems, Self-defenserelated systems, communications equipment for telecom carriers, bank branchsystems, centered-administration systems, ticket reservations and issuing systems,
IP-PBX, business telephones, contact centers, 920MHz band wireless multi-hop
communication systems, and support and maintenance services for them

Mechatronics Systems

ATMs, cash handling equipment, bank branch terminals, ticket reservations andissuing terminals, check-in terminals, currency exchange machines, ATMmonitoring and operations services, etc.

Printers

Color and monochrome LED printers, color and monochrome LED multifunction
printers, wide format ink jet printer, dot impact printers, etc.

EMS

Designing & manufacturing services, printed circuit boards, etc.

- 16 -

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

Classification

Location

Head office

Minato-ku, Tokyo

Branch offices

Hokkaido region (Sapporo, Hokkaido), Tohoku
region (Sendai, Miyagi), Chubu region (Nagoya,
Aichi), Kansai region (Osaka, Osaka),
Chugoku region (Hiroshima, Hiroshima), Shikoku
region (Takamatsu, Kagawa), and Kyushu region(Fukuoka, Fukuoka)

Business offices

Minato-ku (Tokyo), Warabi (Saitama), Honjo(Saitama), Takasaki (Gunma), Tomioka (Gunma)and Numazu (Shizuoka)

Research institutes

Warabi (Saitama), Osaka (Osaka) and Takasaki(Gunma)Oki Electric Industry Co., Ltd.

Oki Data Corporation

Head office

Minato-ku, Tokyo

Oki Customer Adtech Co., Ltd.

Head officeKoto-ku, Tokyo

OKI Software Co., Ltd.

Head office

Warabi, Saitama

Oki Wintech Co., Ltd.

Head office

Shinagawa-ku, Tokyo

Oki Data Americas, Inc.

Head office

U.S.A.

Oki Data Manufacturing(Thailand) Co., Ltd.

Head office

ThailandOki Europe Ltd.

Head officeUK

Oki Electric Industry (Shenzhen)Co., Ltd.

Head officeChina(9) Employees(i) Employees of the OKI Group
Segment

Number of employees

ICT

7,023

Mechatronics Systems

4,106

Printers

4,468

EMS

1,326

Others1,595Company-wide (shared)

460

Total

(ii)

18,978

Employees of Oki Electric Industry
Number of employees

Average age

Average years ofservice

4,024 (decreased by 39 from the end of the previous fiscal year)

43.6

21.0

- 17 -

(Translation)(10) Major creditors
Major creditors of the OKI Group are as follows:(Unit: Billions of yen)
Creditor

Loan balance

Mizuho Bank, Ltd.

20.3

Sumitomo Mitsui Banking Corporation

12.4

Mizuho Trust & Banking Co., Ltd.

3.9

The Norinchukin Bank

3.1

Aozora Bank, Ltd.

2.2

(11) Corporate governance(i)

Basic policy
Guided by the corporate philosophy of “The people of OKI, true to thecompany’s enterprising spirit, are committed to creating superior network solutions
and providing excellent information and communications services globally to meetthe diversified needs of communities worldwide in the information age,” the OKI
Group recognizes sustainable growth and increases corporate value over medium- tolong-term as its most important management priorities in earning the trust of its
various stakeholders. To this end, we are working to enhance corporate governancebased on our fundamental policies of “enhancement of management fairness andtransparency,” “timely decision-making processes,” and “full compliance andfortification of risk management.”(ii)

Structure
The Company has chosen to be a company with the Audit & Supervisory Board,
as a structure to ensure stable realization of its fundamental policies for corporate
governance. Specifically, it establishes the Board of Directors and Audit &Supervisory Board members and an Audit & Supervisory Board in charge ofsupervision and auditing and adopts an executive officer system, aiming to promote
timely decision-making processes by separating business execution and oversight. In
addition, it endeavors to improve the fairness and transparency of management by
nominating outside directors as well as setting up the “Personnel Affairs andCompensation Advisory Committee” as a voluntary committee concerning on
appointment and compensation, and the post of Chairman of the Board, so as toensure effective supervision from an independent and objective standpoint.
In addition to objective audits by Audit & Supervisory Board members and the
Audit & Supervisory Board on the premise of its strong authority for investigation,
OKI seeks to carry out prompt risk management and ensure rigorous compliance byinitiatives such as the establishment of the Risk Management Committee, which
includes outside directors.
Furthermore, there is no system to receive consulting and advice, etc., fromformer representative directors and presidents, etc.

- 18 -

(Translation)(iii) Board of Directors
The Company’s Board of Directors consists of seven Directors, including threehighly independent Outside Directors, with the consideration of diverse expertise andcareers for the purpose of fulfilling such duties as deliberations and decisions on
significant matters concerning the Company’s business execution and oversightthereof. To clarify management responsibility for each fiscal year, the tenure for
Directors has been set as one year.
The Company provides Directors and Audit & Supervisory Board memberswith such opportunities as seminars and trainings, which are necessary in fulfilling
their roles and responsibilities, and conducts presentation for outside officers upon
appointment aimed at deepening their understanding about the OKI Group’s business,in addition to visits to business offices and other sites.
(iv) Election of company officers
The Company has established the Personnel Affairs and Compensation
Advisory Committee to secure transparency in the decision-making processes forappointments of officers. The Committee consists of five members including threeoutside officers, and the Chairman of the Committee is appointed from among
Outside Directors. The Personnel Affairs and Compensation Advisory Committee
deliberates on appointments of Director and executive officer from an objective
viewpoint, and reports the results to the Board of Directors. In addition, theCommittee delivers its opinion on appointments of candidates for Audit &Supervisory Board members to Audit & Supervisory Board members.
Upon the nomination of candidates for Directors and Audit & Supervisory
Board members and appointment of executive officers, the Company takes into
consideration that the candidate satisfies the following requirements, as well as legal
eligibility.
 Those with excellent personality, insights, high ethical standards, fairness andintegrity as well as a high-level awareness of compliance Those who can execute their duties towards the realization of the OKI Group’s
corporate philosophy and continuous improvement of the corporate value
With respect to the appointment of candidates for outside officers, OKI
formulates its independence criteria (See page 10), and elects person who satisfies
these criteria as an outside officer. All outside officers have been reported as
independent officers to the Tokyo Stock Exchange.
(v)Compensation for the Board members and executive directors
In order to secure transparency and objectiveness in the decision-making
processes concerning compensation for officers, the Personnel Affairs andCompensation Advisory Committee deliberates on the structure and level ofcompensation for Director and executive officer from an objective viewpoint, andreports the results to the Board of Directors.
OKI’s basic policy on compensation for Director and executive officer is toserve as incentives for the performance improvement with the aim of the continuous
enhancement of the corporate value and enforcement of the corporate competitiveness- 19 -

(Translation)
while being the compensation structure that can attract excellent human resources.
The compensation system consists of basic compensation, annual incentive
compensation linked to the performance of each fiscal year, and compensation-type
stock option as medium- to long-term incentive compensation. These changes havebeen implemented as part of efforts to develop an environment for a shift to the
management focused on “more aggressive goal setting” and “growth over medium- tolong-term” in order to achieve “continuous growth” of the OKI Group.
Type

Content of compensation

Basic compensation

When serving as Executive Officer concurrently,
monetary compensation shall be paid, determined
individually tailored to position, followed by duties.

Annual incentive
compensation

Monetary compensation shall be paid, determined
individually with a linkage with the past year’s
consolidated business performance of the OKI Group andthat of the division each Director is responsible for. The
amount of payments is 35% of the basic compensation incase that the rate of payments is 100%. The rate ofpayments is determined within the scope of 0% to 200%,
according to a linkage with business performance and thePresident’s qualitative assessment.

Medium- to long-term
incentive compensation

Stock option for stock-liked compensation shall be
granted, around 13% of basic compensation amount, inthe view of value sharing with shareholders and theenhancement of corporate value as well as shareholders’value over the medium- to long-term.

Compensation for Outside Directors consists only of basic compensation. In
addition, the appropriateness of the structure and level of compensation is validated
utilizing objective evaluation data from external organizations and others.
(12) Other significant events of the OKI Group(i) The Company acquired issued shares of Oki Electric Cable Co., Ltd. through a tender
offer, making it a consolidated subsidiary on December 25, 2017.
(ii) Oki Banking Systems (Shenzhen) Co., Ltd., a subsidiary of the Company, filed arequest for arbitration against Shenzhen Yihua Computer Industrial Co., Ltd. in October
2015, demanding payment of RMB1,115,463 thousand (¥18.9 billion if converted toJapanese yen based on the exchange rate as of the end of the fiscal year under review)which includes the proceeds from sale of ATM. The arbitration proceeding is currently
under review by the South China International Economic and Trade Arbitration
Commission. Although the Company has recorded a provision of allowance for doubtfulreceivables regarding this case, there is no change in the Company’s policy of collecting thetotal amount of receivables.

