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<TITLE>MAKITA CORPORATION</TITLE>
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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">






<DIV align="center" style="font-size: 14pt; margin-top: 12pt"><B>UNITED STATES SECURITIES AND EXCHANGE COMMISSION</B>
</DIV>

<DIV align="center" style="font-size: 12pt; margin-top: 12pt">WASHINGTON, D.C. 20549
</DIV>

<DIV align="center" style="font-size: 18pt; margin-top: 12pt"><B>Form&nbsp;20-F</B>
</DIV>

<DIV align="center">
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%" style="font-size: 12pt">
<TR style="font-size: 12pt">
    <TD width="7%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="88%">&nbsp;</TD>
</TR>
<TR valign="top">
    <TD align="center"><FONT face="Wingdings">&#111;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g)&nbsp;OF THE SECURITIES EXCHANGE ACT
OF 1934</TD>
</TR>
</TABLE>
</DIV>

<DIV align="center">
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%" style="font-size: 12pt">
<TR style="font-size: 6pt">
    <TD width="7%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="88%">&nbsp;</TD>
</TR>
<TR valign="top">
    <TD align="center"><FONT face="Wingdings">&#254;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934</TD>
</TR>
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 12%">For the fiscal year ended March&nbsp;31, 2006
</DIV>

<DIV align="center">
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%" style="font-size: 12pt">
<TR style="font-size: 6pt">
    <TD width="7%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="88%">&nbsp;</TD>
</TR>
<TR valign="top">
    <TD align="center"><FONT face="Wingdings">&#111;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) THE SECURITIES EXCHANGE ACT OF 1934</TD>
</TR>
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 12%">For
the transition period from <U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U> to <U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U>
</DIV>

<DIV align="center">
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%" style="font-size: 12pt">
<TR style="font-size: 6pt">
    <TD width="7%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="88%">&nbsp;</TD>
</TR>
<TR valign="top">
    <TD align="center"><FONT face="Wingdings">&#111;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) THE SECURITIES EXCHANGE ACT OF 1934<BR>
</TD>
</TR>
<TR style="font-size: 6pt">    <TD>&nbsp;</TD></TR>

<TR valign="top" style="font-size: 10pt">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>Date of event requiring this shell company report
<U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U></TD>
</TR>

</TABLE>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 12pt">For the transition period from April&nbsp;1, 2005 to March&nbsp;31, 2006</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 12pt">Commission file number 0-12602</DIV>

<DIV align="center" style="font-size: 16pt; margin-top: 20pt"><B>KABUSHIKI KAISHA MAKITA</B>
</DIV>

<DIV align="center" style="font-size: 10pt">(Exact name of registrant as specified in its charter)</DIV>


<DIV align="center" style="font-size: 24pt; margin-top: 12pt"><B>MAKITA CORPORATION</B>
</DIV>

<DIV align="center" style="font-size: 10pt">(Translation of registrant&#146;s name into English)</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 12pt"><B>Japan</B><BR>
(Jurisdiction of incorporation or organization)</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 12pt"><B>3-11-8, Sumiyoshi-cho, Anjo City, Aichi Prefecture, Japan</B><BR>
(Address of principal executive offices)</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 12pt">Securities registered or to be registered pursuant to Section&nbsp;12(b) of the Act.
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="75%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="49%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="49%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">Title of Class
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">Name of each exchange on which registered</TD>
</TR>
<TR style="font-size: 1px">
    <TD align="center" valign="top" style="border-top: 1px solid #000000"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">* <B>American Depositary Shares</B>
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">Nasdaq Global Market</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">** <B>Common Stock</B>
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"></TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<DIV align="left">
<DIV style="font-size: 3pt; margin-top: 16pt; width: 18%; border-top: 0px solid #000000">&nbsp;</DIV>
</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96"></TD>
</TR>

<TR valign="top">
    <TD nowrap align="left">*</TD>
    <TD>&nbsp;</TD>
    <TD>American Depositary Receipts evidence American Depositary Shares,
each American Depositary Share representing one share of the
registrant&#146;s Common Stock.</TD>
</TR>

<TR style="font-size: 10pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">**</TD>
    <TD>&nbsp;</TD>
    <TD>Effective October&nbsp;1, 2001, no par value per share. Not for
trading, but only in connection with the registration of American
Depositary Shares, pursuant to the requirements of the Securities
and Exchange Commission.</TD>
</TR>

</TABLE>


<DIV align="center" style="font-size: 10pt; margin-top: 12pt">Securities registered or to be registered pursuant to Section&nbsp;12(g) of the Act.</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="75%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="49%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="49%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD nowrap align="center" style="border-bottom: 1px solid #000000">Title of each class</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" style="border-bottom: 1px solid #000000">Name of each exchange on which registered</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">None
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">None</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 12pt">Securities
for which there is a reporting obligation pursuant to Section&nbsp;15(d) of the Act.</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 12pt">None
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt">
(Title of Class)</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Indicate the number of outstanding shares of each of the issuer&#146;s classes of capital or common
stock as of the close of the period covered by the annual report.
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="80%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000">Outstanding as of</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">March 31, 2006</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">March 31, 2006</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD nowrap align="center" style="border-bottom: 1px solid #000000">Title of Class</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">(Tokyo time)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">(New York time)</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD nowrap><DIV style="margin-left:15px; text-indent:-15px">Common Stock, excluding 296,994 shares of Treasury Stock</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">143,711,766</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">American Depositary Shares, each representing one share
of Common Stock</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,160,984</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule&nbsp;405 of
the Securities Act.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face="Wingdings">&#254;</FONT> Yes &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <FONT face="Wingdings">&#111;</FONT> No
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">If this report is an annual or transition report, indicate by mark if the registrant is not
required to file reports pursuant to Section&nbsp;13 or 15(d) of the Securities Exchange Act of 1934.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face="Wingdings">&#111;</FONT> Yes &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <FONT face="Wingdings">&#254;</FONT> No
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Note &#150; Checking the box above will not relieve any registrant required to the file reports pursuant
to Section&nbsp;13 or 15(d) of the Securities Exchange Act of 1934 from their obligations under those
Sections.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Indicate by check mark whether the registrant (1)&nbsp;has filed all reports required to be filed by
Section&nbsp;13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12&nbsp;months (or for
such shorter period that the registrant was required to file such reports), and (2)&nbsp;has been
subject to such filing requirements for the past 90&nbsp;days.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face="Wingdings">&#254;</FONT> Yes &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <FONT face="Wingdings">&#111;</FONT> No
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer,
or a non-accelerated filer. See definition of &#147;accelerated filer and large accelerated filer&#148; in
Rule&nbsp;12b-2 of the Exchange Act.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 12pt">Large accelerated filer <FONT face="Wingdings">&#254;</FONT> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Accelerated filer <FONT face="Wingdings">&#111;</FONT> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Non-accelerated filer <FONT face="Wingdings">&#111;</FONT></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Indicate by check mark which financial statement item the registrant has elected to follow.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Item&nbsp;17 <FONT face="Wingdings">&#111;</FONT> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Item&nbsp;18 <FONT face="Wingdings">&#254;</FONT>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">If this is an annual report, indicate by check mark whether the registrant is a shell company ( as
defined in Rule&nbsp;12b-2 of the Exchange Act).
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face="Wingdings">&#111;</FONT>
Yes &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT face="Wingdings">&#254;</FONT> No
</DIV>



<P align="center" style="font-size: 10pt">&nbsp;
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>


<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><DIV style="border-bottom: 2px solid #000000; font-size: 1px">&nbsp;</DIV>
</DIV>




<DIV align="left">
<!-- TOC -->
</DIV>
<DIV align="left">
<A name="tocpage"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Table of Contents</B>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="88%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#101">Cautionary Statement with Respect to Forward-Looking Statements</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center"><DIV style="margin-left:15px; text-indent:-15px"><A href="#102"><B>PART I</B></A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR>    <TD>&nbsp;</TD></TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#103">Item&nbsp;1. Identity of Directors, Senior Management and Advisers</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#104">Item&nbsp;2. Offer Statistics and Expected Timetable</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#105">Item&nbsp;3. Key Information</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#106">A. Selected financial data</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#107">B. Capitalization and indebtedness</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#108">C. Reasons for the offer and use of proceeds</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#109">D. Risk factors</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#110">Item&nbsp;4. Information on the Company</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#111">A. History and development of the Company</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#112">B. Business overview</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#113">C. Organizational structure</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#114">D. Property, plant and equipment</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#115">Item&nbsp;4A. Unresolved Staff Comments</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#116">Item&nbsp;5. Operating and Financial Review and Prospects</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#117">A. Operating results</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#118">B. Liquidity and capital resources</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">27</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#119">C. Research and development, patents and licenses, etc.</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">30</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#120">D. Trend information</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">31</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#121">E. Off-balance sheet arrangements</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">31</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#122">F. Tabular disclosure of contractual obligations</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">32</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#122">G. Safe harbor</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">32</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#123">Item&nbsp;6. Directors, Senior Management and Employees</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">32</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#124">A. Directors and senior management</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">32</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#125">B. Compensation</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">35</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#126">C. Board practices</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">35</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#127">D. Employees</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">37</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#128">E. Share ownership</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">38</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#129">Item&nbsp;7. Major Shareholders and Related Party Transactions</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">38</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#130">A. Major shareholders</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">38</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#131">B. Related party transactions</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">39</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#132">C. Interest of experts and counsel</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">40</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#133">Item&nbsp;8. Financial Information</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">40</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#134">A. Consolidated statements and other financial information</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">40</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#135">B. Significant changes</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">41</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#136">Item&nbsp;9. The Offer and Listing</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">41</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#137">A. Offer and listing details</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">41</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#138">B. Plan of distribution</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">41</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#139">C. Markets</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">41</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#140">D. Selling shareholders</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">42</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#141">E. Dilution</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">42</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#142">F. Expenses of the issue</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">42</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#143">Item&nbsp;10. Additional Information</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">42</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#144">A. Share capital</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">42</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#145">B. Memorandum and articles of association</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">42</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#146">C. Material contracts</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">49</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#147">D. Exchange controls</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">49</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#148">E. Taxation</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">50</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#149">F. Dividends and paying agents</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">54</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#150">G. Statement by experts</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">54</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#151">H. Documents on display</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">55</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#152">I. Subsidiary information</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">55</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#153">Item&nbsp;11. Quantitative and Qualitative Disclosures about Market Risk</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">55</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">&nbsp;
</DIV>

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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>


<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><DIV style="border-bottom: 2px solid #000000; font-size: 1px">&nbsp;</DIV>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="88%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#154">Item&nbsp;12. Description of Securities Other than Equity Securities</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">57</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center"><DIV style="margin-left:15px; text-indent:-15px"><A href="#155"><B>PART II</B></A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#156">Item&nbsp;13. Defaults, Dividend Arrearages and Delinquencies</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">57</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#157">Item&nbsp;14. Material Modifications to the Rights of Security Holders and Use of Proceeds</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">57</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#158">Item&nbsp;15. Controls and Procedures</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">57</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#159">Item&nbsp;16A. Audit Committee Financial Expert</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">57</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#160">Item&nbsp;16B. Code of ethics</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">57</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#161">Item&nbsp;16C. Principal Accountant Fees and Services</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">58</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#162">Item&nbsp;16D. Exemptions from the Listing Standards for Audit Committees</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">59</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">

<TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#163">Item&nbsp;16E.
Purchases of Equity Securities by the Issuer and Affiliated Purchases</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">59</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center"><DIV style="margin-left:15px; text-indent:-15px"><A href="#164"><B>PART III</B></A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#165">Item&nbsp;17. Financial Statements</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">59</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#166">Item&nbsp;18. Financial Statements</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">59</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#167">Item&nbsp;19. Exhibits</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">60</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="k01178exv1w1.htm">EX-1.1 ARTICLES OF INCORPORATION, AS AMENDED AND EFFECTIVE AS OF JUNE 29, 2006 (ENGLISH TRANSLATION)</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="k01178exv1w2.htm">EX-1.2 REGULATIONS OF BOARD OF DIRECTORS, AS AMENDED AND EFFECTIVE AS OF JUNE 29, 2006 (ENGLISH TRANSLATION)</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="k01178exv1w3.htm">EX-1.3 THE SHARE HANDLING REGULATIONS, AS AMENDED AND EFFECTIVE AS OF JUNE 29, 2006 (ENGLISH TRANSLATION)</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="k01178exv1w4.htm">EX-1.4 REGULATIONS OF BOARD OF STATUTORY AUDITORS EFFECTIVE AS OF JULY 7, 2006 (ENGLISH TRANSLATION)</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="k01178exv12w1.htm">EX-12.1 302 CERTIFICATION OF PRESIDENT AND REPRESENTATIVE DIRECTORS</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="k01178exv12w2.htm">EX-12.2 302 CERTIFICATION OF DIRECTORS, GENERAL MANAGER OF ADMINISTRATION HEADQUARTERS</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="k01178exv13w1.htm">EX-13.1 906 CERTIFICATIONS OF PRESIDENT AND REPRESENTATIVE DIRECTOR AND DIRECTOR, GENERAL MANAGER OF ADMINISTRATION HEADQUARTERS</A></FONT></TD></TR>
</TABLE>
</DIV>

<DIV align="left">
<!-- /TOC -->
</DIV>

<P align="center" style="font-size: 10pt">&nbsp;
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><DIV style="border-bottom: 2px solid #000000; font-size: 1px">&nbsp;</DIV>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt">As used in this annual report, the term &#147;fiscal&#148; preceding a year means the twelve-month period
ended March&nbsp;31 of the year referred to. For example, &#147;fiscal 2006&#148; or &#147;FY2006&#148; refers to the
twelve-month period ended March&nbsp;31, 2006. All other references to years refer to the applicable
calendar year.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">All information contained in this annual report is as of March&nbsp;31, 2006 unless otherwise specified.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">In parts of this annual report, amounts reported in Japanese yen have been translated into U.S.
dollars for the convenience of readers. Unless otherwise noted, the rate used for this translation
was &#165;117 = U.S.$1.00, the approximate exchange rate on the noon buying rate for yen in New York
City as certified for customs purposes by the Federal Reserve Bank of New York on March&nbsp;31, 2006.
On June&nbsp;15, 2006 the noon buying rate for yen cable transfer in New York City as reported by the
Federal Reserve Bank of New York was &#165;115.06= $1.00.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">As used herein, the &#147;Company&#148; refers to Makita Corporation and &#147;Makita&#148; or &#147;Makita Group&#148; refer to
Makita Corporation and its consolidated subsidiaries unless the context otherwise indicates.
</DIV>
<DIV align="left">
<A name="101"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U><B>Cautionary Statement with Respect to Forward-Looking Statements </B></U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt">This annual report contains &#147;forward-looking statements&#148; that are based on current expectations,
estimates, strategies and projections of the Company&#146;s management in light of the information
currently available to it. The Company and its representatives may, from time to time, make written
or verbal forward-looking statements, including statements contained in the Company&#146;s filings with
the Securities and Exchange Commission and in its reports to shareholders, with respect to Makita&#146;s
current plans, estimates, strategies and beliefs and other statements that are not historical.
Generally, the inclusion of the words &#147;plan,&#148; &#147;strategy,&#148; &#147;believe,&#148; &#147;expect,&#148; &#147;intend,&#148;
&#147;estimate,&#148; &#147;anticipate,&#148; &#147;will,&#148; &#147;may,&#148; &#147;might&#148; and similar expressions identify statements that
constitute &#147;forward-looking statements&#148; within the meaning of Section&nbsp;27A of the United States
Securities Act of 1933 and Section&nbsp;21E of the United States Securities Exchange Act of 1934 and
that are intended to come within the safe harbor protection provided by those sections. All
statements addressing operating performance, events, or developments that Makita expects or
anticipates to occur in the future, including statements relating to sales growth, earnings or
earnings per share growth, and market share, as well as statements expressing optimism or pessimism
about future operating results, are forward-looking statements. Makita undertakes no obligation to
update or revise any forward-looking statements, whether as a result of new information, future
events, or otherwise.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">By their nature, all forward-looking statements involve risks and uncertainties. Actual results may
differ materially from those contemplated by the forward-looking statements for a number of
reasons, including but not limited to:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>changes in economic conditions affecting the retail, housing and construction markets in
different countries, particularly in Japan, the United States and Europe and, to a lesser
extent, in Canada, Asia, Australia and the Middle East;</TD>
</TR>

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Makita&#146;s ability to maintain mutually beneficial relationships with key distributors and to
penetrate new channels of distribution;</TD>
</TR>

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>circumstances relating to inventory adjustments or changes in purchasing patterns by major
customers and their impact on Makita&#146;s manufacturing volumes and inventory levels;</TD>
</TR>

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>uncertainties surrounding market acceptance of new products introduced in fiscal 2006 and
scheduled for introduction in fiscal 2007, as well as the level of sales generated from these
new products, in connection with Makita&#146;s existing investments in productive capacity and
commitments to fund its advertising and product promotions to introduce these new products;</TD>
</TR>

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Makita&#146;s ability to develop and introduce new products at favorable margins;</TD>
</TR>

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>adverse changes in currency exchange rates or raw material commodity prices, both in absolute
terms and relative to competitors&#146; risk profiles;</TD>
</TR>

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>increased competition in both Japanese market and worldwide;</TD>
</TR>

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>changes in consumer preference or loyalties;</TD>
</TR>

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>price reductions taken by Makita in response to customer and competitive pressures, as well
as price reductions or promotional actions taken in order to drive demand, which may not
result in anticipated sales levels;</TD>
</TR>

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Makita&#146;s ability to achieve projected levels of efficiencies and cost reduction measures and
to avoid delays in or inefficiencies resulting from manufacturing and administrative
reorganization actions in progress or contemplated;</TD>
</TR>

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the impact of various factors on Makita&#146;s foreign operations such as tariffs,
nationalization, exchange controls, interest rate fluctuations, civil unrest, governmental
changes, restrictions on Makita&#146;s foreign investment in local business and risks related to
other political, economic, and regulatory instabilities;</TD>
</TR>

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the effects of litigation, environmental remediation matters, and product liability exposures;</TD>
</TR>

</TABLE>
</DIV>
<P align="center" style="font-size: 10pt">1
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><DIV style="border-bottom: 2px solid #000000; font-size: 1px">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">



</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Makita&#146;s ability to generate sufficient cash flows to support
capital expansion, business acquisition plans and general
operating activities, and Makita&#146;s ability to obtain necessary
financing at favorable interest rates;</TD>
</TR>

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>changes in laws and regulations, including changes in accounting
standards, taxation requirements, including tax rate changes, new
tax laws and revised tax law interpretations, and environmental
laws, both in Japan and in foreign jurisdictions in which Makita
operates;</TD>
</TR>

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the impact of unforeseen events, including war or terrorist
activities, on economic conditions and corporate and consumer
confidence;</TD>
</TR>

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>fluctuations in stock market prices&#59; and</TD>
</TR>

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the effects of attestation on internal control over financial
reporting to be expressed by the Company&#146;s auditors.</TD>
</TR>


</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">The foregoing list is not exhaustive. There can be no assurance that Makita has correctly
identified and appropriately assessed all factors affecting its business or that the publicly
available and other information with respect to these matters is complete and correct. Additional
risks and uncertainties not presently known to Makita or that it currently believes to be
immaterial also may adversely impact Makita. Should any risks and uncertainties develop into actual
events, these developments could have material adverse effects on Makita&#146;s business, financial
condition, and results of operations.
</DIV>

<P align="center" style="font-size: 10pt">2
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>



<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><DIV style="border-bottom: 2px solid #000000; font-size: 1px">&nbsp;</DIV>
</DIV>

<DIV align="left">
<A name="102"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>PART I</B>
</DIV>

<DIV align="left">
<A name="103"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Item&nbsp;1.</B>
<U><B>
Identity of Directors, Senior Management and Advisers</B></U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Not applicable
</DIV>

<DIV align="left">
<A name="104"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Item&nbsp;2.</B>
<U><B> Offer Statistics and Expected Timetable</B></U>
</DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 12pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Not applicable
</DIV>

<DIV align="left">
<A name="105"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Item&nbsp;3.</B> <U><B> Key Information</B></U>
</DIV>

<DIV align="left">
<A name="106"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>A. Selected financial data</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt">The following data for each of the five fiscal years ended March&nbsp;31, 2006 has been derived from
Makita&#146;s audited consolidated financial statements. It should be read in conjunction with Makita&#146;s
audited consolidated balance sheets as of March&nbsp;31, 2005 and 2006, the related consolidated
statements of income, shareholder&#146;s equity and cash flows for each of the three years ended March
31, 2006, and the notes thereto that appear elsewhere in this annual report. Makita&#146;s consolidated
financial statements were prepared in accordance with U.S. generally accepted accounting
principles, or U.S. GAAP, and were included in its Japanese Securities Reports filed with the
Director of the Kanto Local Finance Bureau.
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="28%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">U.S. Dollars</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="18" style="border-bottom: 1px solid #000000">(Millions of yen, except per share amounts)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">(thousands)</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="22" style="border-bottom: 1px solid #000000">Fiscal year ended March 31,</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000">Income Statement Data:</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2002</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2003</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2006</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2006</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net sales</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">166,169</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">175,603</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">184,117</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">194,737</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">229,075</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,957,906</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Operating income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,873</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12,468</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,696</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">31,398</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">45,778</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">391,265</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">133</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,723</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,691</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">22,136</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">40,411</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">345,393</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net income per share of Common stock and per ADS:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Basic</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">45.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">53.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">153.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">281.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.40</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Diluted</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">44.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">51.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">148.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">281.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.40</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="28%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">U.S. Dollars</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="18" style="border-bottom: 1px solid #000000">(Millions of yen, except per share amounts)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">(thousands)</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="22" style="border-bottom: 1px solid #000000">Fiscal year ended March 31,</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000">Balance Sheet Data:</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2002</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2003</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2006</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2006</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">285,138</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">278,600</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">278,116</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">289,904</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">326,038</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">2,786,650</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cash and cash
equivalents, time
deposits and marketable
securities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">63,393</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">64,083</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">92,616</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">91,189</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">88,672</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">757,880</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net working capital</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">144,929</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">141,759</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">147,822</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">149,666</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">181,808</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,553,914</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Short-term borrowings</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,984</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,892</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,128</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,060</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,728</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,769</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Long-term indebtedness</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20,102</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19,843</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,364</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">88</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">104</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">889</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Common stock</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">23,803</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">23,803</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">23,803</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">23,805</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">23,805</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">203,462</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Treasury stock</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2,229</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(5,110</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(3,316</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(3,517</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(258</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2,205</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Shareholders&#146; equity</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">189,939</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">182,400</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">193,348</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">219,640</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">266,584</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,278,496</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total number of
shares outstanding</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">149,673,742</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">145,967,876</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">143,893,191</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">143,777,607</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">143,711,766</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">143,711,766</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Note: Net working capital equals current assets less current liabilities.
</DIV>

<P align="center" style="font-size: 10pt">3
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><DIV style="border-bottom: 2px solid #000000; font-size: 1px">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Exchange rates (Japanese yen amounts per U.S. dollars)<BR>
The following table sets forth information concerning the exchange rates for Japanese yen and U.S.
dollars based on 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. The average Japanese yen
exchange rates represent average noon buying rates on the last business day of each month during
the previous period.
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="80%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="14" style="border-bottom: 1px solid #000000">(Japanese Yen per U.S. $1.00)</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD nowrap align="center" style="border-bottom: 1px solid #000000">Fiscal year ended March 31,</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">High</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Low</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Average</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Year-end</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD align="center"><DIV style="margin-left:15px; text-indent:-15px">2002</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">115.89</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">134.77</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">125.64</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">132.70</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center"><DIV style="margin-left:15px; text-indent:-15px">2003</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">115.71</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">133.40</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">121.94</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">118.07</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD align="center"><DIV style="margin-left:15px; text-indent:-15px">2004</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">104.18</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">120.55</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">113.07</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">104.18</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center"><DIV style="margin-left:15px; text-indent:-15px">2005</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">102.26</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">114.30</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">107.47</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">107.22</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD align="center"><DIV style="margin-left:15px; text-indent:-15px">2006</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">104.41</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">120.93</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">113.15</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">117.48</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="80%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="28%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="22" style="border-bottom: 1px solid #000000">(Japanese Yen per U.S. $1.00)</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">June</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD nowrap align="center" style="border-bottom: 1px solid #000000">2006</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">January</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">February</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">March</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">April</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">May</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">(through June 15)</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD align="center"><DIV style="margin-left:15px; text-indent:-15px">High</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">113.96</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">115.82</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">115.89</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">113.79</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">110.07</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">111.66</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center"><DIV style="margin-left:15px; text-indent:-15px">Low</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">117.55</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">118.95</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">119.07</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">118.66</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">113.46</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">115.06</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt">On June&nbsp;15, 2006 the noon buying rate for yen cable transfer in New York City as reported by the
Federal Reserve Bank of New York was &#165;115.06 = U.S. $1.00
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Cash dividends declared per share of common stock and per ADS:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="80%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000">In Yen</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000">In U.S. Dollars</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD nowrap align="center" style="border-bottom: 1px solid #000000">Fiscal year ended March 31,</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Interim</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Year-end</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Interim</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Year-end</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD align="center"><DIV style="margin-left:15px; text-indent:-15px">2002</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">9.0</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">9.0</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">0.07</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">0.07</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center"><DIV style="margin-left:15px; text-indent:-15px">2003</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">9.0</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">9.0</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">0.07</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">0.07</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD align="center"><DIV style="margin-left:15px; text-indent:-15px">2004</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">9.0</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">13.0</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">0.09</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">0.11</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center"><DIV style="margin-left:15px; text-indent:-15px">2005</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">11.0</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">36.0</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">0.10</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">0.34</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD align="center"><DIV style="margin-left:15px; text-indent:-15px">2006</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">19.0</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">38.0</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">0.16</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">0.32</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Makita&#146;s basic dividend policy on the distribution of profits is to maintain a dividend payout
ratio of 30% or greater, with a lower limit on annual cash dividends of 18 yen per share. However,
in the event special circumstances arise, computation of the amount of dividends will be based on
consolidated net income after certain adjustments.
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="95%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Note:
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">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 yen in New York City as certified for
customs purposes by the Federal Reserve Bank of New York.</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left">
<A name="107"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>B. Capitalization and indebtedness</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Not applicable
</DIV>

<DIV align="left">
<A name="108"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>C. Reasons for the offer and use of proceeds</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Not applicable
</DIV>

<P align="center" style="font-size: 10pt">4
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><DIV style="border-bottom: 2px solid #000000; font-size: 1px">&nbsp;</DIV>
</DIV>

<DIV align="left">
<A name="109"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>D. Risk factors</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt">The following is a summary of some of the significant risks that could affect Makita. Other risks
that could affect Makita are also discussed elsewhere in this annual report. Additionally, some
risks that may be currently unknown to Makita and other risks that are currently believed to be
immaterial, may become material. Some of these statements are forward-looking statements that are
subject to the &#147;Cautionary Statement with Respect to Forward-Looking Statements&#148; appearing
elsewhere in this annual report.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U><B>Makita&#146;s sales are affected by the levels of construction activities and capital investments in
its markets.</B></U><BR>
The demand for power tools, Makita&#146;s main products, is affected to a large extent by the levels of
construction activities and capital investments in the relevant regions. Generally speaking, the
levels of construction activities and capital investment depend largely on the economic conditions
in the market. As a result, when economic conditions weaken in the principal markets for Makita&#146;s
activities, including Japan, North America, Europe, and Asia, this may have an adverse impact on
Makita&#146;s consolidated financial condition and results of operations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U><B>Geographic concentration of Makita&#146;s main facilities may have adverse effects on Makita&#146;s
business activities.</B></U><BR>
Makita&#146;s principal management functions, including its headquarters, and the companies on which it
relies for supplying major parts are located in Aichi Prefecture (&#147;Aichi&#148;), Japan. Makita&#146;s
manufacturing facilities in Aichi and Kunshan, Jiangsu Province, China, collectively account for
approximately 76% of Makita&#146;s total production volume on a consolidated basis in fiscal 2006. Due
to this geographic concentration of Makita&#146;s major functions, including plants and other operations
in Japan and China, Makita&#146;s performance may be significantly affected by major natural disasters
and other catastrophic events, including earthquakes, floods, fires, power outages, and suspension
of water supplies. In addition, Makita&#146;s facilities in China may also be affected by changes in
political and legal environments, changes in economic conditions, revisions in tariff rates,
currency appreciation, labor disputes, emerging infections diseases, power outages resulting from
inadequacies in infrastructure, and other factors. In the event that such developments cannot be
foreseen or measures taken to alleviate their damaging impact are inadequate, Makita&#146;s consolidated
financial condition and results of operations may be adversely affected.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U><B>Makita&#146;s overseas activities and entry into overseas markets entail risks, which may have a
material adverse effect on Makita&#146;s business activities.</B></U><BR>
Makita derives a majority of its sales in markets located outside of Japan, including North
America, Europe, Asia, Oceania, the Middle East, and emerging markets such as Russia and Eastern
Europe. In fiscal 2006, approximately 82% of Makita&#146;s consolidated net sales were derived from
products sold overseas. On a volume basis, Makita depended on overseas markets for 88% of units
sold. The high percentage of overseas sales gives rise to a number of risks. If such risks occur,
they may have a material adverse impact on Makita&#146;s consolidated financial condition and results of
operations. Such risks include the following:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="95%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">(1)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Unexpected changes in laws and regulations;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">(2)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Disadvantageous political and economic factors;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">(3)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">The outflow of technical know-how and knowledge due to personnel
turnover enabling Makita&#146;s competitors to strengthen their
position;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">(4)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Potentially unfavorable tax systems; and</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">(5)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Terrorism, war, and other factors that lead to social turbulence.</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U><B>Environmental or other government regulations may have a material adverse impact on Makita&#146;s
business activities.</B></U><BR>
Makita maintains strict compliance with environmental, commercial, export and import, tax, safety
and other regulations that are applicable to its activities in all the countries in which Makita
operates. If Makita is unable to continue its compliance with existing regulations or is unable to
comply with any new or amended regulations, it may be subject to fines and other penalties and its
activities may be significantly restricted. The costs related to compliance with any new or amended
regulations may also result in significant increases in overall costs.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Beginning on July&nbsp;1, 2006, a European directive entitled &#147;Restriction of the Use of Certain
Hazardous Substances&#148; (&#147;RoHS&#148;) takes effect which forbids the sale in EU member countries of
products containing six toxic substances, including lead. In addressing RoHS, we have abolished
nearly all restricted substances through the cooperation of our parts suppliers. In addition, the
Makita Group itself is constantly reinforcing its system for inspecting parts as they are delivered
and has addressed this issue nearly fully at the present time. However, if Makita&#146;s suppliers have
not fully shifted to alternative materials and Makita is not able to detect the presence of the
forbidden substances, then, if these substances are confirmed within the EU, Makita may face a
number of risks, including the need to replace the defective parts, conduct recalls, and sustain
damage to its brand image. In such cases, Makita&#146;s consolidated financial condition and results of
operations may be adversely affected.
</DIV>

<P align="center" style="font-size: 10pt">5
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><DIV style="border-bottom: 2px solid #000000; font-size: 1px">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U><B>Currency exchange rate fluctuations may adversely affect Makita&#146;s financial results.</B></U><BR>
The functional currency for all of Makita&#146;s significant foreign operations is the local currency.
The results of transactions denominated in local currencies of Makita&#146;s subsidiaries around the
world are translated into yen using the average market conversion rate during each financial
period. Assets and liabilities denominated in local currencies are converted into yen at the rate
prevailing at the end of each financial period. As a result, Makita&#146;s operating results, assets,
liabilities and shareholders&#146; equity are affected by fluctuation in values of the Japanese yen
against these local currencies.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Sales denominated in foreign currencies accounted for approximately 76% of Makita&#146;s consolidated
net sales in fiscal 2006, and, accordingly, Makita&#146;s operating income is significantly affected by
foreign exchange fluctuations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">In an effort to minimize the impact of short-term exchange rate fluctuations between major
currencies, mainly the U.S. dollar, the euro, and the yen, Makita engages in hedging transactions.
Makita is also increasing the percentage of products that it manufactures in China, which has
resulted in an increase in foreign-currency denominated production costs. While Makita believes
that such measures may help reduce the impact of some exchange rate fluctuations, it cannot assure
you that it will be able to successfully hedge its exchange rate risks. In addition,
medium-to-long-term fluctuations of exchange rates may make it difficult for Makita to execute
procurement, production, logistics, and sales activities as planned and may have an adverse impact
on Makita&#146;s consolidated financial condition and results of operations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U><B>Fluctuations in stock market prices may adversely affect Makita&#146;s financial statements.</B></U><BR>
Makita holds certain Japanese equities and equity-linked financial products and records these
securities as marketable securities on its consolidated financial statements. The values of these
investments are influenced by fluctuations in the quoted market prices. A significant depreciation
in the value of these securities will have an adverse impact on Makita&#146;s consolidated financial
condition and results of operations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U><B>If Makita cannot respond to changes in construction method and trends in demand, Makita&#146;s sales
may be materially and adversely affected.</B></U><BR>
In recent years, market trends in demand for various power tools have been changing significantly
due to the adoption of new construction methods, especially in Japan. For example, as prefabricated
housing construction becomes more common, the use of power tools at construction sites has been
decreasing substantially, while demand for fastening tools has increased. If Makita does not or is
unable to respond to these rapid shifts in demand for various power tools, Makita&#146;s sales may
decline and this may have an adverse effect on Makita&#146;s consolidated financial condition and
results of operations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U><B>The rapidly growing presence of China-based power tool manufacturers may adversely affect
Makita&#146;s sales results.</B></U><BR>
In recent years, power tool companies in China have expanded their presence in the world market. In
particular, in certain markets in Asia where purchasing power is relatively low, competition with
power tools made in China has intensified, with respect to lower end products. As the technology of
Chinese power tool manufacturers improves, competition in the markets for high-end products for
professional use may also intensify. As a result, Makita&#146;s market share, consolidated financial
condition and results of operations may be adversely affected.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U><B>If Makita is not able to develop attractive products, Makita&#146;s sales activities may be
adversely affected.</B></U><BR>
Makita&#146;s principal competitive strengths are its diverse range of high-quality, high-performance
power tools for professional use, and the good reputation of the MAKITA brand, both of which depend
in part on Makita&#146;s ability to continue to develop attractive and innovative products that are well
received by the market. There is no assurance that Makita will be able to continue to develop such
products. If Makita is no longer able to quickly develop new products that meet the changing needs
of the market for high-end, professional users, it may have an adverse impact on Makita&#146;s
consolidated financial condition and results of operations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U><B>If Makita fails to maintain cooperative relationships with significant customers, Makita&#146;s
sales may be seriously affected.</B></U><BR>
Makita has a number of significant customers. If Makita loses these customers and is unable to
develop new sales channels to take their place, sales may decline and have an adverse impact on
Makita&#146;s business performance and financial position. In addition, if major customers of Makita
select power tools and other items made in China and sell them under their own brand, this may have
an adverse impact on Makita&#146;s consolidated financial condition and results of operations.
</DIV>

<P align="center" style="font-size: 10pt">6
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><DIV style="border-bottom: 2px solid #000000; font-size: 1px">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U><B>If any of Makita&#146;s suppliers fail to deliver materials or parts required for production as
scheduled, Makita&#146;s production activities may be adversely affected.</B></U><BR>
Makita&#146;s production activities are greatly dependent on the on-schedule delivery of materials and
parts from its suppliers. Makita purchases some of its component parts from sole suppliers. The
largest single source supplier of the Company accounted for approximately 5% of its aggregate
purchases of raw materials and parts in fiscal 2006. There is no assurance that Makita will be able
to find alternate suppliers that can provide materials and parts of similar quality and price in a
sufficient quantity and in a timely manner. In the event that any of these suppliers cannot deliver
the required quality and quantity of parts on schedule, this will have an adverse effect on
Makita&#146;s production schedules and cause a delay in Makita&#146;s own product deliveries. This may cause
Makita to lose some customers or require Makita to purchase replacement materials or parts from
alternate sources at a higher price. Any of these occurrences may have a detrimental effect on
Makita&#146;s consolidated financial condition and results of operations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U><B>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.</B></U><BR>
In manufacturing power tools, Makita Group purchases raw materials and components, including
silicon steel plates, aluminum, steel products, copper wire, and electronic parts. In recent years,
demand for these materials in China and the rest of the world has risen substantially, and some
suppliers are experiencing a shortage of capacity. Under these circumstances, if the Makita Group
is unable to obtain the necessary quantities of these materials, this may have an effect on
production schedules. In addition, the shortage of capacity among suppliers is a factor leading to
increased prices of production materials. If the Makita Group experiences increases in prices of
production materials, greater than what can be absorbed by increased productivity or through other
internal efforts and prices of final products cannot be raised sufficiently, such circumstance may
have a detrimental impact on the performance and financial position of the Makita Group.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U><B>Product liability litigation or recalls may harm Makita&#146;s financial statements and
reputation.</B></U><BR>
Makita manufactures a wide range of power tools at factories worldwide according to ISO
internationally accepted quality control standards. However, Makita cannot be certain that all of
its products will be free of defects nor that it will be subject to product recalls in the future.
A large-scale recall or a substantial product liability suit brought against Makita may result in
severe damage to Makita&#146;s brand image and reputation. In addition, a major product recall or
product liability lawsuit is likely to be very costly and would require a significant amount of
management time and attention. Any of these occurrences may have a major adverse impact on Makita&#146;s
consolidated financial condition and results of operations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U><B>Investor confidence and the value of Makita&#146;s ADRs and ordinary shares may be adversely
impacted if Makita&#146;s management concludes that Makita&#146;s internal controls over financial reporting
are not effective as of March&nbsp;31, 2007, or if Makita&#146;s independent registered public accounting
firm is unable to provide adequate attestation on management&#146;s assessment, or to provide
unqualified opinion on the effectiveness of Makita&#146;s internal controls over financial reporting, as
required by Section&nbsp;404 of the Sarbanes-Oxley Act of 2002.</B></U><BR>
The Securities and Exchange Commission, as directed by Section&nbsp;404 of the Sarbanes-Oxley Act of
2002, adopted rule requiring public companies to include a report of management on Makita&#146;s
internal controls over financial reporting in its Annual Report on Form 20-F that contains an
assessment by management of the effectiveness of Makita&#146;s
internal control over financial reporting. In addition, Makita&#146;s independent registered public
accounting firm must attest to and report on management&#146;s assessment of the effectiveness of
Makita&#146;s internal control over financial reporting. These requirements will first apply to Makita&#146;s
Annual Report on Form 20-F for the fiscal year ending March&nbsp;31, 2007. Although Makita intends to
diligently and vigorously review its internal controls over financial reporting in order to ensure
compliance with Section&nbsp;404 requirements, Makita&#146;s management may conclude that Makita&#146;s internal
controls over financial reporting are not effective. In addition, Makita&#146;s independent registered
public accounting firm may be unable to attest to Makita&#146;s management&#146;s assessment or may issue a
report that concludes that Makita&#146;s internal controls over financial reporting are not effective.
Makita&#146;s failure to achieve and maintain effective internal controls over financial reporting, or
Makita&#146;s independent registered public accounting firm&#146;s inability to attest to Makita&#146;s
management&#146;s assessment, or the issuance of a report that concludes that Makita&#146;s internal controls
over financial reporting are not effective, could result in the loss of investor confidence in the
reliability of Makita&#146;s financial reporting process, which in turn could harm Makita&#146;s business and
ultimately could negatively impact the market price of Makita&#146;s ADRs and ordinary shares.
</DIV>

<P align="center" style="font-size: 10pt">7
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><DIV style="border-bottom: 2px solid #000000; font-size: 1px">&nbsp;</DIV>
</DIV>

<DIV align="left">
<A name="110"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Item&nbsp;4. </B><U><B>Information on the Company</B></U>
</DIV>

<DIV align="left">
<A name="111"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>A. History and development of the Company</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt">The Company traces its origin to an electrical repair workshop founded in Nagoya in 1915, and was
incorporated under the Commercial Code of Japan on December&nbsp;10, 1938 under the name of Makita
Electric Works, Ltd. as a joint stock corporation. Under the presidency of the late Mr.&nbsp;Jujiro
Goto, in 1958, Makita commenced the manufacture of electric power tools and, by 1969, had reached
its present leading position in the Japanese market. In 1970, the Company decided to take advantage
of the large potential for growth in overseas markets for its products and established its first
subsidiary in the United States. Since then, Makita has expanded its export activity and has
established other overseas subsidiaries. In April&nbsp;1991, the Company changed its name from Makita
Electric Works, Ltd. to Makita Corporation. In April&nbsp;1995, Makita established a holding company in
the United Kingdom to better coordinate the overall activities of its European subsidiaries. At
present, Makita sells its products in over 150 countries around the world.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">As part of its efforts to minimize trade friction, Makita started manufacturing operations in
Canada, Brazil and the United States in 1980, 1981 and 1985 respectively. Makita established a
manufacturing subsidiary in the United Kingdom in 1989. In January&nbsp;1991, Makita acquired all of the
shares of Sachs-Dolmar GmbH, a German company, subsequently renamed Dolmar GmbH (Dolmar), which is
primarily engaged in manufacturing engine driven chain saws. Makita established two manufacturing
subsidiaries in China, Makita (China) Co., Ltd. and Makita (Kunshan) Co., Ltd. in December&nbsp;1993 and
in November&nbsp;2000 respectively.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">In May&nbsp;2005, Makita established a new subsidiary, Makita EU S.R.L. in Romania, as a location from
which it can serve growing markets in Eastern Europe, Russia, Western Europe and the Middle East.
Construction began in April&nbsp;2006 on a new Romanian factory in the suburbs of the capital,
Bucharest, where production is scheduled to start by Summer 2007.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Makita presently manufactures power tools in seven countries globally: the United States, Canada,
Brazil, the United Kingdom, Germany, China and Japan. By fiscal year 2008, when construction of the
Romania factory is complete, Makita will have production facilities in eight countries, three of
them in Europe.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">During the fiscal year under review, Makita Ukraine LLC, and Makita EU S.R.L. were newly included
within the scope of consolidation. On the other hand, golf course operator Joyama Kaihatsu Ltd. was
dropped from the list of the company&#146;s consolidated subsidiaries because of the transfer of its
ownership interests in Joyama Kaihatsu Ltd. to a third party. As a result, the number of
consolidated subsidiaries increased to 45.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Makita Corporation&#146;s registered office is located at 3-11-8, Sumiyoshi-cho, Anjo, Aichi 446-8502,
Japan, and its telephone number is &#043;81-566-98-1711.
</DIV>
<DIV align="left">
<A name="112"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>B. Business overview</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Makita&#146;s principal activity is the manufacturing and sale of a wide range of power tools for
professional users worldwide. Makita&#146;s power tools consist of portable general purpose tools,
primarily drills, grinders and sanders and portable woodworking tools, primarily saws and planers.
Makita also produces a line of stationary woodworking machines. For the fiscal year ended March&nbsp;31,
2006, approximately 82% of Makita&#146;s sales were outside of Japan. Makita estimates that most of its
sales worldwide were made to commercial and professional users such as those engaged in timber and
metal processing, carpentry, and concrete and masonry works.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Makita focuses on creating user and environment-friendly products that enhance the work
environment, and have features such as low vibration, low noise and dust concentration.
</DIV>

<P align="center" style="font-size: 10pt">8
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><DIV style="border-bottom: 2px solid #000000; font-size: 1px">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U><B>Products </B></U><BR>
The following table sets forth Makita&#146;s consolidated net sales by product categories for the
periods presented:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="23%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="22">(Millions of yen, except for percentage amounts)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">U.S. Dollars</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="22" style="border-bottom: 1px solid #000000">Consolidated Net Sales by Product Categories</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">(thousands)</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="26" style="border-bottom: 1px solid #000000">Fiscal year ended March 31,</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000">2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000">2005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000">2006</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2006</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Portable woodworking tools</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">34,452</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">18.7</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">34,507</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">17.7</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">37,890</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">16.5</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">323,846</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Portable general purpose tools</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">98,176</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">53.3</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">105,736</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">54.3</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">128,215</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">56.0</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,095,855</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Stationary woodworking
machines</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,711</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">1.0</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,573</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">0.8</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,009</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">0.9</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17,171</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other products</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19,548</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">10.6</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">21,763</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">11.2</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">26,696</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">11.7</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">228,171</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Parts, repairs and accessories</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">30,230</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">16.4</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">31,158</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">16.0</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">34,265</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">14.9</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">292,863</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">184,117</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">100.0</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">194,737</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">100.0</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">229,075</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">100.0</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,957,906</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><I>Portable Woodworking Tools</I>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Portable woodworking tools consist mainly of saws, planers, mortisers, groove cutters, routers,
trimmers, nailers and tackers. Circular saws, which are primarily sold to carpenters in the
homebuilding industry, account for a substantial portion of Makita&#146;s sales of saws. The balance of
saw sales is made up of jigsaws, sold primarily to carpenters and other woodworkers for delicate
work, and recipro saws used for working in confined spaces unsuited to conventional saws. Planers,
which are used exclusively for woodworking, are sold principally to carpenters. Apart from
flat-surfaced planers, which are manufactured in varying widths, Makita also produces curved
planers for use on concave surfaces. Mortisers are used for chiseling holes in wood and groove
cutters are used to install sliding windows. Routers and trimmers are used principally by
carpenters in the homebuilding industry for door and window cutting, pattern cutting and other
interior decorative work. Nailers are used primarily for light woodwork in homebuilding. Tackers
are used to make temporary attachments in house-finishing and for furniture-making. Almost all of
the mortisers, groove cutters, routers and trimmers, nailers and tackers manufactured by Makita are
sold within Japan.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Among Makita&#146;s new products launched in Japan in the fiscal year under review was a 125mm
rechargeable circular saw, featuring a small, lightweight, high-capacity lithium ion battery, a
proprietary digital charge-optimization system, and a high-speed (4,300 rpm) motor.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><I>Portable General Purpose Tools</I>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Portable general purpose tools include drills, hammer drills, rotary hammers, electric breakers
(jackhammers), grinders, sanders, cutters, cutting machines, nibblers and shears, screwdrivers and
impact wrenches. Most of these tools are used for working on metal and materials other than wood,
although many may be used in woodworking as well.</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Drills are typical power tools used for drilling in metals, woods and plastics. They are classified
into pistol-grip drills, D-handle drills, spade-handle drills and angle drills, according to their
configuration. Makita also manufactures various kinds of cordless drills. Some of them are equipped
with a screwdriving mechanism and are called cordless driver drills. Hammer drills are equipped
with a hammering function, but can also be used as conventional drills; these drills are used
principally on metal and masonry in the civil engineering and electrical contracting industries.
Rotary hammers, which are used exclusively on concrete by the construction industry, are equipped
with a rotary function, but can also be used as ordinary hammers. Breakers are used for shattering
hard surfaces, principally concrete.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Grinders and sanders are used for smoothing and finishing. Sanders may also be used for polishing.
Grinders are used on metal and sanders are used on metal, wood, stone and concrete. Grinders are
divided into portable disc grinders and bench grinders and sanders are classified into portable
disc sanders and belt sanders.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Cutters and cutting machines have similar functions, although cutters are designed to be hand-held
and cutting machines are stationary. Cutters have a diamond cutting surface and are used on tile,
brick, concrete and stone. Cutting machines have a carborundum cutting surface and are used
principally on metal.</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Impact wrenches are used mainly in the construction industry and screwdrivers are used in
construction work and by electricians.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Among Makita&#146;s new products launched in Japan in the fiscal year under review was a series of new
products featuring lithium-ion batteries, including a high-cost-performance impact driver with a
small, lightweight, high-capacity lithium ion battery, a newly developed four-pole motor, and a
proprietary digital charge-optimization system. This series also includes a 16 mm rechargeable
hammer drill that is 30% faster than any of our previous products, allowing the user to
set the desired speed of rotation, impact, and fastening torque, and a 100 mm rechargeable disk
grinder with a maximum speed of 10,000 rpm.


</DIV>

<P align="center" style="font-size: 10pt">9
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><DIV style="border-bottom: 2px solid #000000; font-size: 1px">&nbsp;</DIV>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><I>Stationary Woodworking Machines</I>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Makita&#146;s stationary woodworking machines consist mainly of planer-jointers, wood surfacers, band
saws and table saws, all of which are installed in workshops and used for surfacing and cutting
wood.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><I>Other Products</I>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Makita&#146;s other products include chain saws, hand-held vacuum cleaners for home use, industrial
vacuum cleaners, submersible pumps and garden tools, such as hedge trimmers.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><I>Parts, repairs and accessories</I>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Makita manufactures and markets a variety of parts and accessories for its products and performs
repair work as part of its after-sale services.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U><B>Principal Markets, Distribution and After-Sale Services</B></U><BR>
The following table sets forth Makita&#146;s consolidated net sales by geographic area based on
customers locations for the periods presented:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="23%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="22">(Millions of yen, except percentage amount)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">U.S. Dollars</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="22" style="border-bottom: 1px solid #000000">Consolidated Net Sales by Geographic Area</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">(thousands)</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="26" style="border-bottom: 1px solid #000000">Fiscal year ended March 31,</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000">2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000">2005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000">2006</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2006</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Japan</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">39,142</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">21.3</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">39,379</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">20.2</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">41,600</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">18.2</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">355,556</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">North America</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">41,853</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">22.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">38,490</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">47,673</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">407,462</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Europe</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">66,369</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">36.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">75,263</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">38.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">90,504</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">39.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">773,538</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Asia</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,245</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16,341</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16,993</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">145,239</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">22,508</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">25,264</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">32,305</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">276,111</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">184,117</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">100.0</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">194,737</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">100.0</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">229,075</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">100.0</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,957,906</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><I>Japan</I>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Makita believes that most of its domestic sales are made to commercial users. The Japanese
Do-It-Yourself, or DIY, market for power tools is growing but the pace of growth is slow.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Makita attributes its leading position in the Japanese market to the close and frequent contact
that it maintains with retailers and users of Makita products. While Makita&#146;s major competitors
rely primarily on wholesalers for all aspects of distribution and servicing, Makita has
approximately 840 employees directly responsible for the promotion, sale and delivery and
after-sale servicing of its products. These employees, operating from 113 sales offices throughout
Japan, are assigned sales territories and visit retail outlets in their area on an average of once
a week.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">In addition, Makita has two distribution centers in Osaka and Saitama prefecture. These
distribution centers strengthen Makita&#146;s distribution and after-sale service functions.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">The majority of Makita&#146;s products are sold through its 14 wholesalers. Each wholesaler bears the
risk of any bad debts of the retailers for which it has responsibility. The payments by the
wholesalers to Makita are in most cases made within 30 to 60&nbsp;days after sale. During the fiscal
year ended March&nbsp;31, 2006, Makita sold its products, directly or through wholesalers, to
approximately 30,000 retail outlets, and no single retailer accounted for more than 2% of Makita&#146;s
domestic sales. During the year, Makita&#146;s three largest wholesalers accounted, in the aggregate,
for approximately 35% of Makita&#146;s domestic net sales.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Repairs, including free repair service and after-sale services are carried out by Makita&#146;s sales
offices.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">To strengthen its business in Pneumatic Tools, Makita purchased the nailer business of Kanematsu
NNK Corp in January&nbsp;2006
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><I>Overseas</I>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt">In the
fiscal year ended March&nbsp;31, 2006, 82% of Makita&#146;s net sales
were made outside of Japan.</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Overseas sales, distribution, and service are carried out through a network of 36 sales
subsidiaries and 113 branch offices or service centers located in the United States, Canada,
Brazil, Mexico, Argentina, Chile, Australia, New Zealand, Singapore, Taiwan, China, Korea, the
United Kingdom, France, The Netherlands, Belgium, Italy, Greece,
Germany, Denmark, Austria, Poland, the Czech Republic, Hungary, Spain,
</DIV>

<P align="center" style="font-size: 10pt">10
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><DIV style="border-bottom: 2px solid #000000; font-size: 1px">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">the United Arab Emirates,
Romania, Switzerland, Finland, Russia, Ukraine and Slovakia. In addition, the Company exports
directly, as well as through trading companies, to various countries throughout the world. Makita
products are sold principally under the &#147;Makita&#148; brand name and the remaining products are sold
under the &#147;Dolmar&#148; and &#147;Maktec&#148; brand names.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Makita offers warranties to overseas customers. After-sale services and repairs overseas are
provided by local sales subsidiaries, service depots designated by Makita, or by service stores
designated by the applicable local importers. As of March&nbsp;31, 2006, Makita has over 100 service
depots outside of Japan. As of the fiscal year ended March&nbsp;31, 2006, 26 of these service depots
were located in the United States and 21 of these service depots were located in China. The labor
costs of service and repairs to products under warranty for overseas customers are borne by Makita
and the local service agents, and parts are provided by Makita.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U><B>Seasonality</B></U><BR>
Makita&#146;s business has no significant seasonality that affects sales or profits.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U><B>Competition</B></U><BR>
Both in Japan and overseas, the markets in which Makita sells its products are highly competitive.
Makita believes that competition in the portable electric power tool market is based on price,
product reliability, design and after-sale services and that its products are generally competitive
as to price and enjoy competitive advantage due to their reputation for quality, product
reliability and after-sale services. Makita is the largest manufacturer of portable electric power
tools in Japan and, together with one other Japanese competitor, accounts for a substantial
majority of the total sales of such products in Japan.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">In overseas markets, Makita competes with a number of manufacturers, some of which are well
established in their respective local markets as well as internationally. In recent years, in the
U.S. power tool industry, some leading home centers have introduced their own brands of power tools
for professionals, and a high level of M&#038;A activity is in progress within the power tool industry.
Moreover, in the Japanese market, U.S. and Japanese companies are forming business alliances, and
competition is becoming more intense within a saturated market. Makita has also experienced
increasing competition, particularly in countries with lower purchasing power, from China-based
power tool manufacturers who often offer lower-priced products.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U><B>Raw Materials and Sources of Supply</B></U><BR>
Makita purchases raw materials and parts to manufacture its products. The principal raw materials
and parts purchased by Makita include plastics, pressed steel plates, aluminum castings, copper
wires, switches, gears, blades, batteries, and bearings. The Company procures most of its raw
materials from multiple sources, although most components are obtained from single suppliers. The
procurement cost of aluminum, copper, and certain other raw materials is affected by fluctuations
in commodity markets, and these material prices were appreciated during fiscal 2006.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Makita&#146;s purchases of raw materials and parts in the fiscal year ended March&nbsp;31, 2006, amounted to
&#165; 108,057 million. Raw materials and parts are purchased from approximately 250 suppliers in Japan
and a number of local suppliers in each country in which Makita performs manufacturing operations,
with the largest single source accounting for approximately 5% of Makita&#146;s total purchases of raw
materials and parts.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Makita also purchases from outside sources finished products such as vacuum cleaners, electric
generators, brushcutters, cordless laser plumbs and levels, and wood surfacers.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Makita has not experienced any difficulty in obtaining raw materials, parts or finished products.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U><B>Government Regulations</B></U><BR>
Makita is subject to different government regulations in the countries in which it does business,
such as required business and investment regulations approvals, export regulations based on
national-security or other reasons, and other export and import regulations such as tariffs, as
well as commercial, antitrust, patent, consumer and business taxation, exchange control, and
environment and recycling laws and regulations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">If Makita is unable to comply with these regulations, it may be subject to significant fines or
other penalties and its activities in such countries may be limited.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U><B>Intellectual Property Rights</B></U><BR>
As of March&nbsp;31, 2006, Makita owned 391 patents and 52 utility model registrations in Japan and 311
patents outside Japan. A utility model registration is a right granted under Japanese law to
inventions having a practical utility in terms of form, composition or assembly, but embodying less
originality than that required for patents. As of March&nbsp;31, 2006, Makita had made 536 applications
for additional patents and utility model registrations in Japan as well as 252 patent applications
outside Japan. While Makita considers all of its intellectual property to be important, it does not
consider any one or group of patents, trademarks or utility model registrations to be so
significant that their expiration or termination would materially affect Makita&#146;s business.
</DIV>

<P align="center" style="font-size: 10pt">11
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><DIV style="border-bottom: 2px solid #000000; font-size: 1px">&nbsp;</DIV>
</DIV>

<DIV align="left">
<A name="113"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>C. Organizational structure</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt">As of March&nbsp;31, 2006, the Makita Group consisted of 45 consolidated subsidiaries. Makita
Corporation (&#147;the Company&#148;) is the parent company of the Makita Group. The Company heads the
development of products. Domestic sales are made by the Company and overseas sales are made almost
entirely through sales subsidiaries and wholesalers. The following is a list of significant
subsidiaries of the Makita Group.
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD nowrap align="left" colspan="7" style="border-bottom: 1px solid #000000">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Proportion of</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center">Country of</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Ownership and</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000">Company Name</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" style="border-bottom: 1px solid #000000">Incorporation</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">Voting Interest</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Makita U.S.A., Inc.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">U.S.A</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">100.0</TD>
    <TD nowrap valign="top">%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Makita Corporation of America</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">U.S.A</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">100.0</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Makita Canada Inc.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">Canada</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">100.0</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Makita Mexico, S.A. de C.V.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">Mexico</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">100.0</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Makita do Brasil Ferramentas Eletricas Ltda.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">Brazil</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">99.9</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Makita Herramientas Electricas de Argentina S.A.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">Argentine</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">100.0</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Makita Chile Ltda.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">Chile</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">100.0</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Makita (Australia) Pty. Ltd.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">Australia</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">100.0</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Makita (New Zealand) Ltd.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">New Zealand</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">100.0</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Makita International Europe Ltd.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">U.K.</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">100.0</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Makita (U.K.) Ltd.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">U.K.</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">100.0</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Makita Manufacturing Europe Ltd.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">U.K.</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">100.0</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Makita France S.A.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">France</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">55.0</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Makita Benelux B.V.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top" nowrap>The Netherlands</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">100.0</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Euro Makita Corporation B.V.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">The Netherlands</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">100.0</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">S.A. Makita N.V.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">Belgium</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">100.0</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Makita S.p.A.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">Italy</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">100.0</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Makita Werkzeug GmbH</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">Germany</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">100.0</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Dolmar GmbH</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">Germany</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">100.0</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Makita Werkzeug Gesellschaft m.b.H.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">Austria</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">100.0</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Makita Sp. z o. o.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">Poland</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">100.0</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Makita SA</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">Switzerland</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">100.0</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Makita, S.A.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">Spain</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">100.0</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Makita Gulf FZE</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">U.A.E.</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">100.0</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Makita Oy</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">Finland</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">100.0</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Makita Singapore Pte. Ltd.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">Singapore</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">100.0</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Makita (Taiwan) Ltd.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">Taiwan</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">100.0</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Makita Power Tools (HK)&nbsp;Ltd.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">China</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">100.0</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Makita (China) Co., Ltd.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">China</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">100.0</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Makita (Kunshan) Co., Ltd.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">China</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">100.0</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Makita Korea Co., Ltd.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">Korea</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">100.0</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:15px; text-indent:-15px">Makita Ichinomiya Corporation and 13 other subsidiaries</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">Japan and other countries</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="bottom">100.0</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="7" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<P align="center" style="font-size: 10pt">12
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><DIV style="border-bottom: 2px solid #000000; font-size: 1px">&nbsp;</DIV>
</DIV>

