Oki Electric Industry : Corporate Governance Report (As of December 23, 2022)

This document has been translated from the Japanese original (as submitted to the Tokyo Stock Exchange) for reference purposes only. If there are any discrepancies between this document and the Japanese original, the original prevails.

Corporate Governance

Last Update: December 23, 2022

Oki Electric Industry Co., Ltd.

Takahiro Mori,

Representative Director and COO

Contact: Atsushi Yamauchi,

General Manager of the Corporate Secretariat

Stock code: 6703 https://www.oki.com/

The corporate governance of Oki Electric Industry Co., Ltd. (the "Company" or "OKI") is described below.

I. Basic Views on Corporate Governance, Capital Structure, Corporate Attributes, and Other Basic Information

1. Basic Views

To earn the trust of its various stakeholders, the OKI Group recognizes ensuring sustainable growth and increasing corporate value over the medium to long term as its most important management priorities. To this end, we are working to enhance corporate governance based on our fundamental policies, including "enhancement of management fairness and transparency," "timely decision-making processes," and "full compliance and fortification of risk management."

Reasons for Non-Compliance with Principles of Japan's Corporate Governance Code

This corporate governance report is based on the code revised in June 2021 (including principles for the prime market that will become effective from April 2022).

[Principle 1-4:Cross-Shareholdings]

(1) Policy on cross-shareholdings

The Company is gradually reducing its cross-shareholdings, taking into overall consideration such factors as enhancing the medium- to long-term corporate value of the Company and the share-issuing companies.

(2) Details on verifying cross-shareholdings

The Board of Directors reviews cross-shareholdings each year. The Company considers quantitative and qualitative factors when determining the suitability of its holdings of each stock.

(3) Standards for the exercise of voting rights on cross-shareholdings

In exercising its voting rights on cross-shareholdings, the Company categorizes agenda items as follows. We make decisions and exercise voting rights based on exercise criteria.

• When appointing executives, the Company considers such factors as the total number of executives and the ratio of Independent Directors.
• For executive compensation, the Company looks at such factors as business performance and the status of assets.
• For the appropriation of surpluses, the Company considers such factors as business performance and retained earnings.
• The Company gives special consideration to proposals related to anti-takeover measures, M&A, and third-party share allocations.

[Principle 2-4 (1) Ensuring Diversity in Appointment of Core Personnel]

(1) Approach to Ensuring Diversity

The OKI Group promotes diversity and inclusion (D&I) with the aim of creating a workplace where all employees can work and make the most of their abilities, based on its policy of promoting human resource measures aimed at sustainable growth, such as fostering innovation and improving employee engagement.

The OKI Group's D & I strategy is to strengthen human resources. This management strategy aims to foster innovation, increase motivation, and achieve sustainable growth of the organization by respecting the diversity of employees and levering their value. In order to foster a corporate culture that respects differences in gender, age, disability, sexual orientation and gender identity (SOGI), nationality, and personal life, and that enables diverse human resources to work with a sense of fulfillment and to demonstrate their full potential, we are working to build systems that take into account internal enrichment activities and diversity, realize flexible work styles that increase efficiency, and develop systems to evaluate and appoint individuals.

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Aiming to support women so they can grow and develop their careers in ways that allow them to demonstrate their full potential, OKI has drawn up an action plan to promote women's participation and advancement in the workplace. We

have set the following action plan targets to be achieved by April 2023: (1) reduce the number of overtime hours for full- time employees so that it is equal to or lower than the monthly average for fiscal year 2019 (24 hours); and (2) increase the ratio of female managers to 5%.

The ratio of female managers in fiscal year 2021 was 3.61% for OKI and 5.13% for the OKI Group. We continue to provide training to cultivate female leaders on a selective basis to raise female employees' awareness about becoming managers. We are also engaged in workplace training for appointing female employees as managers.

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OKI employs people of all nationalities who are capable of working globally. For mid-career hires, we are also promoting the hiring of personnel who promote IT/AI and innovation, as well as those who will be responsible for future management. In order to promote these human resources to management positions and diversify our core human resources, we will continue to discuss more specific policies and targets.

