Annual Report 2008
Year ended December 31, 2008

The infinite
inite possibilit
possibilities of
of

small
mall
all moto
motor
motorsm
mo rssMabuchi’s Management Vision
Contents

Profile02 Consolidated Financial Highlights
03 To Our Shareholders
06 Segment Information by Motor Application
08 Research and Development Activities
10 Corporate Governance and Compliance
12 Corporate Social Responsibility
13 Board of Directors and Corporate Auditors
14 Global Network
15 Financial Section
36 Investor Information
37 Corporate Data

Since developing a high-performance, horseshoe-shaped magnetic motorin 1947, Mabuchi has kindled the dreams of people and society at large
by developing and providing products that power a wide variety of items,
including automotive products, audio and visual equipment, home
appliances, power tools, optical and precision equipment, and toys andhobbies. We put into practice our own development and production
philosophies centered on standardization to ensure a stable supply of
cost-effective, high-quality products. As a result, we have continued tomeet the demands of the market and society overall, as exemplified by
the early establishment of a complete overseas production system.
Mabuchi has grown to become the world's No. 1 brand of small directcurrent (DC) motors with an annual production capacity of approximately
2 billion units.
OUR MISSIONS
Mabuchi's missions
embrace a set of values
that all Mabuchi Group
employees are to share to
overcome various
difficulties and conflicts
that occur in carryingout their duties andachieving further
growth.

MANAGEMENT
PRINCIPLE

MANAGEMENTGUIDELINES

Forward-Looking Statements
This annual report contains forward-looking
statements about Mabuchi’s future plans, beliefs,
strategies and performance that are nothistorical facts. These statements are based on
current expectations, forecasts, estimates andprojections about the industry in which Mabuchi
operates and the beliefs and assumptions madeby its management. As such expectations,forecasts, estimates and projections are subject
to a number of risks, uncertainties andassumptions, they may cause actual results todiffer materially from those projected. Mabuchi
therefore cautions readers not to place undue
reliance on forward-looking statements.
Furthermore, the Company undertakes noobligation to update any forward-looking
statements as a result of new information, future
events or other developments.
Risks, uncertainties and assumptions
mentioned above include, but are not limited to,
exchange rates and economic conditions; theoutcome of pending and future litigation;commodity prices; and the continued status offinancing, financial instruments and financial
resources.

MABUCHI MOTOR CO., LTD. Annual Report 2008

MANAGEMENT POLICIESMANAGEMENT SCHEME

Our Management Vision

01

Mabuchi targets new levels of growth and development,
backed by unwavering management principles.
MANAGEMENT PRINCIPLE

Contributing to International Society andContinuously Increasing Our Contribution
Mabuchi believes that a company can continue to exist and grow only if its
business activities contribute to society on an ever-expanding basis. It goes
without saying that a company cannot expand or even remain in business unlessit generates profits. However, profit is not Mabuchi’s sole management objective.
Our ultimate objective is to continue raising our level of contribution to society
through our business activities and remain a company that society considers
essential. This management principle is at the core of all our activities, unchanging
through time and irrespective of the people at the management helm.

MANAGEMENT GUIDELINESManagement guidelines, which flow from our management principle, spell out
specifically how we “contribute.” These guidelines outline the mission of Mabuchi’sbusiness activities.

MANAGEMENT POLICIESMabuchi’s management policies provide guidelines for its corporate activities, which
are to be a starting point to create value leading to greater levels of social
contribution and to achieve sound growth.

MANAGEMENT SCHEME
Based on Mabuchi’s business policy of maximizing the potential of small DC brushmotors as our core business, we mobilize our organizational skills and promotebusiness activities in which we can continuously exert a unique “Mabuchi-ism” thatcannot easily be emulated. Naturally, we do not aim at diversification without
contributing to society, namely, diversification only to expand sales. We generate
revenues and profits as a result of our contributions to markets in which we are truly
welcome. We plan to continue reflecting this management philosophy, which hasserved us well in the past, into the future.

MABUCHI MOTOR CO., LTD. Annual Report 2008

02 Consolidated Financial Highlights
Mabuchi Motor Co., Ltd. and Consolidated Subsidiaries
Years ended December 31

Millions of yen

Thousands of
U.S. dollars

Rate ofchange

2006

2007

2008

2008

2008

¥100,517¥ 107,640¥ 92,602$1,017,604-14.0%

Operating income

10,70011,685

5,652

62,109-51.6%

Income before income taxes and minority interests

15,914

16,5305,330

58,571-67.8%Net income

10,603

10,914

3,565

39,175-67.3%

Capital expenditures

3,627

3,700

3,777

41,505+ 2.1%

Depreciation and amortization

5,360

4,913

4,408

48,439-10.3%

R&D expenses

4,076

4,187

3,892

42,769- 7.0%

Total assets¥236,999¥ 230,960¥ 188,691$2,073,527-18.3%Net assets

219,217

213,314

178,291

1,959,241-16.4%

1.04-66.3%For the Year:Net sales

At Year-end:

Per Share of Common Stock:(Yen and U.S. dollars)

Net income¥ 268.03¥ 280.90¥

Net assets

5,541.46

5,577.84

5,088.18

55.91- 8.8%

114.00123.00123.001.35–

Cash dividends

Key Ratios:

94.77

$

(%)

Operating income margin

10.6

10.9

6.1

–

- 4.8pts

ROE

4.9

5.0

1.8

–

- 3.2pts

Shareholders' equity ratio

92.5

92.4

94.5

–

+2.1pts

Notes 1. U.S. dollar amounts have been translated from yen, for convenience only, at the rate of ¥91=U.S.$1, the approximate exchange rate on December 31, 2008.
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.

Composition of motor sales
by application

Composition of motor sales
by region
11.5%
24.6%

23.8%

FY2008Motor sales¥92,510 million

41.8%

17.2%
17.2%

MABUCHI MOTOR CO., LTD. Annual Report 2008

Automotive Products
Audio & Visual Equipment
Information &Communication Equipment
Home Appliances,Power Tools & Others

9.2%

FY2008Motor sales¥92,510 million 15.0%
15.0%

39.7%

Japan
North & Latin America
EuropeChina & Hong Kong
Asia Pacific03

To Our Shareholders

We are making a groupwide
effort to achieve quick
improvements in profitability,
which we recognize as
one of our most importantmanagement issues.
Takaichi Mabuchi,
Chairman

Overview of Sales in Fiscal 2008
In fiscal 2008, ended December 31, 2008, the global economy
suffered from the effects of the subprime loan crisis. From its
epicenter in the United States, the shock waves of this blow
rippled outward through Japan and Europe and into economies
throughout Asia, culminating in a worldwide economic downturnby the fourth quarter. The overseas economic downturn spilledover into Japan in the form of yen appreciation, and by the fourth
quarter companies were cutting production levels and curtailing
capital investments. These factors, along with a worsening
employment situation, plunged the Japanese economy into
recession.
The sudden economic decline, combined with yen appreciation, had serious repercussions for the markets the Mabuchi

Shinji Kamei,
PresidentGroup serves. For instance, we had anticipated growth in themarket for automotive products, and we developed new applications with the aim of boosting per-vehicle sales of power unit
motors, a strategic product line. Owing to plummeting new car
sales, however, we were unable to sustain unit sales in this area,
where we enjoy a prominent share of the existing market. In theaudio and visual equipment market, demand also declined forsuch applications as car CD players and DVD players. Despite ayear-end holiday sales push, sales declined in the markets for
information and communication equipment, home appliances,
power tools, toys and hobbies.
As a result, consolidated net sales fell 14.0% year on year, to¥92.602 million. Of this amount, sales of motors, which accountfor the vast majority of net sales, decreased 13.9%, to ¥92,510

Net sales

Operating income/Operating income margin

Net income(Millions of yen)

(Millions of yen)

(Millions of yen)

120,000

99,347

93,927

100,517

107,640(%)

20,000 17,312

20,00092,60290,00015,00060,00010,00017.4

8.7
30,0000 2004

10.6

10.9

5,000
2005

2006

2007

2008

0

15,000 13,279

8,149 10,700 11,685

2004

2005

2006

2007

10,603 10,914
5,652

10,000

6.1

5,000

2008

0

7,350
3,565

2004

2005

2006

2007

2008

MABUCHI MOTOR CO., LTD. Annual Report 2008

04

million. Although our efforts to improve our product model mix
had a positive impact on profitability, these were overshadowedby higher production costs stemming from such factors as sharply
higher raw material costs and new manufacturing facility investments. Consequently, operating income dropped 51.6%, to¥5,652 million. Net income decreased 67.3%, to ¥3,565 million,
owing partly to foreign exchange losses stemming from ongoing
yen appreciation. In addition, Mabuchi posted a loss on therevaluation of marketable securities due to the stock market
downturn, as well as an extraordinary loss resulting from compensation paid to satisfy customer claims.

Groupwide Efforts to Improve Profitability andEnhance Productivity
In recent years, the Company has experienced ongoing changes
in its management environment, such as shifts in mainstay
applications for its motors and the employment environment at
its production bases. In response, over the past several years wehave pursued new growth strategies to address our top-priority
issue of recovering profit levels. At the same time, we have begun
reorganizing our production bases as part of an overall approach
toward making future changes in our product mix and infrastructure costs.
By promoting these measures and on the strength of increased demand from the automotive products sector, we
succeeded in achieving a gradual but steady recovery in sales. In
2008, however, the situation changed dramatically as theinternational financial crisis plunged the world into recession.
Under these circumstances, we are positioning fiscal 2009 asa year of enhancing our ability to endure downturns in the
management environment. As market conditions are unlikely to
encourage sales increases, we will endeavor to secure profits byimproving our own operations, reviewing the appropriateness ofvarious costs and making adjustments where justified.

Emergency Measures to Improve Profitability
Creating a structure to ensure profits even in an environment in which sales growth is unlikely
We expect our operating environment to become even morechallenging. In light of this situation, we have established theProfitability Improvement Committee, which is introducing
emergency measures to improve profits swiftly by reducing
various operating costs.
First, we will reduce personnel levels in line with decreased
production. In the fourth quarter of 2008, we began this cutback
by not renewing expiring employment contracts and by introducing a voluntary retirement system at some bases. Such measures
reduced employment by 9,100. We have also eliminated overtime
MABUCHI MOTOR CO., LTD. Annual Report 2008

work, reviewed our shift system, and cut back on operations inline with a reduced scale of business.
Second, to date we have promoted space-saving measures toreduce excess production capacity and ensure a proper scale ofoperations and steady results. However, as orders are falling off
more steeply than we had expected, in fiscal 2009 we will
accelerate these measures. Through such methods as further
reducing costs at all facilities and processes and improving
distribution efficiency, we will cut the direct cost of sales and fixed
costs.
We will consider deferring or foregoing investments, including
planned capital investments. Strictly limiting investment in thisway should improve cash flow.
Through this combination of measures, by December 31,
2009, we expect to generate ¥2.8 billion in cost savings throughefficiency improvements at production bases. In addition, we
expect to trim general head office expenses by ¥1.1 billion.

Reorganization and Innovation at Production Bases
Creating a production system to ensure a stable supply of
products in a highly efficient manner while continuously
improving productivity
We are working toward a shift in production from China to
Vietnam by 2011, mainly by expanding our factory in Danang,
Vietnam. We expect this shift to progress essentially as planned,
handling production cutbacks and assisted by the head office andour Guangdong factory.
We expect to become more cost competitive by better
utilizing our Vietnam factories. To achieve additional growth,
however, we must become more operationally competitive andprofitable through stronger and more innovative production
technologies. To this end, in July 2008 we established theProduction Engineering Innovation Center. With this center taking
the lead, we are positioning 2009 as a year of innovation in
production. One initiative is to introduce further automation toenhance and stabilize quality levels. We also plan to create asystem of production lines to meet various quality requirements.
We believe that in addition to boosting productivity, such measures will help normalize product-specific cost control.
In the past, curtailing capital investments other than thoserequired to boost capacity was considered a weakness. We now
view such restraint as a strength, as it provides the leeway for us
to adjust production levels to meet the demands of our operating
environment. By supplying products more efficiently throughinnovations in production technologies and by optimizing
deployment of our production bases, we aim to cut manufacturing costs at these bases by 30% or more.

