Annual Report

2018Year ended December 31, 2018

Motor for vacuum cleaner
ID-659ZA

IS-92BZC
Motor for commercial
robot and light electricvehicleExpanded Our Lineup
in the Consumer andIndustrial Products Market
to Achieve Further Growth

IS-94BZC

Motors for the Future of
People Around the World——— We Expanded Our Lineup in the Consumer andIndustrial Products Market in Addition to
the Automotive Products Market to Achieve Further Growth

Since its founding, Mabuchi Motor Co., Ltd. has been a
specialist manufacturer of small motors that consistently
deliver high quality and efficiency at low prices in line withour basic policy of “bringing better and more reasonably
priced goods to the market.” Our small motors find diverse
applications in automotive products and consumer andindustrial products, including home appliances, power tools,
precision and office equipment, audio andvisual equipment, and toys. In this way,
we contribute to convenient, comfortableliving for people the world over.
“The Mabuchi Group is the world’s
leading producer of small motors. Our annual production volume of
approximately 1,562 million units (in 2018) is testimony to the excellent reputation andtrust we have built with our customers and a source of great pride for us.
In the coming years, we will continue to aspire to create new value through productdevelopment adaptable to market needs and through a flexible supply system.”

Enlarging Our Contribution Through
New Business

Enlarging Our Contribution to
Existing Businesses

We hope to challenge ourselves in new business spheresby creatively combining the technology we have cultivatedover the years into new forms that are applicable totomorrow’s needs. By investigating resources outside ourwalls and by measuring our in-house capabilities, we strive
to develop new technological platforms. By refining our
product and business skills, we in turn strengthen our own
internal structure. Attentive to current technologicaltrends, we invest our energy in business fields where webelieve Mabuchi Motor can excel. Our constant hope is toprovide highly advanced technology, products, andservices with a special touch of “Mabuchi-ness.”

By improving the products and processes of our existing
strata of businesses and by retaining the unique hightechnology of crucial components within our enterprise, we
are able to accomplish the following endeavors thatbuttress our continuous effort to raise consumer satisfaction.

Profile1

MABUCHI MOTOR CO., LTD.

Exerting Continuous Strength
To build realistic and effective organizational power, it isimperative for all employees to have a sense of autonomy
and responsibility when tackling a challenging, worthwhile
project. With his or her own strength, every employee
must exert a sense of leadership, and by sharing acommon direction as a team, aim toward success. By
maximizing the capacities of each individual and byconcentrating these unique forces into one, we are able torealize “Mabuchi Strength.”Annual Report 2018

Contributing to International Society andContinuously Increasing Our Contribution.
Management Guidelines
The “Management Guidelines” offer a direction for how
to perceive and realize the “contribution” expressed in
the “Management Principle.” These guidelines also state
the services our business activities should aspire to
perform. We aim to be a corporation that can continue
to aggrandize this “contribution” and proceed instrength and perseverance.

Mabuchi’sManagement
VisionManagement Policies
When new “value” created through our businessactivities is recognized and received by society, the fruitof our contribution, “profit,” can be achieved. The
management policies of Mabuchi Motor act as astarting point for our philanthropic activities and thehealthy growth of our business.

Management Scheme
For the future of Mabuchi Motor, while sustaining a
distinct “Mabuchi-ness,” we propose to proceed bycompressing our organizational strength through selection
and concentration. We believe that diversifying ourbusiness activities is not possible without contributing tosociety. The heart of our work does not reside solely in therealm of expanding sales. When our products are truly
welcomed in the marketplace, the product of ourcontribution takes the shape of profit. We truly believe inthis view of management, and will continue to support
future endeavors based on this belief.

Our Management Vision
Forward-looking Statements
Statements concerning the business forecast are based on information available at thetime of preparation. Actual results may differ from the forecast due to various factors.
Factors that may affect the operating results include but are not limited to:• Fluctuations in exchange rates• Changes in economic conditions, demand trends, and other factors surrounding
Mabuchi’s businesses• Rapid technological innovations such as new techniques and new products• Fluctuations in market prices of copper, steel, rare earths, and other materials

Table of Contents
1 Profile
2 Mabuchi’s Management Vision
3 To Our Shareholders
7 Segment Information by Motor Application
9	Research and Development Activities
10 Five-year Summary

11 Management’s Discussion and Analysis
13 Corporate Governance
14 Corporate Social Responsibility
15 Investor Information
16	Corporate Data

2

To Our
Shareholders
We will steadily work together as the
Mabuchi Group to further improve
corporate value under the new mediumterm management plan.

Hiroo Okoshi
Representative Director andPresident CEO

The growth of the global economy slowed amid concerns
about economic conditions.

Business Results for Fiscal 2018
We report on the consolidated performance for the fiscal
year ended December 31, 2018 (January 1 to December 31,2018).
Consolidated net sales for fiscal 2018 were 143.1 billion
yen. Operating income for fiscal 2018 was 21.2 billion yen.
Income before income taxes was 22.9 billion yen.
Please see the table below for the rate of change.

Financial Highlights
Thousands of
U.S. dollars

Rate ofchange

2018

2018

YoY

¥143,116$1,289,333-2.6%

Millions of yen

2017
Net sales ¥146,925
Operatingincome24,066

21,243

191,378-11.7%

Profit attributableto owners of parent

20,30322,925

206,532+12.9%

Total
assets269,318

268,246

2,416,631-0.4%

Net assets

242,179

244,4542,202,288

+0.9%



3

MABUCHI MOTOR CO., LTD.

Exchange rate: U.S.$1 = ¥111

Economic Environment of Major Countries/Regions
The U.S. economy maintained solid growth and saw anincrease in consumer spending against a backdrop ofcontinued improvement in the employment environment.
The European economy received a boost from strong
domestic demand, but sluggish exports slowed the pace ofoverall growth.
The Japanese economy showed modest expansion asa result of increased consumer spending accompanying
improvement in the employment environment and capital
investment.
Although overall growth continued in emerging market
economies, the pace of growth of the Chinese economy
slowed.
In the markets related to the Mabuchi Group’s products,
the automotive products market saw slowdowns from thelate second half in Europe and China. The consumer andindustrial products market saw continued stable demand
for motors for personal care products and power tools, but

Annual Report 2018

markets for certain other applications continued to contract.
Sales by application market and rate changes from theprevious year are as follows:

Sales by Application Market
Net Sales
Application by Market

Rate ofchangeMillions of yen

Thousands of
U.S. dollars

Automotive Products
Market104,196938,703-1.5%

Consumer and Industrial
Products Market

38,860350,090-5.5%

Exchange rate: U.S.$1 = ¥111

For more information on products by application market,
see Segment Information on pages 7–8.

Main Efforts and Results of the Current
Fiscal Year
We actively introduced and implemented a number ofmeasures to increase our sales and market share, develop
new markets, and make further advances toward higher
quality and efficiency, which led to business growth during
fiscal 2018 and for the future.
Specifically, these measures included making HANWASTEEL SERVICE (JIANGXI) CO., LTD. the Company’s affiliate,
commencing mass production of next-generation standard
power window lifter motors for Japanese automakers,
increasing sales of standard power window lifter motors for
the Chinese market, increasing orders for new automotive
products’ applications, accelerating development of a range

Net Sales/Gross Profit Ratio
32.8(Millions of yen)
30.4

29.1

143,143

140,699

2014

The Medium-term Management Plan
With regard to the medium-term management plan, due toconcerns about the economic environment, etc., the market
environment significantly deteriorated in the second half of2018 (the final year). Even in that situation, our numericaltargets, excluding those for sales, were generally achieved
during the three fiscal years from fiscal 2016 through fiscal
2018. To steadily achieve sustainable growth, we haveformulated a new medium-term business plan, with thethree fiscal years from fiscal 2019 through 2021 as theplanning years.
Management numerical targets (FY2021) are as follows:

Sales Growth

Net Sales

Approx. 160 billion yen

Earnings PowerOperating Income Ratio

Approx. 15.0%

Capital Efficiency

Return on Equity (ROE)

Approx. 8.0%

* The assumed exchange rate premised for the above targets for fiscal
2021 is U.S.$1 = ¥108.

Operating Income
32.2
146,925

31.0(Millions of yen)

16.0
13.8

143,116

122,544

Gross profit ratio (%)

of applications for standard brushless motors for lightelectric vehicles, implementing the Phase 3 Laborsaving Plan
(FY2017–FY2019) as scheduled, commencing mass
production at Poland Mabuchi and proceeding as plannedwith preparations to expand production capacity at Mexico
Mabuchi, starting construction of a branch plant at Vietnam
Mabuchi, and launching sales activities at Thailand Mabuchi.
By actively introducing and realizing measures to expand
sales and market share, and develop new markets and makefurther progress in high quality and efficiency, we achieved
results that will lead to business growth in the future.

22,961

17.2
24,225

16.4
24,066

14.8
21,243

16,875

2015

2016

2017

2018

2014

2015

2016

2017

2018

Operating income ratio (%)

4An outline of the key measures to achieve each goal of themedium-term management plan is as follows.

FY2019 Priority Activities
Medium-sized Automotive Motors

Medium-term Management Plan (FY2019-FY2021):
Keys to Achieve the Plan

Increase share in China’s PW market by accelerating switch
to new models

Sales Growth

Increase orders through stronger region-specific approach
to European and North American automakers
Strategy for China’s PW market•	Innovate sales structure in China to respond faster tomarket changes•	Promote switch to newest models from first generation
modelsPW and PS motors for European and North American
automakers•	Increase production capacity at Mexico Mabuchi,
promote local production for local consumption•	Aim to obtain orders from new North American
automaker (third company) and strengthen Americas
sales structure•	In Europe, obtain new orders from high-end automaker,
and leverage this to expand the number of equippedmodels•	Strengthen cooperation between European bases, withview to start manufacturing at Poland Mabuchi
Address diversification of applications for medium-sizedautomotive motors•	Develop new products for increasingly diverse
applications for medium-sized automotive motors,
including PS and door area applications•	In motors for automotive products, maintaincompetitiveness in main products, including PW and PS
motors to drive Company’s business•	Comprehensively consider Company’s strengths, potential
for new applications, and cooperation with new andexisting customers, to concentrate resources in theseareas of focus•	In consumer and industrial motors, use external resources
and achieve timely entry and sales expansion in lightelectric vehicles, housing equipment, and robotics markets

Earning Power•	A s Next-generation Manufacturing Innovation, minimize
manufacturing costs at all production lines and enhanceearning power•	At the same time, automate and enhance functionality,
especially in sensory evaluation

Capital Efficiency•	Raise profit margins and increase ROE through agile andflexible capital policy•	Continue activities including possible strategic use ofshareholders’ equity and treasury stock

Power Window Lifter Motor Sales Results and Forecast(Billions of yen)

35

(%)

Sales amount
Sales quantity (2015 = 100%)

150

30

(Billions of yen)

60

(%)

Sales amount
Sales quantity (2015 = 100%)

150

50

25

100

20

40

100

30

15
50

10

20

50

10

5
0

Small Automotive Motor Sales Results and Forecast

2015

2016

2017

2018

2019
Forecast

0

0

2015

2016

2017

2018

2019
Forecast

0* P W: Power window lifters
PS: Power seats
EPS: Electric parking brakes

5

MABUCHI MOTOR CO., LTD.

Annual Report 2018

Small Automotive Motors/
Consumer and Industrial Motors
Lead with newly developed motors for new automotive
applications in areas where future growth is forecast
Expand use of IS series in light electric vehicles, proactively
increase sales and introduce new models for housing
equipment applications
Small automotive motors•	In new inquiries, including for new applications,proactively develop new products based onmarketability, profitability, etc.
Consumer and industrial motors•	Increase options for standard brushless motors for lightelectric vehicles, accelerate development of multiple
applications•	Accelerate sales growth of brushless motors for highend home appliances, etc.
•	Use external resources to expand scope of possible
uses, leading to increased sales•	Following residential electronic locks, accelerate sales
growth of small-diameter standard motors for growing
housing equipment applications

Use global development strength to strengthen structure for
local production for local consumption
Mabuchi Group•	Increase overall Group earning power by reviewing andreorganizing management structure for overseas
subsidiaries
China•	Strengthen China regional headquarters function forfurther expansion of local autonomy•	Locally plan, implement, and manage overall China
strategy, increase accuracy and speed of
implementation
Respond to changes in external environment•	Shift production to optimize manufacturing locations,achieve local production for local consumption at global
level, respond to changes in trade environment•	Steady progress in preparations for production at
Poland Mabuchi and expansion at Mexico Mabuchi

Shareholder Returns
Basic Policy on Dividends Unchanged

Production Engineering Strategy

Hybrid Dividend Policy

Minimize manufacturing costs through “Next-generation
Manufacturing Innovation”
Next-generation Manufacturing Innovation•	Develop and apply expertise and technologies gained atinnovative core production line in production lines
going forward•	A scertain functions required in respective
automation systems and promote further
standardization of production facilities to control
capital expenditures
Phase 3 Laborsaving Plan (FY2017-FY2019)•	In FY2019, final year of the Phase 3 Laborsaving Plan,focus particularly on introduction of automatic
inspection equipment utilizing image processing
technology•	Overall effort to achieve 30% laborsaving vs. FY2016•	Ordinary dividend (full-year): ¥30•	Special dividend (full-year): 30% of consolidated net
income divided by the number of outstanding shares•	Dividend amount calculated based on the consolidated
net income results•	In FY2018-19 only, however, dividend payment will
exceed this policy

Global Base Strategy

Acquisition of treasury stock:

Steadily implement respective regional strategies, expand
local business

Acquire up to ¥3.0 billion or 1.2 million shares in FebruaryMarch 2019

Dividend:
Taking into account short-term uncertainty in management
environment
FY2018: ¥135/share (unchanged from forecast
announced on August 10, 2018)
FY2019: ¥135/share regardless of consolidated net
income (plan)* This is a special, limited-time measure; basic policy on dividends unchanged

6

Segment Information
by Motor Application
Below is a description of conditions in the markets formotors, the Mabuchi Group’s main business,
and a report on the Group’s sales situation.
In fiscal 2018, consolidated net sales
generated by motor sales amounted to
143,057 million yen, down 2.6% from theprevious fiscal year.

Automotive
Products

Automotive Products Market

72.8%

Net sales in this market were 104.1 billion yen(a 1.5% decrease on a year-on-year basis).