- 20 -

(Translation)
2.

Shareholders’ Equity(1)

Number of shares authorized to be issued by the Company:
240,000,000 shares(2)

Number of outstanding shares:
87,217,602 shares(including 352,250 shares of treasury stock)

Note: In addition to the above, the Company acquired 375,605 of its own shares held by Oki Electric Cable
Co., Ltd. as treasury stock on April 27, 2018.

(3)

Number of shareholders:
73,825(4)Major shareholders (Top 10)
Number ofshares held
(thousand shares)

Name of shareholder

Percentage ofshares held(%)

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

4,718

5.43

MSIP Client Securities

3,778

4.35

Japan Trustee Services Bank, Ltd. (trust account)

3,671

4.23

Oki Denki Group Employees’ Shareholdings Committee

1,864

2.15

STATE STREET LONDON CARE OF STATE STREETBANK AND TRUST, BOSTON SSBTC A/C UK
LONDON BRANCH CLIENTS - UNITED KINGDOM

1,813

2.09

BNYM FOR GOLDMAN SACHS JAPAN

1,693

1.95

Japan Trustee Services Bank, Ltd. (trust account 5)

1,552

1.79

Mizuho Bank LTD.

1,419

1.63

Hulic Co., Ltd.

1,407

1.62

Meiji Yasuda Life Insurance Company

1,400

1.61

Note:

The percentages of shares held are calculated after deducting treasury stock.

- 21 -

(Translation)
3.

Equity Warrants(1) Equity warrants granted to the Company’s officers as consideration for theirperformance of duties(i) Number of equity warrants
313(ii) Type and number of shares subject to equity warrants
31,300 shares of the Company’s common stock (100 shares per equity warrant)(iii) Status of equity warrants held by the Company’s officers
Issued Number(Exercise Price)
FY2016 equity warrant (1 yen)
(Issued on August 16, 2016)
FY2017 equity warrant (1 yen)
(Issued on August 15, 2017)

Directors(excluding outside Directors)
Exercise period

Number ofequitywarrants

Number ofholders

August 17, 2016 to August 16, 2041

140

3August 16, 2017 to August 15, 2042

1733(2) Equity warrants issued to employees in consideration of performance during the fiscal
year under review
Directors(excluding outside Directors)
Issued Number

FY2017 equity warrant (1 yen)
(Issued on August 15, 2017)

Exercise period

August 16, 2017 to August 15, 2042

- 22 -

Number ofequitywarrants

Number ofholders444

15

(Translation)
4.

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

Position

Name

Status or main duties

Representative
Director andChairman of the
Board

Hideichi Kawasaki

Chairman of the Board

X

President,
Representative
Director

Shinya Kamagami

Supervision

X

Senior Executive Vice
President andMember of the Board

Toshinao Takeuchi

Chief Internal Control Officer
Chief Compliance Officer
Head of Corporate Management GroupX

Executive Vice
President andMember of the Board

Masayuki Hoshi

Chief Financial Officer
Head of Corporate Planning Group

Director

Takuma Ishiyama

Director

Minoru Morio

Outside Director of Concordia Financial Group, Ltd.,
Outside Director of the Bank of Yokohama, Ltd.

Director

Shigeru Asaba

Outside Director, Nippon Beet Sugar ManufacturingCo., Ltd.

Standing Audit & Supervisory
Board Member

Hisao Suzuki

Standing Audit & Supervisory
Board Member

Sei Yano

Audit & Supervisory Board
MemberKuninori
Hamaguchi

Audit & Supervisory Board
MemberYoichi Nitta

Notes:
1. X indicates executive officer.
2. Directors Takuma Ishiyama, Minoru Morio, and Shigeru Asaba are Outside Directors.
3. Audit & Supervisory Board Members Kuninori Hamaguchi and Yoichi Nitta are Outside Audit &Supervisory Board Members.
4. Directors Takuma Ishiyama, Minoru Morio and Shigeru Asaba, Audit & Supervisory Board Members
Kuninori Hamaguchi and Yoichi Nitta has been reported as independent officers to Tokyo Stock Exchange.
5. Audit & Supervisory Board Member Hisao Suzuki has served in positions such as Officer in charge of the
Accounting & Control Division and Chief Financial Officer, and has extensive knowledge in finance andaccounting.

- 23 -

(Translation)
6.

Executive officers as of March 31, 2018 are as follows (excluding those who concurrently serve as
Directors).
Position

Name

Principal duty

Senior Vice President

Kenichi Tamura

Head of Mechatronics Systems Business Division

Senior Vice President

Toru Hatano

In charge of Printers Business Division (President, Oki
Data Corporation)

Senior Vice President

Tetsuya Izaki

Chief Information Officer
Head of Information & Technologies Planning Group

Senior Vice President

Masaaki Hashimoto

Head of Marketing & Sales Group and General Manager,
IoT Business Development Division

Senior Vice President

Masashi Tsuboi

Head of ICT Business Group

Executive Officer

Yoshiyuki Nakano

Head of EMS Business Group

Executive Officer

Kiyoshi Yokota

Chief Technology Officer, Chief Quality Officer
Deputy Head of Information & Technologies PlanningGroup and Head of Corporate Research and Development
CenterExecutive Officer

Yuichiro Katagiri

Deputy Head of ICT Business Group

Executive Officer

Toru Miyazawa

Head of Marketing & Sales Division-3, Marketing & SalesGroup

Executive Officer

Hiroshi Tsuchiya

Deputy Head of ICT Business Group and Head ofPlanning & Management Division

Executive Officer

Masashi Fuse

Head of Accounting & Control Division and Head ofFinance Division, Corporate Management Group

Executive Officer

Yuka Miyagawa

Head of Marketing & Sales Division-2, Marketing & SalesGroup

Executive Officer

Akiko Horiguchi

Head of Human Resources Division, Corporate PlanningGroup

Executive Officer

Hiroshi Tomizawa

Deputy Head of Mechatronics Systems Business Groupand Head of Global Mechatronics Systems Division

Executive Officer

Masatoshi Saito

Head of Corporate Planning Division, Corporate PlanningGroup(2) Compensation paid to Directors and Audit & Supervisory Board Members
Title

Number of persons

Amount of payment

Directors

8¥270 million

Audit & Supervisory Board Members

5¥60 million

Notes:
1. The amounts of compensation approved by the 82nd Ordinary General Meeting of Shareholders held on June29, 2006 are within ¥600 million per year for Directors and within ¥100 million per year for Audit &Supervisory Board Members. The amount of compensation for Directors excludes employee wages for
Directors who are also employees. The amounts of compensation related to equity warrants allotted ascompensation-type stock option, approved by the 92nd Ordinary General Meeting of Shareholders held on
June 24, 2016, are within ¥100 million per year for Directors (excluding Outside Directors), separately fromthe above compensations.
2. The amounts paid include the remuneration of ¥17 million in the form of stock options for Directors
3. The numbers of Directors and Audit & Supervisory Board Members as of the end of the fiscal year underreview are different from the number shown above, because the above numbers include those who resigned
at the conclusion of the 93rd Ordinary General Meeting of Shareholders held on June 23, 2017.

- 24 -

(Translation)(3) Outside Directors and Audit & Supervisory Board Members(i)Status of material concurrent positions at other organizations, etc. and the Company’s
relationship with the aforesaid organizations
Director Minoru Morio concurrently serves as Outside Director of Concordia
Financial Group, Ltd. and Outside Director of the Bank of Yokohama, Ltd. The
volume of transactions between the companies and the Company accounts for lessthan 1% of the OKI Group’s net sales and accounts for less than 1% of the each said
company’s net sales.
Director Shigeru Asaba serves as an Outside Director of Nippon Beet Sugar
Manufacturing Co., Ltd. There are no business relationships between Nippon Beet
Sugar Manufacturing Co., Ltd. and the Company.

(ii)

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,
Director

13 (15)87%––

Minoru Morio,
Director

15 (15)

100%

–

–

Shigeru Asaba
Director

11 (11)

100%

–

–

Kuninori
Hamaguchi,
Audit & Supervisory
Board Member

15 (15)100%

16 (16)

100%

Yoichi Nitta,
Audit & Supervisory
Board Member

15 (15)100%

16 (16)100%

Note: The number of meetings for Director Shigeru Asaba represents the number of meetings held since he took
office in June 2017.

- 25 -

(Translation)(b) Major activities
Principal comments
Takuma Ishiyama
Director

Making statements from an objective standpoint mainly as a specialist in
corporate law, he provided advice and made proposals for theappropriateness and properness of decision making by the Board of
Directors. He also contributed to strengthening compliance by providing agood example to managerial personnel through his leadership as an advisor
to the Risk Management Committee and enhancing the management
fairness and transparency as the Chairman of the Personnel Affairs andCompensation Advisory Committee.

