UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 6-K

REPORT OF FOREIGN PRIVATE ISSUER

PURSUANT TO RULE 13a-16 or 15d-16 UNDER

THE SECURITIES EXCHANGE ACT OF 1934

For the month of June, 2012

Commission file number 0-12602

MAKITA CORPORATION

 

(Translation of registrant’s name into English)

3-11-8, Sumiyoshi-cho, Anjo City, Aichi Prefecture, Japan

 

(Address of principal executive offices)

Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F.

Form 20-F  x    Form 40-F  ¨

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101 (b)(1):    x

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101 (b)(7):    ¨

Indicate by check mark whether by furnishing the information contained in this Form, the registrant is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.

Yes  ¨             No  x

If “Yes” is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): 82-         

 

 

 

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

 

Date: June 4, 2012

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(Summary English Translation of the Notice of the 100th Ordinary General Meeting of Shareholders Originally Issued in Japanese Language)

MAKITA CORPORATION

(Stock code: 6586)

June 4, 2012

To the Shareholders of

MAKITA CORPORATION

NOTICE OF THE 100TH ORDINARY GENERAL MEETING OF SHAREHOLDERS

You are respectfully requested to attend the 100th Ordinary General Meeting of Shareholders of MAKITA CORPORATION, which is hereby announced.

If you do not expect to attend the meeting, you may exercise your voting rights through the enclosed voting form. Please review the accompanying information and send the enclosed voting form to us by return mail after indicating your vote for or against the proposition.

 

		Masahiko Goto President MAKITA CORPORATION 3-11-8, Sumiyoshi-cho, Anjo City, Aichi Prefecture, 446-8502, Japan

 

1.      Date and Time:		10 a.m., Tuesday, June 26, 2012
2.      Place:		Head Office of MAKITA CORPORATION, 5th Floor 3-11-8, Sumiyoshi-cho, Anjo City, Aichi Prefecture, 446-8502, Japan

 

3.

Agenda:

Items to be Reported:

1.

The Business Report, Consolidated Financial Statements for the 100th term (from April 1, 2011 to March 31, 2012) and the Audit Reports on such Consolidated Financial Statements by the Accounting Auditors and the Board of Statutory Auditors

2.

The Non-consolidated Financial Statements for the 100th term

 

Items to be Resolved:

No.1

Appropriations of Surplus

No.2

Election of 3 Statutory Auditors

No.3

Payment of Bonus to Directors

 

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BUSINESS REPORT

(From April 1, 2011 to March 31, 2012)

1. Matters on the Current Status of Makita

(1) Progress and Results of Operations

In the term ended March 31, 2012, the economy in Western Europe, which was once on a recovery trend, slowed down due to the effects of financial crisis etc. However, German economy grew steadily, supported by strong exports due to the depreciation of the euro. The Russian economy continued to be in good condition thanks to rising crude oil prices. In the United States, the economy remained sluggish because the housing market was still weak, though consumer spending showed some signs of recovery. In Asia and Central and South America, robust capital investments and favorable exports kept the economy growing, but the growth pace slowed due to credit tightening in China and Brazil and the flooding in Thailand. In Japan, the economy didn’t attain the full-scale recovery because exports remained weak due to the yen’s unprecedented appreciation against the Euro and the U.S. dollar, though consumer spending gradually recovered after the Great East Japan Earthquake in March 2011.

Under these circumstances, in development side, Makita Corporation (the “Company”) and its consolidated subsidiaries (collectively “Makita”) continuously expanded its product lines, including those of power tools, rechargeable tools and gardening equipment through the development of smaller and lighter tools or tools with lower noise and vibration. In addition, we set up a development and experimental center for gardening equipment at Nisshin Office (Aichi) in October 2011 to upgrade and extend the product line-ups of engine-powered gardening equipment. In production side, we strengthened our quality control system to continuously produce high-quality brands, while improving a production system so that we could flexibly respond to a change in demand. In sales side, we improved the sales network in China and set up a subsidiary in Slovenia to strengthen its sales system in Balkan countries. Through these steps, we strove to maintain and improve our system of providing sales and after-sales services from immediate proximity to the customers, which had already been our forte.

Our consolidated net sales for this year increased by 8.5% to 295,711 million yen compared to the same period of the previous year. This was because of the rollout of attractive new products as well as the success in expanding sales by making the most of our sales and after-sales service structures that have always been our strong point, although the yen’s appreciation resulted in a decline in our overseas sales. Operating income increased by 15.8% to 48,516 million yen (operating income ratio: 16.4%). This was mainly because of a leap in capacity utilization at the plant as well as an increase in net sales. Meanwhile, because of an increase in non-operating expenses, such as foreign exchange losses of 2,150 million yen due to a drastic appreciation of the yen and realized losses on securities of 652 million yen due to a fall in share prices, income before income taxes and net income attributable to Makita Corporation increased by 9.9% to 46,963 million yen (income before income taxes ratio: 15.9%) and by 8.7% to 32,497 million yen (net income attributable to Makita Corporation ratio: 11.0%), respectively.

Net sales results by region were as follows:

Net sales in Japan increased by 15.4% to 53,175 million yen compared to the same period of the previous year, a record amount. This was because of the favorable sales of lithium-ion battery products, the best product line-ups in the industry, and increased demand from post-quake restoration and reconstruction efforts.

Net sales in Europe increased by 6.3% to 123,251 million yen compared to the same period of the previous year. This was due to steady sales in Russia, though demand in Western countries, such as Germany and the U.K., slowed down in the latter half of the current year.

Net sales in North America increased by 1.0% to 37,475 million yen compared to the same period of the previous year. This was primarily because our sales, mainly lithium-ion battery products, remained robust amid sluggish housing market, though our sales suffered a decline in value due to the yen’s appreciation.

Net sales in Asia increased by 12.7% to 26,013 million yen compared to the same period of the previous year. This was because demand steadily recovered in Southeast Asian countries, though China’s tight credit policy and Thailand’s flooding affected our sales.

Sales situation in other regions are as follows. Net sales in Central and South America and Oceania increased by 15.2% to 23,370 million yen and by 15.6% to 17,780 million yen, respectively, compared to the same period of the previous year, because demand was strong in both regions. Net sales in the Middle East and Africa decreased by 0.5% to 14,647 million yen, because economic activities stagnated due to political uncertainty.

Overall, overseas sales accounted for 82.0% of total sales.

 

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(2) Management Challenges

In developed countries, competition among companies is expected to intensify further because recovery of demand will remain moderate. In emerging countries including Asia where construction demand is expected to expand continuously, markets with a strong orientation toward low-price products are likely to emerge. With trends in crude oil prices and the foreign exchange rates being unpredictable, Makita is expected to continue facing a challenging business environment.

Based on these situations, Makita aims to build a strong brand equity and to become a “Strong Company”, in other words, to become a company that can obtain and maintain worldwide market leadership as a global total supplier of power tools for professional use, pneumatic tools, and gardening equipment etc. through actively making the following efforts:

(i)

Developing new products that fully satisfy professional users by reinforcing its R&D and product development activities to deliver more user-friendly and earth-conscious power tools and gardening equipment.

(ii)

Upgrading global production organizations, which would enable Makita to respond to changing demand conditions and to achieve high quality and price competitiveness of its products; and

(iii)

Strengthening sales activities to professional users and maintaining and improving its sales and after-sales service systems, which hold leading positions in the industry.

Makita will strive to maintain a solid financial position enabling it to implement these measures, which, we believe, will lead to enhancing customer satisfaction and raising Makita’s position in the industry, resulting, in turn, in the improvement of its corporate value.

In closing, we would like to thank you for your ongoing support and ask you for continued backing.

(3) Capital Expenditures

During the term, Makita allocated 13,481 million yen for its capital expenditures. These funds used by the Company amounted to 3,865 million yen. This reflected mainly capital expenditures for set up a development and experimental center for gardening equipment, and metal molds for new products. These funds also used by subsidiaries amounted to 9,616 million yen. This reflected mainly capital expenditures for buildings, machinery equipments and metal molds of China plant, and for land and buildings of Thai plant.

(4) Financial Position and Results of Operations for the Recent 3 Terms

 

Description		97th term (ended March 31, 2009)				98th term (ended March 31, 2010)				99th term (ended March 31, 2011)				100th term (ended March 31, 2012)
Net sales (Millions of Yen)			294,034				245,823				272,630				295,711
Operating income (Millions of Yen)			50,075				30,390				41,909				48,516
Income before income taxes (Millions of Yen)			44,443				33,518				42,730				46,963
Net income attributable to Makita Corporation (Millions of Yen)			33,286				22,258				29,905				32,497
Earning per share (Basic) Net income attributable to Makita Corporation common shareholders (yen)			236.88				161.57				217.08				236.78
Total assets (Millions of Yen)			336,644				349,839				372,507				383,256
Total Makita Corporation Shareholders’ equity (Millions of Yen)			283,485				297,207				307,149				321,253

 

Notes:		1.		Consolidated financial statements are prepared in accordance with United States Generally Accepted Accounting Principles.
		2.		Earning per share (Basic) Net income attributable to Makita Corporation common shareholders is calculated based on the average number of outstanding shares during the term.
		3.		Amounts of less than 1 million yen have been rounded.