<DIV align="left">
<A name="114"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>D. Property, plant and equipment</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt">The following table sets forth information relating to Makita&#146;s principal production facilities as
of March&nbsp;31, 2006.
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="38%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="47%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD nowrap align="left" colspan="7" style="border-bottom: 1px solid #000000">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Floor space</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000">Location</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">(Square meters)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" style="border-bottom: 1px solid #000000">Principal products manufactured</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:15px; text-indent:-15px">In Japan;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:30px; text-indent:-15px">Makita Corporation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Okazaki Plants</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">71,804</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Portable woodworking tools and portable general purpose tools</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:30px; text-indent:-15px">Makita Ichinomiya Corporation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">5,325</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Stationary woodworking machines</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:15px; text-indent:-15px">Overseas;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:30px; text-indent:-15px">Makita Corporation of America</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">24,053</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Portable woodworking tools and portable general purpose tools</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:30px; text-indent:-15px">Makita (China) Co., Ltd.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">33,100</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Portable woodworking tools and portable general purpose tools</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:30px; text-indent:-15px">Makita (Kunshan) Co., Ltd.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">6,401</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Portable woodworking tools and portable general purpose tools</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:30px; text-indent:-15px">Makita Manufacturing Europe Ltd.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">11,520</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Portable woodworking tools and portable general purpose tools</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:30px; text-indent:-15px">Dolmar GmbH</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">17,747</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Engine powered equipment</TD>
</TR>

<TR style="font-size: 1pt" valign="top">
    <TD nowrap align="left" colspan="7" style="border-bottom: 1px solid #000000">&nbsp;</TD>
</TR>

<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt">In addition, the Company owns an aggregate of 213,286 square meters of floor space occupied by
the head office, warehouse facilities, a training center, dormitories and sales offices.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Makita&#146;s overseas manufacturing operations are conducted in the United States, Canada, Brazil,
United Kingdom, Germany and China. All buildings and land in these countries, except for the
properties in China, are owned by Makita.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">None of the buildings or land that Makita owns in Japan is subject to any mortgage or lien. Makita
leases 88 sales offices in Japan and all of its overseas sales offices and premises, except for the
following locations, all of which are owned by the respective subsidiary companies;
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="93%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><B>&#149;</B>
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Head office and certain branch offices of Makita U.S.A., Makita Canada, and Makita Australia; and</TD>
</TR>
<TR>    <TD>&nbsp;</TD></TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><B>&#149;</B>
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Head office of Makita Germany, Makita France, Makita Benelux (The Netherlands), Makita Belgium,
Makita Italy, Makita Brazil, Makita Taiwan, and Makita Singapore.</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Makita considers all of its principal manufacturing facilities and other significant properties to
be in good condition and adequate to meet the needs of its operations. Makita adjusts production
capacity based on its assessment of markets
demands and prospects for demands, according to market conditions and Makita&#146;s business objectives,
by opening, closing, expanding or downsizing manufacturing facilities or by increasing or
decreasing output from the facilities accordingly. Makita, therefore, believes that it is difficult
and would require unreasonable effort to determine the exact productive capacity and the extent of
utilization of each of its manufacturing facilities with a reasonable degree of accuracy. Makita,
however, believes that its manufacturing facilities are currently operating at a normal capacity of
production facility.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Makita believes that there are no material environmental issues that may affect Makita&#146;s current
use of its assets.
</DIV>
<DIV align="left">
<A name="115"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Item&nbsp;4A. Unresolved Staff Comments</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt">None
</DIV>

<P align="center" style="font-size: 10pt">13
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><DIV style="border-bottom: 2px solid #000000; font-size: 1px">&nbsp;</DIV>
</DIV>

<DIV align="left">
<A name="116"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Item&nbsp;5.
</B><U><B>Operating and Financial Review and Prospects</B></U>
</DIV>

<DIV align="left">
<A name="117"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>A. Operating results</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt">The following table sets forth a summary of our results of operations for each of the years ended
March&nbsp;31, 2004, 2005 and 2006.
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="20%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="23" style="border-bottom: 1px solid #000000">(Millions of yen, except for percentage amounts)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000">U.S. Dollars (thousands)</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000">2004</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000">2005</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000">2006</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000">2006</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Change</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">%</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">NET SALES</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#165;</TD>
    <TD align="right">184,117</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">100.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#165;</TD>
    <TD align="right">194,737</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">100.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#165;</TD>
    <TD align="right">229,075</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">100.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1,957,906</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17.6</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cost of sales</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">110,322</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">59.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">113,323</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">58.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">132,897</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">58.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,135,872</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17.3</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="33" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">GROSS PROFIT</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">73,795</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">40.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">81,414</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">41.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">96,178</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">42.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">822,034</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18.1</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Selling, general and
administrative expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">53,698</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">29.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">52,646</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">27.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">58,726</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">25.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">501,931</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11.5</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Losses (Gains) on disposals or
sales of property, plant and
equipment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(2,379</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1.3</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,234</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(8,326</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(3.6</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(71,162</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Impairment of long-lived assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,780</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">577</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Transfer to the government of
the substitutional portion of
pension plan</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(4,441</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(2.3</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="33" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">OPERATING INCOME</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,696</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">31,398</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">45,778</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">391,265</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">45.8</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">OTHER INCOME (EXPENSES)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>


<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Interest and dividend income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">869</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,157</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,301</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,120</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12.4</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Interest expense</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(605</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(0.3</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(588</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(0.3</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(364</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(0.2</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(3,111</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(38.1</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Exchange gains (losses)&nbsp;on
foreign currency transactions,
net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(202</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(0.1</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">37</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(258</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(0.1</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(2,205</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Realized gains on securities, net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">555</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">453</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,918</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">24,940</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">544.2</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other, net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">857</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">161</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(232</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(0.1</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1,983</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="33" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,474</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,220</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,365</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">28,761</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">175.8</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="33" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">INCOME BEFORE INCOME TAXES</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16,170</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">32,618</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">49,143</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">21.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">420,026</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">50.7</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">PROVISION FOR INCOME TAXES</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,479</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,482</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,732</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">74,633</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(16.7</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="33" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">NET INCOME</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,691</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">22,136</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">40,411</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">345,393</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">82.6</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>General
Overview</B></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">In fiscal 2006, the U.S. economy showed a gradual expansion as personal consumption and capital
investment remained firm. In Europe, personal consumption did not see a full-fledged recovery, but
indications of a gradual recovery were evident as exports held firm and the Eastern European and
Russian economies stabilized and expanded. In Asia, growth rates slowed in some areas, but the
region&#146;s overall economic growth remained high, especially in China where exports were strong. The
Japanese economy experienced gradual recovery as capital investment increased along with the
recovery in corporate profitability, and there was also an improvement in personal consumption and
employment.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">The principal business of Makita is the manufacture and sale of power tools and stationary
woodworking machines. Principal products include circular saws, jigsaws, planers, drills, rotary
hammers, grinders and slide compound saws. Makita has ten manufacturing centers, three located in
Japan, two in China and one each in the United States, Canada, Brazil, the United Kingdom, and
Germany.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">In fiscal 2006, Makita worked diligently to develop high-value-added products that precisely
reflect the needs of users. By combining lithium ion batteries with the Company&#146;s proprietary
optimum charging system, Makita created a series of rechargeable products featuring small size and
high output, and released new products such as rotary hammers featuring newly developed
low-vibration designs.
</DIV>

<P align="center" style="font-size: 10pt">14
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><DIV style="border-bottom: 2px solid #000000; font-size: 1px">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">On a consolidated basis, our net sales in fiscal 2006 amounted to &#165;229,075&nbsp;million, up 17.6% from
the previous fiscal year. This was the first time sales exceeded &#165;200&nbsp;billion. In fiscal 2006, the
company recorded a gain of &#165;8,479&nbsp;million from the sale of the golf course, and a gain of &#165;5,238
million from the decrease in valuation allowance on a deferred income tax assets. Accordingly,
year-on-year operating income climbed 45.8%, to &#165;45,778&nbsp;million and net income amounted to &#165;40,411
million, 82.6% higher than the previous fiscal year.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U><B>Fiscal Year (FY)&nbsp;2006 compared to FY2005</B></U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Net sales</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Makita&#146;s consolidated net sales for the fiscal year ended March&nbsp;31, 2006 (&#147;FY 2006&#148;) amounted to
&#165;229,075&nbsp;million, an increase of 17.6%, or &#165; 34,338&nbsp;million, from the fiscal year ended March&nbsp;31,
2005 (&#147;FY 2005&#148;). In FY 2006, the average yen-dollar exchange rate was &#165;113.3 for $1.00,
representing a 5.4% depreciation of the yen compared with the average level in FY 2005. The average
level of the yen-euro exchange rate in FY 2006 was &#165;137.8 for 1.00 euro, representing a 2.0%
depreciation of the yen compared with the average level in FY 2005. Excluding the effect of
currency fluctuations, consolidated net sales would have increased by 13.4% in FY 2006.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">While Makita&#146;s consolidated net sales increased by 17.6% in FY2006, the overall number of units of
products sold also increased in FY 2006. Excluding the effect of the decrease in prices of
products and the currency fluctuations, Makita&#146;s consolidated net sales would have increased by
14.0%, or by &#165; 27,276&nbsp;million. The significant increase in the quantity of goods sold in FY 2006
primarily reflected strong sales of Makita&#146;s portable general purpose tools, such as grinders,
rotary hammers and hammer drills. In Europe, competitiveness has improved due to the strength of
euro against the yen. Further, demand for the rotary hammer in Europe has been strong. In North
America, the sales has increased in part due to the introduction of lithium ion battery products,
which were introduced as a major sales item to major hardware retailers during the Christmas sales
season.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">The average price of Makita&#146;s products declined in FY 2006, and excluding the effect of the
increase in the number of units sold, the drop of prices would have decreased Makita&#146;s net sales by
1.9%, or by &#165; 3,704&nbsp;million. The reduction in prices was caused by Makita&#146;s sales strategy.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Sales of new products comprised 15.9% of consolidated net sales of Makita in FY 2006, or &#165; 36,378
million. Among others, a new series of rechargeable products combining lithium ion batteries with
the Company&#146;s proprietary optimum charging system and new products such as rotary hammers featuring
newly developed low-vibration designs, were introduced during FY 2006 and contributed to the
increase in Makita&#146;s net sales in FY 2006. In North America in particular, the line of tools with
rechargeable lithium battery was popular at major hardware retailers. The distinctive designs as
well as the ability to develop new products quickly to match the changing needs of the market
contributed to the popularity of these products. In Japan, due to the increasing demand for
renovation-related products in the market, among the line of tools with rechargeable lithium ion
battery, the sales of impact drivers and circular saws have been strong.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">In terms of product type, there was an increase in the sales of portable general purpose tools by
21.3% or &#165;22,479&nbsp;million, portable woodworking machines by 9.8% or &#165;3,383&nbsp;million, stationary
woodworking machines by 27.7% or &#165;436&nbsp;million, other products by 22.7% or &#165;4,933&nbsp;million and income
from parts, repairs and accessories by 10.0% or &#165; 3,107&nbsp;million, respectively. In particular, sales
of cordless impact drivers, circular saws and rotary hammers increased.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Sales by region</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">The increase in consolidated net sales in FY 2006 can be attributed to an increase in sales in
Japan by 5.6%, or &#165;2,221&nbsp;million, to &#165;41,600&nbsp;million, an increase in sales in North America, by
23.9%, or &#165;9,183&nbsp;million, to &#165;47,673&nbsp;million, an increase in sales in Europe by 20.3%, or &#165;15,241
million, to &#165;90,504&nbsp;million and, to a lesser extent, increased sales in Asia (excluding Japan) by
4.0%, or &#165;652&nbsp;million, to &#165;16,993&nbsp;million and an increase in sales in other regions including
Australia, Latin America and Middle East by 27.9% or &#165;7,041&nbsp;million, to &#165;32,305&nbsp;million.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">The increased sales in Japan in FY 2006 primarily reflected the increased number of units sold with
respect to its portable general purpose tools such as lithium ion battery based impact drivers and
circular saws, partially offset by the decline in the number of units sold in stationary
woodworking machines. In addition, the automatic nailer business acquired from Kanematsu-NNK Corp.
contributed to the increased sales in Japan.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">The increased sales in North America in FY 2006 primarily reflected strong sales of lithium ion
battery based products to major home centers in North America. Excluding the effect of fluctuations
of the local currencies, net sales in North America would have increased by 16.4%, or &#165;6,325
million in FY 2006, compared with FY 2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">The increased sales in Europe in FY 2006 primarily reflected the appreciation of the euro against
the yen. Net sales in yen terms increased in Russia and Eastern Europe by 34.6%, in the United
Kingdom by 10.4%, in Germany by 18.4% and in France by 24.0% compared to FY 2005. Among others,
Makita&#146;s products such as drills and rotary hammers
</DIV>

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</DIV>

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<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><DIV style="border-bottom: 2px solid #000000; font-size: 1px">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">were particularly popular in countries such as Germany and the United Kingdom, partly reflecting
the lower sales price resulting from the strength of the euro. Drills and rotary hammers increased
by 17.5% and 22.8% respectively. In addition, the introduction of new products, particularly drills
and rotary hammers contributed to the increase of sales in Europe. Excluding the effect of
fluctuations of the local currencies, net sales in Europe would have increased by 17.2%, or &#165;12,920
million in FY 2006.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">The increased sales in Asia (excluding Japan) in FY 2006 primarily reflected the increased sales in
China and Taiwan, particularly with respect to portable general purpose tools, such as grinders and
hammer drills. Net sales in yen terms increased in China by 18.8% over amounts recorded in FY 2005.
The establishment of six branch stores and 15 direct sales service centers in China greatly
improved the after-sales service and was a factor, contributing to the increase of sales in China.
Excluding the effect of fluctuations of the local currencies, net sales in Asia excluding Japan
would have increased by 0.6%, or &#165;98&nbsp;million in FY 2006.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">The increased sales in other regions including Australia, Latin America and the Middle East in FY
2006 were primarily due to an increased number of units sold in Other regions, particularly with
respect to portable general purpose tools such as grinders, impact drivers and rotary hammers sold.
In FY 2006 Makita saw success in its sales efforts to new markets in the Middle East and Africa.
The introduction of new products also contributed to the increase of sales in Other regions, in
particular rotary hammers. The increased number of products sold in other regions was partially
offset by the decreased price per product resulting from the reduced cost of production, especially
in grinders. Overall, net sales of grinders increased by 33.0% from FY 2005. Excluding the effect
of fluctuations of the local currencies, other net sales would have increased by 17.7%, or &#165;4,471
million in FY 2006.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Review of Performance by Product Group</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Portable General Purpose Tools</B><BR>
The Portable General Purpose Tools group offers a wide range of dependable cordless drills, hammer
drills, rotary hammers, demolition hammers, grinders, sanders, screwdrivers, impact wrenches,
shears, nibblers, and cutters. This group generates the largest portion of Makita&#146;s consolidated
net sales. In FY 2006, sales of portable general purpose tools grew 21.3%, to &#165;128,215&nbsp;million,
accounting for 56.0% of consolidated net sales. In Japan, sales of portable general purpose tools
increased 12.4%, to &#165;15,880&nbsp;million, accounting for 38.2% of total domestic sales. Overseas sales
of portable general purpose tools increased 22.6%, to &#165;112,335&nbsp;million, or 59.9% of total overseas
sales.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Portable Woodworking Tools</B><BR>
Principal products in Makita&#146;s Portable Woodworking Tools group include circular saws, jigsaws,
recipro saws, planers, routers, trimmers, and pneumatic nailers. In FY 2006, Makita recorded a 9.8%
increase in sales of Portable Woodworking Tools, to &#165;37,890&nbsp;million, or 16.5% of consolidated net
sales. Domestic sales of portable woodworking tools increased 2.0%, to &#165;6,879&nbsp;million, accounting
for 16.5% of total domestic sales. Makita recorded an 11.7% increase in overseas sales of portable
woodworking tools, to &#165;31,011&nbsp;million, which accounted for 16.5% of total overseas sales in FY
2006.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Stationary Woodworking Machines</B><BR>
Makita&#146;s extensive lineup of Stationary Woodworking Machines encompasses table saws,
planer-jointers, and band saws. Sales of Stationary Woodworking Machines in FY 2006 increased
27.7%, to &#165;2,009&nbsp;million, accounting for 0.9% of consolidated net sales. Domestic sales of
Stationary Woodworking Machines dropped 5.6%, to &#165;805&nbsp;million, accounting for 1.9% of total
domestic sales. Overseas sales of Stationary Woodworking Machines were &#165;1,204&nbsp;million, a 67.2%
increase from the previous fiscal year, accounting for 0.6% of Makita&#146;s total overseas sales.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Other Products</B><BR>
Makita&#146;s Other Products category includes industrial-use dust collectors and generators as well as
various products for garden and home use, including chain saws, brush cutters, grass cutters, hedge
trimmers, blowers, and cordless cleaners. In FY 2006, sales of Other Products grew 22.7%, to
&#165;26,696&nbsp;million, accounting for 11.7% of net sales. In Japan, Makita recorded a 1.3% fall in sales
of Other Products, to &#165;8,365&nbsp;million, accounting for 20.2% of total domestic sales. Overseas sales
of other products increased 37.9%, to &#165;18,331&nbsp;million, accounting for 9.9% of total overseas sales.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Parts, Repairs and Accessories</B><BR>
Makita&#146;s after-sales services include the sale of parts and accessories and repairs. In FY 2006,
parts, repairs, and accessories sales edged up 10.0%, to &#165;34,265&nbsp;million, accounting for 14.9% of
consolidated net sales. Domestic sales of parts, repairs, and accessories increased 5.3% to &#165;9,671
million accounted for 23.2% of total domestic sales. Overseas sales of parts, repairs, and
accessories advanced 11.9%, to &#165;24,594&nbsp;million, accounting for 13.1% of total overseas sales.
</DIV>

<P align="center" style="font-size: 10pt">16
</DIV>

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<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><DIV style="border-bottom: 2px solid #000000; font-size: 1px">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Cost of Sales</B><BR>
Cost of sales increased 17.3% (&#165;19,574&nbsp;million) from FY2005 to &#165;132,897&nbsp;million.
In terms of overseas sales, despite the rise in materials costs, the sales cost ratio improved
slightly from 58.2% in FY2005 to 58.0% as a result of sales increase after yen conversion,
reflecting the declining yen against the euro and the U.S. dollar.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Gross Profit</B><BR>
Gross profit on sales increased 18.1% <FONT style="font-variant: SMALL-CAPS">(&#165;</FONT>14,764&nbsp;million) to &#165;96,178&nbsp;million. Gross profit
margin improved 0.2 points from 41.8% in FY2005 to 42.0%, due to the weak yen and sales of high
value-added products.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Selling, General and Administrative Expenses</B><BR>
Selling, general and administrative expenses for FY2006 increased 11.5% (&#165;6,080&nbsp;million) from
FY2005 to &#165;58,726&nbsp;million. The main causes were increased personnel costs due to an increase in the
number of employees, a rise in shipping costs due to increased sales and the sharp increase in the
price of crude oil, and increased advertising costs due to a sponsorship contract in North America.
Further, the decline of yen caused the yen conversion rate of selling expenses and administrative
expenses of overseas subsidiaries to rise. Selling, general and administrative expenses excluding
the effects of the low yen rose 9.7%.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">On the other hand, the ratio of selling, general and administrative expenses to sales fell 1.5
points from 27.1% to 25.6%, due to increased sales.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Losses (Gains) on disposal or sales of property, plant and equipment</B><BR>
In FY 2004, Joyama Kaihatsu Ltd., our subsidiary that owned a golf course, wrote down the value of
the golf course to its fair value, thereby recording &#165;5,996&nbsp;million in impairment losses. On April
11, 2005, the Nagoya District Court approved the civil rehabilitation plan for Joyama Kaihatsu Ltd.
and such plan was affirmed on May&nbsp;7, 2005. On May&nbsp;31, 2005, Makita transferred its ownership
interest in Joyama Kaihatsu Ltd., including the golf course property, to a third party. As a
result, in FY2006, a gain of &#165;8,479&nbsp;million from the sale of the golf course was recognized, which
included the release from its obligation for club membership of &#165; 6,461&nbsp;million. In addition, the
Company and certain subsidiaries recognized losses on disposal or sales of property, plant and
equipment of &#165;153&nbsp;million. Accordingly, Makita recognized net gains on disposal or sales of
property, plant and equipment of &#165;8,326.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Operating Income</B><BR>
As a result of the above, operating income for FY2006 increased 45.8% to &#165;45,778&nbsp;million.
Operating income margin improved 3.9 points, from 16.1% in FY2005 to 20.0% in FY2006.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Other Income (Expenses)</B><BR>
In FY2006, Other income was &#165;3,365&nbsp;million, a 175.8% increase from FY2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 0pt">The reasons for the increase were as follows:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 0pt">(1)&nbsp;Realized gains on securities increased &#165;2,465&nbsp;million to &#165;2,918&nbsp;million.
As on October&nbsp;1, 2005, UFJ Holdings Co., Ltd., and Mitsubishi Tokyo Financial Group Co., Ltd.,
merged. The shares of UFJ Holdings that the Company owned were exchanged for shares of the newly
merged entity, Mitsubishi UFJ Financial Group Co., Ltd. As a result of this share exchange, the
Company realized a gain on securities, net in the amount of &#165;2,528&nbsp;million.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 0pt">(2)&nbsp;Interest expenses decreased by &#165;224&nbsp;million to &#165;364&nbsp;million.
Interest expenses was reduced by &#165;195&nbsp;million due to the redemption of the Company&#146;s 1.5% annual
interest yen-based convertible bonds in the amount of &#165;12,992&nbsp;million in March&nbsp;2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 0pt">(3)&nbsp;Interest and dividend income increased by &#165;144&nbsp;million to &#165;1,301&nbsp;million.
The main factor in the increase in interest and dividends income in FY2006 was the increase of
dividends from certain investments in trusts due to the recovery in Japanese stock market.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 0pt">(4)&nbsp;The amount of foreign exchange gains and losses fell by &#165;295&nbsp;million, from a gain of &#165;37
million in FY2005 to a loss of &#165;258&nbsp;million in FY2006 due to exchange losses in China caused by the
devaluation of yuan against the U.S. dollar.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Income before income taxes</B><BR>
Income before income taxes for FY2006 increased by 50.7% (&#165;16,525&nbsp;million) as compared with
the previous fiscal year to &#165;49,143&nbsp;million, while the ratio of income before income taxes to sales
for current year increased from 16.7% in FY2005 to 21.5% in FY2006, an increase of 4.8%.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Provision for income taxes</B><BR>
Provision for income taxes for FY2006 was reduced by 16.7% as compared with the previous year
primarily due to the realization of a tax benefit on impairment losses related to our golf course
business.
</DIV>

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</DIV>

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<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><DIV style="border-bottom: 2px solid #000000; font-size: 1px">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">In 2006, following the completion of the civil rehabilitation proceedings and the sale of the golf
course business, previously unrecognized deferred tax asset were realized in connection with the
gain on sale of golf course business and the related valuation allowance of &#165; 5,782&nbsp;million was
reversed. Makita also provided valuation allowance of &#165; 402&nbsp;million for deferred tax assets that
existed at the beginning of the year because it was determined that such assets were more likely
than not to be realized in future years. As a consequence, the net change in the total valuation
allowance for the year ended March&nbsp;31, 2006 was a decrease of &#165;5,238&nbsp;million, resulting in a
reduction of income tax expense. This decrease in valuation allowance as well as a decrease due to
the tax sparing and other miscellaneous adjustments had affect of decreasing Makita&#146;s effective tax
rate by 22.5% to the effective rate of 17.8% from the statutory tax rate of 40.3% for the year
ended March&nbsp;31, 2006.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Net income</B><BR>
As a result of a gain of &#165;8,479&nbsp;million from the sale of the golf course, which included the gain
of release from its obligation for club membership of &#165; 6,461&nbsp;million and other factors, net income
for FY2006 rose by &#165;18,275&nbsp;million to &#165;40,411&nbsp;million, which is an 82.6% increase from the previous
fiscal year.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Earnings per share</B><BR>
Basic earnings per share of common stock amounted to &#165;281.1, compared with &#165;153.9 in FY 2005.
Diluted earnings per share amounted to &#165;281.1, compared with &#165;148.8 in FY 2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Regional Segments</B><BR>
Segment information described below is determined by the location of the Company and its relevant
subsidiaries.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Japan Segment</B><BR>
In FY 2006, sales in the Japan segment grew 13.0%, to &#165;111,614&nbsp;million. Sales to external customers
increased 5.6% to &#165;53,788&nbsp;million, which accounted for 23.5% of consolidated net sales. The
increase reflects a 5.6% rise in sales in the domestic market as well as a 5.3% increase in export
sales mainly to Middle East and Africa. Even though segment operation expenses increased by 5.6%,
to &#165;87,468&nbsp;million, operating income climbed approximately 1.5 times, to &#165;24,146&nbsp;million in FY
2006. This was attributable to the &#165;8,479&nbsp;million gain on the sale of the golf course business in
addition to strong sales of various new products with lithium ion batteries.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>North America Segment</B><BR>
In FY 2006, sales in the North America segment climbed 24.0%, to &#165;52,300&nbsp;million. Sales to external
customers increased 24.3% to &#165;47,979&nbsp;million, which accounted for 20.9% of consolidated net sales.
This increase in sales to external customers was mainly due to better sales of lithium ion battery
based products at major home centers in North America. As a result, operating income for FY2006
increased by 15.7%, to &#165;1,863&nbsp;million.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Europe Segment</B><BR>
In FY 2006, sales in the Europe segment grew 19.5% to &#165;97,555&nbsp;million. Sales to external customers
increased 20.3%, to &#165;91,249&nbsp;million, which accounted for 39.8% of consolidated net sales. This
increase is mainly due to strong sales of the rotary hammer, and the stable and steady economic
growth in Eastern Europe and Russia. Segment operating income increased 19.0%, to &#165;12,050&nbsp;million.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Asia Segment</B><BR>
In FY 2006, sales in the Asia segment increased 24.4% to &#165;52,624&nbsp;million. The increase in sales in
this segment is primarily due to higher sales from two factories in China to North America and
Europe, where sales were favorable. Sales to external customers increased 17.2%, to &#165;8,645&nbsp;million,
which accounted for 3.8% of consolidated net sales. This increase is primarily due to a increase in
sales in Taiwan. Segment operating income grew 31.2%, to &#165;6,462&nbsp;million in FY 2006.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Other Segment</B><BR>
In FY 2006, sales in the Other segment increased 24.9% to &#165;27,595&nbsp;million. Sales to external
customers increased by 25.0%, to &#165;27,414&nbsp;million, which accounted for 12.0% of consolidated net
sales. Sales increase in this segment is primarily due to an increase in sales in Central and South
American countries and Middle East. Segment operating income grew to approximately 2.7 times FY
2005&#146;s to &#165;2,547&nbsp;million, in FY 2006. This increase is primarily due to a turnaround in Oceania
result from cost reductions.
</DIV>

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</DIV>

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</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U><B>Fiscal Year (FY)&nbsp;2005 compared to FY2004</B></U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Net sales</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Makita&#146;s consolidated net sales for the fiscal year ended March&nbsp;31, 2005 (&#147;FY 2005&#148;) amounted to
&#165;194,737&nbsp;million, an increase of 5.8%, or &#165; 10,620&nbsp;million, from the fiscal year ended March&nbsp;31,
2004 (&#147;FY 2004&#148;). In FY 2005, the average yen-dollar exchange rate was &#165;107.5 for $1.00,
representing a 5.5% appreciation of the yen compared with the average level in FY 2004. The average
level of the yen-euro exchange rate in FY 2005 was &#165;135.2 for 1.00 euro, representing a 1.9%
depreciation of the yen compared with the average level in FY 2004. Excluding the effect of
appreciation of the euro and the depreciation of the U.S. dollar, consolidated net sales would have
increased by 6.2% in FY 2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">While Makita&#146;s consolidated net sales increased 5.8% in FY 2005, the overall number of units of
products sold increased significantly in FY 2005, and excluding the effect of the decrease in
prices of products, Makita&#146;s consolidated net sales would have increased by 7.5%, or by &#165; 13,798
million. The significant increase in the quantity of goods sold in FY 2005 primarily reflected
strong sales of Makita&#146;s portable general-purpose tools, such as grinders, rotary hammers and
hammer drills. Among others, Makita&#146;s new line-up cordless driver drill #6270 series were popular
especially in Europe over Makita&#146;s competitors, in part reflecting the lower sales price resulting
from the strength of the euro in FY 2005. The increase was partially offset by a decrease in sales
in the North American market, as the North American home centers, as customers of Makita, continued
to enhance their production and distribution of products under their own brand name. Among others,
the number of drills sold in the North America market declined significantly in FY 2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">The average price of Makita&#146;s products declined in FY 2005, and excluding the effect of the
increase in the number of units sold, the drop of prices would have decreased Makita&#146;s net sales by
1.9%, or by &#165; 3,537&nbsp;million. The reduction in prices was caused primarily by increased price
competition in the markets and reduced cost of production, reflecting primarily the transfer of a
part of Makita&#146;s production from Japan to the People&#146;s Republic of China, where the overall costs
of production, including labor, parts and equipment, are significantly less expensive than in
Japan. A second factor contributing to the decrease in Makita&#146;s prices of goods was the increased
sales volume of MAKTEC, Makita&#146;s lower end brand, which continued to sell particularly well in
Asia.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Sales of new products comprised 10.8% of consolidated net sales of Makita in FY 2005, or &#165;21,119
million. Among others, new models of drills, hammer drills and circular saws were introduced during
FY 2005 in most of Makita&#146;s markets world-wide and contributed significantly to the increase of
Makita&#146;s net sales in FY 2005. In particular, in overseas markets, especially in Europe, Makita&#146;s
new products such as its new line-up cordless driver drill #6270 series proved very popular, in
part because of the features and design and in part because of lower product prices reflecting the
lower cost of production. In Japan, Makita&#146;s new cordless impact drivers and new circular saws sold
well, responding to the increasing demand for renovation-related products in the market.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">In terms of product type, there was an increase in the sales of portable general-purpose tools and
income from parts, repairs and accessories by 6.3% or &#165; 9,692&nbsp;million and 3.1% or &#165; 928&nbsp;million,
respectively. In particular, sales increased significantly in cordless impact drivers, circular
saws and rotary hammers.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Sales by region</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt">The increase in consolidated net sales in FY 2005 can be attributed primarily to increased sales in
Asia (excluding Japan) increasing 14.7%, or &#165;2,096&nbsp;million, to &#165;16,341&nbsp;million and to increased
sales in Europe increasing 13.4%, or &#165;8,894&nbsp;million, to &#165;75,263&nbsp;million and, to a lesser extent,
increased sales in other regions including Australia, Latin America and Middle East increasing
12.2% or &#165;2,756&nbsp;million, to &#165;25,264&nbsp;million and increased sales in Japan increasing 0.6%, or &#165;237
million, to &#165;39,379&nbsp;million. The increase was offset partially by decreased sales in North America
falling 8.0%, or &#165;3,363&nbsp;million, to &#165;38,490&nbsp;million.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">The increased sales in Asia (excluding Japan) in FY 2005 primarily reflected the increased number
of units sold in Asia, particularly with respect to portable general-purpose tools, especially
grinders and hammer drills. The increased quantity of units sold were mostly offset by the
decreased price per product, resulting from the increased popularity of Makita&#146;s lower end brand,
MAKTEC and, to a lesser extent, Makita&#146;s reduced cost of production. Net sales in yen terms
increased in the People&#146;s Republic of China by 9.6% over amounts recorded in FY 2004. In addition,
the introduction of new products contributed significantly to the increase of sales in Asia, in
particular new models of drills and grinders. Excluding the effect of fluctuations of the local
currencies, consolidated net sales would have increased by 16.6%, or &#165;2,371&nbsp;million in FY 2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">The increased sales in Europe in FY 2005 primarily reflected the appreciation of the euro against
the yen. In addition, the increased number of units sold in Europe, particularly with respect to
portable general purpose tools, in especially Russia, Eastern European countries, the United
Kingdom, Germany and France contributed to increased sales in Europe, partially offset by the
decreased price per product resulting from reduced cost of production. Net sales in yen terms
increased in Russia and Eastern Europe by 24.3%, in the United Kingdom by 14.1%, in Germany by 6.9%
and in France by 15.1% over amounts recorded in FY 2004.
</DIV>

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</DIV>

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</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Among others, Makita&#146;s products such as drills
and rotary hammers were particularly popular in countries such as Germany and the United Kingdom,
partly reflecting the lower sales price resulting from the strength of the euro in FY 2005. Drills
and rotary hammers increased by 13.5% and 13.6% respectively. In addition, the introduction of new
products contributed significantly to the increase of sales in Europe, in particular new models of
cordless driver-drills, rotary hammers and chain saws. Excluding the effect of fluctuations of the
local currencies, consolidated net sales would have increased by 11.0%, or &#165;7,304&nbsp;million in FY
2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">The increased sales in other regions including Australia, Latin America and the Middle East in FY
2005 were primarily due to an increased number of units sold in such other regions, particularly
with respect to portable general purpose tools such as grinders, impact driver drills and rotary
hammers sold in the Middle East, Africa and Australia. In FY 2005 Makita saw significant success in
its sales efforts to new markets in the Middle East and Africa. The increased number of Makita
products sold in other regions was partially offset by the decreased price per product resulting
from the reduced cost of production, especially in grinders. Overall, net sales of grinders
increased by 11.8% over amounts recorded in FY 2004. In addition, the introduction of new products
contributed significantly to the increase of sales in other regions, in particular new models of
rotary hammers and grinders. Excluding the effect of fluctuations of the local currencies,
consolidated net sales would have increased by 14.3%, or &#165;3,214&nbsp;million in FY 2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">The increased sales in Japan in FY 2005 primarily reflected the increased number of units sold with
respect to its portable general purpose tools such as Makita&#146;s mainstay impact driver drills and
circular saws, partially offset by the decline in the number of units sold in stationary
woodworking machines and parts for repairs. On the other hand, continuing low levels of housing
construction in Japan restrained the growth of demand for Makita&#146;s products and increased overall
competition resulted in price pressure. In addition, the introduction of new products contributed
significantly to the increase of sales in Japan, in particular new models of renovation-related
products such as cordless impact driver drills and circular saws.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">The decreased sales in North America in FY 2005 were primarily due to the depreciation of the
dollar against the yen. To a lesser extent, decreased sales in North America were due to overall
declining demand in North America, as home centers in the United States and Canada enhanced
production and distribution of products under their own brand name and, as a result, Makita&#146;s sales
to home centers declined. In addition, a part of the decrease in sales was attributable to the
increase in competitive pressures resulting in enhanced sales incentives offered to professional
user customers. The decline in sales in North America was despite Makita&#146;s successful marketing
programs aimed at the professional user market in the United States and Canada, and Makita&#146;s
reorganization of its distribution networks in the United States. In the United States, sales in
dollar terms declined by 4.0%, as a result of weaker sales volume reflecting mainly the decrease in
sales to home centers, such as sales of drills, circular saws and sanders. Overall, net sales of
drills in North America decreased by 20.0% as compared to the amounts recorded in FY 2004.
Excluding the effect of fluctuations of the local currencies, consolidated net sales would have
decreased by 4.2%, or &#165;1,752&nbsp;million in FY 2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Review of Performance by Product Group</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Portable General Purpose Tools</B><BR>
The portable general purpose tools group offers a wide range of dependable cordless drills, hammer
drills, rotary hammers, demolition hammers, grinders, drills, sanders, screwdrivers, impact
wrenches, shears, nibblers, and cutters. This group generates the largest portion of Makita&#146;s
consolidated net sales. In FY 2005, sales of portable general purpose tools grew 7.7%, to &#165;105,736
million, accounting for 54.3% of consolidated net sales. In Japan, sales of portable general
purpose tools increased 1.5%, to &#165;14,129&nbsp;million, accounting for 35.9% of total domestic sales.
Overseas sales of portable general purpose tools increased 8.7%, to &#165;91,607&nbsp;million, or 59.0% of
total overseas sales.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Portable Woodworking Tools</B><BR>
Principal products in Makita&#146;s portable woodworking tools group include circular saws, jigsaws,
recipro saws, planers, routers, trimmers, and pneumatic nailers. In FY 2005, Makita recorded a 0.2%
increase in sales of portable woodworking tools, to &#165;34,507&nbsp;million, or 17.7% of consolidated net
sales. Domestic sales of portable woodworking tools decreased 4.8%, to &#165;6,744&nbsp;million, accounting
for 17.1% of total domestic sales. Makita recorded a 1.5% increase in overseas sales of portable
woodworking tools, to &#165;27,763&nbsp;million, which accounted for 17.9% of total overseas sales in FY
2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Stationary Woodworking Machines</B><BR>
Makita&#146;s extensive lineup of stationary woodworking machines encompasses table saws,
planer-jointers, and band saws. Sales of stationary woodworking machines in FY 2005 fell 8.1%, to
&#165;1,573&nbsp;million, accounting for 0.8% of consolidated net sales. Domestic sales of stationary
woodworking machines dropped 8.4%, to &#165;853&nbsp;million, accounting for 2.2% of total domestic sales.
Overseas sales of stationary woodworking machines were &#165;720&nbsp;million, a 6.5% decrease from the
previous fiscal year, accounting for 0.5% of Makita&#146;s total overseas sales.
</DIV>

<P align="center" style="font-size: 10pt">20
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><DIV style="border-bottom: 2px solid #000000; font-size: 1px">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Other Products</B><BR>
Makita&#146;s other products category includes industrial-use dust collectors and generators as well as
various products for
garden and home use, including chain saws, brush cutters, grass cutters, hedge trimmers, blowers,
and cordless cleaners. In FY 2005, sales of other products grew 11.3%, to &#165;21,763&nbsp;million,
accounting for 11.2% of net sales. In Japan, Makita recorded a 3.8% rise in sales of other
products, to &#165;8,473&nbsp;million, accounting for 21.5% of total domestic sales. Overseas sales of other
products increased 16.7%, to &#165;13,290&nbsp;million, accounting for 8.6% of total overseas sales.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Parts, Repairs and Accessories</B><BR>
Makita&#146;s after-sales services include the sale of parts and accessories and repairs. In FY 2005,
parts, repairs, and accessories sales edged up 5.5%, to &#165;31,158&nbsp;million, accounting for 16.0% of
consolidated net sales. Domestic sales of parts, repairs, and accessories increased 10.3% to &#165;9,180
million and contributed 23.3% of total domestic sales. Overseas sales of parts, repairs, and
accessories advanced 3.7%, to &#165;21,978&nbsp;million, accounting for 14.1% of total overseas sales.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Cost of sales</B><BR>
Cost of sales increased 2.7%, or &#165;3,001&nbsp;million, to &#165;113,323&nbsp;million, and the ratio of cost of
sales to net sales decreased by 1.7 %, falling from 59.9% to 58.2%. The ratio of cost of sales to
net sales improved mainly due to Makita&#146;s strategy to expand production in China and to further
develop high value-added products. As a result of this strategy, productivity in Makita&#146;s factories
in China and Japan improved, accounting for 1.3% out of the 1.7% improvement in the ratio of cost
of sales to net sales.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Gross profit</B><BR>
In addition to cost reductions, the appreciation of the euro against the yen and the dollar
increased the profitability of products manufactured in Japan and China and marketed in Europe. As
a result, gross profit in FY 2005 increased 10.3%, to &#165;81,414&nbsp;million. The ratio of gross profit to
net sales improved 1.7&nbsp;percentage points, from 40.1% to 41.8%.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Selling, general and administrative expenses</B><BR>
Selling, general and administrative expenses dropped 2.0%, or &#165;1,052&nbsp;million, to &#165;52,646&nbsp;million,
in FY 2005, principally as a result of a decrease in pension cost due to an amendment and the
transfer to the government of the substitutional portion of domestic pension plan, and depreciation
expenses. In addition, the ratio of SG&#038;A expenses to net sales decreased 2.1&nbsp;percentage point, from
29.2% to 27.1%, principally as a result of reduced personnel expenses due to restructuring in the
U.S.A. with the aim to reduce personnel expenses and depreciation expenses to net sales.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Losses (Gains) on disposal or sales of property, plant and equipment</B><BR>
In FY2005, there was a loss of &#165;1,234&nbsp;million, versus a gain of &#165;2,379&nbsp;million in FY2004. In
FY2004, the Company sold a portion of land and structures at its head office premises in Anjo,
Aichi Prefecture in Japan. This gain is recorded in the Japan segment. In FY2005, Makita&#146;s
factories disposed of or sold some equipment, and the Company sold a portion of land in Sapporo,
Hokkaido in Japan. These dispositions and sales were recorded as a loss in the Japan segment. Most
of the dispositions and sales resulting in the loss were in connection with Makita&#146;s ordinary
course of business.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Impairment of long-lived assets</B><BR>
FASB Statement No.&nbsp;144 &#147;Accounting for the Impairment or Disposal of Long-Lived Assets&#148; requires an
asset impairment adjustment if the sum of the estimated asset&#146;s related undiscounted future cash
flows is less than the current carrying value of the asset. If an asset is deemed to be impaired,
the value of the asset is written down to its estimated fair value.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Makita made a decision to discontinue the use of a certain information technology facility located
in zoning area in Japan during FY 2005. In accordance with FASB No.&nbsp;144, Makita recorded a &#165;577
million impairment loss on this facility in the Japan segment. The estimated fair value of &#165;196
million represents the fair value of the land as determined by a third party appraiser considering
the estimated net cash flows from effecting the sale to a third party purchaser. Current zoning
regulations require that a buyer utilize the facility on substantially the same basis. Therefore,
the combination of the limitations imposed by the zoning rules and the fact that the facility is
located in a rural, non industrial section of Japan has caused management to determine that the
recoverable value on an as is basis will be most likely limited to the estimated fair value of the
land.
</DIV>

<P align="center" style="font-size: 10pt">21
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><DIV style="border-bottom: 2px solid #000000; font-size: 1px">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Transfer to the government of the substitutional portion of pension plan</B><BR>
Until June, 2004, Makita had an employee pension fund in Japan, which was a defined benefit pension
fund established under the Japanese pension law. This domestic contributory plan was composed of a
corporate defined benefit portion established by the Company and a substitutional portion based on
benefits prescribed by the Japanese government. The Company was exempted from contributing to the
Japanese Pension Insurance program that would otherwise have been required if it had not elected to
fund the government substitutional portion of the benefit through a domestic contributory plan
arrangement. The plan assets of the domestic contributory plan were invested and managed as a
single portfolio for the entire domestic contributory plan and were not separately attributed to
the substitutional and corporate portions. In June&nbsp;2001, the Japanese pension law was amended to
permit an employer to elect to transfer the entire substitutional portion benefit obligation from
the domestic contributory plan to the government together with a specified amount of plan assets
pursuant to a government formula. After such transfer, the employer would be required to make
periodic contributions to the Japanese Pension Insurance program, and the Japanese government would
be responsible for all benefit payments. The corporate portion of the domestic contributory plan
would continue to exist exclusively as a corporate defined benefit pension plan. Makita has
accounted for the transfer in accordance with EITF 03-02 &#147;Accounting for the Transfer to the
Japanese Government of the Substitutional Portion of Employee Pension Fund Liabilities&#148;. As
specified in EITF 03-02, the entire separation process has been accounted for at the time of
completion of the transfer to the government of the benefit obligation and related plan assets as a
settlement in accordance with SFAS No.88 &#147;Employers&#146; Accounting for Settlements and Curtailments of
Defined Benefit Pension Plans and for Termination Benefits&#148;. The aggregate effect of this
separation was determined based on the Company&#146;s pension benefit obligation as of the date the
transfer was completed and the amount of plan assets required to be transferred.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">The Company received an approval of exemption from the Minister of Health, Labor and Welfare in
January&nbsp;2003, from the obligation for benefits related to future employee service with respect to
the substitutional portion of its domestic contributory plan. The Company received government
approval of exemption from the obligation for benefits related to past employee service in April
2004 with respect to the substitutional portion of its domestic contributory plan. The transfer to
the government was completed on June&nbsp;28, 2004.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">As a result of the transfer, the Company recognized a subsidy from the Japanese government equal to
the difference between the fair value of the obligation deemed &#147;settled&#148; with the Japanese
government and the assets required to be transferred to the government in the amount of &#165;9,128
million in FY2005. In addition, the Company recognized a settlement loss equal to the amount
calculated as the ratio of the obligation settled to the total employee&#146;s pension fund obligation
immediately prior to settlement, both of which exclude the effect of future salary progression
relating to the substitutional portion, times the net unrecognized gain/loss immediately prior to
settlement, which amounted to &#165; 4,687&nbsp;million. The resulting net gain of &#165;4,441&nbsp;million was
recorded as a &#147;transfer to the government of the substitutional portion of pension plan&#148; in the
accompanying consolidated income statement in FY 2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Operating Income</B><BR>
As a result of the factors indicated above, operating income grew 113.6%, to &#165;31,398&nbsp;million, in FY
2005, and the ratio of operating income to net sales rose 8.1&nbsp;percentage points, from 8.0% to
16.1%.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Other Income (Expenses)</B><BR>
Other income dropped 17.2%, or &#165;254&nbsp;million, to &#165;1,220&nbsp;million, in FY 2005. This decrease reflects
a decrease in realized gains on securities and other income by 56.5%, or &#165;798&nbsp;million, to &#165;614
million, in FY 2005. The foregoing decrease was partially offset by the following factors. (1)
Interest and dividend income increased 33.1%, or &#165;288&nbsp;million, to &#165;1,157&nbsp;million, in FY 2005. This
resulted from the increase in the amount of cash equivalents with foreign subsidiaries and the
average balance of Securities. (2)As a result of decreases of weighted average interest rates on
borrowings, interest expense decreased by 2.8%, or &#165;17&nbsp;million, to &#165;588&nbsp;million, in FY 2005. (3)The
balance of foreign exchange gains and losses improved by &#165;239&nbsp;million to a &#165;37&nbsp;million gain in
FY2005 from a &#165;202&nbsp;million loss in FY2004. This reflects the Euro appreciating against the Japanese
yen and the U.S. dollar depreciating against the Japanese yen in this period.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Income before income taxes</B><BR>
Income before income taxes in FY 2005 increased by 101.7%, or &#165;16,448&nbsp;million, to &#165;32,618&nbsp;million,
and the ratio of operating income to net sales rose 7.9&nbsp;percentage points, from 8.8% in FY 2004 to
16.7% in FY 2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Provision for income taxes</B><BR>
Total provision for income taxes increased by 23.6% as compared with FY2004 and amounted to &#165;10,482
million in FY 2005, mainly because of a rise in the taxable income of Makita.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">The effective income tax rate was 32.1%, compared with the statutory income tax rate of 40.3%. The
difference between these rates was mainly attributed to the effect of tax treaties, through which
Japanese corporations can claim a tax credit against Japanese income taxes on income earned in
certain countries, even though that income is exempted from income taxes or is reduced by special
tax incentive measures in those countries, as if no special exemption
or reduction was provided. The Company applied such &#147;tax sparing&#148; mainly to China with the indicated
tax reduction effect.
</DIV>

<P align="center" style="font-size: 10pt">22
</DIV>

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<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><DIV style="border-bottom: 2px solid #000000; font-size: 1px">&nbsp;</DIV>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Net income</B><BR>
As a result of the foregoing, net income for FY 2005 increased 187.8% or &#165;14,445&nbsp;million, to
&#165;22,136&nbsp;million.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Earnings per share</B><BR>
Basic earnings per share of common stock amounted to &#165;153.9, compared with &#165;53.2 in FY 2004.
Diluted earnings per share amounted to &#165;148.8, compared with &#165;51.9 in FY 2004.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Regional Segments</B><BR>
Segment information described below is determined by the location of the Company and its relevant
subsidiaries.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Japan Segment</B><BR>
In FY 2005, sales in the Japan segment grew 10.9%, to &#165;98,741&nbsp;million. Sales to outside customers
advanced 5.3% to &#165;50,955&nbsp;million, which accounted for 26.2% of consolidated net sales. The increase
reflects a 0.6% rise in sales in the domestic market as well as a 24.9% surge in export sales
mainly to Asia. Segment operating income climbed 11.0 times, to &#165;15,915&nbsp;million, owing to a 5.4%
fall in operation expenses to &#165;82,826&nbsp;million. The decrease in operating expenses resulted from a
gain of &#165;4,441&nbsp;million in connection with the return of the substitutional portion of the Company&#146;s
Employee Pension Fund to the government in FY2005, versus an impairment loss of &#165;5,996&nbsp;million
related to its golf course subsidiary in FY2004, and due to improved productivity in the Japanese
factory and the Chinese factories.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>North America Segment</B><BR>
In FY 2005, sales in the North America segment dropped 7.6%, to &#165;42,190&nbsp;million. Sales to outside
customers fell 7.4% to &#165;38,607&nbsp;million, which accounted for 19.8% of consolidated net sales. This
decline in sales to outside customers mainly due to overall declining demand in North America, as
home centers in the United States and Canada enhanced production and distribution of products under
their own brand name and, as a result, Makita&#146;s sales to home centers declined. Segment operating
income surged 123.9% to &#165;1,610&nbsp;million, principally owing to a 9.7% fall in operating expenses to
&#165;40,580&nbsp;million. The decrease in operating expenses reflected lower expenses due to restructuring
measures that reduced personnel expenses and due to improved productivity in the Chinese factories.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Europe Segment</B><BR>
In FY 2005, sales in the Europe segment grew 13.7% to &#165;81,666&nbsp;million. Sales to outside customers
advanced 13.0%, to &#165;75,864&nbsp;million, which accounted for 39.0% of consolidated net sales. Segment
operating income surged 35.4%, to &#165;10,125&nbsp;million, principally owing to a rise in net sales on a
local currency basis as well as to a rise in operating profit rates resulting from the strength of
the euro and the improved cost efficiency following the shift of a portion of our manufacturing
processes to factories in China.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Asia Segment</B><BR>
In FY 2005, sales in the Asia segment increased 46.0% to &#165;42,315&nbsp;million. Sales to outside
customers advanced 11.6%, to &#165;7,378&nbsp;million, which accounted for 3.8% of consolidated net sales.
Segment operating income grew 68.2%, to &#165;4,926&nbsp;million in FY 2005. The decrease in operating
expenses reflected improved productivity in the Chinese factories.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Other Segment</B><BR>
In FY 2005, sales in the other segment increased 8.3% to &#165;22,101&nbsp;million. Sales to outside
customers increased by 8.1%, to &#165;21,933&nbsp;million, which accounted for 11.3% of consolidated net
sales. Segment operating income fell 29.0%, to &#165;955&nbsp;million in FY 2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>CRITICAL ACCOUNTING POLICIES</I></B><BR>
As disclosed in Note 3 of the Notes to the accompanying consolidated financial statements, the
preparation of Makita&#146;s consolidated financial statements in accordance with U.S. generally
accepted accounting principles requires management to make certain estimates and assumptions. These
estimates and assumptions were determined by management&#146;s judgment based on currently known facts,
situations and plans for future activities, which may change in the future. Certain accounting
estimates are particularly sensitive because of their significance to the consolidated financial
statements and accompanying notes and due to the possibility that future events affecting the
estimates may differ significantly from management&#146;s current judgments. Accordingly, any change in
the facts, situations, future plans or other factors on which management bases its estimates may
result in a significant difference between earlier estimates and the actual results achieved.
Makita believes that the following are the critical accounting policies and related judgments and
estimates used in the preparation of its consolidated financial statements and accompanying notes.
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><DIV style="border-bottom: 2px solid #000000; font-size: 1px">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>Revenue Recognition</I></B><BR>
Makita believes that revenue recognition is critical for its financial statements because net
income is directly affected by the estimation of sales incentives. In recognizing its sales
incentives, Makita is required to make estimates based on assumptions about matters that are highly
uncertain at the time the estimate is made. Makita principally generates revenue through the sale
of power tool products. Makita&#146;s general revenue recognition policy follows the provisions of Staff
Accounting Bulletin No.&nbsp;104 (&#147;SAB 104&#148;). In accordance with SAB 104 and as disclosed in the
consolidated financial statements, Makita recognizes revenue when persuasive evidence of an
arrangement exists, delivery has occurred or services are rendered, the sales price is fixed and
determinable and collectibility is reasonably assured. Makita believes the foregoing conditions are
satisfied upon the shipment or delivery of Makita&#146;s product.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">With respect to &#147;Revenue Recognition,&#148; Makita offers sales incentives to qualifying customers
through various incentive programs. Sales incentives primarily involve volume-based rebates,
cooperative advertising and cash discounts, and are accounted for in accordance with the Emerging
Issues Task Force Issue No.&nbsp;01-9.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Volume-based rebates are provided to customers only if customers attain a pre-determined cumulative
level of revenue transactions within a specified period of a year or less. Liabilities for
volume-based rebates are recognized within a corresponding reduction to 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.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">If expected sales levels are not achieved or achieved in levels higher than anticipated resulting
in a greater magnitude of incentive, the result could have a material impact on Makita&#146;s financial
statements.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Cooperative advertisings are provided to certain customers as a contribution to or as sponsored
funds 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.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">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&#146;s ability to reliably estimate such future discounts to be taken. Cash discounts are
substantially all taken within 30&nbsp;days following the date of sale. Estimates of expected cash
discounts are evaluated and adjusted periodically based on actual sales transactions and historical
trends.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">The following table shows the changes in accruals for volume-based rebates, cooperative advertising
and cash discounts for the years ended March&nbsp;31, 2004, 2005 and 2006:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="10">Yen</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">U.S. Dollars</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="10" style="border-bottom: 1px solid #000000">(millions)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">(thousand)</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="14" style="border-bottom: 1px solid #000000">For the year ended March 31,</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2006</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2006</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Volume-based rebates:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Actual payment for the year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(3,607</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(3,836</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(5,104</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(43,624</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Income statement impact for the year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,903</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,333</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,726</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">48,940</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Accrued expenses (BS)&nbsp;as of March&nbsp;31,</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,605</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,102</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,724</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">23,282</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cooperative advertisings:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Actual payment for the year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2,076</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,900</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2,127</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(18,179</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Income statement impact for the year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,147</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,812</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,196</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18,769</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Accrued expenses (BS)&nbsp;as of March&nbsp;31,</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">596</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">508</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">577</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,932</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cash discounts:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Actual payment for the year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(3,503</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(3,682</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(4,311</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(36,846</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Income statement impact for the year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,661</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,684</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,371</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">37,359</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Accrued expenses (BS)&nbsp;as of March&nbsp;31,</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">429</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">431</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">491</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,197</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>Inventory valuation and reserve</I></B><BR>
Inventories are valued at the lower of cost or market price, with cost determined based on the
average cost method. The valuation of inventory requires Makita to estimate obsolete or excess
inventory as well as inventory that is not of saleable quality. The determination of obsolete or
excess inventory requires Makita to estimate the future demand for products taking into
consideration such factors as macro and micro economic conditions, competitive pressures,
technological obsolescence, changes in consumer buying habits and others. The estimates of future
demand that Makita uses in the valuation of inventory are the basis for revenue forecasts, which
are also consistent with short-term manufacturing plans. If demand forecast for specific products
is greater than actual demand and Makita fails to reduce manufacturing output accordingly, Makita
could be required to write down additional on-hand inventory, which would have a negative impact on
gross profit and, consequently, a potential material adverse impact on net income.
</DIV>

<P align="center" style="font-size: 10pt">24
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><DIV style="border-bottom: 2px solid #000000; font-size: 1px">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">However, sales of previously written-down or written-off inventory is not significant to any of the periods
presented and Makita believes that the gross profit of the resulting sales of such inventory items
is similar to that realized on all of its sales for the respective periods presented. Accordingly,
the impact on Makita&#146;s consolidated gross profit margin by sales of previously written-down or
written-off inventory is not material. Makita usually sells or scraps remaining inventory items
within a few years after write off and/or write down.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>Unrealized Losses on Securities</I></B><BR>
Makita holds marketable securities and investment securities, which are accounted for in accordance
with SFAS No.&nbsp;115. Makita believes that impairment on securities is critical because it holds
significant amounts of securities and any resulting impairment loss could have a material adverse
impact on net income. Makita utilizes significant judgment based on subjective as well as objective
factors in determining when an investment is other-than-temporarily impaired. Makita regularly
reviews available-for sale securities and held-to-maturity securities for possible impairment based
on criteria that include, but are not limited to, the extent to which cost exceeds market value,
the duration of a market decline, our intent and ability to hold to recovery and the financial
health, specific prospects and creditworthiness of the issuer. Makita performs comprehensive market
research and analysis and monitors market conditions to identify
potential impairment losses.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>Allowance for Doubtful Receivables</I></B><BR>
Makita performs ongoing credit evaluations of its customers and adjusts credit limits based upon
payment history and the customer&#146;s current creditworthiness, as determined by Makita&#146;s review of
their current credit information. Makita continuously monitors collections and payments from its
customers and maintains a provision for probable estimated credit losses based upon its historical
experience and any specific customer collection issues that Makita has identified. Such credit
losses have historically been within Makita&#146;s expectations and the provisions established. However,
Makita cannot guarantee that it will continue to experience the same credit loss rates that it has
in the past. Changes in the underlying financial condition of its customers could result in a
material impact to Makita&#146;s consolidated results of operations and financial condition.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>Impairment of Long-Lived Assets</I></B><BR>
Makita believes that impairment of long-lived assets is critical for its financial statements
because Makita has significant amounts of property, plant and equipment, the recoverability of
which could significantly affect its operating results and financial condition.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Makita periodically performs an impairment review for long-lived assets held and used whenever
events or changes in circumstances indicate that the carrying value of the assets may not be
recoverable. This review is based upon Makita&#146;s projections of expected undiscounted future cash
flows. Estimates of the future cash flows are based on the historical trends adjusted to reflect
the best estimate of future operating conditions. Makita believes that its estimates are
reasonable. However, different assumptions regarding such cash flows could materially affect
Makita&#146;s evaluations. Recoverability of assets to be held and used is assessed by comparing the
carrying amount of an asset or asset group to the expected future undiscounted cash flows of the
asset or group of assets. If an asset or group of assets is considered to be impaired due to
factors such as a significant decline in market value of an asset, current period operating or cash
flow losses and significant changes in the manner of the use of an asset, the impairment charge to
be recognized is measured as the amount by which the carrying amount of the asset or group of
assets exceeds fair value. Long-lived assets meeting the criteria to be considered as held for sale
are reported at the lower of their carrying amount or fair value less costs to sell.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Fair value is determined based on recent transactions involving sales of similar assets or on
appraisals prepared internally or externally, or by discounting future expected cash flows, or by
using other valuation techniques. If actual market and operating conditions under which assets are
operated are less favorable than those projected by management, resulting in lower expected future
cash flows or a shorter expected future period to generate such cash flows, additional impairment
charges may be required. In addition, changes in estimates resulting in lower fair values due to
unanticipated changes in business or operating assumptions could adversely affect the valuations of
long-lived assets and in turn affect Makita&#146;s consolidated results of operations and financial
condition.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>Accrued Retirement and Termination Benefits</I></B><BR>
Makita believes that pension accounting is critical for its financial statements because
assumptions used to estimate pension benefit obligations and pension expenses can have a
significant effect on its operating results and financial condition. Accrued retirement and
termination benefits are determined based on consideration of the levels of retirement and
termination liabilities and plan assets at the end of a given fiscal year. The levels of projected
benefit obligations and net periodic benefit cost are calculated based on various annuity actuarial
calculation assumptions. Principal assumptions include discount rates, assumed rates of increase in
future compensation levels, mortality rates and some other assumed rates. Discount rates employed
by Makita are reflective of rates available on long-term, high quality fixed-income debt
instruments. Discount rates are determined annually on the measurement date.
</DIV>