1. Content and Status of Implementation of the Human Resources Development Policy and the Internal Environment Development Policy for Ensuring Diversity

The OKI Group regards human resources as one of the most important management resources for sustainable development in response to changes in the social environment. By implementing actions based on five action guidelines ("Act with integrity," "Challenge and drive change," "Perform with speed and agility," "Be passionate, and determined to succeed," and "Proactively encourage excellence as 'Team OKI,'") the OKI Group aims to foster "autonomous employees" who can respond flexibly according to their roles and generate results while involving others.

In addition, we are promoting diversity and inclusion initiatives to realize "a workplace where all employees thrive at work and demonstrate their full potential." To enable everyone to balance work and childcare/caregiving, OKI maintains a host of systems to support balancing work with childcare/caregiving, including the flextime system, the teleworking system, systems to provide special work conditions for people caring for children and nursing the elderly, as well as a Special Leave for Particular Purposes system, which can be used to nurse family members, to attend children's school events, and so forth.

For further details, please refer to OKI Report 2022. (https://www.oki.com/en/ir/finance/library/ar2022.html)

[Supplementary Principle 3-1 (3) Sustainability Initiatives]

(1) Sustainability Initiatives

The OKI Group, as described in its corporate philosophy, underpinned by "enterprising spirit," has long aimed to contribute to people around the world through its core business, namely the provision of products and services that can serve the development of the information age. What underlies the Group's CSR initiatives is our commitment to the pursuit and fulfillment of this idea.

Based on this recognition, we enacted the "OKI Group Charter of Corporate Conduct" to ensure the Group as a whole fulfills its social responsibilities precisely in ways that comport with the Group's corporate philosophy. In addition, in accordance with the Charter, OKI set up the "OKI Group Code of Conduct," to be followed by all OKI executives and employees. This Code of Conduct has been adopted across all Group companies and incorporated into OKI's educational programs in order to be made well known and compulsory. The Charter and the Code are regarded as the basis for OKI Group Values that all Group executives and employees hold in esteem in their pursuit of increasing corporate value.

In order to maintain this stance over the long term and "Delivering OK! to your life." as "a corporate group that helps create a safe and convenient infrastructure for customers and society as a whole through the key Japanese concepts of Monozukuri and Koto-zukuri," which is our vision, we specified the materiality in our Medium-Term Business Plan 2022 from the twin perspectives of creating social value and strengthening management infrastructure. Our environmental, social, and governance (ESG) initiatives, which embody this materiality, were summarized in the OKI Report 2022

(https://www.oki.com/en/ir/finance/library/ar2022.html) for fiscal year 2021.

In fiscal year 2020, OKI established the "Sustainability Promotion Working Group (WG)" as a promotional structure in order to strengthen sustainability initiatives based on materiality. The WG is chaired by the President, and comprises the heads of related corporate sections, the Business

Group, and the Marketing & Sales Group. In order to encourage all Group employees to take personal responsibility for sustainability, in fiscal year 2020 the WG hosted a variety of events, including seminars given by outside lecturers, and dialogues on the theme of ESG led by the President and the heads of all of OKI's divisions. OKI will continue to accurately disclose the progress of initiatives, and, based on this, to advance dialogue with stakeholders, provide feedback for activities, and so forth.

(2) Investments in Human Capital and Intellectual Property

Based on the policies of Medium-Term Business Plan 2022, we are building a personnel system that will lead to the further revitalization of manufacturing sites toward the realization of sustainable growth. Furthermore, to realize the AI edge strategy, we are enhancing AI education in the Company and working to develop AI personnel with practical skills. We will continue to actively invest in human capital. With regard to intellectual property, the Company has formulated a Medium-Term Intellectual Property Plan to build a business portfolio in growth/focus areas and reduce intellectual property risks in existing businesses. Appropriate management is carried out through setting targets such as for the number of patent applications. As mentioned above, we will continue to invest more actively in non-financial assets.