Medium-sized Motors•	For PW motors, new, high-torque standard products are growing,
despite an overall decline from weak demand and a delay inswitching from old to new models in the Chinese market•	Increase in sales of EPB motors due to an increase in the number of
equipped models and higher installation rates•	In Others, increases in sales of motors for engine peripheral
equipment, seat belt pretensioners, and door closers

Sales by Main Application(Billion yen)

(Year-on-year change)

60.0
50.0
40.0

7.3
7.2

7.9

Others109.2%

8.6

Electric Parking Brakes
119.0%

10.0

Power Seats
92.7%

29.8

26.6

Power Window Lifters
89.4%

2017

2018

10.8
30.0
20.0
10.0
0

Small Motors•	Slight decline in motors for door lock actuators•	Sales growth in motors for mirrors on higher rate of installation andother factors•	Maintenance of high market share of motors for air conditioning
damper actuators•	Increase in sales of motors for headlight level adjusters due toincreases in the number of equipped models and market share

Sales by Main Application(Billion yen)

(Year-on-year change)

50.0

Others108.2%
Headlight Level Adjusters
103.1%

40.0

3.8
3.2
6.3

4.1
3.3
6.8

18.0

18.4

30.0
20.0
10.0

* P W: Power window lifters
PS: Power seats
EPS: Electric parking brakes

7

MABUCHI MOTOR CO., LTD.

0

19.1

18.0

2017

2018

Air Conditioning Damper
Actuators
107.8%
Mirrors (including folding)
102.4%
Door Lock Actuators
94.5%

Annual Report 2018

Consumer and Industrial Products Market
Net sales in this market were 38.8 billion yen (a 5.5% decrease on a year-on-year basis).

Consumer andIndustrial Products•	Motors for personal care products flat despite strength in midrange and high-end toothbrushsegments
Sales by Main Application•	Lower sales of motors for(Billion yen)
(Year-on-year change)
inkjet printers from market
Otherscontraction
50.0
96.9%
•	Solid sales of motors forMultifunction Printers (MFP)
40.0
and Laser Printers (LP)power tools
97.2%
12.7
12.3
Car CD Players•	Others generally flat despite
30.0
70.6%
2.5
2.4
growth in motors for
4.0
Power Tools
2.8
20.0
100.6%
5.2
5.3
housing equipment andInkjet Printers
7.8
7.1
medical equipment
91.7%
10.0

27.2%

0

8.7

8.7

2017

2018

Personal Care Products
100.0%

Sales Forecast by Market

Automotive Products Market
Medium-sized Motors: 57.2 billion yen(a 7.3% increase on a year-on-year basis)•	Increase in sales of PW motors in the North American andChinese markets due to increases in adoptions of hightorque standard products•	Decrease in sales of PS motors due to the impact of a change
in the product mix and model changes of equipped models•	Increase in sales of EPB motors due to an increase in thenumber of equipped models and higher installation rates•	In Others, increases in sales of motors for engine peripheral
equipment, seat belt pretensioners, and door closers
Small Motors: 53.0 billion yen(a 4.4% increase on a year-on-year basis)•	Maintenance of a high market share of motors for door lockactuators, mirrors, air conditioning damper actuators, andheadlight level adjusters•	In Others, increases in sales of motors for steering locks,
grille shutter actuators, and shift-by-wire systems

Consumer and Industrial Products Market
35.6 billion yen (an 8.2% decrease on a year-on-year basis)•	Although midrange and high-end toothbrush segments
remain strong, overall decline for personal care products fromthe policy of emphasizing profitability in certain applications•	Decrease in sales of motors for inkjet printers due to market
contraction•	Decrease in sales of Others overall due to the policy ofemphasizing profitability, despite increases in sales ofmotors for medical equipment and housing equipment
U.S.$1 = ¥108 (Estimate)(Millions of yen)

Net Sales by Application
Thousands of
U.S. dollars

Millions of yen

2014
Automotive
Products
Consumer andIndustrial Products
Total Sales

2015

2016

2017

2018

¥ 78,748 ¥ 96,369 ¥100,132 ¥105,793 ¥104,196
43,753

46,76440,541

41,122

2018

46,76440,541

41,122

38,86043,753

Consumer andIndustrial Products$  938,703

38,860350,090¥122,502 ¥143,134 ¥140,674 ¥146,915 ¥143,057$1,288,802

Automotive Products
96,369100,132

2015

2016

35,55734,396

105,793

104,196

2017

2018

32,492

27,33048,74847,64078,748

U.S.$1 = ¥111

Net Sales by Region

2014

Thousands of
U.S. dollars

Millions of yen

2014
Japan

2015

2016

2017

2018

¥ 11,307 ¥ 11,615 ¥ 12,010 ¥ 12,533 ¥ 13,590

2018$  122,432

North & Latin
America

12,85017,204

17,36018,376

20,499184,676

Europe23,62429,262

30,11734,76633,996306,270

China & HongKong

44,77949,493

46,79048,74847,640429,189

Asia Pacific

29,94035,55734,39632,492

27,330246,216¥122,502 ¥143,134 ¥140,674 ¥146,915 ¥143,057$1,288,802

Total Sales(Millions of yen)

29,940Asia Pacific49,49323,624

U.S.$1 = ¥111

46,79029,262

30,117China & Hong Kong
Europe44,77934,76633,996

12,85017,204

17,36018,376

20,49911,307

11,61512,01012,533

13,590

2014

2015

2016

2017

2018

North & Latin
AmericaJapan

8

Research andDevelopment Activities
services. In addition, with our new development model, we received
new orders from a European automobile manufacturer.

The Mabuchi Motor Group’s R&D activities are spearheaded by
Mabuchi Motor Co., Ltd., the parent company, and MABUCHIMOTOR (DONGGUAN) CO., LTD. in the Asia segment. For theCompany’s R&D activities, we established the Development
Headquarters, the Manufacturing Headquarters, and the TechnicalResearch Institute.
The Development Headquarters consisted of five departments—
Product Development Department 1, Product Development
Department 2, Product Development Department 3, ProductDevelopment Department 4, and the Engineering Management
Department. However, from September 2018, the TechnicalResearch Institute was added to the Development Headquarters withthe aim of strengthening our development system. This further
reinforces a series of technological collaborations from R&D to
product development. In particular, the Technical Research Instituteis responsible for creating high added value, such as elemental
technology development and new product development, with afocus on strategic applications. In addition, from fiscal 2017, theTechnical Research Institute has been part of the business divisionsystem centered on applications, and the Company has adopted amatrix organization system.
The Manufacturing Headquarters consists of three departments—
Production Engineering Department 1, Production Engineering
Department 2, and the Operations Control Department. Production
Engineering Department 1 is responsible for designing mass
production facilities, supporting manufacturing, and designing
molds. Production Engineering Department 2 is responsible forresearch on process designs and methods, as well as production
technology. At the same time, the R&D center at MABUCHI MOTOR(DONGGUAN) CO., LTD. has been focusing on design improvement
since its establishment. The center improves existing products forquick introduction to the local Chinese market and develops new
products commissioned by the Company.
As for the application status of our products, under the businessdivision system, the engineering departments and the sales
departments work together to develop automotive productapplications and applications to emphasize as pillars of future business.

Power Seat Applications
The introduction of small, distinctive, high-torque motors for powerseats has led to increased adoption by major automotive
manufacturers and sharp growth in sales and market share. Seeking
to further increase market share, we are reinforcing our products
and conducting sales expansion activities. In 2018, we prepared tostart mass production of a derivative motor model for lumbar
support. Furthermore, we are continuing to develop a new type ofgeared motor for recliners and have started developing applicablemotors for various functions for automobile seats.

Engine Peripheral Equipment Application
This application can contribute to energy savings by precisely
controlling engines. At the same time, tolerance for higher
temperatures and resistance to vibration are required for thisapplication, compared with other applications. In 2018, we added
optional specifications to RS-4F5 and RS-4G5, which had alreadygone into mass production, and are continuing sales promotion
activities.

Other Small Electrical Equipment Applications
We developed a motor in response to inquiries for new applications
to achieve lower fuel consumption and further convenience and are
currently preparing for mass production.
Research and development expenses for fiscal 2018 totaled 4,939
million yen, the total number of industrial property rights owned by
the Company was 876 (191 domestic, 685 overseas), and the total
number of new applications at home and abroad was 81. To
contribute to global activities, we aim to improve productcompetitiveness by providing multifaceted in-house productprotection of intellectual property rights. In addition, we arereviewing intellectual property education to promote engineers’
awareness of intellectual property and proactive invention proposals.

Mobile Applications

Representative new products in fiscal 2018 are as follows:

In 2018, we started mass production of new versatile products
IS-92BZC and IS-94BZC and expanded the application to motors for
medical bed assistance and electric lawn mowers. In 2019, we plan
to start selling the developed drive circuit and gear unit options formobility products and electric carts. In addition, we continue toexpand our lineup for a wide range of applications, such as electric
assisted bicycles, AGVs, and service robots.

(1) Brushless motors IS-92BZC and IS-94BZC
These are brushless motors with enhanced versatility used in awide range of environments. Specifically, a waterproof function(IPX4 guaranteed) was added to conventional models, allowing
them to be used for mobile and AGV applications.

(2) Brushless motor ID-659ZAPower Window Applications

This is a new, high-speed brushless motor that is small andlightweight, with a high output, mainly used for handy cleaners.
In addition, the inner rotor structure makes it a brushless motorwith a high starting performance (compared with othercompanies’ brushless motors for the same purpose).

In 2018, we started mass production of a next-generation standard
development model that enables Japanese automobile
manufacturers to develop smaller, lighter products. We are carryingout further sales promotion activities and offering engineering

R&D Expenses/R&D Expenses Ratio

R&D Personnel

Number of Intellectual Properties(Millions of yen)

(Employees)(Intellectual properties)
876

3.7

4,503

2014

3.6

3.6

3.6

5,164

5,024

5,233

2015

2016

2017

R&D expenses ratio (%)

9

MABUCHI MOTOR CO., LTD.

3.5
432

437

436

432

459
640

4,939

2018

109

2014

2015

2016

2017

2018

682
120

748

783

157

168

531

562

591

615

2014

2015

2016

2017

Overseas

Domestic

191

685

2018

Annual Report 2018

Five-year Summary
Mabuchi Motor Co., Ltd. and Consolidated Subsidiaries(Years Ended December 31)

Millions of yen

Thousands of
U.S. dollars

2014

2015

2016

2017

2018

2018

¥ 122,544¥ 143,143¥ 140,699¥ 146,925¥ 143,116$1,289,333

Cost of sales

86,92999,673

94,51099,61998,788889,982

Selling, general and administrative expenses

18,73920,50821,96323,23923,084

207,964

16,87522,961

24,22524,066

21,243

191,378

23,595

26,593

26,53927,48529,323

264,171

18,09018,546

20,59820,30322,925

206,532

Capital expenditures

9,597

16,187

11,236

12,844

16,332

147,135

Depreciation and amortization

4,771

6,386

6,016

7,143

7,652

68,937

R&D expenses

4,503

5,164

5,024

5,233

4,939

44,495

Exchange gain, net

5,124

2,329

493

220

1,474

13,279Net cash provided by operating activities

18,118

20,11527,95822,585

20,979189,000

Net cash provided by (used in) investing
activities(11,977)(1,178)(3,440)(14,027)(12,735)(114,730)

Net cash used in financing activities(6,014)(13,312)(11,860)(13,844)(11,069)(99,721)

Total assets

256,368

256,196258,387

269,318

268,246

2,416,631

Net assets

233,312233,245

232,917242,179

244,4542,202,288

For the year:
Net sales

Operating income
Income before income taxes
Profit attributable to owners of parent

Cash flows:At year-end:

Per share data:

Yen

U.S. dollars

258.02266.98300.70299.74341.193.07

3,325.99

3,363.01

3,405.14

3,579.98

3,640.08

32.79

107.00110.00120.00120.00135.001.22

Operating income ratio (%)

13.8

16.0

17.2

16.4

14.8

–

ROE (%)

8.2

8.0

8.8

8.6

9.4

–

ROA (%)

9.9

10.6

10.2

9.8

9.2

–

Shareholders’ equity ratio (%)

91.0

91.0

90.1

89.9

91.1

–

Number of shares outstanding(Thousands of shares)

35,144

69,46868,587

67,792

67,238–

Number of employees (Persons)

25,354

24,41923,76823,93623,476–

Profit attributable to owners of parent
Net assets
Dividends applicable to current year
earnings
Other data:

Notes:
1. U.S. dollar amounts have been translated from yen, for convenience only, at the rate of U.S.$1=¥111.
2. ROE is calculated by dividing net income by the average of total shareholders’ equity plus the revaluation/translation adjustment during the period.
3. The shareholders’ equity ratio is calculated by dividing the sum of total shareholders’ equity and the revaluation/translation adjustment as of the end of theperiod by total assets as of the end of the period.
4. Per share data: The Company conducted a stock split on January 1, 2015, in which each share of the Company’s common stock was split into two shares. Per
share data has been calculated based on the number of shares issued after the stock split (excluding treasury stock). The results for fiscal year 2014 have beenadjusted and restated, and reflect the amounts after the stock split to facilitate year-on-year comparison of results.

10

Management’s
Discussion and Analysis
Analyses and studies of the Mabuchi Group’s performance and financial position are,in principle, based on the consolidated financial statements.

Operating Resultscommodities, and an increase in manufacturing costs associatedwith expanded production at the plant in Mexico.
Profit before income taxes was 29,323 million yen, a 6.7%
increase on a year-on-year basis, which included a gain on salesof fixed assets from the sale of real estate at the Company’s
wholly owned subsidiary Mabuchi Industry Co., Ltd. (Hong Kong
Mabuchi). Profit attributable to owners of parent was 22,925
million yen, a 12.9% increase on a year-on-year basis.

Consolidated net sales for fiscal 2018 were 143,116 million yen, a
2.6% decrease on a year-on-year basis. Motors sales, which
account for the majority of consolidated net sales, were 143,057
million yen, a 2.6% decrease on a year-on-year basis.
Operating income for fiscal 2018 was 21,243 million yen, an
11.7% decrease on a year-on-year basis, with profit reduced byfactors including weaker selling prices and a deterioration of the
product mix, higher market prices for copper, steel, and otherAnalysis of Financial Position
Assets, Liabilities and Net Assets

increased by 2,274 million yen, to 244,454 million yen. Retained
earnings increased by 11,881 million yen, and foreign currencytranslation adjustments and net unrealized holding gains orlosses on securities decreased by 7,517 million yen and 2,526
million yen, respectively.

