Makita Corporation
Additional Information
for the year ended March 31, 2018
Consolidated Financial Statements(Partial translation of "YUKASHOKEN HOKOKUSHO"
originally issued in Japanese)

CONTENTS【Accounting-Consolidated Financial Statements】 ................................................................................... 2
CONSOLIDATED BALANCE SHEETS .................................................................................................. 3
CONSOLIDATED STATEMENTS OF INCOME .................................................................................... 5
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME ....................................................... 6
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY .................................................................. 7
CONSOLIDATED STATEMENTS OF CASH FLOWS ........................................................................... 8
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ................................................................. 9【Schedule to the Consolidated Financial Statements】........................................................................... 47
Independent Auditor’s Report on the Financial Statements and Internal Control Over Financial
Reporting ....................................................................................................................................................... 48

Partial Translation of "YUKASHOKEN HOKOKUSHO" originally issued in Japanese1【Accounting-Consolidated Financial Statements】
1. Basis for Consolidated Financial Statements(1) Makita’s Consolidated Financial Statements are prepared in accordance with the Generally Accepted Accounting
Principles in the United States of America as prescribed in Article 95 of Regulations for the Terminology, Forms andPreparation Methods of Consolidated Financial Statements (Finance Ministry Ordinance No. 28 of 1976, hereinafter
called “Regulation for Consolidated Financial Statement”).
2. Audit Attestation
Makita’s Consolidated Financial Statements for the consolidated year from April 1, 2017 to March 31, 2018 wereaudited by KPMG AZSA LLC in accordance with the Article 193-2(1) of the Financial Instruments and Exchange Law.
3. Special measures for ensuring the appropriateness of Consolidated Financial Statements, etc.
Makita engages in special measures for ensuring the appropriateness of Consolidated Financial Statements, etc.
More specifically, Makita takes part in the FASF (Financial Accounting Standards Foundation) and attends seminars
in order to properly understand current accounting standards and to promptly and adequately keep pace with their
updates.

Partial Translation of "YUKASHOKEN HOKOKUSHO" originally issued in Japanese

2

CONSOLIDATED BALANCE SHEETSYen (millions)
As of March 31, 2017
As of March 31, 2018ASSETS
CURRENT ASSETS:
Cash and cash equivalents ................................................

142,181

147,320

Time deposits ....................................................................

34,32943,013

Short-term investments .....................................................

23,441

14,782

Notes .............................................................................

1,199

1,343

Accounts........................................................................

67,086

79,092Less- Allowance for doubtful receivables .....................

(1,137)(1,340)Inventories ........................................................................

167,398

196,217

Deferred income taxes ......................................................

4,723

-

Prepaid expenses and other current assets ........................

13,34916,150Total current assets ........................................................

452,569

496,577

Land ..................................................................................

22,35822,626

Building and improvements ..............................................

94,927

98,648

Machinery and equipment ................................................

91,493

98,868Construction in progress ...................................................

5,531

6,027

Sub-total .....................................................................

214,309226,169

Less- Accumulated depreciation and amortization ...........

(119,802)(126,305)

Total net property, plant and equipment .........................

94,50799,864

Investments .......................................................................

34,00433,815

Goodwill ...........................................................................

721

721

Other intangible assets, net ...............................................

3,641

3,944

Deferred income taxes ......................................................

650

3,975

Other assets .......................................................................

11,157

12,135

Total investments and other assets.................................

50,17354,590Total assets ..............................................................................

597,249

651,031

Trade receivables-

PROPERTY, PLANT AND EQUIPMENT, AT COST:INVESTMENTS AND OTHER ASSETS:

Partial Translation of "YUKASHOKEN HOKOKUSHO" originally issued in Japanese3

Yen (millions)
As of March 31, 2017
As of March 31, 2018
LIABILITIESCURRENT LIABILITIES:
Short-term borrowings ......................................................

6,579

3,411

Trade notes and accounts payable.....................................

26,34728,156

Other payables ..................................................................

7,122

7,131

Accrued expenses .............................................................

10,537

11,952

Accrued payroll ................................................................

9,431

10,731

Income taxes payable........................................................

6,944

9,720

Deferred income taxes ......................................................

3,134

-

Other liabilities .................................................................

8,178

9,497

Total current liabilities ..................................................

78,27280,598

Accrued retirement and termination benefits ....................

3,161

3,206

Deferred income taxes ......................................................

8,313

9,391

Other liabilities .................................................................

1,692

1,703

Total long-term liabilities ..............................................

13,166

14,300Total liabilities ...............................................................

91,43894,898

Common stock .................................................................

23,80523,805Additional paid-in capital.................................................

45,50145,531

Legal reserve ....................................................................

5,669

5,669

Retained earnings .............................................................

456,546

497,456

Accumulated other comprehensive income (loss)............

(17,728)(8,905)

Treasury stock, at cost ......................................................

(11,623)(11,617)

Total Makita Corporation shareholders’ equity ...................

502,170

551,939NONCONTROLLING INTEREST ....................................

3,641

4,194

Total equity ....................................................................

505,811556,133

Total liabilities and equity .......................................................

597,249

651,031

LONG-TERM LIABILITIES:EQUITYMAKITA CORPORATION SHAREHOLDERS’
EQUITY:

Partial Translation of "YUKASHOKEN HOKOKUSHO" originally issued in Japanese

4

CONSOLIDATED STATEMENTS OF INCOME
Yen (millions)
For the year ended
For the year ended
March 31, 2018
March 31, 2017
NET SALES ........................................................................................
Cost of sales .....................................................................................
GROSS PROFIT .................................................................................
Selling, general, administrative and others, net ...............................
OPERATING INCOME ......................................................................
OTHER INCOME (EXPENSE):
Interest and dividend income ...........................................................
Interest expense ................................................................................
Exchange gains (losses) on foreign currency transactions, net ........
Realized gains (losses) on securities, net .......................................
Impairment loss on securities
Total other income (expense), net .................................................
INCOME BEFORE INCOME TAXES ...............................................
Provision for income taxes:
Current.............................................................................................
Deferred ...........................................................................................
Total income tax expense ............................................................
NET INCOME ....................................................................................
Less-Net income attributable to the non-controlling interest ..............
NET INCOME ATTRIBUTABLE TO MAKITA CORPORATION ...

Composition ratio

Composition ratio

414,999 100.0%
267,506 64.5%

477,298 100.0%
302,173 63.3%

147,493
84,92962,564

175,125
95,36379,762

35.5%
20.4%
15.1%

36.7%
20.0%
16.7%

2,512
(104)
(233)
26
(27)
2,174 0.5%
64,738 15.6%

2,919
(43)
(3,235)299(24)(84) 0.0%
79,678 16.7%

19,988(378)
19,61024,943(536)
24,4074.7%45,128 10.9%
346 0.1%
44,782 10.8%

5.1%

55,271 11.6%
516 0.1%
54,755 11.5%

Yen
PER SHARE OF COMMON STOCK AND ADS:
Earnings per share: Basic..............................................................
Earnings per share: Diluted…………………………………….
Cash dividends per share paid for the year ...................................

For the year ended
March 31, 2017
165.0
165.0
101.0

For the year ended
March 31, 2018
201.7
201.7
92.0

NOTE: The Company implemented a two-for-one common stock split, effective April 1, 2017. Net income attributable
to Makita Corporation common shareholders per share (basic) and net income attributable to Makita Corporationcommon shareholders per share (diluted) were calculated on the assumption that the relevant stock split had been
implemented at the beginning of the previous consolidated fiscal year. Dividend per share was calculated based on thestock before split.

Partial Translation of "YUKASHOKEN HOKOKUSHO" originally issued in Japanese

5

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

NET INCOME ............................................................................
OTHER COMPREHENSIVE INCOME (LOSS):
Foreign currency translation adjustment ..................................
Unrealized holding gains (losses) on available-for-sale securities .....

Pension liability adjustment .....................................................
Total other comprehensive income (loss) .............................
COMPREHENSIVE INCOME (LOSS) .....................................
Less-Comprehensive income (loss) attributable to thenon-controlling interest ...........................................................
COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE
TO MAKITA CORPORATION ..............................................

Yen (millions)
For the year ended
For the year ended
March 31, 2018
March 31, 201745,12855,271(19,812)
10,742
192(8,878)9,860(1,364)544
9,040

36,25064,311

147

733

36,10363,578

Partial Translation of "YUKASHOKEN HOKOKUSHO" originally issued in Japanese

6

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
Yen (millions)
For the year ended March 31, 2017
Makita Corporation shareholders’ equity

Beginning balanceCommonstock

Additional
paid-in
capitalLegalreserve

23,80545,456

5,669

Retainedearnings

Accumulated
othercomprehensive
income (loss)

Treasury
stock

Total
MakitaCorporation’sshareholders’ equity

425,473(9,049)(11,602)479,752

(21)

(21)

Purchases and disposal oftreasury stock, net
Cash dividends

Noncontrollinginterest

Total

3,618

483,370(21)(13,709)(13,709)(124)(13,833)

44,782

44,782346

45,128(8,679)(199)(8,878)Comprehensive income (loss)
Net income
Other comprehensive
income(8,679)Other income (loss)
Ending balance

45
23,80545,501

45

45
5,669

456,546(17,728)(11,623)

502,170

3,641

505,811

Noncontrollinginterest

Total

3,641

505,811

Yen (millions)
For the year ended March 31, 2018
Makita Corporation shareholders’ equity

Beginning balanceCommonstock

Additional
paid-in
capitalLegalreserve

Retainedearnings

Accumulated
othercomprehensive
income (loss)

23,80545,501

5,669

456,546(17,728)

Purchases and disposal oftreasury stock, net
Disposal of treasury stock by
exercise of stock options(11)

Cash dividends

Treasury
stock

Total
MakitaCorporation’sshareholders’ equity(11,623)

502,170

(5)

(5)

(5)

11

0

0

(13,845)(13,845)(180)(14,025)54,75554,755516

55,271

8,823

217

9,040

Comprehensive income (loss)
Net income
Other comprehensive
income8,823

Other income (loss)
Ending balance

41
23,80545,531

41

41
5,669

497,456(8,905)

Partial Translation of "YUKASHOKEN HOKOKUSHO" originally issued in Japanese(11,617)551,9394,194

556,133

7

CONSOLIDATED STATEMENTS OF CASH FLOWS
Yen (millions)
For the year ended
For the year ended
March 31, 2018
March 31, 2017
CASH FLOWS FROM OPERATING ACTIVITIES:Net income ...........................................................................................
Adjustments to reconcile net income to net cash
provided by operating activitiesDepreciation and amortization .........................................................
Deferred income tax expense (benefit) .............................................
Realized (gains) losses on securities, net..........................................
Unrealized (gains) losses on securities, net
Losses (gains) on disposal or sales of property,
plant and equipment, net ..................................................................
Bad debt expense ..............................................................................
Inventory write-downs .....................................................................
Changes in assets and liabilitiesTrade receivables ..........................................................................
Inventories ....................................................................................
Trade notes and accounts payable and accrued expenses .............
Income taxes payable ...................................................................
Accrued retirement and termination benefits ...............................
Other, net ..........................................................................................
Net cash provided by operating activities.........................................
CASH FLOWS FROM INVESTING ACTIVITIES:Capital expenditures, including interest capitalized .............................
Purchases of available-for-sale securities .............................................
Proceeds from sales of available-for-sale securities .............................
Proceeds from maturities of available-for-sale securities.....................
Purchases of held-to-maturity securities
Proceeds from maturities of held-to-maturity securities.......................
Proceeds from sales of property, plant and equipment .........................
Investment in term (time) deposit.........................................................
Withdrawal of term (time) deposit .......................................................
Other, net ..............................................................................................
Net cash used in investing activities .................................................