 

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(5) Significant Subsidiaries

Company Name

Capital (thousands)

Proportion of     Ownership and     Voting interest     (%)

Principal Business

Makita U.S.A. Inc.

USD

161,400

100.0

Sales of electric power tools

Makita (U.K.) Ltd.

GBP

21,700

100.0*

Sales of electric power tools

Makita France SAS

EUR

12,436

55.0*

Sales of electric power tools

Makita Werkzeug G.m.b.H (Germany)

EUR

7,669

100.0*

Sales of electric power tools

Makita Oy (Finland)

EUR

100

100.0*

Sales of electric power tools

Makia Gulf FZE (U.A.E.)

AED

22,391

100.0

Sales of electric power tools

Makita (China) Co., Ltd.

USD

72,000

100.0

Manufacture and sales of electric power tools

Makita (Kunshan) Co., Ltd.

USD

25,000

100.0

Manufacture of electric power tools

Makita (Australia) Pty. Ltd.

AUD

13,000

100.0

Sales of electric power tools

Makita do Brasil Ferramentas Elétricas Ltda.

BRL

87,943

99.9

Manufacture and sales of electric power tools

Note: The Proportion of Ownership and Voting interest with asterisks include the shares owned by the subsidiaries.

(6) Principal Operations

Makita is primarily involved in the production and sales of electric power tools such as cordless impact drivers, rotary hammers, circular saws and angle grinders, pneumatic tools such as air nailers and tackers, gardening equipment such as hedge trimmers and petrol brushcutters, and household tools such as cordless cleaners.

(7) Principal Sales Offices and Plants

1. Makita Corporation

2. Subsidiaries

 

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(8) Employees

1. Employees of Makita

 

Number of Employees		Increase/Decrease
12,563		509 (Increase)

2. Employees of the Company

 

Number of Employees		Increase/Decrease		Average Age		Average Years of Service
2,807		28 (Decrease)		40.7		18.9

2. Shareholding Status of the Company

(1) Total Number of Shares Authorized to be Issued by the Company:		496,000,000 shares
(2) Total Number of Outstanding Shares:		135,750,518 shares (excluding treasury stock of 4,258,242 shares)
(3) Number of Shareholders:		14,334
(4) Major Shareholders:

 

Note:		The Percentage is calculated based on the total number of outstanding shares (excluding treasury stock) at the end of the term.

(5) Other Important Matters Concerning Shares

The Company purchased 2,000,000 shares of common stock for the total amount of 5,033 million yen through market transactions for the period from December 26, 2011 through January 10, 2012, pursuant to the resolution of the Board of Directors on December 22, 2011, in accordance with Article 165, Paragraph 2 of the Companies Act and Article 7 of the Articles of Incorporation of the Company, in order to enhance the performance of flexible capital management corresponding to the change in the business environment and the increase of the shareholders value through the improvement of capital efficiency.

 

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3. Directors and Statutory Auditors of the Company

(1) Directors and Statutory Auditors

Title		Name		Position at the Company and Important Concurrent Posts
President*		Masahiko Goto
Director Managing Corporate Officer		Yasuhiko Kanzaki		In charge of International Sales and General Manager of International Sales Headquarters: Europe, the Middle East, Africa Region
Director Managing Corporate Officer		Tadayoshi Torii		In charge of Production and General Manager of Production Headquarters
Director Managing Corporate Officer		Shiro Hori		In charge of International Sales and General Manager of International Sales Headquarters: America, Asia and Oceania Region
Director Corporate Officer		Tomoyasu Kato		General Manager of Research and Development Headquarters
Director Corporate Officer		Tadashi Asanuma		In charge of Domestic Sales and General Manager of Domestic Sales Marketing Headquarters
Director Corporate Officer		Hisayoshi Niwa		General Manager of Quality Headquarters
Director Corporate Officer		Shinichiro Tomita		General Manager of Purchasing Headquarters
Director Corporate Officer		Tetsuhisa Kaneko		General Manager of Production Headquarters (in charge of China plant)
Director Corporate Officer		Yoji Aoki		General Manager of Administration Headquarters
Director		Motohiko Yokoyama		Chairman and Representative Director of JTEKT Corporation Chairman of the Japan Machine Tool Builders’ Association
Standing Statutory Auditor		Toshihito Yamazoe
Standing Statutory Auditor		Haruhito Hisatsune
Statutory Auditor		Masafumi Nakamura		Representative of Masafumi Nakamura Accountancy Firm Council member of The Japanese Institute of Certified Public Accountants Professor in Graduate School of Business at Aichi Shukutoku University
Statutory Auditor		Michiyuki Kondo		Representative of Kondo Michiyuki Law Firm

 

Notes: 1.		The asterisk denotes Representative Director.
2.		In order to promote swift execution of group strategies and strengthen the business affairs of Makita, the Company has introduced the corporate officer system. Corporate officers consist of 16 members including 10 directors excluding 1 outside director.
3.		Changes in important concurrent posts during the term

On June 28, 2011, the following change in Director’s important concurrent post was made.

 

Name		After		Before
Motohiko Yokoyama		Chairman and Representative Director of JTEKT Corporation		Vice Chairman and Representative Director of JTEKT Corporation

4.		Changes in important concurrent posts after the term

On April 1, 2012, the following change in Statutory Auditor’s important concurrent posts was made.

 

Name		After		Before
Masafumi Nakamura		Professor of Faculty of Business at Aichi Shukutoku University		Professor of Graduate School of Business at Aichi Shukutoku University

5.		Mr. Motohiko Yokoyama is an Outside Director.
6.		Mr. Haruhito Hisatsune, Mr. Masafumi Nakamura, and Mr. Michiyuki Kondo are Outside Statutory Auditors.
7.		The Company has designated Mr. Motohiko Yokoyama, a Director, and Mr. Haruhito Hisatsune, Mr. Masafumi Nakamura and Mr. Michiyuki Kondo, Statutory Auditors, as the “Independent Director(s)/Statutory Auditor(s)” as required by the regulations of the Tokyo Stock Exchange, Inc. and the Nagoya Stock Exchange, Inc. and made required notification therefor to these Stock Exchanges.
8.		Mr. Haruhito Hisatsune, Standing Statutory Auditor, has a substantial amount of expertise in finance and accounting, through experience working at financial institution for many years.
9.		Mr. Masafumi Nakamura, Statutory Auditor, is a certified public accountant and has a substantial amount of expertise in finance and accounting.

 

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(2) Total Amounts of Compensation and Bonus to Directors and Statutory Auditors

Classification		Total amounts of Compensation (Millions of Yen)				Total amounts of each type of Compensation and Number of payment recipients
						Base Compensation (Millions of Yen)				Number of payment recipients				Bonuses (Millions of Yen)				Number of payment recipients
Directors			284				156				11				128				10
Statutory Auditors			41				41				4				-				-
Total			325				197				15				128				10

 

Notes:		1.		The aggregate amount of base compensation includes the amount of 31 million yen paid to Outside Executives (1 Outside Director and 3 Outside Statutory Auditors).
		2.		Other than the above, the amount of 85 million yen was paid to 6 Directors who concurrently serve as employees as employee salaries (including bonuses).
		3.		The maximum amounts of annual compensation for all Directors and Statutory Auditors, each of which was approved by a resolution passed at the Ordinary General Meeting of Shareholders held in May 1989, is 240 million yen (excluding bonuses and the amounts paid to Directors who concurrently serve as employees as employee salaries) and 60 million yen, respectively.

(3) Decision-Making Policy on Compensation for Directors and Statutory Auditors

Monthly compensation for the Directors is in the form of fixed compensation, as the consideration for each Director’s performance of business in charge and responsibility therefor. After the termination of the retirement allowance plan for Directors and Statutory Auditors by resolution of the General Meeting of Shareholders held on June 29, 2006, the compensation program linked to the Company stock price was introduced as part of director’s compensation. The Directors acquire the Company stock by making contributions to the Executive Stock Ownership Plan in an amount equal to the retirement bonuses added to Directors’ monthly compensation. Acquired stock for this purpose is retained by the Directors during their tenure. The introduction of this system effectively links a part of director’s compensation to the Company stock price, providing further transparency of Directors’ managerial responsibility to improve the Company’s enterprise value.

For the purpose of enhancing corporate governance, the bonuses to Directors are to be paid to the Directors who are responsible for the consolidated business results, other than the Outside Directors, and are linked to consolidated business results so that the relevant Directors share the risks and returns with the shareholders.

Full amount of the compensation to Statutory Auditors is fixed so that the independence of the Statutory Auditors from the management can be secured and the specific amount for each Statutory Auditor is decided through discussions among Statutory Auditors.