<P align="center" style="font-size: 10pt">25
</DIV>

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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><DIV style="border-bottom: 2px solid #000000; font-size: 1px">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">The expected long-term rate of return on plan assets is determined annually based on the
composition of the pension asset portfolios and the expected long-term rate of return on these
portfolios. The expected long-term rate of return on plan assets is designed to approximate the
long-term rate of return actually earned on the plan assets over time to ensure that funds are
available to meet the pension obligations that result from the services provided by employees.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">A number of factors are used to determine the reasonableness of the expected long-term rate of
return, including actual historical returns on the asset classes of the plans&#146; portfolios and
independent projections of returns of the various asset classes.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Accordingly, these assumptions are evaluated annually and retirement and termination liabilities
are recalculated at the end of each fiscal year based on the latest assumptions. In accordance with
U.S. generally accepted accounting principles, actual results that differ from the assumptions are
accumulated and amortized over the future periods and therefore, generally affect Makita&#146;s results
of operations in such future periods.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Makita has a contributory retirement plan in Japan, which covers substantially all of the employees
of the Company. The discount rate assumed to determine the pension obligation for the pension plan was 2.2% for the
year ended March&nbsp;31, 2006.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">As of March&nbsp;31, 2006, Makita allocated 54.6%, and 30.8% of plan assets to equity securities and
debt securities. The value of these plan assets are influenced by fluctuations in world securities
market. Significant depreciation or appreciation will have an impact on future expenses.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">The
following table illustrates the sensitivity to changes in the discount rate and the expected
return on pension plan assets, while holding all other assumptions constant, for Makita&#146;s pension
plans as of March&nbsp;31, 2006.
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD nowrap align="left" colspan="9" style="border-bottom: 1px solid #000000">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Change in</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Change in</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 0px solid #000000">Change in assumption</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">projected benefit</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">pre-tax pension</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">obligation</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">expenses</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7">Yen (millions)</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">50 basis point increase / decrease in discount rate</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">-2,300 / &#043;2,600</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" style="border-bottom: 1px solid #000000">-7 / &#043;6</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">50 basis point increase / decrease in expected return on assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">-140/&#043;140</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">While Makita believes that the assumptions are appropriate, significant differences in its actual
experience or significant changes in its assumptions may materially affect Makita&#146;s accrued
retirement and termination benefits and future expenses.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>Realizability of Deferred Income Tax Assets</I></B><BR>
Makita is required to estimate its income taxes in each of the jurisdictions in which Makita
operates. This process involves estimating Makita&#146;s current tax provision together with assessing
temporary differences resulting from differing treatment of items for income tax reporting and
financial accounting and reporting purposes. Such differences result in deferred income tax assets
and liabilities, which are included within Makita&#146;s consolidated balance sheets. Makita must then
assess the likelihood that Makita&#146;s deferred income tax assets will be recovered from future
taxable income, and to the extent Makita believes that recovery is not more likely than not, Makita
must establish a valuation allowance.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Significant management judgment is required in determining our provision for income taxes, deferred
income tax assets and liabilities and any valuation allowance recorded against our gross deferred
income tax assets. We have recorded a valuation allowance of &#165;2,973&nbsp;million as of March&nbsp;31, 2006
due to uncertainties about our ability to utilize certain deferred income tax assets mainly for net
operating loss carry forwards before they expire. For the balance of deferred income taxes,
although realization is not assured, management believes, judging from an authorized business plan,
it is more likely than not that all of the deferred income tax assets, less the valuation
allowance, will be realized. The amount of such net deferred income tax assets that are considered
realizable, however, could change in the near term and any such change may have a material effect
on Makita&#146;s consolidated results of operations and financial position if estimates of future
taxable income are different.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>New Accounting Standards</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt">In November&nbsp;2004, the FASB issued SFAS No.&nbsp;151, &#147;Inventory Costs &#150; an amendment of ARB No.&nbsp;43,
Chapter&nbsp;4&#148; (&#147;SFAS No.&nbsp;151&#148;). SFAS No.&nbsp;151 amends the guidance in ARB No.&nbsp;43, Chapter&nbsp;4, &#147;Inventory
Pricing,&#148; to clarify the accounting for abnormal amounts of idle facility expense, freight,
handling costs, and wasted material (spoilage). Among other provisions, the new statement requires
that items such as idle facility expense, excessive spoilage, double freight, and rehandling costs
be recognized as current period charges regardless of whether they
meet the criterion of &#147;so abnormal&#148; as stated in ARB No.&nbsp;43.
</DIV>

<P align="center" style="font-size: 10pt">26
</DIV>

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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><DIV style="border-bottom: 2px solid #000000; font-size: 1px">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Additionally, SFAS No.&nbsp;151 requires that the allocation of
fixed production overheads to the costs of conversion be based on the normal capacity of the
production facilities. SFAS No.&nbsp;151 is effective for the year ended March&nbsp;31, 2007. Makita does not
expect the adoption of SFAS No.&nbsp;151 will have a material impact on its consolidated results of
operations and financial condition.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">In December&nbsp;2004, the FASB issued SFAS No.&nbsp;153, &#147;Exchanges of Non-monetary Assets &#150; an amendment of
APB Opinion No.&nbsp;29.&#148; SFAS No.&nbsp;153 eliminates the exception from fair value measurement for
non-monetary exchanges of similar productive assets in paragraph 21(b) of APB Opinion No.&nbsp;29,
&#147;Accounting for Non-monetary Transactions,&#148; and replaces it with an exception for exchanges that do
not have commercial substance. SFAS No.&nbsp;153 specifies that a non-monetary exchange has commercial
substance if the future cash flows of the entity are expected to change significantly as a result
of the exchange. SFAS No.&nbsp;153 is effective for fiscal periods beginning after June&nbsp;15, 2005 and is
required to be adopted by Makita, in the fiscal year beginning April&nbsp;1, 2006. Makita does not
expect the adoption of SFAS No.&nbsp;153 will have a material impact on its consolidated results of
operations and financial condition.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">In May&nbsp;2005, the FASB issued SFAS No.&nbsp;154, &#147;Accounting Changes and Error Corrections&#151;a replacement
of APB Opinion No.&nbsp;20 and FASB Statement No.&nbsp;3.&#148; SFAS No.&nbsp;154 replaces APB Opinion No.&nbsp;20,
&#147;Accounting Changes&#148; and SFAS No.&nbsp;3,&#147;Reporting Accounting Changes in Interim Financial Statements,&#148;
and provides guidance on the accounting for and reporting of accounting changes and error
corrections. SFAS No.&nbsp;154 establishes retrospective application, or the latest practicable date, as
the required method for reporting a change in accounting principle and the reporting of a
correction of an error. SFAS No.&nbsp;154 is effective for accounting changes and corrections of errors
made in fiscal years beginning after December&nbsp;15, 2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">In June&nbsp;2005, the FASB issued FASB Staff Position (FSP)&nbsp;FAS 143-1, &#147;Accounting for Electronic
Equipment Waste Obligations&#148; (&#147;FSP 143-1&#148;). FSP 143-1 provides guidance on the accounting for
certain obligations associated with the Waste Electrical and Electronic Equipment Directive (the
&#147;Directive&#148;), adopted by the European Union (&#147;EU&#148;). Under the Directive, the waste management
obligation for historical equipment (products put on the market on or prior to August&nbsp;13, 2005)
remains with the commercial user until the customer replaces the equipment. FSP 143-1 is required
to be applied to the later of the first reporting period ending after June&nbsp;8, 2005 or the date of
the Directive&#146;s adoption into law by the applicable EU member countries. Makita does not expect the
adoption of FSP 143-1 will have a material impact on its consolidated results of operations and
financial condition.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">In November&nbsp;2005, the FASB issued FSP FAS 115-1 and FAS 124-1, &#147;The Meaning of Other-Than-Temporary
Impairment and Its Application to Certain Investments&#148; (&#147;FSP 115-1&#148;). FSP 115-1 provides guidance
on determining when investments in certain debt and equity securities are considered impaired,
whether that impairment is other-than-temporary, and on measuring such impairment loss. FSP 115-1
also includes accounting considerations subsequent to the recognition of an other-than-temporary
impairment and requires certain disclosures about unrealized losses that have not been recognized
as other-than-temporary impairments. FSP 115-1 is required to be applied to reporting periods
beginning after December&nbsp;15, 2005. Makita does not expect the
adoption of FSP 115-1 will have a
material impact on its consolidated results of operations and financial condition.
</DIV>
<DIV align="left">
<A name="118"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>B. Liquidity and capital resources</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Makita&#146;s principal sources of liquidity are cash on hand, cash provided by operating activities and
borrowings within credit lines. As of March&nbsp;31, 2006, Makita held cash and cash equivalents
amounting to &#165;39,054&nbsp;million and the Company&#146;s subsidiaries have credit lines up to &#165;23,846
million. As of March&nbsp;31, 2006, &#165;1,638&nbsp;million of its credit lines was used and &#165;22,208&nbsp;million was
unused. As of March&nbsp;31, 2006, Makita had &#165;1,728&nbsp;million in short-term borrowing, which included
bank borrowings and capital lease obligations. For further information regarding our short-term
borrowings, including the average interest rates see Note 11 to our accompanying consolidated
financial statements.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">As of March&nbsp;31, 2006, Makita&#146;s total short-term borrowings and long-term indebtedness amounted to
&#165;1,832&nbsp;million, representing a decrease from the &#165;9,148&nbsp;million reported for the previous fiscal
year-end. Makita&#146;s ratio of indebtedness to shareholders&#146; equity declined by 3.5%, to 0.7%. The
reduction in the balance of indebtedness and the decline in the ratio of total indebtedness to
shareholders&#146; equity reflect the efforts of management to improve the efficiency of the usage of
Makita&#146;s capital by reducing the level of unused net cash provided by operating activities. As a
result of these efforts, Makita repaid long-term indebtedness of &#165;6,000&nbsp;million in FY2006.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Except as disclosed above, Makita expects to continue to incur additional debt from time to time as
required to finance working capital needs. Makita has no potentially significant refinancing
requirements in fiscal 2006.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Makita has historically maintained a high level of liquid assets. Management estimates that the
cash and cash equivalents level of &#165;39,054&nbsp;million as of March&nbsp;31, 2006, together with Makita&#146;s
available credit facilities, cash flow from operations and funds available from long-term and
short-term debt financing, will be sufficient to satisfy our future working capital needs, capital expenditure, research and
</DIV>

<P align="center" style="font-size: 10pt">27
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><DIV style="border-bottom: 2px solid #000000; font-size: 1px">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">development
and debt service requirement through fiscal 2006 and thereafter.</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Makita requires operating capital mainly to purchase materials required for production, to conduct
research and development, to respond to cash flow fluctuations related to changes in inventory
levels and to cover the payment cycle of receivables from wholesalers. Makita further requires
funds for capital expenditures, mainly to expand production facilities and purchase metal molds.
Makita also requires funds for financial expenditures, primarily to pay dividends and to repurchase
treasury stock. Maintaining the level of Makita&#146;s production and marketing activities requires
capital investments of approximately &#165;5&nbsp;billion to &#165;7&nbsp;billion annually. Please see &#147;&#150; Fiscal Year
2006 &#150; Capital Expenditures&#148; below in this section for a description of our principal capital
expenditures for fiscal 2006 and the main planned expenditures for fiscal 2006. At the Regular
General Meeting of Shareholders held in June&nbsp;2006, the Company&#146;s shareholders approved a cash
dividend of &#165;38 per share. The total cash dividend payments amount to &#165;5,461&nbsp;million, which the
Company paid in June&nbsp;2006.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Makita believes it will continue to be able to access the capital markets on terms and for amounts
that will be satisfactory to it and as necessary to support the business and to engage in hedging
transactions on commercially acceptable terms.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Makita is rated at &#147;A&#043;&#148; by Standard &#038; Poor&#146;s at March&nbsp;31, 2006.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U><B>Fiscal year 2006</B></U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Cash Flows</B><BR>
Cash flow provided by operating activities is primarily composed of cash received from customers,
and cash used in operating activities, principally payments by Makita for parts and materials,
selling, general and administrative expenses, and income taxes.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">For FY2006, cash inflow from cash received from customers increased by 16.3% to &#165;224,064&nbsp;million,
as a result of an increase in net sales.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">This increase was within the range of the increase in net sales, as there were no significant
changes in Makita&#146;s collection rates.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Cash used in operating activities increased by 13.1% to &#165;198,997&nbsp;million. This increase was caused
by greater purchases of parts and raw materials, increased production as well as the increase in
sales and administrative expenses.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">As a result of these factors, net cash provided by operating activities increased 48.8% (&#165;8,225
million) from &#165;16,842&nbsp;million in FY2005 to &#165;25,067&nbsp;million in FY 2006.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">In FY2006, cash outflow for capital expenditure increased &#165;4,728&nbsp;million to &#165;11,383&nbsp;million.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">In addition, to 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 Corp. as of January&nbsp;1, 2006 for a total of &#165;1,853&nbsp;million. Of the &#165;1,853&nbsp;million
purchase price including related costs, the Company paid &#165;1,204&nbsp;million during FY2006 and paid &#165;649
million in April&nbsp;2006.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">The purchase of securities totaled &#165;21,844&nbsp;million during the previous fiscal year and &#165;21,248
million during FY2006.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">To engage in investing and financing activities, Makita increased its cash by &#165;40,864&nbsp;million from
sales and maturities of securities in the amount of &#165;34,350&nbsp;million and the cancellation of a time
deposit in the amount of &#165;6,514&nbsp;million.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">In FY2006, net cash inflow from sales and maturities of securities increased by &#165;6,168&nbsp;million
from &#165;28,182&nbsp;million.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">As a result, net cash flow resulting from investing activities increased &#165;7,501&nbsp;million from the
previous fiscal year&#146;s &#165;154&nbsp;million to &#165;7,655&nbsp;million.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">In FY2006, following the confirmation of the civil rehabilitation plan for Joyama Kaihatsu, Ltd.,
the Company paid &#165;150&nbsp;million towards &#165;800&nbsp;million in long-term indebtedness, and &#165;6,375&nbsp;million
towards &#165;12,836&nbsp;million in club members&#146; deposits. In addition, the Company also repaid &#165;6,000
million long-term indebtedness of its subsidiary. Cash used in repayments of long-term indebtedness
and club members&#146; deposits totaled &#165;12,525&nbsp;million. This cash outflow was &#165;674&nbsp;million less than
the &#165;13,199&nbsp;million cash used in repayment in FY2005, which included a total of &#165;12,990&nbsp;million for
redemption of convertible bonds and &#165;209&nbsp;million for repayment of club members&#146; deposits. On the
other hand, cash used in the payment of dividends increased &#165;4,454&nbsp;million from &#165;3,453&nbsp;million
during the previous fiscal year to &#165;7,907&nbsp;million.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">As a
result, net cash used in financial activities increased
&#165;3,371&nbsp;million from &#165;16,177 million
during previous fiscal year to &#165;19,548&nbsp;million.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">As a result of these activities as well as the effect of exchange rate changes, our cash and cash
equivalents as of March&nbsp;31, 2006 amounted to &#165;39,054&nbsp;million, up &#165;13,670&nbsp;million from the end of
fiscal 2005.
</DIV>

<P align="center" style="font-size: 10pt">28
</DIV>

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<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><DIV style="border-bottom: 2px solid #000000; font-size: 1px">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Capital Expenditures</B><BR>
Makita has continued to allocate sizable amounts of funds for capital expenditures, which it
believes is crucial for sustaining long-term growth. In light of the severity of the current market
competition, however, Makita has focused its capital investments on expanding its plant in China
and purchasing metal molds for new products to be manufactured, which required Makita to increase
the amount of its capital expenditures in FY 2006 compared to FY 2005. Total capital expenditures
amounted to &#165;4,494&nbsp;million, &#165;6,655&nbsp;million and &#165;11,383&nbsp;million for FY 2004, 2005 and 2006
respectively.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Capital expenditure in FY2006 was mainly for expansion and remodeling to reinforce the earthquake
resistance of buildings at the main production factories in Japan, and for the purchase of
facilities such as Chinese factories. Capital investments of the Company amounted to approximately
&#165;6.4&nbsp;billion, while the capital investments of overseas subsidiaries including manufacturing
subsidiaries amounted to approximately &#165;5.0&nbsp;billion. Capital expenditures for Makita&#146;s consolidated
subsidiaries consisted primarily of the purchase of metal molds for new products of Dolmar GmbH.
and the acquisition of production equipment by Makita (China) Co., Ltd. and Makita (Kunshan) Co.,
Ltd. All of Makita&#146;s capital expenditures in FY 2006 were funded through internal sources.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Under its investment plans for FY 2007, the Makita Group is scheduled to make capital investments
totaling &#165;15.5&nbsp;billion, 36% higher than for FY 2006. Of this total, the Company plans to make
direct investments of &#165;9.9&nbsp;billion and its consolidated subsidiaries will invest &#165;5.6&nbsp;billion.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">In continuation from the FY2006, our Company&#146;s main capital investment plan is to expand and
renovate buildings to strengthen earthquake resistance in some of the head office buildings and
main factories. The main facilities investments by consolidated subsidiaries include new factories
in Europe and production facilities for Makita (China) Co., Ltd., and Makita (Kunshan) Co., Ltd.
These are all scheduled to be funded with internal capital.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U><B>Fiscal year 2005</B></U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Cash Flows</B><BR>
Net cash provided by operating activities in FY 2005 decreased by &#165;12,099&nbsp;million to &#165;16,842
million from &#165;28,941&nbsp;million in the previous fiscal year. The cash inflow is primarily composed of
cash received from customers, and the cash outflow is primarily composed of payments by Makita for
parts and materials, selling, general and administrative expenses, and income taxes.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">For FY 2005, cash inflow from cash received from customers increased, as a result of an increase in
net sales. This increase in cash inflow was within the range of the increase in net sales, as there
were no significant changes in Makita&#146;s collection rates. Cash inflow in operating activities
increased by 5.6%, to &#165;192,742&nbsp;million, and cash outflow in operating activities increased by
14.5%, to &#165;175,900&nbsp;million.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Cash outflow for payments for parts and- materials increased as a result of increased production.
This increase was greater than the increase in net sales. Cash outflow for income taxes payments
increased due to an increase in taxable income.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Net cash inflow from investing activities was &#165;154&nbsp;million, compared with a &#165;17,262&nbsp;million cash
outflow in the previous year. The increase in net cash inflow resulted mainly from the &#165;13,510
million of proceeds from maturities of held to maturity securities. Net cash inflow from sales and
maturities of securities of purchase of securities for FY 2005 was &#165;7,172&nbsp;million, compared with
&#165;16,762&nbsp;million of net securities purchase to accumulate funds in preparation for the payments
needed to redeem our outstanding convertible bonds maturing in March&nbsp;2005. In addition, Makita
spent less cash on time deposits, at &#165;38&nbsp;million for FY 2005 compared with &#165;1,162&nbsp;million for FY
2004. The foregoing was partially offset by reduced proceeds from sales of property, plants and
equipment at &#165;320&nbsp;million for FY 2005 compared with &#165;5,154&nbsp;million for FY 2004, and the increase in
cash used for capital expenditure by &#165;2,161&nbsp;million, to &#165;6,655&nbsp;million.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Net cash used in financing activities amounted to &#165;16,177&nbsp;million, compared with &#165;6,596&nbsp;million in
the previous fiscal year. This included &#165;12,990&nbsp;million used to redeem our outstanding convertible
bond and &#165;3,453&nbsp;million used to pay cash dividends. In FY 2005, net cash outflow from financing
activities increased by &#165;9,581&nbsp;million to &#165;16,177&nbsp;million mainly due to an increase in redemption
of convertible bond and an increase in payment of cash dividends.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">As a result of these activities as well as the effects of exchange rate changes, our cash and cash
equivalents as of March&nbsp;31, 2005 amounted to &#165;25,384&nbsp;million, up &#165;808&nbsp;million from the end of
fiscal 2004.
</DIV>


<P align="center" style="font-size: 10pt">29
</DIV>

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<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><DIV style="border-bottom: 2px solid #000000; font-size: 1px">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Capital Expenditures</B><BR>
Makita has continued to allocate sizable amounts of funds for capital expenditures, which Makita
believes is crucial for sustaining long-term growth. In the light of the severity of its current
market competition however, Makita has focused its capital investments on expanding its plant in
China and purchasing metal molds for new products to be manufactured in Japan and China and in
certain other areas, which required Makita to increase the amount of its capital expenditures in FY
2005 compared to FY 2004. Total capital expenditures amounted to &#165;5,691&nbsp;million, &#165;4,494&nbsp;million and
&#165;6,655&nbsp;million for FY 2003, 2004 and 2005, respectively. Capital expenditures in FY 2005 were
mainly for the purchase of molds for new products, acquisition of production equipment in the
Chinese plant and the construction of a headquarters building for Makita (Australia) Pty. Ltd.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Capital investments of the Company amounted to approximately &#165;2.0&nbsp;billion, while the capital
investments of overseas subsidiaries including manufacturing subsidiaries in such countries as
Germany, China, and the United States amounted to approximately &#165;4.7&nbsp;billion. Capital expenditures
for Makita&#146;s consolidated subsidiaries consisted primarily of the construction of a headquarters
building for Makita (Australia) Pty. Ltd., the purchase of metal molds for new products of Dolmar
GmbH, and the acquisition of production equipment by Makita (China) Co., Ltd. and Makita (Kunshan)
Co., Ltd. All of Makita&#146;s capital expenditures in FY 2005 were funded through internal sources.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Under its investment plans for FY 2006, the Makita Group is scheduled to make capital investments
totaling &#165;11.0&nbsp;billion, 65% higher than for FY 2005, which is scheduled to be funded through
internal sources. Of this total, the Company plans to make direct investments of &#165;7.0&nbsp;billion and
its consolidated subsidiaries will invest &#165;4.0&nbsp;billion.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Financial Position</B><BR>
Total assets at the end of FY 2006 were &#165;326,038&nbsp;million, up 12.5% from the previous fiscal
year-end. Total current assets increased 9.6% to &#165;227,769&nbsp;million, owing to such factors as an
increase of inventories.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt">This increase was partially offset by a decrease in marketable securities.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Property, plant and equipment, at cost less accumulated depreciation, increased 12.1%, to &#165;59,203
million. Investments and other assets increased 33.8%, to &#165;39,066&nbsp;million. Total current
liabilities decreased 21.1%, to &#165;45,961&nbsp;million mainly due to decrease in club member&#146;s deposit and
short-term borrowing.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Long-term liabilities increased 11.5%, to &#165;11,858&nbsp;million, mainly due to an increase in deferred
income tax liabilities incurred as a result of the increase in unrealized gains on securities we
hold. The current ratio was 5.0 times, compared with 3.6 at the previous year-end. Shareholders&#146;
equity increased 21.4%, to &#165;266,584&nbsp;million.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">The main reasons for this increase are an increase in retained earning, and accumulated other
comprehensive income of &#165;5,345&nbsp;million in FY2006, which compares to accumulated other comprehensive
loss of (&#165;9,249) in FY2005.
Fluctuations in the accumulated other comprehensive income (losses)&nbsp;are due to reductions in the
minimum pension liabilities adjustment resulting from the increase in actual return on plan assets
of defined benefit pension plan adopted by the Company, reductions in foreign currency translation
adjustments due to the decline of yen against the US dollar and euro etc., and the increase in the
unrealized gains on securities as a result of the appreciation of the market value of the Company&#146;s
securities holding.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt">As a result, the shareholders&#146; equity ratio rose to 81.8%, from 75.8% at the previous fiscal
year-end.
</DIV>

<DIV align="left">
<A name="119"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>C. Research and development, patents and licenses, etc.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Approximately 500 of Makita&#146;s employees are engaged in research and development activities and
product design. Makita also employs approximately 100 trained personnel in production engineering,
and has developed a number of the machine tools currently used in its factories. The majority of
such personnel are engaged in research and development of mechanical innovations, and the rest are
engaged in the research and development of electric, electronic and other applications.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Makita places a high priority on R&#038;D and believes that strong capability in R&#038;D is crucial to its
continuing development of high-quality, reliable products that meet users&#146; needs. In FY 2006,
Makita allocated &#165;4,826&nbsp;million to R&#038;D, approximately 2.1% of net sales. In FY 2005, Makita
allocated &#165;4,446&nbsp;million for R&#038;D, up 1.6% from the &#165;4,377&nbsp;million allocation in FY 2004. The ratio
of R&#038;D expenses to net sales was approximately 2.3% in FY 2004.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Makita is placing higher priority on designing power tools that are smaller and lighter, featuring
electronic controls, and that have internal power sources allowing a cordless operation. Additional
design priorities include developing units that feature low noise, low vibration, measures to
restrain dust emissions and new safety features. Still another priority is to design units that can
be recycled to address environmental concerns. In order to respond quickly to customers needs,
Makita is also placing an emphasis on shortening the time needed for new product development. To
strengthen initiatives that reduce costs, Makita focused development activities on a more limited range of
items and
</DIV>


<P align="center" style="font-size: 10pt">30
</DIV>

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<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><DIV style="border-bottom: 2px solid #000000; font-size: 1px">&nbsp;</DIV>
</DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 12pt">set objectives for developing models that use more standard parts. New products developed
in FY 2006 included cordless 4-mode impact driver, high-pressure air nailer and other products.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Makita developed a battery recharging system that employs digital communication functions to
provide information on the state of a battery&#146;s charge. Through the use of this new system, the
total volume of work can be increased substantially by enabling batteries to be used up to their
capacity. In addition, Makita adopted lithium ion batteries, which doubles the total volume of work
in comparison with Makita&#146;s batteries that must be inserted. Makita also developed an original
battery checker system using the previously mentioned digital communication functions. Using this
system, customers can check on the state of charge of their batteries and Makita can provide
customers with information on how to make their batteries last longer.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">In FY2006, by combining lithium ion batteries with the Company&#146;s proprietary optimum charging
system, Makita created a series of rechargeable products featuring small size and high output, and
released new products such as rotary hammers featuring newly developed low-vibration designs.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Further, a line of products for the North American market was created through the development of
circular saws and air tools among other product. In order to consolidate our product line, we are
developing, among others, a rechargeable impact driver and slide compound saws.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 12pt">On January&nbsp;1, 2006, the Kanematsu-NNK Corporation&#146;s automatic nailer business was acquired by the
Company to reinforce the air tools business department. Due to this transfer of business, various
air tools with superior quality are being developed. We are planning to develop
competitively-priced air tools for overseas and high-pressure air tools for Japan.
</DIV>

<DIV align="left">
<A name="120"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>D. Trend information</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">With regard to the outlook for the future, while the domestic economy is shrugging off deflation
and heading for recovery, we anticipate that harsh conditions will continue. Given the escalation
of raw material prices, including that of crude oil, and with the increasing trend to employ
prefab/precut materials in residential construction, the demand for power tools will decline. A
number of uncertainties also remain in the business environment. In addition to the global trend in
interest rate hikes, there are also concerns about the US economy where we are starting to see a
decline in personal consumption. There are also concerns regarding the future course of Asia, where
changes in the economy tend to be severe.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Under these circumstances, we acquired the automatic nailer business from Kanematsu-NNK Corporation
on January&nbsp;1, 2006. We started the aggressive sales of air tools and the nails for nailers in
Japan, and the automatic nailer business is expected to make a significant contribution throughout
the FY2007.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 12pt">In addition, tools with rechargeable lithium ion batteries introduced to the market in the second
half of FY2006 contributed to the increased sales in FY2006. Inventory volume increased &#165;13,818
million (&#165;8,646&nbsp;million of the increase due to conversion of the weak yen is excluded) from March
31, 2006 to &#165;79,821&nbsp;million, in anticipation of orders and forecasts for the increased sales of
lithium ion battery products in FY2007. These inventories are expected to decrease during FY2007.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">We expect that demand for high-value-added products in the industrialized nations will continue,
and competition will intensify in the global market for professional power tools, including the
Japanese and North American markets.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Performance in the European market will be stable as the Company sustains its competitiveness and
Chinese power tool manufacturers will work to expand their positions primarily in the Asian
markets.
</DIV>

<DIV align="left">
<A name="121"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>E. Off-balance sheet arrangements</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Makita did not have any off-balance sheet arrangements as of March&nbsp;31, 2006.
</DIV>


<P align="center" style="font-size: 10pt">31
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><DIV style="border-bottom: 2px solid #000000; font-size: 1px">&nbsp;</DIV>
</DIV>



<DIV align="left">
<A name="122"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>F. Tabular disclosure of contractual obligations</B>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="23%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="22" style="border-bottom: 1px solid #000000">Yen (millions)</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="22" style="border-bottom: 1px solid #000000">Expected payment date, year ending March 31,</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Total</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2007</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2008</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2009</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2010</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2011</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Thereafter</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Capital lease</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">194</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">90</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">37</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">27</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Interest expenses on Capital lease</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Operating lease</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,680</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">546</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">401</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">275</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">166</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">86</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">206</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Contributions to defined benefit plan</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,101</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,101</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Derivative financial instruments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">24,498</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">24,498</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Purchase Obligation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,373</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,373</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">35,864</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">34,617</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">442</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">304</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">188</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">98</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">215</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="23%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="22" style="border-bottom: 1px solid #000000">U.S. Dollars (thousands)</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="22" style="border-bottom: 1px solid #000000">Expected payment date, year ending March 31,</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Total</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2007</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2008</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2009</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2010</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2011</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Thereafter</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Capital lease</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,658</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">769</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">316</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">231</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">171</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">94</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">77</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Interest expenses on Capital
lease</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">154</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">77</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">34</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Operating lease</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,359</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,667</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,427</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,350</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,419</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">735</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,761</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Contributions to defined
benefit plan</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">26,504</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">26,504</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Derivative financial instruments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">209,385</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">209,385</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Purchase Obligation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">54,470</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">54,470</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">306,530</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">295,872</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">3,777</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">2,598</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,607</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">838</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,838</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<DIV align="left">
<DIV style="font-size: 3pt; margin-top: 12pt; width: 18%; border-top: 0px solid #000000">&nbsp;</DIV>
</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96"></TD>
</TR>

<TR valign="top">
    <TD nowrap align="left">Note:</TD>
    <TD>&nbsp;</TD>
    <TD>Calculation of contributions to
defined benefit plan after 2007 is not practicable.</TD>
</TR>


</TABLE>
<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>G.
Safe harbor</B>

</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left:0px; text-indent:-0px">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;All
information that is not historical in nature disclosed under &#147;Item 5.
Operating and Financial Review and Prospect - Trend Information&#148; and
&#147; - tabular Disclosure of Contractual Obligations&#148; is deemed to be a
forward-looking Statements. See &#147;Cautionary Statement with
Respect to Forward-Looking Statements&#148; for additional information.
</DIV>



<DIV align="left">
<A name="123"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Item&nbsp;6. </B><U><B>Directors, Senior Management and Employees</B></U>
</DIV>

<DIV align="left">
<A name="124"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>A. Directors and senior management</B>

</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 12pt">The Directors and Statutory Auditors of the Company as of June&nbsp;29, 2006 are as follows:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Masahiko Goto<BR>
Current Position: President, Representative Director since May&nbsp;1989<BR>
Date of Birth: November&nbsp;16, 1946<BR>
Director since: May&nbsp;1984

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Masami Tsuruta<BR>
Current Position: Managing Director, General Manager of Domestic Sales Headquarters since June&nbsp;2003<BR>
Date of Birth: December&nbsp;26, 1942<BR>
Director since: June&nbsp;1995<BR>
Business Experience:<BR>
June&nbsp;1995: Director, Assistant General Manager of Domestic Sales Headquarters<BR>
June&nbsp;1997: Director, General Manager of Domestic Sales Marketing Headquarters

</DIV>

<P align="center" style="font-size: 10pt">32
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><DIV style="border-bottom: 2px solid #000000; font-size: 1px">&nbsp;</DIV>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Yasuhiko Kanzaki<BR>
Current Position: Director, General Manager of International Sales Headquarters (Europe Area) since June&nbsp;2003<BR>
Date of Birth: July&nbsp;9, 1946<BR>
Director since: June&nbsp;1999<BR>
Business Experience:<BR>
April&nbsp;1995: Director of Makita International Europe Ltd.<BR>
June&nbsp;1999: Director, Assistant General Manager of International Sales Headquarters 1

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Kenichiro Nakai<BR>
Current Position: Director, General Manager of Administration Headquarters since June&nbsp;2001<BR>
Date of Birth: November&nbsp;17, 1946<BR>
Director since: June&nbsp;2001<BR>
Business Experience:<BR>
October&nbsp;2000: Assistant General Manager of Production Headquarters<BR>
April&nbsp;2001: General Manager of Personnel Department

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Tadayoshi Torii<BR>
Current Position: Director, General Manager of Production Headquarters since June&nbsp;2003<BR>
Date of Birth: December&nbsp;10, 1946<BR>
Director since: June&nbsp;2001<BR>
Business Experience:<BR>
October&nbsp;1998: General Manager of Production Department<BR>
June&nbsp;2001: Director, General Manager of Quality Control Headquarters

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Tomoyasu Kato<BR>
Current Position: Director, General Manager of Research and Development Headquarters since June&nbsp;2001<BR>
Date of Birth: March&nbsp;25, 1948<BR>
Director since: June&nbsp;2001<BR>
Business Experience:<BR>
March&nbsp;1999: General Manager of Technical Administration Department

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Kazuya Nakamura<BR>
Current Position: Director, General Manager of International Sales Headquarters (Asia and Oceania Area) since June&nbsp;2003<BR>
Date of Birth: April&nbsp;13, 1948<BR>
Director since: June&nbsp;2001<BR>
Business Experience:<BR>
October&nbsp;2000: General Manager of Asia and Oceania Sales Department<BR>
June&nbsp;2001: Director, General Manager of International Sales Headquarters 2

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Masahiro Yamaguchi<BR>
Current Position: Director, General Manager of Purchasing Headquarters since June&nbsp;2003<BR>
Date of Birth: May&nbsp;9, 1945<BR>
Director since: June&nbsp;2003<BR>
Business Experience:<BR>
April&nbsp;1995: Assistant Manager of International Sales Department<BR>
August&nbsp;1995: Transferred to Makita Manufacturing Europe Ltd.<BR>
May&nbsp;2003: Assistant General Manager of Purchasing Headquarters (Makita Corporation)

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Shiro Hori<BR>
Current Position: Director, General Manager of Overseas Sales Headquarters (America Area and
International Administration) since June&nbsp;2003<BR>
Date of Birth: February&nbsp;24, 1948<BR>
Director since: June&nbsp;2003<BR>
Business Experience:<BR>
April&nbsp;1997: Assistant General Manager of Europe Sales Department<BR>
March&nbsp;1999: General Manager of Europe Sales Department

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Tadashi Asanuma<BR>
Current Position: Director, Assistant General Manager of Domestic Sales Marketing Headquarters
since June&nbsp;2003<BR>
Date of Birth: January&nbsp;4, 1949<BR>
Director since: June&nbsp;2003

</DIV>

<P align="center" style="font-size: 10pt">33
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><DIV style="border-bottom: 2px solid #000000; font-size: 1px">&nbsp;</DIV>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Business Experience:<BR>
April&nbsp;1995: Manager of Saitama Branch Office<BR>
April&nbsp;2001: General Manager of Osaka Sales Department

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Hisayoshi Niwa<BR>
Current Position: Director, General Manager of Quality Control Headquarters since June&nbsp;2003<BR>
Date of Birth: February&nbsp;24, 1949<BR>
Director since: June&nbsp;2003<BR>
Business Experience:<BR>
April&nbsp;1995: Assistant General Manager of Production Control Department<BR>
October&nbsp;1999: General Manager of Production Control Department

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Zenji Mashiko<BR>
Current Position: Director, Assistant General Manager of Domestic Sales Marketing Headquarters since June&nbsp;2003<BR>
Date of Birth: May&nbsp;28, 1949<BR>
Director since: June&nbsp;2003<BR>
Business Experience:<BR>
April&nbsp;1995: Manager of Tokyo Branch Office

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Motohiko Yokoyama<BR>
Current Position: Director, since June&nbsp;2005<BR>
Date of Birth: May&nbsp;13, 1944<BR>
Director since: June&nbsp;2005<BR>
Business Experience:<BR>
June&nbsp;2004: President and Representative Director of Toyoda Machine Works, Ltd.<BR>
January&nbsp;2006: Vice President and Representative Director of JTEKT Corporation, which is the entity
created by the merger of Toyoda Machine Works, Ltd. with Koyo Seiko Co., Ltd.

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Akio Kondo<BR>
Current Position: Standing Statutory Auditor since June&nbsp;2004<BR>
Date of Birth: February&nbsp;3, 1946<BR>
Statutory Auditor since: June&nbsp;2004<BR>
Business Experience:<BR>
October&nbsp;1995: General Manager of Accounting &#038; Finance Department

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Hiromichi Murase<BR>
Current Position: Standing Statutory Auditor since June&nbsp;2004<BR>
Date of Birth: April&nbsp;5, 1946<BR>
Statutory Auditor since: June&nbsp;2004<BR>
Business Experience:<BR>
June&nbsp;1998: General Manager of General Affairs Department

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Keiichi Usui<BR>
Current Position: Outside Statutory Auditor since June&nbsp;1994<BR>
Date of Birth: August&nbsp;9, 1933<BR>
Statutory Auditor since: June&nbsp;1994

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Shoichi Hase<BR>
Current Position: Outside Statutory Auditor since June&nbsp;2001<BR>
(Patent attorney, Hase International Patent office)<BR>
Date of Birth: March&nbsp;30, 1934<BR>
Statutory Auditor since: June&nbsp;2001<BR>
April&nbsp;1967: Established Hase Patent Attorney Office

</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 12pt">The term of each director listed above expires in June&nbsp;2007. The terms of Mr.&nbsp;Akio Kondo and Mr.
Hiromichi Murase as Standing Statutory Auditors and Mr.&nbsp;Shoichi Hase as Statutory Auditor expire in
June&nbsp;2008. The term of Mr.&nbsp;Usui as Statutory Auditor expires in June&nbsp;2007.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">There is no family relationship between any of the persons named above. There is no arrangement or
understanding with major shareholders, customers, suppliers, or others pursuant to which any person
named above was selected as a Director or a Statutory Auditor.
</DIV>


<P align="center" style="font-size: 10pt">34
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><DIV style="border-bottom: 2px solid #000000; font-size: 1px">&nbsp;</DIV>
</DIV>




<DIV align="left">
<A name="125"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>B. Compensation</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">The aggregate amount of remuneration, including bonuses but excluding retirement allowances, paid
by the Company during the fiscal year ended March&nbsp;31, 2006 to all Directors and Statutory Auditors,
who served during the fiscal year ended March&nbsp;31, 2006, totaled &#165; 163&nbsp;million. Remuneration paid by
the Company during the fiscal year ended March&nbsp;31, 2005 to all Directors and Statutory Auditors,
who served during the fiscal year ended March&nbsp;31, 2005, totaled &#165; 152&nbsp;million. Some of the fringe
benefits provided by the Company to its employees in Japan, such as medical and dental service
insurance and welfare pension insurance are also made available to Directors and Standing Statutory
Auditors.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">The Company had an unfunded retirement and termination allowances program for Directors and
Statutory Auditors. Under such program, the aggregate amount set aside as retirement
allowances for Directors and Statutory Auditors was &#165;477&nbsp;million as of March&nbsp;31, 2005 and was
increased to &#165;490&nbsp;million as of March&nbsp;31, 2006. However, this Executive retirement and
termination allowances program was abolished by the Annual General Meeting of Shareholders
held in June&nbsp;2006, because the program featured minimal correlation with Company results while
presenting strong seniority-based elements. With regard to retirement bonuses accrued through
that day, the accrued bonuses will be paid to eligible executives upon their retirement.
Furthermore, beginning July&nbsp;2006, amounts equal to the retirement benefit accruals will be
added to their monthly compensation.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Beginning in July&nbsp;2006, the Company introduced a new remuneration program which links the
directors&#146; compensation to Makita&#146;s stock prices. Under this remuneration program, a portion or all
of the directors&#146; monthly compensation representing their retirement benefit will be contributed to
the Executive Stock Ownership Plan, which in turn will acquire the Company&#146;s stock. The acquired
stock will be retained for the duration of the director&#146;s tenure. The purpose of this system is to
effectively link a portion of the directors&#146; remuneration to the stock price, and thereby provide
further transparency of directors&#146; managerial responsibility with respect to improving the
Company&#146;s value.
</DIV>

<DIV align="left">
<A name="126"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>C. Board practices</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Under the Company Law, the Company has elected to structure its corporate governance system as a
company with a Board of Statutory Auditors as set out below.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">The Company&#146;s Articles of Incorporation provide for 15 or less Directors and five or less Statutory
Auditors. All Directors and Statutory Auditors are elected at general meetings of shareholders. In
general, the term of offices of Directors expires at the conclusion of the ordinary general meeting
of shareholders held with respect to the last business year ending within two years from their
election, and in the case of Statutory Auditors, within four years from their election; however,
Directors and Statutory Auditors may serve any number of consecutive terms. With respect to each
expiration date of the term of offices of Directors and Statutory Auditors, see &#147;A. Directors and
senior management&#148; in this Item above.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">The Directors constitute the Board of Directors, which has the ultimate responsibility for
administration of the affairs of the Company. The Board of Directors may elect from among its
members a Chairman and Director, one or more Vice Chairmen and Directors, a President and Director,
one or more Executive Vice Presidents and Directors, Senior Managing Directors and Managing
Directors. From among the Directors referred to above, the Board of Directors elects one or more
Representative Directors. Each Representative Director has the authority to individually represent
the Company in the conduct of the affairs of the Company.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">The Statutory Auditors of the Company are not required to be and are not certified public
accountants. However, at least half of the Statutory Auditors are required to be persons who have
never been in the past a director, accounting counselor, corporate executive officer, general
manager or any other employee of the Company or any of its subsidiaries. The Statutory Auditors may
not, while acting as such, be a director, accounting counselor, corporate executive officer,
general manager or any other employee of the Company or any of its subsidiaries. Each Statutory
Auditor has the statutory duty to supervise the administration by the Directors of the Company&#146;s
affairs and also to examine the Company&#146;s annual consolidated and non-consolidated financial
statements and business report proposed to be submitted by a Representative Director at the general
meeting of shareholders and, based on such examination and a report of an Accounting Auditor
referred to below, to individually prepare their audit reports. They are required to attend
meetings of the Board of Directors but are not entitled to vote. In addition to Statutory Auditors,
independent certified public accountants or an audit corporation must be appointed by a general
meeting of shareholders as Accounting Auditor. Such Accounting Auditor has, as their primary
statutory duties, a duty to examine the Company&#146;s annual consolidated and non-consolidated
financial statements proposed to be submitted by a Representative Director at general meetings of
shareholders and to report their opinion thereon to certain Statutory Auditors designated by the
Board of Statutory Auditors to receive such report (if such Statutory Auditors are not designated,
all Statutory Auditors) and the Directors designated to receive such report (if such Directors are
not designated, the Directors who prepared the financial statements).
</DIV>


<P align="center" style="font-size: 10pt">35
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><DIV style="border-bottom: 2px solid #000000; font-size: 1px">&nbsp;</DIV>
</DIV>




<DIV align="left" style="font-size: 10pt; margin-top: 12pt">The Statutory Auditors constitute the Board of Statutory Auditors. The Board of Statutory Auditors
has a statutory duty to, based upon the reports prepared by respective Statutory Auditors, prepare
and submit its audit report to the Accounting Auditor and certain Directors designated to
receive such report (if such Directors are not designated, the Directors who prepared the financial
statements and the business report). A Statutory Auditor may note his or her opinion in the audit
report if his or her opinion expressed in his or her audit report is different from the opinion
expressed in the audit report. The Board of Statutory Auditors shall elect one or more
full-time Statutory Auditors from among its members. The Board of Statutory Auditors is empowered
to establish audit principles, the method of examination by Statutory Auditors of the Company&#146;s
affairs, and the financial position and other matters concerning the performance of the Statutory
Auditors&#146; duties. For names of the Statutory Auditors that constitute the Board of Statutory
Auditors, see Item&nbsp;6. A.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">There are no contractual arrangements providing for benefits to Directors upon termination of
service. Also see &#147;B. Memorandum and articles of association &#150; Directors&#148; in Item&nbsp;10.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U><B>Exemptions from certain NASDAQ Corporate Governance Rules </B></U>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Pursuant to exemptions granted by the National Association of Securities Dealers Automated
Quotations (the &#147;NASDAQ&#148;), the Company is permitted to follow certain corporate governance
practices complying with Japanese laws, regulations, stock exchange rules, or generally accepted
business practices in lieu of the NASDAQ rules on corporate governance (the &#147;NASDAQ Rules&#148;). Set
forth below are the corporate governance exemptions the Company currently receives from NASDAQ.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">1. Directors. The Company is exempt from the NASDAQ requirement relating to directors that
currently requires the Company&#146;s Board of Directors to be comprised of a majority of independent
directors. Unlike the NASDAQ Rules, the Company Law of Japan and related legislation do not require
Japanese companies with boards of statutory auditors such as the Company to have any independent
directors on its board of directors.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">2. Audit Committee. The Company plans to avail itself of paragraph (c)(3) of Rule&nbsp;10A-3 of the
Securities Exchange Act of 1934, as amended, which provides a general exemption from the audit
committee requirements to a foreign private issuer with a board of statutory auditors, subject to
certain requirements which continue to be applicable under Rule&nbsp;10A-3. The Company is exempt from
the NASDAQ requirement relating to audit committees that currently requires the Company to have,
and certify that it has and will continue to have, an audit committee of at least three members,
each of whom must be independent. Unlike the NASDAQ Rules, under the Company Law, at least half of
the statutory auditors will be required to be persons who have not been a director, accounting
counselor, corporate executive officer, general manager or any other employee of the Company or any
of its subsidiaries at any time prior such statutory auditor&#146;s election. Statutory auditors may not
at the same time be a director, accounting counselor, corporate executive officer, general manager,
or any other employee of the Company or any of its subsidiaries.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">3. Meetings of Ordinary Shareholders. The Company is exempt from the quorum requirement of the
NASDAQ, which currently requires each issuer to provide for a quorum as specified in its by-laws
for any meeting of the holders of common stock, which shall in no case be less than 33 1/3&nbsp;percent
of the outstanding shares of a company&#146;s common voting stock. In keeping with the Company Law and
generally accepted business practices in Japan, the Company&#146;s Articles of Incorporation provide
that except as otherwise provided by law or by the Articles of Incorporation, a resolution can be
adopted at a general meeting of shareholders by a majority of the total number of voting rights of
all the shareholders represented at the meeting. The Company Law and the Company&#146;s Articles of
Incorporation provide, however, that the quorum for the election of Directors and Statutory
Auditors shall not be less than one-third of the total number of voting rights of all the
shareholders. The Company Law and the Company&#146;s Articles of Incorporation also provide that in
order to amend the Company&#146;s Articles of Incorporation and in certain other instances, including:
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="96%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">(1)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">acquisition of its own shares from specific persons other than its subsidiaries;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">(2)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">consolidation of shares;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">(3)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">any offering of new shares at a &#147;specially favorable&#148; price (or any offering of stock acquisition rights to acquire shares of capital stock, or bonds
with stock acquisition rights at &#147;specially favorable&#148; conditions) to any persons other than shareholders;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">(4)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">the removal of a Statutory Auditor;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">(5)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">the exemption of liability of a Director, Statutory Auditor or Accounting Auditor with certain exceptions;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">(6)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">a reduction of stated capital with certain exceptions in which a shareholders&#146; resolution is not required;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">(7)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">a distribution of surplus in kind other than dividends which meets certain requirements;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">(8)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">dissolution, merger, consolidation or corporate split with certain exceptions in which a shareholders&#146;
resolution is not required;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">36
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><DIV style="border-bottom: 2px solid #000000; font-size: 1px">&nbsp;</DIV>
</DIV>


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="96%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">(9)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">the transfer of the whole or a material part of the business;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">(10)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">the taking over of the whole of the business of any other corporation with certain exceptions in which a
shareholders&#146; resolution is not required; or</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">(11)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">share exchange or share transfer for the purpose of establishing 100&nbsp;percent parent-subsidiary
relationships with certain exceptions in which a shareholders&#146; resolution is not required,</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">the quorum shall be one-third of the total number of voting rights of all the shareholders, and the
approval by at least two-thirds of the voting rights of all the shareholders represented at the
meeting is required.
</DIV>

<DIV align="left">
<A name="127"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>D. Employees</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">The following table sets forth information about number of employees:
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="80%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="9" style="border-bottom: 1px solid #000000">As of March 31,</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="1" style="border-bottom: 1px solid #000000">2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="1" style="border-bottom: 1px solid #000000">2005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="1" style="border-bottom: 1px solid #000000">2006</TD>
    <TD>&nbsp;</TD>

</TR>


<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Categorized by Geographic Areas</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Japan</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,041</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,996</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,038</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Overseas</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,392</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,564</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,591</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,433</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,560</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,629</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">During the fiscal year ended March&nbsp;31, 2006, the Company hired on average approximately 1,300
temporary employees in China, and approximately 100 temporary employees in Japan who were not
entitled to retirement or certain other fringe benefits which regular full-time employees receive.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">The Company has a labor contract with the Makita Workers&#146; Union covering wages and
conditions of employment. All full-time employees of the Company in Japan, except management and
certain other employees, must be union members. The Makita Union is affiliated with the Japanese
Electrical Electronic &#038; Information Union. The Company has not been materially affected by any work
stoppages or difficulties in connection with labor negotiations in the past.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">The
Company&#146;s employees are members of the labor union formed on
September&nbsp;13, 1947 that comprises,
starting February&nbsp;9, 1989, the Japanese Electrical Electronic &#038; Information Union. As of March&nbsp;31,
2006, there are 2,742 members of the labor union and Makita considers its relationship with the labor
union to be good.
</DIV>


<P align="center" style="font-size: 10pt">37
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><DIV style="border-bottom: 2px solid #000000; font-size: 1px">&nbsp;</DIV>
</DIV>




<DIV align="left">
<A name="128"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>E. Share ownership</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">The total number of shares of the Company&#146;s Common Stock owned by the Directors and Statutory
Auditors as a group as of March&nbsp;31, 2006 is as follows:
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="80%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="34%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="16%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="17%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="22%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD nowrap align="center">Identity of</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Number of</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center">Percentage of</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD nowrap align="center" style="border-bottom: 1px solid #000000">Person or Group</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">Shares Owned</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" style="border-bottom: 1px solid #000000">voting right</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">Directors and Statutory Auditors
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom">2,113,316</TD>
    <TD nowrap valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="bottom">1.47 %</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">The following table lists the number of shares owned by the Directors and Statutory Auditors of the
Company as of March&nbsp;31, 2006.
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="80%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="30%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="30%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="13%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD nowrap align="center" style="border-bottom: 1px solid #000000">Name</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" style="border-bottom: 1px solid #000000">Position</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">Number of shares</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">Masahiko Goto
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">President, Representative Director
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom">1,974,143</TD>
    <TD nowrap valign="bottom">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">Masami Tsuruta
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">Managing Director
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom">16,022</TD>
    <TD nowrap valign="bottom">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">Yasuhiko Kanzaki
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">Director
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom">11,569</TD>
    <TD nowrap valign="bottom">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">Kenichiro Nakai
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">Director
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom">11,700</TD>
    <TD nowrap valign="bottom">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">Tadayoshi Torii
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">Director
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom">12,900</TD>
    <TD nowrap valign="bottom">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">Tomoyasu Kato
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">Director
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom">12,072</TD>
    <TD nowrap valign="bottom">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">Kazuya Nakamura
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">Director
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom">7,400</TD>
    <TD nowrap valign="bottom">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">Masahiro Yamaguchi
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">Director
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom">5,900</TD>
    <TD nowrap valign="bottom">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">Shiro Hori
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">Director
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom">8,400</TD>
    <TD nowrap valign="bottom">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">Tadashi Asanuma
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">Director
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom">4,900</TD>
    <TD nowrap valign="bottom">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">Hisayoshi Niwa
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">Director
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom">6,000</TD>
    <TD nowrap valign="bottom">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">Zenji Mashiko
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">Director
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom">5,900</TD>
    <TD nowrap valign="bottom">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">Akio Kondo
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">Standing Statutory Auditor
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom">6,400</TD>
    <TD nowrap valign="bottom">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">Hiromichi Murase
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">Standing Statutory Auditor
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom">4,610</TD>
    <TD nowrap valign="bottom">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">Keiichi Usui
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">Outside Statutory Auditor
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom">8,000</TD>
    <TD nowrap valign="bottom">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">Shoichi Hase
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">Outside Statutory Auditor
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom">17,400</TD>
    <TD nowrap valign="bottom">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">The shareholders listed above do not have voting rights that are different from other shareholders
of the Company.
</DIV>

<DIV align="left">
<A name="129"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Item&nbsp;7. </B><U><B>Major Shareholders and Related Party Transactions</B></U>
</DIV>

<DIV align="left">
<A name="130"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>A. Major Shareholders</B>

</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Except for Masahiko Goto holding 1.37% of the Company&#146;s outstanding common stock as of March&nbsp;31,
2006, none of the Company&#146;s Directors and Statutory Auditors owns more than one percent of the
Company&#146;s Common Stock.
Beneficial ownership of the Company&#146;s common stock in the table below was prepared from publicly
available records of the filings made by the Company&#146;s shareholders regarding their ownership of
the Company&#146;s common stock under the Securities and Exchange Law of Japan.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Under the Securities and Exchange Law of Japan, any person who becomes beneficially, solely or
jointly, a holder, including, but not limited to, a deemed holder who manages shares for another
holder pursuant to a discretionary investment agreement, of more than 5% of the shares with voting
rights of a company listed on a Japanese stock exchange (including ADSs representing such shares),
must file a report concerning the shareholding with the Director of the relevant local finance
bureau. A similar report must be filed, with certain exceptions, if the percentage of shares held
by a holder, solely or jointly, of more than 5% of the total issued shares of a company increases
or decreases by 1% or more, or if any change to a material matter set forth in any previously filed
reports occurs.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Based on publicly available information, the following table sets forth the beneficial ownership of
holders of more than 5% of the Company&#146;s common stock as of the dates indicated in the reports
described below.
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="80%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="36%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="17%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="17%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD nowrap align="center" style="border-bottom: 1px solid #000000">Name of Beneficial Owner</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">Number of Shares</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">Percentage</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD nowrap align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">The Master Trust Bank of Japan, Ltd.
(Trust account)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom">9,041,000</TD>
    <TD nowrap valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom">6.27</TD>
    <TD nowrap valign="bottom">%</TD>
</TR>
<TR>    <TD>&nbsp;</TD></TR>
<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">Japan Trustee Services Bank, Ltd.
(Trust account)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom">8,902,500</TD>
    <TD nowrap valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom">6.18</TD>
    <TD nowrap valign="bottom">%</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">38
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><DIV style="border-bottom: 2px solid #000000; font-size: 1px">&nbsp;</DIV>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Based on information made publicly available on or after April&nbsp;1, 2003, the following table
describes transactions resulting in a 1% or more change in the percentage ownership held by major
beneficial owners of the Company&#146;s common stock.
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="28%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Shares Owned</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Number of</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Shares Owned</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center">Date of</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Prior to</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Shares</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">After the</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD nowrap align="center" style="border-bottom: 1px solid #000000">Name of Shareholder</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" style="border-bottom: 1px solid #000000">Transaction</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">Transaction</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">Percentage</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">Changed</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">Transaction</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">Percentage</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD nowrap><DIV style="margin-left:15px; text-indent:-15px">Nippon Life
Insurance Company</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">April 30, 2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,601,503</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">5.14</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Barclays Global
Investors, N.A.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">June 30, 2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,855,003</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">5.31</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Silchester
International Investors Limited</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="bottom">September 29, 2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,267,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">6.06</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,212,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,479,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">7.08</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Goldman Sachs
International</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" valign="top">September 30, 2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,332,900</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">4.14</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,567,079</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,899,979</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">6.01</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Barclays Global
Investors, N.A.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">December 31, 2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,855,003</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">5.31</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(293,559</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,561,444</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">5.11</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Nippon Life
Insurance Company</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">January 31, 2005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,601,503</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">5.14</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(3,503,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,098,503</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">2.77</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Silchester
International
Investors Limited</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="bottom">February 15, 2005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,479,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">7.08</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1,520,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,959,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">6.05</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Barclays Global
Investors, N.A.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">March 31, 2005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,561,444</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">5.11</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">222,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,783,444</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">5.26</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Barclays Global
Investors, N.A.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">June 30, 2005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,783,444</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">5.26</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(2,915,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,868,444</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">3.29</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Silchester
International
Investors Limited</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="bottom">September 23, 2005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,959,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">6.05</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1,017,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,942,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">5.37</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Goldman Sachs
International</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">September 30, 2005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,899,979</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">6.01</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,591,162</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,491,141</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">7.08</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Mitsubishi UFJ
Financial Group</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">October 31, 2005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,164,923</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">5.52</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Goldman Sachs
International</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">November 30, 2005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,491,141</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">7.08</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(3,909,960</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,581,181</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">4.45</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Silchester
International
Investors Limited</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="bottom">January 6, 2006</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,942,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">5.37</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(588,400</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,353,600</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">4.97</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Mitsubishi UFJ
Financial Group</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">January 31, 2006</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,164,923</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">5.52</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">857,200</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,022,123</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">6.10</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Barclays Global
Investors, N.A.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">March 31, 2006</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,868,444</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">3.38</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,161,108</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,029,552</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">6.27</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Mitsubishi UFJ
Financial Group</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">May 15, 2006</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,022,123</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">7.35</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,556,200</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,578,323</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">7.35</TD>
    <TD nowrap>%</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">As of March&nbsp;31, 2006, the Company had 143,711,766, outstanding shares of common stock,
excluding 296,994 shares of Treasury Stock. According to the Bank of New York, depositary for the
Company&#146;s ADSs, as of March&nbsp;31, 2006, 3,160,984 shares of the Company&#146;s common stock were held in
the form of ADRs and there were 49 ADR holders of record in the United States. According to the
Company&#146;s register of shareholders and register of beneficial owners as of March&nbsp;31, 2006, there
were 12,342 holders of common stock of record worldwide and the number of record holders in the
United States was 94.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">The major shareholders do not have voting rights that are different to the other shareholders of
the Company.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">As far as is known to the Company, there is no arrangement, the operation of which may at a
subsequent date result in a change in control of the Company.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">To the knowledge of the Company, it is not directly or indirectly owned or controlled by any other
corporation or by the Japanese or any foreign government.
</DIV>