As of December 31, 2018, total assets stood at 268,246 million
yen, a decrease of 1,072 million yen from the end of the previous
fiscal year. Major changes included an increase of 5,715 million
yen in property, plant and equipment from capital investment
including outlays for setting up a new production base, adecrease of 4,896 million yen in cash and bank deposits, adecrease of 3,170 million yen in trade notes and accounts
receivable, an increase of 2,701 million yen in inventories, and adecrease of 2,202 million yen in investment securities.
Total liabilities stood at 23,791 million yen, a decrease of
3,347 million yen from the end of the previous fiscal year. The
most noticeable changes were decreases in trade notes andaccounts payable of 1,479 million yen, accrued income taxes of
1,041 million yen, and deferred tax liabilities (non-current) of 833
million yen.
From the end of the previous fiscal year, total net assets

Net cash provided by operating activities amounted to 20,979
million yen, a decrease of 1,605 million yen from the previous
fiscal year. Profit before income taxes increased 1,837 million yen
because of an increase of 4,345 million yen in gain on disposal of
fixed assets.
Net cash used in investing activities amounted to 12,735
million yen, a decrease of 1,291 million yen in cash used from theprevious fiscal year. Outlays for the purchase of fixed assets
increased 1,708 million yen, but proceeds from sales of fixed
assets also increased 5,230 million yen.

Total Assets

Liabilities

Net Assets(Millions of yen)

(Millions of yen)

(Millions of yen)

256,368201411

Cash Flows

256,1962015

258,387

2016

MABUCHI MOTOR CO., LTD.

269,3182017

268,246

2018

25,47023,055

22,950

2014

2015

2016

27,1382017

23,791

233,312233,245

232,917242,179

244,454

2018

2014

2015

2016

2017

2018

Annual Report 2018

Net cash used in financing activities amounted to 11,069
million yen, a decrease of 2,775 million yen in cash used from theprevious fiscal year. The main item was a 2,000 million yen
reduction in outlays for the purchase of treasury stock.

As a result, the balance of cash and cash equivalents
amounted to 113,560 million yen, a decrease of 5,396 million
yen from the end of the previous fiscal year.

The indicators have been calculated with the following
formulae, and are based on figures in the consolidated
financial statements:•	Shareholders’ equity ratio = Shareholders’ equity / Total
assets•	Shareholders’ equity ratio based on market value = Total
market value of shares / Total assets
The total market value of shares has been calculated with thefollowing formula:
Closing stock price at the end of the period × Number ofshares outstanding at the end of the period (minus treasury
stock)
Since the Company does not bear substantial interest-bearing
liabilities and relevant interest to be paid, the ratio of interestbearing liabilities to cash flows and interest coverage ratio are
omitted.

Outlook for Fiscal 2019
Although we anticipate a profit boost from increased sales
volumes and an improved product mix, we forecast an overall
decline due to a stronger yen and increased market prices forcommodities, including copper and steel, along with an increase
in selling, general and administrative expenses including startup
costs for a new production base in Europe and proactive researchand development. We anticipate ordinary income of 20,200
million yen, an 18.6% decrease, and profit attributable toowners of parent of 14,800 million yen, a 35.4% decrease,without taking foreign exchange gains or losses into
consideration.

Although we see gradual growth in the global economy continuing
in fiscal 2019, we expect growth rates to slow due to increased
uncertainty related to concerns about economic conditions. In
developed countries, we see solid growth driven by domestic
demand continuing in the U.S. economy, despite concerns about
effects of the direction of trade policy and the partial government
shutdown. In Europe, in addition to concerns about Brexit
negotiations and public finances in Italy, we expect the German
economy to slow and forecast weaker growth for the European
economy. We forecast continued gradual growth in Japan, withfiscal stimulus measures alleviating the effect of the consumption
tax increase. For emerging countries overall, we expect gradual
growth but with an even weaker rate of growth, as uncertainty
about the Chinese economy increases.
In the Mabuchi Group’s products markets, we forecast aslower rate of growth for the automotive products market, withgrowth continuing in South America, Russia, and Southeast Asia,
but with the North American and European markets plateauing
and the Chinese market slowing down. In the consumer andindustrial products market, we expect demand for motors forhome appliances and power tools to remain flat, and we see
demand for motors for office equipment contracting.
As a result, in fiscal 2019, we expect to record net sales of
146,000 million yen, a 2.0% increase on a year-on-year basis.
In terms of business results, we forecast a 10.6% decline inoperating income from fiscal 2018, to 19,000 million yen.

Net Sales/Gross Profit Ratio(Millions of yen)
29.1

32.8
30.4
143,143

140,69932.2
146,925

Capital Expenditures
Forecasting growth in capital expenditures to 18.8 billion yen tohandle orders over the medium and long terms, and for new
products, increased production capacity, and plant expansion.
The main items in the projected capital expenditures are 11.0
billion yen in production facilities investment and 5.2 billion yen
in building-related expenditures.
In addition to the expansion of the plant at Mexico Mabuchi
and the construction of an additional plant at Vietnam Mabuchi,
we anticipate increased investment in new products, increased
production capacity, and additional labor-saving equipment.

Net income attributable to owners of parent/ROE(Millions of yen)
31.0

8.2

8.0

8.8

8.6

20,59820,303

Capital Expenditures/Depreciation and Amortization(Millions of yen)

22,925

143,116

122,544

9.4

18,09016,332

16,187

18,546

12,844
11,236
9,597
6,386

6,016

2015

2016

4,771

2014

2015

2016

Gross profit ratio (%)

2017

2018

2014

2015

2016

2017

2018

2014

Capital Expenditures

ROE (%)

Risk Information

7,143

7,652

2017

2018

Depreciation and Amortization

https://www.mabuchi-motor.com/investor/management/risks.html 12

Corporate Governance•	To disclose corporate information to shareholders andother stakeholders in an appropriate, fair, timely, and clear
manner and to ensure accountability through the Board of
Directors and the Audit & Supervisory Committee.

Basic Approach to Corporate Governance
The Management Principle of MABUCHI MOTOR CO., LTD.
(the “Company”) is “Contributing to International Society
and Continuously Increasing Our Contribution” throughthe Company’s small motors business. The Company
understands that realizing this principle is its raison d’être.
Corporate governance of the Company comprises theorganizational structure and managerial systems that support
the realization of its Management Principle and various
management measures that maintain these systems.
Accordingly, the fundamental objective in establishing andimplementing an appropriate corporate governanceframework is to further the interests of shareholders andother stakeholders on an ongoing basis through the creationof fair profits and the enhancement of corporate value.
Constructing and maintaining a corporate governance systemalong the lines given below are indispensable for theCompany as a listed company:•	To clearly separate management decision making andefficient business execution, and to clarify the scope ofaccountability;•	To build and operate a sound internal control system;•	To appoint a suitable number of independent officers
whose interests do not conflict with those of shareholders
to ensure the objectivity and neutrality of management’s
supervision functions;•	To foster a corporate culture in which all employees
recognize and share the understanding that the practices ofcorporate ethics and compliance support the organization’ssocial impartiality and are fundamental to living up to thetrust and expectations of all stakeholders; andOutline of Corporate Governance System andReasons for Its Adoption
On March 28, 2019, Mabuchi Motor adopted the structureof a company with an audit and supervisory committee, withthe aim of strengthening the supervision functions of theBoard of Directors and speeding up management decisionmaking by delegating part of the executive decision-making
authority to directors. We also established the Nominating
Committee and the Remuneration Committee as
discretionary advisory bodies to the Board of Directors.
In addition to appointing outside directors with highlevels of independence and managerial experience, we haveestablished and are operating multifaceted management
oversight systems, such as audits by the Audit & Supervisory
Committee, whose members include directors with highlevels of independence and expertise, management (internal)
audits, and quality control audits. We also have an audit by
an independent accounting auditor. Through such systems,
we maintain a disciplined management organization andrealize appropriate risk management and compliancethroughout the Mabuchi Motor Group.
This corporate governance system enables us to ensure
efficient and transparent management. Going forward, we
will continue to pursue frameworks that are best suited tothe specific attributes of our business.

General Meeting of Shareholders
Appoint/Dismiss

Independent
Auditors

LiaiseAppoint/Dismiss
Audit & Supervisory Committee

Appoint/Dismiss
Audit/
Supervise

Board of Directors

Director who is an Audit & Supervisory Committee member

Auxiliary

Command/Order
LiaiseAudit & Supervisory
Committee Department

LiaiseSupervise
DirectInternal Audit Department

Internal Reporting System

ReportAccounting Audit

ReportConsult/Report
Nominating
Committee
Remuneration
Committee

Representative Directors

LiaiseDiscussions

Executive Committee(Executive Managing Officers)

Executive
Company Departments(Responsible for Compliance)

Internal Audit
Subsidiaries(One Director in Charge of Compliance)

13

MABUCHI MOTOR CO., LTD.

WEB

https://www.mabuchi-motor.com/investor/management/governance.html

Annual Report 2018

Corporate Social Responsibility
Contributing to Society through Motors

Achieving Sustainable
Development Goals (SDGs)
To realize the SDGs (sustainable development goals), drawn up
by the 193 countries that belong to the United Nations, wemust not only recognize the issues but also create value tosolve those issues. This value creation is the very concept of the
management philosophy “Contributing to International Society
and Continuously Increasing Our Contribution,” which is thefundamental idea for carrying out all our activities.
All employees of the Mabuchi Group are engaged in day-to-day activities with the belief that companies exist to contributeto society and contribute to the well-being of people. Following this belief, we offer a flexible manufacturing system to makeenvironment-friendly products with high performance and low price. Those products can be used in various applications in awide range of fields. Ours is the world’s top brand with a production rate of about 1.5 billion items a year.
Mabuchi Motor’s mission as a specialized motor manufacturer is to supply better and cheaper products and contribute to
reducing the size and weight of our customers’ final products, thereby conserving energy and resources across society. We aim to
do this by utilizing our technology and wisdom, thereby making our customers’ lives more convenient, more comfortable, andsafer. Therefore, we are striving to thoroughly develop the potential uses and benefits of motors and enhance their value.
Please refer to page 9 (Research and Development Activities) for details on new products.

Support for Monozukuri (Manufacturing) and Education
Cosponsoring Robot Contests
Mabuchi has been cosponsoring and providing motors andfunds for the National Technical College Robot Contest, the ABU
Robot Contest, and the College Robot Contest. We support
these events in the hope that we can help foster futureengineers and develop science and technology.

Teaching Children the Fun Side of Science
Visiting Classes: Our employees visit elementary schools in the
Head Office area (Matsudo City) as science instructors every year.
Summer Vacation Handicraft Class: We hold a “summer vacation
handicraft class for parents and children” every year.

Supporting Local Communities
The entire Mabuchi Group has continuously been engaged in regional
activities including environmental conservation projects and various
other social and welfare activities.

14

Investor Information(As of December 31, 2018)

Stock Data

Composition of Shareholders

Number of Shares Authorized...................... 200,000,000
Number of Shares Issued..................................68,562,462
Number of Shareholders......................................... 24,301

Major Shareholders
Number of
Ratio of
Shares Held Shareholders(Thousands)(%)

Major Shareholders
Takaichi Mabuchi
Mabuchi International ScholarshipFoundation
The Master Trust Bank of Japan, Ltd.
(Trust Account)
Japan Trustee Services Bank, Ltd.
(Trust Account)Premiere Corporation
Tamotsu Mabuchi
Takashi Mabuchi
TEXAS Inc.
Ray Corporation
Japan Trustee Services Bank, Ltd.
(Trust Account 9)

5,000

7.4

3,000

4.5

2,822

4.2

2,737

4.1

2,068
2,050
2,010
1,856
1,746

3.1
3.0
3.0
2.8
2.6

1,686

2.5

Treasury Stock

Financial Institutions
24.6%

1.9%
Individuals andOthers29.4%

Financial Instruments
Firms
2.3%

By type ofshareholder

Other Companies
16.5%

Foreign Companies
25.2%

100-499 4.8%

Less than 100 0.0%500-999 1.9%
1,000-9,999 6.7%
10,000-99,999 10.5%

More than 1,000,000
34.1%

By number ofshares held

Notes: 1. In addition to the above, Mabuchi Motor Co., Ltd. retains
1,323,854 shares of treasury stock.
2. R atio of shareholders excludes the number of treasury stock.

100,000-999,999 42.1%

Cash Dividends per Share/Payout Ratio(%)

Purchase History of Treasury Stock

60.3
41.2

39.9

40.0

39.6

135.0

(Yen)
110.0

120.0

120.0

135.0

58.0

76.0

66.0

80.0

68.0

52.0

44.0

54.0

55.0

67.0

2016

2017

2018

2015
InterimYear-end

Payout Ratio

2019(forecast)* We split each share of our common stock into two shares on January 1,
2015.

Transaction period

Number of shares
repurchased

Amount(Millions of yen)Mar. 1, 2018 - Mar. 20, 2018357,100

1,888

Feb. 16, 2018 - Feb. 28, 2018

206,400

1,111

Mar. 1, 2017 - Mar. 24, 2017

474,800

2,978

Feb. 16, 2017 - Feb. 28, 2017

326,800

2,021

Feb. 16, 2016 - Feb. 25, 2016

1,000,000

4,771

Mar. 13, 2015 - Mar. 23, 2015

219,200

1,393

Feb. 17, 2015 - Mar. 12, 2015

605,000

3,605

Changes in Standards for Calculating Dividends
YearOrdinary Dividendper Share

Standard Value for Calculating
Special Dividend

2015

30 yen *1

30% of consolidated net income

2014

60 yen30% of consolidated net income

2007 *2

60 yen20% of consolidated net income

2005

60 yen20% of consolidated net income

2003

50 yen20% of consolidated net income

1999

50 yen5% of consolidated net income

Trend of Stock Price and Related Indicators
2014

2015

2016

2017

2018

High (Yen)

10,540

8,230

6,740

6,740

6,750

Low (Yen)

5,430

4,385

3,810

5,020

3,130

At year-end (Yen)

9,620

6,640

6,100

6,110

3,370

PER

18.6

24.9

20.3

20.4

9.9

PBR

1.4

2.0

1.8

1.7

0.9

*1 We split each share of our common stock into two shares on
January 1, 2015.
*2 [Additional policy] Actual full-year dividend amount shall be basedon the above calculation standards and shall not be less than the
expected dividend amount announced during the full-year period
unless a significant profit warning is issued.

15

MABUCHI MOTOR CO., LTD.

WEB

https://www.mabuchi-motor.com/investor/stock/info.html

Corporate DataWEB

(As of December 31, 2018)▪Company Name

MABUCHI MOTOR CO., LTD.