45,12855,271

8,943
(378)
(26)
27

9,917
(536)
(299)
24

385
172
2,077

18
317
2,759

(4,824)
448
9,171
3,472
(684)
(560)
63,351(11,716)(26,932)
2,780
2,755
(557)
(507)
33,294(13,222)(1,217)30,663(8,601)
5,700
383(56,437)
37,384332(5,015)(14,149)(3,734)
11,993(5,009)4,200
496(51,010)
42,37428(14,811)

4,691(3,667)

CASH FLOWS FROM FINANCING ACTIVITIES:
Changes in borrowings with original maturitiesof less than three months ......................................................................
Payments on borrowings with original maturities
of more than three months ....................................................................
Purchase (sale) of treasury stock, net ...................................................
Cash dividends paid..............................................................................
Other, net ..............................................................................................
Net cash used in financing activities ....................................................
EFFECT OF EXCHANGE RATE CHANGES ON CASH
AND CASH EQUIVALENTS..........................................................
NET CHANGE IN CASH AND CASH EQUIVALENTS...................
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR ........
CASH AND CASH EQUIVALENTS, END OF YEAR ......................

(329)
(22)
(13,709)(126)(9,495)(5)(13,845)(226)(17,743)(6,575)42,26699,915
142,181

4,399
5,139
142,181
147,320

SUPPLEMENT DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the year for interest, net of amount capitalized ........
Cash paid during the year for income taxes .........................................

120
16,51720
22,187

Partial Translation of "YUKASHOKEN HOKOKUSHO" originally issued in Japanese8

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ACCOUNTING PRINCIPLES
In compliance with Article 95 of the Regulation for Consolidated Financial Statement, our Consolidated Financial
Statements are prepared in accordance with the Generally Accepted Accounting Principles in the United States ofAmerica including, but not limited to, Accounting Standards Codification of Financial Accounting Standard Board(hereinafter called “ASC”) in relation to the issuance of American Depositary Receipts (ADR).
In its initial issuance of American Depository Receipts (ADR) in 1977, Makita prepared Consolidated Financial
Statements based on US GAAP and registered them with the SEC. Since then, Makita has continued to prepare and filewith the SEC its Consolidated Financial Statements based on US GAAP, in accordance with Article 13 of Securities
Exchange Act of 1934. Makita effectively delisted from NASDAQ on April 2013 and its registration with the SEC was
discontinued on July 2013.
Major Differences between Generally Accepted Accounting Principles in Japan and those in the United States ofAmerica are listed below. If the variance is significant in amount, the impact is disclosed. The impact on each item is
net income before income tax basis but not net income attributable to Makita Corporation’s shareholders basis.
(1)New share issuing expenses
New share issuing expenses net of taxes are deducted from Additional paid-in Capital.
(2) Allowance for retirement and benefits
Allowance for retirement benefits is recognized in accordance with ASC 715 “Compensation --- Retirement Benefits “.
(3) Goodwill and Other Intangible Assets
Goodwill and Other Intangible Assets are recognized in accordance with ASC 350 “Intangibles --- Goodwill andOther“.
Goodwill and Other Intangible Assets with indefinite useful lives are not depreciated but reassessed for impairment
test at least once a year and tested whenever there is any indication of impairment.
(4) Deferred Tax
Deferred Tax Liabilities and Assets are recognized in accordance with ASC 740 “Balance Sheet Classification ofDeferred Taxes”.
All Deferred Tax Liabilities and Assets are classified as noncurrent in a consolidated balance sheet.

Partial Translation of "YUKASHOKEN HOKOKUSHO" originally issued in Japanese92. OVERVIEW OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES(1)Overview of business
Makita and its Group engage mainly in the business of production and sales of drills, grinders, sanders, hammer
drills, rotary hammers, cordless impact drivers, cutters and circular saws, and also, production and sales of pneumatic
tools and gardening tools.
Sales are made under the brand name of “Makita” or “Maktec” by Makita and another domestic subsidiary in themarket in Japan and by sales subsidiaries and agents in overseas market.
Sales in overseas market account for 82.7% of consolidated sales; in Europe 42.3%, in North America 15.5%, in
Asia 9.2% and in Other Regions 15.7%.
Makita and its Group have 9 production facilities: 2 in China, and one each in the Japan, U.S.A., Brazil, U.K.,
Germany, Romania and Thailand.
(2) Principles of Consolidation
The accompanying consolidated financial statements include the accounts of the Company, and all of its
majority-owned subsidiaries. All significant inter-company balances and transactions have been eliminated in the
consolidation. Makita did not have any consolidated variable interest entities for any of the periods presented herein.
(3) Foreign Currency Translation and Transactions
Overseas subsidiaries’ assets and liabilities on the consolidated balance sheet denominated in their local currencies
are translated at the exchange rate in effect at each fiscal year-end and items on the consolidated profit and loss
statement are translated at the average exchange rates prevailing during each fiscal year. The local currencies of thecountries where the subsidiaries are located are regarded as their functional currencies. The resulting currencytranslation adjustments are included in accumulated other comprehensive income (loss).
Gains and losses resulting from all foreign currency transactions, including foreign exchange contracts, andre-measurement of receivables and payables denominated in foreign currencies are included in other income(expenses).
(4) Cash and Cash Equivalents
Cash and cash equivalents consist of cash on hand and time deposits with original maturities of three months or less.
(5) Short-term Investments and Investments
Makita classifies investments in debt and marketable equity securities as available-for-sale or held-to-maturity
securities. Makita does not hold any marketable or investment securities that are bought and held primarily for the
purpose of sale in the near term.
Except for non-marketable equity securities, available-for-sale securities are reported at fair value, and unrealized
gains or losses are recorded as a separate component of accumulated other comprehensive income (loss), net of
applicable income taxes. Non-marketable equity securities are carried at cost and reviewed periodically for impairment.
Held-to-maturity securities are reported at amortized cost, adjusted for the amortization or accretion of premiums or
discounts.
A decline in the fair value of any equity securities to below the carrying amount that is deemed to beother-than-temporary results in a write-down of the carrying amount to the fair value as a new cost basis and theamount of the write-down is included in earnings.
For debt securities for which the declines are deemed to be other-than-temporary and there is no intent to sell them,
impairments are separated into the amount related to credit loss, which is recognized in earnings, and the amountrelated to all other factors, which is recognized in other comprehensive income (loss). For debt securities for which the
declines are deemed to be other-than-temporary and there is an intent to sell them, impairments in their entirety arerecognized in earnings.
Available-for-sale securities are periodically reviewed for other-than-temporary declines on criteria that include thelength and the magnitude of decline, the financial condition and prospects of the issuer, and Makita’s intent and ability
Partial Translation of "YUKASHOKEN HOKOKUSHO" originally issued in Japanese10

to retain the investment for a period of time to allow for recovery in market value and other relevant factors.
Held-to-maturity securities are periodically evaluated for possible impairment by taking into consideration thefinancial condition, business prospects and credit worthiness of the issuer.
Makita classifies investments, which are available for current operations, in current assets. The other investments areclassified as investments as a part of non-current investments and other assets in the consolidated balance sheets.
The cost of a security sold or the amount reclassified out of accumulated other comprehensive income (loss) into
earnings is determined by the moving average cost method.
(6) Allowance for Doubtful Receivables
Allowance for doubtful receivables represents Makita’s best estimate of the amount of probable credit losses in its
existing receivables. The allowance is determined based on, but is not limited to, historical collection experience
adjusted for the effects of the current economic environment, assessment of inherent risks, aging and changes in thefinancial performance of the debtor. Account balances are charged off against the allowance after all means ofcollection have been exhausted and the potentiality for recovery is considered remote.
(7) Inventories
Inventory costs include raw materials, labor and manufacturing overheads. Inventories are valued at the lower ofcost or market price, with cost determined principally based on the average cost method. Makita estimates theobsolescence of inventory based on the difference between the cost of inventory and its estimated market value
reflecting certain assumptions about anticipated future demand. The carrying amount of inventory is then reduced toaccount for such obsolescence. Once inventory items are written-down or written-off, such items are not written-up
subsequently. All existing and anticipated modifications to product models are evaluated against on-hand inventories,
and are adjusted for potential obsolescence.
(8) Property, Plant and Equipment and Depreciation and Amortization
Property, plant and equipment is stated at cost. For the Company, depreciation is computed principally by using thedeclining-balance method over the estimated useful life. Most of the subsidiaries have adopted the straight-line method
for computing depreciation. The depreciation period generally ranges from 10 years to 60 years for buildings andimprovements and from 3 years to 20 years for machinery and equipment. The cost and accumulated depreciation andamortization applicable to assets retired are removed from the accounts and any resulting gain or loss is recognized in
the consolidated profit and loss statement. The cost for betterments, renewals and repairs that extend the life of theassets are capitalized. Other maintenance and repair costs are expensed as incurred.
Depreciation and amortization expenses for the years ended March 31, 2017 and 2018 amounted to 8,072 million
yen and 9,131 million yen, respectively, which included the amortization of capitalized lease equipment.
Certain leased buildings, improvements, machinery and equipment are accounted for as capital leases. The aggregate
cost included in property, plant and equipment and the related accumulated amortization as of March 31, 2017 and2018 were as follows:

Aggregate cost
Accumulated depreciation and amortization

Yen in millions
2017
2018
74
238
43
60

(9) Goodwill
Goodwill is an asset representing the future economic benefits arising from other assets acquired in a businesscombination that are not individually identified and separately recognized. Goodwill is reviewed for impairment atleast annually. The goodwill impairment test is a two-step process. Under the first step, the fair value of the reporting
unit is compared with its carrying amount (including goodwill). If the fair value of the reporting unit is less than its
carrying amount, an indication of goodwill impairments exists for the reporting unit and the management must perform