Minoru Morio,
Director

Making statements from a viewpoint nurtured through abundant experiencein corporate management, he provided advice and made proposals for theappropriateness and properness of decision making by the Board of
Directors. He also contributed to strengthening compliance by providing agood example to managerial personnel through his leadership as an advisor
to the Risk Management Committee and enhancing the management
fairness and transparency as a member of the Personnel Affairs andCompensation Advisory Committee.

Shigeru Asaba
Director

Making statements from the dual perspectives of industry and academia in
his position as a professor of a university business school, he provided
advice and made proposals for the appropriateness and properness ofdecision making by the Board of Directors. He also contributed tostrengthening compliance by providing a good example to managerial
personnel through his leadership as an advisor to the Risk Management
Committee and enhancing the management fairness and transparency as amember of the Personnel Affairs and Compensation Advisory Committee.

Kuninori Hamaguchi
Audit & Supervisory Board
Member

He audited the business execution of Directors and leveraged his extensive
experience and knowledge as an executive and a Director at manufacturing
companies to make statements aimed at achieving sustainable growth andproducing medium- to long-term corporate value for the Company.

Yoichi Nitta
Audit & Supervisory Board
Member

He audited the business execution of Directors and leveraged his extensive
experience and knowledge as an executive and a Director at financial
institutions to make statements aimed at achieving sustainable growth andestablishing high-quality corporate governance systems for the Company.

(iii) Total amount of compensation, etc.
¥42 million (for the five individuals)(4) Outline of Liability Limitation Agreements
The Company concluded agreements to limit liabilities with outside officers (Takuma
Ishiyama, Minoru Morio, Shigeru Asaba, Kuninori Hamaguchi and Yoichi Nitta) andStanding Audit & Supervisory Board Members (Hisao Suzuki and Sei Yano) under theprovisions of Article 427 of the Companies Act. The outline of the agreements is asfollows:- In cases where outside officers and Standing Audit & Supervisory Board Members areliable for any damages arising from their negligence to the Company, they shallcompensate for such damages only to the extent of the minimum liabilities as stipulated
in Article 427, Paragraph 1 of the Companies Act.
- The above limitation of liability shall be applied only when the relevant outside officers
and Standing Audit & Supervisory Board Members have executed their duties thatcaused the liabilities in good faith and without gross negligence.

- 26 -

(Translation)
5.

Status of Accounting Auditor(1) Name: PricewaterhouseCoopers Aarata LLC
Note: Ernst & Young ShinNihon LLC, which was the Company’s accounting auditor, concluded its
services at the end of the 93rd Ordinary General Meeting of Shareholders held on June 23,
2017.

(2) Compensation, etc.
Amount of payment
1. Compensation, to be paid to the accounting auditor for the fiscal year under review

180 million yen

2. Total sum of cash and profits on other assets that the Company and its subsidiaries
should pay to the accounting auditor

280 million yen

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 Act. The
total of these amounts is recorded above.
2. Among major subsidiaries, Oki Data Americas, Inc., Oki Data Manufacturing (Thailand) Co., Ltd., Oki
Europe Ltd., and Oki Electric Industry (Shenzhen) Co., Ltd. have undergone statutory audits by accounting
auditors other than the accounting auditor of the Company.
3. After having performed the necessary verification as to the appropriateness of matters such as the content of
the accounting auditor’s audit plan, the status of performance of duties by the accounting auditor, and thebasis for the calculation of the estimated compensation for the accounting auditor, the Audit & Supervisory
Board has decided to consent to the amount of compensation, etc. to be paid to the accounting auditor.

(3) Content of non-auditing services
The Company has also entrusted the accounting auditor with “advisory services
relating to internal control” and other services, which are services other than the audits
specified in Article 2, Paragraph 1 of the Certified Public Accountants Act, and pays theauditor compensation for the services.
(4) Policy regarding decision to dismiss or not reappoint the accounting auditor
The Audit & Supervisory Board, in principle, will determine the detail of the proposal
to be submitted to the general meeting of shareholders regarding dismissal or nonreappointment of the accounting auditor if it is deemed unlikely that the accounting auditor
will be able to perform audits properly. In addition, if the accounting auditor falls underprovisions of the items in Paragraph 1, Article 340 of the Companies Act, the Audit &Supervisory Board will dismiss the accounting auditor upon the consent of all the Audit &Supervisory Board Members.

- 27 -

(Translation)
6.

Policies and procedures of the Company(1) Procedures to ensure that Directors and employees comply with applicable laws,
regulations and the Articles of Incorporation in conducting their business and othersystems to ensure appropriate operations(i)

Procedures to ensure that Directors and employees comply with applicable laws,
regulations and the Articles of Incorporation in conducting their business(a) As the foundation for ensuring compliance, the Company has established the“OKI Group Charter of Corporate Conduct” and “OKI Group Code of Conduct.”
In addition, officers take the initiative in compliance activities in conformancewith the “Compliance Commitment.”(b) The Company has established a Compliance Committee chaired by the Chief
Compliance Officer to decide on and examine basic policies regarding
compliance programs.
(c) In accordance with the basic policies formulated by the Compliance Committee,
the division responsible for compliance plans, draws up, and promotes specificmeasures such as education and training for Directors and employees. In
education and training, we aim to raise employee awareness about complianceby utilizing means such as e-learning.
(d) The Company establishes whistle-blowing regulations which enable reporting to
Outside Directors and Audit & Supervisory Board Members and provides acontact point for reporting and consultation, aiming to detect any misconduct at
its earliest stages and make improvements.
(e) The Company stands firmly against antisocial groups that threaten the order andsafety of civil society in cooperation with the police and related organizations,and refuses to have any relationship with them as a whole.

(ii)

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.

(iii) Rules concerning risk management and other procedures(a) The Company has established a Risk Management Committee and promotes
measures for appropriately grasping risks that may occur in relation to businessactivities of the Company and Group companies, and preventing such risks fromemerging.
(b) 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
countermeasures and develops appropriate structures based on such policies.
(c) If any risk occurs, the Company will set up an emergency countermeasure- 28 -

(Translation)
headquarters to handle the risk.
(iv) Procedures to secure efficient business performance by Directors(a) The Company holds regular meetings of the Board of Directors once a month inprinciple to decide important matters including basic management policies andsupervise the business execution of Directors.
(b) The Company appoints executive officers to execute business based on basic
management policies determined by the Board of Directors so as to separate thefunctions of business execution and oversight, and promote timely decisionmaking processes.
In addition, the Company holds meetings of theManagement Committee consisting of executive officers, etc. to assist the
President in making decisions.
(c) The Company assigns Directors responsibilities and authority pursuant to rules
on division of duties and authorities.
(v)

Procedures to secure appropriate Group (Company and subsidiaries) operations(a) To ensure that the Company and subsidiaries run their operations properly, theCompany has established the “OKI Group Charter of Corporate Conduct” whichsets 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 should comply with, and is striving to make the code
known to all of them.
(b) The division responsible for compliance implements various measures forpromoting compliance common to the Group through each subsidiary’s
compliance officer. The Division also determines, through regular monitoring,the implementation status of such measures by each Group company and reports
to the Compliance Committee on the results.
(c) Each subsidiary establishes whistle-blowing regulations that enable reporting totheir Outside Directors and Audit & Supervisory Board Members, provides acontact point for reporting and consultation, and aims to detect any misconduct
at its earliest stages and make improvements after reporting to the Company.
(d) The Company, in accordance with Subsidiaries and Affiliates Management Rules,
determines the status of each subsidiary’s management activities throughreceiving reports regularly from each subsidiary and provides necessary advice
and guidance including organization designing, rules and regulations, andbusiness plannings.
(e) To secure the reliability of financial reporting, the Company and each subsidiaryestablish an internal control system for financial reporting in accordance withrelated laws and regulations, and strive to maintain and improve that system.