▪Corporate Headquarters

430 Matsuhidai, Matsudo City,
Chiba 270-2280, Japan
Tel: +81-47-710-1111▪Established

January 18, 1954

▪Paid-in Capital¥20,704 million

https://www.mabuchi-motor.com/company/profile.html▪Number of Employees▪Shareholders’ Register Custodian▪Ordinary General Meeting of
Shareholders▪Stock Listing824 (Non-consolidated)
23,476 (Consolidated)

Mitsubishi UFJ Trust and Banking Corporation
Corporate Agency Department
Tel: +81-120-232-711

The Ordinary General Meeting of Shareholders
will be held every March at Corporate
Headquarters.

▪Independent Accountants

Japanese Stock Exchange Listing
Tokyo Stock Exchange▪Number of Subsidiaries

Consolidated Subsidiaries
Non-consolidated Subsidiaries

Ernst & Young ShinNihon LLC
Tokyo, Japan

21
3

Board of Directors, Audit & Supervisory Board Members, and Executive Officers
WEB(As of March 31, 2019)▪Board of Directors(excluding Audit & Supervisory
Committee Members)
Hiroo Okoshi
Representative Director andPresident CEO
Masato Itokawa
Representative Director COO,
Senior Managing Executive
Officer, in charge of Internal
Controls and Chief Quality andEnvironmental Officer
Hirotaro Katayama
Director, Managing Executive
Officer, Assistant President andChief Officer of Subsidiaries
Tadahito Iyoda
Director, Group Executive
Officer and Chief Regional
Officer in the Americas
Eiji Uenishi
Director, Executive Officer,
Deputy Chief Business Officer,
Senior General Manager of
Product Development andSenior General Manager Automotive Product Business
Unit 1

Shinichi Taniguchi
Director, Executive Officer,
Chief Technology Officer andSenior General Manager Manufacturing Headquarters
Naoki Mitarai
Outside Director
Kazuhiko Tsutsumi
Outside Director
Jody Ono
Outside Director▪Directors and Audit &Supervisory Committee
Members
Kazuyuki Someya
Director and Full-time Audit &Supervisory Committee
MemberToru Masuda
Outside Director and Audit &Supervisory Committee
MemberTakashi Asai
Outside Director and Audit &Supervisory Committee
Member

https://www.mabuchi-motor.com/investor/management/executives/
Yukie Toge
Outside Director and Audit &Supervisory Committee
Member▪Executive Officers andTheir Responsibilities(excluding those also serving as
directors)
Tadashi Takahashi
Managing Executive Officer
and in charge of Overseas
Subsidiary Issue Management
Kentaro ShiraiManaging Executive Officer,
Chief Business Officer andSenior General Manager Purchasing Headquarters
Isao Ichikawa
Managing Executive Officer,
Deputy Chief Business Officer,
Senior General Manager ofSales & Marketing and Senior
General Manager - Consumer
and Industrial Product Business
Unit

Tsuyoshi Nakamura
Executive Officer and Senior
General Manager - Automotive
Product Business Unit 2
Toichi Koyata
Executive Officer and Senior
General Manager - Business
Platform Innovation
Headquarters
Toru Shibasaki
Executive Officer and Deputy
Senior General Manager Manufacturing Headquarters
Takayuki Kokon
Executive Officer and Senior
General Manager Administration Headquarters
Tomofumi Imamura
Executive Officer and Senior
General Manager - Corporate
Planning Headquarters
Quan Da YongGroup Executive Officer andChief Regional Officer in China

Consolidated Subsidiaries
Area
North & Latin America
EuropeChina & Hong Kong

Asia PacificCompany Name
(Formal)
MABUCHI MOTOR AMERICA CORP.
MABUCHI MOTOR MEXICO S.A. DE C.V.
MABUCHI MOTOR (EUROPE) GmbH
MABUCHI MOTOR POLAND sp. z o.o.
MABUCHI INDUSTRY CO., LTD.
MABUCHI MOTOR (DONGGUAN) CO., LTD.
MABUCHI PRECISION (DONGGUAN) CO., LTD.
MABUCHI MOTOR DONGGUAN DAOJIAO CO., LTD.
MABUCHI MOTOR (JIANGXI) CO., LTD.
MABUCHI MOTOR DALIAN CO., LTD.
MABUCHI MOTOR WAFANGDIAN CO., LTD.
MABUCHI MOTOR (JIANGSU) CO., LTD.
MABUCHI MOTOR (SHANGHAI) CO., LTD.
MABUCHI MOTOR TRADING (SHENZHEN) CO., LTD.
MABUCHI TAIWAN CO., LTD.
MABUCHI MOTOR TAIWAN LTD.
MABUCHI MOTOR VIETNAM LTD.
MABUCHI MOTOR DANANG LTD.
MABUCHI MOTOR (SINGAPORE) PTE. LTD.
MABUCHI MOTOR KOREA CO., LTD.
MABUCHI MOTOR (THAILAND) CO., LTD.

(Informal)
AMERICA MABUCHIMEXICO MABUCHIEUROPE MABUCHI
POLAND MABUCHI
HONG KONG MABUCHIDONGGUAN MABUCHI
LUDONG MABUCHIDAOJIAO MABUCHIJIANGXI MABUCHIDALIAN MABUCHIWAFANGDIAN MABUCHIJIANGSU MABUCHISHANGHAI MABUCHISHENZHEN MABUCHITAIWAN MABUCHI
KAOHSIUNG MABUCHI
VIETNAM MABUCHIDANANG MABUCHI
SINGAPORE MABUCHI
KOREA MABUCHITHAILAND MABUCHI

16

Consolidated Balance Sheet
Mabuchi Motor Co., Ltd. and Consolidated Subsidiaries
December 31, 2017 and 2018
U.S. Dollars(Thousands)

Yen(Millions)(Note 1)

2017

2018

¥117,963¥113,066$1,018,619

27,07923,909215,396

Less – Allowance for doubtful accounts

(148)

(104)

(944)

Short-term investments (Note 4)

2,948

2,500

22,522Merchandise and finished goods

22,17725,014

225,352

Work in process

1,608

998

8,993

Raw materials and supplies

9,221

9,696

87,355

Deferred tax assets – current (Note 8)

1,706

1,570

14,152Other current assets

4,456

4,823

43,451

187,012

181,473

1,634,900

Land

6,661

6,633

59,758

Buildings and structures

45,95548,936440,868

Machinery and equipment

72,962

78,134

703,918

Construction in progress

10,628

11,09999,999136,208

144,804

1,304,545(67,898)(70,778)(637,646)

68,31074,025

666,898

Investment securities (Note 4)

11,411

9,208

82,960Long-term loans receivable

－

453

4,085

424

450

4,060

2,159

2,633

23,727

13,995

12,746

114,833¥269,318¥268,246$2,416,632

ASSETS2018

Current Assets:
Cash and bank deposits (Notes 3, 4)Trade notes and accounts receivable (Note 4)

Total current assets

Property, Plant and Equipment:Less – Accumulated depreciation
Property, plant and equipment, net

Investments and Other Assets:

Deferred tax assets – non-current (Note 8)
Other investments and other assets
Total investments and other assets

Total Assets

U.S. Dollars(Thousands)

Yen(Millions)
LIABILITIES AND NET ASSETS

2017(Note 1)

2018

2018

Current Liabilities:
Trade notes and accounts payable (Note 4)¥7,856¥6,376$57,448

Short-term loans payable

56

－

－

Accrued income taxes

2,854

1,812

16,327

Accrued bonuses due to employees

259

265

2,392

Accrued bonuses due to directors

143

161

1,450

Deferred tax liabilities – current (Note 8)

80

69

629

9,547

9,832

88,584

20,79818,518

166,833

Accrued benefits for stock payment

130

117

1,056

Liability for retirement benefits (Note 7)

2,532

2,259

20,357

16

17

156

3,353

2,519

22,698

306

359

3,239

Other current liabilities
Total current liabilities
Long-term Liabilities:

Asset retirement obligations
Deferred tax liabilities – non-current (Note 8)
Other long-term liabilities – non-current
Total long-term liabilities

6,340

5,273

47,508

Total liabilities

27,13823,791

214,341

Net Assets (Note 2):
Shareholders’ Equity
Common stock, no par value:
Authorized: 200,000,000 shares
Issued: 69,125,962 shares in 2017
20,70420,704

186,529

Additional paid-in capital

68,562,462 shares in 2018

20,41920,419183,962

Retained earnings

200,713

212,594

1,915,263(7,486)(7,400)(66,671)

234,351

246,318

2,219,084

4,546

2,020

18,201

Treasury stock, at cost: 1,513,962 shares in 2017
and 1,323,854 shares in 2018
Total shareholders’ equity
Accumulated other comprehensive income
Net unrealized holding gains on securities
Deferred gains or losses on hedges

(87)

(37)

(334)

Foreign currency translation adjustments

4,443(3,074)(27,696)

Retirement benefits liability adjustments (Note 7)(1,203)(897)(8,084)

7,698(1,988)(17,913)

130

124

1,119

Total net assets

242,179

244,4542,202,291

Total Liabilities and Net Assets¥269,318¥268,246$2,416,632

Total accumulated other comprehensive income
Subscription rights to shares

See notes to consolidated financial statements.

Consolidated Statement of Income
Mabuchi Motor Co., Ltd. and Consolidated Subsidiaries
For the years ended December 31, 2017 and 2018

U.S. Dollars(Thousands)

Yen(Millions)
Net Sales (Note 17)
Cost of Sales
Gross profit
Selling, General and Administrative Expenses (Notes 12, 14)
Operating income
Other Income (Expenses):
Interest and dividend income
Exchange gain, net
Gain on sale of raw material scrap
Gain on disposal of fixed assets, net (Note 15)
Gain (loss) on sales of investment securities, net
Soil restoration related expenses
Special severance payment
Gain on reversal of foreign currency translation adjustments
resulting from liquidation of foreign subsidiary
Other, net
Profit before Income Taxes
Income Taxes (Note 8):
Current
DeferredProfitProfit attributable to owners of parent(Note 1)

2017
¥146,925
99,61947,30523,23924,0662018¥143,116
98,78844,32723,084
21,2432018$1,289,334
889,983
399,350
207,970
191,380

588
280
1,080
445
(36)
－
－

889
1,474
1,520
4,790
－
(292)
(274)

8,009
13,286
13,69943,159－(2,637)(2,471)

1,259

－

－

(198)
3,419
27,485(27)
8,080
29,323(251)
72,794
264,174

7,132
50
7,182
20,303¥20,303

6,433
(35)
6,398
22,925¥22,925

57,955(315)
57,639206,534$206,534

Yen
Per Share Data (Note 11):
Profit attributable to owners of parent - Basic- Diluted
Dividends applicable to current year earnings
See notes to consolidated financial statements.

2017

2018

¥299.74
299.61120.00¥341.19341.05135.00U.S. Dollars
2018
$3.07
3.07
1.21

Consolidated Statement of Comprehensive Income
Mabuchi Motor Co., Ltd. and Consolidated Subsidiaries
For the years ended December 31, 2017 and 2018

U.S. Dollars(Thousands)

Yen(Millions)
ProfitOther Comprehensive Income (Note 9)
Net unrealized holding gains (losses) on securities
Deferred gains or losses on hedges
Foreign currency translation adjustments
Retirement benefits liability adjustments
Total other comprehensive income
Comprehensive income
Comprehensive income attributable to:
Owners of parent
Non-controlling interests
See notes to consolidated financial statements.

(Note 1)

2017¥20,3032018¥22,9252018$206,534

1,838
384
220
239
2,683
¥22,986(2,526)50(7,517)306(9,686)¥13,238(22,759)455(67,725)
2,761(87,266)$119,268¥22,986¥－¥13,238¥－$119,268$－

Consolidated Statement of Changes in Net Assets
Mabuchi Motor Co., Ltd. and Consolidated Subsidiaries
For the years ended December 31, 2017 and 2018
Number of Shares(Thousands)
2017
2018
Common Stock:
Beginning balance
69,927
69,125
Treasury stock cancellation
(801)
(563)
Ending balance
69,12568,562

U.S. Dollars(Thousands)

Yen(Millions)(Note 1)

2017

2018

2018

¥20,704－¥20,704¥20,704－¥20,704$186,529－$186,529

Additional Paid-in Capital:
Beginning balance
Treasury stock disposal
Treasury stock cancellation
Ending balance¥20,579(8)(151)¥20,419¥20,41900¥20,419$183,962
7(7)$183,962

Retained Earnings:
Beginning balance
Profit attributable to owners of parent
Dividends paid
Treasury stock cancellation
Ending balance¥193,141
20,303(8,873)(3,858)¥200,713¥200,713
22,925(8,172)(2,871)¥212,594$1,808,226
206,534(73,625)(25,871)$1,915,263

Treasury Stock:
Beginning balance
Treasury stock acquisition
Treasury stock disposal
Treasury stock cancellation
Ending balance¥(6,633)(5,001)
138
4,009¥(7,486)¥(7,486)(3,002)215
2,872¥(7,400)$(67,446)(27,046)
1,941
25,879$(66,671)

Net Unrealized Holding Gains on Securities:
Beginning balance
Net change during the year
Ending balance¥2,708
1,838¥4,546¥4,546(2,526)¥2,020$40,961(22,759)$18,201

Deferred Gains or Losses on Hedges:
Beginning balance
Net change during the year
Ending balance¥(472)
384
¥(87)

¥(87)
50
¥(37)

$(790)
455$(334)

Foreign Currency Translation Adjustments:
Beginning balance
Net change during the year
Ending balance¥4,222220¥4,443¥4,443(7,517)(3,074)$40,028(67,725)$(27,696)

Retirement Benefit Liability Adjustments:
Beginning balance
Net change during the year
Ending balance¥(1,443)239¥(1,203)¥(1,203)306¥(897)$(10,846)
2,761$(8,084)

Total Accumulated Other Comprehensive Income:
Beginning balance
Net change during the year
Ending balance¥5,014
2,683¥7,698¥7,698(9,686)¥(1,988)$69,353(87,266)$(17,913)

¥110
19
¥130

¥130
(5)
¥124

$1,173(53)$1,119¥232,917
20,303(8,873)(5,001)130
2,703¥242,179¥242,179
22,925(8,172)(3,002)
216(9,692)¥244,454$2,181,798
206,534(73,625)(27,046)
1,949(87,319)$2,202,291

Subscription Rights to Shares:
Beginning balance
Net change during the year
Ending balance
Total Net Assets:
Beginning balance
Profit attributable to owners of parent
Dividends paid
Treasury stock acquisition
Treasury stock disposal
Net changes in items other than those in shareholders’ equity
Ending balance
See notes to consolidated financial statements.