Partial Translation of "YUKASHOKEN HOKOKUSHO" originally issued in Japanese11step two of the impairment test (measurement). Under step two, an impairment loss is recognized for any excess of thecarrying amount of the reporting unit’s goodwill over the implied fair value of that goodwill. The implied fair value of
goodwill is determined by allocating the fair value of the reporting unit in the same manner to a purchase priceallocation and the residual fair value after this allocation is the implied fair value of the reporting unit’s goodwill.
Makita determines the fair value of its reporting units by using a discounted cash flow analysis. If the fair value of thereporting unit exceeds its carrying value, step two does not need to be performed.
Makita performs its annual impairment review of goodwill every December 31, and when a triggering event occurs
between annual impairment dates.
(10) Environmental Liabilities
Liabilities for environmental remediation and other environmental costs, if any, are accrued when environmental
assessments or remedial efforts are probable to be required and the costs can be reasonably estimated. Such liabilities
are adjusted as further information develops or circumstances change. Costs of future obligations are not discounted totheir present values unless the amount and timing of such payments are determinable.
(11) Research and Development Costs and Advertising Costs
Research and development costs, which are included in Selling, general, administrative and others, net in the
consolidated statements of income, are expensed as incurred. Advertising costs are also expensed as incurred.
(12) Shipping and Handling Costs
Shipping and handling costs, which mainly include transportation to customers, are included in Selling, general,administrative and others, net in the consolidated statements of income.
(13) Income Taxes
Deferred income tax assets and liabilities are recognized for the future tax consequences attributable to temporary
differences between the carrying amounts of existing assets and liabilities on the consolidated financial statements andtheir respective tax bases and tax loss carry-forwards and tax credit carry-forwards. Deferred income tax assets andliabilities are measured by using the estimated effective statutory tax rates applicable to taxable income in the years
during which those temporary differences and the tax consequences attributable to those carry-forwards are expected tobe recovered or settled. The effect on deferred income tax assets and liabilities of a change in tax rates or laws isrecognized in income in the period that includes the enactment date.
Makita recognizes in its consolidated financial statements the effect of income tax positions only if those positions
are more likely than not to be sustained. Recognized income tax positions are measured as the largest amount that isgreater than 50% likely of being realized. Changes in recognition or measurement are reflected in the period in which
the change in judgment occurs. Makita classifies penalties and interest related to unrecognized tax benefits, if any, inprovision for income taxes.
(14) Product Warranties
A liability for the estimated product warranty-related cost is established at the time revenue is recognized and isincluded in other current liabilities and cost of sales. Estimates for accrued product warranty costs are primarily basedon historical experience, and are affected by ongoing product failure rates, specific product class failures outside of thebaseline experience, material usage and service delivery costs incurred in correcting a product failure.
(15) Pension and Retirement Benefits
Changes in the amount of either the projected benefit obligation or plan assets resulting from actual results different
from those assumed and from changes in assumptions can result in gains and losses to be recognized in the
consolidated financial statements in the future periods. Amortization of an unrecognized net gain or loss is included as
a component of the net periodic benefit plan cost for a year if, as of the beginning of the year, that unrecognized net
gain or loss exceeds 10 percent of the greater of (1) the projected benefit obligation or (2) the fair value of that plan’sassets. In such a case, the amount of amortization recognized is the excess divided by the average remaining service
Partial Translation of "YUKASHOKEN HOKOKUSHO" originally issued in Japanese12period of active employees expected to receive benefits under the plan.
Each overfunded plan is recognized as an asset and each underfunded plan is recognized as a liability on the
consolidated balance sheet. Subsequent changes in the funded status are recognized as a component of accumulated
other comprehensive income (loss).
(16) Stock-based compensation
We measure stock-based compensation expenses based on the fair value at the grant date according to Subtopic 718-10(Compensation-Stock Compensation).
(17) Earnings per Share
Basic earnings per share is computed by dividing the net income available to common shareholders by the weighted
average common shares outstanding during each year.
(18) Impairment of Long-lived Assets
Long-lived assets, such as property, plant and equipment, and certain intangible assets subject to amortization, arereviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the asset
may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying
amount of an asset to its estimated undiscounted future cash flow. Any acquired intangible asset determined to have an
indefinite useful life is not amortized, but instead is tested for impairment based on its fair value until its life would bedetermined to be no longer indefinite. An impairment charge is recognized in the amount by which the carrying amountof the asset exceeds the fair value of the asset. The fair value is determined by the projected discounted cash flows orother valuation techniques as appropriate.
Assets to be disposed of, if any, are separately presented in the balance sheet and reported at the lower of thecarrying amount or fair value less costs to sell, and are no longer depreciated.
(19) Derivative Financial Instruments
Makita recognizes all derivative instruments as either assets or liabilities in the consolidated balance sheets andmeasures those instruments at fair value. The accounting for changes in the fair value of a derivative instrument
depends on whether it has been designated and qualifies as part of a hedging relationship, and on the type of hedging
relationship.
Makita employs derivative financial instruments, including forward foreign currency exchange contracts andcurrency swaps to manage its exposure to fluctuations in foreign currency exchange rates. Makita does not use
derivatives for speculation or trading purpose. Changes in the fair value of derivatives are recorded for each period incurrent earnings depending on whether or not a derivative is designated as part of a hedge transaction and on the typeof hedge transaction. The ineffective portion of all hedges is recognized currently in earnings.
(20) Use of Estimates in the Preparation of Consolidated Financial Statements
The preparation of financial statements in conformity with U.S. GAAP requires the management to make estimatesand assumptions that affect the reported amounts of assets and liabilities and the disclosures of contingent assets andliabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates.
Makita has identified the following areas where it believes assumptions and estimates are particularly critical to theconsolidated financial statements. These are accounting for sales incentives, volume-based rebates and cooperative
advertising, determination of an allowance for doubtful receivables, impairment of long-lived assets, realizability ofdeferred income tax assets, the determination of unrealized losses on securities for which the decline in market value isconsidered to be other than temporary, the actuarial assumptions on retirement and termination benefit plans andvaluation of inventories.

Partial Translation of "YUKASHOKEN HOKOKUSHO" originally issued in Japanese13

(21) Revenue Recognition
Makita recognizes revenue when persuasive evidence of an arrangement exists, delivery has occurred or services
have been rendered, the sales price is fixed or determinable and the collectability is reasonably assured.
Makita offers sales incentives to qualifying customers through various incentive programs. Sales incentives
primarily involve volume-based rebates, cooperative advertising and cash discounts, and are accounted for inaccordance with ASC 605-50 “Customer’s Payments and Incentives.”
Volume-based rebates are provided to customers only if customers attain a pre-determined cumulative level ofrevenue transactions within a specified period of one year or less. Liabilities for volume-based rebates are recognizedwith a corresponding reduction of revenue for the expected sales incentive at the time the related revenue is recognized,
and are based on the estimation of sales volume reflecting the historical performance of individual customers.
Cooperative advertising programs are provided to certain customers as a contribution to or as sponsored funds foradvertisements.
Under cooperative advertising programs, Makita does not receive an identifiable benefit sufficiently separable fromits customers. Accordingly, cooperative advertising is also recognized as a reduction of revenue at the time the related
revenue is recognized based on Makita’s ability to reliably estimate such future advertising to be taken.
Cash discounts are provided as a certain percentage of the invoice price as predetermined by spot contracts or basedon contractually agreed upon amounts with customers. Cash discounts are recognized as a reduction of revenue at thetime the related revenue is recognized based on Makita’s ability to reliably estimate such future discounts to be taken.
Estimates of expected cash discounts are evaluated and adjusted periodically based on actual sales transactions andhistorical trends.
When repairs are made and charged to customers, the revenue from this source is recognized when the repairs havebeen completed and the item has been shipped to the customer.
Taxes collected from customers and remitted to governmental authorities are accounted for on a net basis andtherefore are excluded from revenues in the consolidated statements of income.
(22) Subsequent events
Makita has evaluated the subsequent events through June 28, 2018, the date on which the financial statements areavailable to be issued.
(23) New Accounting Standards Adopted
In July 2015, Accounting Standards Update 2015-11 (“Simplifying the Measurement of Inventory”—ASC 330(“Inventory”)) was issued. This Update applies to all inventory except for which is measured using last-in, first-out(LIFO) or the retail inventory method, and requires an entity to measure inventory at the lower of cost and net
realizable value. The Company adopted this standard on April 1, 2017. The adoption has no effect on the Company’s
financial statements.
In November 2015, the U.S. Financial Accounting Standards Board (FASB) issued Accounting Standards Update(ASU) No. 2015-17, “Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes.” This accounting
standard change requires that all deferred tax liabilities and assets be classified as noncurrent in a consolidated balance
sheet. Effective April 1, 2017, the Company has adopted this accounting standard. In adopting this accounting standard,
the Company did not adjust the prior period’s financial statement retrospectively.
(24) Changes in accounting principles, procedures and presentations:Not applicable.
(25) New Accounting Standards Not yet Adopted
The Makita Group will voluntarily adopt International Financial Reporting Standards (IFRS) in its consolidated
financial statements to conduct accurate financial report and increase in usefulness from the year ending March 31,
2019. Therefore, new accounting standards not yet adopted in U.S. GAAP have been omitted.

Partial Translation of "YUKASHOKEN HOKOKUSHO" originally issued in Japanese143. INVENTORIESInventories as of March 31, 2017 and 2018 comprised the following:

Finished goods and merchandiseWork in process
Raw materials
Total

Yen in millions
2018
2017
144,143
164,548
2,431
3,117
20,82428,552
196,217
167,398

Inventory write-downs, which are charged to cost of sales, amounted to 2,077 million yen, and 2,759 million yen forthe years ended March 31, 2017 and 2018, respectively.
4. IMPAIRMENT OF LONG-LIVED ASSETS
There is no impairment loss recognized for the year ended March 31, 2017 and 2018.

Partial Translation of "YUKASHOKEN HOKOKUSHO" originally issued in Japanese15

5. SHORT-TERM INVESTMENTS AND INVESTMENTS
As of March 31, 2017 and 2018, short-term investments and investments consisted of available-for-sale securities
and held-to-maturity securities and non-marketable equity securities (carried at cost).
The cost, unrealized gains and losses, fair value and carrying amount of such securities by major security type as ofMarch 31, 2017 and 2018, were as follows:

As of March 31, 2017
Short-term investments:
Available-for-sale:
Investment trusts
MMF and FFF
Marketable equity securities
Sub-total
Held-to-maturity:
Corporate debt securities
Sub-total
Total Short-term investments
Investments:
Available-for-sale:Marketable equity securities
Sub-total
Held-to-maturity:
Corporate debt securities
Sub-total
Total Investments

Yen in millions
Unrealized
Fair value
losses

Cost

Unrealized
gains

Carrying
amount2,806
11,248
1,439
15,493

538
3,324
3,862

14
14

3,330
11,248
4,763
19,341

3,330
11,248
4,763
19,341

4,100
4,100
19,593

3,862

3
3
17

4,097
4,097
23,4384,100
4,100
23,441

Cost

Unrealized
gains

Unrealized
lossesFair value

Carrying
amount10,488
10,48822,93422,934-33,42233,42233,42233,422200
200
10,68811
11
22,945-211
211
33,633200
200
33,622

In addition to the above investments, non-marketable equity securities (carried at cost) amounted to 382 million yen
on March 31, 2017, of which nil million yen is invested in Short-term investments and 382 million yen is invested in
Investments.