05

Market Cultivation Key to Growth and Recovery in
Profitability
Automotive products remains Mabuchi’s key growth market,
both because the number of small motors used per vehicle isincreasing and because we expect the market to continue its shift
from vertical integration to more horizontal division amongmodels.
In terms of motors for power windows, leading Japanesemanufacturers of window regulators are increasing their usage ofmotors. Shipments of such motors to leading manufacturers inthis field are also rising. To bolster sales under these conditions—despite the falloff in vehicle unit demand—we will work to
expand our number of outlets, enhancing our value chain
through the introduction of motors for common deployment on
certain vehicle models and grades.
In markets for applications that are new to us, such as powerseats and electric parking brakes, we will strive to maintain ouredge over our competitors through our operating strategies. Our
fundamental approach is to deliver value by meeting market
needs precisely and ahead of the competition. Formerly foundmainly in luxury vehicles, power seats and electric parking brakes
are becoming more commonplace in popularly priced vehicles.
We see power seat motors, in particular, as a market with major
growth potential. Taking advantage of this trend, we have started
shipping power seat motors for European luxury cars. To accelerate this growth, we need to make these motors more compact
and lightweight, efficient and inexpensive. At the same time, wewill work to achieve top-level product quality and pursue synergies with our power window motor business on the technology
and sales fronts.
We expect the economic recession and a slowdown in
consumer spending to hamper the markets for home appliancesand power tools. Nevertheless, in emerging markets demand is
shifting toward higher-end products. We also expect revenues tobenefit from demand for products that are more compact andpowerful, as well as from the accelerated application of lithiumion batteries.

share—a fixed amount paid consistently to shareholders—plus a
special dividend of ¥62 per share. The special dividend is linked tobusiness performance and is equivalent to 20% of consolidated
net income over the number of applicable shares.
Between 2002 and 2008, Mabuchi acquired 12 million of its
own shares through tender offers, by purchasing shares in the
open market and by acquiring odd-lot shares. In fiscal 2008,
Mabuchi retired 1.2 million of these shares.
Mabuchi will continue to implement capital employment andshareholder return policies, responding expeditiously to changes
in its share price and changes in the management environment.
At the same time, we will sustain sufficient internal reserves toexpand corporate value through the expansion and strengtheningof existing business, as well as the cultivation of new businesses.

Outlook
We expect our management environment to become increasingly
difficult, but we will not lose hope. Rather, in this environment
we will work to secure profitability, strengthen our manufacturingbase and foster growth strategies. Throughout, we will retain our
essence as a manufacturing-based organization.
We consider having been forced to reduce personnel a major
failure of our employment traditions as a manufacturer and regret
the attendant loss of experience and wisdom. We recognize thathighly motivated individuals are essential to achieve new levels of
growth, and accordingly we will do our utmost to sustain current
employment.
The Mabuchi Group is making a concerted effort to put inplace measures that will increase its ability to endure ongoingstagnation in the management environment. In these efforts, we
ask for your continued understanding and cooperation.

Takaichi Mabuchi, Chairman

Basic Policy on Returning Profit to Shareholders
Mabuchi’s basic policy is to return profit to shareholders throughstable, long-term increases in dividends and stock splits while
maintaining the Company’s financial strength. At the same time,
we take into careful consideration the amount of retained
earnings needed for R&D and capital investment to ensure
Mabuchi’s future expansion and development.
For fiscal 2008, we awarded an annual dividend of ¥123 pershare. This amount comprises an ordinary dividend of ¥61 per

Shinji Kamei, President

MABUCHI MOTOR CO., LTD. Annual Report 2008

06 Segment Information by Motor Application

In the fiscal year ended December 31, 2008, the Mabuchi Group faced a difficult operating
environment, affected by slumping new vehicle demand, sharply higher raw materials costs andsubstantial yen appreciation. As a result, sales in the Mabuchi Group’s mainstay motor businessdeclined 13.9% year on year, to ¥92,510 million.

Automotive
Products

Audio &
Visual Equipment

Major Applications

Major Applications

Car mirrors, door locks, air conditioning damper actuators,
power window lifters, steering locks, etc.

DVD player/recorders, CD players,
car component systems, video games, etc.

Automotive Products Market

Audio & Visual Equipment Market

In line with the trend toward higher levels of safety, convenience,
comfort and economic efficiency, automobiles tend to incorporate
more electrical equipment, including more small motors per vehicle.
However, new vehicle demand fell sharply in the second half of the
fiscal year. This situation directly affected sales of motors for door
mirrors, door locks and air conditioning damper actuators, where
Mabuchi’s products enjoy a market share of approximately 70%. We
responded to these conditions by seeking to boost sales in the BRICs
markets, which were experiencing robust demand and where
actuators are being used on more vehicle types. We also cultivateddemand for headlight beam level adjusters and steering locks, as wellas electric parking brakes, a new application. Ultimately, however,these efforts were unable to overcome the slump in the amount andunit volume of sales of products for mainstay applications.
As a result, Mabuchi’s sales in the automotive products
market decreased 9.8%, to ¥38,633 million. During the year,
total sales to this market accounted for 41.8% of motor sales, up
1.9 percentage points from the preceding fiscal year.

Household demand for CD player applications remained
lackluster, and automotive demand plunged, owing to the
sharp decline in new vehicle sales. The average price for DVD
player applications improved, owing to price revisions on
unprofitable models. However, sales declined significantly,
owing to lower demand in the North American market, as well
as from China, India and other parts of Asia. Meanwhile, sales
for video game equipment and other products remained
essentially flat.
Consequently, sales in this market fell 25.3%, to ¥15,908
million. Sales in the audio and visual equipment market
accounted for 17.2% of total motor sales, down 2.6 percentage points.

Net sales

Net sales by principal item

Net sales

Net sales by principal item

(Millions of yen)

(Millions of yen)

(Millions of yen)

(Millions of yen)

40,00024,00042,82048,00048,00038,63336,781
36,000 30,376 31,597

36,00024,00012,00012,000
2004

2005

4,000
5,000

4,000
4,000

99.8%
79.7%

8,800

104.4%

8,500

85.1%

15,10013,100

86.6%

2007

2008

8,400

24,0000(Compared withprevious year)

2006

2007

2008

0
Door locks
Power units
OthersMABUCHI MOTOR CO., LTD. Annual Report 2008

10,0002,500

30,56730,00023,061 22,361

18,00021,30815,90820,000Car mirrors (including retractable rearview mirrors)
Air conditioning damper actuators

2004

2005

2006

2007

2008

7,200

12,000
6,000

10,0000(Compared withprevious year)0
CD players
Others

11,500

2007

1,800

71.7%

4,900

68.8%

9,100

79.0%

2008

DVD player/recorders

07

Information &Communication
Equipment

Home Appliances,Power Tools & Others

Major Applications

Major Applications

Inkjet printers, PCs CD/DVD drives,
digital cameras, etc.

Personal care products, power tools, toys,
health and wellness products, etc.

Information & Communication Equipment Market

Home Appliances, Power Tools & Others Markets

Unit sales for multifunctional equipment, such as inkjet
printers and scanners, rose slightly, supported by the growing
use of motors for such applications. However, sales for digital
cameras declined, as year-end holiday sales campaigns failed
to have a major impact. In addition, our share of the market
for PC drive applications fell, as we weeded out unprofitablemodels.
Accordingly, sales in this market declined 12.4%, to¥15,896 million. Of motor sales, total sales in this market
accounted for 17.2%, 0.3 percentage point higher than in thepreceding fiscal year.

Despite the economic slowdown and sluggish overall demand,
our unit sales in these markets were essentially in line withexpectations. Sales for electric toothbrushes declined, as themarket grew saturated with low-end products. In power tool
applications, increases in the European and South American
markets offset a decline in the North American market.
Furthermore, sales for high-output power tools with highperformance batteries expanded, helping maintain sales in thiscategory at the previous year’s level. For electric shavers, sales
for use in medium- and high-end models increased. Among
health-related applications, sales for medical equipment
remained firm.
As a result, sales in these markets decreased 12.3%, to¥22,071 million. Total sales in these markets accounted for
23.8% of motor sales, up 0.4 percentage point from theprevious year.

Net sales

Net sales by principal item

Net sales

Net sales by principal item

(Millions of yen)

(Millions of yen)

(Millions of yen)

(Millions of yen)

18,139(Compared withprevious year)

20,000900

15,00015,000

1,300
2,900

10,00010,00020,00016,402 16,658

15,896

14,49912,800
5,000

5,000
0

11,600

2004

2005

2006

2007

2008

0
Inkjet printers
Digital cameras

2007

2008

PCs CD/DVD drives
Others

86.9%
79.1%
76.1%

25,17828,0001,800

21,00021,000

2,200
4,000

14,00014,000

7,300

7,000

7,000
0

28,000
800
1,000
2,200

(Compared withprevious year)

23,806 22,772 23,900

22,071

1,700
1,500
3,900

93.4%
70.7%
99.3%

6,300

85.6%

9,600

8,400

87.3%

2007

2008

91.3%

0

2004

2005

2006

2007

2008

Personal care products Others
Power tools
Toys
Health and wellness products

MABUCHI MOTOR CO., LTD. Annual Report 2008

08 Research and Development Activities

Mabuchi conducts research anddevelopment to meet demand for
motors that offer higher levels of
performance, are quieter and morecompact and have longer service lives.
Our success in meeting this demand has
enabled us to maintain our lead in themarket for small motors. These small
motors reflect Mabuchi’s many years ofexperience and wide-ranging technicalexpertise, spanning basic research,
product development and improvement,
development testing, production
technologies and the development ofapplication technologies.
Basic R&D Policies and Systems

R&D expenses /R&D expenses ratio(Millions of yen)

4,800

4,035

3,600
4.1

(%)

4,196

4.5

4,076

4,187

4.1

3.9

4.2

2006

2007

2008

329

335

338

2006

2007

2008

3,892

2,400
1,200
0

2004

2005

R&D personnel(Persons)

400
300

228

247

200
100
0

MABUCHI MOTOR CO., LTD. Annual Report 2008

2004

2005

The market demands increasingly diverse products with shorter
lead times. For motors, this translates into products that are
quieter, more compact, offer higher performance (higher torque)and are more inexpensive. We work to achieve such improvements through our basic research and product development
efforts. We apply our core competence in this manner to develop
future product applications.
To achieve shorter lead times, we are promoting the expanded use of concurrent engineering. Our R&D systems integrate CAD, CAM and CAE from design and equipment to diemaking and machining. In addition, we endeavor to raise
efficiency and lower manufacturing costs through manufacturing
process innovations, such as reducing inventories, shortening
worker-hours and saving space.
Our Research and Development Headquarters is a collaborative system that covers two R&D departments and the Production
Engineering Department—each with their own areas of specialization. In July 2008, we established the Production Engineering
Innovation Center within our Research and Development Headquarters with the aim of enhancing our production engineeringand promoting innovation. The center’s objectives are to take aninnovative approach toward the development of manufacturingsystems that belie conventional wisdom and are unique to
Mabuchi, and to introduce them into practice over the long term.
We are also relocating design improvement activities to China
and working to shift high-value-added operations to the Researchand Development Headquarters.

09

Strategic R&D Fields
In the new business area of power window motors, we areenjoying steady increases in orders from Japanese and overseas
automakers. In the field of small electric motors, as well, we arereinforcing our position in the automotive products market bydeveloping a new lineup that will allow us to introduce development models on an ongoing basis and enhance our ability torespond to customer needs. For other markets, we are conducting R&D to remodel existing products. Through ongoing R&D andthe growth of its core technologies, Mabuchi plans to continue
developing and manufacturing standard motors for various
markets.