Consolidated Statement of Cash Flows
Mabuchi Motor Co., Ltd. and Consolidated Subsidiaries
For the years ended December 31, 2017 and 2018
U.S. Dollars(Thousands)

Yen(Millions)(Note 1)

2017

2018

2018

¥27,485
7,383
104
(588)
136

¥29,323
7,994
127
(889)
(134)

$264,174
72,0261,150(8,009)(1,213)

36

－

－

(445)
2,168
(5,255)126(4,790)2,004(4,710)(207)(43,159)
18,059(42,437)(1,873)(1,259)－－(1,005)28,887587(6,889)22,585(1,410)27,307857(7,185)
20,979(12,706)
246,011
7,726(64,730)
189,006

Cash Flows from Investing Activities:
Proceeds from withdrawal of time deposits
Purchases of short-term investments
Proceeds from sales of short-term investments
Purchases of property, plant and equipment
Proceeds from sales of property, plant and equipment
Purchases of investment securities
Proceeds from sales of investment securities
Other, net
Net cash used in investing activities

168(1,000)500(14,815)
802
(504)
1,093
(271)
(14,027)－(2,000)2,000(16,524)
6,033(1,162)－(1,082)(12,735)－(18,018)
18,018(148,866)
54,355(10,475)－(9,748)(114,734)

Cash Flows from Financing Activities:
Repayment of short-term loans payable
Repayment of long-term loans payable
Cash dividends paid
Purchases of treasury stock
Proceeds from sales of treasury stock
Net cash used in financing activities－(56)(8,872)(5,004)
88(13,844)(56)－(8,170)(3,004)
162(11,069)(511)－(73,608)(27,066)
1,465(99,721)(78)(5,365)
122,302(2,571)(5,396)
118,956(23,163)(48,613)
1,071,681

2,019

－

－

¥118,956¥113,560$1,023,067

Cash Flows from Operating Activities:
Profit before income taxes
Depreciation and amortization
Increase (decrease) in liability for retirement benefits
Interest and dividend income
Exchange (gain) loss
(Gain) loss on sales of short-term investments andinvestment securities(Gain) loss on disposal of fixed assets
Decrease (increase) in trade notes and accounts receivable
Decrease (increase) in inventories
Increase (decrease) in trade notes and accounts payable
Gain on reversal of foreign currency translation adjustments
resulting from liquidation of foreign subsidiary
Other, net
SubtotalInterest and dividends received
Income taxes paid
Net cash provided by operating activities

Effect of exchange rate changes on cash and cash equivalents
Net increase (decrease) in cash and cash equivalents
Cash and Cash Equivalents at the Beginning of Year
Increase in cash and cash equivalents from newly consolidated
subsidiary
Cash and Cash Equivalents at the End of YearSee notes to consolidated financial statements.

Notes to Consolidated Financial Statements
Mabuchi Motor Co., Ltd. and Consolidated Subsidiaries
December 31, 2017 and 2018

1. Summary of Significant Accounting Policies
a Basis of presentation
The accompanying consolidated financial statements of Mabuchi Motor Co., Ltd. (the “Company”) and consolidated subsidiaries areprepared in accordance with accounting principles generally accepted in Japan, which are different in certain respects to the applicationand disclosure requirements of International Financial Reporting Standards, and are compiled from the consolidated financial
statements prepared by the Company as required by the Financial Instruments and Exchange Law of Japan.
For the purpose of this report, certain reclassifications have been made to present the accompanying consolidated financial
statements in a format which is familiar to readers outside Japan.
The consolidated financial statements are expressed in Japanese yen. However, the consolidated financial statements as of, and forthe year ended December 31, 2018, have been translated into U.S. dollars at the rate of ¥111 = U.S.$1, the approximate exchange rate
prevailing on December 31, 2018. Those U.S. dollar amounts presented in the consolidated financial statements and related notes areincluded solely for the convenience of the reader. This translation should not be construed as a representation that all the amounts
shown could be converted into U.S. dollars.
b Principles of consolidation
The consolidated financial statements include the accounts of the Company and all significant subsidiaries. All significant inter-company
balances, transactions, and profits have been eliminated on consolidation. Investments in unconsolidated subsidiaries are stated atcost.
c Foreign currency translation
Receivables and payables denominated in foreign currencies are translated into yen at the rates of exchange in effect at the balance
sheet date, and differences arising from the translation are included in the consolidated statement of income.
The balance sheet accounts of the foreign consolidated subsidiaries are translated into yen at the rates of exchange in effect at thebalance sheet date, except for the components of net assets which are translated at their historical exchange rates. Revenue andexpense accounts are translated at the average rate of exchange in effect during the year. Differences arising from the translation arepresented as foreign currency translation adjustments in the consolidated financial statements.
d Cash equivalents
For the purposes of the consolidated statement of cash flows, the Company considers all highly liquid debt instruments purchased withan original maturity of three months or less to be cash equivalents.
e Short-term investments and investment securities
The Company classifies securities as “trading securities,” when they are held for the purpose of earning capital gains in the short-term,“held-to-maturity,” where management has the positive intent and ability to hold the securities to maturity, and “other securities,” where
those securities are not classified as either trading or held-to-maturity, which represent primarily available-for-sale securities.
Held-to-maturity securities are reported at amortized cost. Available-for-sale securities are stated at fair value with changes in
unrealized holding gains or losses, net of the applicable income taxes, presented in a separate component of net assets. However,when the fair value of held-to-maturity securities and available-for-sale securities declines significantly and the decline is considered tobe irrecoverable, such unrealized holding losses are recognized as impairment losses. Available-for-sale securities for which fair value
is not readily determinable are stated at moving average cost.
Corporate bonds classified as held-to-maturity securities and debt securities (corporate bonds) classified as available-for-salesecurities include compound financial instruments.
The Company considers a decline in the value of securities to be irrecoverable where market values decline to more than 50% of
acquisition costs. Where market values decline to between 30% and 50% of acquisition costs, the Company judges the necessity ofrecognizing any impairment losses by assessing the potential of market values to recover taking into consideration declining pricetrends and other individually relevant factors.
fInventories
Finished goods, work in process and raw materials are stated at average cost, however, where net realizable value is lower than cost,
the carrying value of the inventory is reduced.
g Property, plant and equipment and depreciation
Property, plant and equipment are stated at cost. Depreciation is computed primarily using the declining-balance method for theCompany (except for certain buildings) and for overseas subsidiaries, principally using the straight-line method over their estimateduseful lives. Buildings acquired by the Company on or after April 1, 1998 and facilities attached to buildings and structures acquired on
or after April 1, 2016 are depreciated using the straight-line method. Maintenance and repairs, including minor repairs and improvements,
are charged to income as incurred.
h Leased assets
Assets under finance leases, except for those under lease agreements which stipulate the transfer of ownership of the leased assets
to the lessee, are depreciated using the straight-line method over the lease period with the assumption that there is no residual value.
i
Allowance for doubtful accounts
The allowance to provide for potential loss on receivables is provided at the estimated amount of irrecoverable receivables. Allowancefor ordinary debt is computed based on the historical rate of default. For certain debts, such as those where recovery is doubtful, thelikelihood of recovery is considered on an individual basis.
The allowance for doubtful accounts is adjusted after offsetting receivables and payables between consolidated subsidiaries.
j
Accrued bonuses due to employees
Accrued bonuses due to employees are provided at the estimated amount to be paid to employees for the services rendered by thebalance sheet date.
k Accrued bonuses due to directors
Accrued bonuses due to directors are provided at the estimated amount to be paid to directors for the services rendered by thebalance sheet date.
l
Accrued benefits for stock payment
Accrued benefits for stock payment are provided at the amount of stocks to be paid to directors through the trust by the balance
sheet date based on the performance-linked stock compensation plan.
m Retirement benefits(a) Allocation of projected retirement benefit obligation
In calculating the retirement benefit obligation, the benefit formula basis is used to allocate the projected retirement benefit obligation

to the estimated years of service of eligible employees.
(b) Method for amortizing actuarial gain or loss and prior service cost
Actuarial gains and losses are amortized commencing from the year following the year in which the gains or losses arose, primarily
using the straight-line method within the average remaining years of service of the employees, which is mainly 10 years.
Prior service costs are amortized using the straight-line method mainly over 10 years.
(c) Application of simplified method at smaller-sized companies, etc.
Certain subsidiaries have pension plans similar to the Company or unfunded retirement and termination allowance plans for
qualifying employees. Any amounts required under the rules of the plans have been fully accrued.
n Income taxes
Deferred tax assets and liabilities are recognized for the expected tax consequences of temporary differences between the tax basesof assets and liabilities and their reported amounts using current enacted tax rates.
o Derivative and hedging activities
If a forward foreign exchange contract is executed to hedge a future transaction denominated in a foreign currency, the Company
defers recognition of gains or losses on revaluation of the forward foreign exchange contract until the related losses or gains on thehedged items are recognized.
p Accounting standards issued but not yet effective
Tax Effect Accounting(a) “Implementation Guidance on Tax Effect Accounting” (Accounting Standards Board of Japan (ASBJ) Guidance No. 28 issued
February 16, 2018)(b) “Implementation Guidance on Recoverability of Deferred Tax Assets” (ASBJ Guidance No. 26 revised February 16, 2018)
1) Overview
The following amendments were made to Accounting Standard for Tax Effect Accounting, etc. in connection with the transfer ofauthority for the practical guidance on tax effect accounting issued by the Japanese Institute of Certified Public Accountants to the
ASBJ.
(Major revised treatments)
・The treatment of future taxable temporary differences pertaining to shares of subsidiaries in non-consolidated financial statements
・The treatment of recoverability of deferred tax assets in companies classified as Category 1
2) Scheduled date of adoption
The Company expects to adopt the Accounting Standard and the Implementation Guidance from the fiscal year beginning January
1, 2019.
3) Impact of adopting the accounting standards
The Company is currently evaluating the impact of adopting the Accounting Standard and the Implementation Guidance on its
consolidated financial statements.
Revenue Recognition(a) “Accounting Standard for Revenue Recognition” (ASBJ Statement No. 29 issued March 30, 2018)(b) “Implementation Guidance on Accounting Standard for Revenue Recognition” (ASBJ Guidance No. 30 issued March 30, 2018)
1） Overview
The Accounting Standard and the Implementation Guidance provide comprehensive principles for revenue recognition. An entity
applies the following five steps to recognize revenue.
① Identify the contracts with a customer② Identify the separate performance obligations in the contract③ Determine the transaction price④ Allocate the transaction price to the performance obligations⑤ Recognize revenue when or as the performance obligation is satisfied
2） Scheduled date of adoption
The Company expects to adopt the Accounting Standard and the Implementation Guidance from the fiscal year beginning January
1, 2022.
3） Impact of adopting the accounting standards
The Company is currently evaluating the impact of adopting the Accounting Standard and the Implementation Guidance on its
consolidated financial statements.
q Additional information(Accounting Treatment for Transactions of Delivering the Company’s Own Stock to Employees, etc., through Trusts)
1. Outline of transactions
The ESOP Trust is a trust-type employee incentive plan that uses the mechanism of an employee shareholding association, with the
purpose of attempting to expand the savings system that promotes the asset accumulation of employees who own the Company’s
shares (enhancement of the employee welfare programs). It is based on the Employee Stock Ownership Plan (ESOP) system in the
United States.
The major purpose of introducing the ESOP Trust is to improve welfare programs for employees who support the Company’s growth.
The introduction thereof also aims to enhance the Company’s corporate value over the medium to long term by granting an incentive
toward high stock prices and creating greater awareness of the Company’s business performance and stock value among its employees.
This plan was finished in June 2018.
The Company has established a trust with those employee members of Mabuchi Motor Employee Shareholding Association(hereinafter “Our Shareholding Association”) who meet certain requirements as its beneficiaries, and during a predetermined period for
acquisition, said trust, or the ESOP Trust, will acquire the number of the Company’s shares that Our Shareholding Association is
expected to acquire over the next several years. Afterward, the ESOP Trust sells off the Company’s shares to Our Shareholding
Association on a fixed day every month. The remaining funds will be distributed according to the contribution ratio of the employees as
beneficiaries when there are ESOP Trust earnings resulting from an upward swing in stock prices when the term of the ESOP Trustends. There is no additional burden on the employees as the Company will pay back the loan payable collectively to the bank basedon its guarantee clause in the loan agreement with the bank if a liability associated with the trust estate resulting from a loss is caused
by a drop in stock prices.
The Company applied the “Revised Practical Solution on Transactions of Delivering the Company’s Own Stock to Employees etc.
through Trusts” (ASBJ PITF No.30 revised on March 26, 2015).
2. Treasury shares remaining in the trust
Shares of the Company remaining in the trust are recorded as treasury stock under net assets through the carrying value (net of
associated costs) in the trust. The carrying value was ¥162 million at December 31, 2017 and ¥- million ($- thousand) at December 31,
2018.
Per share amounts are computed based on the number of shares outstanding less treasury stock including shares of the ESOP Trustaccount. The number at year-end and the weighted average number of such treasury shares were 63,800 and 84,621 shares,
respectively, during the fiscal year ended December 31, 2017 and 0 and 29,988 shares, respectively, during the fiscal year ended
December 31, 2018.
3. Carrying value of loans recorded through application of the gross price method
As of December 31, 2017: ¥56 million; as of December 31, 2018: ¥- million($-thousand)(Accounting Treatment for Performance-based Stock Compensation Plan for Directors and Executive Officers)
1. Outline of transactions
The Company has introduced the Executive Compensation BIP (Board Incentive Plan) Trust Plan, the executive remuneration systemclosely linked to the achievement of performance targets as set out in the medium-term management plan, with the purpose ofenhancing the motivation of Directors to contribute to improved business performance and increased corporate value over the medium
term.
Under the Plan, the Company’s shares acquired through the BIP Trust and money equivalent to the amount obtained by converting
the Company’s shares into cash (collectively, the “Company Shares, etc.”) will be delivered and paid (the “Delivery, etc.” or “delivered,etc.”) to those serving as Directors, etc., during the target period based on factors such as the status and level of attainment of
performance targets throughout the trust term. Directors, etc., will receive the Delivery, etc., of Company Shares, etc., during a certain
timeframe following the end of the target period. Originally, the target period was over the three-year period from the fiscal year ended
December 31, 2016, to the fiscal year ended December 31, 2018. However, the plan was extended and the target period is over thethree-year period from the fiscal year ending December 31, 2019, to the fiscal year ending December 31, 2021.
The Company applied the “Revised Practical Solution on Transactions of Delivering the Company’s Own Stock to Employees, etc.,
through Trusts” (ASBJ PITF No. 30 revised on March 26, 2015).
2. Treasury shares remaining in the trust
Shares of the Company remaining in the trust are recorded as treasury stock under net assets through the carrying value (net of
associated costs) in the trust. The carrying value was ¥651 million at December 31, 2017 and ¥651 million ($5,871 thousand) at
December 31, 2018.
Per share amounts are computed based on the number of shares outstanding less treasury stock including shares of the BIP Trustaccount. The number of such treasury shares at December 31, 2017 was 116,386 shares, and at December 31, 2018 was 116,386
shares, and the number of such treasury shares during the fiscal year ended December 31, 2017 was 117,442 shares and during the
fiscal year ended December 31, 2018 was 116,386 shares.