Partial Translation of "YUKASHOKEN HOKOKUSHO" originally issued in Japanese

16Yen in millions
Unrealized
lossesFair value

As of March 31, 2018
Short-term investments:
Available-for-sale:
Investment trusts
MMF and FFF
Marketable equity securities
Sub-total
Held-to-maturity:
Corporate debt securities
Sub-total
Total Short-term investments

Cost

Unrealized
gains

Carrying
amount

3,323
34
1,689
5,046

277
4,780
5,057

27
27

3,573
34
6,469
10,076

3,573
34
6,469
10,076

4,702
4,702
9,748

0
0
5,057

0
0
27

4,702
4,702
14,778

4,702
4,702
14,778Investments:
Available-for-sale:Marketable equity securities
Sub-total
Held-to-maturity:
Corporate debt securities
Sub-total
Total Investments

Cost

Unrealized
gains

Unrealized
lossesFair value

Carrying
amount13,24813,248

19,77919,779-33,02733,02733,02733,027406
406
13,6546
6
19,785

2
2
2

410
410
33,437406
406
33,433

In addition to the above investments, non-marketable equity securities (carried at cost) amounted to 382 million yen
on March 31, 2017, of which 4 million yen is invested in Short-term investments and 382 million yen is invested in
Investments.
Investments in trusts represent funds deposited with trust banks in multiple investor accounts and managed by thefund managers of the trust banks. As of March 31, 2017 and 2018, each fund mainly consisted of marketable equity
securities and interest-bearing bonds. Investments in non-marketable equity securities are accounted for under cost
method and amounted to 382 million yen and 386 million yen as of March 31, 2017 and 2018, respectively. For theyears ended March 31, 2017 and 2018, Makita did not identify any events or changes in circumstances that might have
had significant adverse effects on the fair value of those investments.

Partial Translation of "YUKASHOKEN HOKOKUSHO" originally issued in Japanese

17

The following table shows the gross unrealized holding losses and fair value, aggregated by investment category andlength of time that individual securities have been in a continuous unrealized loss position, at March 31, 2017 and2018.
Yen in millions
12 months or more
Less than 12 months
As of March 31, 2017
Short-term investments:
Available-for-sale:
Investment trusts
Sub-total

As of March 31, 2018
Short-term investments:
Available-for-sale:
Investment trusts
Sub-total

Fair value

Unrealized
losses

1,424
1,424

Fair value

14
14

-

Unrealized
losses-Yen in millions
12 months or more
Less than 12 months
Unrealized
Unrealized
Fair value
losseslossesFair value

1,214
1,214

27
27

-

-

Maturities of debt securities classified as available-for-sale and held-to-maturity as of March 31, 2018, regardless of
their balance sheet classification, were as follows:
Cost
Due within one year
Due from one to five years
Due from five to ten years
Due after ten years
Total

Available-for-sale-

Yen in millions
Held-to-maturity
4,702
200
206
5,108

Total
4,702
200
2065,108

Available-for-sale-

Yen in millions
Held-to-maturity
4,702
206
204
5,112

Total
4,702
206
204
5,112

Fair Value
Due within one year
Due from one to five years
Due from five to ten years
Due after ten years
Total

Gross realized gains on sales of short-term investments and investments for the years ended March 31, 2017 and2018 amounted to 27 million yen and 300 million yen, respectively.
Gross realized losses, which included the gross realized losses considered as other than temporary, during the years
ended March 31, 2017 and 2018 amounted to 1 million yen and 1 million yen, respectively. The cost of the securities
sold was computed based on the moving average method. Impairment losses on short-term marketable investments andinvestments amounted to 27 million yen and 24 million yen for the years ended March 31, 2017 and 2018.
Proceeds from the sales and maturities of available-for-sale securities were 30,663 million yen and 11,993 million
yen for the years ended March 31, 2017 and 2018, respectively. Proceeds from maturities of the held-to-maturity
securities were 5,700 million yen and 4,200 million yen for the years ended March 31, 2017 and 2018, respectively.

Partial Translation of "YUKASHOKEN HOKOKUSHO" originally issued in Japanese18

6. GOODWILL AND OTHER INTANGIBLE ASSETS, NET
Intangible assets developed or acquired during the year ended March 31, 2018 totaled 1,040 million yen, which are
subject to amortization and primarily consist of software. The weighted average amortization period for software, otherand total is approximately 5 years, 5 years and 5 years, respectively. The components of intangible assets subject toamortization at March 31, 2017 and 2018 were as follows:
Yen in millions

Cost

2017
Accumulated
amortization

Carrying
amountCost

2018
Accumulated
amortization

Carrying
amountIndustrial property

2,790

1,514

1,276

2,796

1,716

1,080

Software

4,860

3,574

1,286

5,442

4,122

1,320

Other

2,074

1,058

1,016

2,408

911

1,497

Total

9,724

6,146

3,578

10,646

6,749

3,897

Aggregate amortization expense for the years ended March 31, 2017 and 2018 were 871 million yen and 786 million
yen, respectively. As of March 31, 2018, the estimated amortization expense for intangible assets currently held for the
next five years ending March 31 is 776 million yen in FY2019, 686 million yen in FY2020, 412 million yen in FY2021,
289 million yen in FY2022, and 286 million yen in FY2023.
Intangible assets not subject to amortization at March 31, 2017 and 2018 were as follows:

Acquisition cost

Yen in millions
2017
2018
63
47

The changes in the carrying amount of goodwill for the years ended in March 31, 2017 and 2018 were as follows:

Beginning balance
Impairment
Other
Ending balance

Yen in millions
2017
2018
721
721
721
721

The above goodwill was included in the Japan operating segment.

Partial Translation of "YUKASHOKEN HOKOKUSHO" originally issued in Japanese197. INCOME TAXES
Income before income taxes and the provision for income taxes for the years ended March 31, 2017 and 2018 wereas follows:
Yen in millions
2017
2018
Income before income taxes:
Domestic
26,221
29,491
Foreign
38,51750,187
Total
64,73879,678
Income tax expenses:
Current - Domestic
10,005
11,648- Foreign
9,983
13,295Sub-total
19,98824,943
Deferred - Domestic- Foreign
Sub-total
Total income tax expenses

75
(453)
(378)
19,610

(193)
(343)
(536)
24,407

Total income taxes including deferred tax for the years ended March 31, 2017 and 2018 were allocated as follows:

Income taxes
Other comprehensive income (loss)：
Foreign currency translation adjustment
Unrealized holding gains (losses) on
investment securities
Pension liability adjustment
Total income taxes

Yen in millions
2017
2018
19,61024,407
(495)
4,833

279
(609)

54
24,002

201
24,278The Company and its domestic subsidiaries are subject to a National Corporate tax of 23.4%, an Inhabitant tax 3.3%
and a deductible Enterprise tax of 5.0%, which in the aggregate figure resulted in a combined statutory income tax rateof 31.2% for the year ended March 31, 2017 and 2018.

Partial Translation of "YUKASHOKEN HOKOKUSHO" originally issued in Japanese20

A reconciliation of the combined statutory income tax rates to the effective income tax rates is as follows:Standard tax rate
Non-deductible expenses
Non-taxable dividends received
Change in valuation allowance
Tax sparing impact
Effect of the foreign tax rate differential
Undistributed earnings
Other
Effective income tax rate

Year ended March 31
2018
2017
31.2%
31.2%
0.3
0.5
(0.0)
(0.0)
(0.5)
(1.0)
(0.6)
(0.1)
(4.5)
(4.2)
4.2
3.5
0.2
1.3
30.6%
30.3%

For the year ended in March 31, 2017, an effect of the foreign tax rate differential of 2,933 million yen was recorded.
This was attributable to proportionately higher profits earned in the overseas subsidiaries compared to those in the
Company and domestic subsidiaries in the background of relatively lower tax rates applied in overseas subsidiaries.
Due mainly to these effects, the effective tax rate for the year ended March 31, 2017 was 30.3%, a decrease of 0.9
points as compared with the statutory income tax rate of 31.2%.
For the year ended in March 31, 2018, an effect of the foreign tax rate differential of 3,382 million yen was recorded.
This was attributable to proportionately higher profits earned in the overseas subsidiaries compared to those in the
Company and domestic subsidiaries in the background of relatively lower tax rates applied in overseas subsidiaries.
Due mainly to these effects, the effective tax rate for the year ended March 31, 2018 was 30.6%, a decrease of 0.6
points as compared with the statutory income tax rate of 31.2%.
According to the provisions of the tax treaties which have been concluded between Japan and 7 countries, Japanese
corporations can claim a tax credit against Japanese income taxes on income earned in one of those 7 countries, eventhough that income is exempted from income taxes or is reduced by special tax incentive measures in those countries,
as if no special exemption or reduction were provided. The Company applied such “tax sparing” mainly to China with
the indicated tax reduction effect. The effect of the “tax sparing” resulted in a decrease of tax expense by 0.6% (402million yen) and 0.1% (72 million yen) for the years ended March 31, 2017 and 2018, respectively.
The significant components of deferred income tax expense attributable to income before income taxes for the years
ended March 31, 2017 and 2018 were as follows:

Provision for income tax: Current
Deferred tax expense (benefit) (exclusive of the effects ofother components below)
Change in valuation allowance
Total

Partial Translation of "YUKASHOKEN HOKOKUSHO" originally issued in Japanese

Yen in millions
2017
2018
19,98824,943(29)(349)
19,610(1,325)789
24,40721

Significant components of deferred income tax assets and liabilities as of March 31, 2017 and 2018 were as follows:
Yen in millions
2017
2018
Deferred income tax assets:
Marketable securities and investment securities
Accrued retirement and termination benefits
Accrued expenses
Inventories
Property, plant and equipment
Accrued payroll
Net operating loss carryforwards of subsidiaries
Other
Total deferred income tax assets
Valuation allowance
Sub-total
Deferred income tax liabilities:
Undistributed earnings of overseas subsidiaries
Accrued retirement and termination benefits
Unrealized gain on available-for-sale securities
Property, plant and equipment
Other
Total deferred income tax liabilities
Net deferred income tax assets

26
490
1,663
2,765
3,060
1,617
1,877
917
12,415(2,796)
9,619

612
247
1,804
3,105
3,371
1,757
2,683
881
14,460(3,373)
11,087(7,302)(2,497)(5,142)(750)(2)(15,693)(6,074)(7,800)(2,869)(5,098)(734)(2)(16,503)(5,416)

As of March 31, 2017 and 2018, deferred income tax assets and liabilities are recorded in the consolidated balance
sheets as follows:
Yen in millions
2017
2018
Current assets
Investments and other assets
Current liabilities
non-current liabilities
Net deferred tax assets

4,723
650
(3,134)(8,313)(6,074)

3,975(9,391)(5,416)

In assessing the realizability of deferred income tax assets, Makita considers whether it is more likely than not thatsome portion or all of the deferred income tax assets will not be realized. The ultimate realization of deferred income
tax assets is dependent upon the generation of future taxable income during the periods in which those temporary
differences become deductible and net operating loss carry-forwards are utilizable. Makita considers the scheduled
reversal of deferred income tax liabilities, projected future taxable income, and tax planning strategies in making thisassessment.
Based upon the level of historical taxable income and projections for future taxable income over the periods inwhich the deferred income tax assets are deductible, Makita believes it is more likely than not that the benefits of thesedeductible differences and net operating loss carry-forwards, net of the existing valuation allowance, will be realized.
The actual amount of the deferred income tax assets realizable, however, would be reduced if estimates of futuretaxable income during the carry-forward period are not achieved. Makita has recorded a valuation allowance of 3,373
million yen as of March 31, 2018 against certain deferred income tax assets primarily associated with net operating
loss carry-forwards.