<DIV align="left">
<A name="131"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>B. Related party transactions</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Makita sells and purchases products, materials, supplies and services to and from affiliated
companies in the ordinary course of business.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">No Director or Statutory Auditor has been indebted to the Company or any of its subsidiaries at any
time during the latest three fiscal years. Neither the Company nor any of its subsidiaries expects
to make any loans to Directors or Statutory Auditors in the future.
</DIV>


<P align="center" style="font-size: 10pt">39
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><DIV style="border-bottom: 2px solid #000000; font-size: 1px">&nbsp;</DIV>
</DIV>




<DIV align="left" style="font-size: 10pt; margin-top: 12pt">See Note 20 to the consolidated financial statements.
</DIV>

<DIV align="left">
<A name="132"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>C. Interest of experts and counsel</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Not applicable
</DIV>
<DIV align="left">
<A name="133"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Item&nbsp;8. </B><U><B>Financial Information</B></U>
</DIV>

<DIV align="left">
<A name="134"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>A. Consolidated statements and other financial information</B>

</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U>1-3. Consolidated Financial Statements</U>.<BR>
Makita&#146;s audited consolidated financial statements are included under &#147;Item&nbsp;18 &#150; Financial
Statements&#148;. Except for Makita&#146;s consolidated financial statements included under Item&nbsp;18, no other
information included in this annual report has been audited by Makita&#146;s Independent Registered
Public Accounting Firm.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt">4. Not applicable.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt">5. Not applicable.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">6. Export Sales.<BR>
See &#147;Information on the Company &#150; Business Overview &#150; Principal Markets, Distribution and
After-Sale Services&#148;.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U>7. Legal or arbitration proceedings</U><BR>
There are no material pending legal or arbitration proceedings to which Makita is a party and which
may have, or have had in the recent past, significant effects on Makita&#146;s financial position or
profitability.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U>8. Dividend Policy</U><BR>
Makita&#146;s basic policy on the distribution of profits is to maintain a dividend payout ratio of 30%
or greater, with a lower limit on annual cash dividends of 18 yen per share. However, in the event
special circumstances arise, computation of the amount of dividends will be based on consolidated
net income after certain adjustments. In addition, Makita aims to implement a flexible capital
policy, augment the efficiency of its capital employment, and thereby boost shareholder profit.
Makita continues to consider repurchases of its outstanding shares in light of trends in stock
prices. The Company intends to retire treasury stock when necessary based on consideration of the
balance of treasury stock and its capital policy.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Makita intends to maintain a financial position strong enough to withstand the challenges
associated with changes in its operating environment and other changes and allocate funds for
strategic investments aimed at expanding its global operations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">According to this basic policy, the Company paid interim cash dividends in fiscal 2005 of &#165;19.0 per
share and ADS. The Company has declared a cash dividend of &#165;38.0 per share and ADS, including a
special dividend of &#165;29 per share, all of which were approved by the shareholders&#146; meeting held on
June&nbsp;29, 2006.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">The following table sets forth cash dividends per share of Common Stock declared in Japanese yen
and as translated into U.S. dollars, the U.S. dollar amounts being based on the exchange rates at
the respective payment date, using the noon buying rates for cable transfers in yen in New York
City as certified for customs purposes by the Federal Reserve Bank of New York:
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000">In Yen</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000">In U.S. Dollars</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD nowrap align="center" style="border-bottom: 1px solid #000000">Fiscal year ended March 31</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Interim</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Year-end</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Interim</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Year-end</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD align="center"><DIV style="margin-left:15px; text-indent:-15px">2002</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.07</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.07</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center"><DIV style="margin-left:15px; text-indent:-15px">2003</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.07</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.07</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD align="center"><DIV style="margin-left:15px; text-indent:-15px">2004</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.09</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.11</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center"><DIV style="margin-left:15px; text-indent:-15px">2005</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">36.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.10</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.34</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD align="center"><DIV style="margin-left:15px; text-indent:-15px">2006</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">38.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.16</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.32</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Note:&nbsp;Cash dividends in U.S. dollars are based on the exchange rates at the
respective payment date, using the noon buying rates for cable transfers in yen
in New York City as certified for customs purposes by the Federal Reserve Bank
of New York.
</DIV>



<DIV style="margin-left:15px; text-indent:-15px">
<P align="center" style="font-size: 10pt">40
</DIV>
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><DIV style="border-bottom: 2px solid #000000; font-size: 1px">&nbsp;</DIV>
</DIV>



<DIV align="left">
<A name="135"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>B. Significant changes</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Not applicable</DIV>


<DIV align="left">
<A name="136"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Item&nbsp;9. </B><U><B>The Offer and Listing </B></U>
</DIV>

<DIV align="left">
<A name="137"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>A. Offer and listing details</B>

</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 12pt">The shares of common stock of the Company were listed on the First Section of the Tokyo Stock
Exchange, the Osaka Securities Exchange and the Nagoya Stock Exchange in 1970. The Company decided
to discontinue its listing on the Osaka Securities Exchange due to the low level of trading volume
in its shares on that exchange, and it was delisted from that exchange at the end of February&nbsp;2003.
The shares of common stock of the Company were listed on the Amsterdam Stock Exchange (Euronext
Amsterdam) in 1973, initially in the form of Continental Depositary Receipts. The Company decided
to discontinue its listing on the Euronext Amsterdam Stock Exchange due to the extremely low level
of trading volume in its shares on that exchange, and it was delisted from that exchange at the end
of January&nbsp;2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">The Company&#146;s American Depositary Shares, each representing one share (prior to April&nbsp;1, 1991, five
shares) of common stock and evidenced by American Depositary Receipts (&#147;ADRs&#148;), have been quoted
since 1977 through the National Association of Securities Dealers Automated Quotation (&#147;NASDAQ&#148;)
System under &#147;MKTAY&#148;.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">The following table shows the high and low sales prices of the Common Stock on the Tokyo Stock
Exchange for the periods indicated and the reported high and low bid prices of American Depositary
Shares through the NASDAQ system.
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6">Tokyo Stock Exchange Price</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6">NASDAQ Price</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6">Per Share of Common Stock</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6">Per American Depositary Share</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000">(Yen)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000">(U.S. Dollars)</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000">Fiscal year ended March 31,</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">High</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Low</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">High</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">Low</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">2002</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">871</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">615</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6.85</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4.88</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">2003</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">909</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">654</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7.55</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5.35</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">2004</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,343</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">834</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15.45</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10.00</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">2005</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,115</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,315</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20.27</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12.00</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">2006</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,820</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,755</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">34.19</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16.15</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Quarterly</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="1" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Fiscal year 2005</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">1 <SUP style="font-size: 85%; vertical-align: text-top">st </SUP> quarter ended June&nbsp;30, 2004</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,686</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,315</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15.34</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12.00</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">2 <SUP style="font-size: 85%; vertical-align: text-top">nd </SUP> quarter ended September&nbsp;30, 2004</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,675</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,463</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15.45</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13.20</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">3 <SUP style="font-size: 85%; vertical-align: text-top">rd </SUP> quarter ended December&nbsp;31, 2004</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,874</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,379</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17.75</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13.17</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">4 <SUP style="font-size: 85%; vertical-align: text-top">th </SUP> quarter ended March&nbsp;31, 2005</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,115</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,705</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20.27</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16.56</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Fiscal year 2006</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">1 <SUP style="font-size: 85%; vertical-align: text-top">st </SUP> quarter ended June&nbsp;30, 2005</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,355</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,755</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">21.75</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16.15</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">2 <SUP style="font-size: 85%; vertical-align: text-top">nd </SUP> quarter ended September&nbsp;30, 2005</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,540</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,150</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">21.59</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19.06</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">3 <SUP style="font-size: 85%; vertical-align: text-top">rd </SUP> quarter ended December&nbsp;31, 2005</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,070</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,255</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">24.40</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19.55</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">4 <SUP style="font-size: 85%; vertical-align: text-top">th </SUP> quarter ended March&nbsp;31, 2006</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,820</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,830</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">34.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">24.22</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Monthly</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="1" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">January&nbsp;2006</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,420</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,830</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">28.90</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">24.22</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">February&nbsp;2006</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,820</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,150</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">31.69</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">27.76</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">March&nbsp;2006</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,690</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,180</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">31.49</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">27.62</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">April&nbsp;2006</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,720</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,290</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">31.50</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">29.00</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">May&nbsp;2006</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,830</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,260</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">34.34</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">29.82</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">June&nbsp;2006(through June&nbsp;15)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,660</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,400</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">31.98</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">26.03</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left">
<A name="138"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>B. Plan of distribution</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Not applicable
</DIV>
<DIV align="left">
<A name="139"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>C. Markets</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;See Item&nbsp;9. A
</DIV>

<P align="center" style="font-size: 10pt">41
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><DIV style="border-bottom: 2px solid #000000; font-size: 1px">&nbsp;</DIV>
</DIV>


<DIV align="left">
<A name="140"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>D. Selling shareholders</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Not applicable
</DIV>
<DIV align="left">
<A name="141"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>E. Dilution</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Not applicable
</DIV>
<DIV align="left">
<A name="142"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>F. Expenses of the issue</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Not applicable
</DIV>
<DIV align="left">
<A name="143"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U><B>Item&nbsp;10. Additional Information </B></U>
</DIV>

<DIV align="left">
<A name="144"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>A. Share capital</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Not applicable
</DIV>
<DIV align="left">
<A name="145"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>B. Memorandum and articles of association</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U><B>Organization </B></U>

</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 12pt">The Company is a joint stock corporation <I>(kabushiki kaisha) </I>incorporated in Japan under the Company
Law <I>(kaishaho) </I>of Japan. It is registered in the Commercial Register <I>(shogyo tokibo) </I>maintained by
the Kariya Branch Office of the Nagoya Legal Affairs Bureau of the Ministry of Justice of Japan.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U><B>Objects and purposes </B></U>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Article&nbsp;2 of the Articles of Incorporation of the Company provides that the purposes of the Company
are to engage in the following businesses:
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="96%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><B><B>&#149;</B></B>
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Manufacture and sale of machine tools including electric power tools, pneumatic tools, etc., and
wood-working tools;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><B><B>&#149;</B></B>
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Manufacture and sale of electric machinery and equipment and various other machinery and equipment;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><B><B>&#149;</B></B>
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Manufacture and sale of interior furnishings and household goods and their installation work;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><B><B>&#149;</B></B>
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Purchase, sale, lease and management of real estate;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><B><B>&#149;</B></B>
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Operation of sporting and recreational facilities;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><B><B>&#149;</B></B>
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Casualty insurance agency and business relating to offering of life insurance;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><B><B>&#149;</B></B>
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Tourist business under the Travel Agency Law;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><B><B>&#149;</B></B>
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Acquisition, assignment and licensing of industrial property right, copyright and other
intellectual property right and provision of technical guidance;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><B><B>&#149;</B></B>
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Investment in various kinds of business; and</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><B><B>&#149;</B></B>
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">All other business incidental or relative to any of the preceding items.</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U><B>Directors </B></U>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Under the Company Law, each Director has executive powers and duties to manage the affairs of the
Company and each Representative Director, who is elected from among the Directors by the Board of
Directors, has the statutory authority to represent the Company in all respects. Under the Company
Law, the Directors must refrain from engaging in any business competing with the Company unless
approved by the Board of Directors and any Director who has a material interest in the subject
matter of a resolution to be taken by the Board of Directors cannot vote on such resolution. The
total amount of remuneration to Directors and that to Statutory Auditors are subject to the
approval of the general meeting of shareholders. Within such authorized amounts the Board of
Directors and the Board of Statutory Auditors respectively determine the compensation to each
Director and Statutory Auditor.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Except as stated below, neither the Company Law nor the Company&#146;s Articles of Incorporation make
special provisions as to:
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="96%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><B><B>&#149;</B></B>
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">the Directors&#146; or Statutory Auditors&#146; power to vote in connection with their compensation;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><B><B>&#149;</B></B>
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">the borrowing power exercisable by a Representative Director (or a Director who is given
power by a Representative Director to exercise such power);</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><B><B>&#149;</B></B>
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">the Directors&#146; or Statutory Auditors&#146; retirement age; or</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><B><B>&#149;</B></B>
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">requirement to hold any shares of capital stock of the Company.</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">42
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><DIV style="border-bottom: 2px solid #000000; font-size: 1px">&nbsp;</DIV>
</DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 12pt">The Company Law specifically requires the resolution of the Board of Directors for a company:
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="96%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><B><B>&#149;</B></B>
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">to acquire or dispose of material assets;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><B><B>&#149;</B></B>
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">to borrow a substantial amount of money;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><B><B>&#149;</B></B>
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">to employ or discharge from employment important employees, such as general managers;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><B><B>&#149;</B></B>
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">to establish, change or abolish material corporate organization such as a branch office;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><B><B>&#149;</B></B>
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">to decline conditions concerning offering of corporate bonds; and</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><B><B>&#149;</B></B>
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">to establish and maintain an
internal control system.</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">The Regulations of the Board of Directors and operational regulations thereunder of the Company
require a resolution of the Board of Directors for the Company to borrow money in an amount of &#165;100
million or more or to give a guarantee in an amount of &#165;10&nbsp;million or more.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U>Common stock</U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>General</I></B>

</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Unless indicated otherwise, set forth below is information relating to the Company&#146;s Common Stock,
including brief summaries of the relevant provisions of the Company&#146;s Articles of Incorporation and
Share Handling Regulations, as currently in effect, and of the Company Law, which came into effect
on May&nbsp;1, 2006, of Japan and related legislation.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">All issued shares are fully-paid and non-assessable, and are in registered form. Transfer of shares
is effected by delivery of share certificates, but in order to assert shareholders&#146; rights against
the Company, a shareholder must have its name and address registered or recorded on the Company&#146;s
register of shareholders in writing or digitally (or electronically), in accordance with the
Company&#146;s Share Handling Regulations. The registered beneficial holder of deposited shares
underlying the ADSs is the Depositary for the ADSs. Accordingly, holders of ADSs will not be able
to directly assert shareholders&#146; rights against the Company.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">A holder of shares may choose, at its discretion, to participate in the central clearing system for
share certificates under the Law Concerning Central Clearing of Share Certificates and Other
Securities of Japan. Participating shareholders must deposit certificates representing all of the
shares to be included in this clearing system with the Japan Securities Depository Center, Inc.
(&#147;JASDEC&#148;). If a holder is not a participating institution in JASDEC, it must participate through a
participating institution, such as a securities company or a commercial bank having a clearing
account with JASDEC. All shares of Common Stock deposited with JASDEC will be registered in the
name of JASDEC on the Company&#146;s register of shareholders. Each participating shareholder will in
turn be registered on the Company&#146;s register of beneficial shareholders and be treated in the same
way as shareholders registered on the Company&#146;s register of shareholders. For the purpose of
transferring deposited shares, delivery of share certificates is not required. Entry of the share
transfer in the books maintained by JASDEC for participating institutions, or in the book
maintained by a participating institution for its customers, has the same effect as delivery of
share certificates. The registered beneficial shareholders may exercise the rights attached to the
shares, such as voting rights, and will receive dividends (if any) and notices to shareholders
directly from the Company. The shares held by a person as a registered shareholder and those held
by the same person as a registered beneficial shareholder are aggregated for these purposes.
Beneficial shareholders may at any time withdraw their shares from deposit and receive share
certificates.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">A law to establish a new central clearing system for shares of listed companies and to eliminate
the issuance and use of certificates for such shares was promulgated in June&nbsp;2004 and the relevant
part of the law will come into effect within five years of the date of the promulgation. On the
effective date, a new central clearing system will be established and the shares of all Japanese
companies listed on any Japanese stock exchange, including the shares of Common Stock of the
Company, will be subject to the new central clearing system. On the same day, all existing share
certificates will become null and void. The transfer of such shares will be effected through entry
in the books maintained under the new central clearing system.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>Authorized capital</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Article&nbsp;5 of the Articles of Incorporation of the Company provides that the total number of shares
authorized to be issued by the Company is 496,000,000 shares.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">As of March&nbsp;31, 2006, 144,008,760 shares of Common Stock were in issue.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">All shares of Common Stock of the Company have no par value.
</DIV>



<P align="center" style="font-size: 10pt">43
</DIV>

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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><DIV style="border-bottom: 2px solid #000000; font-size: 1px">&nbsp;</DIV>
</DIV>





<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>Dividends from Surplus</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U><B>Dividends from Surplus &#150; General</B></U>

</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Under the Company Law, distributions of cash or other assets by joint stock corporations to their
shareholders, so called &#147;dividends&#148;, are referred to as &#147;dividends from Surplus&#148; (&#147;Surplus&#148; is
defined in &#147;&#151; Restriction on dividends from Surplus&#148;). The Company may make dividends from Surplus
to the shareholders any number of times per business year, subject to certain limitations described
in &#147;&#151; Restriction on dividends from Surplus.&#148; Dividends from Surplus are required in principle to
be authorized by a resolution of a general meeting of shareholders, but may also be made pursuant
to a resolution of the Board of Directors if:
</DIV>

<DIV align="center" style="margin-top: 10pt">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom" style="font-size: 0pt">
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="96%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">(a)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Articles of Incorporation of the Company so provide;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">(b)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">the normal term of office of the Directors is no longer than one year; and</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">(c)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">its non-consolidated annual financial statements and certain documents</TD>
</TR>


<TR valign="bottom">

<TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">for the latest business year present fairly its assets and profit or loss, as<BR>
required by ordinances of the Ministry of Justice.</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Moreover, even if the requirements described in (a)&nbsp;through (c)&nbsp;are not met, the Company may make
dividends from Surplus in cash to the shareholders by resolutions of the Board of Directors once
per business year, but only if the Articles of Incorporation so provide. Such distribution of
Surplus is called &#147;interim dividends&#148;.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Dividends from Surplus may be made in cash or in kind in proportion to the number of shares of
Common Stock held by each shareholder. A resolution of a general meeting of shareholders or Board
of Directors authorizing a dividend from Surplus must specify the kind and aggregate book value of
the assets to be distributed, the manner of allocation of such assets to shareholders, and the
effective date of the distribution. If a dividend from Surplus is to be made in kind, the Company
may, pursuant to a resolution of a general meeting of shareholders or, as the case may be, the
Board of Directors, grant a right to the shareholders to require the Company to make such
distribution in cash instead of in kind. If no such right is granted to shareholders, the relevant
dividend from Surplus must be approved by a special shareholders resolution (see &#147;- Voting Rights&#148;
with respect to a &#147;special shareholders resolution&#148;).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Under the Articles of Incorporation, year-end dividends and interim dividends may be distributed to
shareholders of record as of March&nbsp;31 and September&nbsp;30 each year, respectively, in proportion to
the number of shares of Common Stock held by each shareholder following approval by the general
meeting of shareholders or the Board of Directors. The Company is not obliged to pay any dividends
unclaimed for a period of three years after the date on which they first became payable.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">In Japan, the ex-dividend date and the record date for dividends precede the date of determination
of the amount of the dividends to be paid. The price of the shares of Common Stock generally goes
ex-dividend on the third business day prior to the record date.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>Restriction on dividends from Surplus</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">When the Company makes a dividend from Surplus, the Company must, until the sum of its additional
paid-in capital and legal reserve reaches one quarter of the stated capital, set aside in its
additional paid-in capital and/or legal reserve an amount equal to one-tenth of the amount of
Surplus so distributed.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">The amount of Surplus at any given time must be calculated in accordance with the following
formula:
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt">A
&#043; B &#043; C &#043; D - (E &#043; F &#043; G)
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt">In the above formula:
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="95%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD nowrap valign="top"><DIV style="margin-left:0px; text-indent:-0px">&#147;A&#148; =
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">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</TD>
</TR>
<TR style="font-size: 6pt">    <TD>&nbsp;</TD></TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&#147;B&#148; =
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">(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</TD>
</TR>
<TR style="font-size: 6pt">    <TD>&nbsp;</TD></TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&#147;C&#148; =
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">(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)</TD>
</TR>
<TR style="font-size: 6pt">    <TD>&nbsp;</TD></TR>
<TR valign="bottom">
    <TD nowrap valign="top"><DIV style="margin-left:0px; text-indent:-0px">&#147;D&#148; =
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">(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)</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">44
</DIV>

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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><DIV style="border-bottom: 2px solid #000000; font-size: 1px">&nbsp;</DIV>
</DIV>


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="95%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD nowrap valign="top"><DIV style="margin-left:0px; text-indent:-0px">&#147;E&#148; =
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">(if the Company has cancelled its treasury stock after the end of
the last business year) the book value of such treasury stock</TD>
</TR>
<TR style="font-size: 6pt">    <TD>&nbsp;</TD></TR>
<TR valign="bottom">
    <TD nowrap valign="top"><DIV style="margin-left:0px; text-indent:-0px">&#147;F&#148; =
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">(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</TD>
</TR>
<TR style="font-size: 6pt">    <TD>&nbsp;</TD></TR>
<TR valign="bottom">
    <TD nowrap valign="top"><DIV style="margin-left:0px; text-indent:-0px">&#147;G&#148; =
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">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.</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">The aggregate book value of surplus distributed by the Company may not exceed a prescribed
distributable amount (the &#147;Distributable Amount&#148;), as calculated on the effective date of such
distribution. The Distributable Amount at any given time shall be equal to the amount of Surplus
less the aggregate of the followings:
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="96%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">(a)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">the book value of its treasury stock;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">(b)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">the amount of consideration for any of the treasury stock disposed of by
the Company after the end of the last business year; and</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">(c)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">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.</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">If the Company has become at its option a company with respect to which consolidated balance sheets
should also be considered in the calculation of the Distributable Amount (<I>renketsu haito kisei
tekiyo kaisha</I>), the Company shall further deduct from the amount of Surplus the excess amount, if
any, of (x)&nbsp;the total amount of stockholders&#146; equity appearing on the non-consolidated balance
sheet as of the end of the last business year and certain other amounts set forth by an ordinance
of the Ministry of Justice over (y)&nbsp;the total amount of stockholders&#146; equity and certain other
amounts set forth by an ordinance of the Ministry of Justice appearing on the consolidated balance
sheet as of the end of the last business year.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">If the Company has prepared interim financial statements as described below, and if such interim
financial statements have been approved by the Board of Directors or (if so required by the Company
Law) by a general meeting of shareholders, then the Distributable Amount must be adjusted to take
into account the amount of profit or loss, and the amount of consideration for any of the treasury
stock disposed of by the Company, during the period in respect of which such interim financial
statements have been prepared. The Company may prepare non-consolidated interim financial
statements consisting of a balance sheet as of any date subsequent to the end of the last business
year and an income statement for the period from the first day of the current business year to the
date of such balance sheet. Interim financial statements so prepared by the Company must be audited
by the Statutory Auditors and Accounting Auditors, as required by ordinances of the Ministry of
Justice.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>Stock splits</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">The Company may at any time split shares of Common Stock in issue into a greater number of shares
by resolution of the Board of Directors, and may amend its Articles of Incorporation to increase
the number of the authorized shares to be issued to allow such stock split pursuant to a resolution
of the Board of Directors rather than relying on a special shareholders resolution, which is
otherwise required for amending the Articles of Incorporation.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">In the event of a stock split, generally, shareholders will not be required to exchange share
certificates for new share certificates, but certificates representing the additional shares
resulting from the stock split will be issued to shareholders. When a stock split is to be made,
the Company must give public notice of the stock split, specifying the record date therefor, at
least 2&nbsp;weeks prior to such record date.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>Consolidation of shares</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">The Company may at any time consolidate shares in issue into a smaller number of shares by a
special shareholders resolution (as defined in &#147;<I>Voting Rights</I>&#148;). When a consolidation of shares is
to be made, the Company must give public notice and notice to each shareholder that, within a
period of not less than one month specified in the notice, share certificates must be submitted to
the Company for exchange. The Company must disclose the reason for the consolidation of shares at
the general meeting of shareholders.
</DIV>


<P align="center" style="font-size: 10pt">45
</DIV>

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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><DIV style="border-bottom: 2px solid #000000; font-size: 1px">&nbsp;</DIV>
</DIV>





<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>General meeting of shareholders</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">The ordinary general meeting of shareholders of the Company for each business year is normally held
in June in each year in or near Anjo, Aichi, Japan. In addition, the Company may hold an
extraordinary general meeting of shareholders whenever necessary by giving notice of convocation
thereof at least 2&nbsp;weeks prior to the date set for the meeting.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Notice of convocation of a general meeting of shareholders setting forth the place, time and
purpose thereof, must be mailed to each shareholder having voting rights (or, in the case of a
non-resident shareholder, to his or her standing proxy or mailing address in Japan) at least 2
weeks prior to the date set for the meeting. Such notice may be given to shareholders by electronic
means, subject to the consent of the relevant shareholders. The record date for an ordinary general
meeting of shareholders is March&nbsp;31 of each year.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Any shareholder or group of shareholders holding at least 3&nbsp;percent of the total number of voting
rights for a period of 6&nbsp;months or more may require the convocation of a general meeting of
shareholders for a particular purpose. Unless such general meeting of shareholders is convened
promptly or a convocation notice of a meeting which is to be held not later than 8&nbsp;weeks from the
day of such demand is dispatched, the requiring shareholder may, upon obtaining a court approval,
convene such general meeting of shareholders. Any shareholder or group of shareholders holding at
least 300 voting rights or 1&nbsp;percent of the total number of voting rights for a period of 6&nbsp;months
or more may propose a matter to be considered at a general meeting of shareholders by submitting a
written request to a Representative Director at least 8&nbsp;weeks prior to the date set for such
meeting.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">If the Articles of Incorporation so provide, any of the minimum voting rights or percentages, time
periods and number of voting rights necessary for exercising the minority shareholder rights
described above may be decreased or shortened.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>Voting rights</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">So long as the Company maintains the unit share system (see &#147;&#150;<I>Unit share system</I>&#148; below; currently
100 shares of Common Stock constitute one unit), a holder of shares constituting one or more full
units is entitled to one voting right per unit of shares subject to the limitations on voting
rights set forth in the following 2 sentences. A corporate or certain other entity more than
one-quarter of whose total voting rights are directly or indirectly owned by the Company may not
exercise its voting rights with respect to shares of Common Stock of the Company that it owns. In
addition, the Company may not exercise its voting rights with respect to shares of Common Stock
that it owns. If the Company eliminates from its Articles of Incorporation the provisions relating
to the unit of shares, holders of shares of Common Stock will have one voting right for each share
they hold. Except as otherwise provided by law or by the Articles of Incorporation, a resolution
can be adopted at a general meeting of shareholders by a majority of the total number of voting
rights of all the shareholders represented at the meeting. The Company Law and the Company&#146;s
Articles of Incorporation provide, however, that the quorum for the election of Directors and
Statutory Auditors shall not be less than one-third of the total number of voting rights of all the
shareholders. The Company&#146;s shareholders are not entitled to cumulative voting in the election of
Directors. Shareholders may exercise their voting rights through proxies, provided that the proxies
are also shareholders of the Company holding voting rights. The Company&#146;s shareholders also may
cast their votes in writing, or exercise their voting rights by electronic means when the Board of
Directors decides to permit such method of exercising voting rights.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">The Company Law and the Company&#146;s Articles of Incorporation provide that in order to amend the
Company&#146;s Articles of Incorporation and in certain other instances, including:
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="96%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">(1)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">acquisition of its own shares from specific persons other than its subsidiaries;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">(2)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">consolidation of shares;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">(3)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">any offering of new shares at a &#147;specially favorable&#148; price (or any offering of stock acquisition rights
to acquire shares of capital stock, or bonds with stock acquisition rights at &#147;specially favorable&#148;
conditions) to any persons other than shareholders;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">(4)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">the removal of a Statutory Auditor;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">(5)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">the exemption of liability of a Director, Statutory Auditor or Accounting Auditor with certain exceptions;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">(6)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">a reduction of stated capital with certain exceptions in which a shareholders&#146; resolution is not required;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">(7)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">a distribution of surplus in kind other than dividends which meets certain requirements;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">(8)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">dissolution, merger, consolidation or corporate split with certain exceptions in which a shareholders&#146;
resolution is not required;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">46
</DIV>

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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><DIV style="border-bottom: 2px solid #000000; font-size: 1px">&nbsp;</DIV>
</DIV>


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="96%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">(9)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">the transfer of the whole or a material part of the business;</TD>
</TR>
<TR valign="bottom">

<TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">(10)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">the taking over of the whole of the business of any other corporation with certain exceptions in which a
shareholders&#146; resolution is not required; or</TD>
</TR>
<TR valign="bottom">

<TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">(11)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">share exchange or share transfer for the purpose of establishing 100&nbsp;percent parent-subsidiary
relationships with certain exceptions in which a shareholders&#146; resolution is not required,</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">the quorum shall be one-third of the total voting rights of all the shareholders, and the approval
by at least two-thirds of the voting rights of all the shareholders represented at the meeting is
required (the &#147;special shareholders resolutions&#148;).
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>Issue of additional shares and pre-emptive rights</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Holders of shares of Common Stock have no pre-emptive rights under the Articles of Incorporation of
the Company. Authorized but unissued shares may be issued at such times and upon such terms as the
Board of Directors determines, subject to the limitations as to the offering of new shares at a
&#147;specially favorable&#148; price mentioned under &#147;<I>Voting rights</I>&#148; above. The Board of Directors may,
however, determine that shareholders shall be given subscription rights regarding a particular
issue of new shares, in which case such rights must be given on uniform terms to all shareholders
as at a record date of which not less than 2&nbsp;weeks&#146; prior public notice must be given. Each of the
shareholders to whom such rights are given must also be given notice of the expiry thereof at least
2&nbsp;weeks prior to the date on which such rights expire.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">The Company may issue stock acquisition rights by a resolution of the Board of Directors, subject
to the limitations as to the offering of stock acquisition rights on &#147;specially favorable&#148; exercise
conditions mentioned under &#147;Voting rights&#148; above. Holders of stock acquisition rights may exercise
their rights to acquire a certain number of shares within the exercise period as prescribed in the
terms of their stock acquisition rights. Upon exercise of stock acquisition rights, the Company
will be obliged to issue the relevant number of new shares or alternatively to transfer the
necessary number of treasury stock held by it.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">In cases where a particular issue of new shares or stock acquisition rights (i)&nbsp;violates laws and
regulations or the Company&#146;s Articles of Incorporation, or (ii)&nbsp;will be performed in a manner
materially unfair, and shareholders may suffer disadvantages therefrom, such shareholder may file
an injunction to enjoin such issue with a court.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>Liquidation rights</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">In the event of a liquidation of the Company, the assets remaining after payment of all debts,
liquidation expenses and taxes will be distributed among shareholders in proportion to the
respective numbers of shares of Common Stock held by them.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>Record date</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">As mentioned above, March&nbsp;31 is the record date for the Company&#146;s year-end dividends. So long as
the Company maintains the unit share system, the shareholders and beneficial shareholders who are
registered or recorded as the holders of one or more full units of shares in the Company&#146;s
registers of shareholders and/or beneficial shareholders in writing or digitally (or
electronically) at the end of each March&nbsp;31 are also entitled to exercise shareholders&#146; rights at
the ordinary general meeting of shareholders with respect to the business year ending on such March
31. September&nbsp;30 is the record date for interim dividends. In addition, the Company may set a
record date for determining the shareholders and/or beneficial shareholders entitled to other
rights pertaining to the Common Stock and for other purposes, by giving at least 2&nbsp;weeks&#146; prior
public notice.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>Acquisition by the Company of Common Stock</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">The Company may acquire shares of Common Stock (i)&nbsp;by soliciting all the shareholders to offer to
sell shares held by them (in this case, the certain terms of such acquisition, such as the total
number of shares to be purchased and the total amount of consideration, shall be set by an ordinary
resolution of a general meeting of shareholders in advance, and acquisition shall be effected
pursuant to a resolution of the Board of Directors), (ii)&nbsp;from a specific shareholder other than
any of its subsidiaries (pursuant to a special shareholders resolution), (iii)&nbsp;from any of its
subsidiaries (pursuant to a resolution of the Board of Directors), or (iv)&nbsp;by way of purchase on
any Japanese stock exchange on which Common Stock is listed or by way of tender offer (in either
case pursuant to an ordinary resolution of a general meeting of shareholders or a resolution of the
Board of Directors). In the case of (ii)&nbsp;above, any other shareholder may make a request to the
Representative Director that such other shareholder be included as a seller in the proposed
purchase, provided that no such right will be available if the purchase price or any other
consideration to be received by the relevant specific shareholder will not exceed the last trading
price of the shares on the relevant stock exchange on the day immediately preceding the date on
which the resolution mentioned in (ii)&nbsp;above was adopted (or, if there is no
</DIV>


<P align="center" style="font-size: 10pt">47
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><DIV style="border-bottom: 2px solid #000000; font-size: 1px">&nbsp;</DIV>
</DIV>




<DIV align="left" style="font-size: 10pt; margin-top: 12pt">trading in the shares on the stock exchange or if the stock exchange is not open on such day, the
price at which the shares are first traded on such stock exchange thereafter).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">The total amount of the purchase price of shares of Common Stock may not exceed the Distributable
Amount, as described in &#147;&#150; Dividends from Surplus &#150; Restriction on dividends from Surplus.&#148;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Shares of Common Stock acquired by the Company may be held by it for any period or may be cancelled
by resolution of the Board of Directors. The Company may also transfer to any person the shares of
Common Stock held by it, subject to a resolution of the Board of Directors, and subject also to
other requirements similar to those applicable to the issuance of new shares, as described in
&#147;<I>Issue of additional shares and pre-emptive rights</I>&#148; above. The Company may also utilize its
treasury stock for the purpose of transfer to any person upon exercise of stock acquisition rights
or for the purpose of acquiring another company by way of merger, share exchange or corporate split
through exchange of treasury stock for shares or assets of the acquired company.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>Unit share system</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">The Articles of Incorporation of the Company provide that 100 shares of Common Stock constitute one
unit of shares. Although the number of shares constituting one unit is included in the Articles of
Incorporation, any amendment to the Articles of Incorporation reducing (but not increasing) the
number of shares constituting one unit or eliminating the provisions for the unit of shares may be
made by the resolution of the Board of Directors rather than by a special shareholders resolution,
which is otherwise required for amending the Articles of Incorporation. The number of shares
constituting one new unit, however, cannot exceed 1,000.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Under the unit share system, shareholders shall have one voting right for each unit of shares that
they hold. Any number of shares less than a full unit carries no voting rights.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Unless the Company&#146;s shareholders amend the Articles of Incorporation of the Company by a special
shareholders resolution to eliminate the provision not to issue share certificates for shares of
Common Stock constituting less than a full unit, a share certificate for any number of shares of
Common Stock constituting less than a full unit will in general not be issued. As the transfer of
shares normally requires the delivery of the share certificates therefor, any fraction of a unit
for which no share certificates are issued is not transferable. Moreover, holders of shares
constituting less than a full unit will have no other shareholder rights if the Articles of
Incorporation so provide, except that such holders may not be deprived of certain rights specified
in the Company Law or an ordinance of the Ministry of Justice, including the right to receive
dividends from Surplus.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">A holder of shares of Common Stock constituting less than a full unit may require the Company to
purchase such shares at their market value in accordance with the provisions of the Share Handling
Regulations of the Company.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">In addition, the Articles of Incorporation of the Company provide that a holder of shares of Common
Stock constituting less than a full unit may request the Company to sell to such holder such amount
of shares of Common Stock which will, when added together with the shares of Common Stock
constituting less than a full unit, constitute a full unit of shares, in accordance with the
provisions of the Share Handling Regulations of the Company.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">A holder who owns ADRs evidencing less than 100 ADSs will indirectly own shares of Common Stock
constituting less than a full unit. Although, as discussed above, under the unit share system
holders of shares of Common Stock constituting less than a full unit have the right to require the
Company to purchase such shares held by them or sell shares of Common Stock held by the Company to
such holders, holders of ADRs evidencing ADSs that represent other than integral multiples of full
units are unable to withdraw the underlying shares of Common Stock constituting less than a full
unit and, therefore, are unable, as a practical matter, to exercise the rights to require the
Company to purchase such underlying shares or sell shares of Common Stock held by the Company to
such holders, unless the Company&#146;s Articles of Incorporation are amended to eliminate the provision
not to issue share certificates for shares of Common Stock constituting less than a full unit. As a
result, access to the Japanese markets by holders of ADRs through the withdrawal mechanism will not
be available for dispositions of shares of Common Stock in lots less than a full unit. The unit
share system does not affect the transferability of ADSs, which may be transferred in lots of any
size.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>Sale by the Company of shares held by shareholders whose location is unknown</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">The Company is not required to send a notice to a shareholder if a notice to such shareholder fails
to arrive at the registered address of the shareholder in the Company&#146;s register of shareholders or
at the address otherwise notified to the Company continuously for 5&nbsp;years or more.
</DIV>


<P align="center" style="font-size: 10pt">48
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><DIV style="border-bottom: 2px solid #000000; font-size: 1px">&nbsp;</DIV>
</DIV>




<DIV align="left" style="font-size: 10pt; margin-top: 12pt">In addition, the Company may sell or otherwise dispose of shares of Common Stock for which the
location of the shareholder is unknown. Generally, if (i)&nbsp;notices to a shareholder fail to arrive
continuously for 5&nbsp;years or more at the shareholder&#146;s registered address in the Company&#146;s register
of shareholders or at the address otherwise notified to the Company, and (ii)&nbsp;the shareholder fails
to receive dividends from Surplus on the shares of Common Stock continuously for 5&nbsp;years or more at
the address registered in the Company&#146;s register of shareholders or at the address otherwise
notified to the Company, the Company may, by a resolution of the Board of Directors, sell or
otherwise dispose of the shareholder&#146;s shares at the then market price of shares of Common Stock
and after giving at least 3&nbsp;months&#146; prior public and individual notice, and hold or deposit the
proceeds of such sale or disposal of shares of Common Stock for such shareholder.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U><B>Reporting of substantial shareholdings </B></U>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">The Securities and Exchange Law of Japan and regulations thereunder require any person, regardless
of residence, who has become, beneficially and solely or jointly, a holder of more than 5&nbsp;percent
of the total issued shares of capital stock of a company listed on any Japanese stock exchange or
whose shares are traded on the over-the-counter market in Japan to file with the Director-General
of a competent Local Finance Bureau of the Ministry of Finance within 5 business days a report
concerning such shareholdings.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">A similar report must also be filed in respect of any subsequent change of one percent or more in
any such holding or any change in material matters set out in reports previously filed, with
certain exceptions. For this purpose, shares issuable to such person upon conversion of convertible
securities or exercise of share subscription warrants or stock acquisition rights are taken into
account in determining both the number of shares held by such holder and the issuer&#146;s total issued
share capital. Copies of such report must also be furnished to the issuer of such shares and all
Japanese stock exchanges on which the shares are listed.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Except for the general limitation under Japanese anti-trust and anti-monopoly regulations against
holding of shares of capital stock of a Japanese corporation which leads or may lead to a restraint
of trade or monopoly, and except for general limitations under the Company Law or the Company&#146;s
Articles of Incorporation on the rights of shareholders applicable regardless of residence or
nationality, there is no limitation under Japanese laws and regulations applicable to the Company
or under its Articles of Incorporation on the rights of non-resident or foreign shareholders to
hold the shares of Common Stock of the Company or exercise voting rights thereon. There is no
provision in the Company&#146;s Articles of Incorporation that would have an effect of delaying,
deferring or preventing a change in control of the Company and that would operate only with respect
to merger, consolidation, acquisition or corporate restructuring involving the Company.
</DIV>

<DIV align="left">
<A name="146"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>C. Material contracts</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">In connection with the civil rehabilitation process of Makita&#146;s consolidated subsidiary, Joyama
Kaihatsu, Ltd. (&#147;Joyama&#148;), Makita entered into a Sponsorship Agreement (the &#147;Sponsorship
Agreement&#148;) dated January&nbsp;17, 2005 with Tokyo Tatemono, Ltd. (&#147;Tokyo Tatemono&#148;) and Joyama, in
order to rehabilitate Joyama&#146;s golf club. Under the Sponsorship Agreement, Joyama is to satisfy at
least 50% of the outstanding debt obligations in connection with its rehabilitation, Joyama will
retire and extinguish all Joyama shares held by Makita for no consideration to Makita, and, as a
result of issuing new Joyama shares to Tokyo Tatemono, Makita will transfer its management of
Joyama to Tokyo Tatemono. In addition, in order to execute the Joyama rehabilitation plan, a
memorandum of understanding regarding the Sponsorship Agreement was executed on May&nbsp;26, 2005.
</DIV>

<DIV align="left">
<A name="147"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>D. Exchange controls</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">The Foreign Exchange and Foreign Trade Law of Japan and its related cabinet orders and ministerial
ordinances (the &#147;Foreign Exchange Regulations&#148;) govern the acquisition and holding of shares of
Common Stock of the Company by &#147;exchange non-residents&#148; and by &#147;foreign investors.&#148; The Foreign
Exchange Regulations currently in effect do not, however, affect transactions between exchange
non-residents to purchase or sell shares outside Japan using currencies other than Japanese yen.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Exchange non-residents are:
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="96%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><B><B>&#149;</B></B>
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">individuals who do not reside in Japan; and</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><B><B>&#149;</B></B>
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">corporations whose principal offices are located outside Japan.</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Generally, branches and other offices of non-resident corporations that are located within Japan
are regarded as residents of Japan. Conversely, branches and other offices of Japanese corporations
located outside Japan are regarded as exchange non-residents.
</DIV>



<P align="center" style="font-size: 10pt">49
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><DIV style="border-bottom: 2px solid #000000; font-size: 1px">&nbsp;</DIV>
</DIV>





<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Foreign investors are:
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="96%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><B><B>&#149;</B></B>
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">individuals who are exchange non-residents;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><B><B>&#149;</B></B>
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">corporations that are organized under the laws of foreign countries or
whose principal offices are located outside of Japan; and</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><B><B>&#149;</B></B>
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">corporations (1)&nbsp;of which 50&nbsp;percent or more of their shares are held
by individuals who are exchange non-residents and/or corporations (a)
that are organized under the laws of foreign countries or (b)&nbsp;whose
principal offices are located outside of Japan or (2)&nbsp;a majority of
whose officers, or officers having the power of representation, are
individuals who are exchange non-residents.</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">In general, the acquisition of shares of a Japanese company (such as the shares of Common Stock of
the Company) by an exchange non-resident from a resident of Japan is not subject to any prior
filing requirements. In certain limited circumstances, however, the Minister of Finance may require
prior approval of an acquisition of this type. While prior approval, as described above, is not
required, in the case where a resident of Japan transfers shares of a Japanese company (such as the
shares of Common Stock of the Company) for consideration exceeding 100&nbsp;million yen to an exchange
non-resident, the resident of Japan who transfers the shares is required to report the transfer to
the Minister of Finance within 20&nbsp;days from the date of the transfer, unless the transfer was made
through a bank, securities company or financial futures trader licensed under Japanese law.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">If a foreign investor acquires shares of a Japanese company that is listed on a Japanese stock
exchange (such as the shares of Common Stock of the Company) or that is traded on an
over-the-counter market in Japan and, as a result of the acquisition, the foreign investor, in
combination with any existing holdings, directly or indirectly holds 10&nbsp;percent or more of the
issued shares of the relevant company, the foreign investor must file a report of the acquisition
with the Minister of Finance and any other competent Ministers having jurisdiction over that
Japanese company within 15&nbsp;days from and including the date of the acquisition, except where the
offering of the company&#146;s shares was made overseas. In limited circumstances, such as where the
foreign investor is in a country that is not listed on an exemption schedule in the Foreign
Exchange Regulations, a prior notification of the acquisition must be filed with the Minister of
Finance and any other competent Ministers, who may then modify or prohibit the proposed
acquisition.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Under the Foreign Exchange Regulations, dividends paid on and the proceeds from sales in Japan of
shares of Common Stock of the Company held by non-residents of Japan may generally be converted
into any foreign currency and repatriated abroad.
</DIV>

<DIV align="left">
<A name="148"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>E. Taxation</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><I>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.</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">The following is a general summary of the principal U.S. federal income and Japanese national tax
consequences of the acquisition, ownership and disposition of shares of Common Stock or ADSs. This
summary does not address any aspects of U.S. federal tax law other than income taxation, and does
not discuss any aspects of Japanese tax law other than such income taxation as limited to national
taxes and inheritance and gift taxation. This summary also does not cover any state or local, or
non-U.S. non-Japanese tax considerations. Investors are urged to consult their tax advisors
regarding the U.S. federal, state and local and Japanese and other tax consequences of acquiring,
owning and disposing of shares of Common Stock or ADSs. Also, this summary does not purport to
address all the material tax consequences that may be relevant to the holders of shares of Common
Stock or ADSs, and does not take into account the specific circumstances of any particular
investors, some of which (such as tax-exempt entities, banks, insurance companies, broker-dealers,
traders in securities that elect to use a mark-to-market method of accounting for their securities
holdings, regulated investment companies, real estate investment trusts, partnerships and other
pass-through entities, investors liable for alternative minimum tax, investors that own or are
treated as owning 10&nbsp;percent or more of the Company&#146;s voting stock, investors that hold shares of
Common Stock or ADSs as part of a straddle, hedge, conversion or constructive sale transaction or
other integrated transaction, and U.S. Holders (as defined below) whose functional currency is not
the U.S. dollar) may be subject to special tax rules. This summary is based on the federal income
tax laws and regulations of the United States and tax laws of Japan, judicial decisions, published
rulings and administrative pronouncements, all as in effect on the date hereof, as well as on the
current income tax convention between the United States and Japan (the &#147;Treaty&#148;), all of which are
subject to change (possibly with retroactive effect), and/or to differing interpretations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">For purposes of this discussion, a &#147;U.S. Holder&#148; is any beneficial owner of shares of Common Stock
or ADSs that is, for U.S. federal income tax purposes:
</DIV>




<P align="center" style="font-size: 10pt">50
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt">
<DIV style="border-bottom: 2px solid #000000; font-size: 1px">&nbsp;
</DIV>
</DIV>


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="96%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">1.
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">an individual citizen or resident of the United States;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">2.
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">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;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">3.
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">an estate the income of which is subject to U.S. federal income tax without regard to its source; or</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">4.
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">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.</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt">An &#147;Eligible U.S. Holder&#148; is a U.S. Holder that:
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="96%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">1.
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">is a resident of the United States for purposes of the Treaty;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">2.
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">does not maintain a permanent establishment in Japan (a)&nbsp;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)&nbsp;of
which shares of Common Stock or ADSs form part of the business
property; and</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">3.
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">is eligible for benefits under the Treaty, with respect to income and
gain derived in connection with shares of Common Stock or ADSs.</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">In addition, this summary is based in part upon the representations of the depositary and the
assumption that each obligation in the deposit agreement for ADSs, and in any related agreement,
will be performed in accordance with its terms.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">In general, for purposes of the Treaty and for U.S. federal income and Japanese national income tax
purposes, owners of ADRs evidencing ADSs will be treated as the owners of shares of Common Stock
represented by those ADSs, and exchanges of shares of Common Stock for ADSs, and exchanges of ADSs
for shares of Common Stock, will not be subject to U.S. federal income or Japanese national income
tax.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U><B>Japanese Taxation </B></U>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">The following is a summary of the principal Japanese tax consequences (limited to national taxes)
to holders of shares of Common Stock and of ADRs evidencing ADSs representing shares of Common
Stock who are either individuals who are non residents of Japan or non-Japanese corporations,
without a permanent establishment in Japan (&#147;non-resident Holders&#148;).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Generally, a non-resident of Japan or a non-Japanese corporation is subject to Japanese withholding
tax on dividends paid by Japanese corporations. Stock splits are, in general, not a taxable event.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">In the absence of an applicable tax treaty, convention or agreement reducing the maximum rate of
Japanese withholding tax or allowing exemption from Japanese withholding tax, the rate of Japanese
withholding tax applicable to dividends paid by Japanese corporations to individuals who are
non-residents of Japan or non-Japanese corporations is generally 20&nbsp;percent, provided, with respect
to dividends paid on listed shares issued by a Japanese corporation (such as shares of Common
Stock) to any corporate or individual shareholders (including those shareholders who are
non-Japanese corporations or Japanese non-resident individuals, such as non-resident Holders) other
than any individual shareholder who holds 5&nbsp;percent or more of the total shares issued by the
relevant Japanese corporation, the aforementioned 20&nbsp;percent withholding tax rate is reduced to (i)
7&nbsp;percent for dividends due and payable on or before March&nbsp;31, 2008, and (ii)&nbsp;15&nbsp;percent for
dividends due and payable on or after April&nbsp;1, 2008. As of the date of this annual report, Japan
has income tax treaties, conventions or agreements whereby the above-mentioned withholding tax rate
is reduced, in most cases to 15&nbsp;percent for portfolio investors with, among other countries,
Australia, Belgium, Canada, Denmark, Finland, France, Germany, Ireland, Italy, Luxembourg, the
Netherlands, New Zealand, Norway, Singapore, Spain, Sweden, Switzerland, and the U.K.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Under the Treaty, the maximum rate of Japanese withholding tax which may be imposed on dividends
paid by a Japanese corporation to an Eligible U.S. Holder that is a portfolio investor is generally
reduced to 10&nbsp;percent of the gross amount actually distributed, and Japanese withholding tax with
respect to dividends paid by a Japanese corporation to an Eligible U.S. Holder that is a pension
fund is exempt from Japanese taxation by way of withholding or otherwise unless such dividends are
derived from the carrying on of a business, directly or indirectly, by such pension fund.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">If the maximum tax rate provided for in the income tax treaty applicable to dividends paid by the
Company to any particular non-resident Holder is lower than the withholding tax rate otherwise
applicable under Japanese tax law or any particular non-resident Holder is exempt from Japanese
income tax with respect to such dividends under the income tax treaty applicable to such particular
non-resident Holder, such nonresident Holder is required to submit an Application Form for Income
Tax Convention Regarding Relief from Japanese Income Tax on Dividends (together with any other
required forms and documents) in advance through the Company to the relevant tax authority before
the payment of dividends. A standing proxy for non-resident Holders of a Japanese corporation may
provide this application service. With respect to ADSs, this reduced rate or exemption is
applicable if the Depositary or its agent submits two Application Forms (one before payment of
</DIV>

<P align="center" style="font-size: 10pt">51
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><DIV style="border-bottom: 2px solid #000000; font-size: 1px">&nbsp;</DIV>
</DIV>




<DIV align="left" style="font-size: 10pt; margin-top: 12pt">dividends and the other within 8&nbsp;months after the
Company&#146;s business year-end or semi-business year-end). To claim this reduced rate or exemption,
any relevant non-resident Holder of ADSs will be required to file a proof of taxpayer status,
residence and beneficial ownership (as applicable) and to provide other information or documents as
may be required by the Depositary. A non-resident Holder who is entitled, under an applicable
income tax treaty, to a reduced rate which is lower than the withholding tax rate otherwise
applicable under Japanese tax law or an exemption from the withholding tax, but failed to submit
the required application in advance will be entitled to claim the refund of taxes withheld in
excess of the rate under an applicable tax treaty (if such non-resident Holder is entitled to a
reduced treaty rate under the applicable income tax treaty) or the full amount of tax withheld (if
such non-resident Holder is entitled to an exemption under the applicable income tax treaty) from
the relevant Japanese tax authority.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Gains derived from the sale of shares of Common Stock or ADSs outside Japan by a non-resident
Holder holding such shares of Common Stock or ADSs as portfolio investors are, in general, not
subject to Japanese income tax or corporation tax. Eligible U.S. Holders are not subject to
Japanese income or corporation tax with respect to such gains under the Treaty.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Japanese inheritance and gift taxes at progressive rates may be payable by an individual who has
acquired shares of Common Stock or ADSs as a legatee, heir or donee even though neither the
individual nor the deceased nor donor is a Japanese resident.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Holders of shares of Common Stock or ADSs should consult their tax advisors regarding the effect of
these taxes and, in the case of U.S. Holders, the possible application of the Estate and Gift Tax
Treaty between the U.S. and Japan.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U><B>U.S. Federal Income Taxation</B></U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>U.S. Holders</I></B>

</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 12pt">The following discussion is a summary of the principal U.S. federal income tax consequences to
holders of shares of Common Stock and ADSs that are U.S. Holders and that hold those shares or ADSs
as capital assets (generally, for investment purposes).
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>Taxation of Dividends</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Subject to the passive foreign investment company rules discussed below, under U.S. federal income
tax law, the gross amount of any distribution made by us in respect of shares of Common Stock or
ADSs (without reduction for Japanese withholding taxes) will constitute a taxable dividend to the
extent paid out of current or accumulated earnings and profits, as determined under U.S. federal
income tax principles. The U.S. dollar amount of such a dividend generally will be included in the
gross income of a U.S. Holder, as ordinary income, when actually or constructively received by the
U.S. Holder, in the case of shares of Common Stock, or by the depositary, in the case of ADSs.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Dividends paid by us will not be eligible for the dividends received deduction generally allowed to
U.S. corporations in respect of dividends received from other U.S. corporation.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Subject to certain exceptions for short-term and hedged positions, and provided that we are not a
passive foreign investment company (as discussed below), dividends received by certain U.S. Holders
(including individuals) with respect to the Common Stock or ADSs will currently be subject to U.S.
federal income taxation at a maximum rate of 15&nbsp;percent. Investors should be aware that the U.S.
Treasury Department has announced its intention to promulgate rules pursuant to which shareholders
(and intermediaries) will be permitted to rely on certifications from issuers to establish that
dividends qualify for the reduced rate of U.S. federal income taxation. Because such procedures
have not yet been issued, we are not certain that we will be able to comply with them. U.S. Holders
of ADSs or Common Stock should consult their own tax advisors regarding the availability of the
reduced rate in the light of their own particular circumstances.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">The U.S. dollar amount of a dividend paid in Japanese yen will be determined based on the Japanese
yen/U.S. dollar exchange rate in effect on the date that dividend is included in the income of the
U. S. Holder, regardless of whether the payment is converted into U.S. dollars on such date.
Generally, any gain or loss resulting from currency exchange fluctuations during the period from
the date the dividend payment is included in the gross income of a U.S. Holder through the date
that payment is converted into U.S. dollars (or the U.S. Holder otherwise disposed of the Japanese
yen) will be treated as U.S. source ordinary income or loss. U.S. Holders should consult their own
tax advisors regarding the calculation and U.S. federal income tax treatment of foreign currency
gain or loss.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">To the extent, if any, that the amount of any distribution received by a U.S. Holder in respect of
shares of Common Stock or ADSs exceeds our current and accumulated earnings and profits, as
determined under U.S. federal income tax principles, the distribution first will be treated as a
tax-free return of the U.S. Holder&#146;s adjusted tax basis in those shares or ADSs, and thereafter as
U.S. source capital gain. Distributions of additional shares of Common Stock that are made
</DIV>