Recent R&D Endeavors
In the automotive products market, we are positioning motors for
power windows and power seats as major opportunities for
growth. Accordingly, we are strategically allocating head officedevelopment resources to these areas, prioritizing the development of products that will meet existing customer needs or future
market needs.
In the second half of 2008, we began mass producing power
seat motors that we developed in collaboration with a worldleading manufacturer of automotive seats. More compact,
lightweight and delivering higher torque than competing models,these new seat motors increased Mabuchi’s competitive advantage. Although announcements of production cutbacks in theautomotive industry have become commonplace in the face of
the worldwide recession, the percentage of vehicles employing

power seats is rising steadily. We will strive to secure a solid
position in this market, centering on slider, lifter and lumbar
support applications.
In the area of power window motors, on the other hand, we
have developed existing models into product series and createdmotors that are more compact and deliver higher performance. In
the future, we will extend this product lineup to include products
designed for specific window sizes. Through such efforts, we aim
to expand our sales of power window motors even further.
Number of patents(Patents)

600

561

542

131

135

496

497

133

132

536
129

400
430

407

363

365

407

2004

2005

2006

2007

2008

200

0

Overseas patents

Domestic patents

MABUCHI MOTOR CO., LTD. Annual Report 2008

10 Corporate Governance and Compliance

We strive to fulfill the mission stated in the Mabuchi Group’s management
principle,“Contributing to international society and continuously
increasing our contribution,” through the small DC motor business.

Basic Approach to Corporate Governance

The elements of our corporate governance are as follows:

We understand that realizing this principle is our raison d’être,and we recognize that corporate governance comprises theorganizational/management systems and various managerial
measures that support those systems.
Accordingly, building an adequate corporate governancestructure and ensuring its efficacy are some of the mostimportant duties of management. As for the basic scheme ofour corporate governance, we regard it as prerequisite tobuild and maintain the following system that supports
appropriate relationships with our stakeholders and thatallows the yield of fair profits necessary to the realization of
the above principle and long-term stable operations.

1. To clearly separate management decision-making
and efficient business execution, and to clarify the scope ofaccountability,
2. To build and operate a sound internal control
system, namely, to effectively work the internal control
system and the management supervision system,
3. To foster a corporate culture in which all Group
employees recognize and share the thought that only thepractices of compliance and corporate ethics are the bases
to support the organization and to live up to all of our
stakeholders’ trust and expectations, and
4. To disclose corporate and management information
to stakeholders in a fair, timely and clear manner.

Ordinary General Meeting of Shareholders
Appoint / Dismiss
Independent Auditors

Board of Auditors

AttendBoard of Directors
Supervise

Audit
Internal Audit Department

Executive Committee
Execute

Audit
Audit

Company Departments(Risk Management Committee)
Other Supervisory Frameworks

Internal Control System
Audit

Monitor

Consolidated Subsidiaries(Internal Audit Committee)
Meeting of Head ofGroup Offices andDepartmental Heads(Emergency Response System)

MonitorInternal Reporting System

MABUCHI MOTOR CO., LTD. Annual Report 2008

Management Vision
Basic Policy on Internal Control
Code of Conduct• Environmental Audits(Internal and Outside)• Quality Audits (Internal and Outside)• Design Reviews• Division of Duties / Company Rules
and Regulations• Ringi System (Others)

11

The Mabuchi Group employs a simple corporate management
structure by establishing a corporate group consisting of
Mabuchi Motor Co., Ltd., and its wholly owned subsidiaries
as well as focusing and specializing its business resources on
and in the small DC motor business. The Mabuchi Group
employs the Corporate Auditor System as the best-suitedorganizational design after considering such matters as
directors’ duties, management efficiency and the maintenance of a management supervisory system that is appropriate to the above business contents and corporate management structure.
The entire management system of the Group is constructed and carried out on the basis that the in-house offices
specified in Japan’s Company Law and external accounting
auditors fulfill each of their duties mandated by statutes andadditionally by the involvement of our own Executive Committee, Internal Audit Department and other organizations
linking to the execution of duties and the internal control.
At each of our overseas group companies, we also
conduct internal control through the statutory offices mandated by statutes of the respective countries, supported byother internal organizations complementing the offices.
Through the Mabuchi Group Management Vision, we also
share our corporate culture and values across the world, andwe strive to improve our internal control functions throughout
the Group by holding meetings for the management ofoverseas bases and for the heads of different Group departments, as well as through operational audits of our groupcompanies conducted by the Internal Audit Department.

Missions more specifically, we have established the Mabuchi
Motor Ethical Standard and distributed copies to all directors
and employees.
As necessary, we conduct compliance training (such as
training programs for new and management-level employees)
to familiarize employees with Ethical Standard items ofparticular importance. In addition, we have set up the EthicalStandard Hotline, through which all directors and employees
can report directly to and consult with the internal audit
department without going through normal communication
channels. This hotline is designed to resolve questions relating
to the Ethical Standard, including compliance and concerns ofnonconformance.
Also, we have established a mechanism that allows top
management to take timely and appropriate measures basedon audit results. Such audits, which cover Group companies
as well as the head office, are conducted by the internal audit
department. Audits concern compliance observation andprocedures, acts of nonconformance with other ethicalstandards, and other matters.
We intend to strengthen our development of complianceactivities for Group companies and enrich our training
activities and awareness campaigns.

Efforts toward ComplianceTo link our management principle of “contributing to international society and continuously increasing our contribution,”to the conduct of each employee, we have established Our
Missions, which sets forth values that our employees need toshare. To help employees understand and implement Our

Mabuchi Motor
Ethical Standard pamphlet

MABUCHI MOTOR CO., LTD. Annual Report 2008

12 Corporate Social Responsibility

Mabuchi’s wide-ranging CSR activities include a social action
program for which the Group is particularly well suited—sharing
the importance and wonder of manufacturing.

Basic Approach to CSR Activities
We conduct our corporate activities in line with our management principle, which expresses the aim of “contributing tointernational society and continuously increasing our contribution.” In other words, our business objective is not the
pursuit of profit for its own sake. Rather, we consider more
important the Company’s continued existence and development, which are achieved by continued increases in ourcontribution to society. The ultimate objectives of our corporate activities are to raise our level of social contribution
through the business of small DC motors and to remain acompany that society considers essential.

EducatingTomorrow’s Leaders
Summer Vacation
Parent/Child Handicraft Class Using
MotorsTo kindle the interest of
tomorrow’s leaders and
The Summer Vacation Parent/Child Handicraft
share with them theClass Using Motors, held on August 8, 2008
joys of manufacturing
and science and technology, we held a summer vacation classusing motors for parents and children. Conducted at
Mabuchi’s head office, the class was open to local elementary
school children in grades four through six. A total of 112
parent/child teams was invited to the class, with Mabuchi
employees serving as instructors and helping the teams create
robots and other items using motors and recycled milk
cartons. Following the class, the attendees toured Mabuchi’s
gallery, where they saw how motors are used in many
everyday items and make our lives comfortable.
Career Experience for
Elementary SchoolStudents
At our technology centerand head office, weoffered career experiencefor elementary school
students to give them a
Learning about wire winding (head office)
MABUCHI MOTOR CO., LTD. Annual Report 2008

glimpse of an actual working
environment. At our technology center, the students
Environmental testing at -40˚Cconducted performance,(technology center)
impact and environmental
tests on actual motors, which helped them understand theimportance of quality motors. At the head office, the students
built sample motors, onto which they printed their names
using a laser marker to make their motors unique.

Robot Contest SponsorshipTo support the education of tomorrow’s technologists andencourage developments in science and technology, Mabuchi
has sponsored various robot contests every year since 2002,
providing funding support and motors. Mabuchi agrees withthe purpose of holding the contests, namely, to have young
people share the importance of creativity and the fun ofmanufacturing by building robots.

Helping Society
Support for Sichuan Province Earthquake Victims
The Mabuchi Group donated ¥20 million in disaster relief andrecovery assistance to the people affected by the major
earthquake that shook China’s Sichuan Province on May 12,
2008. We also raised funds at Mabuchi’s head office, whichwere donated via the Japan Red Cross Society in the name of“Mabuchi Motor Co., Ltd., and its employees.”

Environmental Preservation
Efforts to Enhance Employees’ Environmental
Awareness
The Mabuchi Group considers environmental initiatives animportant management theme and promotes activities
accordingly. As part of practical application of the environmental management system, we conduct regular environmental education activities at the head office. We believe thatraising the level of environmental awareness of each employee will boost such awareness for the Group overall. At ouroverseas bases, employee volunteers participate in ongoingtree-planting activities that put them in close communication
with the regions in which they work. In the future, we plan toincrease environmental activities at all our bases.

13

Board of Directors and Corporate Auditors

Directors
ChairmanTakaichi Mabuchi
President
Shinji Kamei
Executive Managing Director
Chief Factory Management Officer
Nobuyo Habuchi

ChairmanTakaichi Mabuchi

President
Shinji Kamei

Managing Director
General Manager
Administration Headquarters
Shunroku Nishimura
Director
General Manager
Research and Development Headquarters
Akira Okuma

Executive Managing Managing Director
Director
Shunroku Nishimura
Nobuyo Habuchi

Director
General Manager
Operations Control Headquarters
Takashi Kamei
Director
General Manager
Sales Headquarters
Kaoru Kato

Director
Akira Okuma

Director
Takashi Kamei

Director
Kaoru Kato

Full-time Auditor
Masahiro Gennaka

AuditorIchiro Ando

AuditorToyokuni Yazaki

Corporate Auditors
Full-time Auditor

Masahiro Gennaka
AuditorIchiro Ando
AuditorToyokuni Yazaki

AuditorKeiichi Horii

AuditorKeiichi Horii

MABUCHI MOTOR CO., LTD. Annual Report 2008

14 Global Network

At present, Mabuchi operates 19 overseas bases that manufacture and/or sell small DC motors.
Through its overseas network, Mabuchi aims to create a highly efficient manufacturing andsupply system, as well as harmonious relationships with countries where these bases are located.

EuropeAsia

North America
MABUCHI MOTORWAFANGDIAN CO., LTD.
MABUCHI MOTOR
KOREA CO., LTD.

MABUCHI MOTOR DALIAN CO., LTD.
MABUCHI MOTOR(SHANGHAI) CO., LTD.
MABUCHI MOTOR(DONGGUAN) CO., LTD.

MABUCHI MOTOR (JIANGSU) CO., LTD.

MABUCHI MOTOR AMERICA CORP.

MABUCHI TAIWAN CO., LTD.

(Guangdong factories)

MABUCHI MOTOR(EUROPE) GmbH

Headquarters

MABUCHI MOTOR TAIWAN LTD.
MABUCHI MOTOR TRADING(SHENZHEN) CO., LTD.

MABUCHI INDUSTRY CO., LTD.

MABUCHI MOTOR DANANG LTD.

MABUCHI MOTOR VIETNAM LTD.

MABUCHI MOTOR (SINGAPORE) PTE. LTD.

Headquarters

Sales Offices

Factories

Sales/Factories

Design/Factories

Achieving Optimal Production and Supply through a
System of International Specialization
To optimize production and supply, early on Mabuchi created asystem of international specialization by establishing bases inother parts of Asia, as well as in Europe and the United States.
This system embodies the management guideline to “contributeto the leveling of international economic disparities and to
economic development in other countries through the creation of
employment opportunities and technology transfers.” Mabuchi
will continue to optimize its production and supply, making themmore adaptable to economic and marketplace shifts, such as thegrowth of the BRICs and other emerging countries. We also plan
to forge closer links among our bases and make them morefunctionally flexible.

processes and reduce inventories at production bases. After
gaining a detailed understanding of the status of all its production bases, Mabuchi will review each factory’s scale of operations,location and production capacity with the aim of maximizing
production efficiency. Optimizing our production system includes
upgrading and expanding lines in Danang Mabuchi, our second
production base in Vietnam. This measure aims to reduce the riskof overconcentration of bases in China and enhance our export
competitiveness.

Accelerating Production System Optimization, Including the Enhancement of Our Vietnam Bases
Mabuchi is working to optimize the surplus production space
generated through its efforts to apply technical innovation in
response to changes in the market environment, improve

MABUCHI MOTOR CO., LTD. Annual Report 2008

MABUCHI MOTOR DANANG LTD.