(4) Outside Director and Statutory Auditors

1.

Director, Motohiko Yokoyama

(i) Relation between important organization of concurrent post and the Company

Makita purchases parts, machinery and equipment, and accepts seconded employees from JTEKT Corporation and its group companies, but the amount of purchase during the term was 633 million yen, which is insubstantial in that it constitutes approximately 0.2% of Makita’s consolidated net sales and less than 0.1% of JTEKT Group’s consolidated net sales.

(ii) Major activities during the term

Mr. Yokoyama attended 9 of 13 meetings of the Board of Directors (attendance rate: 69%) during the term. At the attended meetings, he expressed his opinions as necessary from the top management perspective of the core company of Toyota Group which is a world’s leading corporate group.

(iii) Outline of Liability Limitation Agreement

With respect to liabilities set forth in Article 423, Paragraph 1 of the Companies Act, the Company has entered into a liability limitation agreement with Mr. Yokoyama which limits the maximum amount of his liabilities to the total amount provided for in each of the items of Article 425, Paragraph 1 of the Companies Act.

 

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2.

Statutory Auditor, Haruhito Hisatsune

(i) Major activities during the term

Mr. Hisatsune attended all meetings of the Board of Directors and of the Statutory Auditors. At the attended meetings, he expressed his opinions from his independent position as necessary.

(ii) Outline of Liability Limitation Agreement

With respect to liabilities set forth in Article 423, Paragraph 1 of the Companies Act, the Company has entered into a liability limitation agreement with Mr. Hisatsune which limits the maximum amount of his liabilities to the total amount provided for in each of the items of Article 425, Paragraph 1 of the Companies Act.

 

3.

Statutory Auditor, Masafumi Nakamura

(i) Relation between important organization of concurrent post and the Company

There is no special interest between important organization of concurrent post and the Company.

(ii) Major activities during the term

Mr. Nakamura attended 11 of 13 meetings of the Board of Directors (attendance rate: 85%) and all meetings of the Statutory Auditors during the term. At the attended meetings, he expressed his opinions from the professional perspective of certified public accountant.

(iii) Outline of Liability Limitation Agreement

With respect to liabilities set forth in Article 423, Paragraph 1 of the Companies Act, the Company has entered into a liability limitation agreement with Mr. Nakamura which limits the maximum amount of his liabilities to the total amount provided for in each of the items of Article 425, Paragraph 1 of the Companies Act.

 

4.

Statutory Auditor, Michiyuki Kondo

(i) Relation between important organization of concurrent post and the Company

There is no special interest between important organization of concurrent post and the Company.

(ii) Major activities during the term

Mr.Kondo attended all meetings of the Board of Directors and of the Statutory Auditors. At the attended meetings, he expressed his opinions from the professional perspective of attorney at law.

(iii) Outline of Liability Limitation Agreement

With respect to liabilities set forth in Article 423, Paragraph 1 of the Companies Act, the Company has entered into a liability limitation agreement with Mr. Kondo which limits the maximum amount of his liabilities to the total amount provided for in each of the items of Article 425, Paragraph 1 of the Companies Act.

 

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4. Accounting Auditor

(1) Name of Accounting Auditor: KPMG AZSA LLC

(2) Compensation and Other Amounts

(3) Contents of Non-Audit Services

The Company commissions KPMG AZSA LLC, with compensation, advisory services concerning a shift to the International Financial Reporting Standards (IFRS).

(4) Decision-Making Policy on Dismissal or Non-Reappointment of Accounting Auditor

If the accounting auditor falls under any of the events prescribed in each of the items of Article 340, Paragraph 1 of the Companies Act, the Board of Statutory Auditors shall dismiss such accounting auditor with the consent of all the Statutory Auditors. In the case of such dismissal, such dismissal and reasons therefor shall be reported to the first General Meeting of Shareholders to be held after such dismissal.

In addition, if it is identified as difficult for the accounting auditor to properly conduct audits as a result of any reason that may harm independence of the accounting auditor, the Board of Directors will submit an agenda concerning non-reappointment of such accounting auditor to a General Meeting of Shareholders with a consent of the Board of Statutory Auditors or upon a request of the Board of Statutory Auditors.

 

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5. Systems and Policies of the Company

Systems to Ensure That the Duties of Directors are Executed in Compliance with Laws and Regulations and the Articles of Incorporation, and Other Systems Necessary for Ensuring that the Company’s Operation Will be Conducted Appropriately

1.  Systems to ensure that the duties of Directors and employees are executed in compliance with laws and regulations and the Articles of Incorporation

(i)

The Board of Directors establishes the Code of Ethics and the Guidelines to the Code of Ethics as the principles for all Executives, and employees of Makita and each of the Directors shall keep all Corporate Officers and employees informed of and in compliance with such ethics.

(ii)

In order to ensure corporate ethics and compliance, a system to discover problems within the Company is created by establishing consulting facilities inside and outside the Company as well as Internal Reporting Policy. In addition, an inquiry window shall be established on the Company’s website, to receive opinions and suggestions from outside the Company concerning accounting, internal controls and auditing.

(iii)

An Internal Audit Department is established that conducts internal audit as deemed necessary.

2.  Systems concerning the retention and management of information regarding the execution of duties by Directors

Information regarding the execution of duties by Directors shall be appropriately kept and managed in accordance with internal regulations such as the Regulations of the Board of Directors and the Regulations on Corporate Approval. Directors and Statutory Auditors shall have access to such information.

3.  Rules and other systems for risk management

(i)

Each Director has the power and responsibility to build a risk management system in Makita in the business areas of which they are in charge, and in the case where a significant event affecting the management of the Company arises, the Director shall report such event to the Board of Directors and Board of Statutory Auditors.

(ii)

Rules and guidelines on risk management regarding quality control, accident prevention, cash management and others, shall be established as necessary and operated by each department.

4.  Systems to ensure the efficient execution of Director’s duties

(i)

A regular meeting of the Board of Directors shall be held once a month and extraordinary meetings shall be held whenever necessary. In addition, pursuant to management policy decided by the Board of Directors, priority targets shall be established for each department in each term. Each Director shall execute his duty to accomplish relevant target and the Board of Directors shall oversight the progress and performance thereof.

(ii)

The Board of Directors establish standards concerning management structure and organization, positions, divisions of functions and duties and powers, which constitute the basis for implementing management policy, and operates business systematically and efficiently.

(iii)

The Board of Directors introduces the Corporate Officer system in order to promptly implement Makita strategy and strengthen the operational organization, and thereby make the business operation flexible and efficient.

5.  Systems to ensure the adequacy of business operations within Makita

(i)

Each of all subsidiaries is under control of Directors who are in charge of such subsidiary and important management matters and matters concerning misconduct shall be reported appropriately to such Director in accordance with the Reporting Policy. The Director who is in charge of such subsidiary, upon receipt of such report, shall inform the Board of Directors of the status of supervision when necessary.

(ii)

To ensure the credibility of financial reporting, the Board of Directors establishes policies on documentation and assessment of internal controls of financial reporting of Makita and evaluates the effectiveness of said policies.

(iii)

In order to enhance the corporate governance of Makita, Outside Directors shall be appointed.

(iv)

For supervision and review of internal control systems of Makita by Statutory Auditors, a system shall be established for Statutory Auditors to cooperate with the Internal Audit Department and other related division and to receive report from Accounting Auditors.

6.  Matters concerning employees posted to assist the duties of the Statutory Auditors when the Statutory Auditors so require and such employees’ independence from Directors

Necessary personnel be posted to assist the duties of the Statutory Auditors. In order to ensure the independence of such employees from Directors, the consent of the Board of Statutory Auditors is required for the appointment and change of such employees.

 

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7.  Systems in accordance with which the Directors and employees report to the Statutory Auditors and other systems concerning reports to the Statutory Auditors

(i)

Directors, Corporate Officers and employees shall report to the Statutory Auditors with respect to matters that may cause significant damage to the Company, important management matters, matters concerning misconduct, status of structures and operation of the internal control system, and the operation of internal hotline system and the results of reports received under such system.

(ii)

The Company shall prepare a system that enables the Statutory Auditors to request reports from Directors, Corporate Officers and employees when necessary and that the Board of Statutory Auditors to exchange opinions with the Directors and Accounting Auditors.

8.  Other systems to ensure that audits by the Statutory Auditors will be conducted effectively

(i)

In order to enhance the supervisory function of the Board of Statutory Auditors over Accounting Auditors, “Policies and Procedures concerning Prior Approval of Auditing and Non-Auditing Services” shall be established. In addition, to ensure that audits by the Statutory Auditors will be conducted effectively, audit shall be conducted in accordance with standards for audit by Statutory Auditors.

(ii)

Full amount of the compensation to Statutory Auditors shall be fixed so that the independence of the Statutory Auditors can be secured.

