##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
  Form 20-F
 o
    
    REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934
 þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
  o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) THE SECURITIES EXCHANGE ACT OF 1934
 o
    
    SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) THE SECURITIES EXCHANGE ACT OF 1934
  KABUSHIKI KAISHA MAKITA
  MAKITA CORPORATION
  Japan
 3-11-8, Sumiyoshi-cho, Anjo City, Aichi Prefecture, Japan
 Minobu Kato
General Manager of Financial Department
Telephone: +81.566.97.1718 Facsimile: +81.566.98.6907
Address: 3-11-8, Sumiyoshi-cho, Anjo City, Aichi Prefecture, Japan
  Title of Class
    
    Name of each exchange on which registered* American Depositary Shares
    
    Nasdaq Global Select Market** Common Stock
 *
    
    American Depositary Receipts evidence American Depositary Shares, each
American Depositary Share representing one share of the registrants
Common Stock.**
    
    No par value. Not for trading, but only in connection with the
registration of American Depositary Shares, pursuant to the
requirements of the Securities and Exchange Commission.     Outstanding as ofMarch 31, 2008
    
    
    March 31, 2008Title of Class
    
    (Tokyo time)
    
    
    (New York time)Common Stock, excluding 235,135 shares of Treasury Stock
    
    
    143,773,625American Depositary Shares, each representing one share
of Common Stock
    
    
    
    
    
    
    2,562,744
  þ o
  o þ
   þ o
  þ o o
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##### Table of Contents



Table of Contents
 PART IItem 1. Identity of Directors, Senior Management and Advisers
    
    
    1Item 2. Offer Statistics and Expected Timetable
    
    
    1Item 3. Key Information
    
    
    1A. Selected financial data
    
    
    1B. Capitalization and indebtedness
    
    
    3C. Reasons for the offer and use of proceeds
    
    
    3D. Risk factors
    
    
    3Item 4. Information on the Company
    
    
    7A. History and development of the Company
    
    
    7B. Business overview
    
    
    8C. Organizational structure
    
    
    12D. Property, plant and equipment
    
    
    13Item 4A. Unresolved Staff Comments
    
    
    14Item 5. Operating and Financial Review and Prospects
    
    
    15A. Operating results
    
    
    15B. Liquidity and capital resources
    
    
    31C. Research and development, patents and licenses, etc.
    
    
    35D. Trend information
    
    
    36E. Off-balance sheet arrangements
    
    
    36F. Tabular disclosure of contractual obligations
    
    
    37G. Safe harbor
    
    
    37Item 6. Directors, Senior Management and Employees
    
    
    38A. Directors and senior management
    
    
    38B. Compensation
    
    
    42C. Board practices
    
    
    42D. Employees
    
    
    44E. Share ownership
    
    
    45Item 7. Major Shareholders and Related Party Transactions
    
    
    46A. Major shareholders
    
    
    46B. Related party transactions
    
    
    47C. Interest of experts and counsel
    
    
    47Item 8. Financial Information
    
    
    47A. Consolidated statements and other financial information
    
    
    47B. Significant changes
    
    
    49Item 9. The Offer and Listing
    
    
    49A. Offer and listing details
    
    
    49B. Plan of distribution
    
    
    50C. Markets
    
    
    50D. Selling shareholders
    
    
    50E. Dilution
    
    
    50F. Expenses of the issue
    
    
    50Item 10. Additional Information
    
    
    50A. Share capital
    
    
    50B. Memorandum and articles of association
    
    
    50C. Material contracts
    
    
    60D. Exchange controls
    
    
    60E. Taxation
    
    
    61F. Dividends and paying agents
    
    
    67G. Statement by experts
    
    
    68H. Documents on display
    
    
    68I. Subsidiary information
    
    
    68
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##### Table of Contents



Item 11. Quantitative and Qualitative Disclosures about Market Risk
    
    
    69Item 12. Description of Securities Other than Equity Securities
    
    
    71PART IIItem 13. Defaults, Dividend Arrearages and Delinquencies
    
    
    71Item 14. Material Modifications to the Rights of Security Holders and Use of Proceeds
    
    
    71Item 15. Controls and Procedures
    
    
    71A. Disclosure controls and procedures
    
    
    71B. Managements annual report on internal control over financial reporting
    
    
    71C. Attestation report of the registered public accounting firm
    
    
    72D. Changes in internal control over financial reporting
    
    
    72Report of Independent Registered Public Accounting Firm
    
    
    73Item 16A. Audit Committee Financial Expert
    
    
    74Item 16B. Code of Ethics
    
    
    74Item 16C. Principal Accountant Fees and Services
    
    
    74Item 16D. Exemptions from the Listing Standards for Audit Committees
    
    
    75Item 16E. Purchases of Equity Securities by the Issuer and Affiliated Purchasers
    
    
    76PART IIIItem 17. Financial Statements
    
    
    77Item 18. Financial Statements
    
    
    77Item 19. Exhibits
    
    
    77EX-1.3 THE SHARE HANDLING REGULATIONS, AS AMENDED AND EFFECTIVE AS OF OCTOBER 1, 2007 (ENGLISH TRANSLATION).EX-12.1 302 CERTIFICATION OF PRESIDENT AND REPRESENTATIVE DIRECTOREX-12.2 302 CERTIFICATION OF DIRECTOR, GENERAL MANAGER OF ADMINISTRATION HEADQUARTERSEX-13.1 906 CERTIFICATIONS OF PRESIDENT AND REPRESENTATIVE DIRECTOR AND DIRECTOR, GENERAL MANAGER OF ADMINISTRATION HEADQUARTERS
  ii




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Cautionary Statement with Respect to Forward-Looking Statements
   
    
    The levels of construction activities and capital investments in Makitas markets
    
    Fluctuations in currency exchange rates
    
    Intense competition in global power tools market for professional use
    
    Makitas inability to develop attractive products
    
    Geographic concentration of Makitas main facilities
    
    Failure to maintain cooperative relationships with significant customers
    
    Failure to deliver materials or parts required for production as scheduled
    
    Makitas overseas activities and entry into overseas markets
    
    Failure to protect Makitas intellectual property rights or infringing intellectual property
rights of third parties
    
    Procurement of raw materials or their escalating prices
    
    Product liability litigation or recalls
    
    Fluctuations in stock market prices
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
    
    Environmental or other government regulations
    
    The effectiveness of Makitas internal control over financial reporting and the related
attestation provided by Makitas auditors
  iv




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PART I
 
 Item 1. Identity of Directors, Senior Management and Advisers
  
 Item 2. Offer Statistics and Expected Timetable
  
 Item 3. Key Information
 
 A. Selected financial data
  Japanese yen
    
    
    U.S. dollars(millions)
    
    
    (thousands)Fiscal year ended March 31,Income Statement Data:
    
    2004
    
    
    2005
    
    
    2006
    
    
    2007
    
    
    2008
    
    
    2008Net sales
    
    ¥
    184,117
    
    
    ¥
    194,737
    
    
    ¥
    229,075
    
    
    ¥
    279,933
    
    
    ¥
    342,577
    
    
    $
    3,425,770Operating income
    
    
    14,696
    
    
    
    31,398
    
    
    
    45,778
    
    
    
    48,176
    
    
    
    67,031
    
    
    
    670,310Net income
    
    
    7,691
    
    
    
    22,136
    
    
    
    40,411
    
    
    
    36,971
    
    
    
    46,043
    
    
    
    460,430
 Net income per share of Common stock and
per ADS:
    

Japanese yen
    

U.S.
dollarsBasic
    
    
    53.2
    
    
    
    153.9
    
    
    
    281.1
    
    
    
    257.3
    
    
    
    320.3
    
    
    
    3.20Diluted
    
    
    51.9
    
    
    
    148.8
    
    
    
    281.1
    
    
    
    257.3
    
    
    
    320.3
    
    
    
    3.20
 Japanese yen
    
    U.S. dollars(millions)
    
    (thousands)Fiscal year ended March 31,Balance Sheet Data:
    
    2004
    
    
    2005
    
    
    2006
    
    
    2007
    
    
    2008
    
    
    2008Total assets
    
    ¥
    278,116
    
    
    ¥
    289,904
    
    
    ¥
    326,038
    
    
    ¥
    368,494
    
    
    ¥
    386,467
    
    
    $
    3,864,670Cash and cash
equivalents, time
deposits and
marketable
securities
    
    
    92,616
    
    
    
    91,189
    
    
    
    88,672
    
    
    
    102,211
    
    
    
    98,142
    
    
    
    981,420Net working capital
    
    
    147,822
    
    
    
    149,666
    
    
    
    181,808
    
    
    
    212,183
    
    
    
    230,699
    
    
    
    2,306,990Short-term borrowings
    
    
    14,128
    
    
    
    9,060
    
    
    
    1,728
    
    
    
    1,892
    
    
    
    1,724
    
    
    
    17,240Long-term
indebtedness
    
    
    7,364
    
    
    
    88
    
    
    
    104
    
    
    
    53
    
    
    
    908
    
    
    
    9,080Common stock
    
    
    23,803
    
    
    
    23,805
    
    
    
    23,805
    
    
    
    23,805
    
    
    
    23,805
    
    
    
    238,050Treasury stock
    
    
    (3,316
    )
    
    
    (3,517
    )
    
    
    (258
    )
    
    
    (298
    )
    
    
    (263
    )
    
    
    (2,630
    )Shareholders equity
    
    
    193,348
    
    
    
    219,640
    
    
    
    266,584
    
    
    
    302,675
    
    
    
    316,498
    
    
    
    3,164,980Total number of
shares outstanding
    
    
    143,893,191
    
    
    
    143,777,607
    
    
    
    143,711,766
    
    
    
    143,701,279
    
    
    
    143,773,625
    
    
    
    143,773,625
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(Japanese yen per U.S. $1.00)Fiscal year ended March 31,
    
    High
    
    
    Low
    
    
    Average
    
    
    Year-end2004
    
    
    104.18
    
    
    
    120.55
    
    
    
    113.07
    
    
    
    104.182005
    
    
    102.26
    
    
    
    114.30
    
    
    
    107.47
    
    
    
    107.222006
    
    
    104.41
    
    
    
    120.93
    
    
    
    113.15
    
    
    
    117.482007
    
    
    110.07
    
    
    
    121.81
    
    
    
    116.92
    
    
    
    117.562008
    
    
    96.88
    
    
    
    124.09
    
    
    
    114.31
    
    
    
    99.852009
(through July 7, 2008)
    
    
    100.87
    
    
    
    108.29
    
    
    
    104.76
    
    
    
    107.55
 (Japanese yen per U.S. $1.00)2008
    
    January
    
    
    February
    
    
    March
    
    
    April
    
    
    May
    
    
    JuneHigh
    
    
    105.42
    
    
    
    104.19
    
    
    
    96.88
    
    
    
    100.87
    
    
    
    103.01
    
    
    
    104.41Low
    
    
    109.70
    
    
    
    108.15
    
    
    
    103.99
    
    
    
    104.56
    
    
    
    105.52
    
    
    
    108.29
   Japanese yen
    
    
    U.S. dollarsFiscal year ended March 31,
    
    Interim
    
    
    Year-end
    
    
    Interim
    
    
    Year-end2004
    
    
    9.0
    
    
    
    13.0
    
    
    
    0.09
    
    
    
    0.112005
    
    
    11.0
    
    
    
    36.0
    
    
    
    0.10
    
    
    
    0.342006
    
    
    19.0
    
    
    
    38.0
    
    
    
    0.16
    
    
    
    0.322007
    
    
    19.0
    
    
    
    55.0
    
    
    
    0.16
    
    
    
    0.472008
    
    
    30.0
    
    
    
    67.0
    
    
    
    0.30
    
    
    
    0.67
  Note:
    
    Cash dividends in U.S. dollars are based on the exchange rates as of
the respective payment date, using the noon buying rates for cable
transfers in Japanese yen in New York City as certified for customs
purposes by the Federal Reserve Bank of New York.
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B. Capitalization and indebtedness
  
 C. Reasons for the offer and use of proceeds
  
 D. Risk factors
  Makitas sales are affected by the levels of construction activities and capital investments in
its markets.
 Currency exchange rate fluctuations may affect Makitas financial results.
 Makita faces intense competition in the global market for its power tools for professional
use.
 3




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If Makita is not able to develop attractive products, Makitas sales activities may be
adversely affected.
 Geographic concentration of Makitas main facilities may have adverse effects on Makitas
business activities.
 If Makita fails to maintain cooperative relationships with significant customers, Makitas
sales may be seriously affected.
 If any of Makitas suppliers fail to deliver materials or parts required for production as
scheduled, Makitas production activities may be adversely affected.
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Makitas overseas activities and entry into overseas markets entail risks, which may have a
material adverse effect on Makitas business activities.
 (1)
    
    Unexpected changes in laws and regulations;(2)
    
    Disadvantageous political and economic factors;(3)
    
    The outflow of technical know-how and knowledge due to personnel turnover
enabling Makitas competitors to strengthen their position;(4)
    
    Potentially unfavorable tax systems; and(5)
    
    Terrorism, war, and other factors that lead to social turbulence.(6)
    
    The interruption of or disruption to Makitas operation due to labor disputes
 Makita may be unable to protect its intellectual property rights and could suffer significant
liabilities, litigation costs or licensing expenses or be prevented from selling its products if it
is infringing the intellectual property of third
parties.
   When the procurement of raw materials used by Makita becomes difficult or prices of these raw
materials rise sharply, this may have an adverse impact on performance.
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Product liability litigation or recalls may harm Makitas financial statements and
reputation.
 Fluctuations in stock market prices may adversely affect Makitas financial statements.
 Environmental or other government regulations may have a material adverse impact on Makitas
business activities.
 Investor confidence and the value of Makitas ADRs and ordinary shares may be adversely
impacted if Makitas management concludes that Makitas internal control over financial reporting
is not effective or if Makitas independent registered public accounting firm is unable to provide
adequate attestation over the adequacy of the internal control over Makitas financial reporting as
required by Section 404 of the Sarbanes-Oxley Act of 2002
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Item 4.
    
    Information on the Company
 
 A. History and development of the Company
        7




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B. Business overview
   Products
 (millions of Japanese yen, except for percentage amounts)
    
    
    U.S. dollarsConsolidated Net Sales by Product Categories
    
    
    (thousands)Fiscal year ended March 31,2006
    
    
    2007
    
    
    2008
    
    
    2008Power Tools
    
    ¥
    171,376
    
    
    
    74.8
    %
    
    ¥
    210,894
    
    
    
    75.3
    %
    
    ¥
    255,869
    
    
    
    74.7
    %
    
    
    2,558,690Gardening and
Household Products
    
    
    23,434
    
    
    
    10.2
    %
    
    
    28,123
    
    
    
    10.0
    %
    
    
    40,410
    
    
    
    11.8
    %
    
    
    404,100Parts, repairs and
accessories
    
    
    34,265
    
    
    
    15.0
    %
    
    
    40,916
    
    
    
    14.7
    %
    
    
    46,298
    
    
    
    13.5
    %
    
    
    462,980Total
    
    
    229,075
    
    
    
    100.0
    %
    
    
    279,933
    
    
    
    100.0
    %
    
    
    342,577
    
    
    
    100.0
    %
    
    
    3,425,770
 Power Tools
     8




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Gardening and Household Products
  9




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Parts, Repairs and Accessories
  Principal Markets, Distribution and After-Sale Services
 (millions of Japanese yen, except percentage amount)
    
    
    U.S. dollarsConsolidated Net Sales by Geographic Area
    
    
    (thousands)Fiscal year ended March 31,2006
    
    
    2007
    
    
    2008
    
    
    2008Japan
    
    ¥
    41,600
    
    
    
    18.2
    %
    
    ¥
    46,860
    
    
    
    16.7
    %
    
    ¥
    52,193
    
    
    
    15.2
    %
    
    $
    521,930Europe
    
    
    90,504
    
    
    
    39.5
    
    
    
    124,020
    
    
    
    44.3
    
    
    
    160,360
    
    
    
    46.8
    
    
    
    1,603,600North America
    
    
    47,673
    
    
    
    20.8
    
    
    
    51,472
    
    
    
    18.4
    
    
    
    56,422
    
    
    
    16.5
    
    
    
    564,220Asia (excluding Japan)
    
    
    16,993
    
    
    
    7.4
    
    
    
    19,469
    
    
    
    7.0
    
    
    
    22,629
    
    
    
    6.6
    
    
    
    226,290Other
    
    
    32,305
    
    
    
    14.1
    
    
    
    38,112
    
    
    
    13.6
    
    
    
    50,973
    
    
    
    14.9
    
    
    
    509,730Total
    
    ¥
    229,075
    
    
    
    100.0
    %
    
    ¥
    279,933
    
    
    
    100.0
    %
    
    ¥
    342,577
    
    
    
    100.0
    %
    
    $
    3,425,770
 Japan
    10




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Overseas
   Seasonality
 Competition
  11




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Raw Materials and Sources of Supply
    Government Regulations
  Intellectual Property Rights
 
 C. Organizational structure
  Proportion ofCountry of
    
    Ownership andCompany Name
    
    Incorporation
    
    Voting InterestMakita Numazu Corporation
    
    Japan
    
    
    100.0
    %Makita U.S.A., Inc.
    
    U.S.A.
    
    
    100.0Makita Corporation of America
    
    U.S.A.
    
    
    100.0Makita Canada Inc.
    
    Canada
    
    
    100.0Makita International Europe Ltd.
    
    U.K.
    
    
    100.0
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Proportion ofCountry of
    
    Ownership andCompany Name
    
    Incorporation
    
    Voting InterestMakita (U.K.) Ltd.
    
    U.K.
    
    
    100.0Makita Manufacturing Europe Ltd.
    
    U.K.
    
    
    100.0Makita France S.A.
    
    France
    
    
    55.0Makita Benelux B.V.
    
    The Netherlands
    
    
    100.0S.A. Makita N.V.
    
    Belgium
    
    
    100.0Makita S.p.A.
    
    Italy
    
    
    100.0Makita Werkzeug GmbH
    
    Germany
    
    
    100.0Dolmar GmbH
    
    Germany
    
    
    100.0Makita Werkzeug Gesellschaft m.b.H.
    
    Austria
    
    
    100.0Makita Sp. z o. o.
    
    Poland
    
    
    100.0Makita SA
    
    Switzerland
    
    
    100.0Makita Oy
    
    Finland
    
    
    100.0Makita (China) Co., Ltd.
    
    China
    
    
    100.0Makita (Kunshan) Co., Ltd.
    
    China
    
    
    100.0Makita (Australia) Pty. Ltd.
    
    Australia
    
    
    100.0Makita Gulf FZE
    
    U.A.E.
    
    
    100.0
 
 D. Property, plant and equipment
   Floor spaceLocation
    
    (Square meters)
    
    
    Principal products manufacturedJapan;Makita CorporationOkazaki Plants
    

    174,508
    
    
    Electric power tools, etc.Makita Numazu Corporation
    
    
    21,199
    
    
    Agricultural and gardening equipmentsOverseas;Makita (China) Co., Ltd.
    
    
    61,302
    
    
    Electric power tools, etc.Makita Corporation of America
    
    
    24,053
    
    
    Electric power tools, etc.Makita (Kunshan) Co., Ltd.
    
    
    17,969
    
    
    Electric power tools, etc.Dolmar GmbH
    
    
    17,747
    
    
    Electric power forestry equipmentsMakita Manufacturing Europe
Ltd.
    