(vi) Procedures for employees who assist Audit & Supervisory Board Members(a) The Company assigns employees as staff to assist Audit & Supervisory Board
Members.
(b) The Company assigns employees, who are not subject to Directors’ instructions
and orders, as staff to assist Audit & Supervisory Board Members, and any- 29 -

(Translation)
reassignment and evaluation of such employees requires the prior consent of the
Audit & Supervisory Board.
(vii) Procedures for Directors and employees to report to Audit & Supervisory Board
Members; procedures for Audit & Supervisory Board Members to receive otherreports(a) If Directors discover anything that may cause significant damage to theCompany, they are required to report the matter immediately to the Audit &Supervisory Board Members pursuant to applicable laws and regulations.
(b) Standing Audit & Supervisory Board Members attend meetings of theManagement Committee and meetings of the Board of Directors in order tounderstand important decision-making processes and the status of business
operations, as well as to inspect important documentation.
(c) Audit & Supervisory Board Members attend the Risk Management Committee
as advisors and receive necessary reports.
(d) Audit & Supervisory Board Members receive whistle-blowing reports based onwhistle-blowing regulations, and receive reports biannually on the status ofoperation of the regulations from relevant divisions.
(e) Audit & Supervisory Board Members receive reports on the status ofestablishing internal control systems and their operations from Directors andemployees on a regular basis, and may request Directors and employees to reporton matters deemed necessary.
(f) The Company ensures that a person who made a whistle-blowing report to Audit& Supervisory Board Members will not be treated unfavorably on account ofmaking such report.
(viii) Other procedures to secure effective audits by Audit & Supervisory Board Members(a) In conducting inspections on the Company’s operations and assets andperforming other audit duties, Audit & Supervisory Board Members shallconduct audits efficiently and effectively in close cooperation with the internal
audit section.
(b) 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 theaccounting auditor on the progress of audits when necessary.
(c) The Company pays all the expenses necessary for the execution of the duties of
Audit & Supervisory Board Members.
(2) Overview of Status of Operations(i) Procedures relating to compliance(a) The Board of Directors has stipulated a basic policy for internal control systems,
and the Company has provided “Behavioral Guidelines,” the “OKI Group
Charter of Corporate Conduct,” and the “OKI Group Code of Conduct,” as a

- 30 -

(Translation)

(b)

(c)

(d)

(e)

foundation to ensure compliance. The Directors of the Company and eachGroup Company take the initiative in compliance activities in conformance withthe “Compliance Commitment.”
The Company has established the Compliance Committee chaired by the Chief
Compliance Officer, to deliberate and decide on basic policies regarding
compliance programs. In accordance with the basic policies formulated by theCompliance Committee, the division responsible for compliance, plans, draws up,
and promotes specific measures such as education and training for Directors andemployees. In education and training, we aim to improve each employee’s
awareness about compliance through means such as e-learning.
In the fiscal year under review, the Company has established the Basic
Regulations on Compliance with Competition Act, in order to ensure compliancewith the Antimonopoly Act, and has stipulated specifically prohibited conduct
and established mechanisms to file and record information on contact withcompetitors. In this regard, the Company has conducted group training and elearning for all employees, at 13 locations including each Marketing & Sales
Division and branch.
The Company has clearly defined that in case of non-compliance, the Company
takes disciplinary action in accordance with the workplace regulations, etc., andhas established the Group Disciplinary Action Committee, which is chaired by
the President and Executive Officer, to consider said action.
The Company has established a Group whistle-blower hotline, which provides
access to external lawyers, to ensure quick discovery and effective correction of
improper conduct, and disseminates information about said hotline to employees.

(ii) Procedures relating to risk management(a) The Company has established a Risk Management Committee chaired by the
President and Executive Director and advised by the Outside Directors and Audit& Supervisory Board Members, to stipulate fundamental matters relating tomeasures to prevent risks from emerging, and preparation in case risks arise.
(b) In relation to business activities, the Company has established a Business Risk
Management Division and a Group Common Risk Management Division, which
deals with risks that are common to the Group, and each of these management
divisions assesses risks and draws up policies for risk countermeasures.
(c) If any risk occurs, the department in which it arises takes necessary steps thathave been stipulated in advance, according to the emergency response system
relating to said risk, and reports promptly according to the OKI Group
Emergency Response System. The Risk Management Committee implements
necessary measures and initial investigations relating to said risk. A response
system and manager are determined for the risk in question, under the directionsof the chairman, giving consideration to the severity and urgency of said risk,
which are discovered through initial investigations.
(d) In the fiscal year under review, definitions of business risks and common risks
have been added to the risk management regulations, and the appropriate- 31 -

(Translation)
response measures have been clarified according to the level of risk. Risk of
breaching the Financial Instruments and Exchange Act has been added tocommon risks, and inspection and readjustment of an internal control system forfinancial reporting is being conducted in accordance with related laws andregulations, in order to secure the reliability of the OKI Group’s financial
reporting.
(e) In June 2017, the Company determined that treatment of allowances for doubtfulreceivables and credit management at subsidiaries amounted to “significant
deficiencies that must be disclosed” as of March 31, 2017, and reported such in
an internal control report. With regard to deficiencies that the Company isaware of, the Company is working to correct internal control systems relating tofinancial reporting based on improvement plans.
(iii) Procedures relating to subsidiary management(a) In the Subsidiaries and Affiliates Management Rules, an administrative division
is designated for each subsidiary, and the head of said administrative division
manages it with the authority and responsibilities stipulated by the authority
regulations. Appointment and dismissal of chief officers of subsidiaries isdetermined by the President of the Company, and appointment and dismissal ofother officers is determined by the head of the administrative division.
(b) Heads of administrative divisions clearly state the missions of subsidiaries which
they supervise, and when developing business plans, they provide support,
instruction, and periodic monitoring, and evaluate the performance of officers.
Heads of administrative divisions also monitor the operational status of thegeneral meeting of shareholders and the Board of Directors and compliance of
Directors of subsidiaries.
(c) At the accounting division of each subsidiary, the Company has appointed staff
with the necessary knowledge and experience. The Company works to conduct
the maintenance and improvement of an internal control system for financial
reporting conducted in accordance with related laws and regulations.
(d) In the fiscal year under review, the Company has worked to improvetransmission of information between the Company and subsidiaries, for the
purpose of strengthening global governance and compliance. The Company
has released a message from the President and the Chief Compliance Officer
relating to ensuring compliance at a management level, in both Japanese andEnglish, for the employees of all companies in the OKI Group. The Company
is re-examining the delegation of authority to subsidiaries and is implementing
improvements that can be made to the transmission of information between the
Company and subsidiaries, including holding regular information exchange
meetings between administrative divisions and subsidiaries.
(iv) Procedures relating to audits by Audit & Supervisory Board Members(a) The Standing Audit & Supervisory Board Member assesses important decision
making processes and the status of business operations by attending meetings of- 32 -

(Translation)

(b)

(c)

(d)

(e)

the Board of Directors and the Management Committee in addition to reading
resolution approval documents.
The Audit & Supervisory Board Members have received whistle-blowing reports
based on whistle-blowing regulations, and received reports biannually on thestatus of operation.
In addition to receiving reports on the development and operational status of theinternal control system at the meetings of the Board of Directors, the Audit &Supervisory Board Members exchange opinions with the President, executive
officers, general managers of divisions and representatives of the subsidiaries,
confirming the development and operation of the internal control system in theprocess.
The Audit & Supervisory Board Members hold discussions and exchanges of
opinion with the Internal Auditing Division by taking part in site visits andmeetings to report on the results of audits held by the Internal Auditing Division,and utilize the results of audits in audits by Audit & Supervisory Board Members.
The Audit & Supervisory Board Members have maintained close cooperation
with the Accounting Auditor including meeting and exchanging opinions with
the Accounting Auditor and attending site visits by the Accounting Auditor, toimplement effective audits.

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.

- 33 -

(Translation)

Consolidated Balance Sheet(as of March 31, 2018)(Unit: Millions of yen)Account title

AmountAccount title(Assets)
Current assets

Amount(Liabilities)
230,420

Current liabilities

186,666

Cash and deposits

48,698Notes and accounts payable

67,124

Notes and accounts receivable

97,936

Short-term borrowings

58,958

Lease investment assets

8,024

Accounts payable, others

19,768Finished goods

17,041Other accrued expenses

21,952Work in process

21,867

Other current liabilities

18,861

Raw materials and supplies

21,296Long-term liabilities

82,967

Deferred tax assets

5,677

Long-term debt

22,956

Other current assets

10,012

Lease obligations

8,950

Allowance for doubtful receivables(132)

Deferred tax liabilities

17,044

141,357

Provision for Directors’ retirement benefits

Property, plant and equipment

Non-current assets

52,048

Liability for retirement benefits

27,814

Buildings and structures

21,957

Other long-term liabilities

5,700

Machinery, equipment and vehicle

7,505

Total liabilities

Tools, furniture and fixtures

9,014(Net Assets)

Land

13,240Construction in progress
Intangible assets
Investments and other assets
Investments in securities

332

Shareholders’ equity
Capital stock502

269,634
109,215
44,0009,952

Additional paid-in capital

19,79579,356

Retained earnings

45,983

48,760Treasury stock, at cost

Asset for retirement benefits

15,357

Accumulated other comprehensive income(9,045)Long-term trade receivables

22,456

Other investments and other assets

12,706

Net unrealized holding gain/loss on othersecurities

6,578

Allowance for doubtful receivables(19,924)

Total assets

371,778- 34 -(563)

Loss on deferred hedges

34

Translation adjustments(12,203)

Retirement benefits liability adjustments(3,455)

Subscription rights to shares

101

Non-controlling interests

1,873

Total net assets

102,144

Total liabilities and net assets

371,778

(Translation)