<P align="center" style="font-size: 10pt">52

</DIV>
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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><DIV style="border-bottom: 2px solid #000000; font-size: 1px">&nbsp;</DIV>
</DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 12pt">to U.S. Holders with respect to their shares of Common Stock or ADSs and that are part of a pro
rata distribution to all the Company&#146;s shareholders generally will not be subject to U.S. federal
income tax.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">For U.S. foreign tax credit purposes, dividends included in gross income by a U.S. Holder in
respect of shares of Common Stock or ADSs will constitute income from sources outside the United
States and will be subject to various classifications and other limitations U.S. federal law and
the Treaty, any Japanese withholding tax imposed in respect of a company dividend may be claimed
either as a credit against the U.S. federal income tax liability of a U.S. Holder or, if the U.S.
Holder elects not to take a credit for any foreign taxes that year, as a deduction from that U.S.
Holder&#146;s taxable income. Special rules will generally apply to the calculation of foreign tax
credits in respect of dividend income that qualifies for preferential U.S. federal income tax
rates. Additionally, special rules may apply to individuals whose foreign source income during the
taxable year consists entirely of &#147;qualified passive income&#148; and whose creditable foreign taxes
paid or accrued during the taxable year do not exceed $300 ($600 in the case of a joint return).
Further, under some circumstances, a U.S. Holder that:
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="96%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><B><B>&#149;</B></B>
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">has held shares of Common Stock or ADSs for less than a specified minimum period, or</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><B><B>&#149;</B></B>
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">is obligated to make payments related to our dividends,</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">will not be allowed a foreign tax credit for foreign taxes imposed on our dividends. The rules with
respect to foreign tax credits are complex and involve the application of rules that depend on a
U.S. Holder&#146;s particular circumstances, and accordingly, U.S. Holders are urged to consult their
tax advisors regarding the availability of the foreign tax credit under their particular
circumstances. The Internal Revenue Service (&#147;IRS&#148;) has expressed concern that parties to whom ADSs
are released may be taking actions that are inconsistent with the claiming of foreign tax credits
by U.S. Holders of ADSs. Accordingly, investors should be aware that the discussion above regarding
the creditability of Japanese withholding tax on dividends could be affected by future actions that
may be taken by the IRS.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>Taxation of Capital Gains and Losses</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">In general, upon a sale or other taxable disposition of shares of Common Stock or ADSs, a U.S.
Holder will recognize gain or loss for U.S. federal income tax purposes in an amount equal to the
difference between the amount realized on the sales or other taxable disposition and the U.S.
Holder&#146;s adjusted tax basis in those Common Stock or ADSs. A U.S. Holder generally will have an
adjusted tax basis in a share of Common Stock or an ADS equal to its U.S. dollar cost. In general,
subject to the passive foreign investment company rules discussed below, such gain or loss
recognized on a sale or other taxable disposition of shares of Common Stock or ADSs will be capital
gain or loss and, if the U.S. Holder&#146;s holding period for those shares or ADSs exceeds one year,
will be long-term capital gain or loss. Certain U.S. Holders, including individuals, are eligible
for preferential rates of U.S. federal income tax in respect of long-term capital gains. Under U.S.
federal tax law, the deduction of capital losses is subject to limitations. Any gain or loss
recognized by a U.S. Holder in respect of the sale or other taxable disposition of shares of Common
Stock or ADSs generally will be treated as derived from U.S. sources for U.S. foreign tax credit
purposes.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Deposits and withdrawals of Common Stock in exchange for ADSs will not result in the realization of
gain or loss for U.S. federal income tax purposes.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>Passive Foreign Investment Companies</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Based on current estimates of our income and assets, we do not believe that we are, for U.S.
federal income tax purposes, a passive foreign investment company (a &#147;PFIC&#148;), and we intend to
continue our operations in such a manner that it is highly unlikely that we would become a PFIC in
the future. However, there can be no assurance in this regard, because the PFIC determination is
made annually and is based on the portion of our assets (including goodwill) or the portion of our
income that is characterized as passive under the PFIC rules. If we become a PFIC, unless a U.S.
Holder elects to be taxed annually on a mark-to-market basis with respect to its shares of Common
Stock or ADSs, any gain realized on a sale or other taxable disposition of shares of Common Stock
or ADSs and certain &#147;excess distributions&#148; (generally distributions in excess of 125&nbsp;percent of the
average distribution over a three-year period, or shorter holding period for the shares of Common
Stock or ADSs) would be treated as realized ratably over the U.S. Holder&#146;s holding period for the
shares of Common Stock or ADSs; amounts allocated to prior years while we are a PFIC would be taxed
at the highest tax rate in effect for each such year, and an additional interest charge may apply
to the portion of the U.S. federal income tax liability on such gains or distributions treated
under the PFIC rules as having been deferred by the U.S. Holder. Amounts allocated to the year of
sale and to any year before we became a PFIC would be taxed as ordinary income in the year of sale.
Moreover, dividends that a U.S. Holder receives from us will not be eligible for the reduced U.S.
federal income tax rates described above if we are a PFIC either in the taxable year of the
distribution or the preceding taxable year (and instead will be taxable at rates applicable to
ordinary income).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">If a market-to-market election were made, a U.S. Holder would take into account each year the
appreciation or depreciation in value of its shares of Common Stock or ADS, which would be treated
as ordinary income or (subject to limitations) ordinary loss, as would gains or losses on actual
dispositions of Common Stock or ADSs. Any U.S. Holder who owns shares of Common Stock or ADSs
during any year that we are a PFIC would be required to file IRS Form&nbsp;8621. U.S. Holders should consult their own tax advisors regarding the application of
</DIV>


<P align="center" style="font-size: 10pt">53
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><DIV style="border-bottom: 2px solid #000000; font-size: 1px">&nbsp;</DIV>
</DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 12pt">the PFIC
rules to the shares of Common Stock or ADSs and the availability and advisability of making an
election to avoid the adverse tax consequences of the PFIC rules should we be considered a PFIC for
any taxable year.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>Non-U.S. Holders</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">The following discussion is a summary of the principal U.S. federal income tax consequences to
beneficial holders of shares of Common Stock or ADSs that are neither U.S. Holders nor partnerships
for U.S. federal income tax purposes (&#147;Non-U.S. Holders&#148;).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Subject to the discussion below under &#147;Backup Withholding and Information Reporting&#148;, a Non-U.S.
Holder generally will not be subject to any U.S. federal income or withholding tax on distributions
received in respect of shares of Common Stock or ADSs unless the distributions are effectively
connected with the conduct by the Non-U.S. Holder of a trade or business within the United States
(and, if an applicable tax treaty requires, are attributable to a U.S. permanent establishment or
fixed base of such Non-U.S. Holder).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Subject to the discussion below under &#147;Backup Withholding and Information Reporting&#148;, a Non-U.S.
Holder generally will not be subject to U.S. federal income tax in respect of gain recognized on a
sale or other disposition of shares of Common Stock or ADSs, unless:
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="96%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">(i)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">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</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">(ii)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">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.</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>Backup Withholding and Information Reporting</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">In general, except in the case of certain exempt recipients (such as corporations), information
reporting requirements will apply to dividends on shares of Common Stock or ADSs paid to U.S.
Holders in the United States or through certain U.S. related financial intermediaries and to the
proceeds received upon the sale, exchange or redemption of shares of Common Stock or ADSs by U.S.
Holders within the United States or through certain U.S. related financial intermediaries.
Furthermore, backup withholding (currently at a rate of 28&nbsp;percent) may apply to those amounts if a
U.S. Holder fails to provide an accurate tax identification number, to certify that such holder is
not subject to backup withholding or to otherwise comply with the applicable requirements of the
backup withholding requirements.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Dividends paid to a Non-U.S. Holder in respect of shares of Common Stock or ADSs, and proceeds
received in the sale, exchange or redemption of shares of Common Stock or ADSs by a Non-U.S.
Holder, generally, are exempt from information reporting and backup withholding under current U.S.
federal income tax law. However, a Non-U.S. Holder may be required to provide certification of
non-U.S. status in order to obtain that exemption. Persons required to establish their exempt
status generally must provide such certification on IRS Form W-9, entitled Request for Taxpayer
Identification Number and Certification, in the case of U.S. persons, and on IRS Form W-8BEN,
entitled Certificate of Foreign Status (or other appropriate IRS Form W-8), in the case of non-U.S.
persons.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Backup withholding is not an additional tax. The amount of backup withholding imposed on a payment
to a U.S. Holder will be allowed as a credit against the holder&#146;s U.S. federal income tax liability
provided that the required information is properly furnished to the IRS.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">THE SUMMARY OF U.S. FEDERAL INCOME AND JAPANESE TAX CONSEQUENCES SET OUT ABOVE IS INTENDED FOR
GENERAL INFORMATION PURPOSES ONLY. INVESTORS IN THE COMMON STOCK OR ADSs ARE URGED TO CONSULT WITH
THEIR OWN TAX ADVISORS WITH RESPECT TO THE PARTICULAR TAX CONSEQUENCES TO THEM OF OWNING OR
DISPOSING OF COMMON STOCK OR ADSs, BASED ON THEIR PARTICULAR CIRCUMSTANCES.
</DIV>

<DIV align="left">
<A name="149"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>F. Dividends and paying agents</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Not applicable

</DIV>
<DIV align="left">
<A name="150"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>G. Statement by experts</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Not applicable

</DIV>

<P align="center" style="font-size: 10pt">54
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><DIV style="border-bottom: 2px solid #000000; font-size: 1px">&nbsp;</DIV>
</DIV>


<DIV align="left">
<A name="151"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>H. Documents on display</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Makita files its annual report on Form 20-F and press releases or reports for shareholders or
investors on Form 6-K with the SEC. You may read and copy documents referred to in this annual
report on Form 20-F that have been filed with the SEC at the SEC&#146;s public reference room located at
100F Street, N.E., Room&nbsp;1580, Washington, D.C. 20549 or by accessing the SEC&#146;s home page
(http://www.sec.gov)
</DIV>

<DIV align="left">
<A name="152"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>I. Subsidiary information</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Not applicable

</DIV>
<DIV align="left">
<A name="153"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Item&nbsp;11. </B><U><B>Quantitative and Qualitative Disclosures about Market Risk</B></U>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U><B>Market
Risk Exposure</B></U><BR>
Makita is exposed to various market risks, including those related to changes in foreign exchange
rates, interest rates, and the prices of marketable securities and investment securities. In order
to hedge the risks of fluctuations in foreign exchange rates and interest rates, Makita uses
derivative financial instruments. Makita does not hold or use derivative financial instruments for
trading purposes. Although the use of derivative financial instruments exposes Makita to the risk
of credit-related losses in the event of nonperformance by counterparties, Makita believes that its
counterparties are creditworthy because they are required to have a credit rating of a specified
level or above, and Makita does not expect credit-related losses, if any, to be significant.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U><B>Equity
and Debt Securities Price Risk</B></U><BR>
Makita classified investments of debt securities for current operations as marketable securities
within current assets. Other investments are classified as investment securities as a part of
investments and other assets in the consolidated balance sheets. Makita does not hold marketable
securities and investment securities for trading purposes. The fair value of certain of these
investments expose Makita to equity price risks. These investments are subject to changes in the
market prices of the securities. The maturities and fair values of such marketable securities and
investment securities at March&nbsp;31, 2005 and 2006 were as follows:
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="28%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="15" style="border-bottom: 1px solid #000000">Yen (millions)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000">U.S. Dollars (thousands)</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000">2005</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000">2006</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000">2006</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Carrying</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Fair</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Carrying</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Fair</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Carrying</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Fair</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Amount</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Value</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Amount</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Value</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Amount</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Value</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Due within one year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#165;</TD>
    <TD align="right">53,504</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#165;</TD>
    <TD align="right">53,504</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#165;</TD>
    <TD align="right">42,810</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#165;</TD>
    <TD align="right">42,810</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">365,897</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">365,897</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Due after one year through five years</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,343</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,348</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,455</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,436</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20,983</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20,821</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Due after five years</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,150</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,144</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,986</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,880</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16,974</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16,068</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Indefinite periods</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,614</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,614</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Equity securities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20,433</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20,433</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">30,961</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">30,961</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">264,624</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">264,624</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#165;</TD>
    <TD align="right">80,044</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#165;</TD>
    <TD align="right">80,043</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#165;</TD>
    <TD align="right">78,212</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#165;</TD>
    <TD align="right">78,087</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">668,478</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">667,410</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">55
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><DIV style="border-bottom: 2px solid #000000; font-size: 1px">&nbsp;</DIV>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U><B>Foreign
Exchange Risk</B></U><BR>
Makita&#146;s international operations and indebtedness denominated in foreign currencies expose Makita
to the risk of fluctuation in foreign currency exchange rates. To manage this exposure, Makita
enters into certain foreign exchange contracts with respect to a part of such international
operations and indebtedness. The following table provides information about Makita&#146;s major
derivative financial instruments related to foreign currency transactions as of March&nbsp;31, 2005 and
March&nbsp;31, 2006. Figures are translated into yen at the rates prevailing at March&nbsp;31, 2005 and March
31, 2006, together with the relevant weighted average contractual exchange rates at March&nbsp;31, 2006.
All of the foreign exchange contracts listed in the following table have contractual maturities in
FY 2006 and 2007.
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="20%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="22" style="border-bottom: 1px solid #000000">Yen (millions) (except average contractual rates)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000">U.S. Dollars (thousands)</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="10" style="border-bottom: 1px solid #000000">2005</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="center" colspan="10" style="border-bottom: 1px solid #000000">2006</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000">2006</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Average</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Average</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Contract</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">contractual</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Contract</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">contractual</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Contract</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">amounts</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Fair Value</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">rates</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">amounts</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Fair Value</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">rates</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">amounts</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Fair Value</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Foreign currency
contracts;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">U.S.$/Yen</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">3,934</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&#165;</TD>
    <TD align="right">(112</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">104.09</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">4,368</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&#165;</TD>
    <TD align="right">(11</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">116.49</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">37,333</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(94</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Euro/Yen</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,166</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(36</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">137.05</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,148</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(67</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">140.14</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">35,453</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(573</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">A$/Yen</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">329</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(9</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">80.12</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">344</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">85.91</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,940</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">85</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">STG/Yen</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">129</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">197.94</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">201.98</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">68</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Euro/STG</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,413</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,421</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(10</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12,145</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(85</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Other</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,299</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,538</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,145</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">69</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">10,270</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&#165;</TD>
    <TD align="right">(137</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">11,827</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&#165;</TD>
    <TD align="right">(70</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">101,084</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(598</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" nowrap align="left" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="left" style="border-top: 3px double #000000">&nbsp;-</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Foreign currency swaps:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">U.S.$/Yen</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">749</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">107.02</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">9,099</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&#165;</TD>
    <TD align="right">(88</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">116.65</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">77,769</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(752</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Euro/Yen</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,133</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(12</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">141.68</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,684</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(103</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">CAN$/Yen</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">424</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(19</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">84.74</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">305</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">101.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,607</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">A$/Yen</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,144</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(187</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">78.60</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,661</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(32</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">83.06</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,197</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(274</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">SFr./Yen</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">174</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(5</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">86.99</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">173</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(8</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">86.45</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,478</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(68</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" nowrap align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">4,491</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&#165;</TD>
    <TD align="right">(211</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">12,371</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&#165;</TD>
    <TD align="right">(140</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">105,735</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(1,197</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" nowrap align="left" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="left" style="border-top: 3px double #000000">&nbsp;-</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Options purchased to
sell foreign
currencies:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">U.S.$/Yen</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">406</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">101.56</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Euro/Yen</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">298</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">135.51</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Other</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">63</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">767</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="left" style="border-top: 3px double #000000">&nbsp;-</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Options written to buy
foreign currencies:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">U.S.$/Yen</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">424</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&#165;</TD>
    <TD align="right">(8</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">106.12</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Euro/Yen</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">305</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(3</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">138.84</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Other</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">67</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">796</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&#165;</TD>
    <TD align="right">(11</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="left" style="border-top: 3px double #000000">&nbsp;-</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">56
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><DIV style="border-bottom: 2px solid #000000; font-size: 1px">&nbsp;</DIV>
</DIV>


<DIV align="left">
<A name="154"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Item&nbsp;12. </B><U><B>Description of Securities Other than Equity Securities</B></U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Not applicable
</DIV>
<DIV align="left">
<A name="155"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>PART II</B>
</DIV>

<DIV align="left">
<A name="156"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Item&nbsp;13. </B><U><B>Defaults, Dividend Arrearages and Delinquencies</B></U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;None
</DIV>
<DIV align="left">
<A name="157"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Item&nbsp;14.
</B><U><B>Material Modifications to the Rights of Security Holders and Use of Proceeds</B></U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;None
</DIV>
<DIV align="left">
<A name="158"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Item&nbsp;15. </B><U><B>Controls and Procedures</B></U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>A. Disclosure controls and procedures</B>

</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Makita performed an evaluation of the effectiveness of the design and operation of its disclosure
controls and procedures as of the end of the fiscal 2006. Disclosure controls and procedures are
designed to ensure that the material financial and non-financial information required to be
disclosed in the reports that Makita files under the Exchange Act is accumulated and communicated
to its management including the chief executive officer and the principal accounting and financial
officer, to allow timely decisions regarding required disclosure.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">The Company&#146;s disclosure controls and procedures also ensure that the reports that it files or
submits under the Exchange Act are recorded, processed, summarized and reported within the time
periods specified in the Commission&#146;s rules and forms. The evaluation was performed under the
supervision of Masahiko Goto, Makita&#146;s Chief Executive Officer, President and Representative
Director and Kenichiro Nakai, Makita&#146;s Principal Financial and Accounting Officer, Director. Makita&#146;s
disclosure and controls and procedures are designed to provide reasonable assurance of achieving
its objectives. Managerial judgment was necessary to evaluate the cost-benefit relationship of
possible controls and procedures. Masahiko Goto and Kenichiro Nakai have concluded that Makita&#146;s
disclosure controls and procedures are effective at the reasonable assurance level.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>B. Changes in internal control over financial reporting</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">There have been no changes in Makita&#146;s internal control over financial reporting during fiscal 2006
that have materially affected, or are reasonably likely to materially affect, Makita&#146;s internal
control over financial reporting.
</DIV>

<DIV align="left">
<A name="159"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Item&nbsp;16A. </B><U><B>Audit Committee Financial Expert </B></U>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Makita&#146;s Board of Directors has determined that Akio Kondo qualifies as an &#147;audit committee
financial expert&#148; as defined by the rules of the SEC. Mr.&nbsp;Kondo is not independent, as that term is
defined in the listing standards of Nasdaq applicable to the Company. Mr.&nbsp;Kondo began his career at Makita in
1969, and from May&nbsp;1979 to June&nbsp;2004 he has worked in the field of finance and accounting. From
April&nbsp;1991, he served as an Assistant General Manager of the Accounting &#038; Finance Department, and
from October&nbsp;1995 he served as a General Manager of the Accounting &#038; Finance Department, the
division responsible for Makita&#146;s consolidated reporting. Mr.&nbsp;Kondo was elected as one of Makita&#146;s
corporate auditors at an ordinary general meeting of shareholders held in June&nbsp;2004. See Item&nbsp;6.A.
for additional information regarding Mr.&nbsp;Kondo.
</DIV>

<DIV align="left">
<A name="160"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Item&nbsp;16B.
</B><U><B>Code of ethics</B></U>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">On May&nbsp;20, 2003, Makita adopted a code of ethics. On March&nbsp;17, 2004, Makita amended the code of
ethics to: (1)&nbsp;ensure the protection of individuals who report questionable behavior to our
board of statutory auditors and (ii)&nbsp;clarify that waivers to our code of ethics for employees must be
requested in writing to our board of statutory auditors and for executive officers, directors and
statutory auditors can only be granted by the board of directors, only if truly necessary and
warranted, and must be promptly disclosed to shareholders.
</DIV>


<P align="center" style="font-size: 10pt">57
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><DIV style="border-bottom: 2px solid #000000; font-size: 1px">&nbsp;</DIV>
</DIV>




<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Makita&#146;s code of ethics is publicly available on our website at www.makita.co.jp.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 12pt">If we make any substantive amendments to the code of ethics or grant any waivers, including any
implicit waiver, from a provision of this code to our directors and executive officers, including
our principal executive officer, principal financial officer, principal accounting officer or
controller, or persons performing similar functions, we will disclose the nature of such amendment
or waiver on our website.
</DIV>

<DIV align="left">
<A name="161"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Item&nbsp;16C. </B><U><B>Principal Accountant Fees and Services</B></U>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">KPMG AZSA &#038; Co. have served as our independent public accountants for each of the financial years
in the three-year period ended March&nbsp;31, 2006, for which audited financial statements appear in
this annual report on Form 20-F.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">The following table presents the aggregate fees for professional services and other services
rendered by KPMG AZSA &#038; Co. and the various member firms of KPMG International, a Swiss Cooperative
to Makita in fiscal 2006 and fiscal 2005:
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="80%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000">Yen (millions)</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2006</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Audit Fees (1)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">189</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">248</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Audit- related Fees (2)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">31</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Tax Fees (3)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">66</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">74</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">All Other Fees (4)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">83</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">71</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">352</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">424</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<DIV align="left">
<DIV style="font-size: 3pt; margin-top: 16pt; width: 18%; border-top: 0px solid #000000">&nbsp;</DIV>
</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96"></TD>
</TR>

<TR valign="top">
    <TD nowrap align="left">(1)</TD>
    <TD>&nbsp;</TD>
    <TD>Audit Fees consist of fees billed for the professional services rendered by the Independent Registered Public Accounting Firm
for the audit of Makita&#146;s annual or interim financial statements and services that are normally provided by the Independent
&nbsp;Registered Public Accounting Firm in connection with statutory and regulatory filings or engagement.</TD>
</TR>

<TR valign="top">
    <TD nowrap align="left">(2)</TD>
    <TD>&nbsp;</TD>
    <TD>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.</TD>
</TR>




<TR valign="top">
    <TD nowrap align="left">(3)</TD>
    <TD>&nbsp;</TD>
    <TD>Tax Fees include fees billed for the professional services rendered by the Independent Registered Public Accounting Firm for tax
compliance and transfer pricing documentation.</TD>
</TR>



<TR valign="top">
    <TD nowrap align="left">(4)</TD>
    <TD>&nbsp;</TD>
    <TD>All Other Fees comprise fees for all other services not included in any of other categories noted above.</TD>
</TR>

</TABLE>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Policy on Pre-Approval of Audit and Non-Audit Services of Independent Registered Public Accounting
Firm
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">The Board of Statutory Auditors of Makita Corporation consisting of four members, including two
outside corporate auditors, is responsible for the oversight of its Independent Registered Public
Accounting Firm&#146;s work. The Board of Statutory Auditors has established &#147;Audit and Non-Audit
Services Pre-approval Policies and Procedures,&#148; effective as of August&nbsp;7, 2003. The policies and
procedures stipulate three means by which audit and non-audit services may be pre-approved,
depending on the content of and the fee for the services.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Under the United States Sarbanes-Oxley Act of 2002 (the &#147;Act&#148;), the Board of Statutory Auditors is
required to pre-approve all audit and non-audit services to be provided by the Independent Registered
Public Accounting Firm to the Company in order to assure that they do not impair their independence
from the Company. To implement these provisions of the Act, the US Securities and Exchange
Commission has issued rules specifying the types of services that an Independent Registered Public
Accounting Firm may not provide to its audit client, as well as the Board of Statutory Auditors&#146;
administration of the engagement of the Independent Registered Public Accounting Firm.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Accordingly, the Board of Statutory Auditors has adopted this Audit and Non-Audit Services
Pre-approval Policy and Procedure, which sets forth the policies, procedures and the conditions for
which such services proposed to be performed by the Independent Registered Public Accounting Firm
may be pre-approved. Under this policy, the Board of Statutory Auditors authorizes general
pre-approval of all such services, including Audit Services, Audit-related Services, Tax Services
and All other Services. Under General Pre-approval protocol, the pre-approved services do not
require specific pre-approval from the Board of Statutory Auditors or its delegated member on a
case-by-case basis.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">The term of any general pre-approval is 12&nbsp;months from the date of pre-approval, unless the Board
of Statutory Auditors considers a different period and states otherwise in the relevant appendix.
The Board of Statutory Auditors
</DIV>


<P align="center" style="font-size: 10pt">58
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><DIV style="border-bottom: 2px solid #000000; font-size: 1px">&nbsp;</DIV>
</DIV>




<DIV align="left" style="font-size: 10pt; margin-top: 12pt">will annually review this policy, including the services that may
be provided by the Independent Registered Public Accounting Firm without obtaining specific
pre-approval from the Board of Statutory Auditors, and make any necessary or appropriate changes to
this policy. This policy is designed (1)&nbsp;to be detailed as to the particular services to be
provided by the independent auditor, (2)&nbsp;to ensure that the Board of Statutory Auditors is informed
of each service provided by the independent auditor and (3)&nbsp;to ensure that the policies and
procedures set forth herein do not include delegation of the Board of Statutory Auditors&#146;
responsibilities under the US Securities Exchange Act of 1934 to management. Nothing in this policy
shall be interpreted to be a delegation of the Board of Statutory Auditors&#146; responsibilities under
the Securities Exchange Act of 1934 to management of the Company.
</DIV>

<DIV align="left">
<A name="162"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Item&nbsp;16D. </B><U><B>Exemptions from the Listing Standards for Audit Committees</B></U><BR>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Makita does not have an audit committee and is relying on the general exemption contained in Rule
10A-3(c)(3) under the Exchange Act, which provides and exemption from NASDAQ&#146;s listing standards
relating to audit committees for foreign companies such as Makita, that has a board of corporate
auditors. Makita&#146;s reliance on Rule&nbsp;10A-3(c)(3) does not, in its opinion, materially adversely
affect the ability of its board of corporate auditors to act independently and to satisfy the other
requirements of Rule&nbsp;10A-3.
</DIV>

<DIV align="left">
<A name="163"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Item&nbsp;16E. </B><U><B>Purchases of Equity Securities by the Issuer and Affiliated Purchasers</B></U>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">The following table sets out all purchases of common stock of the Company by the Company
during the fiscal year ended March&nbsp;31, 2006. The Company did not resolve any repurchase plan or
program by the board of directors or Annual General Meeting of Shareholders, therefore, there is no
publicly announced plan or program regarding repurchase of common stock. The reason for these
repurchases of Common Stock is the purchase requests of holders of shares of common stock
constituting less than one full unit in accordance with the provisions of the Share Handling
Regulations of the Company.
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Total Number of</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Average Price Paid</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Shares Purchased</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">per Share</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD nowrap align="center" style="border-bottom: 1px solid #000000">Period</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">(shares)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">(&#165;)</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">From April&nbsp;1, 2005 to April&nbsp;30, 2005</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,377</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,928</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">From May&nbsp;1, 2005to May&nbsp;31, 2005</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,386</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,049</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">From June&nbsp;1, 2005 to June&nbsp;30, 2005</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,289</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,199</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">From July&nbsp;1, 2005 to July&nbsp;31, 2005</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15,105</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,234</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">From August&nbsp;1, 2005 to August&nbsp;31, 2005</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,663</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,328</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">From September&nbsp;1, 2005 to September&nbsp;30, 2005</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,542</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,229</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">From October&nbsp;1, 2005 to October&nbsp;30, 2005</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,132</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,320</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">From November&nbsp;1, 2005 to November&nbsp;30, 2005</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,889</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,806</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">From December&nbsp;1, 2005 to December&nbsp;31, 2005</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,212</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,908</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">From January&nbsp;1, 2006 to January&nbsp;31, 2006</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,316</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,037</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">From February&nbsp;1, 2006 to February&nbsp;28, 2006</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,374</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,421</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">From March&nbsp;1, 2006 to March&nbsp;31, 2006</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">892</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,452</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total Number of Shares Purchased and Average Price Paid per Share</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">70,177</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,335</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left">
<A name="164"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>PART III</B>
</DIV>

<DIV align="left">
<A name="165"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Item&nbsp;17. </B><U><B>Financial Statements</B></U>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">We have responded to Item&nbsp;18 in lieu of responding to this Item.
</DIV>

<DIV align="left">
<A name="166"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Item&nbsp;18. </B><U><B>Financial Statements</B></U>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">The following financial statements are filed as part of this annual report on Form 20-F.
</DIV>


<P align="center" style="font-size: 10pt">59
</DIV>

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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><DIV style="border-bottom: 2px solid #000000; font-size: 1px">&nbsp;</DIV>
</DIV>




<DIV align="left">
<A name="167"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Item&nbsp;19. </B><U><B>Exhibits</B></U>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="94%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">1.1
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Articles of Incorporation, as amended and effective as of June&nbsp;29, 2006 (English translation)</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">1.2
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Regulations of Board of Directors, as amended and effective as of June&nbsp;29, 2006 (English translation)</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">1.3
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">The Share Handling Regulations, as amended and effective as of June&nbsp;29, 2006 (English translation)</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">1.4
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Regulations of Board of Statutory Auditors effective as of July&nbsp;7, 2006 (English translation)</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">4.1
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Summary translation of the Sponsorship Agreement, dated January&nbsp;17, 2005 and as supplemented on May
26, 2005, among Makita Corporation, Joyama Kaihatsu Ltd., and Tokyo Tatemono Co., Ltd., relating to
the civil rehabilitation of Joyama Kaihatsu Ltd and the operation of Castle Hill Country Club.
(incorporated by reference to Exhibit&nbsp;4.1 of Makita&#146;s annual report on Form&nbsp;20-F filed with the SEC
on July&nbsp;5, 2005 (file no.000-12602))</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">12.1
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">302 Certification of President and Representative Director</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">12.2
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">302 Certification of Director, General Manager of Administration Headquarters</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">13.1
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">906 Certifications of President and Representative Director and Director, General Manager of
Administration Headquarters</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">60
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><DIV style="border-bottom: 2px solid #000000; font-size: 1px">&nbsp;</DIV>
</DIV>


<DIV align="left">
<A name="168"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>SIGNATURES</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and
that it has duly caused and authorized the undersigned to sign this annual report on its behalf.
</DIV>



<TABLE width="100%" border="0" cellspacing="0" cellpadding="0" style="font-size: 10pt">
<TR>
    <TD width="48%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
</TR>
<TR>
    <TD valign="top" align="left">&nbsp;</TD>
    <TD colspan="3" align="left"><B>MAKITA CORPORATION</B>
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD valign="top" align="left">&nbsp;</TD>
    <TD colspan="3" align="left"><B>&nbsp;</B>
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>


<TR>
    <TD align="left">&nbsp;</TD>
    <TD valign="top">By:&nbsp;&nbsp;</TD>
    <TD colspan="2" style="border-bottom: 1px solid #000000" align="left">/s/ Masahiko Goto
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD valign="top">Name:&nbsp;&nbsp;</TD>

    <TD colspan="2" align="left">Masahiko Goto&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR>

    <TD align="left">&nbsp;</TD>
    <TD valign="top">Title:&nbsp;&nbsp;</TD>

    <TD colspan="2" align="left">President and Representative Director&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Date: July&nbsp;7, 2006
</DIV>



<P align="center" style="font-size: 10pt">61
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Makita Corporation and Consolidated Subsidiaries</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULES</B>

</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="88%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#300">Report of Independent Registered Public Accounting Firm</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">F-2</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#301">Consolidated Balance Sheets as of March&nbsp;31, 2005 and 2006</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" valign="top">F-3 and F-4</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#302">Consolidated Statements of Income for the years ended March&nbsp;31, 2004, 2005 and 2006</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">F-5</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#303">Consolidated Statements of Shareholders&#146; Equity for the years ended March&nbsp;31, 2004, 2005 and 2006</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">F-6</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#304">Consolidated Statements of Cash Flows for the years ended March&nbsp;31, 2004, 2005 and 2006</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" valign="top">F-7 and F-8</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#305">Notes to Consolidated Financial Statements</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">F-9 to F-45</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">(Financial Statements of 50% or less owned persons accounted for by the equity method have been omitted
because they are not applicable.)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Schedules:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#306">II. Valuation and Qualifying Accounts and Reserves
for the years ended March&nbsp;31, 2004, 2005 and
2006</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">F-47</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 18pt; margin-left: 4%; text-indent: -2%">(All schedules not listed above have been omitted because they are not applicable, or are not required,
or the information has been otherwise supplied in the consolidated financial statements.)
</DIV>



<P align="center" style="font-size: 10pt">F-1
</DIV>

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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><DIV style="border-bottom: 2px solid #000000; font-size: 1px">&nbsp;</DIV>
</DIV>

<DIV align="left">
<A name="300"></A>
</DIV>

<DIV align="left" style="font-size: 12pt; margin-top: 12pt"><B>Report of Independent Registered Public Accounting Firm</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">To the Shareholders and the Board of Directors<BR>
of Makita Corporation:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">We have audited the consolidated financial statements of Makita Corporation (a Japanese
corporation) and subsidiaries as listed in the accompanying index. In connection with our audits of
the consolidated financial statements, we have also audited the financial statement schedule as
listed in the accompanying index. These consolidated financial statements and financial statement
schedule are the responsibility of the Company&#146;s management. Our responsibility is to express an
opinion on these consolidated financial statements and financial statement schedule based on our
audits.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">We conducted our audits in accordance with the standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our opinion.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">In our opinion, the consolidated financial statements referred to above present fairly, in all
material respects, the financial position of Makita Corporation and subsidiaries as of March&nbsp;31,
2005 and 2006, and the results of their operations and their cash flows for each of the years in
the three-year period ended March&nbsp;31, 2006, in conformity with U.S. generally accepted accounting
principles. Also in our opinion, the related financial statement schedule, when considered in
relation to the basic consolidated financial statements taken as a whole, presents fairly, in all
material respects, the information set forth therein.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">The accompanying consolidated financial statements as of and for the year ended March&nbsp;31, 2006,
have been translated into United States dollars solely for the convenience of the reader. We have
audited the translation and, in our opinion, the consolidated financial statements, expressed in
yen, have been translated into dollars on the basis set forth in Note 4 to the consolidated
financial statements.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">/s/ KPMG
AZSA &#38; CO.<BR><BR><BR>
Tokyo, Japan<BR>
April&nbsp;27, 2006
</DIV>


<P align="center" style="font-size: 10pt">F-2
</DIV>

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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><DIV style="border-bottom: 2px solid #000000; font-size: 1px">&nbsp;</DIV>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 12pt"><U>MAKITA CORPORATION AND CONSOLIDATED SUBSIDIARIES</U>
</DIV>

<DIV align="left">
<A name="301"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><U><B>CONSOLIDATED BALANCE SHEETS</B></U>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><U>MARCH 31, 2005 AND 2006</U>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><U><B>A S S E T S</B></U>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6">Yen</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">U.S. Dollars</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000">(millions)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">(thousands)</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2006</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2006</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">CURRENT ASSETS:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Cash and cash equivalents</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">25,384</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">39,054</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">333,795</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Time deposits</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,867</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,845</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15,769</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Marketable securities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">57,938</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">47,773</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">408,316</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Trade receivables-
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Notes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,687</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,936</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16,547</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Accounts</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">38,997</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">46,074</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">393,795</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Less- Allowance for doubtful receivables</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,178</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,016</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(8,684</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Inventories</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">66,003</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">79,821</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">682,231</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Deferred income taxes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,831</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,661</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">31,291</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Prepaid expenses and other current assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,363</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,621</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">73,684</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Total current assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">207,892</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">227,769</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,946,744</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">PROPERTY, PLANT AND EQUIPMENT, AT COST:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Land</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17,673</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17,737</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">151,598</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Buildings and improvements</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">51,085</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">55,470</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">474,103</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Machinery and equipment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">73,356</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">74,501</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">636,761</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Construction in progress</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">790</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,340</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">142,904</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">150,048</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,282,462</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Less- Accumulated depreciation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(90,080</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(90,845</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(776,453</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">52,824</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">59,203</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">506,009</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">INVESTMENTS AND OTHER ASSETS:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Investment securities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">22,106</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">30,439</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">260,162</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Goodwill</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">779</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,658</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Other intangible assets, net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">841</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,354</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,573</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Deferred income taxes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">390</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">698</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,966</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Other assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,851</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,796</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">49,538</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">29,188</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">39,066</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">333,897</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">289,904</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">326,038</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">2,786,650</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt">The accompanying notes to consolidated financial statements are<BR>
an integral part of these balance sheets.
</DIV>



<P align="center" style="font-size: 10pt">F-3
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><DIV style="border-bottom: 2px solid #000000; font-size: 1px">&nbsp;</DIV>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 12pt"><U>MAKITA CORPORATION AND CONSOLIDATED SUBSIDIARIES</U>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><U><B>CONSOLIDATED BALANCE SHEETS</B></U>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><U>MARCH 31, 2005 AND 2006</U>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><U><B>LIABILITIES AND SHAREHOLDERS&#146; EQUITY</B></U>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6">Yen</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">U.S. Dollars</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000">(millions)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">(thousands)</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2006</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2006</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">CURRENT LIABILITIES:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Short-term borrowings</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">9,060</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">1,728</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">14,769</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Trade notes and accounts payable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,574</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,908</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">118,872</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Other payables</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,197</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,417</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">46,299</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Accrued expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,998</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,427</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">54,932</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Accrued payroll</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,695</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,224</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">70,291</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Club members&#146; deposits</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12,836</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Income taxes payable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,695</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,701</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">57,274</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Deferred income taxes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">118</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">176</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,504</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Other liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,053</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,380</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">28,889</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Total current liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">58,226</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">45,961</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">392,830</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">LONG-TERM LIABILITIES:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Long-term indebtedness</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">88</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">104</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">889</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Accrued retirement and termination benefits</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,126</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,901</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">24,795</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Deferred income taxes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,538</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,923</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">67,718</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Other liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">887</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">930</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,948</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,639</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,858</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">101,350</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">MINORITY INTERESTS</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,399</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,635</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,974</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">COMMITMENTS AND CONTINGENT LIABILITIES</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">SHAREHOLDERS&#146; EQUITY:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Common stock,</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Authorized - 287,000,000 shares in 2005</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:115px; text-indent:-15px">496,000,000 shares in 2006</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Issued and outstanding</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:110px; text-indent:-15px">- 148,008,760 shares and 143,777,607 shares in 2005</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:116px; text-indent:-15px">144,008,760 shares and 143,711,766 shares in 2006</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">23,805</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">23,805</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">203,462</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Additional paid-in capital</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">45,430</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">45,437</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">388,350</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Legal reserve</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,669</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,669</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">48,453</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Retained earnings</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">157,502</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">186,586</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,594,752</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Accumulated other comprehensive income (loss)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(9,249</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,345</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">45,684</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Treasury stock, at cost: - 4,231,153 shares in 2005</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:166px; text-indent:-15px">296,994 shares in 2006</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(3,517</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(258</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2,205</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">219,640</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">266,584</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,278,496</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">289,904</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">326,038</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">2,786,650</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt">The accompanying notes to consolidated financial statements are<BR>
an integral part of these balance sheets.
</DIV>


<P align="center" style="font-size: 10pt">F-4
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><DIV style="border-bottom: 2px solid #000000; font-size: 1px">&nbsp;</DIV>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 12pt"><U>MAKITA CORPORATION AND CONSOLIDATED SUBSIDIARIES</U>
</DIV>

<DIV align="left">
<A name="302"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><U><B>CONSOLIDATED STATEMENTS OF INCOME</B></U>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><U>FOR THE YEARS ENDED MARCH 31, 2004, 2005 AND 2006</U>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="10">Yen</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">U.S. Dollars</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="10" style="border-bottom: 1px solid #000000">(millions)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">(thousands)</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2006</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2006</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">NET SALES</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">184,117</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">194,737</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">229,075</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,957,906</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cost of sales</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">110,322</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">113,323</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">132,897</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,135,872</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">GROSS PROFIT</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">73,795</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">81,414</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">96,178</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">822,034</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Selling, general and administrative expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">53,698</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">52,646</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">58,726</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">501,931</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Losses (gains)&nbsp;on disposals or sales of property, plant and
equipment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2,379</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,234</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(8,326</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(71,162</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Impairment of long-lived assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,780</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">577</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Transfer to the government of the substitutional portion of
pension plan</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(4,441</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">OPERATING INCOME</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,696</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">31,398</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">45,778</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">391,265</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">OTHER INCOME (EXPENSES):</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Interest and dividend income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">869</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,157</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,301</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,120</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Interest expense</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(605</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(588</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(364</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(3,111</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Exchange gains (losses)&nbsp;on foreign currency transactions, net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(202</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">37</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(258</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2,205</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Realized gains on securities, net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">555</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">453</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,918</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">24,940</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Other, net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">857</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">161</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(232</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,983</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,474</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,220</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,365</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">28,761</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">INCOME BEFORE INCOME TAXES</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16,170</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">32,618</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">49,143</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">420,026</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">PROVISION FOR INCOME TAXES:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Current</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,745</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,071</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,365</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">80,043</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Deferred</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(266</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">411</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(633</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(5,410</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,479</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,482</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,732</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">74,633</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">NET INCOME</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">7,691</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">22,136</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">40,411</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">345,393</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="10" style="border-bottom: 1px solid #000000">Yen</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">U.S. Dollars</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2006</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2006</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">PER SHARE OF COMMON STOCK AND ADS:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Net income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Basic</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">53.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">153.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">281.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">2.40</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Diluted</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">51.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">148.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">281.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.40</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Cash dividends paid for the year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">24.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">55.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.47</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt">The accompanying notes to consolidated financial statements are<BR>
an integral part of these statements.
</DIV>


<P align="center" style="font-size: 10pt">F-5
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><DIV style="border-bottom: 2px solid #000000; font-size: 1px">&nbsp;</DIV>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 12pt"><U>MAKITA CORPORATION AND CONSOLIDATED SUBSIDIARIES</U>
</DIV>

<DIV align="left">
<A name="303"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><U><B>CONSOLIDATED STATEMENTS OF SHAREHOLDERS&#146; EQUITY</B></U>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><U>FOR THE YEARS ENDED MARCH 31, 2004, 2005 AND 2006</U>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="10">Yen</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">U.S. Dollars</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="10" style="border-bottom: 1px solid #000000">(millions)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">(thousands)</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2006</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2006</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">COMMON STOCK:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Beginning balance</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">23,803</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">23,803</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">23,805</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">203,462</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Conversion of convertible bonds; 1,768 shares in 2005</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Ending balance</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">23,803</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">23,805</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">23,805</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">203,462</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">ADDITIONAL PAID-IN CAPITAL:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Beginning balance</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">45,419</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">45,421</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">45,430</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">388,290</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Conversion of convertible bonds</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Gain on sales of treasury stock</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">60</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Ending balance</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">45,421</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">45,430</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">45,437</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">388,350</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">LEGAL RESERVE:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Beginning balance</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">5,669</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">5,669</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">5,669</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">48,453</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Ending balance</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">5,669</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">5,669</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">5,669</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">48,453</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">RETAINED EARNINGS:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Beginning balance</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">137,753</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">138,819</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">157,502</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,346,171</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Net income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,691</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">22,136</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">40,411</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">345,393</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Cash dividends</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2,610</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(3,453</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(7,907</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(67,581</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Retirement of treasury stock</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(4,015</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(3,420</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(29,231</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Ending balance</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">138,819</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">157,502</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">186,586</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,594,752</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">ACCUMULATED OTHER COMPREHENSIVE INCOME, NET OF
TAX:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Beginning balance</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&#165;</TD>
    <TD align="right">(25,134</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&#165;</TD>
    <TD align="right">(17,048</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&#165;</TD>
    <TD align="right">(9,249</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(79,051</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Other comprehensive income for the year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,086</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,799</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,594</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">124,735</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Ending balance</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&#165;</TD>
    <TD align="right">(17,048</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&#165;</TD>
    <TD align="right">(9,249</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">5,345</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">45,684</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">TREASURY STOCK:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Beginning balance</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&#165;</TD>
    <TD align="right">(5,110</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&#165;</TD>
    <TD align="right">(3,316</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&#165;</TD>
    <TD align="right">(3,517</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(30,060</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Purchases</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2,227</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(208</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(164</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,402</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Retirement and sales</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,021</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,423</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">29,257</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Ending balance</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&#165;</TD>
    <TD align="right">(3,316</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&#165;</TD>
    <TD align="right">(3,517</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&#165;</TD>
    <TD align="right">(258</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(2,205</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">DISCLOSURE OF COMPREHENSIVE INCOME:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Net income for the year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">7,691</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">22,136</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">40,411</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">345,393</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Other comprehensive income for the year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,086</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,799</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,594</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">124,735</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Total comprehensive income for the year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">15,777</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">29,935</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">55,005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">470,128</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt">The accompanying notes to consolidated financial statements are<BR>
an integral part of these statements.
</DIV>


<P align="center" style="font-size: 10pt">F-6
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><DIV style="border-bottom: 2px solid #000000; font-size: 1px">&nbsp;</DIV>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 12pt"><U>MAKITA CORPORATION AND CONSOLIDATED SUBSIDIARIES</U>
</DIV>

<DIV align="left">
<A name="304"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><U><B>CONSOLIDATED STATEMENTS OF CASH FLOWS</B></U>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><U>FOR THE YEARS ENDED MARCH 31, 2004, 2005 AND 2006</U>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="10">Yen</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">U.S. Dollars</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="10" style="border-bottom: 1px solid #000000">(millions)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">(thousands)</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2006</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2006</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">CASH FLOWS FROM OPERATING ACTIVITIES:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Net income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">7,691</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">22,136</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">40,411</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">345,393</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Adjustments to reconcile net income to net cash provided by
operating activities-</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Depreciation and amortization</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,963</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,381</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,922</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">50,615</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Deferred income taxes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(266</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">411</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(633</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(5,410</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Realized gains on securities, net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(555</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(453</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2,918</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(24,940</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Losses (gains)&nbsp;on disposals or sales of property, plant and
equipment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2,379</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,234</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(8,326</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(71,162</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Impairment of long-lived assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,780</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">577</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Changes in assets and liabilities-</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Trade receivables</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,610</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,995</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(5,011</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(42,829</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Inventories</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,193</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(9,203</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(8,646</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(73,897</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Trade notes and accounts payables and accrued expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,175</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,069</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,121</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">43,769</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Income taxes payable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,368</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(770</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">272</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,325</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Accrued retirement and termination benefits</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(562</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(4,900</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(346</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2,957</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Other, net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(857</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,355</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(779</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(6,659</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:75px; text-indent:-15px">Net cash provided by operating activities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">28,941</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16,842</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">25,067</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">214,248</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">CASH FLOWS FROM INVESTING ACTIVITIES:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Capital expenditures</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(4,494</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(6,655</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(11,383</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(97,291</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Purchases of available-for-sale securities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(26,691</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(20,091</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(19,449</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(166,231</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Purchases of held-to-maturity securities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(8,261</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,753</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,799</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(15,376</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Proceeds from sales of available-for-sale securities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,090</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,422</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16,750</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">143,162</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Proceeds from maturities of available-for-sale securities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,100</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12,250</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17,400</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">148,718</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Proceeds from maturities of held-to-maturity securities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,510</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">200</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,709</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Proceeds from sales of property, plant and equipment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,154</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">320</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,012</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,650</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Decrease (increase)&nbsp;in time deposits</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,162</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(38</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,514</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">55,675</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Cash paid for acquisition of business</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,204</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(10,291</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Other, net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">189</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(386</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(3,298</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:75px; text-indent:-15px">Net cash provided by (used in) investing activities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(17,262</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">154</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,655</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">65,427</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">CASH FLOWS FROM FINANCING ACTIVITIES:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Increase (decrease)&nbsp;in short-term borrowings</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(882</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">693</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,073</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,171</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Redemption of bonds</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(12,990</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Repayment of long-term indebtedness</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(6,150</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(52,564</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Repayment of club members&#146; deposits</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(860</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(209</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(6,375</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(54,487</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Purchases of treasury stock, net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2,220</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(194</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(154</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,316</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Cash dividends paid</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2,610</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(3,453</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(7,907</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(67,581</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Other, net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(24</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(24</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(35</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(300</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:75px; text-indent:-15px">Net cash used in financing activities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(6,596</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(16,177</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(19,548</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(167,077</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt">The accompanying notes to consolidated financial statements are<BR>
an integral part of these statements.
</DIV>


<P align="center" style="font-size: 10pt">F-7
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><DIV style="border-bottom: 2px solid #000000; font-size: 1px">&nbsp;</DIV>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 12pt"><U>MAKITA CORPORATION AND CONSOLIDATED SUBSIDIARIES</U>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><U><B>CONSOLIDATED STATEMENTS OF CASH FLOWS</B></U>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><U>FOR THE YEARS ENDED MARCH 31, 2004, 2005 AND 2006</U>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="10">Yen</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">U.S. Dollars</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="10" style="border-bottom: 1px solid #000000">(millions)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">(thousands)</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2006</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2006</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH
EQUIVALENTS</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&#165;</TD>
    <TD align="right">(877</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&#165;</TD>
    <TD align="right">(11</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">496</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">4,240</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">NET CHANGE IN CASH AND CASH EQUIVALENTS</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,206</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">808</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,670</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">116,838</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20,370</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">24,576</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">25,384</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">216,957</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">CASH AND CASH EQUIVALENTS, END OF YEAR</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">24,576</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">25,384</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">39,054</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">333,795</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Cash paid during the year for-</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Interest</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">605</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">593</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">458</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">3,915</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Income taxes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,377</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,841</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,093</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">77,718</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">NON-CASH INVESTING AND FINANCING ACTIVITIES:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Amount due seller inconnect with business acquisition</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">649</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">5,547</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Release from obligation for club members&#146; deposits</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,461</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">55,222</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Reduction of short-term borrowings and long-term
indebtedness by deconsolidation of a subsidiary</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,177</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18,607</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt">The accompanying notes to consolidated financial statements are<BR>
an integral part of these statements.
</DIV>


<P align="center" style="font-size: 10pt">F-8
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><DIV style="border-bottom: 2px solid #000000; font-size: 1px">&nbsp;</DIV>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 12pt"><U>MAKITA CORPORATION AND CONSOLIDATED SUBSIDIARIES</U>
</DIV>
<DIV align="left">
<A name="305"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><U><B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</B></U>
</DIV>


<DIV style="margin-top: 12pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>1.</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><U><B>DESCRIPTION OF BUSINESS</B></U></TD>
</TR>

<TR>
    <TD style="font-size: 12pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Makita Corporation (the &#147;Company&#148;) is a recognized leader in
manufacture and sale of portable electric power tools. The
Company and its consolidated subsidiaries&#146; main products
include impact drivers, circular saws, jig saws, planers,
drills, rotary hammers, grinders and slide compound saws. The
Company and its consolidated subsidiaries (collectively
&#147;Makita&#148;) also manufacture and sell stationary woodworking
machines and pneumatic tools as well as garden tools.</TD>
</TR>

<TR>
    <TD style="font-size: 12pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Domestic sales in Japan are made by the Company, while
overseas sales are made under the Makita or maktec brand
name, almost entirely through sales subsidiaries and
distributors. Approximately 81.8% of consolidated net sales
for the year ended March&nbsp;31, 2006, were generated from
customers outside Japan, with 20.8% from North America, 39.5%
from Europe and 21.5% from Asia and other areas.</TD>
</TR>

<TR>
    <TD style="font-size: 12pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Makita&#146;s manufacturing and assembly operations are conducted
primarily at three plants in Japan and seven plants overseas,
located in the United States, Germany, the United Kingdom,
Brazil, China (two plants) and Canada.</TD>
</TR>

<TR>
    <TD style="font-size: 12pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>2.</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><U><B>BASIS OF PRESENTING FINANCIAL STATEMENTS</B></U></TD>
</TR>

<TR>
    <TD style="font-size: 12pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Foreign subsidiaries translate their financial statements
into Japanese yen from each of their functional currencies.
The accounts and the financial statements of the Company and
domestic subsidiaries are maintained and reported in their
functional currency, the Japanese yen.</TD>
</TR>

<TR>
    <TD style="font-size: 12pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The 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 country of domicile.</TD>
</TR>

<TR>
    <TD style="font-size: 12pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The accompanying consolidated financial statements reflect
all necessary adjustments, not recorded in the Company&#146;s and
its consolidated subsidiaries&#146; books, to present them in
conformity with U.S. generally accepted accounting principles
(&#147;U.S. GAAP&#148;).</TD>
</TR>

<TR>
    <TD style="font-size: 12pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>3.</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><U><B>SIGNIFICANT ACCOUNTING AND REPORTING POLICIES</B></U></TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 12pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B><I>(a)</I></B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B><I>Principles of Consolidation</I></B></TD>
</TR>

<TR>
    <TD style="font-size: 12pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The 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 (&#147;FASB&#148;) Interpretation
No.&nbsp;46 (revised December&nbsp;2003)
(&#147;FIN 46R&#148;), &#147;Consolidation of
Variable Interest Entities.&#148; All
significant inter-company
balances and transactions have
been eliminated in
consolidation. Makita currently
does not have any consolidated
Variable Interest Entities as
set out in FIN 46R.</TD>
</TR>

<TR>
    <TD style="font-size: 12pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B><I>(b)</I></B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B><I>Foreign Currency Translation</I></B></TD>
</TR>

<TR>
    <TD style="font-size: 12pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Under the provisions of
Statement of Financial
Accounting Standards (&#147;SFAS&#148;)
No.&nbsp;52, &#147;Foreign Currency
Translation,&#148; overseas
subsidiaries&#146; 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 in shareholders&#146; equity.</TD>
</TR>


</TABLE>
</DIV>
<P align="center" style="font-size: 10pt">F-9
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>


<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV style="margin-top: 12pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">



</TABLE>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><DIV style="border-bottom: 2px solid #000000; font-size: 1px">&nbsp;</DIV>
</DIV>


<DIV style="margin-top: 12pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>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).</TD>
</TR>

<TR>
    <TD style="font-size: 12pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B><I>(c)</I></B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B><I>Cash equivalents</I></B></TD>
</TR>

<TR>
    <TD style="font-size: 12pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>For purposes of the consolidated balance sheets and the consolidated
statements of cash flows, Makita considers highly liquid investments
with an original maturity of three months or less at the date of
purchase to be cash equivalents.</TD>
</TR>

<TR>
    <TD style="font-size: 12pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B><I>(d)</I></B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B><I>Marketable and Investment Securities</I></B></TD>
</TR>

<TR>
    <TD style="font-size: 12pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Makita accounts for marketable and investment securities in accordance
with SFAS No.&nbsp;115, &#147;Accounting for Certain Investments in Debt and
Equity Securities,&#148; 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.</TD>
</TR>

<TR>
    <TD style="font-size: 12pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Except for non-marketable equity securities, available-for-sale
securities are reported at fair value, and unrealized gains or losses
are recorded as a separate component of accumulated other
comprehensive income (loss), net of applicable income taxes.
Non-marketable equity securities are carried at cost and reviewed
periodically for impairment. Held-to-maturity securities are reported
at amortized cost, adjusted for the amortization or accretion of
premiums or discounts.</TD>
</TR>

<TR>
    <TD style="font-size: 12pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>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.</TD>
</TR>

<TR>
    <TD style="font-size: 12pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>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&#146;s intent and ability to retain the investment for a
period of time to allow for recovery in market value and other
relevant factors.</TD>
</TR>

<TR>
    <TD style="font-size: 12pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>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 to
be recognized is measured based on the amount by which the carrying
amount of the investment exceeds the fair value of the investment.
Fair value is determined based on quoted market prices or other
valuation techniques as appropriate.</TD>
</TR>

<TR>
    <TD style="font-size: 12pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Makita classifies marketable securities in current assets which are
available for current operations. Other investments are classified as
investment securities as a part of non-current investments and other
assets in the consolidated balance sheets.</TD>
</TR>

<TR>
    <TD style="font-size: 12pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The cost of a security sold or the amount reclassified out of
accumulated other comprehensive income (loss)&nbsp;into earnings is
determined by the average cost method.</TD>
</TR>

</TABLE>
</DIV>
<P align="center" style="font-size: 10pt">F-10
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV style="margin-top: 12pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">



</TABLE>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><DIV style="border-bottom: 2px solid #000000; font-size: 1px">&nbsp;</DIV>
</DIV>


<DIV style="margin-top: 12pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B><I>(e)</I></B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B><I>Allowance for Doubtful Receivables</I></B></TD>
</TR>

<TR>
    <TD style="font-size: 12pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Allowance for doubtful receivables represents the Makita&#146;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
potential for recovery is considered remote.</TD>
</TR>

<TR>
    <TD style="font-size: 12pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B><I>(f)</I></B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B><I>Inventories</I></B></TD>
</TR>

<TR>
    <TD style="font-size: 12pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Inventory 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.</TD>
</TR>

<TR>
    <TD style="font-size: 12pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B><I>(g)</I></B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B><I>Property, Plant and Equipment and Depreciation</I></B></TD>
</TR>

<TR>
    <TD style="font-size: 12pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>For 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&nbsp;years to 50&nbsp;years for buildings and improvements and from 3&nbsp;years to 10&nbsp;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.</TD>
</TR>

<TR>
    <TD style="font-size: 12pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Depreciation expense for the years ended March&nbsp;31, 2004, 2005 and 2006 amounted
to &#165;7,692&nbsp;million, &#165;5,175&nbsp;million and &#165;5,710&nbsp;million, respectively, which
included amortization of capitalized lease equipment.</TD>
</TR>

<TR>
    <TD style="font-size: 12pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Certain leased buildings, improvements, machinery and equipment are accounted for
as capital leases in conformity with SFAS No.&nbsp;13, &#147;Accounting for Leases.&#148; The
aggregate cost included in property, plant and equipment and related accumulated
amortization as of March&nbsp;31, 2005 and 2006, was as follows:</TD>
</TR>

</TABLE>
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="80%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7">Yen</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">U.S. Dollars</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000">(millions)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">(thousands)</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">2005</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">2006</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">2006</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Aggregate cost</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#165;</TD>
    <TD align="right">677</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#165;</TD>
    <TD align="right">656</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD colspan="2" align="right">5,607</TD>

</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Accumulated amortization</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">533</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">510</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right">4,359</TD>

</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">F-11
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><DIV style="border-bottom: 2px solid #000000; font-size: 1px">&nbsp;</DIV>
</DIV>


<DIV style="margin-top: 12pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B><I>(h)</I></B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B><I>Goodwill and Other Intangible Assets</I></B></TD>
</TR>

<TR>
    <TD style="font-size: 12pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Makita follows the provisions of SFAS No.&nbsp;141 and SFAS No.&nbsp;142. SFAS
No.&nbsp;141, &#147;Business Combinations&#148; 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.&nbsp;142, &#147;Goodwill and Other Intangible Assets&#148;
eliminates the amortization of goodwill and instead requires annual
impairment testing thereof. SFAS No.&nbsp;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.&nbsp;144, &#147;Accounting for the Impairment or
Disposal of Long-Lived Assets&#148;. 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 no longer be indefinite. In connection
with the impairment evaluation, SFAS No.&nbsp;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.</TD>
</TR>

<TR>
    <TD style="font-size: 12pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B><I>(i)</I></B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B><I>Environmental Liabilities</I></B></TD>
</TR>

<TR>
    <TD style="font-size: 12pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Liabilities for environmental remediation and other environmental
costs 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.</TD>
</TR>

<TR>
    <TD style="font-size: 12pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B><I>(j)</I></B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B><I>Research and Development Costs and Advertising Costs</I></B></TD>
</TR>

<TR>
    <TD style="font-size: 12pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Research and development costs, included in selling, general and
administrative expenses in the consolidated statements of income, are
expensed as incurred and totaled &#165;4,377&nbsp;million, &#165; 4,446&nbsp;million and
&#165;4,826&nbsp;million ($41,248 thousand) for the years ended March&nbsp;31, 2004,
2005 and 2006, respectively.</TD>
</TR>

<TR>
    <TD style="font-size: 12pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Advertising costs are also expensed as incurred and totaled &#165;3,797
million, &#165;4,381&nbsp;million and &#165;5,138&nbsp;million ($43,915 thousand) for the
years ended March&nbsp;31, 2004, 2005 and 2006, respectively.</TD>
</TR>

<TR>
    <TD style="font-size: 12pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B><I>(k)</I></B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B><I>Shipping and Handling Costs</I></B></TD>
</TR>

<TR>
    <TD style="font-size: 12pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Shipping 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 &#165;4,418&nbsp;million, &#165;5,305&nbsp;million and &#165;6,774&nbsp;million
($57,897 thousand) for the years ended March&nbsp;31, 2004, 2005and 2006,
respectively.</TD>
</TR>

<TR>
    <TD style="font-size: 12pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B><I>(l)</I></B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B><I>Income Taxes</I></B></TD>
</TR>