(3) Disclosure Based on TCFD or Equivalent Framework

In the OKI Group too, we have set ourselves the target of reducing life-cycle CO2 emissions by 40% in 2030 compared to fiscal year 2013 and achieving net-zero CO2 emissions from energy used at all plants and business sites by fiscal year 2050. To work towards these goals we have set in motion the Medium-Term Environmental Plan 2022. The main measures called for in the plan are promoting businesses that contribute to the achievement of the SDGs, taking steps towards decarbonization, and bolstering supply chain management. We are also constructing a framework through which we can distribute information to stakeholders about the processes and results of the aforementioned measures, but which also helps us achieve sustainable growth. In particular, we are working to develop products that help resolve environmental problems, lending our resources to the creation of a circular economy, reducing CO2 at our business sites, and stepping up our efforts to make the transition to renewable energy. OKI announced its support for the TCFD in May 2019 from a perspective of a positive economic and environmental cycle. Along with systemically managing climate- related risks, opportunities, and countermeasures for them, OKI aims to enhance information disclosure about these efforts. For further details, please refer to OKI Report 2022.（https://www.oki.com/en/ir/finance/library/ar2022.html）

[Principle 5-2: Establishing and Disclosing Business Strategies and Business Plans]

The Company's capital policy is to invest for sustainable growth, to maintain a sound financial structure that allows for such risks, and to provide stable and continuous returns to shareholders.

In the "Medium-Term Business Plan 2022" up to FY2022, we have set targets for profitability, stability, and capital efficiency, and are implementing various measures such as structural reforms and growth strategies. Based on the progress made, the Company will continue to consider about reviewing of its business portfolio and allocation of management resources.

[Disclosure Based on the Principles of Japan's Corporate Governance Code]

Details of the items disclosed in accordance with the principles of Japan's Corporate Governance Code are as follows.

[Principle 1-7: Related Party Transactions]

The Board of Directors supervises transactions involving conflicts of interests between the Company and Directors in accordance with the rules of the Board of Directors, and Audit & Supervisory Board members conduct audits in accordance with the auditing standards.

The Company does not have any major shareholder who owns 10% or more of its shares.

[Principle 2-6: Roles as Asset Owners of Corporate Pension Funds]

The OKI Corporate Pension Fund manages funds for corporate pensions of the Company and its domestic group companies.

Each year, the Investment Management Committee drafts investment targets, asset allocations, and investment consignees, which are decided by the Board of Trustees. Members of both the Investment Management Committee and the Board of Trustees include employee representatives as well as people with expertise in the finance and human resources departments, appointed by the Company. Committee members and clerical staff improve their expertise by receiving advice from pension management consultants.

Important matters related to the operation of the Fund have been resolved at the Board of Representatives in accordance with the Fund's Articles of Incorporation, and conflicts of interest that may arise between our company and beneficiaries are also managed appropriately.

The Company entrusts the specific selection of fund investments to multiple investment institutions, monitoring the status of investment at quarterly management reporting meetings.

[Principle 3-1: Full Disclosure]

(ⅰ) Company objectives (management philosophy, etc.), management strategies, and management plans

1. The Company discloses its objectives (management philosophy, etc.) and corporate philosophy on the Company website.
   https://www.oki.com/en/profile/spirit/
2. As for management strategies, and management plans, in October 2020 we formulated the Medium-Term Business Plan 2022, which ends in fiscal year 2022.
   Details are disclosed on the company website. https://www.oki.com/en/ir/corporate/strategy/

(ⅱ) Basic views and guidelines on corporate governance based on each of the principles of the code

These are described in "I.1. Basic Views on Corporate Governance, Capital Structure, Corporate Attributes, and Other Basic Information" in this report.

(ⅲ) Board policies and procedures in determining the remuneration of senior management and Directors These are described in "II.1. [Director Remuneration]" in this report.

(ⅳ) Board policies and procedures in the appointment/dismissal of senior management and the nomination of candidates for Directors and Audit & Supervisory Board Members

To ensure transparency in the process of nominating candidates for Directors, Audit & Supervisory Board members, and executive officers, the Company consults with the Personnel and Compensation Advisory

Committee, a voluntary committee. After receiving the committee's response, the Board of Directors and the Audit

1. & Supervisory Board decide on candidates. The committee consists of all four outside directors (one of whom is a woman), and the chairman is elected from among the outside directors.

   In the nomination and appointment of candidates for Directors, Audit & Supervisory Board Members and executive officers, the Company considers the following matters in addition to meeting legal requirements. ・Nobility of character, wisdom, a high level of ethics, fairness, honesty, and a law-abiding spirit

   ・The ability to conduct duties in a manner that will help realize the OKI Group's corporate philosophy and enhance corporate value sustainably

   ・Length of tenure

   ・Audit & Supervisory Board members must have the necessary financial, accounting, and legal knowledge.