15

Financial Section

Contents
16 Six-year Financial Summary
17 Management’s Discussion and Analysis
22 Consolidated Balance Sheets
24 Consolidated Statements of Income
25 Consolidated Statements of Changes in Net Assets
26 Consolidated Statements of Cash Flows
27 Notes to Consolidated Financial Statements
35 Independent Auditors’ Report

MABUCHI MOTOR CO., LTD. Annual Report 2008

16 Six-year Financial Summary
Mabuchi Motor Co., Ltd. and Consolidated Subsidiaries
Years ended December 31

Thousands of
U.S. dollars

Millions of yen

For the Year:Net sales
Cost of sales
Selling, general andadministrative expenses
Operating income
Income before income taxes andminority interests
Net income
Capital expenditures
Depreciation and amortization
R&D expenses
Cash Flows:
Net cash provided by operating activities
Net cash provided (used in) byinvesting activities
Net cash used in financing activities
At Year-end:
Total assets
Net assets
Per Share of Common Stock:
Net income
Net assets
Cash dividends
Other Data:
Operating income margin (%)
ROE (%)
Shareholders’ equity ratio (%)
Number of shares outstanding(Thousands of shares)
Number of employees

2003

2004

2005

2006

2007

2008

¥ 105,743
63,334¥ 99,347
63,329¥ 93,927
66,479¥ 100,517
71,91917,833
24,576

18,705
17,312

19,298
8,149

17,89810,70018,747
11,685

18,1505,652

199,450
62,10924,741
16,731
5,673
5,578
3,714

19,676
13,27911,606
5,241
4,035

11,597
7,350
5,543
5,734
4,196

15,914
10,603
3,627
5,360
4,076

16,53010,914
3,700
4,913
4,187

5,330
3,565
3,777
4,408
3,892

58,571
39,17541,50548,43942,769¥ 20,506¥ 16,475¥ 11,034¥ 17,500¥ 15,447 ¥

6,542

3,066
(20,676)(11,752)(23,282)(719)(10,343)(6,321)(4,009)3,687(13,531)45(18,641)494(204,846)¥ 229,674
212,803¥ 216,489
201,543¥ 227,375
211,875¥ 236,999
219,217¥ 230,960 ¥ 188,691
213,314
178,291$2,073,527
1,959,241¥ 107,640 ¥ 92,602
77,207
68,7992008$1,017,604
756,032$

71,890(Yen and U.S. dollars)¥ 375.41
4,934.38
128.00¥ 316.14
4,966.70
115.00¥ 180.72
5,354.64
92.00¥ 268.03
5,541.46
114.00¥ 280.90 ¥ 94.77
5,577.84 5,088.18
123.00123.00

$

1.04
55.91
1.35

23.2
7.7
92.7

17.4
6.4
93.1

8.7
3.6
93.2

10.6
4.9
92.5

10.9
5.0
92.4

6.1
1.8
94.5

–
–
–

44,22351,796

41,77049,74340,46946,412

39,56045,01538,24345,60135,04041,328––Notes 1. U.S. dollar amounts have been translated from yen, for convenience only, at the rate of ¥91=U.S.$1, the approximate exchange rate on December 31, 2008.
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. Number of employees includes contract manufacturing labor at plants in Guangdong and Wafangdian, China.

MABUCHI MOTOR CO., LTD. Annual Report 2008

17

Management’s Discussion and Analysis

Market Conditions
During the year under review, the impact of the financial crisis, originating in the United States,
extended throughout the real economy, causing a significant slowdown toward the end of the year.
In Japan, the influence of the lackluster climate overseas, exacerbated by the appreciating yen, led toa falloff in domestic demand from the second quarter, accompanied by dramatic production adjustments and further declines in capital investment. The employment situation worsened accordingly,
and the Japanese economy was thrust along a path of recession. Under these rapidly deteriorating
economic conditions, the Company faced an increasingly hostile environment, which led to shrinking
demand for motors in all markets in which they find applications.

Operating Results
Net Sales
During fiscal 2008, ended December 31, 2008, Mabuchi posted consolidated net sales of ¥92,602
million (US$1,017 million), down 14.0% from the previous year. The principal contributor to thisdecrease was a 13.9% falloff in sales of motors, which account for the majority of net sales, to¥92,510 million (US$1,016 million). Despite growth in demand for power unit motors from our coreautomotive products market and for new applications, sales declined for existing products for which
Mabuchi holds a high market share as a result of a drop in new car sales, leading to decreased
demand across all Mabuchi’s markets.
Costs, Expenses and Operating Income
Operating income fell 51.6% from the previous year, to ¥5,652 million (US$62 million). Improvements to Mabuchi’s product mix and cost of sales reduction efforts failed to offset such factors as
soaring raw material costs, growth in manufacturing expenses arising from higher wages at production bases and up-front investment for the start-up of the Danang factory in Vietnam and higher
per-unit fixed expenses due to rapidly declining production volumes.
Other Income (Expenses), Income before Income Taxes and Net Income
Other expenses stood at ¥321 million (US$3 million). Principal factors were a ¥1,069 million (US$11
million) reduction in interest received due to falling interest rates and ¥1,567 million (US$17 million)
in exchange losses on foreign currency transactions as a result of the appreciation of the yen. Other
factors included a loss on valuation of investment securities of ¥2,457 million (US$27 million) andcompensation paid for products of ¥1,774 million (US$19 million).
As a result, income before income taxes dropped 67.8% from the previous year, to ¥5,330
million (US$58 million), and net income fell 67.3%, to ¥3,565 million (US$39 million).

Net sales/
Gross profit margin(Millions of yen)

120,000(%)

99,347
93,92790,000100,517

107,640
92,602

36.3
29.2

28.5

28.3

2006

2007

25.7

60,00030,0000 2004

2005

2008

Operating income/Operating income margin(Millions of yen)(%)

20,000 17,312
15,00017.4
8,149 10,700 11,685

10,000

10.6

10.9

5,652

8.7
6.1

5,000
0

2004

2005

2006

2007

2008

Net income/
ROE(Millions of yen)

20,00015,000(%)

13,27910,603 10,914

6.4
7,350

4.9

10,000

5.0
3,565

3.6
5,000
1.8

Net Sales by Application
Automotive Products
Net sales for automotive products dropped 9.8%, to ¥38,633 million (US$424 million), with total salesof motors for automotive applications accounting for 41.8% of Mabuchi’s motor sales. Unit sales
were down 5.7%, to 524 million units, with a ¥3.31 cutback in the average unit price, to ¥73.70.
By application, sales of motors for door lock actuators totaled ¥13,100 million (US$143 million),
down 13.4% year on year; sales for door mirror drivers were ¥8,500 million (US$93 million), a falloff
of 14.9%; sales for power units were ¥8,800 million (US$96 million), up 4.4%; sales for air conditioning damper actuators were ¥4,000 million (US$43 million), a drop of 20.3%; and sales for otherapplications decreased 0.2%, to ¥4,000 million (US$43 million).

0

2004

2005

2006

2007

2008

Audio & Visual Equipment
Sales of motors for audio and visual equipment fell 25.3%, to ¥15,908 million (US$174 million), andrepresented 17.2% of total motor sales. Unit sales slipped 17.9%, to 470 million units, and theaverage unit price fell ¥3.36, to ¥33.84.
By application, sales of motors for CD players decreased 21.0%, to ¥9,100 million (US$100
million); sales for DVD and video players declined 31.2%, to ¥4,900 million (US$53 million); andsales for other applications dropped 28.3%, to ¥1,800 million (US$19 million).
MABUCHI MOTOR CO., LTD. Annual Report 2008

18

Information & Communication Equipment
Sales of motors for information and communication equipment, which accounted for 17.2% of total
motor sales, decreased 12.4%, to ¥15,896 million (US$174 million). Unit sales fell 8.2%, to 306
million units, and the average unit price was ¥51.90, ¥2.47 lower than the previous year.
By application, sales of motors for inkjet printers were ¥11,600 million (US$127 million), 8.7%
below fiscal 2007; sales for PC drives were ¥2,200 million (US$24 million), down 23.9%; sales for
digital cameras were ¥1,000 million (US$10 million), down 20.9%; and sales for other applications
decreased 13.1%, to ¥800 million (US$8 million).
Home Appliances, Power Tools & Others
Net sales of motors for home appliances, power tools and other applications stood at ¥22,071
million (US$242 million), 12.3% lower than the previous year, and represented 23.8% of total motor
sales. Unit sales were 5.4% less than the last year’s level, at 343 million units, and the average unit
price was down ¥5.07, to ¥64.33.
By application, sales of motors for beauty-related equipment were ¥8,400 million (US$92
million), down 12.7%; sales for power tools fell 0.7%, to ¥3,900 million (US$42 million); sales fortoys dropped 29.3%, to ¥1,500 million (US$16 million); sales for health-related equipment slipped
6.6%, to ¥1,700 million (US$18 million); and sales for other applications decreased 14.4%, to¥6,300 million (US$69 million).
Net Sales by Application

Thousands of
U.S. dollars

Millions of yen

Automotive Products
Audio & Visual Equipment
Information & Communication Equipment
Home Appliances, Power Tools & Others
Other
Total

2004

2005

2006

2007

2008

2008

¥30,376
30,567
14,49923,806
97¥99,347¥31,597
23,061
16,402
22,772
93¥93,927¥ 36,781
22,361
16,65823,900815¥100,517¥ 42,820
21,30818,13925,178194¥107,640¥38,633
15,90815,89622,071
92¥92,602$ 424,538
174,813
174,681242,538
1,010$1,017,604

Note: Other includes parts and equipment sales.

Net Sales by Geographic Area

Thousands of
U.S. dollars

Millions of yen

Japan
North and Latin America
EuropeChina and Hong Kong
Asia Pacific
Other
Total

2004

2005

2006

2007

2008

2008

¥11,536
9,091
13,84844,855
19,917
97¥99,347¥10,928
8,728
13,06841,665
19,443
93¥93,927¥ 10,902
10,45914,43041,10522,804815¥100,517¥ 10,980
11,697
16,912
41,29026,564
194¥107,640¥10,663
8,487
13,91436,68622,75892¥92,602$ 117,175
93,263
152,901
403,142250,087
1,010$1,017,604

Note: Other includes parts and equipment sales.

Total assets

Financial Position(Millions of yen)

240,000 216,489

227,375

236,999 230,960
188,691

180,000
120,000
60,0000 2004

2005

2006

2007

2008

MABUCHI MOTOR CO., LTD. Annual Report 2008

Assets
As of December 31, 2008, total assets stood at ¥188,691 million (US$2,073 million), down ¥42,268
million (US$464 million), or 18.3%, from one year earlier. Principal causes of the decline included a
decrease of ¥15,613 million (US$171 million) in cash and bank deposits, ¥5,601 million (US$61
million) lower trade notes and accounts receivable, a decline of ¥4,081 million (US$44 million) in
short-term investments, and a ¥12,566 million (US$138 million) drop in investment securities.
Although property, plant and equipment fell ¥3,964 million (US$43 million), this was attributable tothe effect of the escalating yen in currency conversions for assets of overseas subsidiaries.

19

Liabilities
Total liabilities dropped ¥7,245 million (US$79 million), or 41.0%, to ¥10,400 million (US$114
million). The main causes for this decline were a reduction of ¥1,838 million (US$20 million) in tradenotes and accounts payable, ¥2,676 million (US$29 million) less in accrued income taxes arising fromlower profits, and a ¥2,086 million (US$22 million) drop in deferred tax liabilities accompanying adecline in revaluation adjustments for unrealized holding gains on securities. Allowances for retirement benefits for directors and statutory auditors at the end of the year are transferred to accrued
liabilities as fixed obligations, so are included in other long-term liabilities.
Net Assets
Net assets were down ¥35,022 million (US$384 million), or 16.4%, to ¥178,291 million (US$1,959
million). Principal causes included the cancellation of treasury stock, which led to a reduction of¥10,694 million (US$117 million) in retained earnings, and a decline in stock market prices resulted
in a ¥3,078 million (US$33 million) falloff in revaluation adjustments for unrealized holding gains on
securities. Furthermore, the rising value of the yen reduced foreign currency translation adjustments¥16,870 million (US$185 million).
In addition, owing to treasury stock purchases and cancellations during the fiscal year, treasury
stock increased ¥4,379 million (US$48 million). As a result, net assets per share stood at ¥5,088.18(US$55), which was ¥489.66 below the end of the previous year, and the shareholders’ equity ratio
was 94.5%, up 2.1 percentage points.