<TR>
    <TD style="font-size: 12pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Makita accounts for income taxes in accordance with the provision of
SFAS No.&nbsp;109, &#147;Accounting for Income Taxes,&#148; 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.</TD>
</TR>

<TR>
    <TD style="font-size: 12pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B><I>(m)</I></B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B><I>Product Warranties</I></B></TD>
</TR>

<TR>
    <TD style="font-size: 12pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>A 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.</TD>
</TR>

</TABLE>
</DIV>
<P align="center" style="font-size: 10pt">F-12
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><DIV style="border-bottom: 2px solid #000000; font-size: 1px">&nbsp;</DIV>
</DIV>



<DIV style="margin-top: 12pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">


<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B><I>(n)</I></B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B><I>Pension Plans</I></B></TD>
</TR>

<TR>
    <TD style="font-size: 12pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Makita accounts for pension plans in accordance with the provisions
of SFAS No.&nbsp;87, &#147;Employers&#146; Accounting for Pensions.&#148; 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&nbsp;percent of the greater of (1)&nbsp;the projected
benefit obligation or (2)&nbsp;the fair value of that plan&#146;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.</TD>
</TR>

<TR>
    <TD style="font-size: 12pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B><I>(o)</I></B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B><I>Earnings Per Share</I></B></TD>
</TR>

<TR>
    <TD style="font-size: 12pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Basic 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. Diluted earnings per share
reflects the potential dilution computed on the basis that all
convertible bonds had been converted at the beginning of the year or
at the time of issuance unless they were antidilutive.</TD>
</TR>

<TR>
    <TD style="font-size: 12pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B><I>(p)</I></B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B><I>Impairment of Long-Lived Assets</I></B></TD>
</TR>

<TR>
    <TD style="font-size: 12pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Makita accounts for impairment of long lived assets with finite
useful lives in accordance with the provisions of SFAS No.&nbsp;144,
&#147;Accounting for the Impairment or Disposal of Long-lived Assets.&#148;
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 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.</TD>
</TR>

<TR>
    <TD style="font-size: 12pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B><I>(q)</I></B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B><I>Derivative Financial Instruments</I></B></TD>
</TR>

<TR>
    <TD style="font-size: 12pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Makita conforms to SFAS No.&nbsp;133, &#147;Accounting for Derivative
Instruments and Hedging Activities&#148; as amended. Makita recognizes all
derivative instruments as either assets or liabilities in the
consolidated balance sheets and measure those instruments at fair
values. 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.</TD>
</TR>

<TR>
    <TD style="font-size: 12pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>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. Makita dose 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.</TD>
</TR>

</TABLE>
</DIV>
<P align="center" style="font-size: 10pt">F-13
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><DIV style="border-bottom: 2px solid #000000; font-size: 1px">&nbsp;</DIV>
</DIV>


<DIV style="margin-top: 12pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">


<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B><I>(r)</I></B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B><I>Use of Estimates in the Preparation of Financial Statements</I></B></TD>
</TR>

<TR>
    <TD style="font-size: 12pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The preparation of financial statements in conformity with
U.S. generally accepted accounting principles 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.</TD>
</TR>

<TR>
    <TD style="font-size: 12pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>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.</TD>
</TR>

<TR>
    <TD style="font-size: 12pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B><I>(s)</I></B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B><I>Revenue Recognition</I></B></TD>
</TR>

<TR>
    <TD style="font-size: 12pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Makita recognizes revenue when persuasive evidence of an
arrangement exists, delivery has occurred or services are
rendered, the sales price is fixed and determinable and
collectibility is reasonably assured. Makita believes the
foregoing conditions are satisfied upon shipment or
delivery of the product depending on the terms of the
sales arrangement.</TD>
</TR>

<TR>
    <TD style="font-size: 12pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Makita sells its products outside of Japan directly to
retail customers pursuant to sales contracts and purchase
orders. Within Japan, the Company mainly utilizes
wholesalers, which in turn, provide the products to their
associated retail customers. Arrangements with wholesalers
are subject to customary terms and conditions evidenced by
signed contractual arrangements. The use of wholesalers is
a customary point of sale business practice in Japan for
which many companies across multiple industries
participate.</TD>
</TR>

<TR>
    <TD style="font-size: 12pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Makita recognizes revenue to its wholesale customers upon
shipment. Makita believes recognition of revenue at this
point is appropriate because (i)&nbsp;the title and risk of
loss passes to the wholesaler upon shipment of a product
to the wholesaler; (ii)&nbsp;Makita is not contractually
obligated nor has Makita accepted returns of the product
historically from the wholesaler other than in the event
of product defect; (iii)&nbsp;payment terms are established
consistent with Makita&#146;s normal payment terms for all
other customers; (iv)&nbsp;payment terms are not linked
contractually nor practically to the payment of the
wholesalers invoices by its retail customers and; (v)
sales incentives are offered directly to wholesalers under
terms and conditions similar to arrangements offered to
other customers and are in no way established to provide
relief in lieu of returned products.</TD>
</TR>

<TR>
    <TD style="font-size: 12pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Furthermore, Makita periodically reviews readily available
financial statements and other market data on certain of
its wholesale customers in order to assess their overall
financial viability for the purposes of establishing
credit limits. Within Japan, the Company also requires on
average, two months worth of estimated sales be held in
the form of cash collateral with an independent third
party or that the Company be granted a security interest
in the wholesaler&#146;s assets of an equivalent value.</TD>
</TR>

<TR>
    <TD style="font-size: 12pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>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 (&#147;EITF 01-9&#148;), &#147;Accounting for Consideration by a
Vendor to a Customer (including a Reseller of vendor&#146;s
product).&#148;</TD>
</TR>

<TR>
    <TD style="font-size: 12pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>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.</TD>
</TR>

</TABLE>
</DIV>
<P align="center" style="font-size: 10pt">F-14
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><DIV style="border-bottom: 2px solid #000000; font-size: 1px">&nbsp;</DIV>
</DIV>


<DIV style="margin-top: 12pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">


<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Cooperative advertisings are 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.</TD>
</TR>

<TR>
    <TD style="font-size: 12pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>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&#146;s ability to reliably estimate such future discounts
to be taken. Cash discounts are substantially all taken within 30
days following the date of sale. Estimates of expected cash discounts
are evaluated and adjusted periodically based on actual sales
transactions and historical trend.</TD>
</TR>

<TR>
    <TD style="font-size: 12pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>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.</TD>
</TR>

<TR>
    <TD style="font-size: 12pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B><I>(t)</I></B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B><I>New Accounting Standards</I></B></TD>
</TR>

<TR>
    <TD style="font-size: 12pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>In November&nbsp;2004, the FASB issued SFAS No.&nbsp;151, &#147;Inventory Costs &#150; an
amendment of ARB No.&nbsp;43, Chapter&nbsp;4&#148; (&#147;SFAS No.&nbsp;151&#148;). SFAS No.&nbsp;151
amends the guidance in ARB No.&nbsp;43, Chapter&nbsp;4, &#147;Inventory Pricing,&#148; to
clarify the accounting for abnormal amounts of idle facility expense,
freight, handling costs, and wasted material (spoilage). Among other
provisions, the new statement requires that items such as idle
facility expense, excessive spoilage, double freight, and rehandling
costs be recognized as current period charges regardless of whether
they meet the criterion of &#147;so abnormal&#148; as stated in ARB No.&nbsp;43.
Additionally, SFAS No.&nbsp;151 requires that the allocation of fixed
production overheads to the costs of conversion be based on the
normal capacity of the production facilities. SFAS No.&nbsp;151 is
effective for the year ended March&nbsp;31, 2007. Makita does not expect
the adoption of SFAS No.&nbsp;151 will have a material impact on its
consolidated results of operations and financial condition.</TD>
</TR>

<TR>
    <TD style="font-size: 12pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>In December&nbsp;2004, the FASB issued SFAS No.&nbsp;153, &#147;Exchanges of
Non-monetary Assets &#150; an amendment of APB Opinion No.&nbsp;29.&#148; SFAS No.
153 eliminates the exception from fair value measurement for
non-monetary exchanges of similar productive assets in paragraph
21(b) of APB Opinion No.&nbsp;29, &#147;Accounting for Non-monetary
Transactions,&#148; and replaces it with an exception for exchanges that
do not have commercial substance. SFAS No.&nbsp;153 specifies that a
non-monetary exchange has commercial substance if the future cash
flows of the entity are expected to change significantly as a result
of the exchange. SFAS No.&nbsp;153 is effective for fiscal periods
beginning after June&nbsp;15, 2005 and is required to be adopted by
Makita, in the fiscal year beginning April&nbsp;1, 2006. Makita does not
expect the adoption of SFAS No.&nbsp;153 will have a material impact on
its consolidated results of operations and financial condition.</TD>
</TR>

<TR>
    <TD style="font-size: 12pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>In May&nbsp;2005, the FASB issued SFAS No.&nbsp;154, &#147;Accounting Changes and
Error Corrections&#151;a replacement of APB Opinion No.&nbsp;20 and FASB
Statement No.&nbsp;3.&#148; SFAS No.&nbsp;154 replaces APB Opinion No.&nbsp;20,
&#147;Accounting Changes&#148; and SFAS No.&nbsp;3,&#147;Reporting Accounting Changes in
Interim Financial Statements,&#148; and provides guidance on the
accounting for and reporting of accounting changes and error
corrections. SFAS No.&nbsp;154 establishes retrospective application, or
the latest practicable date, as the required method for reporting a
change in accounting principle and the reporting of a correction of
an error. SFAS No.&nbsp;154 is effective for accounting changes and
corrections of errors made in fiscal years beginning after December
15, 2005</TD>
</TR>

<TR>
    <TD style="font-size: 12pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>In June&nbsp;2005, the FASB issued FASB Staff Position (FSP)&nbsp;FAS 143-1,
&#147;Accounting for Electronic Equipment Waste Obligations&#148; (&#147;FSP
143-1&#148;). FSP 143-1 provides guidance on the accounting for certain
obligations associated with the Waste Electrical and Electronic
Equipment Directive (the &#147;Directive&#148;), adopted by the European Union
(&#147;EU&#148;). Under the Directive, the waste management obligation for
historical equipment (products put on the market on or prior to
August&nbsp;13, 2005) remains with the commercial user until the customer
replaces the equipment. FSP 143-1 is required to be applied to the
later of the first reporting period ending after June&nbsp;8, 2005 or the
date of the Directive&#146;s adoption into law by the applicable EU member
countries. Makita does not expect the adoption of FSP 143-1 will have
a material impact on its consolidated results of operations and
financial condition.</TD>
</TR>

<TR>
    <TD style="font-size: 12pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>In November&nbsp;2005, the FASB issued FSP FAS 115-1 and FAS 124-1, &#147;The
Meaning of Other-Than-Temporary Impairment and Its Application to
Certain Investments&#148; (&#147;FSP 115-1&#148;). FSP 115-1 provides guidance on
determining when investments in certain debt and equity securities
are considered impaired, whether that impairment is
other-than-temporary, and on measuring such impairment loss. FSP
115-1 also includes accounting considerations subsequent to the
recognition of an other-than-temporary impairment and </TD>
</TR>

</TABLE>
</DIV>
<P align="center" style="font-size: 10pt">F-15
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><DIV style="border-bottom: 2px solid #000000; font-size: 1px">&nbsp;</DIV>
</DIV>



<DIV style="margin-top: 12pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">


<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>requires certain disclosures about unrealized losses that have not been
recognized as other-than-temporary impairments. FSP 115-1 is required
to be applied to reporting periods beginning after December&nbsp;15, 2005.
Makita does not expect the adoption of FSP 115-1 will have a material
impact on its consolidated results of operations and financial
condition.</TD>
</TR>

<TR>
    <TD style="font-size: 12pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B><I>(u)</I></B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B><I>Reclassifications</I></B></TD>
</TR>

<TR>
    <TD style="font-size: 12pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Certain reclassifications have been made to the prior years&#146;
consolidated financial statements to conform with the presentation
used for the year ended March&nbsp;31, 2006.</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 12pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>4.</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><U><B>TRANSLATION OF FINANCIAL STATEMENTS</B></U></TD>
</TR>

<TR>
    <TD style="font-size: 12pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Solely for the convenience of readers, the accompanying consolidated
financial statement amounts for the year ended March&nbsp;31, 2006, 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 &#165;117 to US$1 at March&nbsp;31, 2006. This
translation should not be construed as a representation that the
amounts shown could be or could have been converted into United States
dollars at the rate.</TD>
</TR>

<TR>
    <TD style="font-size: 12pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>5.</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><U><B>INVENTORIES</B></U></TD>
</TR>

<TR>
    <TD style="font-size: 12pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Inventories as of March&nbsp;31, 2005 and 2006 comprised the following:</TD>
</TR>

</TABLE>
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="80%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6">Yen</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">U.S. Dollars</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000">(millions)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">(thousands)</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2006</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2006</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Finished goods</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">53,425</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">64,121</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">548,043</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Work in process</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,844</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,338</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19,983</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Raw materials</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,734</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,362</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">114,205</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">66,003</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">79,821</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">682,231</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV style="margin-top: 12pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>6.</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><U><B>IMPAIRMENT OF LONG LIVED ASSETS</B></U></TD>
</TR>

<TR>
    <TD style="font-size: 12pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>In December&nbsp;2003, in connection with the ongoing strategic revenue growth and cost cutting
initiatives, specifically including an evaluation of its corporate wide marketing, promotional
activities, the cost benefit relationship therefrom, and the continued rationalization of
certain personnel related costs, Makita made a decision to no longer consider a golf course
owned by a 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, Makita 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 of &#165; 5,996&nbsp;million to reduce the carrying value to its estimated fair value, as
determined on a discounted cash flow basis.</TD>
</TR>

<TR>
    <TD style="font-size: 12pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>On May&nbsp;7, 2005, the Nagoya District Court confirmed a civil rehabilitation plan for Joyama
Kaihatsu, Ltd. On May&nbsp;31, 2005, upon confirmation of the civil rehabilitation plan, Makita
transferred its ownership interests in Joyama Kaihatsu, Ltd., to a third party. In connection
with this ownership transfer, Makita recorded a gain on sale of the golf course of &#165; 8,479
million including the release from its obligation for club membership deposits of &#165; 6,461
million in the consolidated income statement in the year ended March&nbsp;31, 2006.</TD>
</TR>

<TR>
    <TD style="font-size: 12pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>During the year ended March&nbsp;31, 2004, Makita made a decision to sell a part of its production
facility in the United Kingdom rather than holding it for future use. As a result of this
decision, Makita recorded an impairment charge of &#165;243&nbsp;million, based on the expected sales
value less cost to sell the facility.</TD>
</TR>

<TR>
    <TD style="font-size: 12pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The Company, as part of its facilities integration and cost cutting plans, decided to vacate a
certain research and development facility in Japan and a related administrative facility during
the year ended March&nbsp;31, 2004, and a certain information technology facility (collectively the
&#147;Facility&#148;) during the year ended March&nbsp;31, 2005. The Company intends to continue to hold the
Facility as is for the foreseeable future considering the expected difficulty in identifying a
buyer with operating plans commensurating with the present zoning requirements. As discussed
above, the Facility was principally used as a research and development facility and provides
training and information technology</TD>
</TR>


</TABLE>
</DIV>
<P align="center" style="font-size: 10pt">F-16
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>


<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><DIV style="border-bottom: 2px solid #000000; font-size: 1px">&nbsp;</DIV>
</DIV>



<DIV style="margin-top: 12pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">


<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>services. The current zoning regulations require that the
buyer utilize the Facility on a substantially same basis. Therefore, the combination of the
limitations imposed by the zoning rules and the fact that the Facility is located in a rural,
non industrial section of Japan has caused management to determine that the recoverable value on
an as-is basis will most likely be limited to the estimated fair value of the land.</TD>
</TR>

<TR>
    <TD style="font-size: 12pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>As a result of the decision to vacate the Facility, the Company performed an
impairment assessment pursuant to the provisions of SFAS No.&nbsp;144 and recorded
an impairment charge of &#165;1,541&nbsp;million and &#165;577&nbsp;million for the years ended
March&nbsp;31, 2004 and 2005, respectively. This impairment charge reduced the
carrying value of the administrative facility to its estimated fair value of
&#165;316&nbsp;million in the year ended March&nbsp;31, 2004 and the technology facility to
&#165;196&nbsp;million in the year ended March&nbsp;31, 2005. The estimated fair value of &#165;316
million and &#165;196&nbsp;million represents the fair value of the land as determined by
a third party appraiser considering the estimated net cash flows from effecting
the sale to a third party purchaser. The carrying value of the building has
been reduced to zero on the basis that the Company anticipates no future use
from the Facility and the expectation of realizing only the value of the land
upon sale. Presently, the Company has not decided how and when to dispose of
the Facility. In addition, the Company currently has no plans regarding the use
of the vacated Facility and as a result, the Company does not expect any future
cash flows from the Facility.</TD>
</TR>

</TABLE>
</DIV>
<P align="center" style="font-size: 10pt">F-17
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><DIV style="border-bottom: 2px solid #000000; font-size: 1px">&nbsp;</DIV>
</DIV>




<DIV style="margin-top: 12pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>7.</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><U><B>MARKETABLE SECURITIES AND INVESTMENT SECURITIES</B></U></TD>
</TR>

<TR>
    <TD style="font-size: 12pt">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Marketable securities and investment securities consisted of available-for-sale securities and held-to-maturity securities.
</TD>
</TR>
<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The cost, gross unrealized holding gains and losses, fair value and carrying amount for such securities by major security type as of March
31, 2005 and 2006, were as follows:</TD>
</TR>

</TABLE>
</DIV>
<DIV align="right">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="98%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="40%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="18" style="border-bottom: 1px solid #000000">Yen (millions)</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6">Gross Unrealized</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000">Holding</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Carrying</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000">As of March 31, 2005</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Cost</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Gains</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Losses</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Fair value</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Amount</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Available-for-sale:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Marketable securities:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Japanese and foreign government debt securities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">100</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">101</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">101</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Corporate and bank debt securities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,580</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">151</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,730</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,730</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Investments in trusts</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">48,391</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,098</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">49,475</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">49,475</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Marketable equity securities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,403</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,129</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,532</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,532</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:60px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">55,474</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">2,379</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">15</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">57,838</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">57,838</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Investment securities:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Corporate and bank debt securities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">1,594</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">20</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">1,614</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">1,614</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Investments in trusts</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">645</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">94</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">739</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">739</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Marketable equity securities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,837</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,481</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17,311</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17,311</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Non-marketable equity securities (carried at cost)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">590</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">590</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">590</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:60px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">10,666</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">9,595</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">20,254</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">20,254</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:60px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Held-to-maturity:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Marketable securities:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Japanese corporate debt securities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">100</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">100</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">100</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:60px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">100</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">100</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">100</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:60px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Investment securities:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Japanese government debt securities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">300</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">302</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">300</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Japanese corporate debt securities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,552</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,549</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,552</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:60px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">1,852</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">1,851</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">1,852</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:60px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total marketable securities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">55,574</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">2,379</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">15</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">57,938</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">57,938</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:60px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total investment securities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">12,518</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">9,599</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">12</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">22,105</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">22,106</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:60px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">F-18
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><DIV style="border-bottom: 2px solid #000000; font-size: 1px">&nbsp;</DIV>
</DIV>


<DIV align="right">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="98%">
<!-- Begin Table Head -->
<TR valign="bottom" style="font-size: 12pt">
    <TD width="40%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="18" style="border-bottom: 1px solid #000000">Yen (millions)</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6">Gross Unrealized</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000">Holding</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Carrying</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000">As of March 31, 2006</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Cost</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Gains</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Losses</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Fair value</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Amount</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Available-for-sale:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Marketable securities:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Japanese and foreign government
debt securities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">1</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Corporate and bank debt securities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,376</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">77</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">78</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,375</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,375</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Investments in trusts</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">36,874</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,691</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">57</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">38,508</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">38,508</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Marketable equity securities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,496</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,093</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,589</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,589</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:45px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">42,747</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">3,861</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">135</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">46,473</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">46,473</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Investment securities:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Corporate and bank debt securities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">42</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">42</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">42</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Investments in trusts</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">666</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">109</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">775</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">775</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Marketable equity securities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,334</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16,466</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">26,800</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">26,800</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Non-marketable equity securities
(carried at cost)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">572</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">572</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">572</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:45px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">11,614</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">16,575</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">28,189</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">28,189</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:45px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Held-to-maturity:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Marketable securities:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Japanese corporate debt securities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">1,300</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">1,300</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">1,300</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:45px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">1,300</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,300</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,300</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:45px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Investment securities:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Japanese government debt securities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">300</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">297</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">300</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Japanese corporate debt securities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,950</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">122</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,828</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,950</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:45px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">2,250</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">125</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">2,125</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">2,250</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:45px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR><TD align="left" valign="top">&nbsp;</TD></TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total marketable securities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">44,047</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">3,861</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">135</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">47,773</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">47,773</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:45px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total investment securities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">13,864</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">16,575</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">125</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">30,314</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">30,439</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:45px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">F-19
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><DIV style="border-bottom: 2px solid #000000; font-size: 1px">&nbsp;</DIV>
</DIV>


<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="right">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="98%">
<!-- Begin Table Head -->
<TR valign="bottom" style="font-size: 12pt">
    <TD width="40%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="18" style="border-bottom: 1px solid #000000">U.S. Dollars (thousands)</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6">Gross Unrealized</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000">Holding</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Carrying</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000">As of March 31, 2006</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Cost</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Gains</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Losses</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Fair value</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Amount</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Available-for-sale:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Marketable securities:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Japanese and foreign government debt
securities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">9</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Corporate and bank debt securities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">37,402</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">658</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">667</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">37,393</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">37,393</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Investments in trusts</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">315,162</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,453</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">487</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">329,128</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">329,128</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Marketable equity securities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12,786</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17,889</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">30,675</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">30,675</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">365,359</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">33,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,154</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">397,205</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">397,205</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Investment securities:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Corporate and bank debt securities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">358</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">358</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">358</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Investments in trusts</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,692</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">932</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,624</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,624</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Marketable equity securities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">88,325</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">140,735</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">229,060</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">229,060</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Non-marketable equity securities
(carried at cost)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,889</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,889</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,889</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:45px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">99,264</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">141,667</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">240,931</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">240,931</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:45px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Held-to-maturity:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Marketable securities:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Japanese corporate debt securities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">11,111</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">11,111</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">11,111</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:45px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">11,111</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">11,111</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">11,111</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:45px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Investment securities:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Japanese government debt securities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">2,564</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">25</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">2,539</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">2,564</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Japanese corporate debt securities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16,667</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,043</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15,624</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16,667</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:45px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">19,231</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,068</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">18,163</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">19,231</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:45px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR><TD align="left" valign="top">&nbsp;</TD></TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total marketable securities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">376,470</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">33,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,154</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">408,316</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">408,316</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:45px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total investment securities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">118,495</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">141,667</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,068</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">259,094</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">260,162</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:45px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV style="margin-top: 12pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Investments in trusts represent funds deposited with trust banks in multiple investor
accounts and managed by the fund managers of the trust banks. As of March&nbsp;31, 2005 and 2006,
each fund consisted of marketable equity securities and interest-bearing bonds.</TD>
</TR>

</TABLE>
</DIV>
<P align="center" style="font-size: 10pt">F-20
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>



<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><DIV style="border-bottom: 2px solid #000000; font-size: 1px">&nbsp;</DIV>
</DIV>


<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV style="margin-top: 12pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The following table shows our investments&#146; gross unrealized holding losses and fair value, aggregated by investment category and length of time that individual securities have been in a
continuous unrealized loss position, at March&nbsp;31, 2006.</TD>
</TR>

</TABLE>
</DIV>
<DIV align="right">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="98%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="14" style="border-bottom: 1px solid #000000">Yen (millions)</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000">Less than 12 months</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000">12 months or more</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Gross</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Gross</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Unrealized</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Unrealized</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Holding</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Holding</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000">As of March 31, 2006</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Fair value</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Losses</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Fair value</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Losses</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Available-for-sale:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Marketable securities:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Corporate and bank debt securities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">1,374</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">78</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Investments in trusts</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,792</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">57</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">5,166</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">135</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Held-to-maturity:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Investment securities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Japanese government debt securities:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">297</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Japanese corporate debt securities:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">1,828</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">122</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">2,125</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">125</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="right">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="98%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="14" style="border-bottom: 1px solid #000000">U.S. Dollars (thousands)</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000">Less than 12 months</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000">12 months or more</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Gross</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Gross</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Unrealized</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Unrealized</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Holding</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Holding</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000">As of March 31, 2006</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Fair value</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Losses</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Fair value</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Losses</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Available-for-sale:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Marketable securities:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Corporate and bank debt securities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">11,744</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">667</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Investments in trusts</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">32,410</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">487</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">44,154</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,154</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Held-to-maturity:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Investment securities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Japanese government debt securities:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,539</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">25</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Japanese corporate debt securities:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">15,624</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,043</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">18,163</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,068</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">F-21
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><DIV style="border-bottom: 2px solid #000000; font-size: 1px">&nbsp;</DIV>
</DIV>





<DIV style="margin-top: 12pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Maturities of debt securities classified as available-for-sale and held-to-maturity as of March&nbsp;31, 2006, regardless of their balance sheet classification, were as follows:</TD>
</TR>

<TR>
    <TD style="font-size: 12pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><U>Maturities of debt securities based on Cost as of March&nbsp;31, 2006</U></TD>
</TR>

</TABLE>
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="80%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="28%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="10" style="border-bottom: 1px solid #000000">Yen (millions)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>

<TD nowrap align="center" colspan="10" style="border-bottom: 1px solid #000000">U.S. Dollars (thousands)</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Available-</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Held-to-</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Available-</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Held-to-</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">for-sale</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">maturity</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Total</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">for-sale</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">maturity</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Total</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Due within one year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">2,925</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">1,300</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">4,225</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">25,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">11,111</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">36,111</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Due after one to five years</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">30</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,650</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,680</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">256</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,103</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,359</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Due after five to ten years</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">100</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">600</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">700</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">855</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,128</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,983</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Due after ten years</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,364</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,364</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,658</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,658</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">4,419</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">3,550</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">7,969</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">37,769</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">30,342</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">68,111</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV style="margin-top: 12pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><U>Maturities of debt securities based on Fair Value as of March&nbsp;31, 2006</U></TD>
</TR>

</TABLE>
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="80%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="28%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="10" style="border-bottom: 1px solid #000000">Yen (millions)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>

<TD nowrap align="center" colspan="10" style="border-bottom: 1px solid #000000">U.S. Dollars (thousands)</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Available-</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Held-to-</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Available-</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Held-to-</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">for-sale</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">maturity</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Total</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">for-sale</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">maturity</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Total</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Due within one year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">3,002</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">1,300</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">4,302</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">25,658</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">11,111</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">36,769</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Due after one to five years</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">30</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,631</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,661</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">256</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,940</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,196</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Due after five to ten years</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">94</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">494</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">588</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">803</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,223</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,026</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Due after ten years</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,292</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,292</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,043</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,043</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">4,418</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">3,425</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">7,843</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">37,760</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">29,274</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">67,034</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV style="margin-top: 12pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Gross realized gains on sales of marketable securities and investment securities for the years ended March&nbsp;31, 2004, 2005 and 2006 amounted to &#165;862&nbsp;million and &#165;543&nbsp;million and &#165;437&nbsp;million ($3,736 thousand), respectively. Effective October&nbsp;1,
2005, UJF Holdings Co., Ltd., and Mitsubishi Tokyo Financial Group Co., Ltd., completed a merge in which, the shares of common stock owned by the Company in UFJ Holdings were exchanged for shares of common stock of the newly merged entity,
Mitsubishi UFJ Financial Group Co., Ltd. As a result of this merger and common share exchange, the Company realized a gain on securities of &#165;2,528&nbsp;million ($21,606 thousand) for the year ended March&nbsp;31, 2006. Gross realized losses, which included
the gross realized losses considered as other than temporary, during the years ended March&nbsp;31, 2004, 2005 and 2006 amounted to &#165;307&nbsp;million, &#165;90&nbsp;million and &#165;47&nbsp;million ($402 thousand), respectively. The cost of the securities sold was computed
based on the average cost of all the shares of each such security held at the time of sale. Gross unrealized losses on marketable securities and investment securities of which declines in market value are considered to be other than temporary were
charged to earnings as realized losses on securities, amounting to &#165;279&nbsp;million, &#165;82&nbsp;million and &#165;47&nbsp;million ($402 thousand) for the years ended March&nbsp;31, 2004, 2005 and 2006, respectively. Proceeds from the sales and maturities of
available-for-sale securities were &#165;18,190&nbsp;million, &#165;14,672&nbsp;million and &#165;34,150&nbsp;million ($291,880 thousand) for the years ended March&nbsp;31, 2004, 2005 and 2006, respectively. Proceeds from the held-to-maturity securities were &#165;13,510&nbsp;million and
&#165;200&nbsp;million ($1,709 thousand) for the years ended March&nbsp;31, 2005 and 2006, respectively.</TD>
</TR>

</TABLE>
</DIV>
<P align="center" style="font-size: 10pt">F-22
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><DIV style="border-bottom: 2px solid #000000; font-size: 1px">&nbsp;</DIV>
</DIV>




<DIV style="margin-top: 12pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>8.</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><U><B>ACQUISITIONS</B></U></TD>
</TR>

<TR>
    <TD style="font-size: 12pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>To 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 &#147;Business&#148;)
on January&nbsp;1, 2006 for total cash consideration of
&#165;1,853&nbsp;million ($15,838 thousand) including direct
acquisition costs of which, &#165;649&nbsp;million was unpaid
and included in other payables in the accompanying
consolidated balance sheet at March&nbsp;31, 2006 and
which was paid in April&nbsp;2006.</TD>
</TR>

<TR>
    <TD style="font-size: 12pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>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 financial position and the
results of the operation of the Business are included
in the Japan segment in Note 19. 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
(the &#147;Goodwill&#148;) was &#165;779&nbsp;million ($6,658 thousand) as
of March&nbsp;31, 2006. The Goodwill is deductible for
Japanese tax purpose.</TD>
</TR>

<TR>
    <TD style="font-size: 12pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>In connection with this acquisition, intangible assets
of the Business comprised patents of &#165;179&nbsp;million
($1,530 thousand), which were estimated to have a
remaining useful life of 8&nbsp;years, and customer
relationships of &#165;135&nbsp;million ($1,154 thousand), which
were estimated to have a remaining useful life of 10
years. These assets were recorded and presented as
other intangible assets, net in the accompanying
consolidated balance sheets.</TD>
</TR>

<TR>
    <TD style="font-size: 12pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Had the operating result of the Business been included as if the
transaction had been consummated on April&nbsp;1, 2005, the pro forma
operating results for the Company for the year ended March&nbsp;31, 2006
would not have been materially different.</TD>
</TR>

<TR>
    <TD style="font-size: 12pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>9.</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><U><B>INCOME TAXES</B></U></TD>
</TR>

<TR>
    <TD style="font-size: 12pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Income before income taxes and the provision for income taxes for the years ended March&nbsp;31, 2004, 2005 and 2006 were as follows:</TD>
</TR>

</TABLE>
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="80%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="10">Yen</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">U.S. Dollars</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="10" style="border-bottom: 1px solid #000000">(millions)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">(thousands)</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2006</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2006</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Income before income taxes:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Domestic</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">3,237</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">15,837</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">26,895</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">229,872</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Foreign</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12,933</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16,781</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">22,248</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">190,154</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">16,170</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">32,618</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">49,143</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">420,026</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Provision for income taxes:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Current-</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Domestic</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">5,264</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">5,121</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">3,171</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">27,103</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Foreign</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,481</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,950</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,194</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">52,940</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,745</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,071</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,365</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">80,043</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Deferred-</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Domestic</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">26</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">589</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(166</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,419</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Foreign</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(292</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(178</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(467</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(3,991</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(266</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">411</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(633</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(5,410</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Consolidated provision for income taxes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">8,479</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">10,482</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">8,732</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">74,633</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<P align="center" style="font-size: 10pt">F-23
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>


<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><DIV style="border-bottom: 2px solid #000000; font-size: 1px">&nbsp;</DIV>
</DIV>



<DIV style="margin-top: 12pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Total income taxes were allocated as follows:</TD>
</TR>

</TABLE>
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="80%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="10">Yen</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">U.S. Dollars</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="10" style="border-bottom: 1px solid #000000">(millions)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">(thousands)</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2006</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2006</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Provision for income taxes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">8,479</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">10,482</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">8,732</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">74,633</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Shareholders&#146; equity:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Foreign currency translation adjustments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(458</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">945</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">272</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,325</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Net unrealized holding gains on
available-for-sale securities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,168</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">60</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,363</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">28,744</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Minimum pension liability adjustment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,392</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,403</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,360</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,623</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">16,581</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">14,890</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">13,727</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">117,325</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV style="margin-top: 12pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>As a result of the enactment of an amendment to the Japanese local tax law on March&nbsp;31, 2003, the effective tax rate used for the calculation of deferred income tax assets and liabilities was reduced
from 41.4% to 40.2% for the year ended March&nbsp;31, 2003, and increased from 40.2% to 40.3% for the year ended March&nbsp;31, 2004. The effect of this tax rate change for the year ended March&nbsp;31, 2004 was an
&#165;11&nbsp;million increase to total tax expense. For the years ended March&nbsp;31, 2005 and 2006, residual tax effects of &#165;168&nbsp;million and &#165;336&nbsp;million ($2,872 thousand) previously recorded in accumulated other
comprehensive income (minimum pension liability adjustments) were released and recorded as a reduction to income tax expense in the consolidated statements of income as a result of the elimination of
the minimum pension liability adjustment.</TD>
</TR>

<TR>
    <TD style="font-size: 12pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The Company and its domestic subsidiaries are subject to a National Corporate tax of 30.0%, an Inhabitant tax of approximately 5.6% and a deductible Enterprise tax of approximately 7.9%, which in the
aggregate resulted in a combined statutory income tax rate of approximately 40.3% for the years ended March&nbsp;31, 2005 and 2006.</TD>
</TR>


</TABLE>
</DIV>
<P align="center" style="font-size: 10pt">F-24
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><DIV style="border-bottom: 2px solid #000000; font-size: 1px">&nbsp;</DIV>
</DIV>



<DIV style="margin-top: 12pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>A reconciliation of the combined statutory income tax rates to the effective income tax rates is as follows:</TD>
</TR>

</TABLE>
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="80%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="10" style="border-bottom: 1px solid #000000">Year ended March 31,</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2006</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Combined statutory income tax rate in Japan</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">41.4</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">40.3</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">40.3</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Non-deductible expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.6</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Non-taxable dividends received</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(0.2</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(0.1</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(0.2</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Change in valuation allowance</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2.1</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(11.3</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Impact of advance pricing agreement finalization</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1.3</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Effect of changes in enacted tax rate</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(0.5</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(0.7</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Tax sparing impact</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1.8</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(5.5</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(3.5</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Effect of the foreign tax rate differential</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1.3</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2.8</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(6.7</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other, net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(0.4</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(0.7</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Effective income tax rate</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">52.4</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">32.1</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">17.8</TD>
    <TD nowrap>%</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Body -->
</TABLE>
</DIV>


<DIV style="margin-top: 12pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>According to the provisions of the tax treaties which have been concluded between Japan and 15 countries, Japanese corporations can claim a tax credit against Japanese income taxes on income earned in one of those 15 countries, even though that income is
exempted from income taxes or is reduced by special tax incentive measures in those countries, as if no special exemption or reduction was provided. The Company applied such &#147;tax sparing&#148; mainly to China with the indicated tax reduction effect. The effect of
the &#147;tax sparing&#148; resulted in decrease of tax expense by &#165;292&nbsp;million or 1.8%, &#165;1,790&nbsp;million or 5.5% and &#165;1,706&nbsp;million or 3.5% ($14,701 thousand) for the years ended March&nbsp;31, 2004, 2005 and 2006, respectively.
</TD>
</TR>

<TR>
    <TD style="font-size: 12pt">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The net change in the total valuation allowance for the year ended March&nbsp;31, 2004, was an increase of &#165;2,134&nbsp;million, which was mainly caused by 100% valuation allowance against deferred income tax assets on the impairment loss on long-lived assets of the
subsidiary that operates a golf course in Japan. This increase in valuation allowance, offset by a decrease due to the tax sparing and other miscellaneous adjustments, had the effect of increasing Makita&#146;s effective tax rate by 11.0% to the effective tax
rate of 52.4% from the statutory tax rate of 41.4% for the year ended March&nbsp;31, 2004. The net change in the total valuation allowance for the year ended March&nbsp;31, 2005, was a decrease of &#165;617&nbsp;million, which was mainly caused by a decrease in net operating
losses carry forwards of certain consolidated subsidiaries. In addition to this decrease in valuation allowance, a decrease in tax sparing and other miscellaneous adjustments had the affect of decreasing Makita&#146;s effective tax rate by 8.2% to the effective
tax rate of 32.1% from the statutory tax rate of 40.3% for the year
ended March&nbsp;31, 2005. In 2006, following the completion of the civil rehabilitation proceedings and the sale of the golf course business, previously unrecognized deferred tax asset were realized in connection with the gain on sale of golf course business and the related valuation
allowance of &#165; 5,782&nbsp;million ($48,957 thousand) was reversed. Makita also provided a valuation allowance of &#165; 402&nbsp;million ($3,436 thousand) against deferred tax assets that existed at the beginning of the year because it was determined that such assets were
not more likely than not to be realized in future years. As a consequence, the net change in the total valuation allowance for the year ended March&nbsp;31, 2006 was a decrease of &#165;5,238&nbsp;million ($ 44,769 thousand), net of effect of translation, resulting in a
reduction of income tax expense. This decrease in valuation allowance as well as a decrease due to the tax sparing and other miscellaneous adjustments had affect of decreasing Makita&#146;s effective tax rate by 22.5% to the effective rate of 17.8% from the
statutory tax rate of 40.3% for the year ended March&nbsp;31, 2006.</TD>
</TR>



</TABLE>
</DIV>
<P align="center" style="font-size: 10pt">F-25
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><DIV style="border-bottom: 2px solid #000000; font-size: 1px">&nbsp;</DIV>
</DIV>




<DIV style="margin-top: 12pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The significant components of deferred income tax expense attributable to income before income taxes for the years ended March&nbsp;31, 2004, 2005 and 2006 are as follows:</TD>
</TR>

</TABLE>
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="80%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="10">Yen</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">U.S. Dollars</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="10" style="border-bottom: 1px solid #000000">(millions)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">(thousands)</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2006</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2006</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Deferred tax expense
(exclusive of the effects
of other components below)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&#165;</TD>
    <TD align="right">(282</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">619</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&#165;</TD>
    <TD align="right">(1,035</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(8,846</TD>
    <TD nowrap>)</TD>
</TR>
<TR><TD align="left" valign="top">&nbsp;</TD></TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Adjustment to deferred tax
assets and liabilities for
enacted changes in tax
laws and rates</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR><TD align="left" valign="top">&nbsp;</TD></TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Increase (decrease)&nbsp;in
beginning-of-the-year
balance of the valuation
allowance for deferred
tax assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(208</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">402</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,436</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&#165;</TD>
    <TD align="right">(266</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">411</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&#165;</TD>
    <TD align="right">(633</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(5,410</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">F-26
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><DIV style="border-bottom: 2px solid #000000; font-size: 1px">&nbsp;</DIV>
</DIV>




<DIV style="margin-top: 12pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Significant components of deferred income tax assets and liabilities as of March&nbsp;31, 2005 and 2006, were as follows:</TD>
</TR>

</TABLE>
</DIV>
<DIV align="right">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="98%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6">Yen</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">U.S. Dollars</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000">(millions)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">(thousands)</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2006</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2006</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Deferred income tax assets:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Marketable securities and investment securities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">2,432</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">1,071</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">9,154</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Accrued retirement and termination benefits and other accrued expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">407</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">256</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,188</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Minimum pension liability</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,193</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">170</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,453</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Inventories</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,331</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,764</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15,077</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Property, plant and equipment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,647</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,750</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,957</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Accrued payroll</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,951</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,989</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Net operating loss carryforwards</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">854</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">868</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,419</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Other</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">949</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,153</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,855</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Total gross deferred income tax assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16,764</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,021</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">77,103</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Valuation allowance</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(8,211</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2,973</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(25,410</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">8,553</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">6,048</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">51,693</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Deferred income tax liabilities:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Undistributed earnings of overseas subsidiaries</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&#165;</TD>
    <TD align="right">(3,128</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&#165;</TD>
    <TD align="right">(791</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(6,761</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Unrealized gain on available-for-sale securities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(4,817</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(8,181</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(69,923</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Property, plant and equipment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(942</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(809</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(6,915</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Other</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(101</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(7</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(59</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Total gross deferred income tax liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&#165;</TD>
    <TD align="right">(8,988</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&#165;</TD>
    <TD align="right">(9,788</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(83,658</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Net deferred income tax liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&#165;</TD>
    <TD align="right">(435</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&#165;</TD>
    <TD align="right">(3,740</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(31,965</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV style="margin-top: 12pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Net deferred income taxes are recorded in the consolidated balance sheets as follows:</TD>
</TR>

</TABLE>
</DIV>
<DIV align="right">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="98%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6">Yen</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">U.S. Dollars</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000">(millions)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">(thousands)</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2006</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2006</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Deferred income taxes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Current assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">3,831</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">3,661</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">31,291</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Investment and other assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">390</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">698</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,966</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Current liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(118</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(176</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,504</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Long-term liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(4,538</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(7,923</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(67,718</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&#165;</TD>
    <TD align="right">(435</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&#165;</TD>
    <TD align="right">(3,740</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(31,965</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">F-27
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><DIV style="border-bottom: 2px solid #000000; font-size: 1px">&nbsp;</DIV>
</DIV>




<DIV style="margin-top: 12pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>In assessing the realizability of deferred income tax assets, Makita
considers whether it is more likely than not that some portion or all
of the deferred income tax assets will not be realized. The ultimate
realization of deferred income tax assets is dependent upon the
generation of future taxable income during the periods in which those
temporary differences become deductible and net operating loss
carryforwards are utilized. Makita considers the scheduled reversal of
deferred income tax liabilities, projected future taxable income, and
tax planning strategies in making this assessment. Based upon the level
of historical taxable income and projections for future taxable income
over the periods in which the deferred income tax assets are
deductible, Makita believes it is more likely than not that the
benefits of these deductible differences and net operating loss
carryforwards, net of the existing valuation allowance, will be
realized. The actual amount of the deferred income tax assets
realizable, however, would be reduced if estimates of future taxable
income during the carryforward period were not achieved. The valuation
allowance principally relates to the tax effects of net operating
losses recorded by certain subsidiaries.</TD>
</TR>

<TR>
    <TD style="font-size: 12pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>As of March&nbsp;31, 2006, certain subsidiaries had net operating loss
carryforwards for income tax purposes of &#165;1,827&nbsp;million ($15,615
thousand) which are available to reduce future income taxes. The net
operating losses will expire as follows:</TD>
</TR>

</TABLE>
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="80%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Yen</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">U.S. Dollars</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">(millions)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">(thousands)</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Within 5&nbsp;years</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">425</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">3,632</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">6 to 20&nbsp;years</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Indefinite periods</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,402</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,983</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">1,827</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">15,615</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV style="margin-top: 12pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Income taxes have not been accrued on undistributed
earnings of domestic subsidiaries as the tax law provides a
means by which the investment in a domestic subsidiary can
be recovered tax free.</TD>
</TR>

<TR>
    <TD style="font-size: 12pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Makita has not recognized deferred tax liabilities for
certain portions of undistributed earnings of foreign
subsidiaries in the total amount of &#165;44,524&nbsp;million
($380,547 thousand) as of March&nbsp;31, 2006 because Makita
considers these earnings to be permanently reinvested, and
calculation of the unrecognized deferred tax liabilities is
not practicable.</TD>
</TR>

<TR>
    <TD style="font-size: 12pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>10.</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B><u>RETIREMENT AND TERMINATION BENEFIT PLANS</U></B></TD>
</TR>

<TR>
    <TD style="font-size: 12pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The Company and certain of its consolidated subsidiaries
have various contributory and noncontributory employees
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.</TD>
</TR>

<TR>
    <TD style="font-size: 12pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>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.</TD>
</TR>

<TR>
    <TD style="font-size: 12pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Until June, 2004, the domestic contributory plan was composed of a corporate defined benefit portion established by the Company and a
substitutional portion based on benefits prescribed by the Japanese government (similar to social security benefits in the United
States). The Company has been exempted from contributing to the Japanese Pension Insurance program that would otherwise have been
required if it had not elected to fund the government substitutional portion of the benefit through a domestic contributory plan
arrangement. The plan assets of the domestic contributory plan are invested and managed as a single portfolio for the entire domestic
contributory plan and are not separately attributed to the substitutional and corporate portions. In June&nbsp;2001, the Japanese pension law
was amended to permit an employer to elect to transfer the entire substitutional portion benefit obligation from the domestic
contributory plan to the government together with a specified amount of plan assets pursuant to a government formula. After such
transfer, the employer is required to make periodic contributions to the Japanese Pension Insurance program, and the Japanese government
is responsible for all benefit payments. The corporate portion of the domestic contributory plan continues to exist exclusively as a
corporate defined benefit pension plan. The Company accounted for the transfer in accordance with EITF 03-02, &#147;Accounting for the
Transfer to the Japanese Government of the Substitutional Portion of Employee Pension Fund Liabilities.&#148; As specified in EITF 03-02, the
entire separation process is accounted for at the time of completion of the transfer to the government of the benefit obligation and
related plan assets as a settlement in accordance with SFAS
No.&nbsp;88, &#147;Employers&#146; Accounting for Settlements and Curtailments of Defined
Benefit Pension Plans and for Termination Benefits.&#148;</TD>
</TR>


</TABLE>
</DIV>
<P align="center" style="font-size: 10pt">F-28
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><DIV style="border-bottom: 2px solid #000000; font-size: 1px">&nbsp;</DIV>
</DIV>



<DIV style="margin-top: 12pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">


<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD> The aggregate effect of this separation was determined based on the Company&#146;s
pension benefit obligation as of the date the transfer was completed based on the determination of plan assets required to be
transferred.</TD>
</TR>

<TR>
    <TD style="font-size: 12pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The Company received an approval of exemption from the Minister of Health, Labor and Welfare in January&nbsp;2003, from the obligation for
benefits related to future employee service with respect to the substitutional portion of its domestic contributory plan. The Company
received government approval of exemption from the obligation for benefits related to past employee service in April&nbsp;2004 with respect to
the substitutional portion of its domestic contributory plan. The transfer to the government was completed on June&nbsp;28, 2004.</TD>
</TR>

<TR>
    <TD style="font-size: 12pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>As a result of the transfer, the Company recognized a subsidy from the Japanese government equal to the difference between the fair value
of the obligation deemed &#147;settled&#148; with the Japanese government and the assets required to be transferred to the government in the amount
of &#165; 9,128&nbsp;million in the first fiscal quarter ended June&nbsp;30, 2004. In addition, the Company recognized a settlement loss equal to the
amount calculated as the ratio of the obligation settled to the total employee&#146;s pension fund obligation immediately prior to the
settlement, both of which exclude the effect of future salary progression relating to the substitutional portion, times the net
unrecognized gain or loss immediately prior to the settlement, which amounted to &#165; 4,687&nbsp;million. This resulting net gain of &#165;4,441
million is included in operating income for the year ended March&nbsp;31, 2005.</TD>
</TR>

<TR>
    <TD style="font-size: 12pt">&nbsp;</TD>
</TR>

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Effective April&nbsp;1, 2004, the Company&#146;s employee pension plan was amended by a new defined benefit plan that provides benefits based on
length of service and other factors in a manner similar to the predecessor defined benefit plan, however, at a reduced rate. The
reduction in the pension benefit obligation as of the effective date in the amount of &#165;3,089&nbsp;million was accounted for as a negative plan
amendment and is included in prior service cost which are being amortized into net periodic pension costs over the weighted average
remaining service period of the plan participants.
</TD>
</TR>
<TR>
    <TD style="font-size: 12pt">&nbsp;</TD>
</TR>


<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>
The net periodic pension costs (benefit)&nbsp;of the defined benefit plans for the years ended March&nbsp;31, 2004, 2005 and 2006 consisted of the
following components:</TD>
</TR>

</TABLE>
</DIV>
<DIV align="right">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="98%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="10">Yen</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">U.S. Dollars</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="10" style="border-bottom: 1px solid #000000">(millions)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">(thousands)</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2006</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2006</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Service cost-benefit earned during the year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">1,671</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">1,332</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">1,565</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">13,376</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Interest cost on projected benefit obligation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,225</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">852</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">776</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,632</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Expected return on plan assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(643</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(590</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(635</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(5,427</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Amortization of prior service cost</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(176</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(153</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,308</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Recognized actuarial loss</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">975</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">518</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">482</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,120</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net gain resulting from transfer to the government
of the substitutional portion of pension plan</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(4,441</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net periodic pension costs (benefit)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">3,242</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&#165;</TD>
    <TD align="right">(2,505</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">2,035</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">17,393</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">F-29
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><DIV style="border-bottom: 2px solid #000000; font-size: 1px">&nbsp;</DIV>
</DIV>




<DIV style="margin-top: 12pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Reconciliations of beginning and ending balances of the benefit obligations and the fair value of the plan assets are as
follows:</TD>
</TR>

</TABLE>
</DIV>
<DIV align="right">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="98%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6">Yen</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">U.S. Dollars</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000">(millions)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">(thousands)</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2006</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2006</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Change in benefit obligation:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Benefit obligation at beginning of year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">54,899</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">35,853</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">306,436</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Service cost</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,332</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,565</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,376</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Interest cost</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">852</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">776</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,632</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Employees&#146; contributions</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">25</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">27</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">231</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Plan amendments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(3,089</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Curtailment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(32</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(274</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Actuarial losses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(120</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(239</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2,042</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Transfer to the government of the substitutional portion of pension plan</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(17,276</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Business acquired</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">530</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,530</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Benefits paid</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(938</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,027</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(8,778</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Foreign exchange impact</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">168</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">127</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,086</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Benefit obligation at end of year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">35,853</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">37,580</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">321,197</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Change in plan assets:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Fair value of plan assets at beginning of year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">32,981</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">28,289</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">241,786</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Actual return on plan assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">836</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,099</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">43,581</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Employer contributions</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,354</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,265</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19,359</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Employees&#146; contributions</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">25</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">27</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">231</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Transfer to the government of the substitutional portion of pension plan</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(7,082</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Business acquired</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">131</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,120</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Benefits paid</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(843</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(926</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(7,915</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Foreign exchange impact</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">37</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">317</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Fair value of plan assets at end of year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">28,289</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">34,922</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">298,479</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Funded status</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(7,564</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2,658</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(22,718</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Unrecognized net actuarial loss</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,051</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,867</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">50,145</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Prior service cost not yet recognized in net periodic benefit cost</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(3,357</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(3,141</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(26,846</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Unrecognized net transition obligation being recognized over 19&nbsp;years</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">139</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">78</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">667</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Net amount recognized</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">269</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">146</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,248</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Amounts recognized in the consolidated balance sheets consisted of;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Accrued benefit cost</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&#165;</TD>
    <TD align="right">(5,126</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&#165;</TD>
    <TD align="right">(2,901</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(24,795</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Prepaid benefit cost</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,399</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,599</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">22,214</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Intangible assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">23</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Accumulated other comprehensive loss, before income taxes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,973</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">448</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,829</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net amount recognized</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">269</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">146</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,248</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<P align="center" style="font-size: 10pt">F-30
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="center" style="font-size: 10pt; margin-top: 12pt"><DIV style="border-bottom: 2px solid #000000; font-size: 1px">&nbsp;</DIV>
</DIV>


<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><U>Measurement date</U></TD>
</TR>

<TR>
    <TD style="font-size: 10pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The Company uses a December&nbsp;31 measurement date for the majority of its plans.</TD>
</TR>

<TR>
    <TD style="font-size: 10pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><U>Assumptions</U></TD>
</TR>

<TR>
    <TD style="font-size: 10pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The weighted-average assumptions used to determine benefit obligations at March&nbsp;31, 2005 and
2006, were as follows:</TD>
</TR>

</TABLE>
</DIV>
<DIV align="right">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="98%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2006</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Discount rate</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">2.2</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">2.2</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">The assumed rate of increase in future compensation levels</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">3.3</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">3.3</TD>
    <TD nowrap>%</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The weighted-average assumptions used to determine net periodic pension cost for each of the
years in the three-year period ended March&nbsp;31, 2006, were as follows:</TD>
</TR>

</TABLE>
</DIV>
<DIV align="right">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="98%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2006</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Discount rate</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">2.1</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">2.2</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">2.2</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Assumed rate of increase in future compensation levels</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">2.3</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">2.3</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">3.3</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Expected long-term rate of return on plan assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">2.0</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">2.1</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">2.3</TD>
    <TD nowrap>%</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>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.</TD>
</TR>

<TR>
    <TD style="font-size: 10pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>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.</TD>
</TR>

<TR>
    <TD style="font-size: 10pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><U>Plan Assets</U></TD>
</TR>

<TR>
    <TD style="font-size: 10pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The benefit plan weighted-average asset allocations at March&nbsp;31, 2005, and 2006, by asset
category were as follows:</TD>
</TR>

</TABLE>
</DIV>
<DIV align="right">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="98%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2006</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Asset Category</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Equity securities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">43.9</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">54.6</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Debt securities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">36.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">30.8</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Real estate</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.2</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Life insurance company general accounts</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9.7</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Other</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3.7</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">100.0</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">100.0</TD>
    <TD nowrap>%</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">F-31
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="center" style="font-size: 10pt; margin-top: 12pt"><DIV style="border-bottom: 2px solid #000000; font-size: 1px">&nbsp;</DIV>
</DIV>


<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Makita&#146;s funding policy is to contribute monthly the amounts which would provide
sufficient assets for future payments of pension benefits. The plans&#146; assets are invested
primarily in interest-bearing securities and marketable equity securities.</TD>
</TR>

<TR>
    <TD style="font-size: 10pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The mix of equity securities and debt securities is determined 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.</TD>
</TR>

<TR>
    <TD style="font-size: 10pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Equity securities include common stock of Makita in the amount of &#165;4&nbsp;million ($34 thousand) at
March&nbsp;31, 2006.</TD>
</TR>

<TR>
    <TD style="font-size: 10pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><U>Information for pension plans with an accumulated benefit obligation in excess of plan
assets</U></TD>
</TR>

</TABLE>
</DIV>
<DIV align="right">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="98%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6">Yen</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">U.S. Dollars</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000">(millions)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">(thousands)</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2006</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2006</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Projected benefit obligation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">35,401</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">2,548</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">21,778</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Accumulated benefit obligation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">30,564</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,464</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">21,060</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Fair value of plan assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">28,289</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">328</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,803</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">An accumulated benefit obligation in excess of plan assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,275</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,136</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18,257</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><U>Cash flows</U></TD>
</TR>

<TR>
    <TD style="font-size: 10pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Contributions</TD>
</TR>

<TR>
    <TD style="font-size: 10pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Makita expects to contribute &#165;3,101&nbsp;million ($26,504 thousand) to its domestic and foreign
defined benefit plan in the year ending March&nbsp;31, 2007.</TD>
</TR>

<TR>
    <TD style="font-size: 10pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><U>Estimated future benefit payments</U></TD>
</TR>

<TR>
    <TD style="font-size: 10pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The following benefits payments, which reflect expected future service, as appropriate, are
expected to be paid:</TD>
</TR>

</TABLE>
</DIV>
<DIV align="right">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="98%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Yen</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">U.S. Dollars</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000">Year ending March 31,</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">(millions)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">(thousands)</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2007</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">1,369</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">11,701</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2008</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,960</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16,752</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2009</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,937</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16,556</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2010</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,851</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15,821</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2011</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,906</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16,291</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2012-2016</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,019</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">77,085</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Certain foreign subsidiaries have defined contribution plans. The total expenses charged to
income under these plans were &#165;249&nbsp;million, &#165;227&nbsp;million and &#165;216&nbsp;million ($1,846 thousand) for
the years ended March&nbsp;31, 2004, 2005 and 2006, respectively.</TD>
</TR>

<TR>
    <TD style="font-size: 10pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>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 &#165;477&nbsp;million and &#165;490&nbsp;million as of March&nbsp;31, 2005 and
2006, respectively, and is included in other liabilities in the accompanying balance sheets.
The payment to the Directors and the Statutory Auditors are subject to shareholders approval.</TD>
</TR>

</TABLE>
</DIV>
<P align="center" style="font-size: 10pt">F-32
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV style="margin-top: 12pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">



</TABLE>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 12pt"><DIV style="border-bottom: 2px solid #000000; font-size: 1px">&nbsp;</DIV>
</DIV>


<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>11.</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><U><B>SHORT-TERM BORROWINGS AND LONG-TERM INDEBTEDNESS</B></U></TD>
</TR>

<TR>
    <TD style="font-size: 10pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>As of March&nbsp;31, 2005 and 2006, short-term borrowings consisted of the following:</TD>
</TR>

</TABLE>
</DIV>
<DIV align="right">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="97%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6">Yen</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">U.S. Dollars</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000">(millions)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">(thousands)</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2006</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2006</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Bank borrowings</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">1,968</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">1,638</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">14,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Current maturities of long-term indebtedness</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,092</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">90</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">769</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">9,060</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">1,728</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">14,769</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Short-term borrowings, excluding current maturities of long-term indebtedness, amounting
to &#165;1,968&nbsp;million and &#165;1,638&nbsp;million ($14,000 thousand) as of March&nbsp;31, 2005 and 2006,
respectively, consisted primarily of bank borrowings denominated in foreign currencies by
overseas subsidiaries. As of March&nbsp;31, 2005 and 2006, the weighted average interest rate on the
borrowings was 6.1% and 9.8%, respectively.</TD>
</TR>

<TR>
    <TD style="font-size: 10pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Certain subsidiaries of the Company had unused lines of credit available for immediate
short-term borrowings without restrictions amounting to &#165;21,509&nbsp;million and &#165;22,208&nbsp;million
($189,812 thousand) as of March&nbsp;31, 2005 and 2006, respectively.</TD>
</TR>

<TR>
    <TD style="font-size: 10pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>As of March&nbsp;31, 2005 and 2006, long-term indebtedness consisted of the following:</TD>
</TR>