9.  Systems to ensure elimination of antisocial forces

From the viewpoint of corporate social responsibility, Makita will consistently take a resolute stance against involvement in, and have absolutely no relationship with, the activities of antisocial forces that may threaten the order and the security of civil society.

(i)

The Company’s policy of “no intervention by antisocial forces has been permitted” is publicly announced, both internally and outside the Company, by expressly stipulating such in the management policy/quality policy and by displaying such on the Company’s website.

(ii)

Ban on transactions with antisocial forces are expressly stated in the “Guidelines to the Code of Ethics for Makita”, which prescribes the standards for officer and employee conduct applicable in the execution of their tasks. Each Director shall keep all Corporate Officers and employees informed of and in compliance with such prohibition.

(iii)

The Company has been liaising closely with the police and external related organizations, including the Public Interest Incorporated Foundation for Aichi Residents’ Conference for Violence, and endeavors to prevent any involvement in activities of antisocial forces, any damage caused thereby, and others.

(iv)

In addition to collecting information relevant to activities of antisocial forces from the police and external related organizations, the Company voluntarily participates in seminars. Also, the Company endeavors to share information within the Company and related departments of Makita.

 

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CONSOLIDATED BALANCE SHEET

(As of March 31, 2012)

(Millions of Yen)

(Assets)						(Liabilities)
Current assets			276,763			Current liabilities			53,718
Cash and cash equivalents			44,812			Short-term borrowings			2,351
Time deposits			13,504			Trade notes and accounts payable			21,822
Short-term investments			25,125			Other payables			4,313
Trade receivables-						Accrued expenses			6,314
Notes			1,769			Accrued payroll			7,803
Accounts			48,445			Income taxes payable			5,293
Less- Allowance for doubtful receivables			(753)			Deferred income taxes			125
Inventories			129,571			Other liabilities			5,697
Deferred income taxes			5,898			Long-term liabilities			5,760
Prepaid expenses and other current assets			8,392			Long-term indebtedness			12
Property, plant and equipment, at cost			77,738			Accrued retirement and termination benefits			3,027
Land			20,498			Deferred income taxes			130
Buildings and improvements			73,332			Other liabilities			2,591
Machinery and equipment			75,460			Total liabilities			59,478
Construction in progress			6,594			(Equity)
Less- Accumulated depreciation			(98,146)			Common stock			23,805
Investments and other assets			28,755			Additional paid-in capital			45,421
Investments			19,154			Legal reserve and retained earnings
Goodwill			721			Legal reserve			5,669
Other intangible assets, net			4,515			Retained earnings			316,937
Deferred income taxes			853			Accumulated other comprehensive income (loss)			(59,066)
Other assets			3,512			Treasury stock, at cost			(11,513)
						Total Makita Corporation shareholders’ equity			321,253
						Noncontrolling interest			2,525
						Total equity			323,778
Total assets			383,256			Total liabilities and equity			383,256

 

- 12 -

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CONSOLIDATED STATEMENT OF INCOME

(From April 1, 2011 to March 31, 2012)

(Millions of Yen)

Net sales				295,711
Cost of sales				180,541
Gross profit				115,170
Selling, general, administrative and others, net				66,654
Operating income				48,516
Other income (expenses):
Interest and dividend income		1,491
Interest expense		(242)
Exchange gains (losses) on foreign currency transactions, net		(2,150)
Realized gains (losses) on securities, net		(652)		(1,553)
Income before income taxes				46,963
Provision for income taxes:
Current		14,309
Deferred		(135)		14,174
Net income				32,789
Less: Net income attributable to the noncontrolling interest				(292)
Net income attributable to Makita Corporation				32,497

 

- 13 -

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CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY

AND COMPREHENSIVE INCOME (LOSS)

(From April 1, 2011 to March 31, 2012)

(Millions of Yen)

		Makita Corporation shareholders’ equity																								Non-controlling interest				Total
		Common stock				Additional paid-in capital				Legal reserve				Retained earnings				Accumulated other comprehensive income (loss)				Treasury stock
Beginning balance			23,805				45,420				5,669				293,532				(54,824	)			(6,453	)			2,529				309,678
Purchases and disposal of treasury stock, net							1																(5,060	)							(5,059	)
Cash dividends															(9,092	)											(150	)			(9,242	)
Comprehensive income (loss)
Net income															32,497												292				32,789
Foreign currency translation adjustment																			(4,806	)							(146	)			(4,952	)
Unrealized holding gains (losses) on available-for- sale securities																			487												487
Pension liability adjustment																			77												77
Total comprehensive income (loss)
Ending balance			23,805				45,421				5,669				316,937				(59,066	)			(11,513	)			2,525				323,778

 

		Comprehensive income (Loss)
		Net income attributable to Makita Corporation				Net income attributable to the non-controlling interest				Total
Beginning balance
Purchases and disposal of treasury stock, net
Cash dividends
Comprehensive income (loss)
Net income			32,497				292				32,789
Foreign currency translation adjustment			(4,806	)			(146	)			(4,952	)
Unrealized holding gains (losses) on available-for- sale securities			487								487
Pension liability adjustment			77								77
Total comprehensive income (loss)			28,255				146				28,401
Ending balance

 

- 14 -

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Notes to Consolidated Financial Statements

Notes to Important Basic Matters for Preparation of Consolidated Financial Statements

1. Basis of presentation

The consolidated financial statements are prepared in accordance with United States Generally Accepted Accounting Principles (“US GAAP”) pursuant to the provision of Article 120-2, paragraph 1 of the Ordinance on Accounting of Companies. However, certain disclosures required under US GAAP are omitted pursuant to the second sentence of said paragraph.

2. Scope of consolidation

Number of consolidated subsidiaries: 50

Major subsidiaries are as follows:

Makita U.S.A. Inc., Makita (U.K.) Ltd., Makita France SAS,

Makita Werkzeug G.m.b.H (Germany), Makita Oy (Finland),

Makita Gulf FZE (U.A.E.), Makita (China) Co., Ltd.,

Makita (Kunshan) Co., Ltd., Makita (Australia) Pty. Ltd.,

Makita do Brasil Ferramentas Elétricas Ltda. etc.

 

3. Valuation of Short-term investments and Investments
The Company conforms to Accounting Standards Codification (“ASC”) 320, “Investments-Debt and Equity Securities”
Held-to-maturity securities:		Amortized cost
Available-for-sale securities:		Evaluation by the fair value
		All valuation allowances are reported in Accumulated other comprehensive income (loss). The cost of securities sold is based on the moving-average method.
4. Valuation of inventories
Inventories are valued at the lower of cost or market price, with cost determined principally based on the average method. Inventory costs include raw materials, labor and manufacturing overheads.
5. Depreciation method of fixed assets
Tangible fixed assets:		Depreciation of tangible fixed assets of the Company is computed 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.
Goodwill and other intangible assets, net:		With respect to goodwill, in compliance with ASC 350, “Intangibles-Goodwill and Other”, amortization is not performed, but impairment testing is carried out at least once a year in principle. Amortization is performed using the straight-line method with regard to other intangible fixed assets that have clearly established years of service.

 

- 15 -

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6. Allowances

Allowance for doubtful 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. Allowance for doubtful receivables represents the Makita’s best estimate of the amount of probable credit losses in its existing receivables.
Retirement and termination allowances:		In accordance with ASC 715, “Compensation-Retirement Benefits”, pension and severance cost is accrued based on the projected benefit obligations and the fair value of plan assets at the balance sheet date.
		Each overfunded plans and postretirement plans are recognized as an asset and each underfunded plan and postretirement plans are recognized as a liability.
		Unrecognized prior service cost is amortized by the straight-line method over the average remaining service period of employees.
		Unrecognized actuarial difference is recognized by amortizing a portion in excess of 10% of the greater of the projected benefit obligations or the fair value of plan assets at the beginning of the term by the straight-line method over the average remaining service period of employees.

7. Consumption tax is accounted for by allocation separately from related sales and purchase accounts.

8. Restatement/ reclassification

To increase the transparency in the disclosure of the status of liabilities, the total amount of “Other payables”, “Accrued expenses” and “Other liabilities” that has been presented as “accrued expenses and other” (17,694 million yen in the previous term) for the previous term is reported in separate lines from the current term.

Notes to Consolidated Balance Sheet

Guarantee (contingent liabilities):		3 million yen

Notes to Consolidated Statement of Shareholders’ Equity

1. Matter regarding shares issued

Kind of shares		Beginning of the term		Increase		Decrease		End of the term
Common stock		140,008,760 shares		-		-		140,008,760 shares

2. Matter regarding treasury stock

Kind of shares		Beginning of the term		Increase		Decrease		End of the term
Common stock		2,251,061 shares		2,007,907 shares		726 shares		4,258,242 shares

(Reasons for the change)

The reasons for the increase are as follows:

Purchases of treasury stock:		2,000,000 shares
Purchase of shares constituting less than a full unit:		7,907 shares

The reason for the decrease is as follows:

Sales of shares constituting less than a full unit:		726 shares

Notes to Financial Instruments

1. Matter regarding status of financial instruments

Makita carries out short-term and other investments in order to secure profits on a stable basis. Short-term investment consists primarily of MMF (Money Management Fund) and FFF (Free Financial Fund). Other investment is made mainly in marketable shares (shares other than those purely for investment purpose). Long-term liabilities comprise long-term loans from banks and capital-lease obligations. Forward exchange contracts were entered into with the aim of reducing such market risks as foreign exchange rate fluctuations.