Cash FlowsNet Cash Provided by Operating Activities
Net cash provided by operating activities was ¥6,542 million (US$71 million), down ¥8,904 million(US$97 million) from the previous year. The main cause was lower income before income taxes
arising from a decline in profits.
Net Cash Provided by Investing Activities
Net cash provided by investing activities stood at ¥3,642 million (US$40 million), ¥45 million (US$0
million) lower than during fiscal 2007. Primary reasons were a decline in proceeds from withdrawalof time deposits and an increase in purchases of property, plant and equipment.
Net Cash Used in Financing Activities
Net cash used in financing activities amounted to ¥18,641 million (US$204 million), up ¥5,110
million (US$56 million). This rise was led by growth in purchase of treasury stock.

Shareholders' equity/
Shareholders' equity ratio(Millions of yen)(%)

240,000

211,875 211,284 208,671

201,543

180,000 93.1

193,597

93.2

92.5

92.4

94.5

2005

2006

2007

2008

120,000
60,0000 2004

Working capital/
Current ratio(Millions of yen)(%)

97,445120,000

114,520

106,779

94,621

88,69290,000

10.8

10.2

9.8

9.0

7.2

60,00030,0000 2004

2005

2006

2007

2008

Capital expenditures/
Depreciation and amortization(Millions of yen)

11,606
12,000
5,734
5,543

9,000

5,241

5,360

4,913

4,408

3,627

3,700

3,777

2006

2007

2008

6,000
3,000

In addition to the above, there was a dramatic increase in the effect of exchange rate changes oncash and cash equivalents due to the escalation of the yen. This resulted in a ¥20,824 million(US$228 million) reduction in cash and cash equivalents, from ¥76,897 million (US$845 million) at
the end of fiscal 2007 to ¥56,073 million (US$616 million) as of December 31, 2008.

0

2004

2005

Capital expenditures
Depreciation and amortization

Capital Expenditures, Depreciation and Amortization
During fiscal 2008, major capital expenditures included ¥536 million (US$5 million) in construction
expenses for Mabuchi Motor Danang Ltd., ¥331 million (US$3 million) in construction expenses for adormitory for Head Office employees, ¥302 million (US$3 million) for research and development
equipment and ¥2,606 million (US$28 million) for equipment to increase motor production capacity
and upgrade facilities. As a result, total capital expenditures for the year were up ¥77 million (US$0
million), to ¥3,777 million (US$41 million).
Furthermore, depreciation and amortization declined ¥505 million (US$5 million), to ¥4,408
million (US$48 million).

MABUCHI MOTOR CO., LTD. Annual Report 2008

20

OutlookIn fiscal 2009, ending December 31, 2009, we expect the economic climate to become even more
severe. Under these circumstances, the markets targeted for applications of the Mabuchi Group’s
products will tend to shrink, exacerbated by the appreciation of the yen. Accordingly, we anticipate a
29.8% year-on-year reduction in consolidated net sales, to ¥65 billion.
We expect profits to be affected by sharply lower sales and production volumes, which in turnwill boost per-unit fixed expenses and thus push up costs. Consequently, we forecast an operating
loss of ¥1.5 billion for fiscal 2009, despite the anticipated effect of lower raw material costs stemming from falling market prices. Aggravated by a forecast falloff in interest income as a result of
declining dollar interest rates, we expect to post a net loss of ¥0.5 billion for the year. Furthermore,
given this financial outlook, with an assumed interest rate for the term of ¥90 to the U.S. dollar, we
expect no exchange loss on foreign currency transactions.

Business and Other Risks
Changes in Economic Conditions
The demand for Mabuchi products, which are incorporated into our customers’ products, is influenced by the economic conditions present in the diverse markets in which our group operates.
Consequently, our group’s business results and financial position may be adversely affected byeconomic recessions and corresponding contractions in demand in Mabuchi’s key markets, including
Japan, North America, Europe and Asia.
Fluctuations in Foreign Exchange Rates
Items denominated in local currencies on the financial statements of our overseas subsidiaries areconverted into Japanese yen to prepare the consolidated financial statements. Consequently,
amounts that are to be recorded after being converted into Japanese yen are subject to the foreignexchange rates at the time of conversion. In particular, appreciation of the Japanese yen against the
U.S. dollar has a negative effect on our group’s consolidated business results, and conversely, any
depreciation of the Japanese yen has a positive effect. Appreciation of local currencies in regions
where the Mabuchi Group carries out production pushes up manufacturing and procurement costs,
which are denominated in those local currencies. Such increased costs lower our group’s profit
margins and price competitiveness, and negatively affect our business results.
Development of New Products and New Technologies
The new product development and sales processes, by their very natures involve both complexities
and uncertainties, and include a broad array of risks. In the event our group cannot fully predictchanges in market needs, is unable to develop appealing new products in a timely fashion, or atechnological innovation or the like emerges that causes our products to become obsolete could
have a significant adverse effect on our group’s business results and financial position.
Price Competition
Our customers are businesses in a diverse range of sectors that belong to the electrical/electronicequipment and machinery manufacturing industries, and price competition in these industries is
extremely severe. In these environments, prices are a major contributing factor to competition in all
sectors, and with the rise of rival Chinese manufacturers, competition is becoming even more
intense. The inability of our cost-reduction activities to keep up with falling prices over the long term
could have a significant adverse effect on our group’s business results and financial position.
Potential Risks in International Economic Transactions and Expanding Business Overseas
The majority of our group’s business activities are conducted in various countries in Europe, North
America and Asia. These overseas business activities involve certain intrinsic risks, including changes
in political and economic environments, inadequate infrastructures, changes in laws, tax affairs andvarious other systems, and social upheaval. For example, much of our group’s production takes placein China and Vietnam. The occurrence of an unexpected event (such as a change in the political or
legal environment, a change in economic conditions, or a change in the social environment, includMABUCHI MOTOR CO., LTD. Annual Report 2008

21

ing the employment environment) may lead to significant problems for our production and/or sales
activities, and these may have a significant adverse effect on our group’s business results andfinancial position.

Product Quality
There is no guarantee that all of our group products will have no major quality issues. If a quality
issue occurs, the amount of compensation may be influenced by the effect on the quality of the final
product in which the Mabuchi product is incorporated. The unlikely event of a product defect that
leads to a large-scale product complaint, recall or product liability compensation may trigger an
accrual of large amount of costs or downturn in sales due to a loss of credibility, and may havesignificant adverse effects on our group’s business results and financial position.
Protection of Intellectual Property
We recognize that the acquisition of intellectual property can greatly influence the growth of the
Mabuchi Group. However, in certain regions, for certain inherent reasons, our group’s intellectual
property rights may not be completely protected. In such instances, any third party may use ourgroup’s intellectual property without permission to manufacture similar products, and we may suffer
damage as a result. In addition, our competitive superiority may suffer from outflows of other of ourtechnologies or expertise, which was then exploited by other companies. Furthermore, the Mabuchi
Group could face claims of infringing on the intellectual property of another company. The failure ofprotection by or the violation of intellectual property rights, or the outflow of intellectual property
could have significant adverse effects on our group’s business results and financial position.
Securing and Developing Human Resources
The Mabuchi Group operates in a highly competitive corporate arena. This situation renders essential
the recruitment and development of employees who are highly skilled in related areas: engineers
with specialist scientific and technological expertise, and managers with top business strategy
acumen and executive capacities. Mabuchi is fully cognizant of the need for the continuous enhancement and improvement of its human resources for the next generation and beyond. The
failure to recruit and cultivate such a workforce on an ongoing basis through the requisite expenditure and long-term human resource development vision would invite adverse impact on the Group’s
future performance and financial position.
Procurement of Raw Materials
Depending on the type of raw material that our group procures from external sources, we may be
dependent on a limited number of suppliers. There is a possibility that the supply of a raw material
may be suspended due to an accident befalling a supplier or for some other reason, or that ashortage of supply may transpire due to a sudden upsurge in demand. If such conditions continue
over a long period of time and it is difficult to obtain alternative materials, our group’s production
activities could be affected dramatically, which in turn would undermine the assurance of delivery
and quality of products to our customers. Also possible are sharp increases in the prices of suchmaterials, which would trigger a rise in manufacturing costs. If such an event were to occur, ourgroup’s business results and financial position may be subject to significant adverse effects.
Natural Disasters and Accidents
The Mabuchi Group has established a specialized international system. We conduct businessactivities in various countries throughout the world, and at each of our bases we own facilities andequipment, including factories and offices. Our group has implemented measures to prevent our
exposure to risks associated with the occurrence of disasters and accidents at these bases, and wehave implemented measures to reduce damage from disasters and accidents, including insurance.
However, there is no guarantee that such measures will completely protect us against, or can reduce
as planned, the effects of disruptions to our business activities caused by disasters or accidents at our
Head Office or individual bases. In the event these kinds of unforeseeable events occur, our group’sbusiness results and financial position may be subject to significant adverse effects.
MABUCHI MOTOR CO., LTD. Annual Report 2008

22 Consolidated Balance Sheets
Mabuchi Motor Co., Ltd. and Consolidated Subsidiaries
December 31, 2007 and 2008

Thousands of
U.S. Dollars

Millions of Yen

ASSETS

2007

2008

2008

¥ 61,269¥ 45,655$ 501,703

15,145

9,543

104,868

(290)

(195)

(2,142)

Short-term investments

30,25026,168287,560

Inventories

18,04817,060187,472

—

777

8,538

1,375

1,584

17,406

Current Assets:
Cash and bank deposits
Trade notes and accounts receivable
Less—Allowance for doubtful receivables

Income taxes receivable
Deferred tax assets—current
Other current assets

1,206

1,359

14,934

Total current assets

127,006

101,955

1,120,384

Property, Plant and Equipment, at Cost:
Land

6,190

6,023

66,186

Buildings

45,02840,049440,098

Machinery and equipment

61,07951,885570,164

Construction in progress
Less—Accumulated depreciation
Property, plant and equipment, net

894

1,993

21,901

113,191

99,952

1,098,373(74,356)(65,081)(715,175)

38,83534,870383,186

63,17250,606556,109

Investments and Other Assets:
Investment securities
Long-term loans receivable

133

97

1,065

Deferred tax assets—non-current

129

124

1,362

Other investments and other assets

1,682

1,036

11,384

Total investments and other assets

65,11851,865569,945¥230,960¥188,691$2,073,527

Total assets

The accompanying notes to consolidated financial statements are an integral part of these balance sheets.

MABUCHI MOTOR CO., LTD. Annual Report 2008

23

Thousands of
U.S. Dollars

Millions of Yen

LIABILITIES AND NET ASSETS

2007

2008

2008

Current Liabilities:
Trade notes and accounts payable

¥

3,948

¥

2,110

$

23,186

2,676

—

—

Accrued bonus to employees

248

246

2,703

Accrued bonus for directors

81

—

—

Accrued income taxes

Allowance for loss on reorganization of subsidiary

346

—

—

Other current liabilities

5,185

4,976

54,681

Total current liabilities

12,485

7,333

80,582

187

222

2,439

Allowance for retirement benefits for directors and statutory auditors

1,094

—

—

Deferred tax liabilities

Long-term Liabilities:
Allowance for retirement benefits for employees

3,793

1,706

18,747

Other long-term liabilities

84

1,137

12,494

Total long-term liabilities

5,160

3,066

33,692

17,645

10,400114,285

20,704——

Total liabilities
Net Assets:
Shareholders' Equity
Common stock, without par value:
Authorized: 100,000,000 shares
Issued:47,075,881 shares in 2007

Issued:45,875,881 shares in 2008—

20,704

227,516Additional paid-in capital

20,41920,419224,384

Retained earnings

240,983

230,288

2,530,637

Treasury stock, at cost: 8,832,718 shares in 2007
Treasury stock, at cost: 10,835,574 shares in 2008
Total shareholders' equity(73,436)(77,816)(855,120)

208,671

193,597

2,127,439

Revaluation/translation adjustment:
Unrealized holding gains (losses) on securities

1,956(1,122)(12,329)

Foreign currency translation adjustments

2,686(14,183)(155,857)

Total revaluation/translation differences

4,643(15,305)(168,186)

Total net assets

213,314

178,291

1,959,241

Total liabilities and net assets¥230,960¥188,691$2,073,527

MABUCHI MOTOR CO., LTD. Annual Report 2008

24 Consolidated Statements of Income
Mabuchi Motor Co., Ltd. and Consolidated Subsidiaries
For the years ended December 31, 2007 and 2008

Thousands of
U.S. Dollars

Millions of Yen

Net Sales
Cost of Sales
Gross profit
Selling, General and Administrative Expenses
Operating income

2007¥107,640

2008¥92,6022008$1,017,604

77,207

68,799756,032

30,43323,802

261,560

18,747

18,150199,450

11,685

5,652

62,109

3,396

2,489

27,351131(1,567)(17,219)

Other Income (Expenses):
Interest and dividend income
Exchange gains (losses) on foreign currency transactions
Gain on sale of scrap of raw material

1,230

1,446

15,890Gain on sales of fixed assets

293

1,209

13,285

Loss on sales/disposal of fixed assets

(157)

(81)

(890)

Compensation paid for products—(1,774)(19,494)

Loss on revaluation of investment securities—(2,457)(27,000)

Other, net

(49)

415

4,560

4,844

(321)

(3,527)

16,5305,330

58,571

Current

5,851

1,971

21,659Deferred

(235)

(205)

(2,252)

5,615

1,765

19,395¥ 10,914¥ 3,565

Income before Income Taxes
Income Taxes:

Net Income$

Yen39,175

U.S. Dollars

2007

2008

¥ 280.90¥ 94.77

123.00123.002008

Per Share of Common Stock:
Net income
Cash dividends applicable to earnings of the year
The accompanying notes to consolidated financial statements are an integral part of these statements.