Partial Translation of "YUKASHOKEN HOKOKUSHO" originally issued in Japanese22As of March 31, 2018, certain subsidiaries had net operating loss carry-forwards for income tax purposes of 20,446
million yen which are available to offset future taxable income, if any. The time limits during which the net operating
losses may be offset against future taxable income are as follows:
March 31, 2018
Within 5 years
6 to 20 years
Indefinite
Total

Yen in millions(133)(1,481)(8,730)(10,344)

As of March 31, 2017 and 2018, Makita had no foreign tax credit carry-forwards for income tax purposes.
Makita has recognized deferred tax liabilities for certain portions of undistributed earnings of foreign subsidiaries,
while income taxes have not been accrued on undistributed earnings of domestic subsidiaries, as the tax law provides ameans by which the investment in domestic subsidiaries can be recovered tax free. Makita has not recognized deferred
tax liabilities for certain portions of undistributed earnings of foreign subsidiaries in the total amount of 155,780
million yen and 142,555 million yen as of March 31, 2017 and 2018. This is because Makita considers these earnings
to be indefinitely reinvested, and the calculation of the unrecognized deferred tax liabilities is not practicable.
The unrecognized tax benefits for the years ended March 31, 2017 and 2018 were neither material nor expected tosignificantly increase or decrease within the 12-month period subsequent to March 31, 2018. Makita classifies
penalties and interest related to unrecognized tax benefits, if any, as provision for income taxes, and the total amountsof penalties and interest related to unrecognized tax benefits recorded were not material for the years ended March 31,2017 and 2018. Makita conducts business globally and, as a result, the Company and its subsidiaries file income tax
returns in various jurisdictions all over the world. The Company will no longer be subject to income tax examinations
for the periods prior to the fiscal year ended March 31, 2015, and one of the Company’s major subsidiaries in the
United States remains subject to income tax examinations for the periods beginning in the year ended March 31, 2014.

Partial Translation of "YUKASHOKEN HOKOKUSHO" originally issued in Japanese23

8. ALLOWANCE FOR RETIREMENT BENEFITThe Company and certain of its subsidiaries have various employee retirement benefit plans covering substantiallyall of their employees. Under these plans, employees are entitled to lump-sum payments at the time of termination orretirement, or to pension payments. A domestic retirement benefit plan covers substantially all of the employees of theCompany.
The amounts of lump-sum or pension payments under the plans are generally determined on the basis of length ofservice and remuneration at the time of termination or retirement.
The net periodic pension costs of the defined benefit plans for the years ended March 31, 2017 and 2018 are as
follows:

Service cost
Interest cost
Expected return on plan assets
Amortization of prior service cost
Amortization of actuarial loss
Pension costs

Yen in millions
2017
2018
1,688
1,680
213
267
(1,346)(1,125)
(406)
(387)
635
547
982
784

Net actuarial loss and amortization of prior service cost which will be amortized from accumulated othercomprehensive income (loss) into net periodic benefit cost over the next fiscal year are as follows:

Amortization of actuarial loss
Amortization of prior service cost

Partial Translation of "YUKASHOKEN HOKOKUSHO" originally issued in Japanese

Yen in millions
2019
538
(472)

24

Reconciliations of beginning and ending balances of the benefit obligations and the fair value of the plan assets wereas follows:
Yen in millions
2017
2018
Change in projected benefit obligation:
Projected benefit obligation at beginning of
40,37039,777year
Service cost
1,688
1,680
Interest cost
213
267
Plan Amendment(1,187)
Actuarial difference
(605)
488
Benefits paid
(1,662)(1,638)Foreign exchange impact
(227)
315
Projected benefit obligation at end of year
39,77739,702
Change in plan assets:
Fair value of plan assets at beginning ofyear
Actual return on plan assets
Employer contributions
Benefits paid
Foreign exchange impact
Fair value of plan assets at end of year
Funding position
Amounts recognized in consolidated balance
sheets consisted of:Other current liabilities
Pension Allowance
Other assets
Amounts recognized in accumulated othercomprehensive income(loss) consisted of:Actuarial loss
Prior service cost

44,42744,898698
1,323(1,507)(43)
44,898
5,121

1,069
1,350
(1,443)71
45,945
6,244(103)(3,161)
8,385
5,121

(114)
(3,206)
9,564
6,244

(13,856)
3,556(10,300)(13,912)
4,357(9,555)

Measurement date
The Company uses a March 31 measurement date for all of its plans. The accumulated benefit obligation for all
defined benefit plans were as follows:

Accumulated benefit obligation

Yen in millions
2018
2017
38,81438,749Weighted-average assumptions
The weighted-average assumptions used to determine the benefit obligations as of March 31, 2017 and 2018 were as
follows:
Weighted-average rate used in determining the benefit obligation as of March 31
Discount rate
Salary increase rate

Partial Translation of "YUKASHOKEN HOKOKUSHO" originally issued in Japanese

2017
0.7%
4.7%

2018
0.6%
4.7%

25

The weighted-average assumptions used to determine net periodic pension cost for the years ended in March 31,2017 and 2018 were as follows:
Weighted-average rate used in determining the retirement benefit expenses
for years ended March 31, 2017 and 2018
Discount rate
Salary increase rate
Expected long-term rate of return on plan assets

2017
0.5%
4.8%
3.1%

2018
0.7%
4.8%
2.5%

The discount rate is determined by yield curve approach based on high-quality corporate bonds and long term
national bond. The expected rate of return on assets is determined considering the current and future asset portfolio andthe long-term rates of return which are expected currently and in the future from the variety of asset portfolios in plan
assets.
Plan Assets
The target asset allocations by asset class for the year ending March 31, 2019 are as follows:
Asset Class:
Asset Class:Equity securities
Debt securities
Life insurance company general accounts
Short-term assets
Alternative investments
Total

Target Allocations
5%
31
16
10
38
100%

The overall objective of Makita’s pension assets is to earn a rate of return to satisfy the benefit obligations of thepension plans and to pay benefits. In order to meet this objective, Makita determines an optimal asset mix from athree-to-five-year’s medium and long-term standpoint. To avoid a sharp decline in the asset value in the future, Makita
updates the asset mix as necessary by monitoring risks and assessing the magnitude of the risks. Makita has an
acceptable divergence indicator for the asset mix, and the proportion of the temporary asset allocations will be updated
promptly when the divergence occurs. Makita determined the mix of equity securities and debt securities after taking
into consideration the expected long-term rate of return on pension assets. To decide whether changes in the basic
portfolio are necessary, Makita examines the divergence between the expected long-term income and the actual income
from the portfolio on an annual basis. Makita and some subsidiaries revise the portfolio when it is deemed necessary toreach the expected long-term yield. The plans’ equity securities include common stock of the Company in the amountof 9 million yen as of March 31, 2018.

Partial Translation of "YUKASHOKEN HOKOKUSHO" originally issued in Japanese

26

The fair values of Makita’s pension plan assets as of March 31, 2017 and 2018, by asset class, were as follows:
As of March 31, 2017
Total
Fair value measured not at net asset value
Equity securities:
Domestic
Stock
Life insurance company general accounts
Short-term assets
Fair value measured at net asset value
Equity securities:
Domestic
Stocks(commingled)
Overseas
Stocks (commingled)
Debt securities:
Domestic
Commingled
Overseas
Commingled
Alternative investments
Commingled funds
Total

Level 3

1,314
6,973
5,399

1,314
5,399

6,973
-

-

1,557

-

-

-

3,525

-

-

-

10,731

-

-

-

7,279

-

-

-

8,120
44,898

6,713

6,973

-

As of March 31, 2018
Total
Fair value measured not at net asset value
Equity securities:
Domestic
Stock
Life insurance company general accounts
Short-term assets
Fair value measured at net asset value
Equity securities:
Domestic
Stocks(commingled)
Overseas
Stocks (commingled)
Debt securities:
Domestic
Commingled
Overseas
Commingled
Alternative investments
Commingled funds
Total

Yen in millions
Level 1
Level 2

Yen in millions
Level 1
Level 2

Level 3

1,433
7,522
9,007

1,433
9,007

7,522
-

-

1,324

-

-

-

2,427

-

-

-

11,069

-

-

-

5,362

-

-

-

7,801
45,945

10,4407,522-

Domestic and overseas equity securities consist primarily of stocks that are listed on the securities exchanges. Debt
securities consist primarily of domestic and overseas government and municipal bonds. Short-term assets consist
primarily of bank deposits with a short-term maturity. Level 1 assets are comprised principally of equity securities
which are valued based on quoted prices in active markets for identical assets. Level 2 assets are comprised principallyof investments in life insurance company general accounts.
Investments in life insurance company general accounts are valued at the amounts that are the conventional interest
added to the principle amounts calculated by the life insurance company. See note 15 for additional information about
fair value hierarchies and valuation techniques.

Partial Translation of "YUKASHOKEN HOKOKUSHO" originally issued in Japanese27Regarding the debt securities selection, Makita conducts a good research and analysis on issuance conditions, suchas rating, coupon, maturity date, and issuer. Makita appropriately diversifies investments by maturity and issuer. The
equity securities are selected primarily from stocks that are listed on securities exchanges and over-the-counter market.
Makita conducts a good research and analysis on the business scope and growth potential of companies to be invested
in, and appropriately diversifies investments by the type of industry. Regarding investments in foreign equity andbonds, Makita has investigated the political and economic stability of the markets to be invested in, the market
characteristics such as settlement systems and the taxation systems. On that basis, Makita selected countries andcurrencies appropriate for investment. For commingled funds, Makita selected those that have defined operating assets
and management style. Makita also has alternative investments in J-REIT, G-REIT, commodities, high-yield debts andhedge-funds (market neutral strategy for Japanese equity and relative value strategy for bonds).
The assets for which fair value is measured at net asset value, consisting of hedge-funds investment (relative value
strategy for bonds) and Commingled investment were valued using the net asset value calculated by the sponsor of thefund. Information for retirement benefit plans with an accumulated benefit obligation in excess of plan assets is asfollows:

Projected benefit obligation
Accumulated benefit obligation
Fair value of plan assets
Accumulated benefit obligation in excess of plan assets

Yen in millions
2018
2017
4,059
4,241
3,963
4,191
816
939
3,147
3,252

Cash flows
Contributions:
Makita expects to contribute 1,249 million yen to its defined benefit pension plan in the year ending March 31,
2019.
Estimated future benefit payments
At March 31, 2018, the benefits expected to be paid in each of the next five fiscal years, and in the aggregate for thefive years thereafter are as follows:Year ending March 31,
2019
2020
2021
2022
2023
2024-2028
Total

Partial Translation of "YUKASHOKEN HOKOKUSHO" originally issued in Japanese

Yen inmillions
2,098
2,066
1,872
1,762
2,102
10,347
20,24728

Certain foreign subsidiaries have defined contribution plans. The total expenses charged to income under these plans
were 325 million yen and 355 million yen for the years ended March 31, 2017 and 2018, respectively.
The Company has unfunded retirement allowance programs for the Directors and the Statutory Auditors. Under suchprograms, the aggregate amount set aside as retirement allowances for the Directors and the Statutory Auditors were
351 million yen and 326 million yen as of March 31, 2017 and 2018, respectively, which are included in otherliabilities in the accompanying balance sheets. This executive retirement and termination allowances program wasabolished by the Annual General Meeting of Shareholders held in June 2006. The aggregate amount set aside will be
paid to the Directors and the Statutory Auditors when they retire.