 

- 16 -

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2. Matter regarding such as market value of financial instruments

The 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:

(1)

Cash and Cash Equivalents, Time Deposits, Trade Notes and Accounts Receivable, Short-term Borrowings, Trade Notes and Accounts Payable, Other payables, and Accrued expenses

The carrying amounts approximate fair value because of the short maturities of those instruments.

 

(2)

Long-term Time Deposits

The 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.

 

(3)

Short-term investments and Investments

The 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, and such securities have been excluded from fair value disclosure. The fair value of such securities is estimated if and when there are indications that the investment may be impaired. Non-marketable securities amounted to 387 million yen as of March 31, 2012.

 

(4)

Long-term Indebtedness

The 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.

 

(5)

Other Derivative Financial Instruments

The fair values of other derivative financial instruments, composed by foreign currency contracts, 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:

 

 

 

								(Millions of Yen)
								Carrying Amount				Fair Value				Amount of difference
Short-term investments									25,125				25,122				(3)
Investments									18,767				18,764				(3)
Long-term time deposits									15				15				-
Long-term indebtedness including current maturities									(28)				(28)				-
Foreign currency contracts:
Assets									129				129				-
Liabilities									(281)				(281)				-

 

(6)

Limitation

The 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.

 

- 17 -

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Notes to Information Per Share

Total Makita Corporation shareholders’ equity per share		2,366.50		yen

Total Makita Corporation shareholders’ equity per share attributable to common stock was computed based on following;

Total Makita Corporation shareholders’ equity in the balance sheet		321,253		million yen
Total Makita Corporation shareholders’ equity available to common stock		321,253		million yen
Number of shares issued (excluding treasury stock) as of March 31, 2012		135,750,518		shares
Earning per share (Basic) Net income attributable to Makita Corporation common shareholders		236.78		yen
Earning per share (Basic) Net income attributable to Makita Corporation common shareholders was computed based on following;

Net income attributable to Makita Corporation in the statement of income		32,497		million yen
Net income attributable to Makita Corporation available to common stock		32,497		million yen
Average number of outstanding shares of common stock		137,244,683		shares

 

- 18 -

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BALANCE SHEET

(As of March 31, 2012)

(Millions of Yen)

 

(Assets)						(Liabilities)
Current assets			68,440			Current liabilities			18,566
Cash and time deposits			5,378			Trade accounts payable			7,247
Trade notes receivable			229			Other accounts payable			2,035
Trade accounts receivable			20,873			Accrued expenses			4,730
Marketable securities			17,111			Corporate and inhabitant income taxes payable			3,292
Finished goods and merchandise			9,573			Allowance for Directors’ bonuses			128
Work-in-process			1,116			Allowance for product warranties			335
Raw materials and supplies			1,770			Other			799
Short-term loans receivable			9,258
Deferred income tax assets			2,410			Long-term liabilities			1,886
Other			733			Retirement and termination allowances			212
Allowance for doubtful accounts			(11	)		Estimated retirement allowances for Directors and Statutory Auditors			384
Fixed assets			163,982			Long-term accounts payable			329
Tangible fixed assets			36,116			Asset retirement obligation			14
Buildings			18,890			Deferred income tax liabilities			947
Structures			805			Total liabilities			20,452
Machinery and equipment			1,459
Vehicles and transportation equipment			18
Tools, furniture and fixtures			1,222			(Net assets)
Land			12,841			Shareholders’ equity			208,717
Construction in progress			881			Common stock			24,206
Intangible fixed assets			3,293			Capital surplus			47,526
Software			400			Additional paid-in capital			47,525
Industrial property			2,300			Other capital surplus			1
Other			593			Retained earnings			148,498
Investment and other assets			124,573			Legal reserve			5,669
Investment securities			27,042			Other retained earnings			142,829
Stocks of affiliates			57,746			Reserve for dividend			750
Investment in affiliates			25,461			Reserve for technical research			1,500
Long-term loans receivable			6,871			Reserve for advanced depreciation			896
Lease deposits			354			General reserves			85,000
Prepaid pension expenses			7,063			Retained earnings carried forward			54,683
Other			50			Treasury stock			(11,513	)
Allowance for doubtful accounts			(14	)		Valuation and translation adjustments			3,253
						Net unrealized gains on securities			3,253
						Total net assets			211,970
Total assets			232,422			Total liabilities and net assets			232,422

 

- 19 -

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STATEMENT OF INCOME

(From April 1, 2011 to March 31, 2012)

(Millions of Yen)

Net sales				119,758
Cost of sales				77,339
Gross profit				42,419
Selling, general and administrative expenses				27,873
Operating profit				14,546
Non-operating income
Interest and dividend income		3,458
Other non-operating income		801		4,259
Non-operating expense
Exchange losses on foreign currency transactions		378
Other non-operating expense		4		382
Ordinary profit				18,423
Special gain
Gain on sales of fixed assets		0
Gain on sales of investment securities		0		0
Special loss
Loss on sales and disposal of fixed assets		114
Loss on evaluation of investment securities		176
Loss on evaluation of stocks of subsidiaries		400		690
Income before income taxes				17,733
Income taxes - current				5,047
Income taxes - deferred				967
Net income				11,719

 

- 20 -

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STATEMENT OF CHANGES IN NET ASSETS

(From April 1, 2011 to March 31, 2012)

(Millions of Yen)

Shareholders’ equity
Common stock
Beginning balance		24,206
Ending balance		24,206
Capital surplus
Additional paid-in capital
Beginning balance		47,525
Ending balance		47,525
Other capital surplus
Beginning balance		-
Changes in the term
Disposal of treasury stock		1
Total changes in the term		1
Ending balance		1
Total capital surplus
Beginning balance		47,525
Changes in the term
Disposal of treasury stock		1
Total changes in the term		1
Ending balance		47,526
Retained earnings
Legal reserve
Beginning balance		5,669
Ending balance		5,669
Other retained earnings
Reserve for dividend
Beginning balance		750
Ending balance		750
Reserve for technical research
Beginning balance		1,500
Ending balance		1,500
Reserve for advanced depreciation
Beginning balance		928
Changes in the term
Reversal of reserve for advanced depreciation		(32)
Total changes in the term		(32)
Ending balance		896
General reserves
Beginning balance		85,000
Ending balance		85,000

 

- 21 -

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(Millions of Yen)

Retained earnings carried forward
Beginning balance		52,024
Changes in the term
Reversal of reserve for advanced depreciation		32
Dividends paid		(9,092)
Net income		11,719
Total changes in the term		2,659
Ending balance		54,683
Total retained earnings
Beginning balance		145,871
Changes in the term
Reversal of reserve for advanced depreciation		-
Dividends paid		(9,092)
Net income		11,719
Total changes in the term		2,627
Ending balance		148,498
Treasury stock
Beginning balance		(6,453)
Changes in the term
Purchase of treasury stock		(5,062)
Disposal of treasury stock		2
Total changes in the term		(5,060)
Ending balance		(11,513)
Total shareholders’ equity
Beginning balance		211,149
Changes in the term
Reversal of reserve for advanced depreciation		-
Dividends paid		(9,092)
Net income		11,719
Purchase of treasury stock		(5,062)
Disposal of treasury stock		3
Total changes in the term		(2,432)
Ending balance		208,717

 

- 22 -

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(Millions of Yen)

Valuation and translation adjustments
Net unrealized gains on securities
Beginning balance		2,935
Changes in the term
Net change of items other than shareholders’ equity		318
Total changes in the term		318
Ending balance		3,253
Total valuation and translation adjustments
Beginning balance		2,935
Changes in the term
Net change of items other than shareholders’ equity		318
Total changes in the term		318
Ending balance		3,253
Total net assets
Beginning balance		214,084
Changes in the term
Reversal of reserve for advanced depreciation		-
Dividends paid		(9,092)
Net income		11,719
Purchase of treasury stock		(5,062)
Disposal of treasury stock		3
Net change of items other than shareholders’ equity		318
Total changes in the term		(2,114)
Ending balance		211,970

 

- 23 -

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Notes to Non-consolidated Financial Statements

Notes to Significant Accounting Policies

1. Valuation of securities
Held-to-maturity securities:		Amortized cost (straight-line method)
Stocks of subsidiaries:		At moving-average cost
Available-for-sale securities
Those having fair market value:		Fair market value as of term-end
		All valuation allowances are credited to shareholders’ equity.
		The cost of securities sold is based on the moving-average method.
Those having no fair market value:		At moving-average cost

 

2. Valuation of net assets and liabilities accrued from derivative transactions:
		Fair market value as of term-end

 

3. Valuation of inventories
Inventories are valued at the lower of cost or market price.
Finished goods, merchandise, work in process, and raw materials:
		At the lower of average cost or market
Supplies:		At the lower of latest purchase cost or market
4. Depreciation method of fixed assets

Tangible fixed assets:		Declining-balance method
(Excluding lease assets)		However, buildings acquired on or after April 1, 1998, (excluding fixtures) are depreciated on the straight-line method.
		Estimated life:
		Buildings:		38 to 50 years
		Machinery and equipment:		7 to 10 years

Intangible fixed assets:		Straight-line method
(Excluding lease assets)		Software for internal use is depreciated on the straight-line method over its estimated useful life (5 years).
		Industrial property rights are depreciated on the straight-line method over 8 to 14 year period.
Lease assets:		Lease assets relating to finance lease transactions, excluding those whose ownership is transferred to the lessee upon lease expiration, are depreciated by the straight-line method over the lease term with no residual value, the lease term being regarded as the estimated asset service life.