MABUCHI MOTOR CO., LTD. Annual Report 2008

$

1.04
1.35

25

Consolidated Statements of Changes in Net Assets
Mabuchi Motor Co., Ltd. and Consolidated Subsidiaries
For the years ended December 31, 2007 and 2008

Number of Shares(thousands)

2007

Thousands of
U.S. Dollars

Millions of Yen

2008

2007

2008

2008

47,07547,075¥ 20,704¥ 20,704$ 227,516—(1,200)———47,07545,875¥ 20,704¥ 20,704$ 227,516

Beginning balance¥ 20,419¥ 20,419$ 224,384

Ending balance¥ 20,419¥ 20,419$ 224,384¥234,893¥240,983$2,648,164

Net income

10,914

3,565

39,175

Cash dividends(4,825)(4,667)(51,285)—(9,592)(105,406)¥240,983¥230,288$2,530,637

¥

¥

$

Common Stock:
Beginning balance
Treasury stock cancellation
Ending balance
Additional Paid-in Capital:

Retained Earnings:
Beginning balance

Treasury stock cancellation
Ending balance
Unrealized Holding Gains (Losses) on Investments:
Beginning balance
Net change during the year
Ending balance

3,478

1,956

21,494(1,522)(3,078)(33,824)¥

1,956¥ (1,122)$(12,329)

¥

4,454

¥

$

29,516

Foreign Currency Translation Adjustments:
Beginning balance
Net change during the year
Ending balance

2,686(1,767)(16,870)(185,384)

2,686¥ (14,183)$ (155,857)¥ (64,733)¥ (73,436)$ (806,989)¥

Treasury Stock:
Beginning balance
Net change during the year
Ending balance(8,702)(4,379)(48,120)¥ (73,436)¥ (77,816)$ (855,120)

The accompanying notes to consolidated financial statements are an integral part of these statements.

MABUCHI MOTOR CO., LTD. Annual Report 2008

26 Consolidated Statements of Cash Flows
Mabuchi Motor Co., Ltd. and Consolidated Subsidiaries
For the years ended December 31, 2007 and 2008

Thousands of
U.S. Dollars

Millions of Yen

Cash Flows from Operating Activities:
Income before income taxes
Depreciation and amortization
Impairment loss
Allowance for retirement benefits, net payments
Decrease in allowance for loss on reorganization of subsidiary
Interest and dividend income
Foreign exchange loss
Gain on sales of short-term investments and investment securities
Gain on sales and disposal of fixed assets
Losses on revaluation of investment securities(Increase) Decrease in trade notes and accounts receivables
Increase in inventories
Increase (Decrease) in trade notes and accounts payable
Other, net
Sub totalInterest and dividends received
Income taxes paid
Net cash provided by operating activities
Cash Flows from Investing Activities:
Deposition of time deposit
Proceeds from withdrawal of time deposit
Purchase 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
Purchase of investment securities
Proceeds from sales of investment securities
Other, net
Net cash provided by investing activities
Cash Flows from Financing Activities:
Cash dividends paid
Purchase of treasury stock
Net cash used in financing activities
Effect of Exchange Rate Changes on Cash and Cash Equivalents
Net Increase (Decrease) in Cash and Cash Equivalents
Cash and Cash Equivalents at Beginning of Year
Cash and Cash Equivalents at End of Year
The accompanying notes to consolidated financial statements are an integral part of these statements.

MABUCHI MOTOR CO., LTD. Annual Report 2008

2007

2008

2008

¥ 16,530
4,913
24
603
(163)
(3,396)
388
(292)
(161)
—
(742)
(470)
210
164
17,6103,388(5,552)
15,447¥ 5,330
4,408
171
443
(346)
(2,489)1,186(421)(1,129)2,457
3,598(3,946)(1,404)
2,086
9,945
2,397
(5,799)6,542$ 58,571
48,4391,879
4,868(3,802)(27,351)
13,032(4,626)(12,406)
27,00039,538(43,362)(15,428)
22,923
109,285
26,340(63,725)
71,890(26,073)
27,173(14,704)
13,769(3,903)589(7,150)12,823
1,163
3,687(27,505)
23,987(13,994)
20,997(5,138)2,032(8,834)
8,604
(102)
45

(302,252)
263,593(153,780)
230,736(56,461)
22,329(97,076)
94,549(1,120)494(4,828)(8,702)(13,531)(1,346)
4,257
72,639¥ 76,897(4,669)(13,972)(18,641)(8,771)(20,824)
76,897¥ 56,073(51,307)(153,538)(204,846)(96,384)(228,835)
845,021$ 616,186

Notes to Consolidated Financial Statements

27

Mabuchi Motor Co., Ltd. and Consolidated Subsidiaries

1. Summary of Significant Accounting and Reporting Policies(a) Basis of presenting consolidated financial statements
The accompanying consolidated financial statements of Mabuchi Motor Co., Ltd. (the "Company") and consolidated
subsidiaries are prepared on the basis of accounting principles generally accepted in Japan, which are different incertain respects as to the application and disclosure requirements of International Financial Reporting Standards, andare compiled from the consolidated financial statements prepared by the Company as required by the Financial
Instruments and Exchange Law of Japan.
In addition, the notes to the consolidated financial statements include information which is not required underaccounting principles generally accepted in Japan but is presented herein as additional information. For the purposeof this report, certain reclassifications have been made to present the accompanying consolidated financial statements in a format which is familiar to readers outside Japan.
For the convenience of the reader, the accompanying consolidated financial statements have also been presented
in U.S. dollars by translating yen amounts at the rate of ¥91 to U.S.$1, which was the approximate exchange rate
prevailing on December 31, 2008.
(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 in consolidation. Investments inunconsolidated subsidiaries are stated at cost.
(c) Translation of foreign currencies
All monetary assets and liabilities denominated in foreign currencies are translated into yen at the rate of exchange in
effect at the balance sheet date.
Exchange gain and/or loss resulting from these translations are included in income.
Foreign subsidiaries' assets and liabilities are translated into yen at the rates of exchange in effect at the balance
sheet date.
The accounts of shareholders' equity are translated at historical rates. Revenues and expenses are translated at
the average rates of exchange for the year.
The resulting foreign currency translation adjustments are shown as a separate component of shareholders'equity.
(d) Cash equivalents
For purposes of the statements of cash flows, the Company considers all highly-liquid debt instruments purchasedwith an 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" which are held for the purpose of earning capitalgains in the short-term, "held-to-maturity" for which management has the positive intent and ability to hold to maturity, and "available-for-sale" which represent securities not classified as either trading or held-to-maturity.
Held-to-maturity securities are reported at amortized or accumulated cost. Available-for-sale securities are stated
at fair value with changes in unrealized holding gains or losses, net of the applicable income taxes, and are reported
in a separate component of shareholders' equity. However, when the fair value of available-for-sale securities declines
significantly and is considered to be irrecoverable to the book value, such unrealized holding losses are charged toincome.
Available-for-sale securities for which fair value is not readily determinable are stated at moving average cost.
(f) Inventories
Finished goods, work in process and raw materials are principally stated at average cost. Marketable raw materials
such as copper, gold, silver and palladium are stated at the lower of average cost or market.
(g) Property, plant and equipment and depreciation
Property, plant and equipment are stated at cost. Depreciation is computed primarily by the declining-balancemethod for the Company (except for certain building) and principally by the straight-line method for overseas
subsidiaries over their estimated useful lives. Buildings acquired by the Company on and after April 1, 1998 aredepreciated by the straight-line method. Maintenance and repairs, including minor and improvements, are charged
to income as incurred.
(h) Leases
Finance leases, except for those leases of which lease agreements stipulate the transfer of ownership of the leased
assets to the lessee, are accounted for as operating leases. There were no significant reportable leases.

MABUCHI MOTOR CO., LTD. Annual Report 2008

28(i) Research and development expenses
Expenditures relating to research and development activities are charged to income as incurred and amounted to¥4,187 million and ¥3,892 million ($42,769 thousand) for the years ended December 31, 2007 and 2008, respectively.
(j) Income taxes
Deferred tax assets and liabilities are recognized for the expected tax consequences of temporary differences between the tax bases of assets and liabilities and their reported amounts using presently enacted tax rates. Provision
for Japanese income taxes on undistributed earnings of foreign subsidiaries is made only on those amounts in excessof the funds considered to be permanently reinvested.
(k) Retirement benefits
The Company has a trusted noncontributory pension plan covering substantially all qualified full-time employees.
Under the plan, eligible employees are entitled to a 10-year annuity or lump-sum payments based on the rate of pay
at the time of retirement or termination, length of service and certain other factors. Annual payments to the trustees
for the pension plan, which are deductible for tax purposes, are based on actuarially determined costs of the plan.
Allowance for retirement benefits are provided based on the amount of retirement benefit obligation reduced by
the fair value of pension plan assets at the end of the annual period.
Actuarial gain and loss are amortized in the year following the year in which the gain or loss recognized primarily
by the straight-line method over the period of mainly 10 years which are shorter than the average remaining years ofservice of the employees.
Prior service costs are amortized using straight-line method over 10 years.
Certain subsidiaries have pension plans similar to the Company or unfunded retirement and termination allowance plans for qualified employees.
The amounts required under the plans have been fully accrued.
The Company also has an unfunded retirement benefits plan for directors and statutory auditors and has fully
accrued the amount required under the plan.
Retirement benefit plan for directors and statutory auditors
Following a resolution by the Board of Directors to abolish the unfunded retirement benefits plan for directors
and statutory auditors at the close of the shareholders meeting on March 28, 2008, the shareholders meeting
approved the payments to directors and statutory auditors to settle the retirement benefits plan. As a result,allowance for retirement benefits for directors and statutory auditors of ¥1,059 million ($11,637 thousand) weretransferred in long -term accrued expense and presented in other long-term liabilities. Actual payments of theretirement benefits to directors and statutory auditors will be made upon retirement from their posts.
(l) 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 evaluation of derivative financial instruments until the related
losses or gains on the hedged items are recognized.
(m) Impairment of fixed assets
The Company adopted the Accounting Standard for Impairment of Fixed Assets and the Guidance on Accounting for
Impairment of Fixed Assets from 2006. As a result, Impairment of fixed assets incurred ¥24 million in 2007 and ¥171
million ($1,879 thousand) in 2008. Accumulated loss on impairment is directly deducted from the related assets,(n) Allowance for loss on reorganization of subsidiary
Allowance for loss on reorganization of subsidiary incurred in connection with the closure of Mabuchi Motor (Malaysia) SDN. BHD. is reported at the reasonably estimated amount. This item was reversed since buildings and a right ofusing land of this subsidiary had been sold in this fiscal year.
(o) Reclassification
Certain reclassifications have been made to the accompanying 2007 financial statements to conform to the 2008
presentation.
(p) Additional Information
Conventionally, interest income had been computed on a cash basis in the Company and a certain subsidiaries.
However, due to an increase in the materiality in monetary terms, the item was changed to be computed on an
accrual basis, in this fiscal year. The effect of this change was to increase income before income tax and minority
interest by ¥143 million ($1,571 thousand).