2.

Changes in Net Assets
Information regarding changes in net assets for the years ended December 31, 2017 and 2018, is as follows:a Shares issued and outstanding / Treasury stock2017
Shares Issued (Thousands)
Treasury Stock (Thousands)
Type of shares
Common stock
Common stock
Number of shares as of December 31, 2016
69,927
1,558
Increase in number of shares
801
Decrease in number of shares
801
846
Number of shares as of December 31, 201769,125
1,513
Note: 1.The decrease in the number of shares issued and the number of shares of treasury stock was due to the cancellation of 801
thousand shares.
2. The increase in the number of shares of treasury stock was due to the purchase of 801 thousand shares of treasury stock andthe purchase of 0 thousand shares of less than one unit.
3. The decrease in the number of shares of treasury stock was, other than Note 1, due to sales of 34 thousand shares to Our
Shareholding Association by the ESOP Trust, the exercise of 6 thousand stock options, the issue of 1 thousand shares andsales of 1 thousand shares held by the BIP Trust.
4. There were 98 thousand shares and 63 thousand shares of treasury stock held by the ESOP Trust included in the number ofshares of treasury stock as of January 1, 2017 and December 31, 2017, respectively and there were 119 shares and 116
thousand shares of treasury stock held by the BIP Trust included in the number of shares of treasury stock as of January 1,
2017 and December 31, 2017, respectively.

2018
Shares Issued (Thousands)
Treasury Stock (Thousands)
Type of shares
Common s toc kCommon s toc k
Number of shares as of December 31, 201769,125
1,513
Increase in number of shares
563
Decrease in number of shares
563
637
Number of shares as of December 31, 2018
68,562
1,440
Note: 1. The decrease in the number of shares issued and the number of shares of treasury stock was due to the cancellation of 563
thousand shares.
2. The increase in the number of shares of treasury stock was due to the purchase of 563 thousand shares of treasury stock andthe purchase of 0 thousand shares of less than one unit.
3. The decrease in the number of shares of treasury stock was, other than Note 1, due to sales of 51 thousand shares to themarket accompanied by the expiration of the ESOP Trust period, sales of 12 thousand shares to Our Shareholding Associationby the ESOP Trust, disposition of 9 thousand treasury shares as restricted stock compensation, and the exercise of 1 thousandstock options.
4. There were 63 thousand shares and 0 thousand shares of treasury stock held by the ESOP Trust included in the number ofshares of treasury stock as of January 1, 2018 and December 31, 2018, respectively and there were 116 thousand shares and
116 thousand shares of treasury stock held by the BIP Trust included in the number of shares of treasury stock as of January
1, 2018 and December 31, 2018, respectively.

b

Share subscription rights

2017

Number of shares issued

Company

Description

Type of sharesissuedNumber ofshares at
January 1,
2017

Increase

Decrease

Number ofshares at
December 31,
2017

Balance at
December 31,
2017
Yen (Millions)

―

―

―

―

―

¥130

―

―

―

―

―

¥130

Subscription rights
as stock options
Total

Parent Company

2018

Number of shares issued

Company

Description
Subscription rights
as stock options
Total

Parent Company

Type of sharesissuedNumber ofshares at
January 1,
2018

Increase

Decrease

Number ofshares at
December 31,
2018

Balance at
December 31,
2018
Yen (Millions)

U.S. Dollars(Thousands)

―

―

―

―

―

¥124

$1,119

―

―

―

―

―

¥124

$1,119c Dividends
Dividends paid during the fiscal year ended December 31, 20172017
Shareholders’ Meeting
Board of Directors’ Meeting
Resolution by
March 30, 2017
August 10, 2017
Total amount of dividends¥5,212 million¥3,660 million
Dividends per share¥76¥54
Record date
December 31, 2016
June 30, 2017
Effective date
March 31, 2017
September 15, 2017
Note: Dividends approved at the shareholders’ meeting on March 30, 2017 paid to the ESOP Trust and BIP Trust in the amount of ¥16
million have been included in the total amount of dividends. Dividends approved at the Board of Directors’ meeting on August 10,2017 paid to the ESOP Trust and BIP Trust in the amount of ¥10 million have been included in the total amount of dividends.

Dividends whose record date was in the fiscal year ended December 31, 2017, but whose effective date was in the following fiscal year2017
Shareholders’ Meeting
Resolution by
March 29, 2018
Total amount of dividends¥4,474 million
Dividends per share¥66
Record date
December 31, 2017
Effective date
March 30, 2018
Note: Dividends paid to the ESOP Trust and BIP Trust in the amount of ¥11 million have been included in the total amount of dividends.

Dividends paid during the fiscal year ended December 31, 20182018
Shareholders’ Meeting
Board of Directors’ Meeting
Mar c h 29, 2018
Augus t 10, 2018
¥4,474 million¥3,698 million
Total amount of dividends( $40,308 thous and)( $33,316 thous and)
¥66
¥55
Dividends per share( $0.59)( $0.49)
Record date
Dec ember 31, 2017
J une 30, 2018
Effective dateMar c h 30, 2018
September 14, 2018
Note: Dividends approved at the shareholders’ meeting on March 29, 2018 paid to the ESOP Trust and BIP Trust in the amount of ¥11
million ($107 thousand) have been included in the total amount of dividends. Dividends approved at the Board of Directors’
meeting on August 10, 2018 paid to the ESOP Trust and BIP Trust in the amount of ¥9 million ($83 thousand) have been includedin the total amount of dividends.
Resolution by

Dividends whose record date was in the fiscal year ended December 31, 2018, but whose effective date was in the following fiscal year
2018
Shareholders’ Meeting
Mar c h 28, 2019
¥5,379 million
Total amount of dividends( $48,460 thous and)¥80
Dividends per share( $0.72)
Record date
Dec ember 31, 2018
Effective dateMar c h 29, 2019
Note: Dividends paid to the BIP Trust in the amount of ¥9 million ($83 thousand) have been included in the total amount of dividends.
Resolution byd Stock options
The Company issued the following share subscription rights for the purchase of new shares of common stock in accordance with the
Corporation Law of Japan.
For the years ended December 31, 2017 and 2018, the Company recognized and allocated share-based compensation costs asfollows:
Yen (Millions)
2017
¥43
¥43

Selling, general and administrative expenses
Total

U.S. Dollars (Thousands)
2018
¥ ¥ -

2018
¥ ¥ -

A description of the 2013, 2014, 2015, 2016 and 2017 Stock Option Plans as of December 31, 2017 and 2018, respectively, aresummarized as follows:

Grantee categories andnumber of grantees
Number of shares
Grant date
Vesting conditions
Service period
Exercisable period

2013 Stock
Option Plan

2014 Stock
Option Plan

2015 Stock
Option Plan

2016 Stock
Option Plan

2017 Stoc kO ption Plan
6 dir ec tor s of the

6 directors of theCompany

6 directors of theCompany

6 directors of theCompany

11,940 shares of

7,980 shares of

4,650 shares of

10,360 shares of

the Company
8,180 s har es ofcommon stock
May 20, 2013
None
None
May 21, 2013 tocommon stock
April 21, 2014
None
None
April 22, 2014 tocommon stock
April 20, 2015
None
None
April 21, 2015 tocommon stock
April 20, 2016
None
None
April 21, 2016 toc ommon s toc k
Apr il 20, 2017
None
None
Apr il 21, 2017 to

May 20, 2033

April 21, 2034

April 20, 2035

April 20, 2036

Apr il 20, 2037

6 directors of the Company

Company

5 executive officers of

4 ex ec utiv e offic er s of

the Company

Note: The Company conducted a 2-for-1 stock split of its common stock on January 1, 2015. The number of shares for fiscal 2013 and2014 reflect the stock split.
The following table summarizes the option activity under the stock option plans referred to above.
2013 Stock
Option Plan

2014 Stock
Option Plan

Number of shares2016 Stock
Option Plan

2015 Stock
Option Plan

2017 Stoc kO ption Plan

Non-vested:
Outstanding as of December 31, 2017
GrantedForfeited
VestedOutstanding as of December 31, 2018

-

-

-

-

-

Vested:Outstanding as of December 31, 2017
VestedExercised
Forfeited
Outstanding as of December 31, 2018

5,800
5,800

3,880
3,880

3,810
3,810

8,440
640
7,800

8,180
550
7,630

-

Note: Number of stock options are listed after conversion to share numbers.
Price information of stock options for the 2013, 2014, 2015, 2016 and 2017 Stock Option Plans are summarized as follows:

Exercise price
Average price on exercise
Fair value on grant date2013 Stock
Option Plan
Yen
¥1
4,967

2014 Stock
Option Plan
Yen
¥1
6,158

2015 Stock
Option Plan
Yen
¥1
5,465

2016 Stock
Option Plan
Yen
¥1
5,270
4,699

2017 Stoc kO ption Plan
Yen
¥1
5,270
5,304

2017 Stoc kO ption Plan
U.S. Dollars
$0
47
47

Since it is fundamentally difficult to reasonably estimate the forfeited number of stock options for future periods, an estimation of thevested number is based upon actual forfeitures in prior periods.

3.

Cash and Cash Equivalents

Cash and cash equivalents at the end of the year in the accompanying consolidated statement of cash flows are reconciled to cash andbank deposits reported in the accompanying consolidated balance sheet as of December 31, 2017 and 2018, as follows:

Cash and bank deposits
Time deposits with maturities over three months at the time of purchase
Short-term investments
Securities exposed to price risk
Cash and cash equivalents

Yen (Millions)
2017
2018
¥117,963¥113,066
(6)
( 6)
2,948
2,500
(1,948)( 2,000)¥118,956¥113,560

U.S. Dollars (Thousands)
2018$1,018,619( 55)
22,522( 18,018)$1,023,067

Significant non-cash transactions for the years ended December 31, 2017 and 2018, were as follows:

Treasury stock cancellation

4.

Yen (Millions)2017¥4,0092018¥2,872

U.S. Dollars (Thousands)
2018$25,879

Financial Instruments(1) Financial instrumentsa. Policies for financial instruments
The Company funds R&D expenditure and equipment investment through retained earnings to maintain a sound financial position.
According to this policy, the Company limits the management of surplus funds to short-term deposits and other highly secure financial
assets. The Company uses derivatives to mitigate risks as described below and does not engage in speculative transactions.
b. Financial instruments description and risks
Trade notes and accounts receivable are exposed to customer credit risk and some are also exposed to foreign currency risk.
Short-term investments and investment securities, primarily securities and investments in stocks of trading partners, are exposed to
the risk of fluctuations in market prices.
Trade notes and accounts payable are due within one year, and some are exposed to foreign currency risk.
The Company uses forward foreign exchange contracts to hedge the risk of foreign exchange fluctuations associated with receivables
and payables and forecasted transactions denominated in foreign currencies.
c. Risk management of financial instruments
1. Management of credit risk (risks associated with the default of counterparties)
The Company and its consolidated subsidiaries manage credit risk in compliance with internal control rules and procedures. The due
dates and the balances of trade notes and accounts receivable from major counterparties are monitored and managed regularly to ensure
early detection and to mitigate the risk of doubtful receivables.
2. Management of market risk (risks associated with fluctuations in foreign exchange rates and interest rates)
The Company and some of its consolidated subsidiaries hedge the risk of foreign exchange rate fluctuations on foreign currency
denominated receivables and payables and forecasted transactions, using foreign exchange forward contracts on a monthly andindividual currency basis. The Company enters into exchange contracts based on the decision of the Board of Directors and these aremonitored regularly by the head office administrative department.
The Company monitors the fair value and the financial position of the respective issuers of short-term investments and investment
securities regularly in the head office administrative department, and continually reviews the condition of stocks held. The Company
reports the condition of stocks held and their fair value to the Board of Directors, and monitors the rating and financial conditions ofissuers.
3. Management of liquidity risk related to financing activities (risk of non-payment on due date)
The Company manages liquidity risk centrally through the administrative department, which ensures a certain amount of liquidity throughthe preparation and update of cash forecasts based on reports from each department and the finance plans prepared by the accounting
departments of each subsidiary.
d. Supplemental information on the fair value of financial instruments
The Company calculates the fair value of financial instruments based on market prices, or by using reasonable estimates when market
prices are not available.
These estimates include variable factors, and therefore may change depending on changes in the underlying assumptions. The
contract amounts of the derivatives described in Note 6. Derivative Financial Instruments are not indicative of the market risk associatedwith derivatives transactions.
(2) Fair value of financial instruments
The carrying value, fair value and variance for financial instruments as of December 31, 2017 and 2018, were as follows. Fair values
that are not readily determinable are not included in the following table.