    
    11,520
    
    
    Engine powered tools, etc.Makita EU S.R.L
    
    
    6,975
    
    
    Electric power tools, etc.
(Commencement of production: April
2007)
    
    
    Head offices and certain branch offices of Makita U.S.A., Makita Canada, and Makita Australia; and
    
    Head offices of Makita Germany, Makita France, Makita Benelux (the Netherlands), Makita Belgium,
Makita Italy, Makita Brazil, Makita Taiwan, and Makita Singapore.
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Item 4A. Unresolved Staff Comments
  14




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Item 5. Operating and Financial Review and Prospects
 
 A. Operating Results
  U.S. dollars(Millions of Japanese yen, except for percentage amounts)
    
    (thousands)2006
    
    2007
    
    2008
    
    2008Change%
    
    
    
    
    
    %
    
    
    
    
    
    %
    
    %NET SALES
    
    ¥
    229,075
    
    
    
    100.0
    
    
    ¥
    279,933
    
    
    
    100.0
    
    
    ¥
    342,577
    
    
    
    100.0
    
    
    
    22.4
    
    
    $
    3,425,770Cost of sales
    
    
    132,897
    
    
    
    58.0
    
    
    
    163,909
    
    
    
    58.6
    
    
    
    199,220
    
    
    
    58.2
    
    
    
    21.5
    
    
    
    1,992,200GROSS PROFIT
    
    
    96,178
    
    
    
    42.0
    
    
    
    116,024
    
    
    
    41.4
    
    
    
    143,357
    
    
    
    41.8
    
    
    
    23.6
    
    
    
    1,433,570Selling, general and
administrative expenses
    
    
    58,726
    
    
    
    25.6
    
    
    
    66,802
    
    
    
    23.9
    
    
    
    76,198
    
    
    
    22.2
    
    
    
    14.1
    
    
    
    761,980Losses (gains) on disposals or
sales of property, plant and
equipment, net
    
    
    (8,326
    )
    
    
    (3.6
    )
    
    
    (249
    )
    
    
    (0.1
    )
    
    
    128
    
    
    
    0.0
    
    
    
    
    
    
    
    1,280Impairment of long-lived assets
    
    
    
    
    
    
    
    
    
    
    1,295
    
    
    
    0.4
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    OPERATING INCOME
    
    
    45,778
    
    
    
    20.0
    
    
    
    48,176
    
    
    
    17.2
    
    
    
    67,031
    
    
    
    19.6
    
    
    
    39.1
    
    
    
    670,310OTHER INCOME(EXPENSES)Interest and dividend income
    
    
    1,301
    
    
    
    0.6
    
    
    
    1,364
    
    
    
    0.5
    
    
    
    2,092
    
    
    
    0.6
    
    
    
    53.4
    
    
    
    20,920Interest expense
    
    
    (364
    )
    
    
    (0.2
    )
    
    
    (316
    )
    
    
    (0.1
    )
    
    
    (269
    )
    
    
    (0.1
    )
    
    
    (14.9
    )
    
    
    (2,690
    )Exchange gains (losses) on
foreign currency transactions,
net
    
    
    (258
    )
    
    
    (0.1
    )
    
    
    (418
    )
    
    
    (0.2
    )
    
    
    (1,233
    )
    
    
    (0.4
    )
    
    
    195.0
    
    
    
    (12,330
    )Realized gains (losses) on
securities, net
    
    
    2,918
    
    
    
    1.3
    
    
    
    918
    
    
    
    0.3
    
    
    
    (1,384
    )
    
    
    (0.4
    )
    
    
    
    
    
    
    (13,840
    )Other, net
    
    
    (232
    )
    
    
    (0.1
    )
    
    
    (401
    )
    
    
    (0.1
    )
    
    
    (466
    )
    
    
    (0.1
    )
    
    
    16.2
    
    
    
    (4,660
    )Total
    
    
    3,365
    
    
    
    1.5
    
    
    
    1,147
    
    
    
    0.4
    
    
    
    (1,260
    )
    
    
    (0.4
    )
    
    
    
    
    
    
    (12,600
    )INCOME BEFORE INCOME TAXES
    
    
    49,143
    
    
    
    21.5
    
    
    
    49,323
    
    
    
    17.6
    
    
    
    65,771
    
    
    
    19.2
    
    
    
    33.3
    
    
    
    657,710PROVISION FOR INCOME TAXES
    
    
    8,732
    
    
    
    3.8
    
    
    
    12,352
    
    
    
    4.4
    
    
    
    19,728
    
    
    
    5.8
    
    
    
    59.7
    
    
    
    197,280NET INCOME
    
    
    40,411
    
    
    
    17.6
    
    
    
    36,971
    
    
    
    13.2
    
    
    
    46,043
    
    
    
    13.4
    
    
    
    24.5
    
    
    
    460,430
 General Overview
   15




---



##### Table of Contents



Currency Fluctuations
    Overview
  16




---



##### Table of Contents



FY 2008 compared to FY 2007
 Net sales
    17




---



##### Table of Contents



Sales by region
       Review of Performance by Product Group
 Power Tools
 18




---



##### Table of Contents



Gardening and Household Products
 Parts, Repairs and Accessories
 Cost of Sales
 Gross Profit  ¥27,333
 Selling, General and Administrative Expenses
  Losses (Gains) on Disposal or Sales of Property, Plant and Equipment
 Operating Income
 19




---



##### Table of Contents



Other Income (Expense)
    Income
before Income taxes
 Provision
for Income taxes
 Net Income
 Earnings
per Share
 Regional Segments
 Japan Segment
 Europe Segment
 20




---



##### Table of Contents



North America Segment
 Asia Segment (excluding Japan)
 Other Segment
 FY 2007 Compared to FY 2006
 Net sales
   21




---



##### Table of Contents



Sales by region
       22




---



##### Table of Contents



Review of Performance by Product Group
 Power Tools
  Gardening and Household Products
 Parts, Repairs and Accessories
 Cost
of Sales
 Gross Profit  ¥
 Selling, General and Administrative Expenses
  23




---



##### Table of Contents



Losses (Gains) on Disposal or Sales of Property, Plant and Equipment
  Impairment of Long lived assets
  Operating Income
 Other Income (Expenses)
   Income
before Income taxes
  Provision
for Income taxes
 24




---



##### Table of Contents



Net Income
  Earnings
per Share
 Regional Segments
 Japan Segment
 Europe Segment
 North America Segment
 Asia Segment (excluding Japan)
 Other Segment
 25




---



##### Table of Contents



CRITICAL ACCOUNTING POLICIES
 Revenue Recognition
      26




---



##### Table of Contents



Japanese yen
    
    
    U.S. dollars(millions)
    
    
    (thousands)For the year ended March 31,2006
    
    
    2007
    
    
    2008
    
    
    2008Volume-based rebates:Actual payment for the year
    
    
    (5,104
    )
    
    
    (6,342
    )
    
    
    (9,280
    )
    
    
    (92,800
    )Income statement impact for the year
    
    
    5,726
    
    
    
    7,477
    
    
    
    9,897
    
    
    
    98,970Accrued expenses or deduction of
account receivables (BS)
as of March 31
    
    
    2,724
    
    
    
    3,859
    
    
    
    4,476
    
    
    
    44,760Cooperative advertisings:Actual payment for the year
    
    
    (2,127
    )
    
    
    (2,646
    )
    
    
    (3,521
    )
    
    
    (35,210
    )Income statement impact for the year
    
    
    2,196
    
    
    
    3,026
    
    
    
    3,517
    
    
    
    35,170Accrued expenses or deduction of
account receivables (BS)
as of March 31
    
    
    577
    
    
    
    957
    
    
    
    953
    
    
    
    9,530Cash discounts:Actual payment for the year
    
    
    (4,311
    )
    
    
    (5,458
    )
    
    
    (5,833
    )
    
    
    (58,330
    )Income statement impact for the year
    
    
    4,371
    
    
    
    5,315
    
    
    
    5,881
    
    
    
    58,810Accrued expenses or deduction of
account receivables (BS)
as of March 31
    
    
    491
    
    
    
    348
    
    
    
    396
    
    
    
    3,960
 Inventory valuation and reserve
 Impairment Losses on Securities
 27




---



##### Table of Contents



Allowance for Doubtful Receivables
  Impairment of Long-Lived Assets
   28




---



##### Table of Contents



Accrued Retirement and Termination Benefits
        Change in
    
    Change inprojected benefit
    
    pre-tax pensionChange in assumption
    
    obligation
    
    expensesJapanese yen (millions)50 basis point increase / decrease in discount rate
    
    
    -2,305 / +2,582
    
    
    
    -2 / +150 basis point increase / decrease in expected return on assets
    
    
    
    
    
    
    -171/ +171
  29




---



##### Table of Contents



Realizability of Deferred Income Tax Assets
  New Accounting Standards
    30




---



##### Table of Contents



B. Liquidity and capital resources
     31




---



##### Table of Contents



FY 2008
 Cash Flows
 
    
    ¥65,664 million decrease due to higher levels of cash used in operating activities such as
purchases of parts and raw materials, selling, general and administrative expenses, and income
tax payments
    
    ¥62,579 million increase due to higher levels of cash received from customers as a result
of net sales growth
  
    
    ¥6,357 million decrease due to lower purchases of available-for-sale securities and
held-to-maturity securities
    
    ¥8,101 million decrease due to higher proceeds from sales and maturities of securities
    
    ¥9,266 million decrease due to withdrawals of time deposits
    
    ¥2,056 million increase due to higher capital expenditures for reconstruction of the
Okazaki plant, improvements to the headquarters buildings, and new plant constructions of
Makita China, Makita Brazil and Makita Romania
    
    ¥1,385 million increase due to an acquisition of Makita Numazu for ¥2,034 million, net of
cash acquired
  
    
    ¥4,025 million increase due to higher dividends paid
  Capital Expenditures
 32




---



##### Table of Contents



FY 2007
 Cash Flows
      
    
    Rebuilding of Okazaki plant,
    
    Improvements to the Headquarters buildings,
    
    Construction of Makita Romania plant,
    
    Purchases of machine and equipment for Makita China plant,
 33




---



##### Table of Contents




    
    Purchases of metal molds used for new-production, and
    
    Payments of the outstanding acquisition costs (¥649 million) of Kanematsu-NNK Corp.
    
    To fund its investing activities, Makita realized proceeds of ¥18,611 million from sales
and maturities of securities. In FY 2007, net cash inflow from sales and maturities of
securities decreased by ¥15,739 million from ¥34,350 million.
      Capital Expenditures
  Financial Position
 34




---



##### Table of Contents



1.
    
    Accumulated other comprehensive income occurred through net unrealized holding gains on
available-for-sale securities are due to the decrease in the unrealized gains on
available-for-sale securities as a result of the depreciation of the market value of the
Companys securities holding,2.
    
    Accumulated other comprehensive losses occurred through pension liability adjustment are due
to the increase in net actuarial loss as a result of the depreciation of the market value of
the plan asset ,3.
    
    Accumulated other comprehensive losses occurred through foreign currency translation
adjustments are due to the decrease in foreign currency translation adjustments as a result of
appreciation of the Japanese yen against the U.S. dollar, the British pound and the Chinese
Renmin yuan.
  
 C. Research and development, patents and licenses, etc.
    35




---



##### Table of Contents



D. Trend information
       
 E. Off-balance sheet arrangements
  36




---



##### Table of Contents



F. Tabular disclosure of contractual obligations
 Japanese yen (millions)Expected payment date, year ending March 31,Total
    
    
    2009
    
    
    2010
    
    
    2011
    
    
    2012
    
    
    2013
    
    
    ThereafterCapital lease
    
    
    550
    
    
    
    142
    
    
    
    117
    
    
    
    57
    
    
    
    16
    
    
    
    218
    
    
    
    Interest expenses on
capital lease
    
    
    40
    
    
    
    20
    
    
    
    13
    
    
    
    6
    
    
    
    1
    
    
    
    
    
    
    
    Operating lease
    
    
    1,821
    
    
    
    573
    
    
    
    404
    
    
    
    284
    
    
    
    201
    
    
    
    156
    
    
    
    203Unsecured loans from bank
    
    
    500
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    500
    
    
    
    
    
    
    
    Contributions to defined
benefit plan
    
    
    3,058
    
    
    
    3,058
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Purchase obligation
    
    
    9,632
    
    
    
    8,901
    
    
    
    731
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    ¥
    15,601
    
    
    ¥
    12,694
    
    
    ¥
    1,265
    
    
    ¥
    347
    
    
    ¥
    718
    
    
    ¥
    374
    
    
    ¥
    203
 U.S. dollars (thousands)Expected payment date, year ending March 31,Total
    
    
    2009
    
    
    2010
    
    
    2011
    
    
    2012
    
    
    2013
    
    
    ThereafterCapital lease
    
    
    5,500
    
    
    
    1,420
    
    
    
    1,170
    
    
    
    570
    
    
    
    160
    
    
    
    2,180
    
    
    
    Interest expenses on
capital lease
    
    
    400
    
    
    
    200
    
    
    
    130
    
    
    
    60
    
    
    
    10
    
    
    
    
    
    
    
    Operating lease
    
    
    18,210
    
    
    
    5,730
    
    
    
    4,040
    
    
    
    2,840
    
    
    
    2,010
    
    
    
    1,560
    
    
    
    2,030Unsecured loans from bank
    
    
    5,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,000
    
    
    
    
    
    
    
    Contributions to defined
benefit plan
    
    
    30,580
    
    
    
    30,580
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Purchase obligation
    
    
    96,320
    
    
    
    89,010
    
    
    
    7,310
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    $
    156,010
    
    
    $
    126,940
    
    
    $
    12,650
    
    
    $
    3,470
    
    
    $
    7,180
    
    
    $
    3,740
    
    
    $
    2,030
 Note:
    
    1.Determination of contributions to defined benefit plan after 2009 is not practicable.2.The notional amount of derivative financial instruments that are expected to settle in FY
2009 is ¥26,519 million and their estimated fair value is ¥380 million at March 31, 2008.
Please see note 17 to the consolidated financial statements for further information.
 
 G. Safe harbor
  37




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##### Table of Contents



Item 6. Directors, Senior Management and Employees
 
 A. Directors and senior management
  
 
 
 
 
 38




---



##### Table of Contents



39




---



##### Table of Contents



40




---



##### Table of Contents



41




---



##### Table of Contents



B. Compensation
    
 C. Board practices
     42




---



##### Table of Contents



Exemptions from certain NASDAQ Corporate Governance Rules
    43




---



##### Table of Contents



(1)
    
    acquisition of its own shares from specific persons other than its subsidiaries;(2)
    
    consolidation of shares;(3)
    
    any offering of new shares or existing shares held by the Company as treasury stock at a specially favorable
price (or any offering of stock acquisition rights, or bonds with stock acquisition rights at specially
favorable conditions) to any persons other than shareholders;(4)
    
    the removal of a Statutory Auditor;(5)
    
    the exemption of liability of a Director, Statutory Auditor or Accounting Auditor with certain exceptions;(6)
    
    a reduction of stated capital with certain exceptions in which a special shareholders resolution is not required;(7)
    
    a distribution of surplus in kind other than dividends which meets certain requirements;(8)
    
    dissolution, merger, consolidation or corporate split with certain exceptions in which a shareholders resolution
is not required;(9)
    
    the transfer of the whole or a material part of the business with certain exceptions in which a shareholders
resolution is not required;(10)
    
    the taking over of the whole of the business of any other corporation with certain exceptions in which a
shareholders resolution is not required; or(11)
    
    share exchange or share transfer for the purpose of establishing 100 percent parent-subsidiary relationships with
certain exceptions in which a shareholders resolution is not required.
 
 D. Employees
  As of March 31,2006
    
    
    2007
    
    
    2008Categorized by Geographic AreasJapan
    
    
    3,038
    
    
    
    3,007
    
    
    
    3,206China
    
    
    2,325
    
    
    
    2,443
    
    
    
    3,190U.S.A.
    
    
    942
    
    
    
    926
    
    
    
    995Overseas
    
    
    5,591
    
    
    
    6,055
    
    
    
    7,230Total
    
    
    8,629
    
    
    
    9,062
    
    
    
    10,436
 44




---



##### Table of Contents



E. Share ownership
  Identity of
    
    Number of
    
    Percentage ofPerson or Group
    
    Shares Owned
    
    voting rightDirectors and Statutory
Auditors
    
    2,123,335
    
    1.48 %
  Name
    
    Position
    
    Number of sharesMasahiko Goto
    
    President, Representative
Director
    
    
    1,976,543Masami Tsuruta
    
    Managing Director
    
    
    17,522Yasuhiko Kanzaki
    
    Director
    
    
    10,669Kenichiro Nakai
    
    Director
    
    
    12,700Tadayoshi Torii
    
    Director
    
    
    13,700Tomoyasu Kato
    
    Director
    
    
    12,872Shiro Hori
    
    Director
    
    
    10,313Tadashi Asanuma
    
    Director
    
    
    5,700Hisayoshi Niwa
    
    Director
    
    
    6,900Zenji Mashiko
    
    Director
    
    
    6,700Toshio Hyuga
    
    Director
    
    
    9,000Tetsuhisa Kaneko
    
    Director
    
    
    5,500Shinichiro Tomita
    
    Director
    
    
    2,900Akio Kondo
    
    Standing Statutory Auditor
    
    
    6,700Hiromichi Murase
    
    Standing Statutory Auditor
    
    
    4,910Shoichi Hase
    
    Outside Statutory Auditor
    
    
    18,600Holding shares by
Board of directors
    
    
    
    
    2,106
  45




---



##### Table of Contents



Item 7. Major Shareholders and Related Party Transactions
 
 A. Major Shareholders
    Name of Beneficial Owner
    
    Number of Shares
    
    PercentageJapan Trustee Services
Bank, Ltd. (Trust
account)
    
    
    10,695,200
    
    
    
    7.44%Master Trust Bank of
Japan, Ltd. (Trust
account)
    
    
    7,767,200
    
    
    
    5.40%
  Shares Owned
    
    
    
    
    
    Number of
    
    Shares OwnedDate of
    
    Prior to
    
    
    
    
    
    Shares
    
    After theName of Shareholder
    
    Transaction
    
    Transaction
    
    Percentage
    
    Changed
    
    Transaction
    
    PercentageNippon Life Insurance Company
    
    April 30, 2004
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,601,503
    
    
    
    5.14
    %Barclays Global Investors, N.A.
    
    June 30, 2004
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,855,003
    
    
    
    5.31
    %Silchester International
Investors Limited
    
    September 29, 2004
    
    
    9,267,000
    
    
    
    6.06
    %
    
    
    1,212,000
    
    
    
    10,479,000
    
    
    
    7.08
    %Goldman Sachs International
    
    September 30, 2004
    
    
    6,332,900
    
    
    
    4.14
    %
    
    
    2,567,079
    
    
    
    8,899,979
    
    
    
    6.01
    %Barclays Global Investors, N.A.
    
    December 31, 2004
    
    
    7,855,003
    
    
    
    5.31
    %
    
    
    (293,559
    )
    
    
    7,561,444
    
    
    
    5.11
    %Nippon Life Insurance Company
    
    January 31, 2005
    
    
    7,601,503
    
    
    
    5.14
    %
    
    
    (3,503,000
    )
    
    
    4,098,503
    
    
    
    2.77
    %Silchester International
Investors Limited
    
    February 15, 2005
    
    
    10,479,000
    
    
    
    7.08
    %
    
    
    (1,520,000
    )
    
    
    8,959,000
    
    
    
    6.05
    %Barclays Global Investors, N.A.
    
    March 31, 2005
    
    
    7,561,444
    
    
    
    5.11
    %
    
    
    222,000
    
    
    
    7,783,444
    
    
    
    5.26
    %Barclays Global Investors, N.A.
    
    June 30, 2005
    
    
    7,783,444
    
    
    
    5.26
    %
    
    
    (2,915,000
    )
    
    
    4,868,444
    
    
    
    3.29
    %Silchester International
Investors Limited
    
    September 23, 2005
    
    
    8,959,000
    
    
    
    6.05
    %
    
    
    (1,017,000
    )
    
    
    7,942,000
    
    
    
    5.37
    %Goldman Sachs International
    
    September 30, 2005
    
    
    8,899,979
    
    
    
    6.01
    %
    
    
    1,591,162
    
    
    
    10,491,141
    
    
    
    7.08
    %Mitsubishi UFJ Financial Group
    
    October 31, 2005
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,164,923
    
    
    
    5.52
    %Goldman Sachs International
    
    November 30, 2005
    
    
    10,491,141
    
    
    
    7.08
    %
    
    
    (3,909,960
    )
    
    
    6,581,181
    
    
    
    4.45
    %Silchester International
Investors Limited
    
    January 6, 2006
    
    
    7,942,000
    
    
    
    5.37
    %
    
    
    (588,400
    )
    
    
    7,353,600
    
    
    
    4.97
    %
 46




---



##### Table of Contents



Shares Owned
    
    
    
    
    
    Number of
    
    Shares OwnedDate of
    
    Prior to
    
    
    
    
    
    Shares
    
    After theName of Shareholder
    
    Transaction
    
    Transaction
    
    Percentage
    
    Changed
    
    Transaction
    
    PercentageMitsubishi UFJ Financial Group
    
    January 31, 2006
    
    
    8,164,923
    
    
    
    5.52
    %
    
    
    857,200
    
    
    
    9,022,123
    
    
    
    6.10
    %Barclays Global Investors, N.A.
    
    March 31, 2006
    
    
    4,868,444
    
    
    
    3.38
    %
    
    
    4,161,108
    
    
    
    9,029,552
    
    
    
    6.27
    %Mitsubishi UFJ Financial Group
    
    April 30, 2006
    
    
    9,022,123
    
    
    
    6.10
    %
    
    
    1,556,200
    
    
    
    10,578,323
    
    
    
    7.35
    %Barclays Global Investors, N.A.
    
    June 30, 2006
    
    
    9,029,552
    
    
    
    6.27
    %
    
    
    (905,026
    )
    
    
    8,124,526
    
    
    
    5.64
    %Mitsubishi UFJ Financial Group
    
    July 31, 2006
    
    
    10,578,323
    
    
    
    7.35
    %
    
    
    (625,100
    )
    
    
    9,953,223
    
    
    
    6.91
    %Barclays Global Investors, N.A.
    