Consolidated Statement of Operations(From April 1, 2017 to March 31, 2018)(Unit: Millions of yen)Account title

AmountNet sales

438,026

Cost of sales

327,450

Gross profit

110,576

Selling, general and administrative expenses

102,854

Operating income

7,721

Non-operating income
Interest income

191

Dividend income

1,571

Share of profit of entities accounted for using equity
method563

Dividend income of insurance

353

Other

885

3,564

Non-operating expenses
Interest expense

1,559

Penalty

325

Other

884

Ordinary income

2,770
8,515

Extraordinary profit
Gain on step acquisitions

1,116

Gain on sale of property, plant and equipment

770

Gain on sale of investments in securities

115

Gain on negative goodwill

210

Gain on sale of contribution in subsidiaries andaffiliates

119

Gain on extinguishment of debts

179

2,512

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

373

Business structure improvement expenses

2,526

Profit before income taxes

2,900
8,128

Income taxes

2,561

Income taxes deferred

(217)

2,344

Profit5,783

Loss attributable to non-controlling interests(108)

Profit attributable to owners of parent

5,891- 35 -

(Translation)

Consolidated Statement of Changes in Net Assets(Year ended March 31, 2018)(Unit: Millions of yen)
Shareholders’ equity
Capital stock

Additional paid-in
capitalRetained earnings

19,79944,43444,000

Balance at April 1, 2017

Treasury stock,at costTotal shareholders’equity(477)

107,757

Changes during the term underreviewDividends from surplus(4,343)(4,343)

Profit attributable to ownersof parent

5,891

5,891

Purchases of treasury stock
Disposition of treasury
stock

(4)

Change in ownershipinterest of parent due totransactions with noncontrolling interests

0

(99)

(99)

12

8

0

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

–

(4)

1,548

(86)

1,457

Balance at March 31, 2018

44,00019,79545,983(563)

109,215

Accumulated other comprehensive income

Balance at April 1, 2017

Net unrealized
holding
gain/loss onother securities

Loss / Gainon deferredhedgesTranslation
adjustments

Retirement
benefits
liability
adjustments

5,337

(2)

(11,702)(4,511)

Total
Subscription
accumulated
rights toothersharescomprehensive
income(10,878)

94

Noncontrollinginterests

Total
net assets

242

97,215

Changes during the term
under review
Dividends from surplus(4,343)

Profit attributable toowners of parent

5,891

Purchases of treasury
stock

(99)

Change of scope of
consolidation

8

Change in ownershipinterest of parent due
to transactions with
non-controllinginterests

0

Net changes in items
other thanshareholders’ equity
during the term underreview

1,240

37

(500)

1,056

1,833

6

1,631

3,471

Net changes during theterm under review

1,240

37

(500)

1,056

1,833

6

1,631

4,929

Balance at March 31,
2018

6,578

34

(12,203)(3,455)(9,045)

101

1,873

102,144- 36 -

(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: 84 companies
Names of major consolidated subsidiaries:
Oki Data Corporation; Oki Customer Adtech Co., Ltd.; Oki Wintech Co., Ltd.;OKI Software Co., Ltd.; Oki Proserve Co., Ltd.; Nagano Oki Electric Co., Ltd.;Oki Printed Circuits Co., Ltd.; Oki Data Americas, Inc.; Oki Data
Manufacturing (Thailand) Co., Ltd.; Oki Europe Ltd.; Oki Electric Industry(Shenzhen) Co., Ltd.; and OKI Brasil Indústria e Comércio de Produtos e
Tecnologia em Automação S.A.
(2) Changes in scope of consolidation:
Oki Electric Cable Co., Ltd., which used to be an affiliated company to which theequity method is applied, and its five subsidiaries have become subsidiaries of theCompany since the Company obtained additional shares of Oki Electric Cable Co.,
Ltd., and have therefore been included in the scope of consolidation for the fiscal
year under review. Furthermore, the following companies have been excluded fromthe scope of consolidation: OKI Digital Imaging Corporation, which merged with
Oki Data Corporation, a consolidated subsidiary; OPM Co., Ltd., which mergedwith the Company; Oki Shibaura, which merged with Otem Co., Ltd., aconsolidated subsidiary; OKI SYSTEMS (DEUTSCHLAND) GMBH and 11 othercompanies, which merged with OKI EUROPE LTD; and Oki Electric Technology(Kunshan) Co., Ltd., whose shared were sold off. The company name of Otem Co.,
Ltd. has been changed to Oki Alestech Co., Ltd.

2.

Application of equity method(1) Name of affiliated company to which the equity method is not applied:
Banking Channel Solutions Co., Ltd. and other two companies(2) Name of affiliated company to which the equity method is not applied:
TOWN NETWORK SERVICE Corporation and other two companies
Reason for not applying the equity method:
The company has little influence and have no significance on profit or loss andretained earnings.
(3) Changes in scope of application of equity method
Oki Electric Cable Co., Ltd. has been excluded from the scope of equity method
because it became a subsidiary due to the Company obtaining additional shares.

- 37 -

(Translation)
3.

Matters concerning account settlement dates of consolidated subsidiaries
Previously, for OKI BRASIL INDÚSTRIA E COMÉRCIO DE PRODUTOS ETECNOLOGIA EM AUTOMAÇÃO S.A. and seven other companies whose closing date was
December 31, the financial statements as of December 31 were used, and necessary
adjustments were made for major transactions that occurred between the date and theconsolidated closing date. However, from the fiscal year under review, those companies havechanged the method to perform provisional closing on the consolidated closing date in orderto make more appropriate disclosure of consolidated financial statements.
In accordance with this change, the fiscal year under review applies to the 15 months
from January 1, 2017 to March 31, 2018, and adjustments have been made through theconsolidated statement of income.

4.

Accounting standards(1) Valuation standards and methods for significant assets(i) Negotiable securities
The Company and its domestic consolidated subsidiaries value securities inaccordance with how they are held as indicated below. Overseas consolidated
subsidiaries apply the lower of cost or fair value.
Other negotiable securities:
Marketable securities:
Stated at fair value based on the market price at the end of the fiscal year
(Any difference between book value and fair value is included in net
assets; sales costs are calculated by mainly the moving average method.)
Non-marketable securities:
Mainly 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 toreflect declines in profitability.)Work in process:Principally stated at cost based on the specific identification method.
(Balance sheet values are measured by the method of devaluing the bookprice 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 toreflect declines in profitability.)(iii) Derivatives
Stated at fair value- 38 -

(Translation)(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 (3 years). For software for internaluse, the straight-line method, based on the estimated durable years (mainly 5 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) 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.)- 39 -

(Translation)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 and currency swap contracts eligible for allocation treatment.
Special treatment is applied to interest rate swaps that meet requirements for special
treatment.
(ii) Means of hedging and coverage
Forward exchange contracts and currency swap 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 longterm debt.
(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).
(7) Other important matters in preparation of consolidated financial statements(i) Method of accounting for retirement benefitsa. Attributing expected retirement benefits to a period
When calculating retirement benefit obligations, the Company applies thebenefit formula basis to attribute expected retirement benefits to the period until
the end of the fiscal year under review.
b. Accounting for actuarial gains and losses, and prior service costs
Prior service costs are amortized by the straight-line method over a set
number of years (10 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 (10 to 13 years) within the average remaining years of serviceof employees at the time of their accrual in each fiscal year. Amortization ofsuch gains and losses is deemed to be effective from the year after the one inwhich they arise.

- 40 -

(Translation)(ii) Accounting processing of consumption tax
The tax-exclusion method is used for accounting of consumption tax and local
consumption tax.
(iii) Application of consolidated tax payment
The consolidated tax payment is applied.

Additional Information
Oki Banking Systems (Shenzhen) Co., Ltd., an OKI Group consolidated subsidiary, hasfiled a request for arbitration against Shenzhen Yihua Computer Industrial Co., Ltd. on
October 10, 2015, demanding payment of accounts receivable of RMB1,115,463 thousand(¥18,873 million if converted to Japanese yen based on the exchange rate as of the end of the
fiscal year under review) and compensation of damages. Currently, the South China
International Economic and Trade Arbitration Commission continues to review the matter.
In consideration of the status of litigation, since the period for collecting the receivables
is expected to lengthen, an allowance for doubtful receivables of ¥11,480 million wasrecorded at the end of the fiscal year under review.

Notes to Consolidated Balance Sheet
1. Assets pledged as collateral
Investments in securities
Liabilities collateralized by the above assets:
Short-term borrowings¥17,759 million

2.

Accumulated depreciation on property, plant and equipment¥159,972 million

3.

Liabilities for guarantee
Guarantee for borrowings by employees- 41 -¥7,000 million¥172 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 FY2017
Common Stock87,217 thousand shares

2.