 

- 24 -

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5. Allowances

Allowance for doubtful accounts:		The allowance for doubtful accounts is reserved based on the historical write-off ratio for accounts receivable. For accounts receivable that are difficult to collect, individually estimated write-off amounts are reserved.
Allowance for Directors’ bonuses:		In preparation for the anticipated payment of Directors’ bonuses, we appropriated the amount estimated to pay for the term.
Allowance for product warranties:		In preparation for the payment of product after-service and free post-sale repair services, we appropriated the projected amount based on actual payment in the past.
Retirement and termination allowances:		To be prepared for employee retirement, retirement and termination allowances and prepaid pension expenses are reserved based on projected benefit obligations and plan assets at the balance sheet date.. Past service liabilities are amortized by the straight-line method over the average remaining employment period. Actuarial differences are amortized starting immediately after the year of accruement by the straight-line method over the average remaining employment period.
Estimated retirement allowances for Directors and Statutory Auditors:
		The Company terminated the retirement allowance plan for Directors and Statutory Auditors as of the end of the Ordinary General Meeting of Shareholders held on June 29, 2006. The balance of the term end is the amount of the reserve for the period of office served until abolition of the plan by those current Directors (excluding Outside Director) and Statutory Auditors who served until June 29, 2006.

6. Consumption tax is accounted for by allocation separately from related sales and purchase accounts.

7. Additional information

The Company adopted the “Accounting Standard for Accounting Changes and Error Corrections” (ASBJ Statement No. 24, as of December 4, 2009) and the “Guidance on Accounting Standard for Accounting Changes and Error Corrections” (ASBJ Guidance No. 24, as of December 4, 2009) for the accounting changes and the correction of the past errors conducted after the beginning of the current term.

 

- 25 -

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Notes to Balance Sheet

 

1. Accumulated depreciation on tangible fixed assets:
Buildings		23,239		million yen
Structures		2,078		million yen
Machinery and equipment		14,987		million yen
Vehicles and transportation equipment		358		million yen
Tools, furniture and fixtures		26,873		million yen
Total		67,535		million yen
2. Guarantee:
Guarantee for borrowing from financial institution
Maximum amount of guarantee for Makita U.S.A. Inc. (50 million U.S. dollars)		4,110		million yen
Guarantee for housing loan to employees		3		million yen
Guarantee for the customer’s accounts payable
Makita General Service Co., Ltd.		9		million yen
Total		4,122		million yen
3. Receivables and payables for affiliates:
Short-term receivables		18,691		million yen
Long-term receivables		6,865		million yen
Short-term payables		4,394		million yen

Notes to Statement of Income

 

Transactions with affiliates
Amount of operating transactions
Sales		50,102		million yen
Purchases, etc.		26,206		million yen
Amount of non-operating transactions		3,654		million yen

 

- 26 -

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Notes to Statement of Changes in Net Assets

1. Matter regarding shares issued

Kind of shares		Beginning of the term		Increase		Decrease		End of the term
Common stock		140,008,760 shares		-		-		140,008,760 shares

2. Matter regarding treasury stock

Kind of shares		Beginning of the term		Increase		Decrease		End of the term
Common stock		2,251,061 shares		2,007,907 shares		726 shares		4,258,242 shares

(Reasons for the change)

The reasons for the increase are as follows:

Purchases of treasury stock:		2,000,000 shares
Purchase of shares constituting less than a full unit:		7,907 shares

The reason for the decrease is as follows:

Sales of shares constituting less than a full unit:		726 shares

3. Matter regarding subscription rights

None.

4. Matter regarding dividend distribution

(1) Amount of dividend distribution

(2) Although the record date falls in the term, some dividends become effective during the following term.

 

- 27 -

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Notes to Tax Effect Accounting

 

1.	The main reasons for deferred income tax assets and liabilities are as follows:

 

Short-term deferred income tax assets
Accrued expenses		1,540		million yen
Inventories		340		million yen
Outstanding enterprise taxes		331		million yen
Tax credit carried forward		143		million yen
Others		56		million yen
Net amount of short-term deferred income tax assets		2,410		million yen
Long-term deferred income tax assets
Loss on evaluation of investment securities		3,353		million yen
Excess in depreciation		1,705		million yen
Estimated retirement allowances for Directors and Statutory Auditors		135		million yen
Loss on impairment of land		98		million yen
Others		42		million yen
Subtotal		5,333		million yen
Valuation allowance		(1,463)		million yen
Total		3,870		million yen
Long-term deferred income tax liabilities
Retirement and termination allowances		(2,527)		million yen
Net unrealized gains on securities		(1,763)		million yen
Advanced depreciation		(527)		million yen
Total		(4,817)		million yen
Net amount of long-term deferred income tax liabilities		947		million yen

 

2.	Major items causing the significant difference between the statutory effective income tax rate applicable to the Company and the rates of tax burden after the adoption of tax effect accounting are as follows:

 

Statutory effective tax rate		40.0%
(Reconciliations)
Change in for valuation allowance		(0.7%)
Dividend income and other permanently non-taxable income		(6.5%)
Tax sparing impact		(2.7%)
Effect of tax rate change		2.1%
Other		1.7%
Tax burden rates after tax effect accounting		33.9%

3. Changing of the amount of deferred income tax assets and liabilities due to a change in the statutory effective tax rate

Along with the promulgation of the Law to Revise the Income Tax, etc., in Order to Construct a Tax System Addressing Changes in the Socio-Economic Structure (Act No. 114 of 2011) and the Act on Special Measures for Securing Financial Resources Necessary for Reconstruction from the Great East Japan Earthquake (Act No. 117 of 2011), each being effective on December 2, 2011, the statutory effective tax rate used for the calculation of the deferred income tax assets and liabilities for the current term was changed from 40.0% in the previous term to 37.4%, with respect to the period when the reversal of temporary difference was expected to be from April 1, 2012 through March 31, 2015, and 35.1% with respect to the period when the reversal of temporary difference was expected to be after April 1, 2015, respectively.

As a result, the amount of deferred income tax assets (net of the amount of the deferred income tax liabilities) decreased by 121 million yen, and the tax provision, deferred and the net unrealized gains on securities accrued for the current term increased by 367 million yen and 246 million yen, respectively.

 

- 28 -

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Notes to Fixed Assets Used through Leases

 

Operating

leases

Lease commitments under non-cancelable operating leases

Within 1 year			141 million yen
Over 1 year			306 million yen

Notes to Transactions with Related Parties

 

1.

Directors and primary individual shareholders

Attribute		Directors and their relatives				Companies which directors and their relatives own the majority of voting rights (including the subsidiaries of such companies)
Corporate name		JTEKT Corporation				TOA Co., Ltd. (Note 2)		Maruwa, Ltd. (Note 3)
Principal business or position		Director of the Company (Chairman and Representative Director of JTEKT Corporation)				Design, manufacture and distribution of automatic regulators		Real estate business
Owning and owned ratio of voting rights (%)		Direct owning ratio: 0.0 Direct owned ratio: 0.1				Direct owned ratio: 0.0		Direct owned ratio: 2.9
Relationship		Purchase of production equipment Acceptance of seconded employees Interlocking Directors (Number of directors: 1)				Purchase of production equipment Interlocking Directors (Number of directors: 1)		Advertising Interlocking Directors (Number of directors: 1)
Principal transactions		Purchase of production equipment (Note 1)		Acceptance of seconded employees (Note 1)		Purchase of production equipment (Note 1)		Advertising (Note 1)
Transaction amount (millions of yen) (Note 4)		7		82		75		2
Account title		Other accounts payable		-		Other accounts payable		-
Balance at end of the term (millions of yen) (Note 4)		2		-		2		-

Terms of transactions and the policy to decide the terms

(Note 1)

The terms of the transactions with JTEKT Corporation, TOA Co., Ltd. and Maruwa, Ltd. are the same as those other general transactions.