    September 30, 2006
    
    
    8,124,526
    
    
    
    5.64
    %
    
    
    (2,089,460
    )
    
    
    6,035,066
    
    
    
    4.19
    %Nomura Asset Management
    
    January 15, 2007
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,528,400
    
    
    
    5.23
    %Mitsubishi UFJ Financial Group
    
    January 22, 2007
    
    
    9,953,223
    
    
    
    6.91
    %
    
    
    (1,408,800
    )
    
    
    8,544,423
    
    
    
    5.93
    %Mitsubishi UFJ Financial Group
    
    April 14, 2008
    
    
    8,544,423
    
    
    
    5.93
    %
    
    
    1,478,577
    
    
    
    10,023,000
    
    
    
    6.97
    %
     
 B. Related party transactions
    
 C. Interest of experts and counsel
  
 Item 8. Financial Information
 
 A. Consolidated financial statements and other financial information
 1-3. Consolidated Financial Statements
  47




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7. Legal or arbitration proceedings
  8. Dividend Policy
     In Japanese yen
    
    
    In U.S. dollarsFiscal year ended March 31
    
    Interim
    
    
    Year-end
    
    
    Interim
    
    
    Year-end2003
    
    
    9
    
    
    
    9
    
    
    
    0.07
    
    
    
    0.072004
    
    
    9
    
    
    
    13
    
    
    
    0.09
    
    
    
    0.112005
    
    
    11
    
    
    
    36
    
    
    
    0.10
    
    
    
    0.342006
    
    
    19
    
    
    
    38
    
    
    
    0.16
    
    
    
    0.322007
    
    
    19
    
    
    
    55
    
    
    
    0.16
    
    
    
    0.472008
    
    
    30
    
    
    
    67
    
    
    
    0.30
    
    
    
    0.67
  48




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##### Table of Contents



B. Significant changes
  
 Item 9. The Offer and Listing
 
 A. Offer and listing details
    Tokyo Stock Exchange Price
    
    
    NASDAQ PricePer Share of Common Stock
    
    
    Per American Depositary Share(Japanese Yen)
    
    
    (U.S. dollars)Fiscal year ended March 31,
    
    High
    
    
    Low
    
    
    High
    
    
    Low2004
    
    
    1,343
    
    
    
    834
    
    
    
    15.45
    
    
    
    10.002005
    
    
    2,115
    
    
    
    1,315
    
    
    
    20.27
    
    
    
    12.002006
    
    
    3,820
    
    
    
    1,755
    
    
    
    34.19
    
    
    
    16.152007
    
    
    4,630
    
    
    
    2,995
    
    
    
    39.00
    
    
    
    26.032008
    
    
    5,920
    
    
    
    2,885
    
    
    
    50.60
    
    
    
    27.28QuarterlyFiscal year 20071
st quarter ended June 30, 2006
    
    
    3,830
    
    
    
    2,995
    
    
    
    34.34
    
    
    
    26.032
nd quarter ended September 30, 2006
    
    
    3,830
    
    
    
    3,210
    
    
    
    33.16
    
    
    
    27.563
rd quarter ended December 31, 2006
    
    
    3,730
    
    
    
    3,110
    
    
    
    31.49
    
    
    
    26.784
th quarter ended March 31, 2007
    
    
    4,630
    
    
    
    3,570
    
    
    
    39.00
    
    
    
    30.23Fiscal year 20081
st quarter ended June 30, 2007
    
    
    5,650
    
    
    
    4,210
    
    
    
    45.30
    
    
    
    35.642
nd quarter ended September 30, 2007
    
    
    5,820
    
    
    
    4,030
    
    
    
    47.44
    
    
    
    35.203
rd quarter ended December 31, 2007
    
    
    5,920
    
    
    
    4,470
    
    
    
    50.60
    
    
    
    39.86
 49




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##### Table of Contents



Tokyo Stock Exchange Price
    
    
    NASDAQ PricePer Share of Common Stock
    
    
    Per American Depositary Share(Japanese Yen)
    
    
    (U.S. dollars)Fiscal year ended March 31,
    
    High
    
    
    Low
    
    
    High
    
    
    Low4
th quarter ended March 31, 2008
    
    
    4,510
    
    
    
    2,885
    
    
    
    42.13
    
    
    
    27.28MonthlyJanuary 2008
    
    
    4,510
    
    
    
    3,340
    
    
    
    42.13
    
    
    
    31.38February 2008
    
    
    4,230
    
    
    
    3,640
    
    
    
    39.38
    
    
    
    33.83March 2008
    
    
    3,870
    
    
    
    2,885
    
    
    
    35.90
    
    
    
    27.28April 2008
    
    
    3,810
    
    
    
    3,000
    
    
    
    36.19
    
    
    
    29.94May 2008
    
    
    4,440
    
    
    
    3,600
    
    
    
    42.47
    
    
    
    36.03June 2008
    
    
    4,780
    
    
    
    3,860
    
    
    
    45.76
    
    
    
    36.73
 
 B. Plan of distribution
  
 C. Markets
  
 D. Selling shareholders
  
 E. Dilution
  
 F. Expenses of the issue
  
 Item 10. Additional Information
 
 A. Share capital
  
 B. Memorandum and articles of association
 Organization
 (kabushiki kaisha) (kaishaho) (shogyo tokibo)
 Objects and purposes
  50




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##### Table of Contents




    
    Manufacture and sale of machine tools including electric power tools and pneumatic tools, etc.,
and wood-working tools;
    
    Manufacture and sale of electric machinery and equipment and various other machinery and equipment;
    
    Manufacture and sale of interior furnishings and household goods and their installation work;
    
    Purchase, sale, lease and management of real estate;
    
    Operation of sporting and recreational facilities;
    
    Casualty insurance agency and business relating to offering of life insurance;
    
    Tourist business under the Travel Agency Law;
    
    Acquisition, assignment and licensing of industrial property right, copyright and other
intellectual property right and provision of technical guidance;
    
    Investment in various kinds of business; and
    
    All other business incidental or relative to any of the preceding items.
 Directors
   
    
    the Directors or Statutory Auditors power to vote in connection with their compensation;
    
    the borrowing power exercizable by a Representative Director (or a Director who is given
power by a Representative Director to exercise such power);
    
    the Directors or Statutory Auditors retirement age; or
    
    requirement to hold any shares of capital stock of the Company.
  
    
    to acquire or dispose of material assets;
    
    to borrow a substantial amount of money;
    
    to employ or discharge from employment important employees, such as general managers;
    
    to establish, change or abolish material corporate organization such as a branch office;
    
    to determine material conditions concerning offering of corporate bonds; and
    
    to establish and maintain an internal control system.
  51




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Common stock
 General
     52




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##### Table of Contents



Authorized capital
    Dividends from Surplus
 Dividends from Surplus  General
  (a)
    
    Articles of Incorporation of the Company so provide;(b)
    
    the normal term of office of the Directors is no longer than one year; and(c)
    
    its non-consolidated annual financial statements and certain documents
for the latest business year present fairly its assets and profit or
loss, a s required by ordinances of the Ministry of Justice.
    53




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Restriction on dividends from Surplus
     A =
    
    the total amount of other capital surplus and other retained
earnings, each such amount being that appearing on the
non-consolidated balance sheet as of the end of the last business
yearB =
    
    (if the Company has disposed of its treasury stock after the end of
the last business year) the amount of the consideration for such
treasury stock received by the Company less the book value thereofC =
    
    (if the Company has reduced its stated capital after the end of the
last business year) the amount of such reduction less the portion
thereof that has been transferred to additional paid-in capital or
legal reserve (if any)D =
    
    (if the Company has reduced its additional paid-in capital or legal
reserve after the end of the last business year) the amount of such
reduction less the portion thereof that has been transferred to
stated capital (if any)E =
    
    (if the Company has cancelled its treasury stock after the end of
the last business year) the book value of such treasury stockF =
    
    (if the Company has distributed Surplus to its shareholders after
the end of the last business year) the total book value of the
Surplus so distributedG =
    
    certain other amounts set forth in ordinances of the Ministry of
Justice, including (if the Company has reduced Surplus and increased
its stated capital, additional paid-in capital or legal reserve
after the end of the last business year) the amount of such
reduction and (if the Company has distributed surplus to the
shareholders after the end of the last business year) the amount set
aside in additional paid-in capital or legal reserve (if any) as
required by ordinances of the Ministry of Justice
  (a)
    
    the book value of its treasury stock;(b)
    
    the amount of consideration for any of the treasury stock disposed of
by the Company after the end of the last business year; and(c)
    
    certain other amounts set forth in ordinances of the Ministry of
Justice, including (if the sum of one-half of goodwill and the
deferred assets exceeds the total of stated capital, additional
paid-in capital and legal reserve, each such amount being that
appearing on the non-consolidated balance sheet as of the end of the
last business year) all or certain part of such exceeding amount as
calculated in accordance with the ordinances of the Ministry of
Justice.
 54




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renketsu haito kisei
tekiyo kaisha
  Stock splits
   Consolidation of shares
 Voting Rights
 General meeting of shareholders
  55




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Voting rights
 Unit share system
  (1)
    
    acquisition of its own shares from specific persons other than its subsidiaries;(2)
    
    consolidation of shares;
 56




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##### Table of Contents



(3)
    
    any offering of new shares or existing shares held by the
Company as treasury stock at a specially favorable price (or any offering of stock acquisition rights, or bonds with stock acquisition rights at specially
favorable conditions) to any persons other than shareholders;(4)
    
    the removal of a Statutory Auditor;(5)
    
    the exemption of liability of a Director, Statutory Auditor or Accounting Auditor with certain exceptions;(6)
    
    a reduction of stated capital with certain exceptions in which a special shareholders resolution is not required;(7)
    
    a distribution of surplus in kind other than dividends which meets certain requirements;(8)
    
    dissolution, merger, consolidation or corporate split with certain exceptions in which a shareholders resolution
is not required;(9)
    
    the transfer of the whole or a material part of the business with certain exceptions in which a shareholders
resolution is not required;(10)
    
    the taking over of the whole of the business of any other corporation with certain exceptions in which a
shareholders resolution is not required; or(11)
    
    share exchange or share transfer for the purpose of establishing 100 percent parent-subsidiary relationships with
certain exceptions in which a shareholders resolution is not required.
 Issue of additional shares and pre-emptive rights
 Voting rights
 Voting rights
  Liquidation rights
  57




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##### Table of Contents



Record date
  Acquisition by the Company of Common Stock
   Issue of additional shares and pre-emptive rights
 Unit share system
    58




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##### Table of Contents



Sale by the Company of shares held by shareholders whose location is unknown
   59




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##### Table of Contents



Reporting of substantial shareholdings
    
 C. Material contracts
  
 D. Exchange controls
   
    
    individuals who do not reside in Japan; and
    
    corporations whose principal offices are located outside Japan.
  60




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
    
    individuals who are exchange non-residents;
    
    corporations that are organized under the laws of foreign countries
and areas or whose principal offices are located outside of Japan;
    
    corporations of which 50 percent or more of their shares are held by
individuals who are exchange non-residents and/or corporations (1)
that are organized under the laws of foreign countries and areas or
(2) whose principal offices are located outside of Japan; or
    
    corporations a majority of whose officers, or officers having the
power of representation, are individuals who are exchange
non-residents.
    
 E. Taxation
 The discussion below is intended for general information only and does not constitute a complete
analysis of all tax consequences relating to the ownership of shares of Common Stock or ADSs.
Prospective purchasers of shares of Common Stock or ADSs should consult their own tax advisors
concerning the tax consequences of their particular situations.
  61




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1.
    
    an individual citizen or resident of the United States;2.
    
    a corporation (or other entity taxable as a corporation for U.S. federal income tax purposes)
organized in or under the laws of the United States, any state thereof, or the District of
Columbia;3.
    
    an estate the income of which is subject to U.S. federal income tax without regard to its source; or4.
    
    a trust that is subject to the primary supervision of a U.S. court and the control of one or more
U.S. persons, or that has a valid election in effect under applicable Treasury regulations to be
treated as a U.S. person.
  1.
    
    is a resident of the United States for purposes of the Treaty;2.
    
    does not maintain a permanent establishment in Japan (a) with which
shares of Common Stock or ADSs are effectively connected and through
which the U.S. holder carries on or has carried on business and (b) of
which shares of Common Stock or ADSs form part of the business
property; and3.
    
    is eligible for benefits under the Treaty, with respect to income and
gain derived in connection with shares of Common Stock or ADSs.
   Japanese Taxation
  62




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63




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##### Table of Contents



U.S. Federal Income Taxation
 U.S. Holders
  Taxation of Dividends
      64




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##### Table of Contents




    
    has held shares of Common Stock or ADSs for less than a specified minimum period, or
    
    is obligated to make payments related to our dividends,
  Taxation of Capital Gains and Losses
   65




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##### Table of Contents



Passive Foreign Investment Companies
    Non-U.S. Holders
   66




---



##### Table of Contents



(i)
    
    the gain is effectively connected with a trade or business conducted
by the Non-U.S. Holder within the United States (and, if an
applicable tax treaty requires, is attributable to a U.S. permanent
establishment or fixed base of such Non-U.S. Holder), or(ii)
    
    the Non-U.S. Holder is an individual who was present in the United
States for 183 or more days in the taxable year of the disposition
and other conditions are met.
  Backup Withholding and Information Reporting
     
 F. Dividends and paying agents
  67




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##### Table of Contents



G. Statement by experts
  
 H. Documents on display
  
 I. Subsidiary information
  68




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##### Table of Contents



Item 11. Quantitative and Qualitative Disclosures about Market Risk
 Market
Risk Exposure
 Equity
and Debt Securities Price Risk
 Japanese yen (millions)
    
    U.S. dollars (thousands)2007
    
    2008
    
    2008Carrying
    
    
    
    Carrying
    
    
    
    CarryingAmount
    
    Fair Value
    
    Amount
    
    Fair Value
    
    Amount
    
    Fair ValueDue within one year
    
    ¥
    6,323
    
    
    ¥
    6,322
    
    
    ¥
    2,599
    
    
    ¥
    2,599
    
    
    $
    25,990
    
    
    $
    25,990Due after one year through five years
    
    
    2,203
    
    
    
    2,195
    
    
    
    2,677
    
    
    
    2,675
    
    
    
    26,770
    
    
    
    26,750Due after five years
    
    
    5,921
    
    
    
    5,822
    
    
    
    2,950
    
    
    
    2,881
    
    
    
    29,500
    
    
    
    28,810Indefinite periods
    
    
    42,697
    
    
    
    42,697
    
    
    
    40,735
    
    
    
    40,735
    
    
    
    407,350
    
    
    
    407,350Equity securities
    
    
    28,352
    
    
    
    28,352
    
    
    
    18,516
    
    
    
    18,516
    
    
    
    185,160
    
    
    
    185,160¥
    85,496
    
    
    ¥
    85,388
    
    
    ¥
    67,477
    
    
    ¥
    67,406
    
    
    $
    674,770
    
    
    $
    674,060
 69




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##### Table of Contents



Foreign Exchange Risk
 Japanese yen (millions) (except average contractual rates)
    
    
    U.S. dollars (thousands)2007
    
    
    2008
    
    
    2008Average
    
    
    
    
    
    
    
    
    
    
    AverageContract
    
    
    
    
    
    
    contractual
    
    
    Contract
    
    
    
    
    
    
    contractual
    
    
    Contractamounts
    
    
    Fair Value
    
    
    rates
    
    
    amounts
    
    
    Fair Value
    
    
    rates
    
    
    Amounts
    
    
    Fair ValueForeign currency
contracts;U.S.$/yen
    
    ¥
    3,107
    
    
    ¥
    2
    
    
    ¥
    117.50
    
    
    ¥
    4,614
    
    
    ¥
    155
    
    
    ¥
    103.32
    
    
    $
    46,140
    
    
    $
    1,550euro/yen
    
    
    5,387
    
    
    
    (60
    )
    
    
    115.15
    
    
    
    5,816
    
    
    
    (37
    )
    
    
    156.63
    
    
    
    58,160
    
    
    
    (370
    )A$/yen
    
    
    343
    
    
    
    (8
    )
    
    
    92.69
    
    
    
    418
    
    
    
    7
    
    
    
    92.83
    
    
    
    4,180
    
    
    
    70STG/yen
    
    
    58
    
    
    
    
    
    
    
    230.96
    
    
    
    228
    
    
    
    10
    
    
    
    206.88
    
    
    
    2,280
    
    
    
    100euro/STG
    
    
    1,579
    
    
    
    (1
    )
    
    
    
    
    
    
    3,804
    
    
    
    (108
    )
    
    
    
    
    
    
    38,040
    
    
    
    (1,080
    )US$/EUR
    
    
    1,794
    
    
    
    (13
    )
    
    
    
    
    
    
    1,288
    
    
    
    (36
    )
    
    
    
    
    
    
    12,880
    
    
    
    (360
    )Other
    
    
    811
    
    
    
    (20
    )
    
    
    
    
    
    
    450
    
    
    
    4
    
    
    
    
    
    
    
    4,500
    
    
    
    40Total
    
    ¥
    13,079
    
    
    ¥
    (100
    )
    
    
    
    
    
    ¥
    16,618
    
    
    ¥
    (5
    )
    
    
    
    
    
    $
    166,180
    
    
    $
    (50
    )Foreign currency swaps:U.S.$/yen
    
    ¥
    2,853
    
    
    ¥
    (30
    )
    
    ¥
    117.53
    
    
    ¥
    7,840
    
    
    ¥
    353
    
    
    ¥
    105.94
    
    
    $
    78,400
    
    
    $
    3,530euro/yen
    
    
    3,289
    
    
    
    (20
    )
    
    
    156.64
    
    
    
    1,860
    
    
    
    32
    
    
    
    161.73
    
    
    
    18,600
    
    
    
    320A$/yen
    
    
    191
    
    
    
    
    
    
    
    95.25
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    SFr./yen
    
    
    191
    
    
    
    (3
    )
    
    
    95.56
    
    
    
    201
    
    
    
    
    
    
    
    100.35
    
    
    
    2,010
    
    
    
    Total
    
    ¥
    6,524
    
    
    ¥
    (53
    )
    
    
    
    
    
    ¥
    9,901
    
    
    ¥
    385
    
    
    
    
    
    
    $
    99,010
    
    
    $
    3,850Options purchased to
sell foreign
currencies:U.S.$/yen
    
    ¥
    233
    
    
    ¥
    2
    
    
    ¥
    116.38
    
    
    ¥
    202
    
    
    ¥
    7
    
    
    ¥
    101.23
    
    
    $
    2,020
    
    
    $
    70euro/yen
    
    
    1,518
    
    
    
    5
    
    
    
    151.80
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    ¥
    1,751
    
    
    ¥
    7
    
    
    
    
    
    
    ¥
    202
    
    
    ¥
    7
    
    
    
    
    
    
    $
    2,020
    
    
    $
    70Options written to buy
foreign currencies:U.S.$/yen
    
    ¥
    239
    
    
    ¥
    (1
    )
    
    ¥
    119.15
    
    
    ¥
    208
    
    
    ¥
    (2
    )
    
    ¥
    103.99
    
    
    $
    2,080
    
    
    $
    (20
    )euro/yen
    
    
    1,569
    
    
    
    (18
    )
    
    
    156.92
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    ¥
    1,808
    
    
    ¥
    (19
    )
    
    
    
    
    
    ¥
    208
    
    
    ¥
    (2
    )
    
    
    
    
    
    $
    2,080
    
    
    $
    (20
    )
 70




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##### Table of Contents



Item 12. Description of Securities Other than Equity Securities
  
 PART II
 
 Item 13. Defaults, Dividend Arrearages and Delinquencies
  
 Item 14. Material Modifications to the Rights of Security Holders and Use of Proceeds
  
 Item 15. Controls and Procedures
 
 A. Disclosure controls and procedures
   
 B. Managements annual report on internal control over financial reporting
  71




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##### Table of Contents



Internal Control-Integrated
Framework
  
 C. Attestation report of the registered public accounting firm
  
 D. Changes in internal control over financial reporting
  72




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##### Table of Contents



Report
of Independent Registered Public Accounting Firm
 
        
 73




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##### Table of Contents



Item 16A. Audit Committee Financial Expert
  
 Item 16B. Code of Ethics
 www.makita.co.jp/global/company/governance01.html
 
 Item 16C. Principal Accountant Fees and Services
   Japanese yen (millions)2007
    
    
    2008Audit Fees (1)
    
    ¥
    824
    
    
    
    738Audit- related Fees (2)
    
    
    6
    
    
    
    5Tax Fees (3)
    
    
    86
    
    
    
    80All Other Fees (4)
    
    
    25
    
    
    
    10Total
    
    ¥
    941
    
    
    ¥
    833
 74




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##### Table of Contents



(1)
    
    Audit Fees consist of fees billed for the professional services rendered by the Independent Registered
Public Accounting Firm for the audit of Makitas annual or interim financial statements and services
that are normally provided by the Independent Registered Public Accounting Firm in connection with
statutory and regulatory filings or engagement. Audit fees for fiscal 2008 include the part that has
not yet been agreed by Makita, which amount to ¥132 million.(2)
    
    Audit-related Fees consist of fees billed for assurance and related services by the Independent
Registered Public Accounting Firm that are reasonably related to employee benefit plan audits, and
consultation concerning financial accounting and reporting standards.(3)
    
    Tax Fees include fees billed for the professional services rendered by the Independent Registered
Public Accounting Firm for tax compliance and transfer pricing documentation.(4)
    
    All Other Fees comprise fees for all other services not included in any of other categories noted above.
      
 Item 16D. Exemptions from the Listing Standards for Audit Committees
  75




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##### Table of Contents



Item 16E. Purchases of Equity Securities by the Issuer and Affiliated Purchasers
  Total Number of
    
    
    Average Price PaidShares Purchased
    
    
    per SharePeriod
    
    (shares)
    
    
    (JPY)April, 2007
    
    
    1,090
    
    
    
    4,393May, 2007
    
    
    655
    
    
    
    4,810June, 2007
    
    
    609
    
    
    
    5,221July, 2007
    
    
    2,757
    
    
    
    5,493August, 2007
    
    
    758
    
    
    
    5,038September, 2007
    
    
    559
    
    
    
    4,401October, 2007
    
    
    1,248
    
    
    
    5,201November, 2007
    
    
    894
    
    
    
    5,420December, 2007
    
    
    862
    
    
    
    4,747January, 2008
    
    
    390
    
    
    
    3,954February, 2008
    
    
    141
    
    
    
    4,040March, 2008
    
    
    356
    
    
    
    3,644Total Number of Shares Purchased and Average Price Paid per Share
    
    
    10,319
    
    
    
    4,979
 Issue to be stated
  The number of its common stock repurchased
    
    3,000,000 sharesAverage price paid per share
    
    JPY 3,974
 76




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##### Table of Contents



PART III
 
 Item 17. Financial Statements
  
 Item 18. Financial Statements
  
 Item 19. Exhibits
 1.1
    
    Articles of Incorporation, as amended and effective as of June 29, 2006 (English translation),
incorporated by reference from Makitas Annual Report on Form 20-F (Commission file no. 0-12602)
filed on June 7, 2006.1.2
    
    Regulations of Board of Directors, as amended and effective as of June 29, 2006 (English
translation), incorporated by reference from Makitas Annual Report on Form 20-F (Commission file
no. 0-12602) filed on June 7, 2006.1.3
    
    The Share Handling Regulations, as amended and effective as of October 1, 2007 (English translation).1.4
    
    Regulations of Board of Statutory Auditors effective as of July 7, 2006 (English translation),
incorporated by reference from Makitas Annual Report on Form 20-F (Commission file no. 0-12602)
filed on June 7, 2006.12.1
    
    302 Certification of President and Representative Director12.2
    
    302 Certification of Director, General Manager of Administration Headquarters13.1
    
    906 Certifications of President and Representative Director and Director, General Manager of
Administration Headquarters
 77




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##### Table of Contents



SIGNATURES
  MAKITA CORPORATIONBy:
    /s/ Masahiko GotoName:
    Masahiko GotoTitle:
    President and Representative Director  78




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##### Table of Contents



Makita Corporation and Consolidated Subsidiaries
 INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULES
 Report of Independent Registered Public Accounting Firm
    
    F-2Consolidated Balance Sheets as of March 31, 2007 and 2008
    
    F-3 to F-4Consolidated Statements of Income for the years ended March 31, 2006, 2007 and 2008
    
    F-5Consolidated Statements of Shareholders Equity for the years ended March 31, 2006, 2007 and 2008
    
    F-6Consolidated Statements of Cash Flows for the years ended March 31, 2006, 2007 and 2008
    
    F-7 to F-8Notes to Consolidated Financial Statements
    
    F-9 to F-43(Financial Statements of 50% or less owned persons accounted for by the equity method have been omitted
because they are not applicable.)Schedules:II. Valuation and Qualifying Accounts and Reserves
for the years ended March 31, 2006, 2007 and
2008
    