Partial Translation of "YUKASHOKEN HOKOKUSHO" originally issued in Japanese29

9. STOCK-BASED COMPENSATION
Based on the ordinary general shareholders’ meeting on June 25, 2015 and the provision of Article 361 of thecorporation law, we enacted stock option plan to its members of the board of directors, excluding outside directors.
We issued stock acquisition rights to its directors to purchase 700 shares of common stock on July 31, 2015, 682
shares of common stock on July 28, 2016 and 511 shares of common stock on July 31, 2017. Pursuant to the provisionsof the plan, stock acquisition rights may be exercised during a fifty-year period that starts from August 19, 2015 toAugust 18, 2065, from August 19, 2016 to August 18, 2066 and from August 19, 2017 to August 18, 2067,
respectively. The option vest once the directors retired from the company. The exercise price of each stock acquisitionis 1 yen.
The following table summarizes option activity under the Plans during the years ended March 31, 2017.

SharesBalance at April 1, 2016
GrantedExercised
Forfeited/Expired
Balance at March 31, 2017
Exercisable at March 31,2017

Weightedaverage
exercise
price

Weighted-averageremaining
contractual
term

Aggregate
intrinsic value

Yen

Years

Millions ofyen

14,00013,64027,640
-

1
1
1
-

48.9
-

108
-

The following table summarizes option activity under the Plans during the years ended March 31, 2018.

SharesBalance at April 1, 2017
GrantedExercised
Forfeited/Expired
Balance at March 31, 2018
Exercisable at March 31,2018

27,640
10,220(8,680)29,180-Weightedaverage
exercise
price

Weighted-averageremaining
contractual
term

Aggregate
intrinsic value

Yen

Years

Millions of
yen

1
1
1
1
-

48.9
48.4
-

108
152
-

The stock-based compensation expenses recognized as selling, general and administrative expenses for this stock
option for the years ended March 31, 2017and 2018 was 45 million yen and 41 million yen, respectively. The
grant-date fair value during the year ended March 31, 2017 and 2018 was 45 million yen and 40 million yen,respectively.
The aggregate intrinsic value of exercised stock options on the year ended March 31, 2018 was 36 million and
Makita disposed treasury stock. The sum of money paid up by exercise of stock options is not material.
The Grant-date fair value of stock acquisition rights per share on the year ended March 31, 2017 and 2018 was 6,569
yen and 3,892 yen. It was estimated on the following assumption, using a Black-Scholes valuation model.

Grant-date stock prices
Expected remaining contractual
termrisk-free rate

March 31,2017

March 31,2018

7,160Yen
6.1Year

4,320Yen
9.0Year(0.18)%

0.01%

Partial Translation of "YUKASHOKEN HOKOKUSHO" originally issued in Japanese30Volatility of the Company’s stock
34.93%
40.15%
Dividend yield of the Company
1.41%
1.16%
NOTE: The Company implemented a two-for-one common stock split, effective April 1, 2017. We calculated on theassumption that the relevant stock split had been implemented at the beginning of the previous consolidated fiscal year.

Partial Translation of "YUKASHOKEN HOKOKUSHO" originally issued in Japanese31

10. SHORT-TERM BORROWINGS AND LONG-TERM INDEBTEDNESSAs of March 31, 2017 and 2018, short-term borrowings consisted of the following:
Yen in millions
2018
2017
6,564
3,361
50
15
3,411
6,579

Bank borrowings
Current maturities of long-term indebtedness
Total

Short-term borrowings, excluding long-term indebtedness maturing within one year, consisted primarily of bankborrowings of overseas subsidiaries denominated in foreign currencies. As of March 31, 2017 and 2018, the weighted
average interest rate on short-term bank borrowings was 0.21% and 0.25%, respectively. Certain subsidiaries of theCompany had unused lines of credit available for immediate short-term borrowings without restrictions amounting to7,790 million yen and 12,592 million yen of March 31, 2017 and 2018, respectively.
As of March 31, 2017 and 2018, long-term indebtedness consisted of the following:
Yen in millions
2018
2017
33
183
(15)
(50)
133
18

Bank borrowings
Capital lease obligations (see Note 2 (8) )Current maturities included in short-term borrowings
Total

There were no covenants or cross default provisions under the Makita’s financing arrangements. Furthermore, there
were no subsidiary level dividend restrictions under the financing arrangements.
The aggregate annual maturities of long-term indebtedness subsequent to March 31, 2018 are as summarized below:
Year ending March 31,
2019
2020
2021
2022
2023
2024 and after
Total

Yen in millions
50
126
4
2
1
183

Partial Translation of "YUKASHOKEN HOKOKUSHO" originally issued in Japanese32

11. SHAREHOLDERS’ EQUITYThe Companies Act of Japan provides that an amount equal to 10% of distributions from retained earnings paid by
the Company should be appropriated as a capital reserve or earned reserve (hereinafter called reserve). No further
appropriations are required when the total amount of the reserve exceeds 25% of the capital stock. After shareholders’approval of the declaration of a cash dividend in the amount of 13,845 million yen at the annual meeting ofshareholders held on June 27, 2018 based on a resolution of the Board of Directors, cash dividends will be paid toshareholders of record as of March 31, 2018. The declaration of this dividend has not been reflected in the consolidated
financial statements as of March 31, 2018.
The amount of retained earnings available for dividends distribution is recorded in the Company’s non-consolidated
financial statement and amounted to 230,314 million yen as of March 31, 2018.

Partial Translation of "YUKASHOKEN HOKOKUSHO" originally issued in Japanese33

12. OTHER COMPREHENSIVE INCOME (LOSS)
Accumulated other comprehensive income (loss) as of March 31, 2017 and 2018 were as follows:

For the year ended March 31, 2017

Beginning balance
Other comprehensive income (loss) before
reclassification
Reclassification
Other comprehensive income (loss)
Less: Other comprehensive income
attributable to noncontrolling interests
Ending balance

For the year ended March 31, 2018

Beginning balance
Other comprehensive income (loss) before
reclassification
Reclassification
Other comprehensive income (loss)
Less: Other comprehensive income
attributable to noncontrolling interests
Ending balance

Foreigncurrencytranslation
adjustment(8,959)

Yen in millions
Unrealized
Pensiongains onliability
investment
adjustment
securities
6,516(6,606)

Total(9,049)(19,812)(19,812)

10,755(13)
10,74215
177
192(9,042)
164(8,878)(199)(28,572)

17,258(6,414)(199)(17,728)

Foreigncurrencytranslation
adjustment(28,572)

Yen in millions
Unrealized
Pensiongains onliability
investment
adjustment
securities
17,258(6,414)

Total(17,728)

9,860
9,860

(1,165)(199)(1,364)

412
132
544

9,107
(67)
9,040

217
(18,929)

15,894(5,870)217(8,905)

Tax effects allocated to each component of other comprehensive income (loss) and reclassification adjustments wereas follows:

For the year ended March 31, 2017
Foreign currency translation adjustment:
Net unrealized gains and losses on securities
Unrealized losses arising during the year
Deduction: Reclassification adjustment for losses
realized in net income
Net unrealized losses
Pension liability adjustment:
Unrealized losses arising during the year
Deduction: Reclassification adjustment for losses
realized in net income
Net unrealized losses
Other comprehensive income (loss)

Before tax
adjustment(20,307)

Yen in millions
AmountAfter tax
of taxadjustment
495(19,812)

15,594(4,839)10,755(19)
15,575

6(4,833)(13)
10,742

17

(2)

15

229
246
(4,486)(52)(54)(4,392)

177
192(8,878)

Partial Translation of "YUKASHOKEN HOKOKUSHO" originally issued in Japanese34For the year ended March 31, 2018

Before tax
adjustment
10,139Foreign currency translation adjustment:
Net unrealized gains and losses on securities
Unrealized losses arising during the year
Deduction: Reclassification adjustment for losses
realized in net income
Net unrealized losses
Pension liability adjustment:
Unrealized losses arising during the year
Deduction: Reclassification adjustment for losses
realized in net income
Net unrealized losses
Other comprehensive income (loss)

Yen in millions
AmountAfter tax
of taxadjustment
(279)
9,860

(1,685)520(1,165)(288)(1,973)

89
609

(199)
(1,364)

585

(173)

412

160
745
8,911

(28)
(201)
129

132
544
9,040

Other comprehensive income (loss) redistribution of accumulated amount were as follows :For the year ended March 31, 2017
Yen in millions
Other Comprehensive Income
Items that influence the(Loss)
consolidated statement ofRedistribution of accumulated
incomeamountUnrealized gain arising during the year
Realized gains on securities
Unrealized loss on securities

Pension liability adjustment
Amortization of prior service cost
Actuarial difference Elimination ofdifferences in calculation methods

Total reclassified amount

23
(4)
(6)
13
406
(635)
(229)
52
(177)
(164)

Partial Translation of "YUKASHOKEN HOKOKUSHO" originally issued in JapaneseRealized gains (losses) on
securities, net
Impairment loss on securities
Provision for income taxes
Net Income※※
Income before income taxes
Provision for income taxes
Net Income35

For the year ended March 31, 2018
Yen in millions
Other Comprehensive Income(Loss)
Items that influence theRedistribution of accumulated
consolidated statement ofamountincomeUnrealized gain arising during the year
Realized gains on securities
Unrealized loss on securities

Pension liability adjustment
Amortization of prior service cost
Actuarial difference Elimination ofdifferences in calculation methods

Total reclassified amount

299
(11)
(89)
199
387
(547)
(160)
28
(132)
67

Realized gains (losses) on
securities, net
Impairment loss on securities
Provision for income taxes
Net Income※※
Income before income taxes
Provision for income taxes
Net Income※Included pension payments. See note 8 for Consolidated Financial Statements (ALLOWANCE FOR RETIREMENTBENEFIT)

Partial Translation of "YUKASHOKEN HOKOKUSHO" originally issued in Japanese36

13. EARNINGS PER SHARE
Basic earnings per share computations were as follows.

Numerator
Net income available to common shareholders- Basic
Denominator
Weighted-average number of common shares outstanding- Basic
Effect of diluted securities:
Stock Option
Diluted common shares outstanding

Earnings per share: Basic
Earnings per share: Diluted

Yen in millions
2017
2018
44,78254,755
Number of shares
2017
2018
271,463,676 271,465,951
22,519271,486,195
Yen
2017
165.0
165.0

27,870271,493,821

2018
201.7
201.7

NOTE: The Company implemented a two-for-one common stock split, effective April 1, 2017. Net income attributable
to Makita Corporation common shareholders per share (basic) and net income attributable to Makita Corporationcommon shareholders per share (diluted) were calculated on the assumption that the relevant stock split had been
implemented at the beginning of the previous consolidated fiscal year.