(Note 2)

Masahiko Goto, President and Representative Director of the Company, and his relatives own 100% of voting rights of TOA Co., Ltd.

(Note 3)

Masahiko Goto, President and Representative Director of the Company, and his relatives own 68.1% of voting rights of Maruwa, Ltd.

(Note 4)

The above stated transaction amount do not include consumption tax, and that balance at end of the term includes consumption tax.

 

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2. Subsidiaries

Attribute		Subsidiaries
Corporate name		Makita U.S.A. Inc. (United States)		Makita Gulf FZE (U.A.E.)		Dolmar GmbH (Germany)		Makita do Brasil Ferramentas Elétricas Ltda. (Brazil)
Owning and owned ratio of voting rights (%)		Direct owning ratio: 100.0		Direct owning ratio: 100.0		Direct owning ratio: 1.0 Indirect owning ratio: 99.0		Direct owning ratio: 99.9
Relationship		Debt guarantee		Money loan		Money loan		Money loan
		Interlocking Directors (Number of directors: 1)		Interlocking Directors (Number of directors: 1)		Interlocking Directors (Number of directors: 1)
Principal transactions		Debt guarantee (Note 1)		Money loan (Note 2)		Money loan (Note 2)		Money loan (Note 2)
Transaction amount (millions of yen) (Note 6)		4,110		7,173		4,213		4,000
Account title		-		Short-term loans receivable		Short-term loans receivable		Long-term loans receivable
Balance at end of the term (millions of yen) (Note 6)		-		4,110		1,098		4,000
Attribute		Subsidiaries
Corporate name		Makita Numazu Corporation (Numazu city, Shizuoka Prefecture)		Makita Manufacturing (Thailand) Co., Ltd. (Thailand)		Makita (Kunshan) Co., Ltd. (China)
Owning and owned ratio of voting rights (%)		Direct owning ratio: 100.0		Direct owning ratio: 100.0		Direct owning ratio: 100.0
Relationship		Money loan		Investment in establishment and capital increase		Purchase of finished goods and merchandise
		Interlocking Directors (Number of directors: 1)		Interlocking Directors (Number of directors: 2)		Interlocking Directors (Number of directors: 4)
Principal transactions		Money loan (Note 3)		Subscription of shares on incorporation and additional increase of capital (Note 4)		Purchase of finished goods and merchandise (Note 5)
Transaction amount (millions of yen) (Note 6)		22,350		2,421		15,003
Account title		Long-term loans receivable		Stocks of affiliates		Trade accounts payable
Balance at end of the term (millions of yen) (Note 6)		1,950		2,421		2,768

Terms of transactions and the policy to decide the terms

 

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Notes to Information Per Share

 

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[English Translation of the Independent Auditor’s Report Originally Issued in the Japanese Language]

Independent Auditor’s Report

May 25, 2012

The Board of Directors

Makita Corporation

KPMG AZSA LLC

Noriaki Habuto (Seal)

Designated Limited Liability Partner

Engagement Partner

Certified Public Accountant

Hideaki Koyama (Seal)

Designated Limited Liability Partner

Engagement Partner

Certified Public Accountant

Hisashi Ohkita (Seal)

Designated Limited Liability Partner

Engagement Partner

Certified Public Accountant

We have audited the consolidated financial statements, comprising the consolidated balance sheet, the consolidated statement of income, the consolidated statement of shareholders’ equity and comprehensive income (loss) and the notes to consolidated financial statements of Makita Corporation as at March 31, 2012 and for the year from April 1, 2011 to March 31, 2012 in accordance with Article 444-4 of the Companies Act.

Management’s Responsibility for the Consolidated Financial Statements

Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with the provision of the second sentence of Article 120-2-1 of the Ordinance of Companies Accounting that prescribes some omissions of disclosure items required under accounting principles generally accepted in the United States of America, and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatements, whether due to fraud or error.

Auditor’s Responsibility

Our responsibility is to express an opinion on the consolidated financial statements based on our audit as independent auditor. We conducted our audit in accordance with auditing standards generally accepted in Japan. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on our judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, we consider internal control relevant to the entity’s preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, while the objective of the financial statement audit is not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

 

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We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the consolidated financial statements referred to above, which were prepared in accordance with the second sentence of Article 120-2-1 of the Ordinance of Companies Accounting that prescribes some omissions of disclosure items required under accounting principles generally accepted in the United States of America, present fairly, in all material respects, the financial position and the results of operations of Makita Corporation and its subsidiaries for the period, for which the consolidated financial statements were prepared.

Other Matter

Our firm and engagement partners have no interest in the Company which should be disclosed pursuant to the provisions of the Certified Public Accountants Law of Japan.

Notes to the Reader of Independent Auditor’s Report:

The Independent Auditor’s Report herein is the English translation of the Independent Auditor’s Report as required by the Companies Act.

 

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[English Translation of the Independent Auditor’s Report Originally Issued in the Japanese Language]

Independent Auditor’s Report

May 25, 2012

The Board of Directors

Makita Corporation

KPMG AZSA LLC

Noriaki Habuto (Seal)

Designated Limited Liability Partner

Engagement Partner

Certified Public Accountant

Hideaki Koyama (Seal)

Designated Limited Liability Partner

Engagement Partner

Certified Public Accountant

Hisashi Ohkita (Seal)

Designated Limited Liability Partner

Engagement Partner

Certified Public Accountant

We have audited the non-consolidated financial statements, comprising the balance sheet, the statement of income, the statement of changes in net assets and the notes to non-consolidated financial statements, and the supplementary schedules of Makita Corporation as at March 31, 2012 and for the year from April 1, 2011 to March 31, 2012 in accordance with Article 436-2-1 of the Companies Act.

Management’s Responsibility for the Non-Consolidated Financial Statements and Others

Management is responsible for the preparation and fair presentation of the non-consolidated financial statements and the supplementary schedules in accordance with accounting principles generally accepted in Japan, and for such internal control as management determines is necessary to enable the preparation of non-consolidated financial statements and the supplementary schedules that are free from material misstatements, whether due to fraud or error.

Auditor’s Responsibility

Our responsibility is to express an opinion on the non-consolidated financial statements and the supplementary schedules based on our audit as independent auditor. We conducted our audit in accordance with auditing standards generally accepted in Japan. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the non-consolidated financial statements and the supplementary schedules are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the non-consolidated financial statements and the supplementary schedules. The procedures selected depend on our judgment, including the assessment of the risks of material misstatement of the non-consolidated financial statements and the supplementary schedules, whether due to fraud or error. In making those risk assessments, we consider internal control relevant to the entity’s preparation and fair presentation of the non-consolidated financial statements and the supplementary schedules in order to design audit procedures that are appropriate in the circumstances, while the objective of the financial statement audit is not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the non-consolidated financial statements and the supplementary schedules.

 

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We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the non-consolidated financial statements and the supplementary schedules referred to above present fairly, in all material respects, the financial position and the results of operations of Makita Corporation for the period, for which the non-consolidated financial statements and the supplementary schedules were prepared, in accordance with accounting principles generally accepted in Japan.

Other Matter

Our firm and engagement partners have no interest in the Company which should be disclosed pursuant to the provisions of the Certified Public Accountants Law of Japan.

Notes to the Reader of Independent Auditor’s Report:

The Independent Auditor’s Report herein is the English translation of the Independent Auditor’s Report as required by the Companies Act.

 

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English Translation of the Audit Report of Board of Statutory Auditors Originally Issued in Japanese Language

AUDIT REPORT

The Board of Statutory Auditors, having discussed with each other based on the audit reports prepared by each Statutory Auditor regarding the performance of duties of Directors during the 100th term, from April 1, 2011 to March 31, 2012, does hereby report the results of their audit as follows:

1. Auditing Method Employed by Statutory Auditors and Board of Statutory Auditors and Details Thereof

The Board of Statutory Auditors established the audit policy and duties of each Statutory Auditor, received reports from each Statutory Auditor on the execution of audits and results thereof and received reports from Directors and other related persons and Accounting Auditors on the performance of their duties, and, when necessary, requested explanations.

In conformity with the auditing standards for the Statutory Auditors established by the Board of Statutory Auditors and in accordance with the audit policy and the duties assigned to each Statutory Auditor by the Board of Statutory Auditors, each Statutory Auditor has had communication with Directors, employees such as a staff of Internal Auditing Office and other related persons and endeavored to gather information and create an improved environment for auditing. Each Statutory Auditor also attended meetings of the Board of Directors and other important meetings, received from Directors, employees and other related persons reports on the performance of their duties, and, when necessary, requested explanations. Each Statutory Auditor also inspected the important documents and examined the status of operations and properties at the head office and the principal offices of the Company. The Statutory Auditors regularly received from Directors, employees and other related persons reports and, when necessary, requested explanations and expressed opinions with respect to the status of establishment and operation of systems to ensure that the Directors perform their duties stated in the Business Report in compliance with applicable laws and regulations and the Articles of Incorporation, the content of a resolution of the Board of Directors concerning the establishment of other systems necessary to ensure the propriety of company’s operations as provided for in Article 100, Paragraphs 1 and 3 of the Ordinance for Enforcement of the Companies Act (internal control system), and the systems established based on said resolution. As for the subsidiaries of the Company, the Statutory Auditors, having communication with the directors and statutory auditors and other related persons of the subsidiaries and sharing information among them, received reports from such subsidiaries as necessary. According to the foregoing method, we examined the business report and the accompanying supplemental schedules for this term.