    F-44
 
 F-1




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##### Table of Contents



Report of Independent Registered Public Accounting Firm
 
       
 F-2




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##### Table of Contents



MAKITA CORPORATION AND CONSOLIDATED SUBSIDIARIES
 
 CONSOLIDATED BALANCE SHEETS
 MARCH 31, 2007 AND 2008
 A S S E T S
 Yen
    
    
    U.S. dollars(millions)
    
    
    (thousands)2007
    
    
    2008
    
    
    2008CURRENT ASSETS:Cash and cash equivalents
    
    ¥
    37,128
    
    
    ¥
    46,306
    
    
    $
    463,060Time deposits
    
    
    6,866
    
    
    
    2,393
    
    
    
    23,930Marketable securities
    
    
    58,217
    
    
    
    49,443
    
    
    
    494,430Trade receivables-Notes
    
    
    3,125
    
    
    
    2,950
    
    
    
    29,500Accounts
    
    
    54,189
    
    
    
    60,234
    
    
    
    602,340Less- Allowance for doubtful receivables
    
    
    (869
    )
    
    
    (1,018
    )
    
    
    (10,180
    )Inventories
    
    
    92,800
    
    
    
    112,187
    
    
    
    1,121,870Deferred income taxes
    
    
    5,080
    
    
    
    6,478
    
    
    
    64,780Prepaid expenses and other current assets
    
    
    9,963
    
    
    
    11,382
    
    
    
    113,820Total current assets
    
    
    266,499
    
    
    
    290,355
    
    
    
    2,903,550PROPERTY, PLANT AND EQUIPMENT, AT COST:Land
    
    
    16,732
    
    
    
    18,370
    
    
    
    183,700Buildings and improvements
    
    
    57,242
    
    
    
    64,268
    
    
    
    642,680Machinery and equipment
    
    
    74,087
    
    
    
    75,651
    
    
    
    756,510Construction in progress
    
    
    5,576
    
    
    
    2,765
    
    
    
    27,650153,637
    
    
    
    161,054
    
    
    
    1,610,540Less- Accumulated depreciation
    
    
    (90,257
    )
    
    
    (91,996
    )
    
    
    (919,960
    )63,380
    
    
    
    69,058
    
    
    
    690,580INVESTMENTS AND OTHER ASSETS:Investment securities
    
    
    27,279
    
    
    
    18,034
    
    
    
    180,340Goodwill
    
    
    764
    
    
    
    2,001
    
    
    
    20,010Other intangible assets, net
    
    
    1,527
    
    
    
    2,240
    
    
    
    22,400Deferred income taxes
    
    
    1,367
    
    
    
    1,826
    
    
    
    18,260Other assets
    
    
    7,678
    
    
    
    2,953
    
    
    
    29,53038,615
    
    
    
    27,054
    
    
    
    270,540¥
    368,494
    
    
    ¥
    386,467
    
    
    $
    3,864,670
 
 F-3




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##### Table of Contents



MAKITA CORPORATION AND CONSOLIDATED SUBSIDIARIES
 CONSOLIDATED BALANCE SHEETS
 MARCH 31, 2007 AND 2008
 LIABILITIES AND SHAREHOLDERS EQUITY
 Yen
    
    
    U.S. dollars(millions)
    
    
    (thousands)2007
    
    
    2008
    
    
    2008CURRENT LIABILITIES:Short-term borrowings
    
    ¥
    1,892
    
    
    ¥
    1,724
    
    
    $
    17,240Trade notes and accounts payable
    
    
    16,025
    
    
    
    23,372
    
    
    
    233,720Other payables
    
    
    6,556
    
    
    
    5,640
    
    
    
    56,400Accrued expenses
    
    
    6,714
    
    
    
    7,982
    
    
    
    79,820Accrued payroll
    
    
    8,571
    
    
    
    8,096
    
    
    
    80,960Income taxes payable
    
    
    10,447
    
    
    
    7,518
    
    
    
    75,180Deferred income taxes
    
    
    28
    
    
    
    58
    
    
    
    580Other liabilities
    
    
    4,083
    
    
    
    5,266
    
    
    
    52,660Total current liabilities
    
    
    54,316
    
    
    
    59,656
    
    
    
    596,560LONG-TERM LIABILITIES:Long-term indebtedness
    
    
    53
    
    
    
    908
    
    
    
    9,080Accrued retirement and termination benefits
    
    
    3,227
    
    
    
    3,716
    
    
    
    37,160Deferred income taxes
    
    
    4,976
    
    
    
    1,215
    
    
    
    12,150Other liabilities
    
    
    1,112
    
    
    
    1,958
    
    
    
    19,5809,368
    
    
    
    7,797
    
    
    
    77,970MINORITY INTERESTS
    
    
    2,135
    
    
    
    2,516
    
    
    
    25,160COMMITMENTS AND CONTINGENT LIABILITIES (Note 15)SHAREHOLDERS EQUITY:Common stock,Authorized - 496,000,000 shares in 2007496,000,000 shares in 2008Issued and outstanding- 144,008,760 shares and 143,701,279
shares, respectively in 2007144,008,760 shares and 143,773,625
shares, respectively in 2008
    
    
    23,805
    
    
    
    23,805
    
    
    
    238,050Additional paid-in capital
    
    
    45,437
    
    
    
    45,753
    
    
    
    457,530Legal reserve
    
    
    5,669
    
    
    
    5,669
    
    
    
    56,690Retained earnings
    
    
    215,365
    
    
    
    249,191
    
    
    
    2,491,910Accumulated other comprehensive income (loss)
    
    
    12,697
    
    
    
    (7,657
    )
    
    
    (76,570
    )Treasury stock, at cost: - 307,481 shares in 2007235,135 shares in 2008
    
    
    (298
    )
    
    
    (263
    )
    
    
    (2,630
    )302,675
    
    
    
    316,498
    
    
    
    3,164,980¥
    368,494
    
    
    ¥
    386,467
    
    
    $
    3,864,670
 
 F-4




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##### Table of Contents



MAKITA CORPORATION AND CONSOLIDATED SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF INCOME
 FOR THE YEARS ENDED MARCH 31, 2006, 2007 AND 2008
 Yen
    
    
    U.S. dollars(millions)
    
    
    (thousands)2006
    
    
    2007
    
    
    2008
    
    
    2008NET SALES
    
    ¥
    229,075
    
    
    ¥
    279,933
    
    
    ¥
    342,577
    
    
    $
    3,425,770Cost of sales
    
    
    132,897
    
    
    
    163,909
    
    
    
    199,220
    
    
    
    1,992,200GROSS PROFIT
    
    
    96,178
    
    
    
    116,024
    
    
    
    143,357
    
    
    
    1,433,570Selling, general and administrative expenses
    
    
    58,726
    
    
    
    66,802
    
    
    
    76,198
    
    
    
    761,980Losses (gains) on disposals or sales of property, plant and
equipment, net
    
    
    (8,326
    )
    
    
    (249
    )
    
    
    128
    
    
    
    1,280Impairment of long-lived assets
    
    
    
    
    
    
    1,295
    
    
    
    
    
    
    
    OPERATING INCOME
    
    
    45,778
    
    
    
    48,176
    
    
    
    67,031
    
    
    
    670,310OTHER INCOME (EXPENSES):Interest and dividend income
    
    
    1,301
    
    
    
    1,364
    
    
    
    2,092
    
    
    
    20,920Interest expenses
    
    
    (364
    )
    
    
    (316
    )
    
    
    (269
    )
    
    
    (2,690
    )Exchange gains (losses) on foreign currency transactions, net
    
    
    (258
    )
    
    
    (418
    )
    
    
    (1,233
    )
    
    
    (12,330
    )Realized gains (losses) on securities, net
    
    
    2,918
    
    
    
    918
    
    
    
    (1,384
    )
    
    
    (13,840
    )Other, net
    
    
    (232
    )
    
    
    (401
    )
    
    
    (466
    )
    
    
    (4,660
    )Total
    
    
    3,365
    
    
    
    1,147
    
    
    
    (1,260
    )
    
    
    (12,600
    )INCOME BEFORE INCOME TAXES
    
    
    49,143
    
    
    
    49,323
    
    
    
    65,771
    
    
    
    657,710PROVISION FOR INCOME TAXES:Current
    
    
    9,365
    
    
    
    16,486
    
    
    
    19,148
    
    
    
    191,480Deferred
    
    
    (633
    )
    
    
    (4,134
    )
    
    
    580
    
    
    
    5,800Total
    
    
    8,732
    
    
    
    12,352
    
    
    
    19,728
    
    
    
    197,280NET INCOME
    
    ¥
    40,411
    
    
    ¥
    36,971
    
    
    ¥
    46,043
    
    
    $
    460,430
 Yen
    
    
    U.S. dollars2006
    
    
    2007
    
    
    2008
    
    
    2008PER SHARE OF COMMON STOCK AND ADS:Earnings per share:Basic
    
    ¥
    281.1
    
    
    ¥
    257.3
    
    
    ¥
    320.3
    
    
    $
    3.20Cash dividends paid for the year
    
    
    55.0
    
    
    
    57.0
    
    
    
    85.0
    
    
    
    0.85
 
 F-5




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##### Table of Contents



MAKITA CORPORATION AND CONSOLIDATED SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY
 FOR THE YEARS ENDED MARCH 31, 2006, 2007 AND 2008
 Yen
    
    
    U.S. dollars(millions)
    
    
    (thousands)2006
    
    
    2007
    
    
    2008
    
    
    2008COMMON STOCK:Beginning balance
    
    ¥
    23,805
    
    
    ¥
    23,805
    
    
    ¥
    23,805
    
    
    $
    238,050Ending balance
    
    ¥
    23,805
    
    
    ¥
    23,805
    
    
    ¥
    23,805
    
    
    $
    238,050ADDITIONAL PAID-IN CAPITAL:Beginning balance
    
    ¥
    45,430
    
    
    ¥
    45,437
    
    
    ¥
    45,437
    
    
    $
    454,370Disposal of treasury stock
    
    
    7
    
    
    
    
    
    
    
    316
    
    
    
    3,160Ending balance
    
    ¥
    45,437
    
    
    ¥
    45,437
    
    
    ¥
    45,753
    
    
    $
    457,530LEGAL RESERVE:Beginning balance
    
    ¥
    5,669
    
    
    ¥
    5,669
    
    
    ¥
    5,669
    
    
    $
    56,690Ending balance
    
    ¥
    5,669
    
    
    ¥
    5,669
    
    
    ¥
    5,669
    
    
    $
    56,690RETAINED EARNINGS:Beginning balance
    
    ¥
    157,502
    
    
    ¥
    186,586
    
    
    ¥
    215,365
    
    
    $
    2,153,650Net income
    
    
    40,411
    
    
    
    36,971
    
    
    
    46,043
    
    
    
    460,430Cash dividends
    
    
    (7,907
    )
    
    
    (8,192
    )
    
    
    (12,217
    )
    
    
    (122,170
    )Retirement of treasury stock
    
    
    (3,420
    )
    
    
    
    
    
    
    
    
    
    
    Ending balance
    
    ¥
    186,586
    
    
    ¥
    215,365
    
    
    ¥
    249,191
    
    
    $
    2,491,910ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS), NET OF
TAX:Beginning balance
    
    ¥
    (9,249
    )
    
    ¥
    5,345
    
    
    ¥
    12,697
    
    
    $
    126,970Other comprehensive income (loss) for the year
    
    
    14,594
    
    
    
    7,515
    
    
    
    (20,354
    )
    
    
    (203,540
    )Adjustment to initially apply SFAS No.158, net of tax
    
    
    
    
    
    
    (163
    )
    
    
    
    
    
    
    Ending balance
    
    ¥
    5,345
    
    
    ¥
    12,697
    
    
    ¥
    (7,657
    )
    
    $
    (76,570
    )TREASURY STOCK:Beginning balance
    
    ¥
    (3,517
    )
    
    ¥
    (258
    )
    
    ¥
    (298
    )
    
    $
    (2,980
    )Purchases
    
    
    (164
    )
    
    
    (40
    )
    
    
    (51
    )
    
    
    (510
    )Disposal
    
    
    3,423
    
    
    
    
    
    
    
    86
    
    
    
    860Ending balance
    
    ¥
    (258
    )
    
    ¥
    (298
    )
    
    ¥
    (263
    )
    
    $
    (2,630
    )DISCLOSURE OF COMPREHENSIVE INCOME:Net income for the year
    
    ¥
    40,411
    
    
    ¥
    36,971
    
    
    ¥
    46,043
    
    
    $
    460,430Other comprehensive income (loss) for the year
    
    
    14,594
    
    
    
    7,515
    
    
    
    (20,354
    )
    
    
    (203,540
    )Total comprehensive income for the year
    
    ¥
    55,005
    
    
    ¥
    44,486
    
    
    ¥
    25,689
    
    
    $
    256,890
 
 F-6




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##### Table of Contents



MAKITA CORPORATION AND CONSOLIDATED SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 FOR THE YEARS ENDED MARCH 31, 2006, 2007 AND 2008
 Yen
    
    
    U.S. dollars(millions)
    
    
    (thousands)2006
    
    
    2007
    
    
    2008
    
    
    2008CASH FLOWS FROM OPERATING ACTIVITIES:Net income
    
    ¥
    40,411
    
    
    ¥
    36,971
    
    
    ¥
    46,043
    
    
    $
    460,430Adjustments to reconcile net income to net cash provided
by operating activities-Depreciation and amortization
    
    
    5,922
    
    
    
    8,773
    
    
    
    8,871
    
    
    
    88,710Provision for deferred income taxes
    
    
    (633
    )
    
    
    (4,134
    )
    
    
    580
    
    
    
    5,800Realized losses (gains) on securities, net
    
    
    (2,918
    )
    
    
    (918
    )
    
    
    1,384
    
    
    
    13,840Losses (gains) on disposals or sales of property, plant
and equipment, net
    
    
    (8,326
    )
    
    
    (249
    )
    
    
    128
    
    
    
    1,280Impairment of long-lived assets
    
    
    
    
    
    
    1,295
    
    
    
    
    
    
    
    Changes in assets and liabilities-Trade receivables
    
    
    (5,011
    )
    
    
    (6,398
    )
    
    
    (6,463
    )
    
    
    (64,630
    )Inventories
    
    
    (8,646
    )
    
    
    (7,979
    )
    
    
    (22,499
    )
    
    
    (224,990
    )Trade notes and accounts payable and accrued expenses
    
    
    5,121
    
    
    
    4,055
    
    
    
    6,896
    
    
    
    68,960Income taxes payable
    
    
    272
    
    
    
    2,198
    
    
    
    (3,357
    )
    
    
    (33,570
    )Accrued retirement and termination benefits
    
    
    (346
    )
    
    
    (1,702
    )
    
    
    (2,053
    )
    
    
    (20,530
    )Other, net
    
    
    (779
    )
    
    
    448
    
    
    
    (255
    )
    
    
    (2,550
    )Net cash provided by operating activities
    
    
    25,067
    
    
    
    32,360
    
    
    
    29,275
    
    
    
    292,750CASH FLOWS FROM INVESTING ACTIVITIES:Capital expenditures
    
    
    (11,383
    )
    
    
    (12,980
    )
    
    
    (15,036
    )
    
    
    (150,360
    )Purchases of available-for-sale securities
    
    
    (19,449
    )
    
    
    (26,798
    )
    
    
    (19,944
    )
    
    
    (199,440
    )Purchases of held-to-maturity securities
    
    
    (1,799
    )
    
    
    (499
    )
    
    
    (996
    )
    
    
    (9,960
    )Proceeds from sales of available-for-sale securities
    
    
    16,750
    
    
    
    6,635
    
    
    
    4,382
    
    
    
    43,820Proceeds from maturities of available-for-sale securities
    
    
    17,400
    
    
    
    10,476
    
    
    
    21,030
    
    
    
    210,300Proceeds from maturities of held-to-maturity securities
    
    
    200
    
    
    
    1,500
    
    
    
    1,300
    
    
    
    13,000Proceeds from sales of property, plant and equipment
    
    
    1,012
    
    
    
    739
    
    
    
    1,812
    
    
    
    18,120Decrease (increase) in time deposits
    
    
    6,514
    
    
    
    (5,035
    )
    
    
    4,231
    
    
    
    42,310Cash paid for acquisition of business, net of cash acquired
    
    
    (1,204
    )
    
    
    (649
    )
    
    
    (2,034
    )
    
    
    (20,340
    )Other, net
    
    
    (386
    )
    
    
    (665
    )
    
    
    747
    
    
    
    7,470Net cash provided by (used in) investing activities
    
    
    7,655
    
    
    
    (27,276
    )
    
    
    (4,508
    )
    
    
    (45,080
    )CASH FLOWS FROM FINANCING ACTIVITIES:Increase (decrease) in short-term borrowings
    
    
    1,073
    
    
    
    135
    
    
    
    (1,279
    )
    
    
    (12,790
    )Repayment of long-term indebtedness
    
    
    (6,150
    )
    
    
    
    
    
    
    
    
    
    
    Repayment of club members deposits
    
    
    (6,375
    )
    
    
    
    
    
    
    
    
    
    
    Purchases of treasury stock, net
    
    
    (154
    )
    
    
    (40
    )
    
    
    (47
    )
    
    
    (470
    )Cash dividends paid
    
    
    (7,907
    )
    
    
    (8,192
    )
    
    
    (12,217
    )
    
    
    (122,170
    )Other, net
    
    
    (35
    )
    
    
    (210
    )
    
    
    (272
    )
    
    
    (2,720
    )Net cash used in financing activities
    
    
    (19,548
    )
    
    
    (8,307
    )
    
    
    (13,815
    )
    
    
    (138,150
    )
 
 F-7




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##### Table of Contents



MAKITA CORPORATION AND CONSOLIDATED SUBSIDIARIES
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 FOR THE YEARS ENDED MARCH 31, 2006, 2007 AND 2008
 Yen
    
    
    U.S. dollars(millions)
    
    
    (thousands)2006
    
    
    2007
    
    
    2008
    
    
    2008EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS
    
    ¥
    496
    
    
    ¥
    1,297
    
    
    ¥
    (1,774
    )
    
    $
    (17,740
    )NET CHANGE IN CASH AND CASH EQUIVALENTS
    
    
    13,670
    
    
    
    (1,926
    )
    
    
    9,178
    
    
    
    91,780CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR
    
    
    25,384
    
    
    
    39,054
    
    
    
    37,128
    
    
    
    371,280CASH AND CASH EQUIVALENTS, END OF YEAR
    
    ¥
    39,054
    
    
    ¥
    37,128
    
    
    ¥
    46,306
    
    
    $
    463,060SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:Cash paid during the year for-Interest
    
    ¥
    458
    
    
    ¥
    316
    
    
    ¥
    269
    
    
    $
    2,690Income taxes
    
    
    9,093
    
    
    
    14,289
    
    
    
    22,505
    
    
    
    225,050NON-CASH INVESTING AND FINANCING ACTIVITIES:Amount due seller in connection with business acquisition
    
    ¥
    649
    
    
    ¥
    
    
    
    ¥
    
    
    
    $
    Release from obligation for club members deposits
    
    
    6,461
    
    
    
    
    
    
    
    
    
    
    
    Reduction of short-term borrowings and long-term indebtedness
by disposal of a subsidiary
    
    
    2,177
    
    
    
    
    
    
    
    
    
    
    
    Delivery of treasury stock in connection with the share exchange
    
    
    
    
    
    
    
    
    
    
    397
    
    
    
    3,970
 
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MAKITA CORPORATION AND CONSOLIDATED SUBSIDIARIES
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 1.
    
    DESCRIPTION OF BUSINESSMakita Corporation (the Company) is a recognized leader in
the manufacture and sale of power tools. The Company and its
consolidated subsidiaries main products include drills,
rotary hammers, demolition hammers, grinders and cordless
impact drivers. The Company and its consolidated subsidiaries
(collectively Makita) also manufacture and sell pneumatic
tools and garden tools.Domestic sales in Japan are made by the Company, while
overseas sales are made almost entirely through sales
subsidiaries and distributors under the Makita or Maktec
brand name. Approximately 84.8% of consolidated net sales for
the year ended March 31, 2008, were generated from customers
outside Japan, with 46.8% from Europe, 16.5% from North
America and 21.5% from Asia and other areas.Makitas manufacturing and assembly operations are conducted
primarily at three plants in Japan and eight plants overseas,
located in the United States, Germany, the United Kingdom,
Brazil, China (two plants), Canada and Romania.2.
    
    BASIS OF PRESENTING FINANCIAL STATEMENTSThe books of the Company and its domestic subsidiaries are
maintained in conformity with Japanese accounting principles,
while foreign subsidiaries maintain their books in conformity
with the standards of their countries of domicile.The accompanying consolidated financial statements reflect
all necessary adjustments, not recorded in the Companys and
its consolidated subsidiaries books, to present them in
conformity with U.S. generally accepted accounting principles
(U.S. GAAP).3.
    