Matters concerning appropriation of surplus(1) Dividends paid
Resolution

Ordinary General
Meeting of
Shareholders
on June 23, 2017
Board of Directors
Meeting on
October 31, 2017Class ofshares

Source ofdividends

Total
dividends(millions ofyen)

Dividends
per share(yen)

Recorddate

Effective
date

CommonStockRetainedearnings

2,605

30.00

March 31,2017

June 26,
2017

CommonStockRetainedearnings

1,737

20.00

September
30, 2017

December 6,
2017(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.

Proposal

Class ofshares

Source ofdividends

Total
dividends(millions ofyen)

Dividends
per share(yen)

Recorddate

Effective
date

Ordinary General
Meeting of
Shareholders
on June 22, 2018

CommonStockRetainedearnings

2,605

30.00

March 31,2018

June 25,
2018

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

Breakdown of equity warrants

The Company

FY2016 Equity Warrants(issued on August 16, 2016)
FY2017 Equity Warrants(issued on August 15, 2017)

Type of shares to be issued
upon exercise of equity
warrants

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

Common stock46,200Common stock

61,700- 42 -

(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
and foreign currency risk, the Group applies derivative instruments (interest rate swap transactions
and currency 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, 2018 (consolidated balance sheet date), the amount recorded in the
consolidated balance sheet, fair value, and the amount of differences are as shown in the tablebelow. Any item whose fair value is deemed extremely difficult to assess is excluded from thetable. (See Note 2.)(Unit: Millions of yen)Amount recorded inconsolidated balance
sheet

Fair value

Difference( 1 ) Cash and deposits

48,69848,698–( 2 ) Notes and accounts receivable

97,936

97,936–( 3 ) Investments in securities

41,09041,0998( 4 ) Long-term trade receivables
Allowance for doubtful receivables (*2)
( 5 ) Notes and accounts payable

22,456(14,835)
7,621

7,621

(67,124)(67,124)–( 6 ) Short-term borrowings (*2)(36,964)(36,964)–( 7 ) Account payable(19,768)(19,768)–( 8 ) Other accrued expenses(21,952)(21,952)–( 9 ) Long-term debt (*3)(44,950)(44,232)281(10) Derivative transactions
(102)
(102)
–
(*1) Those recorded as liabilities are shown within brackets.
(*2) Allowance for doubtful receivables specifically provided for long-term trade receivables is deducted.
(*3) Long-term debt (¥21,944 million) that will be reimbursed within one year are classified as “short-term”
borrowings 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 equal to their book value.
Hence, their fair value is based on the relevant book value.

- 43 -

(Translation)(3)

2.

Investments in securities
The fair value of investments in 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) Long-term trade receivables
Fair value of long-term trade receivables is based on the amount after deducting the present estimateddoubtful receivables from the book value as estimated doubtful receivables are calculated based on thepresent value of loans / receivables.
(5) Notes and accounts payable, (6) Short-term borrowings, (7) Account payable and (8) Other accrued expenses
These items are settled over a short period of time and their fair value is virtually equal to their book value.
Hence, their fair value is based on the relevant book value.
(9) Long-term debt
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 debt with floating interest rates are prescribed to be subject
to special accounting treatment applicable to interest rate swaps (see (10) below). Hence, the fair value of along-term debt is based on the method of calculation whereby the sum of principal and interest, treated in
combination with the said interest rate swap, is discounted by a reasonably estimable interest rate on theassumption that the said amount is freshly borrowed in a similar manner.
(10) Derivative transactions
Derivative transactions subject to allocation treatment applicable to currency swaps, and to special
accounting treatment applicable to interest rate swaps are treated in combination with long-term debt ashedged items. Hence, their fair value is included in that of long-term debt.
Financial instruments whose fair value is considered extremely difficult to assess
Unlisted equity securities (¥7,669 million on the consolidated balance sheet) are not included in (3) Investments insecurities because they have no market price and it is deemed extremely difficult to assess their fair values.

Notes to Per-share Information
1. Net assets per share: ¥1,154.03
2. Earnings per share:¥67.86- 44 -

(Translation)
Other Notes (Notes on Securities)
1. Other negotiable securities(Unit: Millions of yen)Amount recorded inconsolidated balance
sheet

Acquisition cost

39,13529,268

9,867

39,13529,268

9,867

1,955

2,334

(379)

Subtotal

1,955

2,334

(379)

Total

41,09031,602

9,487(Securities whose amounts recorded inconsolidated balance sheet exceed theiracquisition costs)

Difference

Equity Securities
Subtotal(Securities whose amounts recorded inconsolidated balance sheet are not more thantheir acquisition costs)
Equity Securities

2.

Other securities sold during the consolidated fiscal year under review(From April 1, 2017 to March 31, 2018)(Unit: Millions of yen)Type
Equity Securities
Total

Sales amount

Total gain on sales

Total loss on sales

245

115

–

245

115

–

3.

Impaired securities
Impairment has not been applied to securities for the fiscal year under review.
Impairment was applied to amounts for which impairment was considered necessary based on
a comprehensive judgment on whether values would rise or not, and the amounts were impaired if
their market values at the end of the year under review were remarkably lower than theiracquisition costs.

- 45 -

(Translation)
Other Notes (Notes on Business Combination)
Business combination via acquisition
Based on a decision made at the Board of Directors meeting held on October 31, 2017, thecompany acquired ordinary shares of Oki Electric Cable Co., Ltd. via a takeover bid as stipulated
in the Financial Instruments and Exchange Act, in order to make Oki Electric Cable Co., Ltd. awholly owned subsidiary instead of an affiliated company to which the equity method is applied.
1. Overview of business combination(1) Name of business overview of company acquired
Name of company acquired:Oki Electric Cable Co., Ltd.
Business overview:
Manufacturing and sales of electric cables and electrodewires, and the rental of real estate(2) Main reason for business combination
Making Oki Electric Cable Co., Ltd. a wholly owned subsidiary will enable the speed ofmanagement strategy decision making to be sped up and human resources of the Group to be used
to increase the corporate value of Oki Electric Cable Co., Ltd. and strengthen the earnings base of
the entire Group.
(3) Date of business combination
December 25, 2017(4) Legal form of business combination
Cash acquisition of shares(5) Company name after combination
No change.
(6) Ratio of voting rights acquired
Ratio of voting rights owned before acquisition
37.45%
Additional ratio of voting rights obtained on date of business combination
49.71%
Ratio of voting rights after acquisition
87.17%(Note) The acquired company was made a wholly owned subsidiary via share consolidation
on April 1, 2018.
(7) Main basis for reaching a decision on business combination
Because the Company obtained the shares through cash acquisition
2.

Performance period of acquired company included in the consolidated financial statement
The performance from January 1, 2018 to March 31, 2018.
Since the acquired company was an affiliated company to which the equity method is applied,the performance from April 1, 2017 to December 31, 2017 is recorded as investment earnings
based on the equity method.

3.

Breakdown of each type of consideration and acquisition cost of the acquired company
Market value of owned shares before acquisition on the date of business¥4,912 million
combination
Cash paid for additional acquisition¥6,520 million
Acquisition cost
¥11,433 million- 46 -

(Translation)
4.

Major acquisition-related costs
Compensation and fees, etc. for advisors: ¥132 million

5.

Difference between the acquisition cost of the acquired company and the total cost of
acquisitions for each transaction required until acquisition
Marginal profits related to phased acquisition: ¥1,116 million

6. Amount of Negative goodwill generated and the cause(1) Negative goodwill generated¥210 million(2) Cause
Since the net asset value exceeded the acquisition cost at the time of business combination,that difference was recorded as negative goodwill generated.
7.

The assets acquired and liabilities assumed on the date of business combination andbreakdowns
Current assets
Non-current assets
Total assets
Current liabilities
Long-term liabilities
Total liabilities(Unit: Millions of yen)
8,792
12,367
21,159
3,566
4,175
7,741

- 47 -

(Translation)

Transcript of Accounting Auditors’ Report on Consolidated Financial Statements

Independent Auditors’ Report
May 21, 2018
To: Board of Directors
Oki Electric Industry Co., Ltd.
PricewaterhouseCoopers Aarata LLC
Kensuke Koda,
Engagement Partner, Certified Public Accountant
Hiroyuki Sawayama,
Engagement Partner, Certified Public Accountant
Masataka Kubota,
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 net assets equity and notes to the consolidated financial
statements – of Oki Electric Industry Co., Ltd. for the 94th term from April 1, 2017 to March 31, 2018 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.
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.