In addition, the Statutory Auditors also monitored and examined whether the Accounting Auditors maintain their independence and conduct their audits in an appropriate manner. The Statutory Auditors received reports from the Accounting Auditors on the performance of their duties and, when necessary, requested their explanations. The Statutory Auditors also received notification from the Accounting Auditors that they have taken steps to improve the “system for ensuring appropriate execution of the duties of the accounting auditors” (as set forth in Items of Article 131 of the Ordinance on Corporate Accounting) in compliance with the “Quality Control Standard for Auditing” (adopted by the Business Accounting Council on October 28, 2005). The Statutory Auditors requested explanations on such notifications as necessary. According to the foregoing method, the Statutory Auditors reviewed the financial statements for this term (balance sheet, statement of income, statement of changes in net assets and notes to non-consolidated financial statements) and the accompanying supplemental schedules and the consolidated financial statements (consolidated balance sheet, consolidated statement of income, consolidated statement of shareholders’ equity and comprehensive income (loss) and notes to consolidated financial statements).

 

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2. Results of Audit

(1) Results of Audit of the Business Report and Others

A.

We confirm that the business report and the accompanying supplemental schedules present fairly the status of the Company in conformity with the applicable laws and regulations of Japan as well as the Articles of Incorporation of the Company.

B.

We confirm that there are no fraudulent acts or material facts that violated the applicable laws and regulations of Japan or the Articles of Incorporation of the Company in the course of the performance of the duties of the Directors.

C.

We confirm that the substance of the resolutions by the Board of Directors regarding establishment of Internal Control System is appropriate. We do not see anything to be pointed out on the description of the business report, and the performance of the Directors regarding the Internal Control System.

(2) Results of Audit of the Financial Statements and the Accompanying Supplemental Schedules

We confirm that the method and the results of the audit conducted by KPMG AZSA LLC, the Accounting Auditors, are appropriate.

(3) Results of Audit of the Consolidated Financial Statements

We confirm that the method and the results of the audit conducted by KPMG AZSA LLC, the Accounting Auditors, are appropriate.

May 29, 2012

Board of Statutory Auditors

Makita Corporation

Toshihito Yamazoe (Seal)

Standing Statutory Auditor

Haruhito Hisatsune (Seal)

Standing Statutory Auditor

(Outside Statutory Auditor)

Masafumi Nakamura (Seal)

Outside Statutory Auditor

Michiyuki Kondo (Seal)

Outside Statutory Auditor

 

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REFERENCE DOCUMENT

Propositions and Explanatory Information

Agenda Item No. 1: Appropriations of Surplus

The Company makes it its basic policy for profit distribution to propose the dividends with a target consolidated dividend payout ratio of at least 30% of net income, with a minimum amount for annual total dividends at 18 yen per share; provided, however, that if special circumstances arise, the amount of dividends will be determined based on Net income attributable to Makita Corporation after certain adjustments reflecting such circumstances.

Taking into consideration this basic policy, the future business environment and the business strategy, it is proposed that the surplus be appropriated as follows. As this appropriation, the total dividends for the term under review shall amount to 72 yen per share that include interim dividends in the amount of 15 yen per share.

1. Matters on allocation of dividends to shareholders and total amount of allocation

57 yen per share of common stock

Total amount: 7,737,779,526 yen

2. Effective date of dividend payment

June 27, 2012

 

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Agenda Item No. 2: Election of 3 Statutory Auditors

The term of office of 3 Statutory Auditors presently in office, Mr. Toshihito Yamazoe, Haruhito Hisatsune, and Michiyuki Kondo will have expired at the conclusion of this General Shareholders’ Meeting. We would like to request the election of 3 Statutory Auditors.

The candidates are as follows:

The Board of Statutory Auditors has agreed to this proposal.

 

Candidate Number		Name (Date of birth)		Brief personal background, title and position at the Company and Important concurrent posts						Number of  the Company’s shares held
1		Toshihito Yamazoe (October 16, 1949)		March		1974		Joined the Company		5,700
				December		1980		Transferred to Makita (U.K.) Ltd.
				March		1984		Transferred to Makita Werkzeug G.m.b.H (Germany)
				February		1985		Transferred to Makita Werkzeug Gesellschaft m.b.H. (Austria)
				March		1991		Transferred to S.A. Makita N.V. (Belgium)
				April		1999		Assistant General Manager of Asia and Oceania Sales Department of International Sales Headquarters 2 of the Company
				August		2000		President of Makita (China) Co., Ltd.
				April		2006		General Manager of Europe Sales Department of International Sales Headquarters of the Company
				June		2008		Statutory Auditor of the Company (present)
2		Haruhito Hisatsune (February 7, 1947)		July		1969		Joined the Bank of Japan		-
				May		1990		Manager of Government Securities Services Section of Operations Department
				May		1991		Officer of Examination Department
				April		1997		Joined the Hekikai Shinkin Bank, General Manager of Overseas Section
				May		1997		Director, General Manager of Overseas Section
				June		1999		Managing Director (in charge of Securities, Overseas and Compliance Supervision Office)
				January		2001		Managing Director (in charge of Business Center), Director of Business Center
				August		2003		Managing Director and Corporate Officer (in charge of Business Center), Director of Business Center
				June		2008		Outside Statutory Auditor of the Company (present)
3		Michiyuki Kondo (October 23, 1944)		April		1971		Attorney-at-law, admitted and belonging to the Nagoya Bar Association		1,600
				April		1971		Joined Takasu Hiroo Law Firm
				May		1977		Representative of Kondo Michiyuki Law Firm (present)
				May		2005		Outside Statutory Auditor of ELMO CO., LTD.
				June		2008		Outside Statutory Auditor of the Company (present)
				April		2010		Outside Statutory Auditor of TECHNO HORIZON HOLDINGS CO., LTD. (present)
				(Important Concurrent Posts)
				Representative of Kondo Michiyuki Law Firm

 

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Notes:		1.		There is no special interest between the above candidates and the Company.
		2.		Mr. Haruhito Hisatsune and Mr. Michiyuki Kondo are candidates for Outside Statutory Auditors.
		3.		The Company proposes the election of Mr. Haruhito Hisatsune as Outside Statutory Auditor, considering that his many years of experience at financial institutions and his expertise in accounting, etc. will greatly contribute to the auditing system of the Company.
		4.		The Company proposes the election of Mr. Michiyuki Kondo as Outside Statutory Auditor, considering that, although he does not have any experience directly involving the corporate management, he will provide appropriate supervision for the management of the Company with his extensive knowledge and abundant experience through his practices as a lawyer.
		5.		Mr. Haruhito Hisatsune and Mr. Michiyuki Kondo are currently Outside Statutory Auditors of the Company, and will have been Outside Statutory Auditors for 4 years at the conclusion of this meeting.
		6.		With respect to liabilities set forth in Article 423, Paragraph 1 of the Companies Act, the Company has entered into a liability limitation agreement with Mr. Haruhito Hisatsune and Mr. Michiyuki Kondo which limits the maximum amount of his liabilities to the total amount provided for in each of the items of Article 425, Paragraph 1 of the Companies Act. If Mr. Haruhito Hisatsune and Mr. Michiyuki Kondo are appointed to be Outside Statutory Auditors, the Company will extend such an agreement.
		7.		The Company has designated Mr. Haruhito Hisatsune and Mr. Michiyuki Kondo as “Independent Statutory Auditors” as required by the regulations of the Tokyo Stock Exchange, Inc. and the Nagoya Stock Exchange, Inc. and made required notification therefor to these Stock Exchanges. If Mr. Haruhito Hisatsune and Mr. Michiyuki Kondo are appointed to be Outside Statutory Auditors, the Company plans to continue designating them as Independent Statutory Auditors.
		8		The stated number of the Company’s shares held by candidates for Statutory Auditors represents the actual number of shares each of candidates hold, including those vested to them in the Executive Stock Ownership Plan of the Company.

Agenda Item No. 3: Payment of Bonus to Directors

Bonus to Directors of the Company are, as with the basic policy for profit distributions, linked to consolidated business result. Compensation to Outside Director and Statutory Auditors are fixed, and they are not eligible to receive bonus payments.

At end of the term, the Company has 11 directors. In accordance with above policy, we would like to pay directors’ bonuses to 10 directors in the amount of 128 million yen considering performance during the term. This is with the exception of Mr. Motohiko Yokoyama, who is an Outside Director.

 

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