    SIGNIFICANT ACCOUNTING AND REPORTING POLICIES
 (a)
    
    Principles of ConsolidationThe accompanying consolidated
financial statements include the
accounts of the Company, all of
its majority owned subsidiaries
and those variable interest
entities where Makita is the
primary beneficiary under
Financial Accounting Standards
Board (FASB) Interpretation
No. 46 (revised December 2003)
(FIN 46R), Consolidation of
Variable Interest Entities. All
significant inter-company
balances and transactions have
been eliminated in
consolidation. Makita did not
have any consolidated variable
interest entities as set out in
FIN 46R for any of the periods
presented herein.(b)
    
    Foreign Currency TranslationUnder the provisions of
Statement of Financial
Accounting Standards (SFAS)
No. 52, Foreign Currency
Translation, overseas
subsidiaries assets and
liabilities denominated in their
local foreign currencies are
translated at the exchange rate
in effect at each fiscal
year-end and income and expenses
are translated at the average
rates of exchange prevailing
during each fiscal year. The
local currencies of the overseas
subsidiaries are regarded as
their functional currencies. The
resulting currency translation
adjustments are included in
accumulated other comprehensive
income (loss) in shareholders
equity.
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Gains and losses resulting from all foreign currency transactions,
including foreign exchange contracts, and translation of receivables
and payables denominated in foreign currencies are included in other
income (expenses).(c)
    
    Cash and Cash EquivalentsCash and cash equivalents consist of cash on hand and highly liquid
investments with original maturities of three months or less.(d)
    
    Marketable and Investment SecuritiesMakita accounts for marketable and investment securities in accordance
with SFAS No. 115, Accounting for Certain Investments in Debt and
Equity Securities, which requires all investments in debt and
marketable equity securities to be classified as either trading,
available-for-sale securities or held-to-maturity securities. Makita
classifies investments in debt and marketable equity securities as
available-for-sale or held-to-maturity securities. Makita does not
hold any marketable and investment securities, which are bought and
held primarily for the purpose of sale in the near term.Except for non-marketable equity securities, available-for-sale
securities are reported at fair value, and unrealized gains or losses
are recorded as a separate component of accumulated other
comprehensive income, net of applicable income taxes. Non-marketable
equity securities are carried at cost and reviewed periodically for
impairment. Held-to-maturity securities are reported at amortized
cost, adjusted for the amortization or accretion of premiums or
discounts.A decline in fair value of any available-for-sale or held-to-maturity
security below the amortized cost basis that is deemed to be
other-than-temporary results in a write-down of the amortized cost
basis to the fair value as a new cost basis and the amount of the
write-down is included in earnings.Available-for-sale securities are periodically reviewed for
other-than-temporary declines on criteria that include the length and
magnitude of decline, the financial condition and prospects of the
issuer, Makitas intent and ability to retain the investment for a
period of time to allow for recovery in market value and other
relevant factors.Held-to-maturity securities are periodically evaluated for possible
impairment by taking into consideration the financial condition,
business prospects and credit worthiness of the issuer. Impairment is
measured based on the amount by which the carrying amount of the
investment exceeds its fair value. Fair value is determined based on
quoted market prices or other valuation techniques as appropriate.Makita classifies marketable securities, which are available for
current operations, in current assets. Other investments are
classified as investment securities as a part of non-current
investments and other assets in the consolidated balance sheets.The cost of a security sold or the amount reclassified out of
accumulated other comprehensive income into earnings is determined by
the average cost method.
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(e)
    
    Allowance for Doubtful ReceivablesAllowance for doubtful receivables represents the Makitas best estimate of the
amount of probable credit losses in its existing receivables. The allowance is
determined based on, but is not limited to, historical collection experience adjusted
for the effects of the current economic environment, assessment of inherent risks,
aging and financial performance. Account balances are charged off against the
allowance after all means of collection have been exhausted and the potentiality for
recovery is considered remote.(f)
    
    InventoriesInventory costs include raw materials, labor and manufacturing overheads. Inventories
are valued at the lower of cost or market price, with cost determined principally
based on the average cost method. Makita estimates the obsolescence of inventory
based on the difference between the cost of inventory and its estimated market value
reflecting certain assumptions about anticipated future demand. The carrying value of
inventory is then reduced to account for such obsolescence. Once inventory items are
written-down or written-off, such items are not written-up subsequently. All existing
and anticipated modifications to product models are evaluated against on-hand
inventories, and are adjusted for potential obsolescence.(g)
    
    Property, Plant and Equipment and DepreciationFor the Company, depreciation of property, plant and equipment is computed
principally by using the declining-balance method over the estimated useful lives.
Most of the consolidated subsidiaries have adopted the straight-line method for
computing depreciation. The depreciation period generally ranges from 10 years to 60
years for buildings and improvements and from 3 years to 20 years for machinery and
equipment. The cost and accumulated depreciation and amortization applicable to
assets retired are removed from the accounts and any resulting gain or loss is
recognized. Betterments, renewals and extraordinary repairs that extend the life of
the assets are capitalized. Other maintenance and repair costs are expensed as
incurred.Depreciation expense for the years ended March 31, 2006, 2007 and 2008 amounted to
¥5,710 million, ¥8,495 million and ¥8,519 million ($85,190 thousand), respectively,
which included amortization of capitalized lease equipment.Certain leased buildings, improvements, machinery and equipment are accounted for as
capital leases in conformity with SFAS No. 13, Accounting for Leases. The aggregate
cost included in property, plant and equipment and related accumulated amortization
as of March 31, 2007 and 2008, was as follows:
 Yen
    
    
    U.S. dollars(millions)
    
    
    (thousands)2007
    
    
    2008
    
    
    2008Aggregate cost
    
    ¥
    348
    
    
    
    986
    
    
    
    9,860Accumulated amortization
    
    
    220
    
    
    
    437
    
    
    
    4,370
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(h)
    
    Goodwill and Other Intangible AssetsMakita follows the provisions of SFAS No. 141 Business Combinations
and SFAS No. 142 Goodwill and Other Intangible Assets. SFAS No. 141
requires the use of only the purchase method of accounting for
business combinations and refines the definition of intangible assets
acquired in a purchase business combination. SFAS No. 142 eliminates
the amortization of goodwill and instead requires annual impairment
testing thereof. SFAS No. 142 also requires acquired intangible assets
with a definite useful life to be amortized over their respective
estimated useful lives and reviewed for impairment in accordance with
SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived
Assets. Any acquired intangible asset determined to have an
indefinite useful life is not amortized, but instead is tested for
impairment based on its fair value until its life would be determined
to be no longer indefinite. In connection with the impairment
evaluation, SFAS No. 142 requires Makita to perform an assessment of
whether there is an indication that goodwill is impaired. To
accomplish this, Makita identifies its reporting units, determines the
carrying value of each reporting unit by assigning the assets and
liabilities, including existing goodwill and intangible assets to
those reporting units, and determines the fair value of each reporting
unit.(i)
    
    Environmental LiabilitiesLiabilities for environmental remediation and other environmental
costs, if any, are accrued when environmental assessments or remedial
efforts are probable and the costs can be reasonably estimated. Such
liabilities are adjusted as further information develops or
circumstances change. Costs of future obligations are not discounted
to their present values unless the amount and timing of such payments
are determinable.(j)
    
    Research and Development Costs and Advertising CostsResearch and development costs, included in selling, general and
administrative expenses in the consolidated statements of income, are
expensed as incurred and totaled ¥4,826 million, ¥5,460 million and
¥5,922 million ($59,220 thousand) for the years ended March 31, 2006,
2007 and 2008, respectively.Advertising costs are also expensed as incurred and totaled ¥5,138
million, ¥6,002 million and ¥6,860 million ($68,600 thousand) for the
years ended March 31, 2006, 2007 and 2008, respectively.(k)
    
    Shipping and Handling CostsShipping and handling costs, which mainly include transportation to
customers, are included in selling, general and administrative
expenses in the consolidated statements of income. Shipping and
handling costs were ¥6,774 million, ¥7,637 million and ¥9,882 million
($98,820 thousand) for the years ended March 31, 2006, 2007 and 2008,
respectively.(l)
    
    Income TaxesMakita accounts for income taxes in accordance with the provision of
SFAS No. 109, Accounting for Income Taxes, which requires an asset
and liability approach for financial accounting and reporting for
income taxes. Deferred income tax assets and liabilities are
recognized for the future tax consequences attributable to differences
between the financial statement carrying amounts of existing assets
and liabilities and their respective tax bases and operating loss
carryforwards. Deferred income tax assets and liabilities are measured
using the enacted tax rates expected to apply to taxable income in the
years the temporary differences and carryforwards are expected to be
recovered or settled. The effect on deferred income tax assets and
liabilities of a change in tax rates is recognized in income in the
period that includes the enactment date.Makita also adopted FASB Interpretation No. 48(FIN 48), Accounting
for Uncertainty in Income Taxes, an interpretation of FASB Statement
No. 109 on April 1, 2007. FIN 48 clarifies the accounting for
uncertainty in income taxes recognized in financial statements and
prescribes a recognition threshold and measurement attribute for the
financial statement recognition and measurement of a tax position
taken or expected to be taken in a tax return. FIN48 requires that the
tax effects of a position be recognized only when it is more likely
than not to be sustained upon examination. Makita classifies penalties
and interest related to unrecognized tax benefits in income taxes, if
any, in provision for income taxes.
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(m)
    
    Product WarrantiesA liability for the estimated product warranty related cost is
established at the time revenue is recognized and is included in
accrued expenses and cost of sales. Estimates for accrued product
warranty costs are primarily based on historical experience, and are
affected by ongoing product failure rates, specific product class
failures outside of the baseline experience, material usage and
service delivery costs incurred in correcting a product failure.(n)
    
    Pension PlansMakita accounts for pension plans in accordance with the provisions of
SFAS No. 87, Employers Accounting for Pensions. Under SFAS No. 87,
changes in the amount of either the projected benefit obligation or
plan assets resulting from actual results different from that assumed
and from changes in assumptions can result in gains and losses to be
recognized in the consolidated financial statements in the future
periods. Amortization of an unrecognized net gain or loss is included
as a component of the net periodic benefit plan cost for a year if, as
of the beginning of the year, that unrecognized net gain or loss
exceeds 10 percent of the greater of (1) the projected benefit
obligation or (2) the fair value of that plans assets. In such cases,
the amount of amortization recognized is the resulting excess divided
by the average remaining service period of active employees expected
to receive benefits under the plan.Effective March 31, 2007, the Company adopted SFAS No. 158,
Employers Accounting for Defined Benefit Pension and Other
Postretirement Plans. SFAS No.158 requires, among other things, the
recognition of the funded status of each defined pension benefit plan,
retiree health care and other postretirement benefit plans and
postemployment benefit plans on the balance sheet. Each overfunded
plan is recognized as an asset and each underfunded plan is recognized
as a liability. The initial impact of the standard due to unrecognized
prior service costs or credits and net actuarial gains or losses as
well as subsequent changes in the funded status is recognized as a
component of accumulated comprehensive income in shareholders equity.
Additional minimum pension liabilities (AML) and related intangible
assets are also derecognized upon adoption of the new standard. .(o)
    
    Earnings Per ShareBasic earnings per share is computed by dividing net income available
to common shareholders by the weighted-average number of common shares
outstanding during each year.(p)
    
    Impairment of Long-Lived AssetsMakita accounts for impairment of long lived assets with finite useful
lives in accordance with the provisions of SFAS No. 144. Long-lived
assets, such as property, plant and equipment, and certain intangible
assets subject to amortization, are reviewed for impairment whenever
events or charges in circumstances indicate that the carrying amount
of an asset may not be recoverable. Recoverability of assets to be
held and used is measured by a comparison of the carrying amount of an
asset to its estimated undiscounted future cash flow. An impairment
charge is recognized in the amount by which the carrying amount of the
asset exceeds the fair value of the asset. The fair value is
determined by independent third party appraisal, projected discounted
cash flows or other valuation techniques as appropriate. Assets to be
disposed of, if any, are separately presented in the balance sheet and
reported at the lower of the carrying amount or fair value less costs
to sell, and are no longer depreciated.(q)
    
    Derivative Financial InstrumentsMakita conforms to SFAS No. 133, Accounting for Derivative
Instruments and Hedging Activities as amended. Makita recognizes all
derivative instruments as either assets or liabilities in the
consolidated balance sheets and measures those instruments at fair
value. The accounting for changes in the fair value of a derivative
instrument depends on whether it has been designated and qualifies as
part of a hedging relationship, and on the type of hedging
relationship.Makita employs derivative financial instruments, including forward
foreign currency exchange contracts, foreign currency options,
interest rate swaps and currency swap agreements to manage its
exposure to fluctuations in foreign currency exchange rates and
interest rates.
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Makita does not use derivatives for speculation or trading purpose. Changes in the fair value of derivatives are recorded
each period in current earnings depending on whether a derivative is
designated as part of a hedge transaction and the type of hedge
transaction. The ineffective portion of all hedges is recognized
currently in operations.(r)
    
    Use of Estimates in the Preparation of Financial StatementsThe preparation of financial statements in conformity with U.S. GAAP
requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and the disclosures of
contingent assets and liabilities at the date of the consolidated
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.Makita has identified the following areas where it believes
assumptions and estimates are particularly critical to the
consolidated financial statements. These are revenue recognition,
determination of an allowance for doubtful receivables, impairment of
long-lived assets, realizability of deferred income tax assets, the
determination of unrealized losses on securities for which the decline
in market value is considered to be other than temporary, the
actuarial assumptions on retirement and termination benefit plans and
valuation of inventories.(s)
    
    Revenue RecognitionMakita recognizes revenue at the time of delivery or shipment when all
of the following conditions are met. (1) The sales price is fixed and
determinable, (2) Collectibility is reasonably assured, (3) The title
and risk of loss pass to the customer, and (4) Payment terms are
established consistent with Makitas normal payment terms.Makita offers sales incentives to qualifying customers through various
incentive programs. Sales incentives primarily involve volume-based
rebates, cooperative advertisings and cash discounts, and are
accounted for in accordance with the Emerging Issues Task Force Issue
No. 01-9 (EITF 01-9), Accounting for Consideration by a Vendor to a
Customer (including a Reseller of vendors product).Volume-based rebates are provided to customers only if customers
attain a pre-determined cumulative level of revenue transactions
within a specified period of one year or less. Liabilities for
volume-based rebates are recognized with a corresponding reduction of
revenue for the expected sales incentive at the time the related
revenue is recognized, and are based on the estimation of sales volume
reflecting the historical performance of individual customers.Cooperative advertising is provided to certain customers as
contribution or sponsored fund for advertisements. Under cooperative
advertising programs, Makita does not receive an identifiable benefit
sufficiently separable from its customers. Accordingly, cooperative
advertisings are also accounted as a reduction of revenue.Cash discounts are provided as a certain percentage of the invoice
price as predetermined by spot contracts or based on contractually
agreed upon amounts with customers. Cash discounts are recognized as a
reduction of revenue at the time the related revenue is recognized
based on Makitas ability to reliably estimate such future discounts
to be taken. Estimates of expected cash discounts are evaluated and
adjusted periodically based on actual sales transactions and
historical trend.When repairs are made and charged to customers, the revenue from this
source is recognized when the repairs have been completed and the item
is shipped to the customer.(t)
    
    New Accounting StandardsIn September 2006, the FASB issued SFAS No. 157, Fair Value
Measurements. SFAS No. 157 has been subsequently amended by FASB
Staff Position FAS157-1, Application of FASB Statement No. 157 to
FASB Statement No. 13 and Other Accounting Pronouncements That Address
Fair Value Measurements for Purposes of Lease Classification or
Measurement under Statement 13 and FASB Staff Position FAS157-2,
Effective Date of FASB Statement No. 157. SFAS No. 157, as amended,
defines fair value, establishes a framework for measuring fair value,
and expands disclosures about fair value measurements for instruments
within its scope. SFAS No. 157, as amended, is effective from the
fiscal period beginning after November 15, 2007, except for items that
are not recognized or disclosed at fair value in an entitys financial
statements on a recurring basis (at least annually),
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for which it is
effective from the fiscal period beginning after November 15, 2008.
SFAS No. 157, as amended, is required to be adopted by Makita in the
fiscal year beginning April 1, 2008. Makita does not expect the
adoption of SFAS No. 157 will have a material impact on its
consolidated results of operations and financial condition.In February 2007, the FASB issued SFAS No. 159, The Fair Value Option
for Financial Assets and Financial LiabilitiesIncluding an amendment
of FASB Statement No. 115, which permits an entity to measure many
financial assets and financial liabilities at fair value that are not
currently required to be measured at fair value. Entities that elect
the fair value option will report unrealized gains and losses in
earnings. SFAS No 159 is effective for fiscal periods beginning after
November 15, 2007 and is required to be adopted by Makita, in the
fiscal year beginning April 1, 2008. Makita does not expect the
adoption of SFAS No. 159 will have a material impact on its
consolidated results of operations and financial condition.In December 2007, the FASB issued SFAS No. 141(R), Business
Combinations, and No. 160, Noncontrolling Interests in Consolidated
Financial Statements, an amendment of ARB No. 51. These statements
aim to improve, simplify, and converge internationally the accounting
for business combinations and the reporting of noncontrolling
interests in consolidated financial statements. These statements are
effective for fiscal years beginning after December 15, 2008 and are
required to be adopted by Makita, in the fiscal year beginning April
1, 2009. Under SFAS No. 141(R), an acquiring entity will be required
to recognize all the assets acquired and liability assumed in a
transaction at the acquisition date at fair value with limited
exceptions. SFAS No. 141(R) also establishes disclosure requirements
to enable the evaluation of the nature and financial effects of the
business combination. SFAS No. 160 establishes new accounting and
reporting standards for the noncontrolling interest in a subsidiary
and for the deconsolidation of a subsidiary. Specifically, this
statement requires the recognition of noncontrolling interests
(minority interests) as equity in the consolidated financial
statements and separates from the parents equity. The amount of net
income attributable to noncontrolling interests will be included in
consolidated net income on the face of the consolidated income
statement. This statement also establishes disclosure requirements
that clearly identify and distinguish between the interests of the
parent and the interests of the noncontrolling owners. Makita is
currently evaluating the effect that the adoption of these statements
will have on its consolidated financial statements.(u)
    
    ReclassificationsCertain reclassifications have been made to the prior years
consolidated financial statements to conform with the presentation
used for the year ended March 31, 2008.
 4.
    
    TRANSLATION OF FINANCIAL STATEMENTSSolely for the convenience of readers, the accompanying consolidated
financial statement amounts for the year ended March 31, 2008, are
also presented in U.S. dollars by arithmetically translating all yen
amounts using the approximate prevailing exchange rate at the Federal
Reserve Bank of New York of ¥100 to US$1 at March 31, 2008. This
translation should not be construed as a representation that the
amounts shown could be or could have been converted into U.S. dollars
at the rate indicated.
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5.
    
    INVENTORIESInventories as of March 31, 2007 and 2008 comprised the following:
 Yen
    
    
    U.S. dollars(millions)
    
    
    (thousands)2007
    
    
    2008
    
    
    2008Finished goods
    
    ¥
    75,859
    
    
    ¥
    92,053
    
    
    $
    920,530Work in process
    
    
    2,308
    
    
    
    2,607
    
    
    
    26,070Raw materials
    
    
    14,633
    
    
    
    17,527
    
    
    
    175,270¥
    92,800
    
    
    ¥
    112,187
    
    
    $
    1,121,870
 6.
    
    IMPAIRMENT OF LONG LIVED ASSETSIn December 2003, in connection with the evaluation of its corporate wide marketing, promotional
activities, and the cost benefit relationship, Makita made a decision to no longer consider a
golf course owned by its consolidated subsidiary, Joyama Kaihatsu, Ltd., as a corporate asset
and to curtail utilizing such golf course for promotional, entertainment and employee welfare
purposes. As a result of this decision, the Company performed an impairment analysis by
considering cash flows expected to be generated from the golf course on a stand alone basis and
recorded an impairment charge totaling ¥5,996 million to reduce the carrying value to its
estimated fair value, as determined on a discounted cash flow basis for the year ended March 31,
2004. On May 7, 2005, the Nagoya District Court confirmed a civil rehabilitation plan for Joyama
Kaihatsu. On May 31, 2005, upon confirmation of the civil rehabilitation plan, Makita completed
the disposition of Joyama Kaihatsu. As a result, Makita recorded gains on disposals or sales of
property, plant and equipment of ¥8,326 million for the year ended March 31, 2006. Such gains
included ¥8,479 million of gain on sale of Makitas ownership interests of Joyama Kaihatsu to a
third party.During the year ended March 31, 2007, Makita decided to transfer the manufacturing business (stationary woodworking machines) of its consolidated subsidiary,
Makita Ichinomiya Corporation, to Makitas Okazaki plant in order to streamline the production function in Japan no later than December 2007. Following the transfer
in 2008, Makita planed to dispose of the facility. As a result of this decision, Makita performed an impairment assessment pursuant to the provisions of SFAS No. 144 and
estimated the carrying amount of the facility would not be recovered by the future cash flows. Consequently, Makita recorded an impairment charge totaling ¥1,295 million for the
year ended March 31, 2007. The fair value of the related assets was determined by independent third party appraisal considering the estimated net cash flows from the sale to a third
party purchaser.
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7. MARKETABLE SECURITIES AND INVESTMENT SECURITIES
   Yen (millions)Gross UnrealizedHoldingCarryingAs of March 31, 2007
    
    Cost
    
    
    Gains
    
    
    Losses
    
    
    Fair value
    
    
    AmountAvailable-for-sale:Marketable securities:Japanese and foreign government debt securities
    
    ¥
    1
    
    
    ¥
    
    
    
    ¥
    
    
    
    ¥
    1
    
    
    ¥
    1Corporate and bank debt securities
    
    
    6,437
    
    
    
    10
    
    
    
    1
    
    
    
    6,446
    
    
    
    6,446Investments in trusts
    
    
    45,115
    
    
    
    2,025
    
    
    
    64
    
    
    
    47,076
    
    
    
    47,076Marketable equity securities
    
    
    1,481
    
    
    
    1,914
    
    
    
    
    
    
    
    3,395
    
    
    
    3,395¥
    53,034
    
    
    ¥
    3,949
    
    
    ¥
    65
    
    
    ¥
    56,918
    
    
    ¥
    56,918Investment securities:Investments in trusts
    
    ¥
    720
    
    
    ¥
    264
    
    
    ¥
    12
    
    
    ¥
    972
    
    
    ¥
    972Marketable equity securities
    
    
    10,546
    
    
    
    13,856
    
    
    
    12
    
    
    
    24,390
    
    
    
    24,390Non-marketable equity securities (carried at cost)
    
    
    567
    
    
    
    
    
    
    
    
    
    
    
    567
    
    
    
    567¥
    11,833
    
    
    ¥
    14,120
    
    
    ¥
    24
    
    
    ¥
    25,929
    
    
    ¥
    25,929Held-to-maturity:Marketable securities:Japanese government debt securities
    
    ¥
    299
    
    
    ¥
    
    
    
    ¥
    
    
    
    ¥
    299
    
    
    ¥
    299Japanese corporate debt securities
    
    
    1,000
    
    
    
    
    
    
    
    1
    
    
    
    999
    
    
    
    1,000¥
    1,299
    
    
    ¥
    
    
    
    ¥
    1
    
    
    ¥
    1,298
    
    
    ¥
    1,299Investment securities:Japanese corporate debt securities
    
    ¥
    1,350
    
    
    ¥
    
    
    
    ¥
    107
    
    
    ¥
    1,243
    
    
    ¥
    1,350¥
    1,350
    
    
    ¥
    
    
    