Partial Translation of "YUKASHOKEN HOKOKUSHO" originally issued in Japanese37

14. COMMITMENTS AND CONTINGENT LIABILITIES
Makita guarantees borrowings of its employees from external financial institutions. As of March 31, 2017 and 2018,
the Company was contingently liable as a guarantor for housing and education loans to employees in the amount of 1
million yen, respectively. The Company will be required to satisfy the outstanding loan commitments of certain
employees in the event those employees are not able to fulfill their repayment obligations. The fair value of theliabilities for the Company’s obligations under the guarantees described above as of March 31, 2018, was insignificant.
Makita is involved in various claims and legal actions arising in the ordinary course of business. In the opinion ofmanagement, the ultimate disposition of these matters will not have a material adverse effect on Makita’s consolidated
financial position, results of operations, or cash flows.
Makita made rental payments of 3,411 million yen and 3,474 million yen under cancelable and noncancelable
operating lease agreements for offices, warehouses, automobiles and office equipment during the years ended March
31, 2017 and 2018, respectively. The minimum rental payments required under noncancelable operating leaseagreements as of March 31, 2018, were as follows:
Yen inmillions
1,310
886
612
514
399
784
4,505

March 31, 2018
2019
2020
2021
2022
2023
2024 and after
Total

Makita generally guarantees the performance of products delivered and of services rendered for a certain period or
term. Estimates for product warranty cost are made based on historical warranty claim experience. The changes inprovision for product warranty cost for the years ended March 31, 2017 and 2018 are summarized as follows:

Balance at beginning of year
Increase amount
Decrease amount (Utilization)
Foreign exchange adjustments
Balance at end of year

Yen in millions
2017
2018
2,972
3,163
2,292
2,684
(2,036)(2,570)
(65)
23
3,300
3,163

Liabilities for environmental protection and other environmental costs, if any, are accrued when environmental
assessments or remedial efforts are probable to be required and the costs can be reasonably estimated.
Following the closure of operations in Numazu office in FY2014, we conducted a soil contamination investigation tofind that there was a possibility for exceeding pollution threshold prescribed by Soil Contamination Countermeasures
Act. Therefore, we implemented land improvement construction such as drilling, removing the contaminated soil andreclaiming the land. The construction was completed on December 2015 and submitted report of construction
completed and got the approval of the local government on March 31, 2018.
The provisions for environment protection as of March 31, 2017 and 2018 were as follows:

Balance at beginning of year
Increase amount
Decrease amount (Utilization)
Other*
Balance at end of year

Yen in millions
2017
2018
560
560
(69)
(491)
560

Partial Translation of "YUKASHOKEN HOKOKUSHO" originally issued in Japanese38* The difference between estimated and actual costs was written off because Makita got the approval of the local
government on March 31, 2018.

15. FAIR VALUE MEASUREMENTS
ASC 820 establishes a fair value hierarchy that prioritizes the inputs applied to valuation techniques used to measurefair value. The hierarchy gives the highest priority to unadjusted quoted market prices in active markets for identicalassets or liabilities (Level 1 measurements) and the lowest priority to measurements involving significant unobservable
inputs (Level 3 measurements).
The three levels of the fair value hierarchy are as follows:
Level 1:
Inputs are quoted prices in active markets for identical assets or liabilities that theCompany has the ability to access at the measurement date.
Level 2:
Inputs are those other than quoted prices included in Level 1 that are observablefor the asset or liability, either directly or indirectly.
Level 3:
Inputs are unobservable types for the asset or liability.
The level in the fair value hierarchy within which a fair values measurement in its entirety falls is based on thelowest level input that is significant to the fair value measurement in its entirety.
Assets and liabilities measured at fair value on a recurring basis
The following table presents the placement in the fair value hierarchy of Makita’s assets and liabilities that were
measured at fair value on a recurring basis as of March 31, 2017 and 2018:

Total

Yen in millions
Level 1
Level 2

2,938
11,248
4,763
392
274

2,938
4,763
-

11,248274-

33,42233,422

-

-

(269)

-

(269)

-

Total

Yen in millions
Level 1
Level 2

Level 3

3,511
34
6,469
62
125

3,511
6,469
-

34
125

-

33,02733,027

-

-

(379)

-

(379)

-

As of March 31, 2017
Assets:Short-term investments:
Investment trusts
MMF and FFF
Marketable equity securities
Fair value measured at Net Asset Value

Derivatives
Investments:
Marketable equity securities
Liabilities:
Derivatives
As of March 31, 2018
Assets:Short-term investments:
Investment trusts
MMF and FFF
Marketable equity securities
Fair value measured at Net Asset Value

Derivatives
Investments:
Marketable equity securities
Liabilities:
Derivatives

Partial Translation of "YUKASHOKEN HOKOKUSHO" originally issued in Japanese

Level 339

Level 1:
Short-term investments and investments are comprised of marketable equity securities. They are valued using an
unadjusted quoted market price in active markets with sufficient volume and frequency of transactions.
Level 2:
MMF and FFF are acronyms for “Money Management Funds” and “Free Financial Funds”. They are comprised
principally of domestic public bonds, domestic corporate bonds, commercial papers, foreign public bonds and foreign
corporate bonds which are operated to accrue stable capital gain.
Corporate bonds are not directly observable, but are valued using observable market data obtained from the financial
institutions.
Derivatives are comprised of foreign currency contracts which are estimated by using observable market inputs,
such as foreign currency exchange rates, interest rate and volatility.
The assets for which fair value measured at net asset value are comprised principally of foreign bond investment
funds that are valued at their net asset values calculated by the sponsor of the fund.
Assets and liabilities measured at fair value on a nonrecurring basis
During the year ended March 31, 2017 and 2018, there is no asset and liability that was measured at fair value on
nonrecurring basis.

Partial Translation of "YUKASHOKEN HOKOKUSHO" originally issued in Japanese40

16. DERIVATIVES AND HEDGING ACTIVITIESRisk management policy
Makita is exposed to market risks, such as changes in currency exchange rates and interest rates. The Company andcertain of its subsidiaries enter into foreign exchange contracts and currency swap to reduce these risks. Makita does
not use derivative instruments for trading or speculation purpose. Makita is also exposed to a risk of credit-related
losses in the event of nonperformance by counter parties to the financial instrument contracts; however it is notexpected that any counter parties will fail to meet their obligations, because the contracts are diversified among a
number of major internationally recognized credit-worthy financial institutions.
Foreign exchange rate risk management
Makita operates internationally, giving rise to significant exposures to market risks from changes in foreignexchange rates, and enters into foreign currency contracts and currency swap to hedge the foreign currency exposure.
These derivative instruments are principally intended to protect against foreign exchange exposure related tointercompany transactions and financing activities.
The fair value of the derivative instruments as of March 31, 2017 and 2018 were as follows.
Yen in millions
March 31,
March 31,
2017
2018

Derivatives not designated as hedging
instruments
Account title
AssetsForeign currency contracts
Other current assets
Liabilities
Foreign currency contracts
Other current liabilities
Currency swap
Other current liabilities

274

125

(269)
-

(379)
-

The amount of gains (losses) recognized in income from derivatives for the years ended March 31, 2017 and 2018
were as follows:
Yen in millions
Derivatives notdesignated as hedging
instruments

Account title

Foreign currency
contracts

Net exchange gains (losses)

(550)

(259)

Currency swap

Net exchange gains (losses)

8-

Amount of gains (losses) on
valuation of derivative
2017
2018

Partial Translation of "YUKASHOKEN HOKOKUSHO" originally issued in Japanese41

As of March 31, 2017 and 2018, the components of the notional amounts related to outstanding derivative assets andliabilities, by product and by currency, were as follows:
Breakdown of notional amounts outstanding byderivative productYen in millions
March 31, 2018
March 31, 2017

Foreign currency contracts

18,825

16,056

Total

18,825

16,056

Breakdown of notional amounts outstanding by
currency

Yen in millions
March 31, 2018
March 31, 2017

U.S. Dollars

7,475

7,159

Euro

7,990

6,967

Other

3,360

1,930

Total

18,825

16,056

Interest rate risk management
Makita conducts financing and investing activities through the Company. As Makita’s subsidiaries are financed byloans within the Group—from subsidiaries with surplus funds to subsidiaries that lack funds—interest expense
variation is insignificant.

Partial Translation of "YUKASHOKEN HOKOKUSHO" originally issued in Japanese42

17. FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and significant assumptions are used to estimate the fair value of each class of financial
instruments for which it is practicable to estimate a fair value:(1) Cash and Cash Equivalents, Time Deposits, Trade Notes and Accounts Receivable, Short-term Borrowings, Trade
Notes and Accounts Payable, Other Payables, and Accrued Expenses
The carrying amounts approximate to the fair value because of the short or no maturities of those instruments.
(2) Long-term Time Deposits
The fair value is estimated by discounting future cash flows using the market rate at the end of the year, in which
Makita would be offered for deposits with similar terms and remaining maturities.
(3) Short-term Investments and Investments
The fair value of marketable short-term investments is estimated based on quoted market prices. For non-marketablesecurities, since there are no quoted market prices existing, a reasonable estimation of a fair value is impracticable, andsuch securities have been excluded from fair value disclosure. The fair value of such securities is estimated if and when
the fair value becomes extremely low, or there may be indications of this.
Non-marketable securities amounted to 382 million yen and 386 million yen as of March 31, 2017 and 2018
respectively, of which 4 million yen is invested in Short-term investments and 382 million yen is invested in
Investments as of March 31, 2018.
(4) Long-term Indebtedness
The fair value of long-term indebtedness is calculated based on the present value of future cash flows associatedwith each instrument discounted using Makita’s current borrowing rates for similar debt instruments of comparable
maturities.
(5) Derivatives
The fair values of derivative financial instruments, consisting of foreign currency contracts and currency swap used
for hedging purposes, are estimated by obtaining quotes from brokers.
As of March 31, 2017 and 2018, the estimated fair value of the financial instruments was as follows:
Yen in millions
March 31, 2017
March 31, 2018
Carrying
amountFair value

Carrying
amountFair value

Fair Value
Hierarchy Levels

Short-term investments(see Note 15)

23,441

23,438

14,778

14,778

1 or 2

Investments(see Note 15)

33,622

33,63333,43333,437

1 or 2

10

10

9

9

Long-term time deposits

2Long-term indebtedness
including current maturities
(33)
(33)
(183)
(183)
2
Foreign currency contracts:
Assets(see Note 15)
274
274
125
125
2
Foreign currency contracts:
Liabilities(see Note 15)
(269)
(269)
(379)
(379)
2
Currency swap:
Liabilities(see Note 15)
2
The fair value estimates are made at a specific point in time, based on relevant market information and information
about the financial instruments. These estimates are subjective in nature and involve uncertainties and are matters ofsignificant judgment and therefore cannot be determined with precision. Changes in assumptions could significantly
affect the estimates.