MABUCHI MOTOR CO., LTD. Annual Report 200829

2. Cash and Cash Equivalents
Reconciliation of cash and cash equivalents to the accounts on the statement of cash flows as of December 31, 2007
and 2008 were as follows:
Thousands of
U.S. Dollars

Millions of Yen

Cash and bank deposits on the consolidated balance sheet
Time deposits with maturities over threemonths at the time of purchase
Short-term investments
Securities under the risk value fluctuation
Cash and cash equivalents

2007¥61,269

2008¥45,6552008$501,703(2,639)30,250(11,983)¥76,897(5,142)
26,168(10,609)¥56,073(56,505)
287,560(116,582)$616,186

3. Inventories
Inventories as of December 31, 2007 and 2008 were as follows:
Thousands of
U.S. Dollars

Millions of Yen

2007¥ 9,705
1,703
6,639¥18,048

Finished goods
Work in process
Raw materials

2008¥ 9,0721,468
6,518¥17,060

2008$ 99,692
16,131
71,626$187,472

4. Securities
The Company and its consolidated subsidiaries have no trading securities.
The cost, net of unrealized gains and losses, and fair value for securities classified as available-for-sale and held-tomaturity as of December 31, 2007 and 2008 were as follows:
Millions of Yen

2007

Available-for-sale:
Debt securities
Equity securities
Other

Held-to-maturity:
Debt securities
Millions of Yen

Cost

Fair
value

Gains
(losses)¥18,185
3,641
11,484¥33,310¥17,680
6,381
12,529¥36,592¥ (504)2,740
1,045¥ 3,281¥37,475¥35,179¥(2,296)

Thousands of U.S. Dollars

2008
Gains
(losses)

Cost¥17,2103,401
7,522¥28,135¥16,335
3,488
6,427¥26,251¥ (875)86(1,095)¥(1,883)$189,120
37,37382,659$309,175$179,505
38,32970,626$288,472$ (9,615)
945(12,032)$(20,692)¥33,853¥29,912¥(3,941)$372,010$328,703$(43,307)

Cost

Available-for-sale:
Debt securities
Equity securities
Other

Held-to-maturity:
Debt securities

2008

Fair
value

Fair
value

Gains
(losses)

MABUCHI MOTOR CO., LTD. Annual Report 2008

30

The securities for which fair values were not available as of December 31, 2007 and 2008 were as follows:
Thousands of
U.S. Dollars

Millions of Yen

Securities with no fair value
Commercial paper
Money Management Funds
Certificate of deposit
Equity securities of non-consolidated subsidiaries
Other equity securities

2007

2008

2008

¥14,186
4,988
—
70
110
¥19,355¥10,991
3,000
2,500
70
108
¥16,670$120,780
32,96727,472769
1,186$183,186

The contractual maturities for securities classified as available-for-sale and held-to-maturity at December 31, 2007
and 2008 were as follows:
Millions of Yen

2007

Corporate bonds
Commercial paper
Other

Corporate bonds
Commercial paper
Certificate of deposit
Other

Withinone yearOver oneyear throughfive years

Over five
years throughten years

Over ten
years

Total

¥10,992
14,186—¥25,179¥10,687—
1,723¥12,411¥16,475—
4,517¥20,993¥17,000——¥17,000¥55,156
14,186
6,241¥75,584

Millions of Yen

Thousands of
U.S. Dollars

2008

2008

Withinone yearOver oneyear throughfive years

Over five
years throughten years

Over ten
years

Total

Total

¥ 8,427
10,9912,500
1,182¥23,101¥ 9,907——2,177¥12,085¥23,853———¥23,853¥8,000———¥8,000¥50,189
10,991
2,500
3,359¥67,040$551,527
120,780
27,472
36,912$736,703

5. Retirement Plans
The table below sets forth the plan's status and amounts recognized in the balance sheets at December 31, 2007 and2008.
Millions of Yen

Retirement benefit obligation
Plan assets of fair value
Unfunded retirement benefit obligation
Unrecognized prior service cost
Unrecognized actuarial gain or loss
Net retirement benefit obligation
Prepaid pension costAccrued retirement benefits

MABUCHI MOTOR CO., LTD. Annual Report 2008

2007¥(7,165)
7,445
280
202
(324)
158
345
¥ (187)2008¥(7,075)
6,985
(90)
182
(313)
(222)
—
¥ (222)Thousands of
U.S. Dollars

2008$(77,747)
76,758(989)
2,000(3,439)(2,439)—$ (2,439)

31

The components of net periodic pension cost for the years ended December 31, 2007 and 2008 were as follows:
Effective as of April 1, 2008, the Company amended its retirement benefit plan to introduced a "point" based
retirement benefit plan. This plan amendment resulted in prior service cost of ¥202 million. Under the amended plan,
the estimated amount of all retirement benefits to be paid upon retirement is allocated to each service year based on
points earned.
Thousands of
U.S. Dollars

Millions of Yen

Service cost
Interest cost
Amortization of prior service cost
Expected return on plan assets
Amortization of unrecognized actuarial gain or loss
Net periodic pension cost

2007
¥486
122
—
(63)
4
¥549

2008
¥516
120
20
(64)
(23)
¥568

2008
$5,670
1,318
219
(703)
(252)
$6,241

2007
2.0%
1.0%

2008
2.0%
1.0%

The assumptions used in accounting for the above plans were as follows:
Discount rate
Expected rate of return on plan assets

6. Income Taxes
The Company and domestic consolidated subsidiaries are subject to a number of taxes based on income with anormal tax rate aggregating approximately 40.4% for the years ended December 31, 2007 and 2008. Foreignsubsidiaries are subject to income taxes in the countries where they operate.
The following table summarizes the significant differences between the Japanese statutory income tax rate andthe effective income tax rate on pre-tax income for the years ended December 31, 2007 and 2008:

Statutory income tax rate
International income taxed at varying rates
Effect on elimination of dividend income fromforeign subsidiaries for consolidation purposes
Foreign and R&D tax credit utilization
Undistributed earnings in foreign subsidiaries
Tax credit on dividend income
Other, net
Effective income tax rate

2007
40.4%
(16.4)

2008
40.4%(19.1)

24.6(14.6)
0.1
(0.9)
0.8
34.0%

57.0
(36.9)
(0.9)
(4.5)
(2.9)
33.1%

MABUCHI MOTOR CO., LTD. Annual Report 2008

32

Deferred income taxes reflect the net effects of temporary differences between the carrying amounts of assets
and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of deferred tax assets and liabilities at December 31, 2007 and 2008 were as follows:
Thousands of
U.S. Dollars

Millions of Yen

2007

2008

2008

Deferred tax assets
Unrealized profits on inventories and fixed assets
Evaluation losses on assets
Depreciation
Accrued enterprise taxes
Allowance for retirements benefits
Unrealized loss on investments
Other
Total

¥1,144
1,479
193
276
(132)
—
755
¥3,715

¥ 860
1,684
156
—
16
761
1,122
¥4,601$ 9,450
18,505
1,714
—
175
8,362
12,329$50,560

Deferred tax liabilities
Tax on undistributed foreign earnings
Unrealized loss on investments
Other
Total

¥4,491
1,325
187¥6,004¥4,443—157¥4,600$48,824—
1,725$50,549

As reported in the consolidated balance sheet
Deferred tax assets
Deferred tax liabilities¥1,505
3,793¥1,7091,708$18,780
18,7697. Compensation Paid for Products
The compensation paid for products included in "other expenses" was attributed to unexpected factors and was an
extraordinary expense for the product claim from certain customer. Estimates based on the number of received claim
were also included in it.
8. Shareholders' Equity
The Japanese Commercial Code (the "Code") provides that an amount equivalent to at least 10% of cash dividends
paid and other cash outlays, resulting from appropriations of retained earning with respect to each annual period, be
appropriated to the legal reserve until total of such reserve and additional paid-in capital equals 25% of the statedcapital. As of December 31, 2008, the total of the legal reserve of ¥3,819 million ($33,500 thousand) which isincluded in retained earnings at December 31, 2008, and additional paid-in capital, already reached 25% of thestated capital. The Code also provides that additional paid-in capital and the legal reserve up to 25% of the statedcapital are not available for cash dividends but may be used to reduce a capital deficit or may be capitalized. The
paid-in capital and legal reserve exceeding 25% of the stated capital are available for dividends or purchase oftreasury stock upon approval of shareholders' meeting.
The Corporation Law of Japan (the "Law"), which superseded most of the provisions of the Commercial Code ofJapan, went into effect on May 1, 2006. Under the Law, distribution of earnings can be made at any time byresolution of the shareholders, or by the Board of Directors if certain conditions are met. The Company's policy on
distribution of earnings is that, as in the past, year-end cash dividends are approved by the shareholders after the endof each fiscal year and semi-annual interim cash dividends are declared by the Board of Directors after the end ofeach interim six-month period. Such dividends are payable to shareholders of record at the end of each fiscal year orinterim six-month period.
On September 19, 2008, semi-annual interim cash dividends (¥61 or $0.67 per share) of ¥2,296 million ($25,230
thousand) were paid to shareholders of record at June 30, 2008. On March 27, 2009, the shareholders approved thedeclaration of cash dividends (¥62 or $0.68 per share) totaling ¥2,172 million ($23,868 thousand).
9. Per Share Data
Net income per share was computed based on the net income reported in the consolidated statements of income
and the weighted average number of shares of common stock outstanding during each year. In accordance with anaccounting standard for earnings per share, basic net income per share was computed based on the net income
available for distribution to shareholders of common stock and the weighted average number of shares of common
stock outstanding during the year ended December 31, 2008.

MABUCHI MOTOR CO., LTD. Annual Report 2008

33

10. Derivative Financial Instruments
The Company enters into forward exchange contracts and forward precious metal contracts as a normal part of risk
management efforts and also utilizes compound financial instrument for the purpose of efficient management offund surplus. The Company utilizes only principal-guaranteed instrument, and does not utilize it for speculative
trading purposes. As a result, the Company is exposed to risk of a currency rate fluctuation and interest volatility incompound instruments embedded derivatives. The Company is also exposed credit-related losses in the event of
nonperformance of counterparties to foreign exchange contracts, precious metal contracts and compound instruments embedded derivatives. Management believes such credit risks are minor because of the high credit worthinessof the counterparties and such financial instruments have not been held for trading purpose. Following is a summaryof derivative financial instruments which are currently held by the Company.
The Company uses foreign exchange forward contracts to hedge the risk of changes in foreign exchange rates
substantially associated with accounts receivable and payable denominated in foreign currencies. Gains and losses
explicitly deferred, arising from contracts related to future trade transactions, are insignificant, at December 31, 2007
and 2008. There were no outstanding currency option contracts at December 31, 2007 and 2008.
Forward precious metal contracts are used by the Company to hedge the risk of changes in market prices
resulting from purchase of precious metals as raw materials for motor products. The contracted amounts outstandingat December 31, 2007 and 2008 were ¥101 million and ¥231 million ($2,538 thousand), respectively.
The estimated fair value at December 31, 2007 and 2008 were ¥107 million ($938 thousand) and ¥163 million($1,791 thousand), respectively.
11. Contingent Liabilities
As of December 31, 2008, there were contingently liable principally for forward precious metal contracts in theamount of ¥231 million ($2,538 thousand).
12. Segment Information
The Company and consolidated subsidiaries manufacture and sell small electric motors, parts and equipment used for
production purposes. Substantially all of the consolidated net sales and operating income are generated from a broad
range of motor products. The information on net sales, operating income and assets by geographic area, andoverseas sales is summarized as follows:
Segment Information by Geographic Area
Thousands of
U.S. Dollars