   ・Outside officers who satisfy the Company's independence criteria

   The criteria for submitting a proposal to dismiss a Director, an Audit & Supervisory Board Member, or an executive officer take into consideration the following: where the person's act violates or infringes on the law and the Articles of Incorporation; whether the person has become unable to properly perform his/her duties. Such proposals are immediately deliberated by the Personnel Affairs and Compensation Advisory Committee, which then submits its proposal to the Board of Directors.

2. Explanation of individual appointments, dismissals and nominations when the Board of Directors appoints and dismisses senior management and nominates candidates for Directors and Audit & Supervisory Board Members based on (iv) above
   Reasons for appointment and dismissal as well as brief backgrounds and responsibilities are described in reference documents for the General Meeting of Shareholders, business reports, corporate governance reports, financial reports, and other documents.

[Principle 4-1(1): Scope and Overview of Delegation to Management]

The Company has stipulated in the rules of the Board of Directors that important matters, such as laws and regulations, matters stipulated in the Articles of Incorporation, and basic management policies are to be discussed by the Board of Directors. The details of matters to be decided by the Board of Directors are decided by the Representative Director, who also serves as President and Executive Officer, after deliberation by the Management Committee or approval procedures. Executive officers carry out their duties in accordance with basic management policies determined by the Board of Directors.

[Principle 4-9: Independence Standards and Qualifications for Independent Directors] This information is described in "II.1. [Independent Officers]" in this report.

[Principle 4 -10 (1) Utilization of Voluntary Committees]

OKI has adopted a corporate structure with an Audit & Supervisory Board. As the Board of Directors requires both decision-making and supervisory functions, we believe that the balance between internal and executive directors and independent outside directors should be roughly evenly balanced. As of the end of June 2022, the Board of Directors consisted of four independent outside directors out of a total of nine directors, and the chairperson of the Board of Directors is a female independent outside director. The Personnel Affairs and Compensation Advisory Committee has been established as a voluntary committee to ensure transparency in the process of appointing and dismissing directors and determining compensation for directors. Prior to the resolution of the Board of Directors, the Committee receives inquiries on the appointment and dismissal of Directors, Executive Officers, etc., as well as the remuneration system and level, etc., and reports to the Board of Directors after deliberating from an objective viewpoint. The Board of Directors shall consist of non-executive directors selected by resolution of the Board of Directors, the majority of which shall be independent outside directors, and the Chairperson of the Committee shall be elected by the members from among others, as stipulated in the regulations of the Personnel Affairs and Compensation Advisory Committee. As of the end of June 2022, there were four members, all of whom are outside directors (including one woman).

Deliberations in fiscal 2021 have been mainly on skill matrix of the Board of Directors, the system implementation with Chief Executive Officer (CEO) and Chief Operating Officer (COO), and appointment criteria and assessment process of the President and COO, and nomination of the new President and COO.

Proposals to the Personnel Affairs and Compensation Advisory Committee

1. Proposed General Meeting of Shareholders on the Appointment and Dismissal of Directors and Corporate Auditors
2. Compensation system, payment policy, and level of directors
3. Basic Policy and Standards for the Appointment and Dismissal of Officers
4. Matters required by the Committee concerning the appointment, dismissal and remuneration of officers
5. Matters concerning the development plan for the successor to the president

[Principle 4-11 (1): Views on the Balance, Diversity and Size of Knowledge, Experience and Capabilities of the Board of Directors as a Whole]

OKI maintains a corporate auditor system, with the Board of Directors and the Audit & Supervisory Board. With an executive officer system in place, it strives to promote timely decision making processes by separating business execution and oversight. In order to carry out the above, the Board of Directors is required to have both decision-making and

supervisory functions. In consideration of the balance between internal and executive directors and independent outside directors, as of the end of June 2022, the Company has elected 4 independent outside directors out of 9 directors. (In order to further improve the independence and objectivity of the Board of Directors, Ms. Izumi Kawashima, Independent Outside Director, serves as Chairman of the Board of Directors.)