Partial Translation of "YUKASHOKEN HOKOKUSHO" originally issued in Japanese43

18. SEGMENT INFORMATIONThe operating segments presented below are defined as components of the enterprise for which separate financial
information is available and regularly reviewed by the Company’s chief operating decision maker. The Company’s
chief operating decision maker utilizes various measurements to assess segment performance and allocate company
resources to the segments.
Segment by region
For the years ended March 31, 2017 and 2018, Makita’s operating structure included the following geographicaloperating segments: Japan Group, Europe Group, North America Group, Asia Group, and Other Regions Group.
Segment information is determined by the location of the Company and its relevant subsidiaries, as reported to theCompany’s chief operating decision maker.
Major countries or regions in each geographic area:(1) Europe:
Germany, United Kingdom, Russia, France, Finland(2) North America:
United States, Canada(3) Asia:
China, Thailand(4) Other regions:
Australia, Brazil, United Arab Emirates
Makita evaluates the performance of each operating segment based on U.S. GAAP information. Segment profit andloss is measured in a consistent manner with consolidated operating income, which excludes interest income, dividend
income, interest expense, foreign exchange gains or losses, realized gains and losses on investment securities, and other.
Segment assets are based on total assets attributable to the segment. The accounting policies used in the segments
information are the same as those used in the preparation of the consolidated financial statements. Inter-segment sales
are made at estimated arm’s-length. Eliminations and corporate items include inter-segment transactions, inter-segment
payables and receivables, and elimination of unrealized profits related to inter-segment transactions. Makita is amanufacturer and wholesaler of electric power tools and other tools. The operating segments derive substantially all of
their revenues from the sale of electric power tools and parts and their repairs.
Year ended March 31, 2017
(From April 1, 2016 to March 31, 2017)

Sales:
External customers
Inter-segment(including transfers)
Total
Operating expenses
Operating income
Non-operating income
Income before incometaxesLong-lived assets
Total assets
Capital expenditures
Loss on valuation of
inventories
Depreciation andamortization
Provision forenvironmental
measures

Yen in millions
Other
Asia
regions

Total

Corporate andEliminations

Consolidated

Japan

EuropeNorth
America

97,797

169,204

68,06922,33657,593414,999-

414,999

144,791
242,588
218,973
23,615-

4,238
173,442
159,804
13,638-3,553
71,62270,035
1,587-

172,357
194,693
173,637
21,056-525
58,11855,732
2,386-

325,464
740,463
678,181
62,282-(325,464)(325,464)(325,746)
282-

414,999352,435
62,5642,174

38,061
354,552
2,809

21,554
187,668
2,602

4,601
52,0592,450

23,516
162,231
4,654

7,009
70,897749

94,741
827,407
13,264(234)(230,158)(42)

64,73894,507597,249
13,222

63

1,025

53

751

185

2,077

-

2,077

2,777

1,857

460

3,514

415

9,023

(80)

8,943

-

-

-

-

-

-

-

-

The Long-lived assets in China included in the Asia Segment amount to 17,432 million yen.

Partial Translation of "YUKASHOKEN HOKOKUSHO" originally issued in Japanese44Year ended March 31, 2018
(From April 1, 2017 to March 31, 2018)

Sales:
External customers
Inter-segment(including transfers)
Total
Operating expenses
Operating income
Non-operating income
Income before incometaxesLong-lived assets
Total assets
Capital expenditures
Loss on valuation of
inventories
Depreciation andamortization
Provision forenvironmental
measures

Yen in millions
Other
Asia
regions

Total

Corporate andEliminations

Consolidated

Japan

EuropeNorth
America

106,862202,364

76,325

26,13965,608477,298-477,298

202,827
309,689
278,313
31,376-

4,811
207,175
188,160
19,015-

4,388
80,71378,452
2,261-

212,697
238,836214,271
24,565-

1,560
67,16861,673
5,495-

426,283
903,581820,869
82,712-(426,283)(426,283)(423,333)(2,950)-477,298
397,536
79,762(84)

39,302
390,877
4,518

24,117
227,172
2,860

4,653
61,161625

25,589163,066
5,561

6,540
71,997497

100,201
914,273
14,061(337)(263,242)
88

79,67899,864651,031
14,149

-

1,609

240

423

487

2,759

-

2,759

2,923

2,106

595

3,915

461

10,000

(83)

9,917

(491)

-

-

-

-

-

(491)

(491)

The Long-lived assets in China included in the Asia Segment amount to 19,239 million yen.
Makita’s current revenues by geographic area are set forth below.

Japan
EuropeUnited States
North America(excluding United States)
Asia (excluding Japan)
Other
Total

Yen in millions, except for percentage amounts
Year ended March 31,
2017
2018
74,381
17.9%
82,57517.3%
168,99240.7
202,054
42.3
57,22013.8
64,08913.4
8,928
40,07965,399414,999

2.1
9.7
15.8
100.0%

9,784
44,09474,702477,298

2.1
9.2
15.7
100.0%

No single external customer accounted for 10% or more of Makita’s net sales for each of the year ended March 31,2017 and 2018.
Consolidated Net Sales by Product Categories are as follows:

Electric Power Tools
Gardening Equipment,
Household and Other Products
Parts, Repairs and Accessories
Total

Yen in millions, except for percentage amounts
Fiscal Year ended March 31,
2017
2018
269,787
65.0%
299,26462.7%
77,501
67,711
414,99918.7
16.3
100.0%

Partial Translation of "YUKASHOKEN HOKOKUSHO" originally issued in Japanese

99,97678,058477,298

20.9
16.4
100.0%

45

19. SUPPLEMENTARY INFORMATION TO THE CONSOLIDATED STATEMENTS OF INCOME
The following items and amounts were included in selling, general, administrative and others, net:
Yen in millions
Item

2017

2018

Research and Development Costs

10,13910,894Advertising Costs

6,642

8,363

Shipping and Handling Costs

7,389

8,637

-

(491)

Provision for environmental protection

Partial Translation of "YUKASHOKEN HOKOKUSHO" originally issued in Japanese46

20. RELATED PARTY TRANSACTIONS
The transactions between the Company and Maruwa Co., Ltd. (“Maruwa”), for which the representative director of
the Company, Masahiko Goto, the representative director of the Company, Munetoshi Goto and certain of his family
members have a majority of the voting rights, amounted to 2 million yen for advertising expenses for each of the years
ended March 31, 2017 and 2018. The accounts payable of the Company related to these transactions were nil as ofMarch 31, 2017 and March 31, 2018.
The Company’s purchases of raw materials and production equipment from Toa Co., Ltd., for which a representative
director of the Company, Masahiko Goto, the representative director of the Company, Munetoshi Goto and certain of
his family members have a majority of the voting rights, were 93 million yen and 162 million yen during the years
ended March 31, 2017 and 2018, respectively. The other payables of the Company related to these transactions were 14
million yen and 6 million yen as of March 31, 2017 and 2018, respectively.
21. SUBSEQUENT EVENTS
Not applicable.
【Schedule to the Consolidated Financial Statements】
List of Bonds Payable
Makita has no Bonds Payable.
List of Borrowings
Please refer to Notes 10 of the Consolidated Financial Statementsa.

List of Asset Retirement Obligation
Since the balance of Asset Retirement Obligation was less than one-hundredth of the total of liabilities and net assets
as of the beginning and ending of FY2018, a detailed description of this is omitted.

Partial Translation of "YUKASHOKEN HOKOKUSHO" originally issued in Japanese

47

(TRANSLATION)

Independent Auditor’s Report on the Financial Statements
andInternal Control Over Financial Reporting
June 29, 2018
To the Board of Directors of Makita Corporation:
KPMG AZSA LLC
Hideaki Koyama (Seal)
Designated Limited Liability Partner
Engagement Partner
Certified Public Accountant
Masaki Kawaguchi (Seal)
Designated Limited Liability Partner
Engagement Partner
Certified Public Accountant
Financial Statement Audit
We have audited the accompanying consolidated financial statements of Makita Corporation and its
consolidated subsidiaries provided in the “Financial Information” section in the company’s Annual Report,
which comprise the consolidated balance sheet as at March 31, 2018 and the consolidated statement ofincome, statement of comprehensive income, statement of changes in equity and statement of cash flows forthe year then ended, and notes to consolidated financial statements and schedule to the consolidated
financial statements , in accordance with Article 193-2(1) of the Financial Instruments and Exchange Law ofJapan.
Management’s Responsibility for the Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of these consolidated financial
statements in accordance with accounting principles generally accepted in the United States of America
pursuant to the Paragraph 3 of the Supplementary Provisions of the Cabinet Office Ordinance for Partial
Amendment of the Regulations for Terminology, Forms and Preparation Methods of Consolidated Financial
Statements (No.11 of the Cabinet Office Ordinance in 2002), and for such internal control as management
determines is necessary to enable the preparation of consolidated financial statements that are free frommaterial misstatements, whether due to fraud or error.
Auditor’s Responsibility
Our responsibility is to independently express an opinion on these consolidated financial statements basedon our audit. We conducted our audit in accordance with auditing standards generally accepted in Japan.
Those standards require that we perform the audit to obtain reasonable assurance about whether the
consolidated financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the
consolidated financial statements. The procedures selected depend on our judgement, including theassessment of the risks of material misstatement of the consolidated financial statements, whether due toPartial Translation of "YUKASHOKEN HOKOKUSHO" originally issued in Japanese48

fraud or error. In making those risk assessments, we consideres internal control relevant to the entity’s
preparation and fair presentation of the consolidated financial statements in order to design audit proceduresthat are appropriate in the circumstances, while the objective of the financial statement audit is not for the
purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes
evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates
made by management, as well as evaluating the overall presentation of the consolidated financial
statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our
audit opinion.
OpinionIn our opinion, the consolidated financial statements present fairly, in all material respects, the financial
position of Makita Corporation and its consolidated subsidiaries as at March 31, 2018, and their financial
performance and cash flows for the year then ended in accordance with accounting principles generally
accepted in the United States of America.

Internal Control Audit
We also have audited the accompanying internal control report of Makita Corporation as at March 31, 2018,
in accordance with Article 193-2(2) of the Financial Instruments and Exchange Law of Japan.
Management’s Responsibility for the Internal Control ReportManagement is responsible for the design and operation of internal control over financial reporting and the
preparation and fair presentation of the internal control report in accordance with assessment standards forinternal control over financial reporting generally accepted in Japan. Internal control over financial reporting
may not completely prevent or detect financial statement misstatements.
Auditor’s Responsibility
Our responsibility is to independently express an opinion on the internal control report based on our internal
control audit. We conducted our internal control audit in accordance with auditing standards for internal
control over financial reporting generally accepted in Japan. Those standards require that we plan andperform the audit to obtain reasonable assurance about whether the internal control report is free frommaterial misstatement.
An internal control audit involves performing procedures to obtain audit evidence about the assessment ofinternal control over financial reporting in the internal control report. The procedures selected depend on theauditor’s judgement, including significance of effect on the reliability of financial reporting. Also, an internal
control audit includes evaluating the appropriateness of the scope, procedures and result of the assessment
determined and presented by management, and the overall internal control report presentation.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our
opinion.
OpinionIn our opinion, the internal control report, in which Makita Corporation states that internal control overfinancial reporting was effective as at March 31, 2018, presents fairly, in all material respects, thePartial Translation of "YUKASHOKEN HOKOKUSHO" originally issued in Japanese49assessment of internal control over financial reporting in accordance with assessment standards for internal
control over financial reporting generally accepted in Japan.
Other Matter
Our firm and engagement partners have no interest in the Company which should be disclosed pursuant to
the provisions of the Certified Public Accountants Law of Japan.

Notes to the reader of audit report:
The Independent Auditor’s Report herein is the English translation of the Independent Auditor’s Report as
required by the Financial Instruments and Exchange Law of Japan.

Partial Translation of "YUKASHOKEN HOKOKUSHO" originally issued in Japanese50