Yen (Millions)
2017
Fair value

Carrying value
Assets:(1) Cash and bank deposits(2) Trade notes and accounts receivable(3) Short-term investments and investment securities
Total assets
Liabilities
Trade notes and accounts payable
Total liabilities

Assets:(1) Cash and bank deposits(2) Trade notes and accounts receivable(3) Short-term investments and investment securities
Total assets
Liabilities
Trade notes and accounts payable
Total liabilities

Variance¥117,963
27,07914,248¥159,290¥117,963
27,07914,248¥159,290¥¥-¥7,856¥7,856¥7,856¥7,856¥¥-

Carrying value

Yen (Millions)
2018
Fair value¥113,066
23,90911,433¥148,409¥113,066
23,90911,433¥148,409¥ ¥ -$1,018,619
215,396
103,005$1,337,021$1,018,619
215,396
103,005$1,337,021$ $ -¥6,376¥6,376¥6,376¥6,376¥ ¥ -$57,448$57,448$57,448$57,448$ $ -Variance

U.S. Dollars (Thousands)
2018
Carrying value
Fair value

Variance

1: Method for calculating the fair values of financial instruments, short-term investments and derivative transactions
Assets:(1) Cash and bank deposits, (2) Trade notes and accounts receivable
The carrying value is used for the fair value of these short-term items because these amounts are approximately the same.
(3) Short-term investments and investment securities
Market prices on securities exchanges are used to determine the fair value of stock. Prices quoted by exchanges or financial institutions
are used to determine the fair value of bonds.
Liabilities:(1) Trade notes and accounts payable
The carrying value is used for the fair value of these short-term items because these amounts are approximately the same.
Derivative instruments:
Please refer to Note 6. Derivative Financial Instruments.
2: Carrying value of financial instruments for which fair values were extremely difficult to determine
Yen (Millions)
2017
¥112

Unlisted stocks

2018
¥275

U.S. Dollars (Thousands)
2018$2,477

These items are not included in “(3) Short-term investments and investment securities” because market prices do not exist for these
items and their fair values are not readily determinable.
3: Redemption schedule for receivables and marketable securities with maturities at December 31, 2017 and 2018

Cash and bank deposits
Trade notes and accounts receivable
Short-term investments and investment securities
Other securities
Corporate bonds
Total

Cash and bank deposits
Trade notes and accounts receivable
Short-term investments and investment securities
Other securities
Corporate bonds
Certificate of deposit
Total

Within 1 year
¥117,963
27,079Yen (Millions)2017
1-5 years¥-

3,000¥148,042¥-

Within 1 year
¥113,066
23,909Yen (Millions)2018
1-5 years¥ -5-10 years
¥ -

2,000
500
¥139,475¥ -¥ -5-10 years¥-¥-

U.S. Dollars (Thousands)
2018
Within 1 year
1-5 years$1,018,619$ 215,396-

18,0184,504$1,256,538$ -5-10 years
$ -

$ -

5.

Investment Securities

The carrying value, fair value and variance for held-to-maturity securities as of December 31, 2017 and 2018, were as follows:(1) Held-to-maturity securities
They were not applicable for the years ended December 31, 2017 and 2018.
The acquisition cost, carrying value and variance for other securities as of December 31, 2017 and 2018, were as follows:(2) Other securities

Securities whose carrying value exceeds their acquisition cost
Stock
Credit (Corporate bonds)
Other
Subtotal
Securities whose acquisition cost exceeds their carrying value
Stock
Credit (Corporate bonds)
Subtotal
Total

Carrying value

Yen (Millions)2017
Acquisition cost

¥10,788
2,000
511
13,299¥4,528
2,000
500
7,028

¥6,259
0
11
6,270

948
948
¥14,248

1,000
1,000
¥8,028(51)(51)¥6,219Variance

Note: 1.Corporate bonds include compound financial instruments.
2.Unlisted stocks of ¥42 million are not included in “Other securities” because their market prices do not exist and their fair values
are not readily determinable.

Carrying value

Yen (Millions)2018
Acquisition cost

¥5,1531,000
6,153¥1,942
1,000
2,942¥3,211
03,211$46,431
9,009
55,441$17,502
9,009
26,511$28,9290
28,929

3,283
1,000
995
5,279
¥11,433

3,585
1,000
1,000
5,585
¥8,528( 301)( 4)( 305)¥2,90529,583
9,009
8,972
47,564$103,005

32,3009,009
9,009
50,318$76,829( 2,716)( 36)( 2,753)$26,176

Securities whose carrying value exceeds their acquisition cost
Stock
Credit (Corporate bonds)
Subtotal
Securities whose acquisition cost exceeds their carrying value
Stock
Credit (Corporate bonds)
Other
Subtotal
Total

Variance

U.S. Dollars (Thousands)
2018
Carrying value
Acquisition cost

Variance

Note: Unlisted stocks of ¥41 million ($374 thousand) are not included in “Other securities” because their market prices do not exist andtheir fair values are not readily determinable.
(3) Other securities soldYen (Millions)

Other
Total

Sold amount¥1,093¥1,0932017
Total gain¥¥-

Total loss
¥36
¥36

Sold amount
¥ ¥ -

2018
Total gain
¥ ¥ -Total loss
¥ ¥ -U.S. Dollars (Thousands)
2018
Sold amount
Total gain
$ $ $ $ -Total loss
$ $ -(4) Held-to-maturity securities sold
They were not applicable for the years ended December 31, 2017 and 2018.

6.

Derivative Financial Instruments

The Company enters into forward exchange contracts and options, and forward precious metal contracts, as a normal part of risk
management efforts. The Company also utilizes compound financial instruments for the purpose of efficient management of surplus
funds. However, only principal guaranteed instruments are used, and derivatives are not used for speculative trading purposes. As aresult, the Company is exposed to risk of currency rate fluctuations and commodity price risk. The Company is also exposed to credit
related losses in the event of the nonperformance of the counterparties to foreign exchange contracts, precious metal contracts andcompound instruments. Management believes such credit risks are minor because of the high credit worthiness of the counterparties
and as such financial instruments are not held for trading purposes.
Forward precious metal contracts are used by the Company to hedge the risk of changes in market prices resulting from the purchaseof precious metals as raw materials for motor products. These contracts are long-term purchase contracts of raw materials, and are also
not in the scope of the accounting standards of financial instruments.
The fair value of derivative transactions for which hedge accounting is not applied is the forward foreign exchange quotation or the
price provided by correspondent financial institutions.

(1) Derivative transactions for which hedge accounting is not applied
1. Forward exchange contracts and currency option transactions
Yen (Millions)2017
Maturity over 1 year

Contract amountNon-market transactions
Forward exchange contracts
Sell US$
Total¥21,239¥21,239¥¥-¥19,708¥19,708¥ ¥ -$177,556$177,556$ $ -Revaluation gain/loss¥1¥1

Fair value

Revaluation gain/loss

¥3
¥3

¥3
¥3

U.S. Dollars (Thousands)
2018
Maturity over 1 year
Fair value

Contract amountNon-market transactions
Forward exchange contracts
Sell US$
Total

¥1
¥1

Yen (Millions)2018
Maturity over 1 year

Contract amountNon-market transactions
Forward exchange contracts
Sell US$
Total

Fair value

Revaluation gain/loss

$33
$33

$33
$33

Fair value

Revaluation gain/loss¥17,118¥17,118¥3,715¥3,715

Fair value

Revaluation gain/loss¥9,918¥9,918¥532¥532

2. Forward precious metal contracts
Yen (Millions)2017
Maturity over 1 year

Contract amountNon-market transactions
Buy
Total

¥13,403¥13,403¥9,554¥9,554
Yen (Millions)2018
Maturity over 1 year

Contract amountNon-market transactions
Buy
Total

¥9,385¥9,385¥5,654¥5,654

U.S. Dollars (Thousands)
2018
Maturity over 1 year
Fair value

Contract amountNon-market transactions
Buy
Total

$84,555$84,555$50,940$50,940$89,351$89,351

Revaluation gain/loss$4,796$4,796(2) Derivative transactions for which hedge accounting is applied
Dividends receivable from foreign subsidiaries
Yen (Millions)
2017
Hedge accounting method
Principle-based accounting

Hedging instrument
Forward exchange contracts
Sell US$

Hedged item
Dividends

Total

Contract amount

Maturity over 1 year

Fair value¥5,463¥5,463¥¥-¥(126)¥(126)

Contract amount

Maturity over 1 year

Fair value¥4,314¥4,314¥ ¥ -¥( 53)¥( 53)

Maturity over 1 year

Fair value$ $ -$( 480)$( 480)Yen (Millions)2018
Hedge accounting method
Principle-based accounting

Hedging instrument
Forward exchange contracts
Sell US$

Total

Hedge accounting method
Principle-based accounting
Total

Hedging instrument
Forward exchange contracts
Sell US$

Hedged item
Dividends

U.S. Dollars (Thousands)
2018
Hedged item
Contract amount
Dividends$38,866$38,866

7.

Retirement Benefit Plans

The table below sets forth the plans’ status and amounts recognized in the consolidated balance sheets at December 31, 2017 and 2018.
1. Movement in retirement benefit obligations

Beginning balance
Service cost
Interest cost
Actuarial loss (gain)
Benefit paid
Other
Ending balance

Yen (Millions)
2017
2018
¥12,123¥12,130
470
479
76
73
(107)
( 157)(611)( 909)
178( 161)¥12,130¥11,455

U.S. Dollars (Thousands)
2018$109,280
4,324
662( 1,418)( 8,191)( 1,456)$103,200

Yen (Millions)
2017
2018
¥9,916¥10,013
103
100
11
89
462
451
(611)
( 661)
130( 119)¥10,013¥9,873

U.S. Dollars (Thousands)
2018$90,207
904
810
4,068
( 5,957)( 1,080)$88,953

2. Movement in plan assets

Beginning balance
Expected return on plan assets
Actuarial gain (loss)
Contributions paid by the employer
Benefit paid
Other
Ending balance

3. Movement in retirement benefit obligations calculated using the simplified method

Beginning balance
Retirement benefit cost
Benefit paid
Other
Ending balance

Yen (Millions)
2017
¥413
44
(33)
(8)
¥415

2018
¥415
61
( 44)
( 16)
¥415

U.S. Dollars (Thousands)
2018$3,747551( 402)( 150)$3,746

4. Reconciliation from retirement benefit obligations and plan assets to liability (asset) for retirement benefits

Unfunded retirement benefit obligations
Total net liability for retirement benefits at December 31

Yen (Millions)
2017
2018
¥12,130¥11,455(10,013)( 9,873)
2,117
1,581
415
415
¥2,532¥1,997

U.S. Dollars (Thousands)
2018$103,200( 88,953)
14,247
3,746$17,993

Liability for retirement benefits
Total net liability for retirement benefits at December 31

Yen (Millions)2017¥2,532¥2,532

2018¥1,997¥1,997

U.S. Dollars (Thousands)
2018$17,993$17,993

Yen (Millions)
2017
¥470
76
(103)
164
20
44
34
¥707

2018
¥479
73
( 100)
180
0
61
288
¥984

U.S. Dollars (Thousands)
2018$4,324662( 904)
1,630
6
551
2,601
$8,873Funded retirement benefit obligations
Plan assets

5. Retirement benefit costs

Service cost
Interest cost
Expected return on plan assets
Amortization of unrecognized actuarial gain
Amortization of prior service cost
Retirement benefit costs applying a simplified method
Other
Total retirement benefit costs for the fiscal year ended December 31

6. Retirement benefits liability adjustments before tax effect in other comprehensive income

Prior service cost
Actuarial loss
Total balance amount for the year

Yen (Millions)
2017
¥20
283
¥304

2018
¥0
408
¥409

U.S. Dollars (Thousands)
2018
$6
3,684
$3,690

7. Retirement benefits liability adjustments before tax effect in accumulated other comprehensive income
Yen (Millions)2017
Unrecognized prior service cost
Unrecognized actuarial loss
Total balance amount for the year

¥1
1,559
¥1,561

2018
¥0
1,150
¥1,151

U.S. Dollars (Thousands)
2018$8
10,366$10,374

8. Plan assets
The fair values of plan assets, by major category, as a percentage of total plan assets were as follows:①Plan assets at December 31, 2017 and 2018, comprise:
General accounts
Bonds
StocksCash and deposits
Other
Total

2017
75.2%
13.6%
－
4.5%
6.7%
100.0%

2018
67.6%
13.4%
5.1%
3.0%
10.9%
100.0%②Long-term expected rates of return
The expected rates of return on plan assets have been estimated based on the anticipated allocation to each asset class and the
expected long-term returns on assets held in each category.
The assumptions used in accounting for the above plans were as follows:
Discount rates
Expected rates of return on plan assets
Expected rates of salary increase

8.

2017
Mainly 0.4%
Mainly 1.0%
Mainly 2.7%

2018
Mainly 0.3%
Mainly 1.0%
Mainly 2.8%

Income Taxes

1. Income taxes in Japan applicable to the Company consist of corporation tax, inhabitant’s taxes and enterprise tax, which, in theaggregate, resulted in statutory rates of approximately 30.7% and 30.7% for the years ended December 31, 2017 and 2018, respectively.
Income taxes of the foreign consolidated subsidiaries are based generally on the tax rates applicable in their countries of incorporation.
The reconciliation between the effective tax rates reflected in the consolidated statement of income and the effective statutory tax rates
for the years ended December 31, 2017 and 2018 was as follows:

Effective statutory tax rates
Tax credits on dividend income
Different tax rates applied to foreign subsidiaries
Tax deduction
Undistributed earnings in foreign subsidiaries
Valuation allowance
Other, net
Effective tax rates

2017
Percentage
30.7
0.6
(5.7)
(2.1)
0.8
0.4
1.4
26.1

2018
Percentage
30.7
0.9( 9.8)( 1.3)
0.9
2.0( 1.6)
21.8

2. The significant components of deferred tax assets and liabilities at December 31, 2017 and 2018, were as follows:
Yen (Millions)Deferred tax assets:
Enterprise tax payable
Depreciation
Liability for retirement benefits
Loss on retirement of fixed assets
Valuation losses on investment securities and other assets
Valuation losses on golf club membership
Impairment loss
Net unrealized holding gains on securities
Deferred gains or losses on hedges
Unrealized profits on inventories and fixed assets
Loss carried forward
Other
Subtotal
Valuation allowance
Total
Deferred tax liabilities:
Tax on undistributed earnings in foreign subsidiaries
Reserve for reduction entry
Unrealized holding gains on securities
Other
Total
Net deferred tax assets (liabilities)
As reported in the consolidated balance sheet:
Deferred tax assets‐Current
Deferred tax assets‐Non-current
Deferred tax liabilities‐Current
Deferred tax liabilities‐Non-current

2017

2018

U.S. Dollars (Thousands)
2018

¥144
138
585
247
71
12
15
38
1,558
485
354
3,653
(914)
¥2,738

¥85
138
537
320
247
71
11
93
16
1,455
1,068
436
4,482
( 1,550)¥2,931

$766
1,249
4,838
2,883
2,232
641
105
838
146
13,116
9,623
3,935
40,379( 13,967)$26,411¥2,227(56)(1,688)(68)¥(4,041)¥(1,303)¥2,480( 54)( 885)( 79)¥( 3,499)¥( 567)$22,343( 492)( 7,974)( 716)$( 31,527)$( 5,115)¥1,706424(80)(3,353)¥1,570450( 69)( 2,519)$14,152
4,060( 629)( 22,698)