- 48 -

(Translation)

Non-Consolidated Balance Sheet(as of March 31, 2018)

Account title(Assets)
Current assets
Cash and deposits
Notes receivable
Accounts receivable, trade
Lease investment assets
Finished goods
Work in process
Raw materials and supplies
Advance payments - trade
Prepaid expenses
Short-term loans
Accounts receivable-other
Deferred tax assets
Other current assets
Allowance for doubtful receivables
Total current assets
Non-current assets
Property, plant and equipment
Buildings
Accumulated depreciation
Structures
Accumulated depreciation
Machinery and equipment
Accumulated depreciation
VehicleAccumulated depreciation
Tools, furniture and fixtures
Accumulated depreciation
Land
Construction in progress
Total property, plant and equipment
Intangible assets
Goodwill
Right of using facilities
SoftwareTotal intangible assets
Investments and other assets
Investments in securities
Investments in and advances tosubsidiaries and affiliates
Contribution
Contribution in subsidiaries andaffiliates
Long-term loans receivable fromsubsidiaries and affiliates
Claims provable in bankruptcy,
rehabilitation and other
Long-term prepaid expenses
Prepaid pension cost
Lease and guarantee deposits
Other investments and other assets
Allowance for doubtful receivables
Total investments and other assets
Total non-current assets
Total assets

Amount23,266
1,862
50,425
8,007
2,858
14,917
5,661
88
1,179
6,151
6,420
2,243
336
(20)
123,400
31,721
23,0492,228
1,649
11,827
10,08772
56
35,84829,741

8,672
579
1,740
15
6,106
1,805
272
19,191
5
114
6,453
6,573
43,98153,49888
98
21,274
31
181
291
3,200
232
(15,910)
106,969
132,734
256,135- 49 -(Unit: Millions of yen)Account title
Amount(Liabilities)
Current liabilities
Notes payable479
Electronically recorded obligations 2,637
operatingAccounts payable, trade42,218
Short-term borrowings
32,118Current portion of long-term debt
20,081
Lease obligations
2,033
Accounts payable, others
10,998Other accrued expenses
6,705
Income taxes payable
159
Advances received
1,049
Deposits received
8,703
Provision for product warranties
339
Provision for directors’ bonuses
127
Provision for loss on construction
986
contracts
Provision for contingent loss
20
Provision for loss on Anti-Monopoly
689
Act
Other current liabilities
13
Total current liabilities
129,363
Long-term liabilities
Long-term debt
21,681
Lease obligations
8,592
Deferred tax liabilities
9,680
Retirement benefits
5,784
Provision for product warranties
80
Provision for loss on construction
320
contracts
Provision for loss on business of
1,114
subsidiaries and affiliates
Provision for contingent loss
42
Asset retirement obligations
1,049
Other long-term liabilities
920
Total long-term liabilities
49,266
Total liabilities
178,629(Net Assets)
Shareholders’ equity
Capital stock
44,000Additional paid-in capital
21,549
Capital reserve
15,000
Other additional paid-in capital
6,549
Retained earnings
6,581
Other retained earnings
6,581
Retained earnings carried forward
6,581
Treasury stock, at cost
(460)
Total shareholders’ equity
71,670
Valuation, translation adjustments andothersNet unrealized holding gain/loss on
5,733
other securities
Total valuation, translation
5,733
adjustments and others
Subscription rights to shares
101
Total net assets
77,505
Total liabilities and net assets
256,135

(Translation)

Non-Consolidated Statement of Operations(From April 1, 2017 to March 31, 2018)(Unit: Millions of yen)Account title

AmountNet sales

203,987

Cost of sales

165,955

Gross profit

38,031

Selling, general and administrative expenses

38,923Operating loss

891

Non-operating income
Interest income

602

Dividend income

4,933

Royalty income from corporate brand

777

Other

523

6,836

Non-operating expenses
Interest expense

1,224

Foreign exchange loss, net

1,260

Provision of allowance for doubtful receivables

334

Penalty

284

Other

514

Ordinary income

3,617
2,327

Extraordinary profit
Gain on extinguishment of tie-in shares

26

Gain on sale of property, plant and equipment

469

Gain on sale of investments in securities

107

Gain on reversal of subscription rights to shares

46

650

Extraordinary loss
Loss on sale and disposition of property, plant and equipment
Loss on valuation of shares of subsidiaries and affiliates
Loss on sale of contribution in subsidiaries and affiliates
provision of allowance for doubtful receivables

153
1,881
180
3,840

Loss before income taxes

6,055
3,078

Income taxes(848)

Income taxes deferred

(254)

Loss

(1,102)
1,975- 50 -

(Translation)

Non-Consolidated Statement of Changes in Net Assets(Year ended March 31, 2018)(Unit: Millions of yen)
Shareholders’ equity
Additional paid-in capital
Capitalstock

Balance at April 1,
2017

44,000Retained earnings

Capitalreserve

Other
additional
paid-in
capitalTotal
additional
paid-in capital

15,0006,553

21,553

Other retained
earnings
Retained earnings
carried forward

Total
retainedearnings

Treasurystock,
at costTotal
shareholders’equity(463)

77,99012,90012,900

Dividends fromsurplus(4,343)(4,343)(4,343)Loss(1,975)(1,975)(1,975)

Changes during theterm under review

Purchases oftreasury stock
Disposition oftreasury stock

(4)

(4)

(9)

(9)

12

8

Net changes in
items other thanshareholders’equity during theterm under review
Net changes during
the term underreview
Balance at March
31, 2018

–

–

(4)

(4)

(6,319)(6,319)3(6,320)44,00015,0006,549

21,549

6,581

6,581

(460)

71,670

Subscription
rights tosharesTotal net assets

94

82,623

Valuation, translation adjustments and others

Balance at April 1, 2017

Net unrealized holding
gain/loss on othersecurities

Loss / Gain on deferredhedgesTotal valuation,translation adjustments
and others

4,538

–

4,538

Changes during the term
under review
Dividends from surplus(4,343)Loss(1,975)Purchases of treasury stock(9)

Disposition of treasury stock

8

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

1,194

–

1,194

6

1,201

Net changes during the term
under review

1,194

–

1,194

6

(5,118)

Balance at March 31, 2018

5,733

–

4,538

101

77,505- 51 -

(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 (mainly 5 years)
Others:Straight-line method- 52 -

(Translation)
Lease assets(Lease assets relating to finance lease transactions without transfer of ownership):
They are depreciated over the lease contract’s lifetime by the straight-line
method, assuming the residual value is zero.
In addition, out of the finance lease transactions that do not transfer ownership,lease transactions whose lease transaction commencement date 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 product warranties
To prepare for the expenses caused by free repairs that occur after product sales, theCompany includes a provision for product warranties based on past performance or individual
estimates.
Provision for directors’ bonuses
To prepare for the payment of bonuses to officers (includes executive officers, the same
applies below), the Company records the amount attributable to the current fiscal year out of
the amount of bonuses expected to be paid to officers.
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.
Provision for contingent loss
To prepare for losses that may occur in the future, the Company includes a provision forcontingency losses rationally calculated based on individual risks, etc.
Provision for loss on Anti-Monopoly Act
To prepare for any losses relating to the Anti-Monopoly Act, the estimated amount forthe current fiscal year end is recorded.
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.
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 one in which it arises.

- 53 -

(Translation)
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. Allocation treatment is applied for forward exchange
contracts and currency swap contracts eligible for allocation treatment. Special
treatment is applied to interest rate swaps that meet the requirements for special
treatment.
(2) Means of hedging and hedged item
Forward exchange contracts and currency swap contracts are used to hedge fluctuationsof exchange rates on credits and debts in foreign currencies. Interest rate swaps are
employed to hedge fluctuations of market interest rates on variable-rate and long-term
debt.
(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 theperiod from the start of hedging to the assessment. The Company then makes adecision based on the changes of the two.

7.

Other important matters in preparation of non-consolidated financial statements(1) Accounting for retirement benefits
The methods of accounting for unappropriated amounts of unrecognized prior service
costs and unrecognized actuarial gains and losses for retirement benefits differ fromthose in the consolidated financial statements.
(2) Accounting processing of consumption tax
The tax-exclusion approach is applied for accounting of consumption tax and local
consumption tax.
(3) Application of consolidated tax payments
Consolidated tax payments are applied.

- 54 -

(Translation)
Notes to Non-consolidated Balance Sheets
1. Assets provided as collateral
Investments in securities
Liabilities collateralized by the above assets
Short-term borrowings
2.

¥17,759 million¥7,000 million

Guarantee liabilities:
The Company provides guarantees for bank borrowings made by employees, andsubsidiaries and affiliates as shown below.
Oki HONG KONG LTD.

¥4,244 million($35,000 thousand, HK$38,800 thousand)Oki Europe Ltd. and its subsidiaries, etc.
¥3,603 million(10,000 thousand pounds sterling, 16,199 thousand euro)
Oki Data Americas, Inc.
¥1,594 million($15,000 thousand)Oki Printed Circuits Co., Ltd.
¥1,236 million
Oki Wintech Co., Ltd.
¥712 million
Oki Data Manufacturing (Thailand) Co., Ltd.
¥595 million(175,000 thousand baht)
Six other entities:¥1,172 million¥13,159 million

Total:
3.