    ¥
    107
    
    
    ¥
    1,243
    
    
    ¥
    1,350Total marketable securities
    
    ¥
    54,333
    
    
    ¥
    3,949
    
    
    ¥
    66
    
    
    ¥
    58,216
    
    
    ¥
    58,217Total investment securities
    
    ¥
    13,183
    
    
    ¥
    14,120
    
    
    ¥
    131
    
    
    ¥
    27,172
    
    
    ¥
    27,279
 F-17




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##### Table of Contents



Yen (millions)Gross UnrealizedHoldingCarryingAs of March 31, 2008
    
    Cost
    
    
    Gains
    
    
    Losses
    
    
    Fair value
    
    
    AmountAvailable-for-sale:Marketable securities:Foreign government debt securities
    
    ¥
    1
    
    
    ¥
    
    
    
    ¥
    
    
    
    ¥
    1
    
    
    ¥
    1Corporate and bank debt securities
    
    
    3,410
    
    
    
    83
    
    
    
    
    
    
    
    3,493
    
    
    
    3,493Investments in trusts
    
    
    42,563
    
    
    
    991
    
    
    
    616
    
    
    
    42,938
    
    
    
    42,938Marketable equity securities
    
    
    1,473
    
    
    
    941
    
    
    
    2
    
    
    
    2,412
    
    
    
    2,412¥
    47,447
    
    
    ¥
    2,015
    
    
    ¥
    618
    
    
    ¥
    48,844
    
    
    ¥
    48,844Investment securities:Investments in trusts
    
    ¥
    184
    
    
    ¥
    4
    
    
    ¥
    6
    
    
    ¥
    182
    
    
    ¥
    182Marketable equity securities
    
    
    9,662
    
    
    
    5,977
    
    
    
    107
    
    
    
    15,532
    
    
    
    15,532Non-marketable equity securities (carried at cost)
    
    
    572
    
    
    
    
    
    
    
    
    
    
    
    572
    
    
    
    572¥
    10,418
    
    
    ¥
    5,981
    
    
    ¥
    113
    
    
    ¥
    16,286
    
    
    ¥
    16,286Held-to-maturity:Marketable securities:Japanese corporate debt securities
    
    ¥
    599
    
    
    ¥
    
    
    
    ¥
    
    
    
    ¥
    599
    
    
    ¥
    599¥
    599
    
    
    ¥
    
    
    
    ¥
    
    
    
    ¥
    599
    
    
    ¥
    599Investment securities:Japanese corporate debt securities
    
    ¥
    1,748
    
    
    ¥
    
    
    
    ¥
    71
    
    
    ¥
    1,677
    
    
    ¥
    1,748¥
    1,748
    
    
    ¥
    
    
    
    ¥
    71
    
    
    ¥
    1,677
    
    
    ¥
    1,748Total marketable securities
    
    ¥
    48,046
    
    
    ¥
    2,015
    
    
    ¥
    618
    
    
    ¥
    49,443
    
    
    ¥
    49,443Total investment securities
    
    ¥
    12,166
    
    
    ¥
    5,981
    
    
    ¥
    184
    
    
    ¥
    17,963
    
    
    ¥
    18,034
 F-18




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##### Table of Contents



U.S. dollars (thousands)Gross UnrealizedHoldingCarryingAs of March 31, 2008
    
    Cost
    
    
    Gains
    
    
    Losses
    
    
    Fair value
    
    
    AmountAvailable-for-sale:Marketable securities:Foreign government debt securities
    
    $
    10
    
    
    $
    
    
    
    $
    
    
    
    $
    10
    
    
    $
    10Corporate and bank debt securities
    
    
    34,100
    
    
    
    830
    
    
    
    
    
    
    
    34,930
    
    
    
    34,930Investments in trusts
    
    
    425,630
    
    
    
    9,910
    
    
    
    6,160
    
    
    
    429,380
    
    
    
    429,380Marketable equity securities
    
    
    14,730
    
    
    
    9,410
    
    
    
    20
    
    
    
    24,120
    
    
    
    24,120$
    474,470
    
    
    $
    20,150
    
    
    $
    6,180
    
    
    $
    488,440
    
    
    $
    488,440Investment securities:Investments in trusts
    
    $
    1,840
    
    
    $
    40
    
    
    $
    60
    
    
    $
    1,820
    
    
    $
    1,820Marketable equity securities
    
    
    96,620
    
    
    
    59,770
    
    
    
    1,070
    
    
    
    155,320
    
    
    
    155,320Non-marketable equity securities
(carried at cost)
    
    
    5,720
    
    
    
    
    
    
    
    
    
    
    
    5,720
    
    
    
    5,720$
    104,180
    
    
    $
    59,810
    
    
    $
    1,130
    
    
    $
    162,860
    
    
    $
    162,860Held-to-maturity:Marketable securities:Japanese corporate debt securities
    
    $
    5,990
    
    
    $
    
    
    
    $
    
    
    
    $
    5,990
    
    
    $
    5,990$
    5,990
    
    
    $
    
    
    
    $
    
    
    
    $
    5,990
    
    
    $
    5,990Investment securities:Japanese corporate debt securities
    
    $
    17,480
    
    
    $
    
    
    
    $
    710
    
    
    $
    16,770
    
    
    $
    17,480$
    17,480
    
    
    $
    
    
    
    $
    710
    
    
    $
    16,770
    
    
    $
    17,480Total marketable securities
    
    $
    480,460
    
    
    $
    20,150
    
    
    $
    6,180
    
    
    $
    494,430
    
    
    $
    494,430Total investment securities
    
    $
    121,660
    
    
    $
    59,810
    
    
    $
    1,840
    
    
    $
    179,630
    
    
    $
    180,340
  F-19




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##### Table of Contents



Yen (millions)Less than 12 months
    
    
    12 months or moreGross
    
    
    
    
    
    
    GrossUnrealized
    
    
    
    
    
    
    UnrealizedHolding
    
    
    
    
    
    
    HoldingAs of March 31, 2008
    
    Fair value
    
    
    Losses
    
    
    Fair value
    
    
    LossesAvailable-for-sale:Marketable securities:Investments in trusts
    
    ¥
    3,502
    
    
    ¥
    616
    
    
    ¥
    
    
    
    ¥
    Marketable equity securities
    
    
    168
    
    
    
    2
    
    
    
    
    
    
    
    ¥
    3,670
    
    
    ¥
    618
    
    
    ¥
    
    
    
    ¥
    Investment securities:Investments in trusts
    
    ¥
    156
    
    
    ¥
    6
    
    
    ¥
    
    
    
    ¥
    Marketable equity securities
    
    
    1,386
    
    
    
    107
    
    
    
    
    
    
    
    ¥
    1,542
    
    
    ¥
    113
    
    
    ¥
    
    
    
    ¥
    Held-to-maturity:Investment securities:Japanese corporate debt securities
    
    ¥
    
    
    
    ¥
    
    
    
    ¥
    978
    
    
    ¥
    71¥
    
    
    
    ¥
    
    
    
    ¥
    978
    
    
    ¥
    71
 U.S. dollars (thousands)Less than 12 months
    
    
    12 months or moreGross
    
    
    
    
    
    
    GrossUnrealized
    
    
    
    
    
    
    UnrealizedHolding
    
    
    
    
    
    
    HoldingAs of March 31, 2008
    
    Fair value
    
    
    Losses
    
    
    Fair value
    
    
    LossesAvailable-for-sale:Marketable securities:Investments in trusts
    
    $
    35,020
    
    
    $
    6,160
    
    
    $
    
    
    
    $
    Marketable equity securities
    
    
    1,680
    
    
    
    20
    
    
    
    
    
    
    
    $
    36,700
    
    
    $
    6,180
    
    
    $
    
    
    
    $
    Investment securities:Investments in trusts
    
    $
    1,560
    
    
    $
    60
    
    
    $
    
    
    
    $
    Marketable equity securities
    
    
    13,860
    
    
    
    1,070
    
    
    
    
    
    
    
    $
    15,420
    
    
    $
    1,130
    
    
    $
    
    
    
    $
    Held-to-maturity:Investment securities:Japanese corporate debt securities
    
    $
    
    
    
    $
    
    
    
    $
    9,780
    
    
    $
    710$
    
    
    
    $
    
    
    
    $
    9,780
    
    
    $
    710
 F-20




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##### Table of Contents



Maturities of debt securities based on Cost as of March 31, 2008
 Yen (millions)
    
    
    U.S.dollars (thousands)Available-
    
    
    Held-to-
    
    
    
    
    
    
    Available-
    
    
    Held-to-for-sale
    
    
    maturity
    
    
    Total
    
    
    for-sale
    
    
    maturity
    
    
    TotalDue within one year
    
    ¥
    1,999
    
    
    ¥
    599
    
    
    ¥
    2,598
    
    
    $
    19,990
    
    
    $
    5,990
    
    
    $
    25,980Due after one to five years
    
    
    
    
    
    
    1,148
    
    
    
    1,148
    
    
    
    
    
    
    
    11,480
    
    
    
    11,480Due after five to ten years
    
    
    1,412
    
    
    
    
    
    
    
    1,412
    
    
    
    14,120
    
    
    
    
    
    
    
    14,120Due after ten years
    
    
    
    
    
    
    600
    
    
    
    600
    
    
    
    
    
    
    
    6,000
    
    
    
    6,000Total
    
    ¥
    3,411
    
    
    ¥
    2,347
    
    
    ¥
    5,758
    
    
    $
    34,110
    
    
    $
    23,470
    
    
    $
    57,580
 Maturities of debt securities based on Fair Value as of March 31, 2008
 Yen (millions)
    
    
    U.S.dollars (thousands)Available-
    
    
    Held-to-
    
    
    
    
    
    
    Available-
    
    
    Held-to-for-sale
    
    
    maturity
    
    
    Total
    
    
    for-sale
    
    
    maturity
    
    
    TotalDue within one year
    
    ¥
    2,000
    
    
    ¥
    599
    
    
    ¥
    2,599
    
    
    $
    20,000
    
    
    $
    5,990
    
    
    $
    25,990Due after one to five years
    
    
    
    
    
    
    1,146
    
    
    
    1,146
    
    
    
    
    
    
    
    11,460
    
    
    
    11,460Due after five to ten years
    
    
    1,494
    
    
    
    
    
    
    
    1,494
    
    
    
    14,940
    
    
    
    
    
    
    
    14,940Due after ten years
    
    
    
    
    
    
    531
    
    
    
    531
    
    
    
    
    
    
    
    5,310
    
    
    
    5,310Total
    
    ¥
    3,494
    
    
    ¥
    2,276
    
    
    ¥
    5,770
    
    
    $
    34,940
    
    
    $
    22,760
    
    
    $
    57,700
   F-21




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##### Table of Contents



8.
    
    ACQUISITIONTo strengthen its position in the automatic nailer business as a
comprehensive supplier of tools for professional use, Makita acquired
the automatic nailer business of Kanematsu-NNK Corporation (the
Business) on January 1, 2006 for total cash consideration of ¥1,853
million. The Company used the purchase method of accounting to account
for the acquisition of the Business. Accordingly, the financial
position and the results of the operation of the Business are included
in the accompanying consolidated financial statements from the
acquisition date. The Company has allocated the purchase price based
on the fair value of the tangible and intangible assets acquired and
liabilities assumed. The excess of purchase price compared to the fair
value of the net assets acquired, or the goodwill, was
¥793 million.The Goodwill is amortized and deductible for Japanese tax purpose.At the Board of Directors meeting held on March 20, 2007, in order to
strengthen the gardening tool business, the Board of the Company
decided to make Fuji Robin Industries Ltd. (Fuji Robin, which
manufactures and sells engines, machinery for agriculture, forestry
and construction industries, etc. in Japan) a wholly-owned subsidiary
of the Company through a tender offer. As a result, the Company
purchased 10,279,375 shares of Fuji Robins outstanding shares for
total cash consideration of ¥2,673 million, and Fuji Robin became a
consolidated subsidiary of the Company as of May 15, 2007. On May 25,
2007, in order to acquire all of the remaining shares of Fuji Robin,
the Company entered into a share exchange agreement with Fuji Robin.
On August 1, 2007, the Company acquired the remaining shares of Fuji
Robin by exchanging 0.059 of the Companys treasury stock for each
share of Fuji Robins outstanding common stock. The Company and Fuji
Robin obtained third party appraisals of the respective share prices
which were used as a basis of negotiation over the share exchange
ratio, and the Company issued 81,456 shares of treasury stock. Fuji
Robin was renamed Makita Numazu Corporation (MNC) as of August 1,
2007. The total cost for acquiring MNC was ¥3,380 million. The
Company, pursuant to SFAS No.141, used the purchase method to account
for the acquisition of MNC.The following table reflects the fair value of 100% of the assets and
liabilities of Fuji Robin as of August 1, 2007:
 Yen
    
    
    U.S. dollars(millions)
    
    
    (thousands)Cash and cash equivalent
    
    ¥
    788
    
    
    $
    7,880Receivables and other assets
    
    
    5,064
    
    
    
    50,640Property and equipment
    
    
    3,951
    
    
    
    39,510Intangible assets
    
    
    162
    
    
    
    1,620Goodwill (not deductible for
tax purposes)
    
    
    1,251
    
    
    
    12,510Trade payables, bank borrowings
and other liabilities
    
    
    (7,836
    )
    
    
    (78,360
    )Net assets
    
    ¥
    3,380
    
    
    $
    33,800
 The results of operations and cash flows associated with MNC
since May 15, 2007 have been included in the accompanying consolidated
financial statements of Makita. Makita has not presented pro forma
results of operations of the acquisition because the results are not
material.
 F-22




---



##### Table of Contents



9.
    
    INCOME TAXESIncome before income taxes and the provision for income taxes for the
years ended March 31, 2006, 2007 and 2008 were as follows:
 Yen
    
    
    U.S. dollars(millions)
    
    
    (thousands)2006
    
    
    2007
    
    
    2008
    
    
    2008Income before income taxes:Domestic
    
    ¥
    26,895
    
    
    ¥
    16,341
    
    
    ¥
    19,896
    
    
    $
    198,960Foreign
    
    
    22,248
    
    
    
    32,982
    
    
    
    45,875
    
    
    
    458,750¥
    49,143
    
    
    ¥
    49,323
    
    
    ¥
    65,771
    
    
    $
    657,710Provision for income taxes:Current-Domestic
    
    ¥
    3,171
    
    
    ¥
    8,366
    
    
    ¥
    6,957
    
    
    $
    69,570Foreign
    
    
    6,194
    
    
    
    8,120
    
    
    
    12,191
    
    
    
    121,9109,365
    
    
    
    16,486
    
    
    
    19,148
    
    
    
    191,480Deferred-Domestic
    
    
    (166
    )
    
    
    (2,453
    )
    
    
    1,283
    
    
    
    12,830Foreign
    
    
    (467
    )
    
    
    (1,681
    )
    
    
    (703
    )
    
    
    (7,030
    )(633
    )
    
    
    (4,134
    )
    
    
    580
    
    
    
    5,800Consolidated provision for income taxes
    
    ¥
    8,732
    
    
    ¥
    12,352
    
    
    ¥
    19,728
    
    
    $
    197,280
 F-23




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##### Table of Contents



Yen
    
    
    U.S. dollars(millions)
    
    
    (thousands)2006
    
    
    2007
    
    
    2008
    
    
    2008Provision for income taxes
    
    ¥
    8,732
    
    
    ¥
    12,352
    
    
    ¥
    19,728
    
    
    $
    197,280Shareholders equity:Foreign currency translation adjustments
    
    
    272
    
    
    
    93
    
    
    
    (107
    )
    
    
    (1,070
    )Net unrealized holding gains on
available-for-sale securities
    
    
    3,363
    
    
    
    (935
    )
    
    
    (4,320
    )
    
    
    (43,200
    )Minimum Pension liability adjustment
    
    
    1,360
    
    
    
    66
    
    
    
    
    
    
    
    Pension liability adjustment
    
    
    
    
    
    
    
    
    
    
    (2,549
    )
    
    
    (25,490
    )Adjustment to initially apply SFAS
No.158
    
    
    
    
    
    
    (110
    )
    
    
    
    
    
    
    ¥
    13,727
    
    
    ¥
    11,466
    
    
    ¥
    12,752
    
    
    $
    127,520
    Year ended March 31,2006
    
    
    2007
    
    
    2008Combined statutory income tax rate in Japan
    
    
    40.3
    %
    
    
    40.3
    %
    
    
    40.3
    %Non-deductible expenses
    
    
    0.6
    
    
    
    0.8
    
    
    
    0.6Non-taxable dividends received
    
    
    (0.2
    )
    
    
    (0.1
    )
    
    
    (0.1
    )Change in valuation allowance
    
    
    (11.3
    )
    
    
    (5.4
    )
    
    
    (0.4
    )Effect of changes in enacted tax rate
    
    
    (0.7
    )
    
    
    
    
    
    
    Tax sparing impact
    
    
    (3.5
    )
    
    
    (2.1
    )
    
    
    (0.7
    )Effect of the foreign tax rate differential
    
    
    (6.7
    )
    
    
    (10.4
    )
    
    
    (11.1
    )Other, net
    
    
    (0.7
    )
    
    
    1.9
    
    
    
    1.4Effective income tax rate
    
    
    17.8
    %
    
    
    25.0
    %
    
    
    30.0
    %
   F-24




---



##### Table of Contents



F-25




---



##### Table of Contents



Yen
    
    
    U.S. dollars(millions)
    
    
    (thousands)2006
    
    
    2007
    
    
    2008
    
    
    2008Deferred tax expense
(exclusive of the
effects of other
components below)
    
    ¥
    (1,035
    )
    
    ¥
    (1,467
    )
    
    ¥
    765
    
    
    $
    7,650Increase (decrease)
in beginning-of-the-year
balance of the
valuation allowance
for deferred tax
assets
    
    
    402
    
    
    
    (2,667
    )
    
    
    (185
    )
    
    
    (1,850
    )¥
    (633
    )
    
    ¥
    (4,134
    )
    
    ¥
    580
    
    
    $
    5,800
  Yen
    
    
    U.S. dollars(millions)
    
    
    (thousands)2007
    
    
    2008
    
    
    2008Deferred income tax assets:Marketable securities and investment securities
    
    ¥
    1,039
    
    
    ¥
    1,495
    
    
    $
    14,950Accrued retirement and termination benefits
    
    
    178
    
    
    
    2,198
    
    
    
    21,980Inventories
    
    
    1,670
    
    
    
    1,900
    
    
    
    19,000Property, plant and equipment
    
    
    3,197
    
    
    
    2,570
    
    
    
    25,700Accrued payroll
    
    
    2,043
    
    
    
    1,906
    
    
    
    19,060Net operating loss carryforwards
    
    
    772
    
    
    
    774
    
    
    
    7,740Other
    
    
    1,105
    
    
    
    1,713
    
    
    
    17,130Total gross deferred income tax assets
    
    
    10,004
    
    
    
    12,556
    
    
    
    125,560Valuation allowance
    
    
    (318
    )
    
    
    (331
    )
    
    
    (3,310
    )¥
    9,686
    
    
    ¥
    12,225
    
    
    $
    122,250Deferred income tax liabilities:Undistributed earnings of overseas subsidiaries
    
    ¥
    (183
    )
    
    ¥
    (565
    )
    
    $
    (5,650
    )Unrealized gain on available-for-sale securities
    
    
    (7,245
    )
    
    
    (2,929
    )
    
    
    (29,290
    )Property, plant and equipment
    
    
    (796
    )
    
    
    (1,699
    )
    
    
    (16,990
    )Other
    
    
    (19
    )
    
    
    (1
    )
    
    
    (10
    )Total gross deferred income tax liabilities
    
    ¥
    (8,243
    )
    
    ¥
    (5,194
    )
    
    $
    (51,940
    )Net deferred income tax assets
    
    ¥
    1,443
    
    
    ¥
    7,031
    
    
    $
    70,310
 F-26




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##### Table of Contents



Yen
    
    
    U.S. dollars(millions)
    
    
    (thousands)2007
    
    
    2008
    
    
    2008Deferred income taxesCurrent assets
    
    ¥
    5,080
    
    
    ¥
    6,478
    
    
    $
    64,780Investment and other assets
    
    
    1,367
    
    
    
    1,826
    
    
    
    18,260Current liabilities
    
    
    (28
    )
    
    
    (58
    )
    
    
    (580
    )Long-term liabilities
    
    
    (4,976
    )
    
    
    (1,215
    )
    
    
    (12,150
    )¥
    1,443
    
    
    ¥
    7,031
    
    
    $
    70,310
   Yen
    
    
    U.S. dollars(millions)
    
    
    (thousands)Within 5 years
    
    
    713
    
    
    
    7,1306 to 20 years
    
    
    758
    
    
    
    7,580Indefinite periods
    
    
    1,920
    
    
    
    19,2003,391
    
    
    
    33,910
    F-27




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##### Table of Contents



10.
    