</TABLE>
</DIV>
<DIV align="right">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="97%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6">Yen</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">U.S. Dollars</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000">(millions)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">(thousands)</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2006</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2006</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">3.3% (weighted average rate) unsecured loans from banks
and insurance companies in yen, due September and
November&nbsp;2005</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">6,205</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">0.6% (weighted average rate) unsecured loans from
Japanese companies, due May&nbsp;2005</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">800</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Capital lease obligations (see Note 3(g))</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">175</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">194</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,658</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,180</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">194</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,658</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Less- Current maturities included in short-term borrowings</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(7,092</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(90</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(769</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">88</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">104</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">889</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>In accordance with SFAS No.&nbsp;133, changes in fair values of fixed rate long-term
indebtedness, amounting to &#165;205&nbsp;million as of March&nbsp;31, 2005, which are effectively hedged by
using derivative instruments, are reflected in the carrying value of long-term indebtedness in
the accompanying consolidated balance sheets. During the year ended March&nbsp;31, 2006, the
long-term indebtedness was redeemed and therefore no interest rate swaps were outstanding at
March&nbsp;31, 2006. There were no covenants or cross default provisions under the Company&#146;s
financing arrangements. Furthermore, there were no subsidiary level dividend restrictions under
the financing arrangements.</TD>
</TR>


</TABLE>
</DIV>
<P align="center" style="font-size: 10pt">F-33
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV style="margin-top: 12pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">



</TABLE>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 12pt"><DIV style="border-bottom: 2px solid #000000; font-size: 1px">&nbsp;</DIV>
</DIV>


<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The aggregate annual maturities of long-term indebtedness subsequent to March&nbsp;31, 2006 are as
summarized below:</TD>
</TR>

</TABLE>
</DIV>
<DIV align="right">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="96%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Yen</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">U.S. Dollars</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000">Year ending March 31,</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">(millions)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">(thousands)</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2007</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">90</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">769</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2008</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">37</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">316</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2009</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">27</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">231</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2010</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">171</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2011</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">94</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2012 and thereafter</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">77</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">194</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,658</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>12.</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><U><B>CLUB MEMBERS&#146; DEPOSITS</B></U></TD>
</TR>

<TR>
    <TD style="font-size: 10pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Makita&#146;s club members&#146; deposits as of March&nbsp;31, 2005, consisted of deposits from individuals
who were members of the Castle Hill Country Club, owned and operated by Joyama Kaihatsu Ltd., a
subsidiary of the Company. On April&nbsp;11, 2005, the Nagoya District Court approved the civil
rehabilitation plan for Joyama Kaihatsu, Ltd., including its repayment obligation of the club
members&#146; deposits and such plan was confirmed on May&nbsp;7, 2005. On May&nbsp;31, 2005, Makita
transferred its ownership interests in Joyama Kaihatsu, Ltd., to a third party. In connection
with the ownership transfer, Makita paid &#165;6,375&nbsp;million ($54,487 thousand), and was released
from its obligation for club member deposits of &#165;6,461&nbsp;million ($55,222 thousand) in the year
ended March&nbsp;31, 2006. Please see Note 6.</TD>
</TR>

<TR>
    <TD style="font-size: 10pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>13.</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><U><B>SHAREHOLDERS&#146; EQUITY</B></U></TD>
</TR>

<TR>
    <TD style="font-size: 10pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The Japanese Commercial Code (&#147;the Code&#148;) provides that an amount equal to at least 10% of cash
dividends and other distributions from retained earning paid by the Company be appropriate as a
legal reserve. No further appropriation is required when the total amount of the legal reserve
and additional paid-in capital equals 25% of common stock. The Code also provides that to the
extent that the sum of the additional paid-in capital and the legal reserve exceeds 25% of the
stated capital, the amount of the excess (if any ) is available for appropriations by the
resolution of the shareholders. Legal reserves as of March&nbsp;31, 2005 and 2006 were &#165;5,669
million ($48,453 thousand), and were restricted from being used as dividends. Further, the Code
provides that at least one-half of the proceeds from shares issued be included in common stock.</TD>
</TR>

<TR>
    <TD style="font-size: 10pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>On June&nbsp;29, 2004, the shareholders of the Company resolved to amend the Company&#146;s Articles of
Incorporation to permit the Company&#146;s Board of Directors to authorize a repurchase of the
Company&#146;s shares of common stock. At the Board of Directors&#146; meeting held on February&nbsp;17, 2006,
the Company decided to retire treasury stock pursuant to the provisions of Article&nbsp;212 of the
Code. 4,000,000 shares of treasury stock were retired during the fiscal year ended March&nbsp;31,
2006.</TD>
</TR>

<TR>
    <TD style="font-size: 10pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The Code provides that cash dividends may be approved semiannually by the resolution of the
annual general shareholders&#146; meeting after the end of each fiscal year or by the declaration of
the Board of Directors after the end of each interim six-month period. Such dividends are
payable to shareholders of record at the end of each fiscal year or interim six-month period.
At the general meeting to be held on June&nbsp;29, 2006, the shareholders will be asked to approve
the declaration of a cash dividend (&#165;38 per share) on the common stock totaling 5,461&nbsp;million
($46,675 thousand), which will be paid to shareholders of record as of March&nbsp;31, 2006. The
declaration of this dividend has not been reflected in the consolidated financial statements as
of March&nbsp;31, 2006.</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The amount of retained earnings legally available for dividend distribution is that recorded in
the Company&#146;s non-consolidated books and amounted to &#165;122,972&nbsp;million ($1,051,043 thousand) as
of March&nbsp;31, 2006.</TD>
</TR>

<TR>
    <TD style="font-size: 10pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The Corporate Act, which has been in force since May&nbsp;1, 2006 (&#147;the Act&#148;), requires a company to
obtain the approval of shareholders for transferring on amount between capital and additional
paid-in capital. The Act also permits a company to transfer an amount of capital or additional
paid-in capital to legal reserve or retained earnings mainly upon approval of shareholders.</TD>
</TR>

</TABLE>
</DIV>
<P align="center" style="font-size: 10pt">F-34
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV style="margin-top: 12pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">



</TABLE>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 12pt"><DIV style="border-bottom: 2px solid #000000; font-size: 1px">&nbsp;</DIV>
</DIV>


<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>14.</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><U><B>OTHER COMPREHENSIVE INCOME (LOSS)</B></U></TD>
</TR>

<TR>
    <TD style="font-size: 10pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Accumulated other comprehensive income (loss)&nbsp;as of March&nbsp;31, 2004, 2005 and 2006, was as
follows:</TD>
</TR>

</TABLE>
</DIV>
<DIV align="right">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="96%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="10">Yen</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">U.S.Dollars</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="10" style="border-bottom: 1px solid #000000">(millions)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">(thousands)</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2006</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2006</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Foreign currency translation adjustments:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Beginning balance</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&#165;</TD>
    <TD align="right">(13,022</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&#165;</TD>
    <TD align="right">(17,582</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&#165;</TD>
    <TD align="right">(14,486</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(123,812</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Adjustments for the year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(4,560</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,096</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,443</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">72,162</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Ending balance</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&#165;</TD>
    <TD align="right">(17,582</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&#165;</TD>
    <TD align="right">(14,486</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&#165;</TD>
    <TD align="right">(6,043</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(51,650</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net unrealized holding gains on available-for-sale securities:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Beginning balance</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">478</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">6,592</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">6,680</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">57,094</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Adjustments for the year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,114</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">88</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,986</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">42,615</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Ending balance</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">6,592</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">6,680</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">11,666</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">99,709</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Minimum pension liability adjustment:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Beginning balance</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&#165;</TD>
    <TD align="right">(12,590</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&#165;</TD>
    <TD align="right">(6,058</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&#165;</TD>
    <TD align="right">(1,443</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(12,333</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Adjustments for the year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,532</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,615</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,165</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,958</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Ending balance</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&#165;</TD>
    <TD align="right">(6,058</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&#165;</TD>
    <TD align="right">(1,443</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&#165;</TD>
    <TD align="right">(278</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(2,375</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total accumulated comprehensive income (loss):</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Beginning balance</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&#165;</TD>
    <TD align="right">(25,134</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&#165;</TD>
    <TD align="right">(17,048</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&#165;</TD>
    <TD align="right">(9,249</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(79,051</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Adjustments for the year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,086</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,799</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,594</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">124,735</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Ending balance</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&#165;</TD>
    <TD align="right">(17,048</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&#165;</TD>
    <TD align="right">(9,249</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">5,345</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">45,684</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">F-35
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="center" style="font-size: 10pt; margin-top: 12pt"><DIV style="border-bottom: 2px solid #000000; font-size: 1px">&nbsp;</DIV>
</DIV>


<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Tax effects allocated to each component of other comprehensive income (loss)&nbsp;and adjustments
were as follows:</TD>
</TR>

</TABLE>
</DIV>
<DIV align="right">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="98%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="10" style="border-bottom: 1px solid #000000">Yen (millions)</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Tax benefit</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Net of tax</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Pretax amount</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">(expense)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">amount</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><U>As of March&nbsp;31, 2004</U></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Foreign currency translation adjustment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&#165;</TD>
    <TD align="right">(5,018</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">458</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&#165;</TD>
    <TD align="right">(4,560</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Unrealized gains on available-for-sale securities:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Unrealized holding gains arising during the year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,837</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(4,393</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,444</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Less- Reclassification adjustment for gains realized in net income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(555</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">225</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(330</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Net unrealized gains</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,282</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(4,168</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,114</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Minimum pension liability adjustment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,924</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(4,392</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,532</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Other comprehensive income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">16,188</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&#165;</TD>
    <TD align="right">(8,102</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">8,086</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="right">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="98%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="10" style="border-bottom: 1px solid #000000">Yen (millions)</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Tax benefit</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Net of tax</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Pretax amount</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">(expense)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">amount</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><U>As of March&nbsp;31, 2005</U></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Foreign currency translation adjustment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">4,041</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&#165;</TD>
    <TD align="right">(945</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">3,096</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Unrealized gains on available-for-sale securities:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Unrealized holding gains arising during the year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">601</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(243</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">358</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Less- Reclassification adjustment for gains realized in net income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(453</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">183</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(270</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Net unrealized gains</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">148</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(60</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">88</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Minimum pension liability adjustment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,018</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(3,403</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,615</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Other comprehensive income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">12,207</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&#165;</TD>
    <TD align="right">(4,408</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">7,799</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="right">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="98%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="10" style="border-bottom: 1px solid #000000">Yen (millions)</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Tax benefit</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Net of tax</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Pretax amount</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">(expense)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">amount</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><U>As of March&nbsp;31, 2006</U></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Foreign currency translation adjustment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">8,715</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&#165;</TD>
    <TD align="right">(272</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">8,443</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Unrealized gains on available-for-sale securities:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Unrealized holding gains arising during the year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,267</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(4,539</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,728</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Less- Reclassification adjustment for gains realized in net income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2,918</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,176</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,742</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Net unrealized gains</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,349</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(3,363</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,986</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Minimum pension liability adjustment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,525</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,360</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,165</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Other comprehensive income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">19,589</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&#165;</TD>
    <TD align="right">(4,995</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">14,594</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">F-36
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="center" style="font-size: 10pt; margin-top: 12pt"><DIV style="border-bottom: 2px solid #000000; font-size: 1px">&nbsp;</DIV>
</DIV>

<DIV align="right">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="96%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="10" style="border-bottom: 1px solid #000000">U.S. Dollars (thousands)</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Tax benefit</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Net of tax</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Pretax amount</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">(expense)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">amount</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><U>As of March&nbsp;31, 2006</U></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Foreign currency translation adjustment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">74,487</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(2,325</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">72,162</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Unrealized gains on available-for-sale securities:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Unrealized holding gains arising during the year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">96,299</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(38,795</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">57,504</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Less- Reclassification adjustment for gains
realized in net income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(24,940</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,051</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(14,889</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Net unrealized gains</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">71,359</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(28,744</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">42,615</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Minimum pension liability adjustment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">21,581</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(11,623</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,958</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Other comprehensive income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">167,427</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(42,692</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">124,735</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>15.</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><U><B>EARNINGS PER SHARE</B></U></TD>
</TR>

<TR>
    <TD style="font-size: 10pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>A reconciliation of the numerators and denominators of basic and diluted earnings per share
computations is as follows:</TD>
</TR>

</TABLE>
</DIV>
<DIV align="right">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="96%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="10">Yen</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">U.S. Dollars</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 0px solid #000000"><U>Numerator</U></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="10" style="border-bottom: 1px solid #000000">(millions)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">(thousands)</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2006</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2006</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net income available to common
share holders &#150; Basic</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">7,691</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">22,136</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">40,411</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">345,393</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Effect of dilutive common shares:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">1.5% unsecured convertible
bonds, due March, 2005</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">119</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">117</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net income available to
common share holders&#150; Diluted</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">7,810</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">22,253</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">40,411</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">345,393</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR>
    <TD>&nbsp;</TD>
</TR>


<TR style="font-size: 10pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 0px solid #000000"><U>Denominator</U></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="10" style="border-bottom: 1px solid #000000">Number of shares</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Weighted average common shares
outstanding &#150; Basic</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">144,682,696</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">143,844,383</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">143,736,927</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Dilutive effect of:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">1.5% unsecured convertible
bonds, due and fully repaid in
March, 2005</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,749,811</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,748,927</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Weighted average common
shares outstanding &#150; Diluted</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">150,432,507</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">149,593,310</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">143,736,927</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>


<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="10" style="border-bottom: 1px solid #000000">Yen</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">U.S. Dollars</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Earnings per share:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Basic</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">53.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">153.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">281.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">2.40</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Diluted</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">51.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">148.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">281.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.40</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">F-37
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="center" style="font-size: 10pt; margin-top: 12pt"><DIV style="border-bottom: 2px solid #000000; font-size: 1px">&nbsp;</DIV>
</DIV>


<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>16.</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><U><B>COMMITMENTS AND CONTINGENT LIABILITIES</B></U></TD>
</TR>

<TR>
    <TD style="font-size: 10pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>At March&nbsp;31, 2006, the Company was contingently liable as a guarantor for housing and education
loans to employees in the amount of &#165;14&nbsp;million ($120 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&#146;s obligations under the guarantees described above as of March&nbsp;31, 2006, was
insignificant.</TD>
</TR>

<TR>
    <TD style="font-size: 10pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Makita was contingently liable for trade notes receivable discounted with banks of &#165;653&nbsp;million
($5,581 thousand) as of March&nbsp;31, 2006 in the event notes issuers are not able to fulfill their
payment obligations. The fair value of the liabilities for the Company&#146;s obligations described
above as of March&nbsp;31, 2006, was insignificant.</TD>
</TR>

<TR>
    <TD style="font-size: 10pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Makita&#146;s purchase obligations, mainly for raw materials, were &#165; 6,373&nbsp;million ($54,470
thousand) as of March&nbsp;31, 2006.</TD>
</TR>

<TR>
    <TD style="font-size: 10pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>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&#146;s consolidated financial position, results of operations,
or cash flows.</TD>
</TR>

<TR>
    <TD style="font-size: 10pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Makita made rental payments of &#165;1,745&nbsp;million, &#165;1,796&nbsp;million and &#165;1,714&nbsp;million ($14,650
thousand) under cancelable and noncancelable operating lease agreements for offices,
warehouses, automobiles and office equipment during the years ended March&nbsp;31, 2004, 2005 and
2006, respectively. The minimum rental payments required under noncancelable operating lease
agreements as of March&nbsp;31, 2006, were as follows:</TD>
</TR>

</TABLE>
</DIV>
<DIV align="right">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="96%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Yen</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">U.S. Dollars</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000">Year ending March 31,</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">(millions)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">(thousands)</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2007</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">546</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">4,667</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2008</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">401</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,427</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2009</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">275</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,350</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2010</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">166</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,419</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2011</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">86</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">735</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2012 and thereafter</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">206</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,761</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">1,680</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">14,359</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">F-38
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="center" style="font-size: 10pt; margin-top: 12pt"><DIV style="border-bottom: 2px solid #000000; font-size: 1px">&nbsp;</DIV>
</DIV>


<DIV style="margin-top: 12pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>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&nbsp;31, 2004, 2005 and 2006 is summarized as follows:</TD>
</TR>

</TABLE>
</DIV>
<DIV align="right">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="98%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="10">Yen</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">U.S. Dollars</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="10" style="border-bottom: 1px solid #000000">(millions)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">(thousands)</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2006</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2006</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Balance at beginning of year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">693</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">667</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">804</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">6,872</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Addition</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">529</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">830</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">853</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,291</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Utilization</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(532</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(728</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(779</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(6,658</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Foreign exchange impact</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(23</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">35</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">50</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">427</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Balance at end of year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">667</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">804</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">928</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">7,932</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV style="margin-top: 12pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>17.</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><U><B>DERIVATIVES AND HEDGING ACTIVITIES</B></U></TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 12pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B><I>(a)</I></B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B><I>Risk management policy</I></B></TD>
</TR>

<TR>
    <TD style="font-size: 10pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Makita 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 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.</TD>
</TR>

<TR>
    <TD style="font-size: 10pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>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.</TD>
</TR>

<TR>
    <TD style="font-size: 10pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B><I>(b)</I></B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B><I>Foreign currency exchange rate risk management</I></B></TD>
</TR>

<TR>
    <TD style="font-size: 10pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Makita 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.</TD>
</TR>

<TR>
    <TD style="font-size: 10pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>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&nbsp;31, 2005 and 2006 of &#165;30&nbsp;million and &#165;48
million ($410 thousand) were recorded as assets and &#165;387&nbsp;million and &#165;258&nbsp;million
($2,205 thousand) in liabilities, respectively, and changes in their fair values for the years
ended March&nbsp;31, 2005 and 2006 amounting to a loss of &#165;732&nbsp;million and a gain of &#165;147&nbsp;million
($1,256 thousand), respectively, were recorded in exchange gains (losses)&nbsp;on foreign currency
transactions.</TD>
</TR>

<TR>
    <TD style="font-size: 10pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B><I>(c)</I></B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B><I>Interest rate risk management</I></B></TD>
</TR>

<TR>
    <TD style="font-size: 10pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Makita executes financing and investing activities through the Company and its financial
subsidiary, Euro Makita Corporation B.V. (&#147;EMC&#148;). To manage the variability in the fair values
of fixed rate long-term indebtedness, time deposit and fixed rate debt securities caused by
fluctuations in interest rates, the Company and EMC enter into interest rate swaps as a fair
value hedge.</TD>
</TR>

<TR>
    <TD style="font-size: 10pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>As of March&nbsp;31, 2005, EMC had interest rate swaps with a fair value of &#165;205&nbsp;million, which have
been designated as fair value hedges of underlying long-term indebtedness with fixed interest
rates and were recorded as current assets. Changes in fair values of both the hedging interest
rate swaps and the underlying long-term indebtedness were recorded as equal and offsetting
gains and losses in other income (expenses). There was no hedging ineffectiveness or net gains
or losses excluded from the assessment of hedge effectiveness for the year ended March&nbsp;31,
2005, as the critical terms of the interest rate swaps match the terms of the hedged long-term
indebtedness. During the year ended March&nbsp;31, 2006, the long-term indebtedness was
redeemed and therefore the fair value hedge interest rate swaps related to EMC were not
outstanding at March&nbsp;31, 2006.</TD>
</TR>

</TABLE>
</DIV>
<P align="center" style="font-size: 10pt">F-39
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV style="margin-top: 12pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">



</TABLE>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 12pt"><DIV style="border-bottom: 2px solid #000000; font-size: 1px">&nbsp;</DIV>
</DIV>


<DIV style="margin-top: 12pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="0%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The Company and EMC had interest rate swaps with a fair value of &#165;7&nbsp;million as of March&nbsp;31,
2005, and the Company had interest rate swaps with a fair value of &#165;5&nbsp;million ($43 thousand) as
of March&nbsp;31, 2006. These interest swaps have been designated as fair value hedges of underlying
time deposit and investment securities with fixed interest rates and were recorded as current
liabilities. As the interest rate swaps do not meet hedge accounting criteria, the changes in
fair value of the hedging interest rate swaps which amounted to a loss of &#165;19&nbsp;million and an
gain of &#165;2&nbsp;million ($17 thousand) were recorded in earnings and classified in other income
(expenses)&nbsp;for the years ended March&nbsp;31, 2005 and 2006, respectively.</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 12pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>18.</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><U><B>DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS</B></U></TD>
</TR>

<TR>
    <TD style="font-size: 10pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>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:</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 12pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B><I>(a)</I></B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B><I>Cash and Cash Equivalents, Time Deposits, Trade Notes and Accounts Receivable, Short-term
Borrowings, Trade Notes and Accounts Payable, Other payables, and Other Accrued Expenses</I></B>
<BR>The carrying amount approximates fair value because of the short maturities of those
instruments.</TD>
</TR>

<TR>
    <TD style="font-size: 10pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B><I>(b)</I></B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B><I>Long-term Time Deposits</I></B><BR>
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.</TD>
</TR>

<TR>
    <TD style="font-size: 10pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B><I>(c)</I></B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B><I>Marketable Securities and Investment Securities</I></B><BR>
The fair value of marketable securities is estimated based on quoted market prices. For other
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. Non-marketable securities amounted to &#165;590&nbsp;million and &#165;572&nbsp;million ($4,889 thousand) as
of as of March&nbsp;31, 2005 and 2006, respectively.</TD>
</TR>

<TR>
    <TD style="font-size: 10pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B><I>(d)</I></B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B><I>Long-term Indebtedness</I></B><BR>
The fair value of long-term indebtedness is present value of future cash flows associated with
each instrument discounted using the Company&#146;s current borrowing rate for similar debt
instruments of comparable maturities.</TD>
</TR>

<TR>
    <TD style="font-size: 10pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B><I>(e)</I></B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B><I>Club Members&#146; Deposits</I></B><BR>
The fair value of club members&#146; deposits is based on the latest actual transaction price or the
present value of future cash flows.</TD>
</TR>

<TR>
    <TD style="font-size: 10pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B><I>(f)</I></B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B><I>Interest Rate Swap Agreements</I></B><BR>
The 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.</TD>
</TR>

<TR>
    <TD style="font-size: 10pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B><I>(g)</I></B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B><I>Other Derivative Financial Instruments</I></B><BR>
The 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.</TD>
</TR>

</TABLE>
</DIV>
<P align="center" style="font-size: 10pt">F-40
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV style="margin-top: 12pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">



</TABLE>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 12pt"><DIV style="border-bottom: 2px solid #000000; font-size: 1px">&nbsp;</DIV>
</DIV>


<DIV style="margin-top: 12pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The estimated fair value of the financial instruments was as follows:</TD>
</TR>

</TABLE>
</DIV>
<DIV align="right">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="94%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="28%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="14">Yen</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6">U.S. Dollars</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="14" style="border-bottom: 1px solid #000000">(millions)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000">(thousands)</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000">2005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000">2006</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000">2006</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Carrying</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Carrying</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Carrying</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Amount</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Fair Value</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Amount</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Fair Value</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Amount</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Fair Value</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Marketable securities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">57,938</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">57,938</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">47,773</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">47,773</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">408,316</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">408,316</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Investment securities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">22,106</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">22,105</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">30,439</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">30,314</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">260,162</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">259,094</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Long-term time deposits</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,322</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,316</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,006</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,006</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17,145</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17,145</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Long-term indebtedness
including current maturities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(7,180</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(6,530</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(194</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(194</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,658</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,658</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Club members&#146; deposits</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(12,836</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(6,375</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Interest rate swap agreements:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">205</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">205</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(7</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(7</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(5</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(5</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(43</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(43</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Foreign currency contracts:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">23</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">23</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">31</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">31</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">265</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">265</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(160</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(160</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(101</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(101</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(863</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(863</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Currency swaps:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">145</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">145</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(216</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(216</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(157</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(157</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,342</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,342</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Currency option contracts:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(11</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(11</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV style="margin-top: 12pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B><I>(h)</I></B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B><I>Limitation</I></B></TD>
</TR>

<TR>
    <TD style="font-size: 10pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>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.</TD>
</TR>

</TABLE>
</DIV>
<P align="center" style="font-size: 10pt">F-41
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV style="margin-top: 12pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">



</TABLE>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 10pt"><DIV style="border-bottom: 2px solid #000000; font-size: 1px">&nbsp;</DIV>
</DIV>


<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>19.</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><U><B>OPERATING SEGMENT INFORMATION</B></U></TD>
</TR>

<TR>
    <TD style="font-size: 10pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The operating segments presented below are defined as components of an enterprise for which
separate financial information is available and regularly reviewed by the Company&#146;s chief operating
decision maker. The Company&#146;s chief operating decision maker utilizes various measurements to
assess segment performance and allocate resources to the segments.</TD>
</TR>

<TR>
    <TD style="font-size: 10pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>During the three years ended March&nbsp;31, 2004, 2005, 2006, Makita&#146;s operating structure included the
following geographical operating segments: Japan Group, North America Group, Europe Group, Asia
Group, and Other Group.</TD>
</TR>

<TR>
    <TD style="font-size: 10pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Makita evaluates the performance of each operating segment based on U.S. generally accepted
accounting principles.</TD>
</TR>

<TR>
    <TD style="font-size: 10pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>Segment Products and Services</B><BR>
Makita is a manufacturer and wholesaler of electric power tools and other tools. The operating
segments derive substantially all their revenues from the sale of electric power tools and parts
and repairs.</TD>
</TR>

<TR>
    <TD style="font-size: 10pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Year ended March&nbsp;31, 2004</TD>
</TR>

</TABLE>
</DIV>
<DIV align="right">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="96%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="20%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="30">Yen</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="30" style="border-bottom: 1px solid #000000">(millions)</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">North</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Corporate and</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Japan</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">America</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Europe</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Asia</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Other</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Total</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Eliminations</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Consolidated</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Sales:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">External customers</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">48,413</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">41,699</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">67,110</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">6,612</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">20,283</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">184,117</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">184,117</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Intersegment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">40,633</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,978</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,726</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">22,364</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">123</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">71,824</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(71,824</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">89,046</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">45,677</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">71,836</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">28,976</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">20,406</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">255,941</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&#165;</TD>
    <TD align="right">(71,824</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">184,117</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Operating expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">87,594</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">44,958</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">64,358</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">26,048</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">19,061</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">242,019</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&#165;</TD>
    <TD align="right">(72,598</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">169,421</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Operating income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,452</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">719</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,478</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,928</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,345</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,922</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">774</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,696</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Long-lived assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">35,701</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,610</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,386</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,176</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,257</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">53,130</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(165</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">52,965</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Identifiable assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">230,165</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">29,037</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">69,908</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">28,526</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16,364</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">374,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(95,884</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">278,116</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Depreciation and amortization</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,804</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,163</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,044</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">824</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">172</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,007</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(44</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,963</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Capital expenditures</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,958</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">256</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,149</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,266</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">273</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,902</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(408</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,494</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV style="margin-top: 12pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Year ended March&nbsp;31, 2005</TD>
</TR>

</TABLE>
</DIV>
<DIV align="right">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="96%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="20%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="30">Yen</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="30" style="border-bottom: 1px solid #000000">(millions)</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">North</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Corporate and</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Japan</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">America</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Europe</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Asia</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Other</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Total</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Eliminations</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Consolidated</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Sales:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">External customers</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">50,955</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">38,607</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">75,864</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">7,378</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">21,933</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">194,737</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">194,737</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Intersegment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">47,786</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,583</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,802</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">34,937</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">168</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">92,276</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(92,276</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">98,741</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">42,190</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">81,666</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">42,315</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">22,101</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">287,013</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&#165;</TD>
    <TD align="right">(92,276</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">194,737</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Operating expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">82,826</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">40,580</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">71,541</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">37,389</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">21,146</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">253,482</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&#165;</TD>
    <TD align="right">(90,143</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">163,339</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Operating income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15,915</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,610</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,125</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,926</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">955</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">33,531</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2,133</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">31,398</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Long-lived assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">33,023</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,431</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,993</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,858</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,686</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">52,991</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(167</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">52,824</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Identifiable assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">224,099</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">30,627</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">79,309</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">31,713</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19,141</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">384,889</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(94,985</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">289,904</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Depreciation and amortization</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,729</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">668</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,057</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">794</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">186</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,434</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(53</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,381</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Capital expenditures</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,966</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">589</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,289</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,483</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,544</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,871</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(216</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,655</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">F-42
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="center" style="font-size: 10pt; margin-top: 12pt"><DIV style="border-bottom: 2px solid #000000; font-size: 1px">&nbsp;</DIV>
</DIV>


<DIV style="margin-top: 12pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Year ended March&nbsp;31, 2006</TD>
</TR>

</TABLE>
</DIV>
<DIV align="right">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="96%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="20%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="26">Yen</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="26" style="border-bottom: 1px solid #000000">(millions)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">North</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Corporate and</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Japan</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">America</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Europe</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Asia</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Other</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Total</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Eliminations</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Consolidated</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Sales:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">External customers</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">53,788</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">47,979</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">91,249</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">8,645</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">27,414</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">229,075</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">229,075</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Intersegment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">57,826</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,321</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,306</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">43,979</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">181</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">112,613</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(112,613</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">111,614</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">52,300</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">97,555</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">52,624</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">27,595</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">341,688</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&#165;</TD>
    <TD align="right">(112,613</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">229,075</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Operating expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">87,468</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">50,437</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">85,505</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">46,162</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">25,048</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">294,620</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&#165;</TD>
    <TD align="right">(111,323</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">183,297</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Operating income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">24,146</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,863</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12,050</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,462</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,547</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">47,068</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,290</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">45,778</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Long-lived assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">36,578</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,732</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,529</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,170</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,371</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">59,380</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(177</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">59,203</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Identifiable assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">243,553</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">44,814</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">85,858</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">42,275</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">21,556</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">438,056</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(112,018</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">326,038</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Depreciation and amortization</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,917</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">656</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,217</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">923</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">269</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,982</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(60</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,922</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Capital expenditures</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,398</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">620</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,549</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,537</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">426</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,530</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(147</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,383</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV style="margin-top: 12pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Year ended March&nbsp;31, 2006</TD>
</TR>

</TABLE>
</DIV>
<DIV align="right">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="96%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="20%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="30">U.S. Dollars</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="30" style="border-bottom: 1px solid #000000">(thousands)</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">North</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Corporate and</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Japan</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">America</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Europe</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Asia</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Other</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Total</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Eliminations</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Consolidated</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Sales:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">External customers</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">459,726</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">410,077</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">779,906</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">73,889</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">234,308</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,957,906</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,957,906</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Intersegment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">494,239</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">36,932</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">53,897</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">375,889</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,547</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">962,504</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(962,504</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">953,965</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">447,009</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">833,803</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">449,778</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">235,855</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">2,920,410</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(962,504</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,957,906</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Operating expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">747,589</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">431,086</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">730,811</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">394,547</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">214,086</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">2,518,119</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(951,478</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,566,641</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Operating income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">206,376</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15,923</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">102,992</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">55,231</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">21,769</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">402,291</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(11,026</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">391,265</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Long-lived assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">312,633</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">31,897</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">64,350</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">78,376</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20,265</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">507,521</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,512</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">506,009</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Identifiable assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,081,650</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">383,026</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">733,829</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">361,325</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">184,239</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,744,069</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(957,419</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,786,650</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Depreciation and amortization</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">24,932</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,607</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,402</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,889</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,299</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">51,129</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(514</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">50,615</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Capital expenditures</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">54,684</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,299</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,239</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">21,684</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,641</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">98,547</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,256</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">97,291</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV style="margin-top: 12pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Long-lived assets shown above consist of property, plant and equipment.</TD>
</TR>

<TR>
    <TD style="font-size: 10pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Transfers between segments are made at estimated arm&#146;s-length prices. No single external customer
accounted for 10% or more of Makita&#146;s net sales for each of the years ended March&nbsp;31, 2004, 2005
and 2006.</TD>
</TR>

<TR>
    <TD style="font-size: 10pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Segment information is determined by the location of the Company and its relevant subsidiaries.</TD>
</TR>

</TABLE>
</DIV>
<P align="center" style="font-size: 10pt">F-43
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV style="margin-top: 12pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">



</TABLE>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 12pt"><DIV style="border-bottom: 2px solid #000000; font-size: 1px">&nbsp;</DIV>
</DIV>


<DIV style="margin-top: 12pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&nbsp;</TD>

    <TD colspan="2">Makita&#146;s current revenues from external customers by each group of products are set forth below.</TD>
</TR>

</TABLE>
</DIV>
<DIV align="right">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="96%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="23%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="14">(Yen millions, except for percentage amounts)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">U.S. Dollars</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="14" style="border-bottom: 0px solid #000000">Consolidated Net Sales by Product Categories</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">(thousands)</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="26" style="border-bottom: 1px solid #000000">Year ended March 31,</TD>

    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000">2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000">2005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000">2006</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2006</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Portable woodworking tools</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">34,452</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">18.7</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">34,507</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">17.7</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">37,890</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">16.5</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">323,846</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Portable general purpose tools</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">98,176</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">53.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">105,736</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">54.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">128,215</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">56.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,095,855</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Stationary woodworking
machines</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,711</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,573</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,009</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17,171</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other products</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19,548</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">21,763</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">26,696</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">228,171</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Parts, repairs and accessories</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">30,230</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">31,158</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">34,265</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">292,863</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">184,117</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">100.0</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">194,737</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">100.0</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">229,075</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">100.0</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,957,906</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">F-44
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="center" style="font-size: 10pt; margin-top: 12pt"><DIV style="border-bottom: 2px solid #000000; font-size: 1px">&nbsp;</DIV>
</DIV>


<DIV style="margin-top: 12pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>20.</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><U><B>RELATED PARTY TRANSACTIONS</B></U></TD>
</TR>

<TR>
    <TD style="font-size: 10pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>One of the Company&#146;s consolidated subsidiaries has long-term borrowings from Maruwa Co., Ltd.
(&#147;Maruwa&#148;), for which a director of the Company and certain of his family members have a majority
of the voting rights. The amount of these borrowings was &#165;500&nbsp;million as of March&nbsp;31, 2004, and
2005. In 2005, the Nagoya District Court approved a civil rehabilitation plan for the subsidiary,
and it was released from its obligation for the long-term borrowings
of &#165;501 million ($4,282
thousand), including accrued interest. In addition, the transactions between Makita and Maruwa for
the year ended March&nbsp;31, 2004, and 2005, amounted to &#165;3&nbsp;million for interest on the subsidiary&#146;s
borrowings and &#165;2&nbsp;million for advertising expenses. For the year ended March&nbsp;31, 2006, advertising
expenses amounted to &#165;2&nbsp;million.</TD>
</TR>

<TR>
    <TD style="font-size: 10pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The Company&#146;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 &#165;199&nbsp;million and &#165;215&nbsp;million, respectively, during the year ended March&nbsp;31, 2004, &#165;55&nbsp;million
and &#165;145&nbsp;million, respectively, during the year ended March&nbsp;31, 2005, and &#165;11&nbsp;million and &#165;211
million, respectively, during the year ended March&nbsp;31, 2006. The accounts payable of the Company
related to these transactions were &#165;79&nbsp;million as of March&nbsp;31, 2004, &#165;19&nbsp;million as of March&nbsp;31,
2005, and &#165;10&nbsp;million as of March&nbsp;31, 2006.</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 12pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The president of Toyoda Machine Works Ltd. was elected as an outside director of the Company as of
June&nbsp;29, 2005. The Company&#146;s purchases of raw materials and production equipment from Toyoda
Machine Works Ltd. were &#165;4&nbsp;million from July 1 to December&nbsp;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&nbsp;1, 2006, became an
outside director of the Company. The Company&#146;s purchases of raw materials and production equipment
from JTEKT Corporation, were &#165;33&nbsp;million and &#165;118&nbsp;million, respectively, from January&nbsp;1, 2006 to
March&nbsp;31, 2006. The accounts payable by the Company related to these transactions were &#165;53&nbsp;million
as of March&nbsp;31, 2006.</TD>
</TR>

</TABLE>
</DIV>
<P align="center" style="font-size: 10pt">F-45
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV style="margin-top: 12pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">



</TABLE>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 12pt"><DIV style="border-bottom: 2px solid #000000; font-size: 1px">&nbsp;</DIV>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><U>MAKITA CORPORATION AND CONSOLIDATED SUBSIDIARIES</U>
</DIV>

<DIV align="left">
<A name="306"></A>
</DIV>
<DIV align="center" style="font-size: 10pt"><U>SCHEDULE II &#150; VALUATION AND QUALIFYING ACCOUNTS AND RESERVES</U></DIV>


<DIV align="center" style="font-size: 10pt"><U>FOR THE YEARS ENDED MARCH 31, 2004, 2005 AND 2006</U></DIV>


<DIV align="center" style="margin-top: 10pt">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="28%"></TD>
    <TD width="5%"></TD>
    <TD width="1%"></TD>
    <TD width="5%"></TD>
    <TD width="1%"></TD>
    <TD width="5%"></TD>
    <TD width="1%"></TD>
    <TD width="5%"></TD>
    <TD width="1%"></TD>
    <TD width="5%"></TD>
    <TD width="1%"></TD>
    <TD width="5%"></TD>
    <TD width="1%"></TD>
    <TD width="5%"></TD>
    <TD width="1%"></TD>
    <TD width="5%"></TD>
    <TD width="1%"></TD>
    <TD width="5%"></TD>
    <TD width="1%"></TD>
    <TD width="5%"></TD>
    <TD width="1%"></TD>
    <TD width="5%"></TD>
    <TD width="1%"></TD>
    <TD width="5%"></TD>
    <TD width="1%"></TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="22" style="border-bottom: 1px solid #000000">Japanese Yen (millions)</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000">Additions</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Balance at</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Charged to</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Charged to</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Deductions</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Balance at</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">beginning</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">costs and</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">other</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">from</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Translation</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">end of</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000">Descriptions</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">of year</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">expenses</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Accounts</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">reserves</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">adjustments</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">year</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2004:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Allowance for doubtful receivables</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,456</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">136</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(135</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(111</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,346</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Deferred income tax assets
valuation allowance</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,694</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,938</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(459</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(345</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,828</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2005:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Allowance for doubtful receivables</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,346</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">98</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(326</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">60</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,178</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Deferred income tax assets
valuation allowance</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,828</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">234</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(929</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">78</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,211</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2006:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Allowance for doubtful receivables</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,178</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">114</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(356</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">80</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,016</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Deferred income tax assets
valuation allowance</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,211</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">698</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(6,228</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">292</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,973</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<P align="center" style="font-size: 10pt">F-46
</DIV>