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

Notes to Non-consolidated Statement of Operations
Transactions with subsidiaries and affiliates
Sales:
Purchases:
Non-operating transactions:

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:- 55 -¥16,453 million¥1,161 million¥24,134 million¥67 million¥19,507 million¥50,822 million¥6,386 million

352 thousand shares

(Translation)
Notes to Deferred Tax Accounting
Major factors giving rise to deferred tax assets and liabilities
Deferred tax assets
Nondeductible write-downs of shares of subsidiaries and affiliates
Allowance for doubtful receivables
Loss carry forwards
Nondeductible retirement benefits
Adjustments of losses on transfers among consolidated subsidiaries
Nondeductible accrued bonuses
Nondeductible write-downs of inventories
Nondeductible accounts payable-other due to changes in retirement
benefit plans
Balance of trust property with retirement benefits
Provision for loss on construction contracts
Bad debts expenses
Nondeductible provision for loss on business of subsidiaries andaffiliates
OthersSubtotal deferred tax assets
Valuation allowance
Total deferred tax assets
Deferred tax liabilities
Gain on valuation of investment securities
Net unrealized holding gain/loss on other securities
Nondeductible unrealized gain on contribution of securities to thepension trust
OthersTotal deferred tax liabilities
Net deferred tax assets- 56 -¥16,709 million¥4,938 million¥4,643 million¥4,437 million¥3,452 million¥1,265 million¥733 million¥594 million¥413 million¥404 million¥358 million¥345 million¥1,738 million¥40,035 million¥(37,097) million¥2,937 million¥(5,793) million¥(2,473) million¥(1,981) million¥(125) million¥(10,373) million¥(7,436) million

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

Subsidiary

Subsidiary

Subsidiary

Subsidiary

Subsidiary

Name of company, etc.

OKI Software Co.,Ltd.

Oki Hong Kong,Ltd.

Oki Customer
Adtech Co., Ltd.

Oki Wintech Co.,Ltd.

Oki Proserve Co.,Ltd.

Subsidiary

OKI EUROPE andits subsidiaries, etc.

Subsidiary

OKI Brasil Indústriae Comércio deProdutos e
Tecnologia em
Automação S.A.

Location

Warabi,
Saitama Pref.

Hong Kong

Koto-ku,Tokyo

Shinagawaku, Tokyo

Minato-ku,
Tokyo

England

BrazilCapitalBusiness

Votingright ratio

Relationship withrelated party

Description oftransactions

Transaction
amount(mil. yen)Account item

Endingbalance(mil. yen)¥400 million

Development, design,
manufacture andmaintenance ofsoftware andembedded software,system building
services, SI/solution
services, consulting
outsourcing and salesof informationequipment(Direct)100%

Production ofsoftware on a contract
basis, etc.

Purchase ofservices

15,279Accounts
payable,
trade

4,395

Lending offunds

18,267(Direct)
100%

Supply products etc.,
lending of funds,
guarantee forborrowings

15,302

Debt guarantee

4,244Long-term
loans
receivable
fromsubsidiaries
and affiliates

US$10,292
thousandHoldings company,
material procurement

Maintenance,
construction,
monitoring, operation,
manufacturing, andsales of device andsystem(Direct)
100%

Supply products etc.,
purchase of services,concurrent
assumption of office

Purchase ofservices

13,486

Accounts
payable,
trade

2,570

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

Supply products etc.,
purchase of services,concurrent
assumption of office

Sales ofproducts

4,805

Accounts
receivable,
trade

2,794

Short-term
loans
receivable

500

Long-term
loans
receivable
fromsubsidiaries
and affiliates

1,600

3,606

–

–

4,113

Long-term
loans
receivable
fromsubsidiaries
and affiliates

3,840¥18,000
millionFacility business,
human resource
management,
advancedcommunication
business, logistics
business(Direct)
100%

141,366
thousandEURO

Sales and services ofprinters and multipurpose printers

BRL415,999
thousand

Design, development,
manufacture, sales andmaintenance ofautomation equipment¥321 million

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

Lending offunds(Indirect)
100%

Guarantee forborrowings

Debt guarantee(Direct)
90%

Supply products etc.,
lending of funds,
concurrent

Lending of
funds

2,746

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 sales of products based on market
prices and conducting negotiation.
(2) The Company determines the interest rate for the lending of funds by taking the market rate of interest into
consideration. However, for some subsidiaries, the Company determines the said interest rate by taking thefinancial position of the subsidiaries. Transaction amount shows the average balance during the fiscal year
because the transactions are repetitive.
(3) Guarantee of obligation is performed with bank loans of OKI HONG KONG LTD., OKI EUROPE LTD. andits subsidiaries, etc. and the Company receives an annual premium of 0.1%.
3. An allowance for doubtful accounts of ¥15,851 million has been recorded for loans to two subsidiaries. Furthermore,an allowance for doubtful accounts of ¥4,171 million has been provisioned this fiscal year.

Notes to Per-share Information
1. Net assets per share:¥891.08
2. Earnings per share:¥22.75- 57 -

(Translation)

Transcript of Accounting Auditors’ Report

Independent Auditors’ Report
May 21, 2018
To: Board of Directors
Oki Electric Industry Co., Ltd.
PricewaterhouseCoopers Aarata LLC
Kensuke Koda,
Engagement Partner, Certified Public Accountant
Hiroyuki Sawayama,
Engagement Partner, Certified Public Accountant
Masataka Kubota,
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 net assets and notes to the nonconsolidated financial statements—and its supporting schedules of Oki Electric Industry Co., Ltd. for the 94th termfrom April 1, 2017 to March 31, 2018 in accordance with Article 436 Paragraph 2 Item 1 of the Companies 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.
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.

- 58 -

(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 94th fiscal year from
April 1, 2017 to March 31, 2018, as follows:
1. Auditing methods used by Audit & Supervisory Board Members and the Audit & Supervisory Board, and details of
audit(1) 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 and accounting auditors on the status of the execution of their duties and asked them for explanations asneeded.
(2) 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 and strived to collect information and improve the audit environment and conducted an audit by following
the methods described below:(a) We attended the meetings of the Board of Directors and other meetings as deemed important, received from Directors
and employees reports on the execution of their duties, asked for explanations as necessary, perused the documents
whereby the important decisions were made, and examined business and financial conditions at the head office andprincipal operating offices. With respect to the subsidiaries of the Company, we have maintained goodcommunications and exchanged information with Directors, Audit & Supervisory Board Members and others andreceived reports on business conditions from the subsidiaries as needed.
(b) In addition, we have periodically received reports from Directors and employees, among others, required explanation
when necessary, and made opinions with regard to the status 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 the Companies Act as necessary forensuring compliance with laws and the Company’s Articles of Incorporation in the performance of duties byDirectors, described in the Business Report, and for ensuring appropriateness of duties of corporate group consistingof joint stock company and its subsidiaries. With respect to the internal controls over financial reporting, we havereceived reports on the internal control evaluation and status of the audits from the Directors, etc. and thePricewaterhouseCoopers Aarata LLC, and asked them for explanations as necessary.
(c) We have 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 as necessary. The accounting auditors reported to us that “systems for ensuring proper execution ofduties” (listed in each item of Article 131 of the Corporate Calculation Regulations) have been established inaccordance 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 the business report for the said fiscal year and their
supplementary schedules, financial statements for the said fiscal year (balance sheet, statement of operations, statement ofchanges in shareholders’ equity, and notes to non-consolidated financial statements), their supplementary schedules andconsolidated financial statements (consolidated balance sheet, consolidated statement of operations, consolidated statement ofchanges in shareholders’ equity, and notes to consolidated financial statements).
2. Results of Audit(1) Results of audit of the business report(a) We consider that the business report and its supplementary schedules fairly present the situation of the Company inaccordance with relevant laws and regulations and the Company’s Articles of Incorporation.
(b) 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.
(c) We consider that the details of the resolution made by the Board of Directors concerning internal control proceduresare proper. With respect to the details described in the Business Report and the Directors’ performance of theirinternal control duties, we have found no issues to be pointed out. With respect to the internal controls overfinancial reporting, we have received reports on the status as of the date of preparing this Audit & Supervisory
Board’s Report from the Directors, etc. and the PricewaterhouseCoopers Aarata LLC. However, the evaluation andaudit of the reports has not completed.
(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, PricewaterhouseCoopers
Aarata 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, PricewaterhouseCoopers
Aarata LLC, are proper.
May 21, 2018
The Audit & Supervisory Board, Oki Electric Industry Co., Ltd.
Hisao Suzuki, Standing Audit & Supervisory Board Member
Sei Yano, Standing Audit & Supervisory Board Member
Kuninori Hamaguchi, Outside Audit & Supervisory Board Member
Yoichi Nitta, Outside Audit & Supervisory Board Member- 59 -