    RETIREMENT AND TERMINATION BENEFIT PLANSThe Company and certain of its consolidated subsidiaries have various
contributory and noncontributory employee benefit plans covering
substantially all of their employees. Under the plans, employees are
entitled to lump-sum payments at the time of termination or
retirement, or to pension payments. A domestic contributory plan
covers substantially all of the employees of the Company.The amounts of lump-sum or pension payments under the plans are generally
determined on the basis of length of service and remuneration at the time of
termination or retirement.The net periodic pension costs (benefit) of the defined benefit plans for the years ended March 31, 2006, 2007 and 2008 consisted
of the following components:
 Yen
    
    
    U.S. dollars(millions)
    
    
    (thousands)2006
    
    
    2007
    
    
    2008
    
    
    2008Service cost-benefit earned during the year
    
    ¥
    1,592
    
    
    ¥
    1,611
    
    
    ¥
    1,410
    
    
    $
    14,100Interest cost on projected benefit obligation
    
    
    776
    
    
    
    804
    
    
    
    927
    
    
    
    9,270Expected return on plan assets
    
    
    (635
    )
    
    
    (1,268
    )
    
    
    (1,459
    )
    
    
    (14,590
    )Amortization of prior service cost
    
    
    (215
    )
    
    
    (215
    )
    
    
    (215
    )
    
    
    (2,150
    )Amortization of net transition obligation
    
    
    62
    
    
    
    37
    
    
    
    37
    
    
    
    370Recognized actuarial loss
    
    
    482
    
    
    
    428
    
    
    
    414
    
    
    
    4,140Net periodic pension costs (benefit)
    
    ¥
    2,062
    
    
    ¥
    1,397
    
    
    ¥
    1,114
    
    
    $
    11,140
 F-28




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##### Table of Contents



Reconciliations of beginning and ending balances of the benefit obligations and the fair value of the plan assets are
as follows:
 Yen
    
    
    U.S. dollars(millions)
    
    
    (thousands)2007
    
    
    2008
    
    
    2008Change in benefit obligation:Benefit obligation at beginning of year
    
    ¥
    37,580
    
    
    ¥
    37,389
    
    
    $
    373,890Service cost
    
    
    1,611
    
    
    
    1,410
    
    
    
    14,100Interest cost
    
    
    804
    
    
    
    927
    
    
    
    9,270Plan amendment
    
    
    
    
    
    
    136
    
    
    
    1,360Actuarial gains
    
    
    (1,551
    )
    
    
    104
    
    
    
    1,040Business acquired
    
    
    
    
    
    
    761
    
    
    
    7,610Benefits paid
    
    
    (1,306
    )
    
    
    (1,856
    )
    
    
    (18,560
    )Foreign exchange impact
    
    
    251
    
    
    
    27
    
    
    
    270Benefit obligation at end of year
    
    
    37,389
    
    
    
    38,898
    
    
    
    388,980Change in plan assets:Fair value of plan assets at beginning of year
    
    
    34,922
    
    
    
    38,456
    
    
    
    384,560Actual return on plan assets
    
    
    1,785
    
    
    
    (4,803
    )
    
    
    (48,030
    )Employer contributions
    
    
    2,915
    
    
    
    3,022
    
    
    
    30,220Business acquired
    
    
    
    
    
    
    
    
    
    
    Benefits paid
    
    
    (1,168
    )
    
    
    (1,659
    )
    
    
    (16,590
    )Foreign exchange impact
    
    
    2
    
    
    
    36
    
    
    
    360Fair value of plan assets at end of year
    
    
    38,456
    
    
    
    35,052
    
    
    
    350,520Funded status
    
    ¥
    1,067
    
    
    ¥
    (3,846
    )
    
    $
    (38,460
    )Amounts recognized in accumulated other
comprehensive income consisted ofNet actuarial loss
    
    ¥
    3,446
    
    
    ¥
    9,366
    
    
    $
    93,660Prior service cost
    
    
    (2,926
    )
    
    
    (2,575
    )
    
    
    (25,750
    )Net transition obligation being recognized
over 19 years
    
    
    41
    
    
    
    4
    
    
    
    40¥
    561
    
    
    ¥
    6,795
    
    
    $
    67,950Amounts recognized in the consolidated balance
sheet consisted of;Non-current assets
    
    ¥
    4,465
    
    
    ¥
    
    
    
    $
    Current liabilities
    
    
    (171
    )
    
    
    (130
    )
    
    
    (1,300
    )Non-current liabilities
    
    
    (3,227
    )
    
    
    (3,716
    )
    
    
    (37,160
    )¥
    1,067
    
    
    ¥
    (3,846
    )
    
    $
    (38,460
    )
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##### Table of Contents



Measurement dateThe Company uses a March 31 measurement date for all of its plans.AssumptionsThe weighted-average assumptions used to determine benefit obligations at March 31, 2007 and 2008, were as follows:
 2007
    
    
    2008Discount rate
    
    
    2.5
    %
    
    
    2.4
    %Assumed rate of increase in future compensation levels
    
    
    3.3
    %
    
    
    3.3
    %
  2006
    
    
    2007
    
    
    2008Discount rate
    
    
    2.2
    %
    
    
    2.2
    %
    
    
    2.5
    %Assumed rate of increase in future compensation levels
    
    
    3.3
    %
    
    
    3.3
    %
    
    
    3.3
    %Expected long-term rate of return on plan assets
    
    
    2.3
    %
    
    
    4.2
    %
    
    
    4.2
    %
 Makita determines the discount rate based on long-term high quality fixed income debt securities that have the same maturity period as the period over which pension benefits are expected to be settled.
In addition, Makita also takes into account estimates with respect to future changes that are expected by management in the interest rates on its debt securities when determining the discount rate.Makita determines the expected long-term rate of return on plan assets based on the expected long-term return of the various asset categories in which the plan invests considering the current
expectations for future returns and actual historical returns.Plan AssetsThe benefit plan weighted-average asset allocations at March 31, 2007, and 2008, by asset category were as follows:
 2007
    
    
    2008Asset CategoryEquity securities
    
    
    54.9
    %
    
    
    45.7
    %Debt securities
    
    
    31.2
    
    
    
    36.8Real estate
    
    
    1.6
    
    
    
    1.1Life insurance company general accounts
    
    
    9.5
    
    
    
    11.4Other
    
    
    2.8
    
    
    
    5.0100.0
    %
    
    
    100.0
    %
 F-30




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##### Table of Contents



Makitas funding policy is to contribute monthly the amounts which would provide sufficient assets for future payments of pension benefits. The plans assets are invested primarily in marketable equity
securities and interest-bearing securities.Makita determined the mix of equity securities and debt securities after taking into consideration the expected long-term yield on pension assets. To decide whether changes in the basic portfolio are
necessary, Makita examines the divergence between the expected long-term income and the actual income from the portfolio on an annual basis. Makita revises the portfolio when it is deemed necessary to
reach the expected long-term yield.Equity securities included common stock of Makita in the amount of ¥4 million ($40 thousand) at March 31, 2008.Information for pension plans with an accumulated benefit obligation in excess of plan assets
 Yen
    
    
    U.S. dollars(millions)
    
    
    (thousands)2007
    
    
    2008
    
    
    2008Projected benefit obligation
    
    ¥
    3,853
    
    
    ¥
    3,989
    
    
    $
    39,890Accumulated benefit obligation
    
    
    3,705
    
    
    
    3,890
    
    
    
    38,900Fair value of plan assets
    
    
    456
    
    
    
    370
    
    
    
    3,700An accumulated benefit obligation in excess of plan assets
    
    
    3,249
    
    
    
    3,520
    
    
    
    35,200
 Cash flowsContributionsMakita expects to contribute ¥3,058 million ($30,580 thousand) to its domestic and foreign defined benefit plan in the year ending March 31, 2009.Estimated future benefit paymentsAt March 31,2008, the benefits expected to be paid in each of the next five fiscal years, and in the aggregate for the five fiscal years thereafter are as follows:
 Yen
    
    
    U.S. dollarsYear ending March 31,
    
    (millions)
    
    
    (thousands)2009
    
    ¥
    1,998
    
    
    $
    19,9802010
    
    
    1,904
    
    
    
    19,0402011
    
    
    1,962
    
    
    
    19,6202012
    
    
    1,858
    
    
    
    18,5802013
    
    
    1,958
    
    
    
    19,5802014-2018
    
    
    8,833
    
    
    
    88,330Total
    
    ¥
    18,513
    
    
    $
    185,130
 Certain foreign subsidiaries have defined contribution plans. The total expenses charged to income under these plans were ¥216 million, ¥223 million and ¥270 million ($2,700 thousand) for
the years ended March 31, 2006, 2007 and 2008, respectively.The Company has unfunded retirement allowance programs for the Directors and the Statutory Auditors. Under such programs, the aggregate amount set aside as retirement allowances for the
Directors and the Statutory Auditors was ¥501 million and ¥468 million ($4,680 thousand) as of March 31, 2007 and 2008, respectively, which is included in other liabilities in the
accompanying balance sheets. This Executive retirement and termination allowances program was abolished by the Annual General Meeting of Shareholders held in June 2006. The aggregate amount
set aside will be paid to the Directors and the Statutory Auditors when they retire.
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##### Table of Contents



11.
    
    SHORT-TERM BORROWINGS AND LONG-TERM INDEBTEDNESSAs of March 31, 2007 and 2008, short-term borrowings consisted of the following:
 Yen
    
    
    U.S. dollars(millions)
    
    
    (thousands)2007
    
    
    2008
    
    
    2008Bank borrowings
    
    ¥
    1,816
    
    
    ¥
    1,582
    
    
    $
    15,820Current maturities of long-term indebtedness
    
    
    76
    
    
    
    142
    
    
    
    1,420Total
    
    ¥
    1,892
    
    
    ¥
    1,724
    
    
    $
    17,240
 Short-term borrowings, excluding current maturities of long-term indebtedness, amounting to ¥1,816 million and ¥1,582 million ($15,820 thousand) as of March 31, 2007 and 2008, respectively, consisted primarily
of bank borrowings of overseas subsidiaries denominated in foreign currencies. As of March 31, 2007 and 2008, the weighted average interest rate on the borrowings was 12.6% and 8.9%, respectively.Certain subsidiaries of the Company had unused lines of credit available for immediate short-term borrowings without restrictions amounting to ¥18,800 million and ¥22,664 million ($226,640 thousand) as of
March 31, 2007 and 2008, respectively.As of March 31, 2007 and 2008, long-term indebtedness consisted of the following:
 Yen
    
    
    U.S. dollars(millions)
    
    
    (thousands)2007
    
    
    2008
    
    
    20081.9% (weighted average rate) unsecured loans from banks, due 2012
    
    ¥
    
    
    
    ¥
    500
    
    
    $
    5,000Capital lease obligations (see Note 3(g))
    
    
    129
    
    
    
    550
    
    
    
    5,500Less- Current maturities included in short-term borrowings
    
    
    (76
    )
    
    
    (142
    )
    
    
    (1,420
    )¥
    53
    
    
    ¥
    908
    
    
    $
    9,080
 There were no covenants or cross default provisions under the Makitas financing arrangements. Furthermore, there were no subsidiary level dividend restrictions under the financing arrangements.The aggregate annual maturities of long-term indebtedness
subsequent to March 31, 2008 are as summarized below:
 Yen
    
    
    U.S. dollarsYear ending March 31,
    
    (millions)
    
    
    (thousands)2009
    
    ¥
    142
    
    
    $
    1,4202010
    
    
    117
    
    
    
    1,1702011
    
    
    57
    
    
    
    5702012
    
    
    516
    
    
    
    5,1602013
    
    
    218
    
    
    
    2,1802014 and thereafter
    
    
    
    
    
    
    Total
    
    ¥
    1,050
    
    
    $
    10,500
 F-32




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##### Table of Contents



12.
    
    SHAREHOLDERS EQUITYAt the annual meeting of shareholders held on
June 29, 2004, the shareholders of the Company
resolved to amend the Companys Articles of
Incorporation to permit the Companys Board of
Directors to authorize a purchase option of
the Companys common stock. At the Board of
Directors meeting held on February 17, 2006,
the Company decided to retire treasury stock
pursuant to the provisions of Article 212 of
the Japanese commercial code. 4,000,000 shares
of treasury stock were retired during the
fiscal year ended March 31, 2006.The Corporation Law of Japan provides that an
amount equal to 10% of distributions from
retained earnings paid by the Company should
be appropriated as capital reserve or earned
reserve (hereinafter called reserve). No
further appropriations are required when the
total amount of the reserve exceed 25% of
capital stock.Based on a resolution of the Board of Directors, at the annual meeting of
shareholders to be held on June 26, 2008, the shareholders will be asked to
approve the declaration of a cash dividend in the amount of ¥9,633 million,
which will be paid to shareholders of record as of March 31, 2008. The
declaration of this dividend has not been reflected in the consolidated
financial statements as of March 31, 2008.The amount of retained earnings available for dividends distribution is
recorded in the Companys non-consolidated books and amounted to ¥152,756
million ($1,528 million) as of March 31, 2008.
 F-33




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##### Table of Contents



13.
    
    OTHER COMPREHENSIVE INCOME (LOSS)Accumulated other comprehensive income (loss) as of March 31, 2006, 2007 and 2008, were as follows:
 Yen
    
    
    U.S.dollars(millions)
    
    
    (thousands)2006
    
    
    2007
    
    
    2008
    
    
    2008Foreign currency translation adjustments:Beginning balance
    
    ¥
    (14,486
    )
    
    ¥
    (6,043
    )
    
    ¥
    2,764
    
    
    $
    27,640Adjustments for the year
    
    
    8,443
    
    
    
    8,807
    
    
    
    (10,274
    )
    
    
    (102,740
    )Ending balance
    
    ¥
    (6,043
    )
    
    ¥
    2,764
    
    
    ¥
    (7,510
    )
    
    $
    (75,100
    )Net unrealized holding gains on available-for-sale securities:Beginning balance
    
    ¥
    6,680
    
    
    ¥
    11,666
    
    
    ¥
    10,280
    
    
    $
    102,800Adjustments for the year
    
    
    4,986
    
    
    
    (1,386
    )
    
    
    (6,395
    )
    
    
    (63,950
    )Ending balance
    
    ¥
    11,666
    
    
    ¥
    10,280
    
    
    ¥
    3,885
    
    
    
    38,850Minimum pension liability adjustment:Beginning balance
    
    ¥
    (1,443
    )
    
    ¥
    (278
    )
    
    ¥
    
    
    
    $
    Adjustments for the year
    
    
    1,165
    
    
    
    94
    
    
    
    
    
    
    
    Adjustments to initially apply SFAS No.158
    
    
    
    
    
    
    184
    
    
    
    
    
    
    
    Ending balance
    
    ¥
    (278
    )
    
    ¥
    
    
    
    ¥
    
    
    
    $
    Pension liability adjustment:Beginning balance
    
    ¥
    
    
    
    ¥
    
    
    
    ¥
    (347
    )
    
    $
    (3,470
    )Adjustments for the year
    
    
    
    
    
    
    
    
    
    
    (3,685
    )
    
    
    (36,850
    )Adjustments to initially apply SFAS No.158
    
    
    
    
    
    
    (347
    )
    
    
    
    
    
    
    Ending balance
    
    ¥
    
    
    
    ¥
    (347
    )
    
    ¥
    (4,032
    )
    
    $
    (40,320
    )Total other accumulated comprehensive income (loss):Beginning balance
    
    ¥
    (9,249
    )
    
    ¥
    5,345
    
    
    ¥
    12,697
    
    
    $
    126,970Adjustments for the year
    
    
    14,594
    
    
    
    7,515
    
    
    
    (20,354
    )
    
    
    (203,540
    )Adjustments to initially apply SFAS No.158
    
    
    
    
    
    
    (163
    )
    
    
    
    
    
    
    Ending balance
    
    ¥
    5,345
    
    
    ¥
    12,697
    
    
    ¥
    (7,657
    )
    
    $
    (76,570
    )
 F-34




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##### Table of Contents



Tax effects allocated to each component of other comprehensive income were as follows:
 Yen (millions)Tax benefit
    
    
    Net of taxPretax amount
    
    
    (expense)
    
    
    amountFor the year ended March 31, 2006Foreign currency translation adjustment
    
    ¥
    8,715
    
    
    ¥
    (272
    )
    
    ¥
    8,443Unrealized gains on available-for-sale securities:Unrealized holding gains arising during the year
    
    
    11,267
    
    
    
    (4,539
    )
    
    
    6,728Less- Reclassification adjustment for gains realized in net
income
    
    
    (2,918
    )
    
    
    1,176
    
    
    
    (1,742
    )Net unrealized gains
    
    
    8,349
    
    
    
    (3,363
    )
    
    
    4,986Minimum pension liability adjustment
    
    
    2,525
    
    
    
    (1,360
    )
    
    
    1,165Other comprehensive income
    
    ¥
    19,589
    
    
    ¥
    (4,995
    )
    
    ¥
    14,594
 Yen (millions)Tax benefit
    
    
    Net of taxPretax amount
    
    
    (expense)
    
    
    amountFor the year ended March 31, 2007Foreign currency translation adjustment
    
    ¥
    8,900
    
    
    ¥
    (93
    )
    
    ¥
    8,807Unrealized holding losses on available-for-sale securities:Unrealized holding losses arising during the year
    
    
    (1,403
    )
    
    
    565
    
    
    
    (838
    )Less- Reclassification adjustment for gains realized in net
income
    
    
    (918
    )
    
    
    370
    
    
    
    (548
    )Net unrealized losses
    
    
    (2,321
    )
    
    
    935
    
    
    
    (1,386
    )Minimum pension liability adjustment
    
    
    160
    
    
    
    (66
    )
    
    
    94Other comprehensive income
    
    ¥
    6,739
    
    
    ¥
    776
    
    
    ¥
    7,515
 Yen (millions)Tax benefit
    
    
    Net of taxPretax amount
    
    
    (expense)
    
    
    amountFor the year ended March 31, 2008Foreign currency translation adjustment
    
    ¥
    (10,381
    )
    
    ¥
    107
    
    
    ¥
    (10,274
    )Unrealized holding losses on available-for-sale securities:Unrealized holding losses arising during the year
    
    
    (12,099
    )
    
    
    4,878
    
    
    
    (7,221
    )Less- Reclassification adjustment for losses realized in net income
    
    
    1,384
    
    
    
    (558
    )
    
    
    826Net unrealized losses
    
    
    (10,715
    )
    
    
    4,320
    
    
    
    (6,395
    )Pension liability adjustmentUnrealized losses arising during the year
    
    
    (6,470
    )
    
    
    2,633
    
    
    
    (3,837
    )Less- Reclassification adjustment for losses realized in net income
    
    
    236
    
    
    
    (84
    )
    
    
    152Net unrealized losses
    
    
    (6,234
    )
    
    
    2,549
    
    
    
    (3,685
    )Other comprehensive losses
    
    ¥
    (27,330
    )
    
    ¥
    6,976
    
    
    ¥
    (20,354
    )
 F-35




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##### Table of Contents



U.S. dollars (thousands)Tax benefit
    
    
    Net of taxPretax amount
    
    
    (expense)
    
    
    amountFor the year ended March 31, 2008Foreign currency translation adjustment
    
    $
    (103,810
    )
    
    $
    1,070
    
    
    $
    (102,740
    )Unrealized holding losses on available-for-sale securities:Unrealized holding losses arising during the year
    
    
    (120,990
    )
    
    
    48,780
    
    
    
    (72,210
    )Less- Reclassification adjustment for losses realized in net income
    
    
    13,840
    
    
    
    (5,580
    )
    
    
    8,260Net unrealized gains
    
    
    (107,150
    )
    
    
    43,200
    
    
    
    (63,950
    )Pension liability adjustmentUnrealized losses arising during the year
    
    
    (64,700
    )
    
    
    26,330
    
    
    
    (38,370
    )Less- Reclassification adjustment for losses realized in net income
    
    
    2,360
    
    
    
    (840
    )
    
    
    1,520Net unrealized losses
    
    
    (62,340
    )
    
    
    25,490
    
    
    
    (36,850
    )Other comprehensive losses
    
    $
    (273,300
    )
    
    $
    69,760
    
    
    $
    (203,540
    )
 14.
    
    EARNINGS PER SHAREA reconciliation of the numerators and denominators of basic earnings per share computations is as follows, there are no diluted effect during the representing fiscal
years.
 Yen
    
    
    U.S. dollars(millions)
    
    
    (thousands)Numerator
    
    2006
    
    
    2007
    
    
    2008
    
    
    2008Net income available to common share
holders  Basic
    
    ¥
    40,411
    
    
    ¥
    36,971
    
    
    ¥
    46,043
    
    
    $
    460,430Denominator
    
    Number of sharesWeighted average common shares
outstanding  Basic
    
    
    143,736,927
    
    
    
    143,706,789
    
    
    
    143,749,824Yen
    
    
    U.S. dollarsEarnings per share:Basic
    
    ¥
    281.1
    
    
    ¥
    257.3
    
    
    ¥
    320.3
    
    
    $
    3.20
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##### Table of Contents



15.
    
    COMMITMENTS AND CONTINGENT LIABILITIESAt March 31, 2008, the Company was contingently liable as a guarantor for housing and education
loans to employees in the amount of ¥6 million ($60 thousand). The Company will be required to
satisfy the outstanding loan commitments of certain employees in the event those employees are not
able to fulfill their repayment obligations. The fair value of the liabilities for the Companys
obligations under the guarantees described above as of March 31, 2008, was insignificant.At March 31, 2008, the Company was contingently liable as a guarantor for the union organized by
customers in the amount of ¥530 million ($5,300 thousand). The fair value of the liabilities for
the Companys obligations under the guarantees described above as of March 31, 2008, was
insignificant.Makitas purchase obligations, mainly for raw materials, were ¥9,632 million ($96,320 thousand) as
of March 31, 2008.Makita is involved in various claims and legal actions arising in the ordinary course of business.
In the opinion of management, the ultimate disposition of these matters will not have a material
adverse effect on Makitas consolidated financial position, results of operations, or cash flows.Makita made rental payments of ¥1,714 million, ¥1,881 million and ¥2,132 million ($21,320 thousand)
under cancelable and noncancelable operating lease agreements for offices, warehouses, automobiles
and office equipment during the years ended March 31, 2006, 2007 and 2008, respectively. The
minimum rental payments required under noncancelable operating lease agreements as of March 31,
2008, were as follows:
 Yen
    
    
    U.S. dollarsYear ending March 31,
    
    (millions)
    
    
    (thousands)2009
    
    ¥
    573
    
    
    $
    5,7302010
    
    
    404
    
    
    
    4,0402011
    
    
    284
    
    
    
    2,8402012
    
    
    201
    
    
    
    2,0102013
    
    
    156
    
    
    
    1,5602014 and thereafter
    
    
    203
    
    
    
    2,030¥
    1,821
    
    
    $
    18,210
 Makita generally guarantees the performance of products delivered and
services rendered for a certain period or term. Estimates for product
warranty cost are made based on historical warranty claim experience.
The change in accrued product warranty cost for the years ended March
31, 2006, 2007 and 2008 was summarized as follows:
 Yen
    
    
    U.S. dollars(millions)
    
    
    (thousands)2006
    
    
    2007
    
    
    2008
    
    
    2008Balance at beginning of year
    
    ¥
    804
    
    
    ¥
    928
    
    
    ¥
    1,306
    
    
    $
    13,060Addition
    
    
    853
    
    
    
    1,476
    
    
    
    2,117
    
    
    
    21,170Utilization
    
    
    (779
    )
    
    
    (1,163
    )
    
    
    (1,357
    )
    
    
    (13,570
    )Foreign exchange impact
    
    
    50
    
    
    
    65
    
    
    
    (102
    )
    
    
    (1,020
    )Balance at end of year
    
    ¥
    928
    
    
    ¥
    1,306
    
    
    ¥
    1,964
    
    
    $
    19,640
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##### Table of Contents



16.
    