Our approach to the Board of Directors as a whole is structured in a way that balances knowledge, experience, and ability, and balances diversity, including gender, international exposure, work experience, and age, with an appropriate size. The Articles of Incorporation of the Company stipulate that the Company shall have no more than 15 Directors to enable prompt decision-making and achieve an appropriate number of Directors. The Board of Directors has appointed five people who have sufficient knowledge, experience, and ability in areas necessary for the creation of social value, such as marketing, technology and innovation, manufacturing and SCM, and areas necessary for the strengthening of management foundations, such as human resources, finance and accounting, legal and risk management, as internal and executive directors. In addition, the Company appoints two people with experience in corporate management and two people with relevant knowledge and experience as independent outside directors in the expectation that they will provide appropriate supervision and advice based on their experience and expertise in each field. The Board of Directors is attended by five corporate auditors with experience in business execution (two internal and full-time Audit & Supervisory Board members and one independent external Audit & Supervisory Board member) and Audit & Supervisory Board members who are certified public accountants (two independent external corporate auditors).

As of June 29, 2022, the skill matrix for Directors elected at the 98th Annual General Meeting of Shareholders is as described in the Notice of Convocation of the 98th Annual General Meeting of Shareholders.

（https://www.oki.com/en/ir/corporate/governance/structure.html#co01）

[Principle 4 -11 (2) Concurrent Positions of Directors and Audit & Supervisory Board Members]

Significant concurrent positions of Directors and Audit & Supervisory Board Members (including candidates) are disclosed in the reference documents for the General Meeting of Shareholders and business reports in the "Notice of Convocation of the General Meeting of Shareholders," as well as in security reports.

・Notice of Convocation of General Meeting of Shareholders: https://www.oki.com/en/ir/stock/meeting.html

・Security Report (Japanese only):https://www.oki.com/jp/ir/data/report/

The status of Outside Directors and Outside Audit & Supervisory Board Members is also described in "II.1. [Related to Directors]" and "[Related to Audit & Supervisory Board Members]" in this report.

[Principle 4-11 (3) Evaluation of the Effectiveness of the Board of Directors]

The Company conducts evaluations and analyses to improve the effectiveness of the Board of Directors by recognizing, sharing, and improving the directions that the Board of Directors should take and the issues related to that direction.

[Method for Evaluating the Effectiveness of the Board of Directors]

The Board of Directors discussed methods for evaluating the effectiveness of the plan in FY2021.

(1)We judged that self-evaluation is appropriate for conducting research and evaluation in line with our company's circumstances. Meanwhile, we decided to abstain from a third-party evaluation aimed at verifying the objectivity and validity of the evaluation process in FY2021 because an evaluation of this type was performed in FY2020, and we have determined that conducting these evaluations once every few years is sufficient and appropriate.

1. As in FY2020, the assessment was performed in three stages: a questionnaire, individual hearings, and deliberations conducted by the Board of Directors. This applied to all Directors and Audit & Supervisory Board members. The Secretariat of the Board of Directors served as the secretariat.

(3)The questionnaire was the same used in FY2020. It was based on "Corporate Governance Code" and related materials.

[Results of Evaluation of the Effectiveness of the Board of Directors]

As a result of the FY2021 evaluation, we realized that the effectiveness of our company's Board of Directors has improved in some respects but also acknowledged that further improvement is needed. Overall, the Board's level of efficacy was roughly even with that observed in FY2020.

The details are as follows:

・In managing the progress of the Medium-Term Management Plan 2022, the managers of each business and sales division reported directly to the Board of Directors and held Q&A session aimed at clarifying actual circumstances. On the other hand, explanations regarding quantitative monitoring based on KPIs varied in terms of their respective levels, so further improvements will implemented in the future.

・The Personnel and Remuneration Advisory Committee, which consists of Outside Directors, held discussions on the "Plan to Nurture Successors to the President and Other Executives." Our president has changed, but moving forward, we will continue to discuss the formulation of a plan for developing our next crop of management personnel and their successors as well.

・Amid the COVID-19 pandemic, no significant improvements were made in terms of creating opportunities for providing on-site information to outside directors. We will increase visits to business sites by devising infection prevention measures, thereby facilitating communication between outside directors and business execution sites.