9．Consolidated Statement of Comprehensive Income
The following table presents reclassification adjustments and tax effects for each component of other comprehensive income for theyears ended December 31, 2017 and 2018.
Yen (Millions)
Net unrealized holding gains (losses) on securities:
Amount arising during the year
Reclassification adjustments for gains and losses included in net income
Amount before tax effectTax effectNet unrealized holding gains (losses) on securities
Deferred gains or losses on hedges:
Amount arising during the year
Tax effect
Deferred gains or losses on hedges
Foreign currency translation adjustments:
Amount arising during the year
Retirement benefits liability adjustments:
Amount arising during the year
Reclassification adjustments for gains and losses included in net income
Amount before tax effectTax effect
Retirement benefits liability adjustments
Total other comprehensive income

2017

2018

U.S. Dollars (Thousands)
2018¥2,444
36
2,481
(643)
1,838

¥( 3,313)( 3,313)787( 2,526)$( 29,854)( 29,854)
7,094( 22,759)

555
(170)
384

73
( 22)
50

659
( 203)
455

220( 7,517)( 67,725)

119
185
304
(64)
239
¥2,683227
181
409( 103)
306¥( 9,686)

2,053
1,637
3,690
( 928)
2,761$( 87,266)

10. Shareholders’ Equity
Under the Japanese Corporation Law (“the Law”), the entire amount paid for new shares is required to be designated as common stock.
However, a company may, by a resolution of the Board of Directors, designate an amount not exceeding one half of the price of the newshares as additional paid-in capital, which is included in capital surplus.
Under the Law, where a distribution of earnings is made, the smaller of an amount equal to 10% of the dividend or the excess, if any,of 25% of common stock over the total of additional paid-in capital and the legal earnings reserve must be set aside as additional paidin capital or as part of the legal earnings reserve. The legal earnings reserve is included in retained earnings in the accompanying
consolidated balance sheets.
As of December 31, 2018, the total amount of additional paid-in capital and the legal earnings reserve exceeded 25% of the common
stock; therefore, no additional transfer is required.
Additional paid-in capital and the legal earnings reserve may not be distributed as dividends. However, by a resolution at a shareholders’meeting, additional paid-in capital and the legal earnings reserve may be transferred to other retained earnings and capital surplus,
respectively, which are potentially available for dividends.
The maximum amount that the Company can distribute as dividends is calculated based on the non-consolidated financial statementsof the Company in accordance with the Law.
Year-end dividends are approved by the shareholders after the end of each fiscal year, and semiannual interim cash dividends are
declared by the Board of Directors after the end of each interim six-month period.
On September 14, 2018, interim dividends (¥55 or $0.49 per share) totaling ¥3,698 million ($33,316 thousand) were paid toshareholders based on the shareholders’ record at June 30, 2018. On March 28, 2019, the shareholders approved the declaration ofdividends (¥80 or $0.72 per share) totaling ¥5,379 million ($48,460 thousand).

11. Amounts per ShareYen
Profit attributable to owners of parent
Basic
Diluted

2017

2018

¥299.74¥299.61¥341.19¥341.05
Yen

Net assets

2017¥3,579.98

2018¥3,640.08

U.S. Dollars
2018
$3.07
$3.07
U.S. Dollars
2018$32.79Notes: 1. Per share amounts are computed based on the number of shares outstanding less treasury stock including shares of the ESOP
trust account and BIP trust account.
2. The number at year end of such treasury shares were 63,800 and 116,386 shares, respectively, during the fiscal year ended
December 31, 2017, and 0 and 116,386 shares, respectively, during the fiscal year ended December 31, 2018.
3. The weighted average number of such treasury shares were 84,621 and 117,442 shares, respectively, during the fiscal year
ended December 31, 2017, and 29,988 and 116,386 shares, respectively, during the fiscal year ended December 31, 2018.
The bases for calculation (net assets per share) are as follows:

Total net assets
Amounts deducted from total net assets:
Share subscription rights
Net assets attributable to shares of Common stock
Number of Common stock on December 31 (Shares)

Yen (Millions)
2017
2018
¥242,179¥244,454
130
124
130
124
¥242,049¥244,330
67,612,000
67,122,222

U.S. Dollars (Thousands)
2018$2,202,291
1,119
1,119
$2,201,171-

The bases for calculation (basic and diluted profit attributable to owners of parent per share) are as follows:
Yen (Millions)
2017
Profit attributable to owners of parent per share
Profit attributable to owners of parent
Amounts not attributable to ordinary shareholders
Profit attributable to owners of parent in relation to Common stock
Average number of Common stock (Shares)
Diluted profit attributable to owners of parent per share
Profit attributable to owners of parent adjustments
Increase in number of shares of Common stock (Shares)
Share subscription rights (Shares)

2018

U.S. Dollars (Thousands)
2018¥20,303
20,30367,735,198¥22,925
22,92567,191,599$206,534
206,534-

29,23029,23029,24329,243-

12. Selling, General and Administrative Expenses
The main components of “Selling, General and Administrative Expenses” for the years ended December 31, 2017 and 2018, were as
follows:

Packing and freightage expenses
Salaries and wages
Provision for bonuses due to employees
Provision for bonuses due to directors
Retirement benefit expenses
Employee benefit costs
Depreciation
Provision of allowance for doubtful debts
Research expenses

Yen (Millions)2017¥1,168
9,031
260
143
615
1,739
1,584
44
1,140

2018
¥1,173
9,341
262
161
596
1,927
1,565
( 56)
1,159

U.S. Dollars (Thousands)
2018$10,575
84,161
2,363
1,450
5,370
17,364
14,107( 512)
10,442

13. Contingent Liabilities
As of December 31, 2017 and 2018, the Company is contingently liable principally for forward precious metal contracts in the amountsof ¥13,403 million and ¥9,385 million ($84,555 thousand), respectively.

14. Research and Development Expenses
Expenditures relating to research and development activities are charged to income as incurred and amounted to ¥5,233 million and¥4,939 million ($44,502 thousand) for the years ended December 31, 2017 and 2018, respectively.

15. Other Income (Expenses)
A gain of ¥567 million and ¥6,023 million ($54,266 thousand) on the sale of buildings and structures was recognized for the years ended
December 31, 2017 and 2018, respectively, and included in gain on disposal of fixed assets, net. A loss of ¥1,050 million ($9,465
thousand) on the disposal of construction in progress was recognized for the years ended December 31, 2018 and included in gain on
disposal of fixed assets, net.

16.

Impairment of Fixed Assets

There were no impairment losses relating to fixed assets to be disclosed in the notes for the fiscal years ended December 31, 2017and 2018.

17.

Segment Information

1. Overview of reporting segments
The reporting segments of the Company and its consolidated subsidiaries are regularly reviewed by the Board of Directors using thesegregated financial information available within each segment of the Company and its consolidated subsidiaries, to determine theallocation of management resources and evaluate business results.
The Company and its consolidated subsidiaries specialize in small motors manufacturing and sales as a single line of business. The
Company is in charge of the business activities in Japan. Meanwhile, subsidiaries located overseas are in charge of operations in Asia,
North and Latin America, Europe, etc. Subsidiaries located overseas are independent management units and propose comprehensive
product strategies while pursuing business expansion.
Since the Company and its consolidated subsidiaries are composed of regional segments based on a manufacturing and sellingsystem, the Company and its consolidated subsidiaries have designated “Japan,” “Asia,” “North and Latin America” and “Europe” astheir reporting segments.
2. Methods for calculating net sales, profits or losses, assets, liabilities and other items by reporting segment
The accounting policies and methods for the Group’s reporting segments are the same as described in “1. Summary of Significant
Accounting Policies.”
Intersegment net sales are based on prevailing market prices.

3. Information concerning net sales, profits or losses, assets, liabilities and other items by reporting segment
Yen (Millions)
Net sales:Japan
External customers
Intersegment
Total
Asia
External customers
Intersegment
Total
North and Latin America
External customers
Intersegment
Total
EuropeExternal customers
Intersegment
Total
Corporate and elimination
Consolidated
Segment profit or loss:
Japan
Asia
North and Latin America
EuropeCorporate and elimination
Consolidated
Segment assets:
Japan
Asia
North and Latin America
EuropeCorporate and elimination
Consolidated
Others:Depreciation and amortization:
Japan
Asia
North and Latin America
EuropeCorporate and elimination
Consolidated
Increase in tangible and intangible fixed assets:
Japan
Asia
North and Latin America
EuropeCorporate and elimination
Consolidated

2017

2018

U.S. Dollars (Thousands)
2018¥12,424
90,313
102,738¥13,032
87,898100,931$117,411
791,880
909,292

81,35878,213
159,571

75,581
78,262
153,844

680,916705,070
1,385,987

18,37626
18,402

20,505420
20,925

184,735
3,784
188,519

34,766
34,766(168,554)¥146,925

33,996
79
34,075( 166,661)¥143,116

306,270719
306,989( 1,501,455)$1,289,334¥10,137
13,596
(449)
1,202
(421)
¥24,066¥7,062
13,529( 1,085)
1,325
410¥21,243$63,627
121,883( 9,778)
11,944
3,702$191,380¥103,338
162,854
19,526
20,332(36,734)¥269,318¥113,103
166,481
25,033
21,726( 58,099)¥268,246$1,018,948
1,499,837
225,526
195,738( 523,418)$2,416,632¥1,215
6,074
397
5
(308)
¥7,383¥1,1516,535
628
7( 329)¥7,994$10,375
58,881
5,663
71( 2,966)$72,026¥1,667
7,855
3,128
1,357
(528)
¥13,480

¥129
9,626
3,410
1,966
( 584)¥14,548$1,16986,72630,723
17,718( 5,265)$131,072

Notes: 1. (1) Corporate and elimination for segment profit or loss of ¥(421) million in fiscal 2017 and ¥410 million ($3,702 thousand) in
fiscal 2018 represent intersegment transaction eliminations.
(2) The segment assets eliminations include: corporate assets of ¥70,970 million in fiscal 2017 and ¥56,298 million ($507,196
thousand) in fiscal 2018, not allocated to each segment; intersegment debt and credit eliminations of ¥(107,705) million in
fiscal 2017 and ¥(114,398) million ($(1,030,614) thousand) in fiscal 2018. Corporate assets primarily include the parent
company’s surplus funds for investment (e.g., cash and bank deposits and short-term investments) and long-term
investment funds (e.g., investment securities).
(3) The depreciation and amortization eliminations of ¥(308) million in fiscal 2017 and ¥(329) million ($(2,966) thousand) in
fiscal 2018 represent intersegment transaction eliminations.
(4) Increase in tangible and intangible fixed assets eliminations of ¥(528) million in fiscal 2017 and ¥(584) million ($(5,265)
thousand) in fiscal 2018 represent intersegment transaction eliminations.
2. Segment profit or loss is adjusted for operating income reported in the consolidated statement of income.
Related information
Information on net sales, tangible fixed assets and impairment losses by geographic area is summarized as follows. For the fiscal year
ended December 31, 2017, sales to one specific major customer in the amount of ¥14,729 million accounted for 10% or more of
consolidated net sales. For the fiscal year ended December 31, 2018, sales to one specific major customer in the amount of ¥14,392
million ($129,659 thousand) accounted for 10% or more of consolidated net sales.

Geographical Information
Yen (Millions)
Net sales
Japan
Asia
North and Latin America
EuropeTotal

U.S. Dollars (Thousands)
2018

2017

2018

¥12,540
81,241
18,376
34,766¥146,925¥13,59775,022
20,49933,996¥143,116

Yen (Millions)Tangible fixed assets
Japan
Asia
North and Latin America
EuropeTotal$122,502
675,882
184,678306,270$1,289,334

2017

2018

U.S. Dollars (Thousands)
2018¥17,115
43,1216,691
1,381¥68,310¥16,438
45,102
9,263
3,221¥74,025$148,093
406,326
83,45829,020$666,898

There were no impairment losses relating to fixed assets to be disclosed for the fiscal years ended December 31, 2017 and 2018.
Notes: 1. Net sales in China in the amount of ¥35,652 million and ¥35,724 million ($321,841 thousand) for the years ended December
31, 2017 and 2018, respectively were included in Asia.
2. Tangible fixed assets in China in the amount of ¥25,628 million and ¥25,684 million ($231,388 thousand) and in Vietnam in theamount of ¥13,208 million and ¥14,462 million ($130,288 thousand) were included in Asia for the years ended December 31,
2017 and 2018, respectively. Tangible fixed assets in Mexico in the amount of ¥9,251 million ($83,345 thousand) for the year
ended December 31, 2018 were included in North and Latin America.

18.

Subsequent Events

1) Purchase of treasury stock
On February 14, 2019, the Company resolved, at the Board of Directors’ meeting, to purchase treasury stock pursuant to the provisionsof Article 156 of the Companies Act, applied by replacing terms pursuant to the provisions of Article 165, Paragraph 3, of said Act, as
described below.
1. Reasons for the purchase of treasury stock
The Company purchases treasury stock in order to implement a flexible capital policy to respond to changes in the business environment
and to improve shareholder returns and capital efficiency.
2. Details of matters pertaining to the purchase of treasury stock(1) Class of shares to be purchased: Common stock of the Company(2) Total number of shares to be purchased: 1,200,000 shares (maximum)(1.8% of the total number of shares issued [excluding treasury stock])(3) Total amount of purchase cost: ¥3.0 billion ($27,027 thousand) (maximum)(4) Purchase period: February 18, 2019 to March 22, 2019(5) Purchase method: Purchase in the open market through discretionary trading(6) As a result, the Company purchased 777,500 shares of common stock (total amount ¥2,999 million ($27,023 thousand)).
2) Introduction of restricted stock compensation plan
The Company, at its Board of Directors’ meeting held on March 28, 2019, resolved the total amount of compensation receivable and thetotal number of shares to be allotted for granting restricted stock to Directors of the Company (the “Directors Covered by the Plan”,
excluding members of the audit and supervisory committee, outside directors, and directors residing outside Japan).
Number of directors to be granted shares
13

Total compensation receivable¥56,603,500( $509,941 )Total number of shares to be allotted
14,330 shares

The Company, at its Board of Directors’ meeting held on March 28, 2019, resolved the treasury stock disposal as part of the restricted
stock compensation plan.
(1) Payment date(2) Class and number of shares to be disposed(3) Disposal value(4) Total disposal value(5) Grantees and number of grantees and number of shares to be allotted

April 26, 201914,330 shares of common stock¥3,950 per share($35 per share)¥56,603,500($509,941)
5 directors of the Company (excluding members of the audit and supervisory committee,
outside directors, and directors residing outside Japan): 7,550 shares of common stock
8 executive officers of the Company: 6,780 shares of common stock