    DERIVATIVES AND HEDGING ACTIVITIES
 (a)
    
    Risk management policyMakita is exposed to market risks, such as changes in currency exchange rates and interest rates.
Derivative financial instruments are comprised principally of foreign exchange contracts, currency
swaps, currency options contracts and interest rate swaps utilized by the Company and certain of
its consolidated subsidiaries to reduce these risks. Makita does not use derivative instruments for
trading or speculation purpose.Makita is also exposed to a risk of credit-related losses in the event of nonperformance by counter
parties to the financial instrument contracts; however it is not expected that any counter parties
will fail to meet their obligations, because the contracts are diversified among a number of major
internationally recognized credit worthy financial institutions.(b)
    
    Foreign currency exchange rate risk managementMakita operates internationally, giving rise to significant exposures to market risks from changes
in foreign exchange rates, and enters into forward exchange contracts, currency swaps and currency
options to hedge the foreign currency exposure.These derivative instruments are principally intended to protect against foreign exchange exposure
related to intercompany transfer of inventories and financing activities. The fair values of these
derivative instruments as of March 31, 2007 and 2008 of ¥50 million and ¥601 million ($6,010
thousand), respectively, were recorded as assets and of ¥215 million and ¥216 million ($2,160
thousand), respectively as liabilities, and the changes in their fair values for the years ended
March 31, 2007 and 2008 amounting to a gain of ¥45 million and ¥550 million ($5,500 thousand),
respectively, were recorded in exchange gains on foreign currency transactions, net.(c)
    
    Interest rate risk managementMakita executes financing and investing activities through the Company. To manage the variability
in cash flows caused by interest rate change of time deposit, the Company enters into interest rate
swaps as a cash flow hedge.The Company had interest rate swaps with a fair value of ¥3 million as of March 31, 2007. The
interest rate swaps matured during the year ended March 31, 2008. The Company did not have interest
rate swaps as of March 31, 2008. These interest swaps were recorded as current liabilities. As the
interest rate swaps did not meet the hedge accounting criteria, the changes in fair value of the
hedging interest rate swaps which amounted to a gain of ¥2 million and ¥3 million were recorded in
earnings and classified in other income for the years ended March 31, 2007 and 2008, respectively.
 17.
    
    DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTSThe following methods and significant assumptions were used to estimate the fair value of each class of financial instruments for
which it is practicable to estimate a fair value:
 (a)
    
    Cash and Cash Equivalents, Time Deposits, Trade Notes and Accounts Receivable, Short-term
Borrowings, Trade Notes and Accounts Payable, Other payables, and Other Accrued ExpensesThe carrying amounts approximate fair value because of the short maturities of those instruments.(b)
    
    Long-term Time DepositsThe fair value is estimated by discounting future cash flows using the current rates that Makita
would be offered for deposits with similar terms and remaining maturities.(c)
    
    Marketable Securities and Investment SecuritiesThe fair value of marketable and investment securities is estimated based on quoted market
prices. For certain investments such as non-marketable securities, since there are no quoted
market prices existing, a reasonable estimation of a fair value could not be made without
incurring excessive cost.
 F-38




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##### Table of Contents



Non-marketable securities amounted to ¥567 million and ¥572 million
($5,720 thousand) as of March 31, 2007 and 2008, respectively.(d)
    
    Long-term IndebtednessThe fair value of long-term indebtedness is a present value of future cash flows associated with
each instrument discounted using Makitas current borrowing rates for similar debt instruments
of comparable maturities.(e)
    
    Interest Rate Swap AgreementsThe fair values of interest rate swap agreements are based on the estimated amount that Makita
would receive or pay to terminate the swap agreements which are based on quoted prices obtained
from brokers.(f)
    
    Other Derivative Financial InstrumentsThe fair values of other derivative financial instruments, foreign currency contracts, currency
swaps and currency option contracts, all of which are used for hedging purposes, are estimated
by obtaining quotes and other relevant information from brokers.The estimated fair value of the financial instruments was as follows:
 Yen
    
    U.S. dollars(millions)
    
    (thousands)2007
    
    2008
    
    2008Carrying
    
    
    
    
    
    Carrying
    
    
    
    
    
    CarryingAmount
    
    Fair Value
    
    Amount
    
    Fair Value
    
    Amount
    
    Fair ValueMarketable securities
    
    ¥
    58,217
    
    
    ¥
    58,216
    
    
    ¥
    49,443
    
    
    ¥
    49,443
    
    
    $
    494,430
    
    
    $
    494,430Investment securities
    
    
    27,279
    
    
    
    27,172
    
    
    
    18,034
    
    
    
    17,963
    
    
    
    180,340
    
    
    
    179,630Long-term time deposits
    
    
    2,207
    
    
    
    2,207
    
    
    
    2,207
    
    
    
    2,207
    
    
    
    22,070
    
    
    
    22,070Long-term indebtedness including current maturities
    
    
    (129
    )
    
    
    (129
    )
    
    
    (1,050
    )
    
    
    (1,050
    )
    
    
    (10,500
    )
    
    
    (10,500
    )Interest rate swap agreements:Assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Liabilities
    
    
    (3
    )
    
    
    (3
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Foreign currency contracts:Assets
    
    
    25
    
    
    
    25
    
    
    
    186
    
    
    
    186
    
    
    
    1,860
    
    
    
    1,860Liabilities
    
    
    (125
    )
    
    
    (125
    )
    
    
    (191
    )
    
    
    (191
    )
    
    
    (1,910
    )
    
    
    (1,910
    )Currency swaps:Assets
    
    
    18
    
    
    
    18
    
    
    
    408
    
    
    
    408
    
    
    
    4,080
    
    
    
    4,080Liabilities
    
    
    (71
    )
    
    
    (71
    )
    
    
    (23
    )
    
    
    (23
    )
    
    
    (230
    )
    
    
    (230
    )Currency option contracts:Assets
    
    
    7
    
    
    
    7
    
    
    
    7
    
    
    
    7
    
    
    
    70
    
    
    
    70Liabilities
    
    
    (19
    )
    
    
    (19
    )
    
    
    (2
    )
    
    
    (2
    )
    
    
    (20
    )
    
    
    (20
    )
 (g)
    
    LimitationThe fair value estimates are made at a specific point in time, based on relevant market information
and information about the financial instrument. These estimates are subjective in nature and involve
uncertainties and are matters of significant judgment and therefore cannot be determined with
precision. Changes in assumptions could significantly affect the estimates.
 F-39




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##### Table of Contents



18.
    
    OPERATING SEGMENT INFORMATIONThe operating segments presented below are defined as components of the enterprise for which
separate financial information is available and regularly reviewed by the Companys chief operating
decision maker. The Companys chief operating decision maker utilizes various measurements to
assess segment performance and allocate resources to the segments.During the three years ended March 31, 2006, 2007 and 2008, Makitas operating structure included
the following geographical operating segments: Japan Group, Europe Group, North America Group, Asia
Group, and Other Group.Makita evaluates the performance of each operating segment based on U.S. GAAP.Segment Products and Services
Makita is a manufacturer and wholesaler of electric power tools and other tools. The operating segments derive substantially all of their revenues from the sale of electric power tools and parts and repairs.Year ended March 31, 2006
 Yen(millions)North
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Corporate andJapan
    
    
    Europe
    
    
    America
    
    
    Asia
    
    
    Other
    
    
    Total
    
    
    Eliminations
    
    
    ConsolidatedSales:External customers
    
    ¥
    53,788
    
    
    ¥
    91,249
    
    
    ¥
    47,979
    
    
    ¥
    8,645
    
    
    ¥
    27,414
    
    
    ¥
    229,075
    
    
    ¥
    
    
    
    ¥
    229,075Intersegment
    
    
    57,826
    
    
    
    6,306
    
    
    
    4,321
    
    
    
    43,979
    
    
    
    181
    
    
    
    112,613
    
    
    
    (112,613
    )
    
    
    Total
    
    ¥
    111,614
    
    
    ¥
    97,555
    
    
    ¥
    52,300
    
    
    ¥
    52,624
    
    
    ¥
    27,595
    
    
    ¥
    341,688
    
    
    ¥
    (112,613
    )
    
    ¥
    229,075Operating expenses
    
    ¥
    87,468
    
    
    ¥
    85,505
    
    
    ¥
    50,437
    
    
    ¥
    46,162
    
    
    ¥
    25,048
    
    
    ¥
    294,620
    
    
    ¥
    (111,323
    )
    
    ¥
    183,297Operating income
    
    
    24,146
    
    
    
    12,050
    
    
    
    1,863
    
    
    
    6,462
    
    
    
    2,547
    
    
    
    47,068
    
    
    
    (1,290
    )
    
    
    45,778Long-lived assets
    
    
    36,578
    
    
    
    7,529
    
    
    
    3,732
    
    
    
    9,170
    
    
    
    2,371
    
    
    
    59,380
    
    
    
    (177
    )
    
    
    59,203Identifiable assets
    
    
    243,553
    
    
    
    85,858
    
    
    
    44,814
    
    
    
    42,275
    
    
    
    21,556
    
    
    
    438,056
    
    
    
    (112,018
    )
    
    
    326,038Depreciation and amortization
    
    
    2,917
    
    
    
    1,217
    
    
    
    656
    
    
    
    923
    
    
    
    269
    
    
    
    5,982
    
    
    
    (60
    )
    
    
    5,922Capital expenditures
    
    
    6,398
    
    
    
    1,549
    
    
    
    620
    
    
    
    2,537
    
    
    
    426
    
    
    
    11,530
    
    
    
    (147
    )
    
    
    11,383
 Year ended March 31, 2007
 Yen(millions)North
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Corporate andJapan
    
    
    Europe
    
    
    America
    
    
    Asia
    
    
    Other
    
    
    Total
    
    
    Eliminations
    
    
    ConsolidatedSales:External customers
    
    ¥
    61,776
    
    
    ¥
    124,924
    
    
    ¥
    51,432
    
    
    ¥
    9,698
    
    
    ¥
    32,103
    
    
    ¥
    279,933
    
    
    ¥
    
    
    
    ¥
    279,933Intersegment
    
    
    64,040
    
    
    
    5,709
    
    
    
    5,297
    
    
    
    67,021
    
    
    
    149
    
    
    
    142,216
    
    
    
    (142,216
    )
    
    
    Total
    
    ¥
    125,816
    
    
    ¥
    130,633
    
    
    ¥
    56,729
    
    
    ¥
    76,719
    
    
    ¥
    32,252
    
    
    
    422,149
    
    
    ¥
    (142,216
    )
    
    ¥
    279,933Operating expenses
    
    ¥
    108,403
    
    
    ¥
    112,577
    
    
    ¥
    54,217
    
    
    ¥
    66,815
    
    
    ¥
    28,786
    
    
    ¥
    370,798
    
    
    ¥
    (139,041
    )
    
    ¥
    231,757Operating income
    
    
    17,413
    
    
    
    18,056
    
    
    
    2,512
    
    
    
    9,904
    
    
    
    3,466
    
    
    
    51,351
    
    
    
    (3,175
    )
    
    
    48,176Long-lived assets
    
    
    36,831
    
    
    
    10,345
    
    
    
    3,381
    
    
    
    10,296
    
    
    
    2,690
    
    
    
    63,543
    
    
    
    (163
    )
    
    
    63,380Identifiable assets
    
    
    257,735
    
    
    
    110,158
    
    
    
    38,756
    
    
    
    50,934
    
    
    
    26,535
    
    
    
    484,118
    
    
    
    (115,624
    )
    
    
    368,494Depreciation and amortization
    
    
    5,270
    
    
    
    1,432
    
    
    
    637
    
    
    
    1,233
    
    
    
    261
    
    
    
    8,833
    
    
    
    (60
    )
    
    
    8,773Capital expenditures
    
    
    7,266
    
    
    
    2,820
    
    
    
    451
    
    
    
    2,235
    
    
    
    351
    
    
    
    13,123
    
    
    
    (143
    )
    
    
    12,980
 F-40




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##### Table of Contents



Year ended March 31, 2008
 Yen(millions)North
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Corporate andJapan
    
    
    Europe
    
    
    America
    
    
    Asia
    
    
    Other
    
    
    Total
    
    
    Eliminations
    
    
    ConsolidatedSales:External customers
    
    ¥
    72,466
    
    
    ¥
    160,218
    
    
    ¥
    56,234
    
    
    ¥
    11,271
    
    
    ¥
    42,388
    
    
    ¥
    342,577
    
    
    ¥
    
    
    
    ¥
    342,577Intersegment
    
    
    69,540
    
    
    
    5,606
    
    
    
    5,212
    
    
    
    101,211
    
    
    
    172
    
    
    
    181,741
    
    
    
    (181,741
    )
    
    
    Total
    
    ¥
    142,006
    
    
    ¥
    165,824
    
    
    ¥
    61,446
    
    
    ¥
    112,482
    
    
    ¥
    42,560
    
    
    ¥
    524,318
    
    
    ¥
    (181,741
    )
    
    ¥
    342,577Operating expenses
    
    ¥
    120,020
    
    
    ¥
    138,850
    
    
    ¥
    59,727
    
    
    ¥
    98,468
    
    
    ¥
    36,964
    
    
    ¥
    454,029
    
    
    ¥
    (178,483
    )
    
    ¥
    275,546Operating income
    
    
    21,986
    
    
    
    26,974
    
    
    
    1,719
    
    
    
    14,014
    
    
    
    5,596
    
    
    
    70,289
    
    
    
    (3,258
    )
    
    
    67,031Long-lived assets
    
    
    42,752
    
    
    
    10,563
    
    
    
    2,656
    
    
    
    9,961
    
    
    
    3,313
    
    
    
    69,245
    
    
    
    (187
    )
    
    
    69,058Identifiable assets
    
    
    264,721
    
    
    
    126,428
    
    
    
    39,523
    
    
    
    52,890
    
    
    
    31,556
    
    
    
    515,118
    
    
    
    (128,651
    )
    
    
    386,467Depreciation and amortization
    
    
    4,874
    
    
    
    1,653
    
    
    
    691
    
    
    
    1,397
    
    
    
    320
    
    
    
    8,935
    
    
    
    (64
    )
    
    
    8,871Capital expenditures
    
    
    8,637
    
    
    
    2,453
    
    
    
    713
    
    
    
    2,220
    
    
    
    1,113
    
    
    
    15,136
    
    
    
    (100
    )
    
    
    15,036
 Year ended March 31, 2008
 U.S. dollars(thousands)North
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Corporate andJapan
    
    
    Europe
    
    
    America
    
    
    Asia
    
    
    Other
    
    
    Total
    
    
    Eliminations
    
    
    ConsolidatedSales:External customers
    
    $
    724,660
    
    
    $
    1,602,180
    
    
    $
    562,340
    
    
    $
    112,710
    
    
    $
    423,880
    
    
    $
    3,425,770
    
    
    $
    
    
    
    $
    3,425,770Intersegment
    
    
    695,400
    
    
    
    56,060
    
    
    
    52,120
    
    
    
    1,012,110
    
    
    
    1,720
    
    
    
    1,817,410
    
    
    
    (1,817,410
    )
    
    
    Total
    
    $
    1,420,060
    
    
    $
    1,658,240
    
    
    $
    614,460
    
    
    $
    1,124,820
    
    
    $
    425,600
    
    
    $
    5,243,180
    
    
    $
    (1,817,410
    )
    
    $
    3,425,770Operating expenses
    
    $
    1,200,200
    
    
    $
    1,388,500
    
    
    $
    597,270
    
    
    $
    984,680
    
    
    $
    369,640
    
    
    $
    4,540,290
    
    
    $
    (1,784,830
    )
    
    $
    2,755,460Operating income
    
    
    219,860
    
    
    
    269,740
    
    
    
    17,190
    
    
    
    140,140
    
    
    
    55,960
    
    
    
    702,890
    
    
    
    (32,580
    )
    
    
    670,310Long-lived assets
    
    
    427,520
    
    
    
    105,630
    
    
    
    26,560
    
    
    
    99,610
    
    
    
    33,130
    
    
    
    692,450
    
    
    
    (1,870
    )
    
    
    690,580Identifiable assets
    
    
    2,647,210
    
    
    
    1,264,280
    
    
    
    395,230
    
    
    
    528,900
    
    
    
    315,560
    
    
    
    5,151,180
    
    
    
    (1,286,510
    )
    
    
    3,864,670Depreciation and
amortization
    
    
    48,740
    
    
    
    16,530
    
    
    
    6,910
    
    
    
    13,970
    
    
    
    3,200
    
    
    
    89,350
    
    
    
    (640
    )
    
    
    88,710Capital expenditures
    
    
    86,370
    
    
    
    24,530
    
    
    
    7,130
    
    
    
    22,200
    
    
    
    11,130
    
    
    
    151,360
    
    
    
    (1,000
    )
    
    
    150,360
 Long-lived assets shown above consist of property, plant and equipment.Transfers between segments are made at estimated arms-length prices. No single external customer
accounted for 10% or more of Makitas net sales for each of the years ended March 31, 2006, 2007
and 2008.Segment information is determined by the location of the Company and its relevant subsidiaries.
 F-41




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##### Table of Contents



Makitas current revenues from external customers by each group of products are set forth below.
 (Yen millions, except for percentage amounts)Consolidated Net Sales by Product Categories
    
    
    U.S. dollarsYear ended March 31,
    
    
    (thousands)2006
    
    
    2007
    
    
    2008
    
    
    2008Power Tools
    
    ¥
    171,376
    
    
    
    74.8
    %
    
    ¥
    210,894
    
    
    
    75.3
    %
    
    ¥
    255,869
    
    
    
    74.7
    %
    
    $
    2,558,690Gardening and
Household Products
    
    
    23,434
    
    
    
    10.2
    
    
    
    28,123
    
    
    
    10.0
    
    
    
    40,410
    
    
    
    11.8
    
    
    
    404,100Parts, Repairs and
Accessories
    
    
    34,265
    
    
    
    15.0
    
    
    
    40,916
    
    
    
    14.7
    
    
    
    46,298
    
    
    
    13.5
    
    
    
    462,980Total
    
    ¥
    229,075
    
    
    
    100.0
    %
    
    ¥
    279,933
    
    
    
    100.0
    %
    
    ¥
    342,577
    
    
    
    100.0
    %
    
    $
    3,425,770
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##### Table of Contents



19.
    
    RELATED PARTY TRANSACTIONSThe transactions between the Company and Maruwa Co., Ltd. (Maruwa), for which a director of the
Company and certain of his family members have a majority of the voting rights, amounted to ¥2
million for advertising expenses for each of the years ended March 31, 2006, 2007 and 2008.The Companys purchases of raw materials and production equipment from Toa Co., Ltd., for which a
director of the Company and certain of his family members have a majority of the voting rights,
were ¥223 million, ¥129 million and ¥96 million during the years ended March 31, 2006, 2007 and
2008, respectively. The accounts payable of the Company related to these transactions were ¥10
million, ¥6 million and ¥15 million as of March 31, 2006, 2007 and 2008, respectively.The president of Toyoda Machine Works Ltd. was elected as an outside director of the Company as of
June 29, 2005. The Companys purchases of raw materials and production equipment from Toyoda
Machine Works Ltd. were ¥4 million from July 1 to December 31, 2005. The outside director became a
vice president of JTEKT Corporation, which was formed as the result of a business combination
between Toyoda Machine Works Ltd. and Koyo Seiko Co., Ltd., occurring on January 1, 2006, became an
outside director of the Company. The Companys purchases of raw materials and production equipment
from JTEKT Corporation, were ¥151 million from January 1, 2006 to March 31, 2006, ¥498 million
during the year ended March 31, 2007 and ¥658 million during the year ended March 31, 2008. The
accounts payable of the Company related to these transactions were ¥53 million, ¥35 million and ¥65
million as of March 31, 2006, 2007, and 2008 respectively.20.
    
    SUBSEQUENT EVENTSOn April 30, 2008, the Board of Directors of the Company approved a plan to repurchase up to 3
million shares of the Companys common stock at a cost of up to ¥12,000 million for the period from
May 1, 2008 to May 26, 2008. Such repurchases were intended to perform flexible capital strategies
and enhance shareholders value. As a result, the Company repurchased 3 million shares of the
Companys common stock for ¥11,923 million.
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##### Table of Contents



MAKITA CORPORATION AND CONSOLIDATED SUBSIDIARIES
 
 SCHEDULE II  VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
 FOR THE YEARS ENDED MARCH 31, 2006, 2007 AND 2008
 Japanese Yen (millions)AdditionsBalance at
    
    
    Charged to
    
    
    Charged to
    
    
    Deductions
    
    
    
    
    
    
    Balance atbeginning
    
    
    costs and
    
    
    Other
    
    
    from
    
    
    Translation
    
    
    end ofDescriptions
    
    of year
    
    
    expenses
    
    
    Accounts
    
    
    reserves
    
    
    adjustments
    
    
    year2006:Allowance for doubtful receivables
    
    
    1,178
    
    
    
    114
    
    
    
    
    
    
    
    (356
    )
    
    
    80
    
    
    
    1,016Deferred income tax assets
valuation allowance
    
    
    8,211
    
    
    
    698
    
    
    
    
    
    
    
    (6,228
    )
    
    
    292
    
    
    
    2,9732007:Allowance for doubtful receivables
    
    
    1,016
    
    
    
    175
    
    
    
    
    
    
    
    (386
    )
    
    
    64
    
    
    
    869Deferred income tax assets
valuation allowance
    
    
    2,973
    
    
    
    34
    
    
    
    
    
    
    
    (2,701
    )
    
    
    12
    
    
    
    3182008:Allowance for doubtful receivables
    
    
    869
    
    
    
    269
    
    
    
    
    
    
    
    (73
    )
    
    
    (47
    )
    
    
    1,018Deferred income tax assets
valuation allowance
    
    
    318
    
    
    
    
    
    
    
    251
    
    
    
    (237
    )
    
    
    (1
    )
    
    
    331
 F-44