Millions of Yen

Net sales:Japan
Outside customers
Intersegment
Total
Asia
Outside customers
Intersegment
Total
U.S.A.
Outside customers
Intersegment
Total
EuropeOutside customers
Intersegment
Total
Corporate and elimination
Consolidated
Operating Income:
Japan
Asia
U.S.A.
EuropeCorporate and elimination
Consolidated

2007

2008

¥ 23,986
51,65675,643¥ 21,327
43,62664,95357,30557,375
114,680

50,53049,161
99,692555,274
540,230
1,095,516

9,533
53
9,587

6,875
49
6,925

75,549538
76,09816,814—
16,814(109,085)¥ 107,640

13,868—13,868(92,837)¥ 92,602

152,395—
152,395(1,020,186)$ 1,017,604

¥

¥

$

3,924
7,589
315
(72)
(70)
¥ 11,685

¥

1,765
2,170
220
249
1,246
5,652

2008

$

$

234,362
479,406
713,769

19,39523,846
2,417
2,736
13,692
62,109MABUCHI MOTOR CO., LTD. Annual Report 2008

34

Thousands of
U.S. Dollars

Millions of Yen

Assets:Japan
Asia
U.S.A.
EuropeCorporate and elimination
Consolidated

2007

2008

2008

¥ 70,551
100,415
5,097
6,818
48,076¥230,960¥ 66,010
78,515
3,490
4,762
35,912¥188,691$ 725,384
862,80238,351
52,329394,637$2,073,527

The amount of corporate assets included in "Corporate and elimination" is ¥109,987 million in 2007 and¥89,294 million ($981,252 thousand) in 2008, which comprises principally cash, short-term investments and investment securities.
Overseas Sales
Thousands of
U.S. Dollars

Millions of Yen

Overseas Sales
U.S.A.
EuropeAsia and Other
Total
Net Sales% of Overseas Sales to Net Sales

2007

2008

¥ 11,697
16,912
68,034¥ 96,644
107,640
89.8%¥ 8,487
13,91459,535¥81,936
92,602
88.5%

2008
$

93,263
152,901
654,230$ 900,395
1,017,604
88.5%

Overseas sales are the total of exports by the Company and sales by consolidated overseas subsidiaries.

13. Subsequent Event
On January 26, 2009, the Board of Directors resolved to cancel the repurchased shares as follows:(1) Purpose for cancellation of shares
To urge further improving capital efficiency, thereby making an appropriate return the Company's profits to shareholders.
(2) Class of shares to be cancelled
Common share of the Company(3) Number of shares to be cancelled
2,000,000 shares(4) Cancellation dateFebruary 5, 2009
(5) Total number of shares issued after the cancellation
43,875,881 shares

MABUCHI MOTOR CO., LTD. Annual Report 2008

35

Independent Auditors’ Report

Report of Independent Auditors
The Board of Directors
Mabuchi Motor Co., Ltd.
We have audited the accompanying consolidated balance sheets of Mabuchi Motor Co., Ltd.
and consolidated subsidiaries as of December 31, 2007 and 2008, and the related
consolidated statements of income, changes in net assets, and cash flows for the years thenended, all expressed in yen. These financial statements are the responsibility of theCompany’s management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted in Japan.
Those standards require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and disclosures in thefinancial statements. An audit also includes assessing the accounting principles used andsignificant estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in all material
respects, the consolidated financial position of Mabuchi Motor Co., Ltd. and consolidated
subsidiaries at December 31, 2007 and 2008, and the consolidated results of theiroperations and their cash flows for the years then ended in conformity with accounting
principles generally accepted in Japan.
The U.S. dollar amounts in the accompanying consolidated financial statements withrespect to the year ended December 31, 2008 are presented solely for convenience. Our
audit also included the translation of yen amounts into U.S. dollar amounts and, in our
opinion, such translation has been made on the basis described in Note 1(a).

March 27, 2009

MABUCHI MOTOR CO., LTD. Annual Report 2008

36 Investor Information(As of December 31, 2008)

Stock Data

Composition of Shareholders

Number of Shares Authorized ..................... 100,000,000 shares
Number of Shares Issued .............................. 45,875,881 shares

Treasury Share
23.6%

Financial Institutions
17.6%
Financial Instruments Firms
0.6%

Number of Shareholders ............................. 11,594 shareholders

Major Shareholders
Major Shareholders

Takaichi Mabuchi
Takashi Mabuchi
Tamotsu Mabuchi
Northern Trust Company (AVFC)
Sub-account American Client
Mellon Bank NA Treaty Client Omnibus
Mabuchi International
Scholarship Foundation
Japan Trustee Services Bank, Ltd.
(Trust Account 4G)
Japan Trustee Services Bank, Ltd.
(Trust Account)
State Street Bank and Trust Company
Premiere Corporation

Number of
Shares Held(Thousands)

Voting Rights
Ratio
(%)

2,500
2,158
2,158

7.1
6.2
6.2

2,125

6.1

1,615

4.6

1,500

4.3

1,432

4.1

1,203

3.4

1,040
1,034

3.0
3.0

Other Corporations
7.5%

By type ofshareholders

Individuals and Others
25.7%

Foreign Corporations
25.0%

Less than 100 0.1%
100-499 3.0%
500-999 1.2%
1,000-9,999 4.3%
10,000-99,999 8.5%

More than 1,000,000 60.2%

By number ofshares held

Note: In addition to the above, Mabuchi Motor Co., Ltd. retains 10,835 thousand
shares as treasury shares.

Cash Dividends per Share / Payout Ratio

100,000-999,999 22.7%

Total Dividend / Amount for Repurchase of Own
Stocks / Total Dividend Payout Ratio

(Yen)

(%)

(Millions of yen)

(%)

129.8

516.8
150

17.9
160

34.1

70.00
35.00

80
40

35.00

0

2002
Interim

50.9

42.5

600

100

43.8

149.5

129.8

171.0

139.3

50
128.00

120

36.4

61.00

115.0051.00

114.0092.00
50.0

123.00

63.00

62.00

123.000

62.00

21,000200
023,80014,000

64.00

42.00

51.00

61.00

61.00

7,000

2003

2004

2005

2006

2007

2008

0

Payout Ratio

16,166

3,154
2002

Total Dividend

Changes in Standards for Calculating Dividends

42.5

28,00067.00

Year-end

400

122.7

5,547
2003

18,042
4,664
2004

6,559
3,681
2005

8,682
4,509
2006

Amount for repurchase of Own Stocks

4,703
2007

13,957
4,468
2008

Total Dividend Payout Ratio

Trend of Stock Price and Related Indicators

Year

Ordinary Dividendper Share

Standard Value for Calculating
Special DividendHigh (Yen)

2004
8,280

2005
7,490

2006
7,710

2007
7,990

2008
6,740

2007(*)

60 yen20% of consolidated net income

Low (Yen)

6,950

5,510

5,710

6,610

2,845

2005

60 yen20% of consolidated net income

At Year-end (Yen)

7,390

6,550

7,080

6,740

3,690

2003

60 yen20% of consolidated net income

PER

23.4

36.2

26.4

24.0

38.9

1999

50 yen5% of consolidated net income

PBR

1.5

1.2

1.3

1.2

0.7

(* Additional policy) Actual full-year dividend amount shall be based on theabove 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.
MABUCHI MOTOR CO., LTD. Annual Report 2008

37

Corporate Data
(As of December 31, 2008)

Company Name
MABUCHI MOTOR CO., LTD.

Corporate Directory

Corporate Headquarters
430 Matsuhidai, Matsudo-City
Chiba, 270-2280 Japan
Tel: 81-47-710-1111
Fax: 81-47-710-1141

MABUCHI INDUSTRY CO., LTD.
19 Sam Chuk Street, San Po Kong,
Kowloon, Hong Kong
Tel: 852-2328-5575
Fax: 852-2352-5266

Consolidated Subsidiaries

Paid-in Capital¥20,704,818,800

MABUCHI MOTOR(DONGGUAN) CO., LTD.
Guancheng Science & Technology Park,
Shilong Road, Guanlong Road's Section,
Dongguan City, Guangdong Province,
523119 China
Tel: 86-769-2225-6985
Fax: 86-769-2220-2117

Number of Employees
763 (Non-consolidated)
41,328 (Consolidated)

MABUCHI TAIWAN CO., LTD.
No. 18, Chunghwa Road, Hsinchu Industrial
District, Hsinchu, 30352 Taiwan
Tel: 886-3-598-1111
Fax: 886-3-598-6256

Established
January 18, 1954

Ordinary General Meeting of
Shareholders
The Ordinary General Meeting of Shareholders will be held at the end of March in
Matsudo.

Independent Accountants
Ernst & Young Shin Nihon LLC
Tokyo, Japan
Shareholders’ Register Custodian
Mitsubishi UFJ Trust and Banking Corporation
Corporate Agency Department
10-11, Higashi-suna 7-chome, Koto-ku,
Tokyo, 137-8081 Japan
Tel: 81-120-232-711

Stock Listing
Japanese Stock Exchange Listing
Tokyo Stock Exchange

MABUCHI MOTOR TAIWAN LTD.
No. 66 Kai-Fa Road, N.E.P.Z., Kaohsiung,
81170 Taiwan
Tel: 886-7-362-1111
Fax: 886-7-361-2446
MABUCHI MOTOR DALIAN CO.,LTD.
No. 41 Harbin Road, Dalian Economic andTechnical Development Zone, Dalian,
116600 China
Tel: 86-411-8761-1111
Fax: 86-411-8761-2900
MABUCHI MOTORWAFANGDIAN CO.,LTD.
Laohutun Town, Wafangdian City, Liaoning
Province, 116322 China
Tel: 86-411-8537-0241
Fax: 86-411-8537-0291
MABUCHI MOTOR (JIANGSU) CO., LTD.
No. 1 Liuxu Road, Wujiang City Economic
Development Zone, Jiangsu Province,
215200 China
Tel: 86-512-6345-1111
Fax: 86-512-6345-0438
MABUCHI MOTOR VIETNAM LTD.
No. 2-5A Street, Bienhoa II Industrial Zone,
Bienhoa, Dongnai, Vietnam
Tel: 84-61-3836711
Fax: 84-61-3836712

MABUCHI MOTOR DANANG LTD.
Lot A2, No. 3 Street, Hoa Khanh Industrial
Zone, Lien Chieu District, Danang City,
Vietnam
Tel: 84-511-3731931
Fax: 84-511-3731932
MABUCHI MOTOR AMERICA CORP.
3001, West Big Beaver Road, Suite 520,
Troy, MI 48084 U.S.A.
Tel: 1-248-816-3100
Fax: 1-248-816-3242
MABUCHI MOTOR(SINGAPORE) PTE. LTD.
111, North Bridge Road, #12-05 Peninsula
Plaza, Singapore 179098
Tel: 65-6339-9991
Fax: 65-6339-9091
MABUCHI MOTOR (EUROPE) GmbH
Herriotstrasse 1, 60528 Frankfurt am Main,
Germany
Tel: 49-69-6690220
Fax: 49-69-66902229
MABUCHI MOTOR(SHANGHAI) CO., LTD.
Room 1901, Kirin Plaza Building, No. 666
Gubei Road, Changning District, Shanghai,
200336 China
Tel: 86-21-6208-5666
Fax: 86-21-6208-8466
MABUCHI MOTOR KOREA CO., LTD.
Room 426, Central Plaza G-five, 1685-8
Seocho-Dong, Seocho-Gu, Seoul, 137-070
Korea
Tel: 82-2-534-8131
Fax: 82-2-534-8135
MABUCHI MOTOR TRADING(SHENZHEN) CO., LTD.
Room 1704-05 Great China International
Exchange Square, Jintian Road, FutianDistrict, Shenzhen City, Guangdong
Province, 518034 China
Tel: 86-755-2399-8568
Fax: 86-755-2399-8566
MABUCHI MOTOR(MALAYSIA) SDN. BHD.
This company closed during 2005.
Non-consolidated Subsidiary
MABUCHI REAL ESTATE CO., LTD.

MABUCHI MOTOR CO., LTD. Annual Report 2008

CORPORATE HEADQUARTERS
430 Matsuhidai, Matsudo-City, Chiba, 270-2280 Japan
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