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{"company-data": {"conformed-name": "MAKITA CORP", "cik": "0000202467", "assigned-sic": "3540", "irs-number": "000000000", "fiscal-year-end": "0331"}, "filing-values": {"form-type": "20-F", "act": "34", "file-number": "000-12602", "film-number": "06949727"}, "business-address": {"street1": "11 8 SUMIYOSHI CHO 3 CHOME", "street2": "ANJO-SHI", "city": "AICHI JAPAN", "state": "M0", "zip": "446-0072"}, "former-company": {"former-conformed-name": "MAKITA ELECTRIC WORKS LIMITED", "date-changed": "19910424"}}
MAKITA CORPORATION
Table of Contents
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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
For the fiscal year ended March 31, 2006
o
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) THE SECURITIES EXCHANGE ACT OF 1934
For
the transition period from
to
o
SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) THE SECURITIES EXCHANGE ACT OF 1934
Date of event requiring this shell company report
For the transition period from April 1, 2005 to March 31, 2006
Commission file number 0-12602
KABUSHIKI KAISHA MAKITA
(Exact name of registrant as specified in its charter)
MAKITA CORPORATION
(Translation of registrant's name into English)
Japan
(Jurisdiction of incorporation or organization)
3-11-8, Sumiyoshi-cho, Anjo City, Aichi Prefecture, Japan
(Address of principal executive offices)
Securities registered or to be registered pursuant to Section 12(b) of the Act.
Title of Class
Name of each exchange on which registered
*
American Depositary Shares
Nasdaq Global Market
**
Common Stock
*
American Depositary Receipts evidence American Depositary Shares,
each American Depositary Share representing one share of the
registrant's Common Stock.
**
Effective October 1, 2001, no par value per share. Not for
trading, but only in connection with the registration of American
Depositary Shares, pursuant to the requirements of the Securities
and Exchange Commission.
Securities registered or to be registered pursuant to Section 12(g) of the Act.
Title of each class
Name of each exchange on which registered
None
None
Securities
for which there is a reporting obligation pursuant to Section 15(d) of the Act.
None
(Title of Class)
Indicate the number of outstanding shares of each of the issuer's classes of capital or common
stock as of the close of the period covered by the annual report.
Outstanding as of
March 31, 2006
March 31, 2006
Title of Class
(Tokyo time)
(New York time)
Common Stock, excluding 296,994 shares of Treasury Stock
143,711,766
American Depositary Shares, each representing one share
of Common Stock
3,160,984
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of
the Securities Act.
þ
Yes
o
No
If this report is an annual or transition report, indicate by mark if the registrant is not
required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.
o
Yes
þ
No
Note – Checking the box above will not relieve any registrant required to the file reports pursuant
to Section 13 or 15(d) of the Securities Exchange Act of 1934 from their obligations under those
Sections.
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for
such shorter period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
þ
Yes
o
No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer,
or a non-accelerated filer. See definition of "accelerated filer and large accelerated filer" in
Rule 12b-2 of the Exchange Act.
Large accelerated filer
þ
Accelerated filer
o
Non-accelerated filer
o
Indicate by check mark which financial statement item the registrant has elected to follow.
Item 17
o
Item 18
þ
If this is an annual report, indicate by check mark whether the registrant is a shell company ( as
defined in Rule 12b-2 of the Exchange Act).
o
Yes
þ
No
Table of Contents
Table of Contents
Cautionary Statement with Respect to Forward-Looking Statements
1
PART I
Item 1. Identity of Directors, Senior Management and Advisers
3
Item 2. Offer Statistics and Expected Timetable
3
Item 3. Key Information
3
A. Selected financial data
3
B. Capitalization and indebtedness
4
C. Reasons for the offer and use of proceeds
4
D. Risk factors
5
Item 4. Information on the Company
8
A. History and development of the Company
8
B. Business overview
8
C. Organizational structure
12
D. Property, plant and equipment
13
Item 4A. Unresolved Staff Comments
13
Item 5. Operating and Financial Review and Prospects
14
A. Operating results
14
B. Liquidity and capital resources
27
C. Research and development, patents and licenses, etc.
30
D. Trend information
31
E. Off-balance sheet arrangements
31
F. Tabular disclosure of contractual obligations
32
G. Safe harbor
32
Item 6. Directors, Senior Management and Employees
32
A. Directors and senior management
32
B. Compensation
35
C. Board practices
35
D. Employees
37
E. Share ownership
38
Item 7. Major Shareholders and Related Party Transactions
38
A. Major shareholders
38
B. Related party transactions
39
C. Interest of experts and counsel
40
Item 8. Financial Information
40
A. Consolidated statements and other financial information
40
B. Significant changes
41
Item 9. The Offer and Listing
41
A. Offer and listing details
41
B. Plan of distribution
41
C. Markets
41
D. Selling shareholders
42
E. Dilution
42
F. Expenses of the issue
42
Item 10. Additional Information
42
A. Share capital
42
B. Memorandum and articles of association
42
C. Material contracts
49
D. Exchange controls
49
E. Taxation
50
F. Dividends and paying agents
54
G. Statement by experts
54
H. Documents on display
55
I. Subsidiary information
55
Item 11. Quantitative and Qualitative Disclosures about Market Risk
55
Table of Contents
Item 12. Description of Securities Other than Equity Securities
57
PART II
Item 13. Defaults, Dividend Arrearages and Delinquencies
57
Item 14. Material Modifications to the Rights of Security Holders and Use of Proceeds
57
Item 15. Controls and Procedures
57
Item 16A. Audit Committee Financial Expert
57
Item 16B. Code of ethics
57
Item 16C. Principal Accountant Fees and Services
58
Item 16D. Exemptions from the Listing Standards for Audit Committees
59
Item 16E.
Purchases of Equity Securities by the Issuer and Affiliated Purchases
59
PART III
Item 17. Financial Statements
59
Item 18. Financial Statements
59
Item 19. Exhibits
60
EX-1.1 ARTICLES OF INCORPORATION, AS AMENDED AND EFFECTIVE AS OF JUNE 29, 2006 (ENGLISH TRANSLATION)
EX-1.2 REGULATIONS OF BOARD OF DIRECTORS, AS AMENDED AND EFFECTIVE AS OF JUNE 29, 2006 (ENGLISH TRANSLATION)
EX-1.3 THE SHARE HANDLING REGULATIONS, AS AMENDED AND EFFECTIVE AS OF JUNE 29, 2006 (ENGLISH TRANSLATION)
EX-1.4 REGULATIONS OF BOARD OF STATUTORY AUDITORS EFFECTIVE AS OF JULY 7, 2006 (ENGLISH TRANSLATION)
EX-12.1 302 CERTIFICATION OF PRESIDENT AND REPRESENTATIVE DIRECTORS
EX-12.2 302 CERTIFICATION OF DIRECTORS, GENERAL MANAGER OF ADMINISTRATION HEADQUARTERS
EX-13.1 906 CERTIFICATIONS OF PRESIDENT AND REPRESENTATIVE DIRECTOR AND DIRECTOR, GENERAL MANAGER OF ADMINISTRATION HEADQUARTERS
Table of Contents
As used in this annual report, the term "fiscal" preceding a year means the twelve-month period
ended March 31 of the year referred to. For example, "fiscal 2006" or "FY2006" refers to the
twelve-month period ended March 31, 2006. All other references to years refer to the applicable
calendar year.
All information contained in this annual report is as of March 31, 2006 unless otherwise specified.
In parts of this annual report, amounts reported in Japanese yen have been translated into U.S.
dollars for the convenience of readers. Unless otherwise noted, the rate used for this translation
was ¥117 = U.S.$1.00, the approximate exchange rate on the noon buying rate for yen in New York
City as certified for customs purposes by the Federal Reserve Bank of New York on March 31, 2006.
On June 15, 2006 the noon buying rate for yen cable transfer in New York City as reported by the
Federal Reserve Bank of New York was ¥115.06= $1.00.
As used herein, the "Company" refers to Makita Corporation and "Makita" or "Makita Group" refer to
Makita Corporation and its consolidated subsidiaries unless the context otherwise indicates.
Cautionary Statement with Respect to Forward-Looking Statements
This annual report contains "forward-looking statements" that are based on current expectations,
estimates, strategies and projections of the Company's management in light of the information
currently available to it. The Company and its representatives may, from time to time, make written
or verbal forward-looking statements, including statements contained in the Company's filings with
the Securities and Exchange Commission and in its reports to shareholders, with respect to Makita's
current plans, estimates, strategies and beliefs and other statements that are not historical.
Generally, the inclusion of the words "plan," "strategy," "believe," "expect," "intend,"
"estimate," "anticipate," "will," "may," "might" and similar expressions identify statements that
constitute "forward-looking statements" within the meaning of Section 27A of the United States
Securities Act of 1933 and Section 21E of the United States Securities Exchange Act of 1934 and
that are intended to come within the safe harbor protection provided by those sections. All
statements addressing operating performance, events, or developments that Makita expects or
anticipates to occur in the future, including statements relating to sales growth, earnings or
earnings per share growth, and market share, as well as statements expressing optimism or pessimism
about future operating results, are forward-looking statements. Makita undertakes no obligation to
update or revise any forward-looking statements, whether as a result of new information, future
events, or otherwise.
By their nature, all forward-looking statements involve risks and uncertainties. Actual results may
differ materially from those contemplated by the forward-looking statements for a number of
reasons, including but not limited to:
•
changes in economic conditions affecting the retail, housing and construction markets in
different countries, particularly in Japan, the United States and Europe and, to a lesser
extent, in Canada, Asia, Australia and the Middle East;
•
Makita's ability to maintain mutually beneficial relationships with key distributors and to
penetrate new channels of distribution;
•
circumstances relating to inventory adjustments or changes in purchasing patterns by major
customers and their impact on Makita's manufacturing volumes and inventory levels;
•
uncertainties surrounding market acceptance of new products introduced in fiscal 2006 and
scheduled for introduction in fiscal 2007, as well as the level of sales generated from these
new products, in connection with Makita's existing investments in productive capacity and
commitments to fund its advertising and product promotions to introduce these new products;
•
Makita's ability to develop and introduce new products at favorable margins;
•
adverse changes in currency exchange rates or raw material commodity prices, both in absolute
terms and relative to competitors' risk profiles;
•
increased competition in both Japanese market and worldwide;
•
changes in consumer preference or loyalties;
•
price reductions taken by Makita in response to customer and competitive pressures, as well
as price reductions or promotional actions taken in order to drive demand, which may not
result in anticipated sales levels;
•
Makita's ability to achieve projected levels of efficiencies and cost reduction measures and
to avoid delays in or inefficiencies resulting from manufacturing and administrative
reorganization actions in progress or contemplated;
•
the impact of various factors on Makita's foreign operations such as tariffs,
nationalization, exchange controls, interest rate fluctuations, civil unrest, governmental
changes, restrictions on Makita's foreign investment in local business and risks related to
other political, economic, and regulatory instabilities;
•
the effects of litigation, environmental remediation matters, and product liability exposures;
1
Table of Contents
•
Makita's ability to generate sufficient cash flows to support
capital expansion, business acquisition plans and general
operating activities, and Makita's ability to obtain necessary
financing at favorable interest rates;
•
changes in laws and regulations, including changes in accounting
standards, taxation requirements, including tax rate changes, new
tax laws and revised tax law interpretations, and environmental
laws, both in Japan and in foreign jurisdictions in which Makita
operates;
•
the impact of unforeseen events, including war or terrorist
activities, on economic conditions and corporate and consumer
confidence;
•
fluctuations in stock market prices; and
•
the effects of attestation on internal control over financial
reporting to be expressed by the Company's auditors.
The foregoing list is not exhaustive. There can be no assurance that Makita has correctly
identified and appropriately assessed all factors affecting its business or that the publicly
available and other information with respect to these matters is complete and correct. Additional
risks and uncertainties not presently known to Makita or that it currently believes to be
immaterial also may adversely impact Makita. Should any risks and uncertainties develop into actual
events, these developments could have material adverse effects on Makita's business, financial
condition, and results of operations.
2
Table of Contents
PART I
Item 1.
Identity of Directors, Senior Management and Advisers
Not applicable
Item 2.
Offer Statistics and Expected Timetable
Not applicable
Item 3.
Key Information
A. Selected financial data
The following data for each of the five fiscal years ended March 31, 2006 has been derived from
Makita's audited consolidated financial statements. It should be read in conjunction with Makita's
audited consolidated balance sheets as of March 31, 2005 and 2006, the related consolidated
statements of income, shareholder's equity and cash flows for each of the three years ended March
31, 2006, and the notes thereto that appear elsewhere in this annual report. Makita's consolidated
financial statements were prepared in accordance with U.S. generally accepted accounting
principles, or U.S. GAAP, and were included in its Japanese Securities Reports filed with the
Director of the Kanto Local Finance Bureau.
U.S. Dollars
(Millions of yen, except per share amounts)
(thousands)
Fiscal year ended March 31,
Income Statement Data:
2002
2003
2004
2005
2006
2006
Net sales
¥
166,169
¥
175,603
¥
184,117
¥
194,737
¥
229,075
$
1,957,906
Operating income
5,873
12,468
14,696
31,398
45,778
391,265
Net income
133
6,723
7,691
22,136
40,411
345,393
Net income per share of Common stock and per ADS:
Basic
0.9
45.3
53.2
153.9
281.1
2.40
Diluted
0.9
44.2
51.9
148.8
281.1
2.40
U.S. Dollars
(Millions of yen, except per share amounts)
(thousands)
Fiscal year ended March 31,
Balance Sheet Data:
2002
2003
2004
2005
2006
2006
Total assets
¥
285,138
¥
278,600
¥
278,116
¥
289,904
¥
326,038
$
2,786,650
Cash and cash
equivalents, time
deposits and marketable
securities
63,393
64,083
92,616
91,189
88,672
757,880
Net working capital
144,929
141,759
147,822
149,666
181,808
1,553,914
Short-term borrowings
8,984
2,892
14,128
9,060
1,728
14,769
Long-term indebtedness
20,102
19,843
7,364
88
104
889
Common stock
23,803
23,803
23,803
23,805
23,805
203,462
Treasury stock
(2,229
)
(5,110
)
(3,316
)
(3,517
)
(258
)
(2,205
)
Shareholders' equity
189,939
182,400
193,348
219,640
266,584
2,278,496
Total number of
shares outstanding
149,673,742
145,967,876
143,893,191
143,777,607
143,711,766
143,711,766
Note: Net working capital equals current assets less current liabilities.
3
Table of Contents
Exchange rates (Japanese yen amounts per U.S. dollars)
The following table sets forth information concerning the exchange rates for Japanese yen and U.S.
dollars based on 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. The average Japanese yen
exchange rates represent average noon buying rates on the last business day of each month during
the previous period.
(Japanese Yen per U.S. $1.00)
Fiscal year ended March 31,
High
Low
Average
Year-end
2002
115.89
134.77
125.64
132.70
2003
115.71
133.40
121.94
118.07
2004
104.18
120.55
113.07
104.18
2005
102.26
114.30
107.47
107.22
2006
104.41
120.93
113.15
117.48
(Japanese Yen per U.S. $1.00)
June
2006
January
February
March
April
May
(through June 15)
High
113.96
115.82
115.89
113.79
110.07
111.66
Low
117.55
118.95
119.07
118.66
113.46
115.06
On June 15, 2006 the noon buying rate for yen cable transfer in New York City as reported by the
Federal Reserve Bank of New York was ¥115.06 = U.S. $1.00
Cash dividends declared per share of common stock and per ADS:
In Yen
In U.S. Dollars
Fiscal year ended March 31,
Interim
Year-end
Interim
Year-end
2002
9.0
9.0
0.07
0.07
2003
9.0
9.0
0.07
0.07
2004
9.0
13.0
0.09
0.11
2005
11.0
36.0
0.10
0.34
2006
19.0
38.0
0.16
0.32
Makita's basic dividend policy on the distribution of profits is to maintain a dividend payout
ratio of 30% or greater, with a lower limit on annual cash dividends of 18 yen per share. However,
in the event special circumstances arise, computation of the amount of dividends will be based on
consolidated net income after certain adjustments.
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 yen in New York City as certified for
customs purposes by the Federal Reserve Bank of New York.
B. Capitalization and indebtedness
Not applicable
C. Reasons for the offer and use of proceeds
Not applicable
4
Table of Contents
D. Risk factors
The following is a summary of some of the significant risks that could affect Makita. Other risks
that could affect Makita are also discussed elsewhere in this annual report. Additionally, some
risks that may be currently unknown to Makita and other risks that are currently believed to be
immaterial, may become material. Some of these statements are forward-looking statements that are
subject to the "Cautionary Statement with Respect to Forward-Looking Statements" appearing
elsewhere in this annual report.
Makita's sales are affected by the levels of construction activities and capital investments in
its markets.
The demand for power tools, Makita's main products, is affected to a large extent by the levels of
construction activities and capital investments in the relevant regions. Generally speaking, the
levels of construction activities and capital investment depend largely on the economic conditions
in the market. As a result, when economic conditions weaken in the principal markets for Makita's
activities, including Japan, North America, Europe, and Asia, this may have an adverse impact on
Makita's consolidated financial condition and results of operations.
Geographic concentration of Makita's main facilities may have adverse effects on Makita's
business activities.
Makita's principal management functions, including its headquarters, and the companies on which it
relies for supplying major parts are located in Aichi Prefecture ("Aichi"), Japan. Makita's
manufacturing facilities in Aichi and Kunshan, Jiangsu Province, China, collectively account for
approximately 76% of Makita's total production volume on a consolidated basis in fiscal 2006. Due
to this geographic concentration of Makita's major functions, including plants and other operations
in Japan and China, Makita's performance may be significantly affected by major natural disasters
and other catastrophic events, including earthquakes, floods, fires, power outages, and suspension
of water supplies. In addition, Makita's facilities in China may also be affected by changes in
political and legal environments, changes in economic conditions, revisions in tariff rates,
currency appreciation, labor disputes, emerging infections diseases, power outages resulting from
inadequacies in infrastructure, and other factors. In the event that such developments cannot be
foreseen or measures taken to alleviate their damaging impact are inadequate, Makita's consolidated
financial condition and results of operations may be adversely affected.
Makita's overseas activities and entry into overseas markets entail risks, which may have a
material adverse effect on Makita's business activities.
Makita derives a majority of its sales in markets located outside of Japan, including North
America, Europe, Asia, Oceania, the Middle East, and emerging markets such as Russia and Eastern
Europe. In fiscal 2006, approximately 82% of Makita's consolidated net sales were derived from
products sold overseas. On a volume basis, Makita depended on overseas markets for 88% of units
sold. The high percentage of overseas sales gives rise to a number of risks. If such risks occur,
they may have a material adverse impact on Makita's consolidated financial condition and results of
operations. Such risks include the following:
(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.
Environmental or other government regulations may have a material adverse impact on Makita's
business activities.
Makita maintains strict compliance with environmental, commercial, export and import, tax, safety
and other regulations that are applicable to its activities in all the countries in which Makita
operates. If Makita is unable to continue its compliance with existing regulations or is unable to
comply with any new or amended regulations, it may be subject to fines and other penalties and its
activities may be significantly restricted. The costs related to compliance with any new or amended
regulations may also result in significant increases in overall costs.
Beginning on July 1, 2006, a European directive entitled "Restriction of the Use of Certain
Hazardous Substances" ("RoHS") takes effect which forbids the sale in EU member countries of
products containing six toxic substances, including lead. In addressing RoHS, we have abolished
nearly all restricted substances through the cooperation of our parts suppliers. In addition, the
Makita Group itself is constantly reinforcing its system for inspecting parts as they are delivered
and has addressed this issue nearly fully at the present time. However, if Makita's suppliers have
not fully shifted to alternative materials and Makita is not able to detect the presence of the
forbidden substances, then, if these substances are confirmed within the EU, Makita may face a
number of risks, including the need to replace the defective parts, conduct recalls, and sustain
damage to its brand image. In such cases, Makita's consolidated financial condition and results of
operations may be adversely affected.
5
Table of Contents
Currency exchange rate fluctuations may adversely affect Makita's financial results.
The functional currency for all of Makita's significant foreign operations is the local currency.
The results of transactions denominated in local currencies of Makita's subsidiaries around the
world are translated into yen using the average market conversion rate during each financial
period. Assets and liabilities denominated in local currencies are converted into yen at the rate
prevailing at the end of each financial period. As a result, Makita's operating results, assets,
liabilities and shareholders' equity are affected by fluctuation in values of the Japanese yen
against these local currencies.
Sales denominated in foreign currencies accounted for approximately 76% of Makita's consolidated
net sales in fiscal 2006, and, accordingly, Makita's operating income is significantly affected by
foreign exchange fluctuations.
In an effort to minimize the impact of short-term exchange rate fluctuations between major
currencies, mainly the U.S. dollar, the euro, and the yen, Makita engages in hedging transactions.
Makita is also increasing the percentage of products that it manufactures in China, which has
resulted in an increase in foreign-currency denominated production costs. While Makita believes
that such measures may help reduce the impact of some exchange rate fluctuations, it cannot assure
you that it will be able to successfully hedge its exchange rate risks. In addition,
medium-to-long-term fluctuations of exchange rates may make it difficult for Makita to execute
procurement, production, logistics, and sales activities as planned and may have an adverse impact
on Makita's consolidated financial condition and results of operations.
Fluctuations in stock market prices may adversely affect Makita's financial statements.
Makita holds certain Japanese equities and equity-linked financial products and records these
securities as marketable securities on its consolidated financial statements. The values of these
investments are influenced by fluctuations in the quoted market prices. A significant depreciation
in the value of these securities will have an adverse impact on Makita's consolidated financial
condition and results of operations.
If Makita cannot respond to changes in construction method and trends in demand, Makita's sales
may be materially and adversely affected.
In recent years, market trends in demand for various power tools have been changing significantly
due to the adoption of new construction methods, especially in Japan. For example, as prefabricated
housing construction becomes more common, the use of power tools at construction sites has been
decreasing substantially, while demand for fastening tools has increased. If Makita does not or is
unable to respond to these rapid shifts in demand for various power tools, Makita's sales may
decline and this may have an adverse effect on Makita's consolidated financial condition and
results of operations.
The rapidly growing presence of China-based power tool manufacturers may adversely affect
Makita's sales results.
In recent years, power tool companies in China have expanded their presence in the world market. In
particular, in certain markets in Asia where purchasing power is relatively low, competition with
power tools made in China has intensified, with respect to lower end products. As the technology of
Chinese power tool manufacturers improves, competition in the markets for high-end products for
professional use may also intensify. As a result, Makita's market share, consolidated financial
condition and results of operations may be adversely affected.
If Makita is not able to develop attractive products, Makita's sales activities may be
adversely affected.
Makita's principal competitive strengths are its diverse range of high-quality, high-performance
power tools for professional use, and the good reputation of the MAKITA brand, both of which depend
in part on Makita's ability to continue to develop attractive and innovative products that are well
received by the market. There is no assurance that Makita will be able to continue to develop such
products. If Makita is no longer able to quickly develop new products that meet the changing needs
of the market for high-end, professional users, it may have an adverse impact on Makita's
consolidated financial condition and results of operations.
If Makita fails to maintain cooperative relationships with significant customers, Makita's
sales may be seriously affected.
Makita has a number of significant customers. If Makita loses these customers and is unable to
develop new sales channels to take their place, sales may decline and have an adverse impact on
Makita's business performance and financial position. In addition, if major customers of Makita
select power tools and other items made in China and sell them under their own brand, this may have
an adverse impact on Makita's consolidated financial condition and results of operations.
6
Table of Contents
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.
Makita's production activities are greatly dependent on the on-schedule delivery of materials and
parts from its suppliers. Makita purchases some of its component parts from sole suppliers. The
largest single source supplier of the Company accounted for approximately 5% of its aggregate
purchases of raw materials and parts in fiscal 2006. There is no assurance that Makita will be able
to find alternate suppliers that can provide materials and parts of similar quality and price in a
sufficient quantity and in a timely manner. In the event that any of these suppliers cannot deliver
the required quality and quantity of parts on schedule, this will have an adverse effect on
Makita's production schedules and cause a delay in Makita's own product deliveries. This may cause
Makita to lose some customers or require Makita to purchase replacement materials or parts from
alternate sources at a higher price. Any of these occurrences may have a detrimental effect on
Makita's consolidated financial condition and results of operations.
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.
In manufacturing power tools, Makita Group purchases raw materials and components, including
silicon steel plates, aluminum, steel products, copper wire, and electronic parts. In recent years,
demand for these materials in China and the rest of the world has risen substantially, and some
suppliers are experiencing a shortage of capacity. Under these circumstances, if the Makita Group
is unable to obtain the necessary quantities of these materials, this may have an effect on
production schedules. In addition, the shortage of capacity among suppliers is a factor leading to
increased prices of production materials. If the Makita Group experiences increases in prices of
production materials, greater than what can be absorbed by increased productivity or through other
internal efforts and prices of final products cannot be raised sufficiently, such circumstance may
have a detrimental impact on the performance and financial position of the Makita Group.
Product liability litigation or recalls may harm Makita's financial statements and
reputation.
Makita manufactures a wide range of power tools at factories worldwide according to ISO
internationally accepted quality control standards. However, Makita cannot be certain that all of
its products will be free of defects nor that it will be subject to product recalls in the future.
A large-scale recall or a substantial product liability suit brought against Makita may result in
severe damage to Makita's brand image and reputation. In addition, a major product recall or
product liability lawsuit is likely to be very costly and would require a significant amount of
management time and attention. Any of these occurrences may have a major adverse impact on Makita's
consolidated financial condition and results of operations.
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 controls over financial reporting
are not effective as of March 31, 2007, or if Makita's independent registered public accounting
firm is unable to provide adequate attestation on management's assessment, or to provide
unqualified opinion on the effectiveness of Makita's internal controls over financial reporting, as
required by Section 404 of the Sarbanes-Oxley Act of 2002.
The Securities and Exchange Commission, as directed by Section 404 of the Sarbanes-Oxley Act of
2002, adopted rule requiring public companies to include a report of management on Makita's
internal controls over financial reporting in its Annual Report on Form 20-F that contains an
assessment by management of the effectiveness of Makita's
internal control over financial reporting. In addition, Makita's independent registered public
accounting firm must attest to and report on management's assessment of the effectiveness of
Makita's internal control over financial reporting. These requirements will first apply to Makita's
Annual Report on Form 20-F for the fiscal year ending March 31, 2007. Although Makita intends to
diligently and vigorously review its internal controls over financial reporting in order to ensure
compliance with Section 404 requirements, Makita's management may conclude that Makita's internal
controls over financial reporting are not effective. In addition, Makita's independent registered
public accounting firm may be unable to attest to Makita's management's assessment or may issue a
report that concludes that Makita's internal controls over financial reporting are not effective.
Makita's failure to achieve and maintain effective internal controls over financial reporting, or
Makita's independent registered public accounting firm's inability to attest to Makita's
management's assessment, or the issuance of a report that concludes that Makita's internal controls
over financial reporting are not effective, could result in the loss of investor confidence in the
reliability of Makita's financial reporting process, which in turn could harm Makita's business and
ultimately could negatively impact the market price of Makita's ADRs and ordinary shares.
7
Table of Contents
Item 4.
Information on the Company
A. History and development of the Company
The Company traces its origin to an electrical repair workshop founded in Nagoya in 1915, and was
incorporated under the Commercial Code of Japan on December 10, 1938 under the name of Makita
Electric Works, Ltd. as a joint stock corporation. Under the presidency of the late Mr. Jujiro
Goto, in 1958, Makita commenced the manufacture of electric power tools and, by 1969, had reached
its present leading position in the Japanese market. In 1970, the Company decided to take advantage
of the large potential for growth in overseas markets for its products and established its first
subsidiary in the United States. Since then, Makita has expanded its export activity and has
established other overseas subsidiaries. In April 1991, the Company changed its name from Makita
Electric Works, Ltd. to Makita Corporation. In April 1995, Makita established a holding company in
the United Kingdom to better coordinate the overall activities of its European subsidiaries. At
present, Makita sells its products in over 150 countries around the world.
As part of its efforts to minimize trade friction, Makita started manufacturing operations in
Canada, Brazil and the United States in 1980, 1981 and 1985 respectively. Makita established a
manufacturing subsidiary in the United Kingdom in 1989. In January 1991, Makita acquired all of the
shares of Sachs-Dolmar GmbH, a German company, subsequently renamed Dolmar GmbH (Dolmar), which is
primarily engaged in manufacturing engine driven chain saws. Makita established two manufacturing
subsidiaries in China, Makita (China) Co., Ltd. and Makita (Kunshan) Co., Ltd. in December 1993 and
in November 2000 respectively.
In May 2005, Makita established a new subsidiary, Makita EU S.R.L. in Romania, as a location from
which it can serve growing markets in Eastern Europe, Russia, Western Europe and the Middle East.
Construction began in April 2006 on a new Romanian factory in the suburbs of the capital,
Bucharest, where production is scheduled to start by Summer 2007.
Makita presently manufactures power tools in seven countries globally: the United States, Canada,
Brazil, the United Kingdom, Germany, China and Japan. By fiscal year 2008, when construction of the
Romania factory is complete, Makita will have production facilities in eight countries, three of
them in Europe.
During the fiscal year under review, Makita Ukraine LLC, and Makita EU S.R.L. were newly included
within the scope of consolidation. On the other hand, golf course operator Joyama Kaihatsu Ltd. was
dropped from the list of the company's consolidated subsidiaries because of the transfer of its
ownership interests in Joyama Kaihatsu Ltd. to a third party. As a result, the number of
consolidated subsidiaries increased to 45.
Makita Corporation's registered office is located at 3-11-8, Sumiyoshi-cho, Anjo, Aichi 446-8502,
Japan, and its telephone number is +81-566-98-1711.
B. Business overview
Makita's principal activity is the manufacturing and sale of a wide range of power tools for
professional users worldwide. Makita's power tools consist of portable general purpose tools,
primarily drills, grinders and sanders and portable woodworking tools, primarily saws and planers.
Makita also produces a line of stationary woodworking machines. For the fiscal year ended March 31,
2006, approximately 82% of Makita's sales were outside of Japan. Makita estimates that most of its
sales worldwide were made to commercial and professional users such as those engaged in timber and
metal processing, carpentry, and concrete and masonry works.
Makita focuses on creating user and environment-friendly products that enhance the work
environment, and have features such as low vibration, low noise and dust concentration.
8
Table of Contents
Products
The following table sets forth Makita's consolidated net sales by product categories for the
periods presented:
(Millions of yen, except for percentage amounts)
U.S. Dollars
Consolidated Net Sales by Product Categories
(thousands)
Fiscal year ended March 31,
2004
2005
2006
2006
Portable woodworking tools
¥
34,452
18.7
%
¥
34,507
17.7
%
¥
37,890
16.5
%
323,846
Portable general purpose tools
98,176
53.3
%
105,736
54.3
%
128,215
56.0
%
1,095,855
Stationary woodworking
machines
1,711
1.0
%
1,573
0.8
%
2,009
0.9
%
17,171
Other products
19,548
10.6
%
21,763
11.2
%
26,696
11.7
%
228,171
Parts, repairs and accessories
30,230
16.4
%
31,158
16.0
%
34,265
14.9
%
292,863
Total
184,117
100.0
%
194,737
100.0
%
229,075
100.0
%
1,957,906
Portable Woodworking Tools
Portable woodworking tools consist mainly of saws, planers, mortisers, groove cutters, routers,
trimmers, nailers and tackers. Circular saws, which are primarily sold to carpenters in the
homebuilding industry, account for a substantial portion of Makita's sales of saws. The balance of
saw sales is made up of jigsaws, sold primarily to carpenters and other woodworkers for delicate
work, and recipro saws used for working in confined spaces unsuited to conventional saws. Planers,
which are used exclusively for woodworking, are sold principally to carpenters. Apart from
flat-surfaced planers, which are manufactured in varying widths, Makita also produces curved
planers for use on concave surfaces. Mortisers are used for chiseling holes in wood and groove
cutters are used to install sliding windows. Routers and trimmers are used principally by
carpenters in the homebuilding industry for door and window cutting, pattern cutting and other
interior decorative work. Nailers are used primarily for light woodwork in homebuilding. Tackers
are used to make temporary attachments in house-finishing and for furniture-making. Almost all of
the mortisers, groove cutters, routers and trimmers, nailers and tackers manufactured by Makita are
sold within Japan.
Among Makita's new products launched in Japan in the fiscal year under review was a 125mm
rechargeable circular saw, featuring a small, lightweight, high-capacity lithium ion battery, a
proprietary digital charge-optimization system, and a high-speed (4,300 rpm) motor.
Portable General Purpose Tools
Portable general purpose tools include drills, hammer drills, rotary hammers, electric breakers
(jackhammers), grinders, sanders, cutters, cutting machines, nibblers and shears, screwdrivers and
impact wrenches. Most of these tools are used for working on metal and materials other than wood,
although many may be used in woodworking as well.
Drills are typical power tools used for drilling in metals, woods and plastics. They are classified
into pistol-grip drills, D-handle drills, spade-handle drills and angle drills, according to their
configuration. Makita also manufactures various kinds of cordless drills. Some of them are equipped
with a screwdriving mechanism and are called cordless driver drills. Hammer drills are equipped
with a hammering function, but can also be used as conventional drills; these drills are used
principally on metal and masonry in the civil engineering and electrical contracting industries.
Rotary hammers, which are used exclusively on concrete by the construction industry, are equipped
with a rotary function, but can also be used as ordinary hammers. Breakers are used for shattering
hard surfaces, principally concrete.
Grinders and sanders are used for smoothing and finishing. Sanders may also be used for polishing.
Grinders are used on metal and sanders are used on metal, wood, stone and concrete. Grinders are
divided into portable disc grinders and bench grinders and sanders are classified into portable
disc sanders and belt sanders.
Cutters and cutting machines have similar functions, although cutters are designed to be hand-held
and cutting machines are stationary. Cutters have a diamond cutting surface and are used on tile,
brick, concrete and stone. Cutting machines have a carborundum cutting surface and are used
principally on metal.
Impact wrenches are used mainly in the construction industry and screwdrivers are used in
construction work and by electricians.
Among Makita's new products launched in Japan in the fiscal year under review was a series of new
products featuring lithium-ion batteries, including a high-cost-performance impact driver with a
small, lightweight, high-capacity lithium ion battery, a newly developed four-pole motor, and a
proprietary digital charge-optimization system. This series also includes a 16 mm rechargeable
hammer drill that is 30% faster than any of our previous products, allowing the user to
set the desired speed of rotation, impact, and fastening torque, and a 100 mm rechargeable disk
grinder with a maximum speed of 10,000 rpm.
9
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Stationary Woodworking Machines
Makita's stationary woodworking machines consist mainly of planer-jointers, wood surfacers, band
saws and table saws, all of which are installed in workshops and used for surfacing and cutting
wood.
Other Products
Makita's other products include chain saws, hand-held vacuum cleaners for home use, industrial
vacuum cleaners, submersible pumps and garden tools, such as hedge trimmers.
Parts, repairs and accessories
Makita manufactures and markets a variety of parts and accessories for its products and performs
repair work as part of its after-sale services.
Principal Markets, Distribution and After-Sale Services
The following table sets forth Makita's consolidated net sales by geographic area based on
customers locations for the periods presented:
(Millions of yen, except percentage amount)
U.S. Dollars
Consolidated Net Sales by Geographic Area
(thousands)
Fiscal year ended March 31,
2004
2005
2006
2006
Japan
¥
39,142
21.3
%
¥
39,379
20.2
%
¥
41,600
18.2
%
$
355,556
North America
41,853
22.7
38,490
19.8
47,673
20.8
407,462
Europe
66,369
36.0
75,263
38.6
90,504
39.5
773,538
Asia
14,245
7.7
16,341
8.4
16,993
7.4
145,239
Other
22,508
12.3
25,264
13.0
32,305
14.1
276,111
Total
¥
184,117
100.0
%
¥
194,737
100.0
%
¥
229,075
100.0
%
$
1,957,906
Japan
Makita believes that most of its domestic sales are made to commercial users. The Japanese
Do-It-Yourself, or DIY, market for power tools is growing but the pace of growth is slow.
Makita attributes its leading position in the Japanese market to the close and frequent contact
that it maintains with retailers and users of Makita products. While Makita's major competitors
rely primarily on wholesalers for all aspects of distribution and servicing, Makita has
approximately 840 employees directly responsible for the promotion, sale and delivery and
after-sale servicing of its products. These employees, operating from 113 sales offices throughout
Japan, are assigned sales territories and visit retail outlets in their area on an average of once
a week.
In addition, Makita has two distribution centers in Osaka and Saitama prefecture. These
distribution centers strengthen Makita's distribution and after-sale service functions.
The majority of Makita's products are sold through its 14 wholesalers. Each wholesaler bears the
risk of any bad debts of the retailers for which it has responsibility. The payments by the
wholesalers to Makita are in most cases made within 30 to 60 days after sale. During the fiscal
year ended March 31, 2006, Makita sold its products, directly or through wholesalers, to
approximately 30,000 retail outlets, and no single retailer accounted for more than 2% of Makita's
domestic sales. During the year, Makita's three largest wholesalers accounted, in the aggregate,
for approximately 35% of Makita's domestic net sales.
Repairs, including free repair service and after-sale services are carried out by Makita's sales
offices.
To strengthen its business in Pneumatic Tools, Makita purchased the nailer business of Kanematsu
NNK Corp in January 2006
Overseas
In the
fiscal year ended March 31, 2006, 82% of Makita's net sales
were made outside of Japan.
Overseas sales, distribution, and service are carried out through a network of 36 sales
subsidiaries and 113 branch offices or service centers located in the United States, Canada,
Brazil, Mexico, Argentina, Chile, Australia, New Zealand, Singapore, Taiwan, China, Korea, the
United Kingdom, France, The Netherlands, Belgium, Italy, Greece,
Germany, Denmark, Austria, Poland, the Czech Republic, Hungary, Spain,
10
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the United Arab Emirates,
Romania, Switzerland, Finland, Russia, Ukraine and Slovakia. In addition, the Company exports
directly, as well as through trading companies, to various countries throughout the world. Makita
products are sold principally under the "Makita" brand name and the remaining products are sold
under the "Dolmar" and "Maktec" brand names.
Makita offers warranties to overseas customers. After-sale services and repairs overseas are
provided by local sales subsidiaries, service depots designated by Makita, or by service stores
designated by the applicable local importers. As of March 31, 2006, Makita has over 100 service
depots outside of Japan. As of the fiscal year ended March 31, 2006, 26 of these service depots
were located in the United States and 21 of these service depots were located in China. The labor
costs of service and repairs to products under warranty for overseas customers are borne by Makita
and the local service agents, and parts are provided by Makita.
Seasonality
Makita's business has no significant seasonality that affects sales or profits.
Competition
Both in Japan and overseas, the markets in which Makita sells its products are highly competitive.
Makita believes that competition in the portable electric power tool market is based on price,
product reliability, design and after-sale services and that its products are generally competitive
as to price and enjoy competitive advantage due to their reputation for quality, product
reliability and after-sale services. Makita is the largest manufacturer of portable electric power
tools in Japan and, together with one other Japanese competitor, accounts for a substantial
majority of the total sales of such products in Japan.
In overseas markets, Makita competes with a number of manufacturers, some of which are well
established in their respective local markets as well as internationally. In recent years, in the
U.S. power tool industry, some leading home centers have introduced their own brands of power tools
for professionals, and a high level of M&A activity is in progress within the power tool industry.
Moreover, in the Japanese market, U.S. and Japanese companies are forming business alliances, and
competition is becoming more intense within a saturated market. Makita has also experienced
increasing competition, particularly in countries with lower purchasing power, from China-based
power tool manufacturers who often offer lower-priced products.
Raw Materials and Sources of Supply
Makita purchases raw materials and parts to manufacture its products. The principal raw materials
and parts purchased by Makita include plastics, pressed steel plates, aluminum castings, copper
wires, switches, gears, blades, batteries, and bearings. The Company procures most of its raw
materials from multiple sources, although most components are obtained from single suppliers. The
procurement cost of aluminum, copper, and certain other raw materials is affected by fluctuations
in commodity markets, and these material prices were appreciated during fiscal 2006.
Makita's purchases of raw materials and parts in the fiscal year ended March 31, 2006, amounted to
¥ 108,057 million. Raw materials and parts are purchased from approximately 250 suppliers in Japan
and a number of local suppliers in each country in which Makita performs manufacturing operations,
with the largest single source accounting for approximately 5% of Makita's total purchases of raw
materials and parts.
Makita also purchases from outside sources finished products such as vacuum cleaners, electric
generators, brushcutters, cordless laser plumbs and levels, and wood surfacers.
Makita has not experienced any difficulty in obtaining raw materials, parts or finished products.
Government Regulations
Makita is subject to different government regulations in the countries in which it does business,
such as required business and investment regulations approvals, export regulations based on
national-security or other reasons, and other export and import regulations such as tariffs, as
well as commercial, antitrust, patent, consumer and business taxation, exchange control, and
environment and recycling laws and regulations.
If Makita is unable to comply with these regulations, it may be subject to significant fines or
other penalties and its activities in such countries may be limited.
Intellectual Property Rights
As of March 31, 2006, Makita owned 391 patents and 52 utility model registrations in Japan and 311
patents outside Japan. A utility model registration is a right granted under Japanese law to
inventions having a practical utility in terms of form, composition or assembly, but embodying less
originality than that required for patents. As of March 31, 2006, Makita had made 536 applications
for additional patents and utility model registrations in Japan as well as 252 patent applications
outside Japan. While Makita considers all of its intellectual property to be important, it does not
consider any one or group of patents, trademarks or utility model registrations to be so
significant that their expiration or termination would materially affect Makita's business.
11
Table of Contents
C. Organizational structure
As of March 31, 2006, the Makita Group consisted of 45 consolidated subsidiaries. Makita
Corporation ("the Company") is the parent company of the Makita Group. The Company heads the
development of products. Domestic sales are made by the Company and overseas sales are made almost
entirely through sales subsidiaries and wholesalers. The following is a list of significant
subsidiaries of the Makita Group.
Proportion of
Country of
Ownership and
Company Name
Incorporation
Voting Interest
Makita U.S.A., Inc.
U.S.A
100.0
%
Makita Corporation of America
U.S.A
100.0
Makita Canada Inc.
Canada
100.0
Makita Mexico, S.A. de C.V.
Mexico
100.0
Makita do Brasil Ferramentas Eletricas Ltda.
Brazil
99.9
Makita Herramientas Electricas de Argentina S.A.
Argentine
100.0
Makita Chile Ltda.
Chile
100.0
Makita (Australia) Pty. Ltd.
Australia
100.0
Makita (New Zealand) Ltd.
New Zealand
100.0
Makita International Europe Ltd.
U.K.
100.0
Makita (U.K.) Ltd.
U.K.
100.0
Makita Manufacturing Europe Ltd.
U.K.
100.0
Makita France S.A.
France
55.0
Makita Benelux B.V.
The Netherlands
100.0
Euro Makita Corporation B.V.
The Netherlands
100.0
S.A. Makita N.V.
Belgium
100.0
Makita S.p.A.
Italy
100.0
Makita Werkzeug GmbH
Germany
100.0
Dolmar GmbH
Germany
100.0
Makita Werkzeug Gesellschaft m.b.H.
Austria
100.0
Makita Sp. z o. o.
Poland
100.0
Makita SA
Switzerland
100.0
Makita, S.A.
Spain
100.0
Makita Gulf FZE
U.A.E.
100.0
Makita Oy
Finland
100.0
Makita Singapore Pte. Ltd.
Singapore
100.0
Makita (Taiwan) Ltd.
Taiwan
100.0
Makita Power Tools (HK) Ltd.
China
100.0
Makita (China) Co., Ltd.
China
100.0
Makita (Kunshan) Co., Ltd.
China
100.0
Makita Korea Co., Ltd.
Korea
100.0
Makita Ichinomiya Corporation and 13 other subsidiaries
Japan and other countries
100.0
12
Table of Contents
D. Property, plant and equipment
The following table sets forth information relating to Makita's principal production facilities as
of March 31, 2006.
Floor space
Location
(Square meters)
Principal products manufactured
In Japan;
Makita Corporation
Okazaki Plants
71,804
Portable woodworking tools and portable general purpose tools
Makita Ichinomiya Corporation
5,325
Stationary woodworking machines
Overseas;
Makita Corporation of America
24,053
Portable woodworking tools and portable general purpose tools
Makita (China) Co., Ltd.
33,100
Portable woodworking tools and portable general purpose tools
Makita (Kunshan) Co., Ltd.
6,401
Portable woodworking tools and portable general purpose tools
Makita Manufacturing Europe Ltd.
11,520
Portable woodworking tools and portable general purpose tools
Dolmar GmbH
17,747
Engine powered equipment
In addition, the Company owns an aggregate of 213,286 square meters of floor space occupied by
the head office, warehouse facilities, a training center, dormitories and sales offices.
Makita's overseas manufacturing operations are conducted in the United States, Canada, Brazil,
United Kingdom, Germany and China. All buildings and land in these countries, except for the
properties in China, are owned by Makita.
None of the buildings or land that Makita owns in Japan is subject to any mortgage or lien. Makita
leases 88 sales offices in Japan and all of its overseas sales offices and premises, except for the
following locations, all of which are owned by the respective subsidiary companies;
•
Head office and certain branch offices of Makita U.S.A., Makita Canada, and Makita Australia; and
•
Head office of Makita Germany, Makita France, Makita Benelux (The Netherlands), Makita Belgium,
Makita Italy, Makita Brazil, Makita Taiwan, and Makita Singapore.
Makita considers all of its principal manufacturing facilities and other significant properties to
be in good condition and adequate to meet the needs of its operations. Makita adjusts production
capacity based on its assessment of markets
demands and prospects for demands, according to market conditions and Makita's business objectives,
by opening, closing, expanding or downsizing manufacturing facilities or by increasing or
decreasing output from the facilities accordingly. Makita, therefore, believes that it is difficult
and would require unreasonable effort to determine the exact productive capacity and the extent of
utilization of each of its manufacturing facilities with a reasonable degree of accuracy. Makita,
however, believes that its manufacturing facilities are currently operating at a normal capacity of
production facility.
Makita believes that there are no material environmental issues that may affect Makita's current
use of its assets.
Item 4A. Unresolved Staff Comments
None
13
Table of Contents
Item 5.
Operating and Financial Review and Prospects
A. Operating results
The following table sets forth a summary of our results of operations for each of the years ended
March 31, 2004, 2005 and 2006.
(Millions of yen, except for percentage amounts)
U.S. Dollars (thousands)
2004
2005
2006
2006
Change
%
%
%
%
NET SALES
¥
184,117
100.0
¥
194,737
100.0
¥
229,075
100.0
$
1,957,906
17.6
Cost of sales
110,322
59.9
113,323
58.2
132,897
58.0
1,135,872
17.3
GROSS PROFIT
73,795
40.1
81,414
41.8
96,178
42.0
822,034
18.1
Selling, general and
administrative expenses
53,698
29.2
52,646
27.1
58,726
25.6
501,931
11.5
Losses (Gains) on disposals or
sales of property, plant and
equipment
(2,379
)
(1.3
)
1,234
0.6
(8,326
)
(3.6
)
(71,162
)
–
Impairment of long-lived assets
7,780
4.2
577
0.3
–
–
–
–
Transfer to the government of
the substitutional portion of
pension plan
–
–
(4,441
)
(2.3
)
–
–
–
–
OPERATING INCOME
14,696
8.0
31,398
16.1
45,778
20.0
391,265
45.8
OTHER INCOME (EXPENSES)
Interest and dividend income
869
0.5
1,157
0.6
1,301
0.6
11,120
12.4
Interest expense
(605
)
(0.3
)
(588
)
(0.3
)
(364
)
(0.2
)
(3,111
)
(38.1
)
Exchange gains (losses) on
foreign currency transactions,
net
(202
)
(0.1
)
37
0.0
(258
)
(0.1
)
(2,205
)
–
Realized gains on securities, net
555
0.3
453
0.2
2,918
1.3
24,940
544.2
Other, net
857
0.4
161
0.1
(232
)
(0.1
)
(1,983
)
–
Total
1,474
0.8
1,220
0.6
3,365
1.5
28,761
175.8
INCOME BEFORE INCOME TAXES
16,170
8.8
32,618
16.7
49,143
21.5
420,026
50.7
PROVISION FOR INCOME TAXES
8,479
4.6
10,482
5.3
8,732
3.8
74,633
(16.7
)
NET INCOME
7,691
4.2
22,136
11.4
40,411
17.6
345,393
82.6
General
Overview
In fiscal 2006, the U.S. economy showed a gradual expansion as personal consumption and capital
investment remained firm. In Europe, personal consumption did not see a full-fledged recovery, but
indications of a gradual recovery were evident as exports held firm and the Eastern European and
Russian economies stabilized and expanded. In Asia, growth rates slowed in some areas, but the
region's overall economic growth remained high, especially in China where exports were strong. The
Japanese economy experienced gradual recovery as capital investment increased along with the
recovery in corporate profitability, and there was also an improvement in personal consumption and
employment.
The principal business of Makita is the manufacture and sale of power tools and stationary
woodworking machines. Principal products include circular saws, jigsaws, planers, drills, rotary
hammers, grinders and slide compound saws. Makita has ten manufacturing centers, three located in
Japan, two in China and one each in the United States, Canada, Brazil, the United Kingdom, and
Germany.
In fiscal 2006, Makita worked diligently to develop high-value-added products that precisely
reflect the needs of users. By combining lithium ion batteries with the Company's proprietary
optimum charging system, Makita created a series of rechargeable products featuring small size and
high output, and released new products such as rotary hammers featuring newly developed
low-vibration designs.
14
Table of Contents
On a consolidated basis, our net sales in fiscal 2006 amounted to ¥229,075 million, up 17.6% from
the previous fiscal year. This was the first time sales exceeded ¥200 billion. In fiscal 2006, the
company recorded a gain of ¥8,479 million from the sale of the golf course, and a gain of ¥5,238
million from the decrease in valuation allowance on a deferred income tax assets. Accordingly,
year-on-year operating income climbed 45.8%, to ¥45,778 million and net income amounted to ¥40,411
million, 82.6% higher than the previous fiscal year.
Fiscal Year (FY) 2006 compared to FY2005
Net sales
Makita's consolidated net sales for the fiscal year ended March 31, 2006 ("FY 2006") amounted to
¥229,075 million, an increase of 17.6%, or ¥ 34,338 million, from the fiscal year ended March 31,
2005 ("FY 2005"). In FY 2006, the average yen-dollar exchange rate was ¥113.3 for $1.00,
representing a 5.4% depreciation of the yen compared with the average level in FY 2005. The average
level of the yen-euro exchange rate in FY 2006 was ¥137.8 for 1.00 euro, representing a 2.0%
depreciation of the yen compared with the average level in FY 2005. Excluding the effect of
currency fluctuations, consolidated net sales would have increased by 13.4% in FY 2006.
While Makita's consolidated net sales increased by 17.6% in FY2006, the overall number of units of
products sold also increased in FY 2006. Excluding the effect of the decrease in prices of
products and the currency fluctuations, Makita's consolidated net sales would have increased by
14.0%, or by ¥ 27,276 million. The significant increase in the quantity of goods sold in FY 2006
primarily reflected strong sales of Makita's portable general purpose tools, such as grinders,
rotary hammers and hammer drills. In Europe, competitiveness has improved due to the strength of
euro against the yen. Further, demand for the rotary hammer in Europe has been strong. In North
America, the sales has increased in part due to the introduction of lithium ion battery products,
which were introduced as a major sales item to major hardware retailers during the Christmas sales
season.
The average price of Makita's products declined in FY 2006, and excluding the effect of the
increase in the number of units sold, the drop of prices would have decreased Makita's net sales by
1.9%, or by ¥ 3,704 million. The reduction in prices was caused by Makita's sales strategy.
Sales of new products comprised 15.9% of consolidated net sales of Makita in FY 2006, or ¥ 36,378
million. Among others, a new series of rechargeable products combining lithium ion batteries with
the Company's proprietary optimum charging system and new products such as rotary hammers featuring
newly developed low-vibration designs, were introduced during FY 2006 and contributed to the
increase in Makita's net sales in FY 2006. In North America in particular, the line of tools with
rechargeable lithium battery was popular at major hardware retailers. The distinctive designs as
well as the ability to develop new products quickly to match the changing needs of the market
contributed to the popularity of these products. In Japan, due to the increasing demand for
renovation-related products in the market, among the line of tools with rechargeable lithium ion
battery, the sales of impact drivers and circular saws have been strong.
In terms of product type, there was an increase in the sales of portable general purpose tools by
21.3% or ¥22,479 million, portable woodworking machines by 9.8% or ¥3,383 million, stationary
woodworking machines by 27.7% or ¥436 million, other products by 22.7% or ¥4,933 million and income
from parts, repairs and accessories by 10.0% or ¥ 3,107 million, respectively. In particular, sales
of cordless impact drivers, circular saws and rotary hammers increased.
Sales by region
The increase in consolidated net sales in FY 2006 can be attributed to an increase in sales in
Japan by 5.6%, or ¥2,221 million, to ¥41,600 million, an increase in sales in North America, by
23.9%, or ¥9,183 million, to ¥47,673 million, an increase in sales in Europe by 20.3%, or ¥15,241
million, to ¥90,504 million and, to a lesser extent, increased sales in Asia (excluding Japan) by
4.0%, or ¥652 million, to ¥16,993 million and an increase in sales in other regions including
Australia, Latin America and Middle East by 27.9% or ¥7,041 million, to ¥32,305 million.
The increased sales in Japan in FY 2006 primarily reflected the increased number of units sold with
respect to its portable general purpose tools such as lithium ion battery based impact drivers and
circular saws, partially offset by the decline in the number of units sold in stationary
woodworking machines. In addition, the automatic nailer business acquired from Kanematsu-NNK Corp.
contributed to the increased sales in Japan.
The increased sales in North America in FY 2006 primarily reflected strong sales of lithium ion
battery based products to major home centers in North America. Excluding the effect of fluctuations
of the local currencies, net sales in North America would have increased by 16.4%, or ¥6,325
million in FY 2006, compared with FY 2005.
The increased sales in Europe in FY 2006 primarily reflected the appreciation of the euro against
the yen. Net sales in yen terms increased in Russia and Eastern Europe by 34.6%, in the United
Kingdom by 10.4%, in Germany by 18.4% and in France by 24.0% compared to FY 2005. Among others,
Makita's products such as drills and rotary hammers
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were particularly popular in countries such as Germany and the United Kingdom, partly reflecting
the lower sales price resulting from the strength of the euro. Drills and rotary hammers increased
by 17.5% and 22.8% respectively. In addition, the introduction of new products, particularly drills
and rotary hammers contributed to the increase of sales in Europe. Excluding the effect of
fluctuations of the local currencies, net sales in Europe would have increased by 17.2%, or ¥12,920
million in FY 2006.
The increased sales in Asia (excluding Japan) in FY 2006 primarily reflected the increased sales in
China and Taiwan, particularly with respect to portable general purpose tools, such as grinders and
hammer drills. Net sales in yen terms increased in China by 18.8% over amounts recorded in FY 2005.
The establishment of six branch stores and 15 direct sales service centers in China greatly
improved the after-sales service and was a factor, contributing to the increase of sales in China.
Excluding the effect of fluctuations of the local currencies, net sales in Asia excluding Japan
would have increased by 0.6%, or ¥98 million in FY 2006.
The increased sales in other regions including Australia, Latin America and the Middle East in FY
2006 were primarily due to an increased number of units sold in Other regions, particularly with
respect to portable general purpose tools such as grinders, impact drivers and rotary hammers sold.
In FY 2006 Makita saw success in its sales efforts to new markets in the Middle East and Africa.
The introduction of new products also contributed to the increase of sales in Other regions, in
particular rotary hammers. The increased number of products sold in other regions was partially
offset by the decreased price per product resulting from the reduced cost of production, especially
in grinders. Overall, net sales of grinders increased by 33.0% from FY 2005. Excluding the effect
of fluctuations of the local currencies, other net sales would have increased by 17.7%, or ¥4,471
million in FY 2006.
Review of Performance by Product Group
Portable General Purpose Tools
The Portable General Purpose Tools group offers a wide range of dependable cordless drills, hammer
drills, rotary hammers, demolition hammers, grinders, sanders, screwdrivers, impact wrenches,
shears, nibblers, and cutters. This group generates the largest portion of Makita's consolidated
net sales. In FY 2006, sales of portable general purpose tools grew 21.3%, to ¥128,215 million,
accounting for 56.0% of consolidated net sales. In Japan, sales of portable general purpose tools
increased 12.4%, to ¥15,880 million, accounting for 38.2% of total domestic sales. Overseas sales
of portable general purpose tools increased 22.6%, to ¥112,335 million, or 59.9% of total overseas
sales.
Portable Woodworking Tools
Principal products in Makita's Portable Woodworking Tools group include circular saws, jigsaws,
recipro saws, planers, routers, trimmers, and pneumatic nailers. In FY 2006, Makita recorded a 9.8%
increase in sales of Portable Woodworking Tools, to ¥37,890 million, or 16.5% of consolidated net
sales. Domestic sales of portable woodworking tools increased 2.0%, to ¥6,879 million, accounting
for 16.5% of total domestic sales. Makita recorded an 11.7% increase in overseas sales of portable
woodworking tools, to ¥31,011 million, which accounted for 16.5% of total overseas sales in FY
2006.
Stationary Woodworking Machines
Makita's extensive lineup of Stationary Woodworking Machines encompasses table saws,
planer-jointers, and band saws. Sales of Stationary Woodworking Machines in FY 2006 increased
27.7%, to ¥2,009 million, accounting for 0.9% of consolidated net sales. Domestic sales of
Stationary Woodworking Machines dropped 5.6%, to ¥805 million, accounting for 1.9% of total
domestic sales. Overseas sales of Stationary Woodworking Machines were ¥1,204 million, a 67.2%
increase from the previous fiscal year, accounting for 0.6% of Makita's total overseas sales.
Other Products
Makita's Other Products category includes industrial-use dust collectors and generators as well as
various products for garden and home use, including chain saws, brush cutters, grass cutters, hedge
trimmers, blowers, and cordless cleaners. In FY 2006, sales of Other Products grew 22.7%, to
¥26,696 million, accounting for 11.7% of net sales. In Japan, Makita recorded a 1.3% fall in sales
of Other Products, to ¥8,365 million, accounting for 20.2% of total domestic sales. Overseas sales
of other products increased 37.9%, to ¥18,331 million, accounting for 9.9% of total overseas sales.
Parts, Repairs and Accessories
Makita's after-sales services include the sale of parts and accessories and repairs. In FY 2006,
parts, repairs, and accessories sales edged up 10.0%, to ¥34,265 million, accounting for 14.9% of
consolidated net sales. Domestic sales of parts, repairs, and accessories increased 5.3% to ¥9,671
million accounted for 23.2% of total domestic sales. Overseas sales of parts, repairs, and
accessories advanced 11.9%, to ¥24,594 million, accounting for 13.1% of total overseas sales.
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Cost of Sales
Cost of sales increased 17.3% (¥19,574 million) from FY2005 to ¥132,897 million.
In terms of overseas sales, despite the rise in materials costs, the sales cost ratio improved
slightly from 58.2% in FY2005 to 58.0% as a result of sales increase after yen conversion,
reflecting the declining yen against the euro and the U.S. dollar.
Gross Profit
Gross profit on sales increased 18.1%
(¥
14,764 million) to ¥96,178 million. Gross profit
margin improved 0.2 points from 41.8% in FY2005 to 42.0%, due to the weak yen and sales of high
value-added products.
Selling, General and Administrative Expenses
Selling, general and administrative expenses for FY2006 increased 11.5% (¥6,080 million) from
FY2005 to ¥58,726 million. The main causes were increased personnel costs due to an increase in the
number of employees, a rise in shipping costs due to increased sales and the sharp increase in the
price of crude oil, and increased advertising costs due to a sponsorship contract in North America.
Further, the decline of yen caused the yen conversion rate of selling expenses and administrative
expenses of overseas subsidiaries to rise. Selling, general and administrative expenses excluding
the effects of the low yen rose 9.7%.
On the other hand, the ratio of selling, general and administrative expenses to sales fell 1.5
points from 27.1% to 25.6%, due to increased sales.
Losses (Gains) on disposal or sales of property, plant and equipment
In FY 2004, Joyama Kaihatsu Ltd., our subsidiary that owned a golf course, wrote down the value of
the golf course to its fair value, thereby recording ¥5,996 million in impairment losses. On April
11, 2005, the Nagoya District Court approved the civil rehabilitation plan for Joyama Kaihatsu Ltd.
and such plan was affirmed on May 7, 2005. On May 31, 2005, Makita transferred its ownership
interest in Joyama Kaihatsu Ltd., including the golf course property, to a third party. As a
result, in FY2006, a gain of ¥8,479 million from the sale of the golf course was recognized, which
included the release from its obligation for club membership of ¥ 6,461 million. In addition, the
Company and certain subsidiaries recognized losses on disposal or sales of property, plant and
equipment of ¥153 million. Accordingly, Makita recognized net gains on disposal or sales of
property, plant and equipment of ¥8,326.
Operating Income
As a result of the above, operating income for FY2006 increased 45.8% to ¥45,778 million.
Operating income margin improved 3.9 points, from 16.1% in FY2005 to 20.0% in FY2006.
Other Income (Expenses)
In FY2006, Other income was ¥3,365 million, a 175.8% increase from FY2005.
The reasons for the increase were as follows:
(1) Realized gains on securities increased ¥2,465 million to ¥2,918 million.
As on October 1, 2005, UFJ Holdings Co., Ltd., and Mitsubishi Tokyo Financial Group Co., Ltd.,
merged. The shares of UFJ Holdings that the Company owned were exchanged for shares of the newly
merged entity, Mitsubishi UFJ Financial Group Co., Ltd. As a result of this share exchange, the
Company realized a gain on securities, net in the amount of ¥2,528 million.
(2) Interest expenses decreased by ¥224 million to ¥364 million.
Interest expenses was reduced by ¥195 million due to the redemption of the Company's 1.5% annual
interest yen-based convertible bonds in the amount of ¥12,992 million in March 2005.
(3) Interest and dividend income increased by ¥144 million to ¥1,301 million.
The main factor in the increase in interest and dividends income in FY2006 was the increase of
dividends from certain investments in trusts due to the recovery in Japanese stock market.
(4) The amount of foreign exchange gains and losses fell by ¥295 million, from a gain of ¥37
million in FY2005 to a loss of ¥258 million in FY2006 due to exchange losses in China caused by the
devaluation of yuan against the U.S. dollar.
Income before income taxes
Income before income taxes for FY2006 increased by 50.7% (¥16,525 million) as compared with
the previous fiscal year to ¥49,143 million, while the ratio of income before income taxes to sales
for current year increased from 16.7% in FY2005 to 21.5% in FY2006, an increase of 4.8%.
Provision for income taxes
Provision for income taxes for FY2006 was reduced by 16.7% as compared with the previous year
primarily due to the realization of a tax benefit on impairment losses related to our golf course
business.
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In 2006, following the completion of the civil rehabilitation proceedings and the sale of the golf
course business, previously unrecognized deferred tax asset were realized in connection with the
gain on sale of golf course business and the related valuation allowance of ¥ 5,782 million was
reversed. Makita also provided valuation allowance of ¥ 402 million for deferred tax assets that
existed at the beginning of the year because it was determined that such assets were more likely
than not to be realized in future years. As a consequence, the net change in the total valuation
allowance for the year ended March 31, 2006 was a decrease of ¥5,238 million, resulting in a
reduction of income tax expense. This decrease in valuation allowance as well as a decrease due to
the tax sparing and other miscellaneous adjustments had affect of decreasing Makita's effective tax
rate by 22.5% to the effective rate of 17.8% from the statutory tax rate of 40.3% for the year
ended March 31, 2006.
Net income
As a result of a gain of ¥8,479 million from the sale of the golf course, which included the gain
of release from its obligation for club membership of ¥ 6,461 million and other factors, net income
for FY2006 rose by ¥18,275 million to ¥40,411 million, which is an 82.6% increase from the previous
fiscal year.
Earnings per share
Basic earnings per share of common stock amounted to ¥281.1, compared with ¥153.9 in FY 2005.
Diluted earnings per share amounted to ¥281.1, compared with ¥148.8 in FY 2005.
Regional Segments
Segment information described below is determined by the location of the Company and its relevant
subsidiaries.
Japan Segment
In FY 2006, sales in the Japan segment grew 13.0%, to ¥111,614 million. Sales to external customers
increased 5.6% to ¥53,788 million, which accounted for 23.5% of consolidated net sales. The
increase reflects a 5.6% rise in sales in the domestic market as well as a 5.3% increase in export
sales mainly to Middle East and Africa. Even though segment operation expenses increased by 5.6%,
to ¥87,468 million, operating income climbed approximately 1.5 times, to ¥24,146 million in FY
2006. This was attributable to the ¥8,479 million gain on the sale of the golf course business in
addition to strong sales of various new products with lithium ion batteries.
North America Segment
In FY 2006, sales in the North America segment climbed 24.0%, to ¥52,300 million. Sales to external
customers increased 24.3% to ¥47,979 million, which accounted for 20.9% of consolidated net sales.
This increase in sales to external customers was mainly due to better sales of lithium ion battery
based products at major home centers in North America. As a result, operating income for FY2006
increased by 15.7%, to ¥1,863 million.
Europe Segment
In FY 2006, sales in the Europe segment grew 19.5% to ¥97,555 million. Sales to external customers
increased 20.3%, to ¥91,249 million, which accounted for 39.8% of consolidated net sales. This
increase is mainly due to strong sales of the rotary hammer, and the stable and steady economic
growth in Eastern Europe and Russia. Segment operating income increased 19.0%, to ¥12,050 million.
Asia Segment
In FY 2006, sales in the Asia segment increased 24.4% to ¥52,624 million. The increase in sales in
this segment is primarily due to higher sales from two factories in China to North America and
Europe, where sales were favorable. Sales to external customers increased 17.2%, to ¥8,645 million,
which accounted for 3.8% of consolidated net sales. This increase is primarily due to a increase in
sales in Taiwan. Segment operating income grew 31.2%, to ¥6,462 million in FY 2006.
Other Segment
In FY 2006, sales in the Other segment increased 24.9% to ¥27,595 million. Sales to external
customers increased by 25.0%, to ¥27,414 million, which accounted for 12.0% of consolidated net
sales. Sales increase in this segment is primarily due to an increase in sales in Central and South
American countries and Middle East. Segment operating income grew to approximately 2.7 times FY
2005's to ¥2,547 million, in FY 2006. This increase is primarily due to a turnaround in Oceania
result from cost reductions.
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Fiscal Year (FY) 2005 compared to FY2004
Net sales
Makita's consolidated net sales for the fiscal year ended March 31, 2005 ("FY 2005") amounted to
¥194,737 million, an increase of 5.8%, or ¥ 10,620 million, from the fiscal year ended March 31,
2004 ("FY 2004"). In FY 2005, the average yen-dollar exchange rate was ¥107.5 for $1.00,
representing a 5.5% appreciation of the yen compared with the average level in FY 2004. The average
level of the yen-euro exchange rate in FY 2005 was ¥135.2 for 1.00 euro, representing a 1.9%
depreciation of the yen compared with the average level in FY 2004. Excluding the effect of
appreciation of the euro and the depreciation of the U.S. dollar, consolidated net sales would have
increased by 6.2% in FY 2005.
While Makita's consolidated net sales increased 5.8% in FY 2005, the overall number of units of
products sold increased significantly in FY 2005, and excluding the effect of the decrease in
prices of products, Makita's consolidated net sales would have increased by 7.5%, or by ¥ 13,798
million. The significant increase in the quantity of goods sold in FY 2005 primarily reflected
strong sales of Makita's portable general-purpose tools, such as grinders, rotary hammers and
hammer drills. Among others, Makita's new line-up cordless driver drill #6270 series were popular
especially in Europe over Makita's competitors, in part reflecting the lower sales price resulting
from the strength of the euro in FY 2005. The increase was partially offset by a decrease in sales
in the North American market, as the North American home centers, as customers of Makita, continued
to enhance their production and distribution of products under their own brand name. Among others,
the number of drills sold in the North America market declined significantly in FY 2005.
The average price of Makita's products declined in FY 2005, and excluding the effect of the
increase in the number of units sold, the drop of prices would have decreased Makita's net sales by
1.9%, or by ¥ 3,537 million. The reduction in prices was caused primarily by increased price
competition in the markets and reduced cost of production, reflecting primarily the transfer of a
part of Makita's production from Japan to the People's Republic of China, where the overall costs
of production, including labor, parts and equipment, are significantly less expensive than in
Japan. A second factor contributing to the decrease in Makita's prices of goods was the increased
sales volume of MAKTEC, Makita's lower end brand, which continued to sell particularly well in
Asia.
Sales of new products comprised 10.8% of consolidated net sales of Makita in FY 2005, or ¥21,119
million. Among others, new models of drills, hammer drills and circular saws were introduced during
FY 2005 in most of Makita's markets world-wide and contributed significantly to the increase of
Makita's net sales in FY 2005. In particular, in overseas markets, especially in Europe, Makita's
new products such as its new line-up cordless driver drill #6270 series proved very popular, in
part because of the features and design and in part because of lower product prices reflecting the
lower cost of production. In Japan, Makita's new cordless impact drivers and new circular saws sold
well, responding to the increasing demand for renovation-related products in the market.
In terms of product type, there was an increase in the sales of portable general-purpose tools and
income from parts, repairs and accessories by 6.3% or ¥ 9,692 million and 3.1% or ¥ 928 million,
respectively. In particular, sales increased significantly in cordless impact drivers, circular
saws and rotary hammers.
Sales by region
The increase in consolidated net sales in FY 2005 can be attributed primarily to increased sales in
Asia (excluding Japan) increasing 14.7%, or ¥2,096 million, to ¥16,341 million and to increased
sales in Europe increasing 13.4%, or ¥8,894 million, to ¥75,263 million and, to a lesser extent,
increased sales in other regions including Australia, Latin America and Middle East increasing
12.2% or ¥2,756 million, to ¥25,264 million and increased sales in Japan increasing 0.6%, or ¥237
million, to ¥39,379 million. The increase was offset partially by decreased sales in North America
falling 8.0%, or ¥3,363 million, to ¥38,490 million.
The increased sales in Asia (excluding Japan) in FY 2005 primarily reflected the increased number
of units sold in Asia, particularly with respect to portable general-purpose tools, especially
grinders and hammer drills. The increased quantity of units sold were mostly offset by the
decreased price per product, resulting from the increased popularity of Makita's lower end brand,
MAKTEC and, to a lesser extent, Makita's reduced cost of production. Net sales in yen terms
increased in the People's Republic of China by 9.6% over amounts recorded in FY 2004. In addition,
the introduction of new products contributed significantly to the increase of sales in Asia, in
particular new models of drills and grinders. Excluding the effect of fluctuations of the local
currencies, consolidated net sales would have increased by 16.6%, or ¥2,371 million in FY 2005.
The increased sales in Europe in FY 2005 primarily reflected the appreciation of the euro against
the yen. In addition, the increased number of units sold in Europe, particularly with respect to
portable general purpose tools, in especially Russia, Eastern European countries, the United
Kingdom, Germany and France contributed to increased sales in Europe, partially offset by the
decreased price per product resulting from reduced cost of production. Net sales in yen terms
increased in Russia and Eastern Europe by 24.3%, in the United Kingdom by 14.1%, in Germany by 6.9%
and in France by 15.1% over amounts recorded in FY 2004.
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Among others, Makita's products such as drills
and rotary hammers were particularly popular in countries such as Germany and the United Kingdom,
partly reflecting the lower sales price resulting from the strength of the euro in FY 2005. Drills
and rotary hammers increased by 13.5% and 13.6% respectively. In addition, the introduction of new
products contributed significantly to the increase of sales in Europe, in particular new models of
cordless driver-drills, rotary hammers and chain saws. Excluding the effect of fluctuations of the
local currencies, consolidated net sales would have increased by 11.0%, or ¥7,304 million in FY
2005.
The increased sales in other regions including Australia, Latin America and the Middle East in FY
2005 were primarily due to an increased number of units sold in such other regions, particularly
with respect to portable general purpose tools such as grinders, impact driver drills and rotary
hammers sold in the Middle East, Africa and Australia. In FY 2005 Makita saw significant success in
its sales efforts to new markets in the Middle East and Africa. The increased number of Makita
products sold in other regions was partially offset by the decreased price per product resulting
from the reduced cost of production, especially in grinders. Overall, net sales of grinders
increased by 11.8% over amounts recorded in FY 2004. In addition, the introduction of new products
contributed significantly to the increase of sales in other regions, in particular new models of
rotary hammers and grinders. Excluding the effect of fluctuations of the local currencies,
consolidated net sales would have increased by 14.3%, or ¥3,214 million in FY 2005.
The increased sales in Japan in FY 2005 primarily reflected the increased number of units sold with
respect to its portable general purpose tools such as Makita's mainstay impact driver drills and
circular saws, partially offset by the decline in the number of units sold in stationary
woodworking machines and parts for repairs. On the other hand, continuing low levels of housing
construction in Japan restrained the growth of demand for Makita's products and increased overall
competition resulted in price pressure. In addition, the introduction of new products contributed
significantly to the increase of sales in Japan, in particular new models of renovation-related
products such as cordless impact driver drills and circular saws.
The decreased sales in North America in FY 2005 were primarily due to the depreciation of the
dollar against the yen. To a lesser extent, decreased sales in North America were due to overall
declining demand in North America, as home centers in the United States and Canada enhanced
production and distribution of products under their own brand name and, as a result, Makita's sales
to home centers declined. In addition, a part of the decrease in sales was attributable to the
increase in competitive pressures resulting in enhanced sales incentives offered to professional
user customers. The decline in sales in North America was despite Makita's successful marketing
programs aimed at the professional user market in the United States and Canada, and Makita's
reorganization of its distribution networks in the United States. In the United States, sales in
dollar terms declined by 4.0%, as a result of weaker sales volume reflecting mainly the decrease in
sales to home centers, such as sales of drills, circular saws and sanders. Overall, net sales of
drills in North America decreased by 20.0% as compared to the amounts recorded in FY 2004.
Excluding the effect of fluctuations of the local currencies, consolidated net sales would have
decreased by 4.2%, or ¥1,752 million in FY 2005.
Review of Performance by Product Group
Portable General Purpose Tools
The portable general purpose tools group offers a wide range of dependable cordless drills, hammer
drills, rotary hammers, demolition hammers, grinders, drills, sanders, screwdrivers, impact
wrenches, shears, nibblers, and cutters. This group generates the largest portion of Makita's
consolidated net sales. In FY 2005, sales of portable general purpose tools grew 7.7%, to ¥105,736
million, accounting for 54.3% of consolidated net sales. In Japan, sales of portable general
purpose tools increased 1.5%, to ¥14,129 million, accounting for 35.9% of total domestic sales.
Overseas sales of portable general purpose tools increased 8.7%, to ¥91,607 million, or 59.0% of
total overseas sales.
Portable Woodworking Tools
Principal products in Makita's portable woodworking tools group include circular saws, jigsaws,
recipro saws, planers, routers, trimmers, and pneumatic nailers. In FY 2005, Makita recorded a 0.2%
increase in sales of portable woodworking tools, to ¥34,507 million, or 17.7% of consolidated net
sales. Domestic sales of portable woodworking tools decreased 4.8%, to ¥6,744 million, accounting
for 17.1% of total domestic sales. Makita recorded a 1.5% increase in overseas sales of portable
woodworking tools, to ¥27,763 million, which accounted for 17.9% of total overseas sales in FY
2005.
Stationary Woodworking Machines
Makita's extensive lineup of stationary woodworking machines encompasses table saws,
planer-jointers, and band saws. Sales of stationary woodworking machines in FY 2005 fell 8.1%, to
¥1,573 million, accounting for 0.8% of consolidated net sales. Domestic sales of stationary
woodworking machines dropped 8.4%, to ¥853 million, accounting for 2.2% of total domestic sales.
Overseas sales of stationary woodworking machines were ¥720 million, a 6.5% decrease from the
previous fiscal year, accounting for 0.5% of Makita's total overseas sales.
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Other Products
Makita's other products category includes industrial-use dust collectors and generators as well as
various products for
garden and home use, including chain saws, brush cutters, grass cutters, hedge trimmers, blowers,
and cordless cleaners. In FY 2005, sales of other products grew 11.3%, to ¥21,763 million,
accounting for 11.2% of net sales. In Japan, Makita recorded a 3.8% rise in sales of other
products, to ¥8,473 million, accounting for 21.5% of total domestic sales. Overseas sales of other
products increased 16.7%, to ¥13,290 million, accounting for 8.6% of total overseas sales.
Parts, Repairs and Accessories
Makita's after-sales services include the sale of parts and accessories and repairs. In FY 2005,
parts, repairs, and accessories sales edged up 5.5%, to ¥31,158 million, accounting for 16.0% of
consolidated net sales. Domestic sales of parts, repairs, and accessories increased 10.3% to ¥9,180
million and contributed 23.3% of total domestic sales. Overseas sales of parts, repairs, and
accessories advanced 3.7%, to ¥21,978 million, accounting for 14.1% of total overseas sales.
Cost of sales
Cost of sales increased 2.7%, or ¥3,001 million, to ¥113,323 million, and the ratio of cost of
sales to net sales decreased by 1.7 %, falling from 59.9% to 58.2%. The ratio of cost of sales to
net sales improved mainly due to Makita's strategy to expand production in China and to further
develop high value-added products. As a result of this strategy, productivity in Makita's factories
in China and Japan improved, accounting for 1.3% out of the 1.7% improvement in the ratio of cost
of sales to net sales.
Gross profit
In addition to cost reductions, the appreciation of the euro against the yen and the dollar
increased the profitability of products manufactured in Japan and China and marketed in Europe. As
a result, gross profit in FY 2005 increased 10.3%, to ¥81,414 million. The ratio of gross profit to
net sales improved 1.7 percentage points, from 40.1% to 41.8%.
Selling, general and administrative expenses
Selling, general and administrative expenses dropped 2.0%, or ¥1,052 million, to ¥52,646 million,
in FY 2005, principally as a result of a decrease in pension cost due to an amendment and the
transfer to the government of the substitutional portion of domestic pension plan, and depreciation
expenses. In addition, the ratio of SG&A expenses to net sales decreased 2.1 percentage point, from
29.2% to 27.1%, principally as a result of reduced personnel expenses due to restructuring in the
U.S.A. with the aim to reduce personnel expenses and depreciation expenses to net sales.
Losses (Gains) on disposal or sales of property, plant and equipment
In FY2005, there was a loss of ¥1,234 million, versus a gain of ¥2,379 million in FY2004. In
FY2004, the Company sold a portion of land and structures at its head office premises in Anjo,
Aichi Prefecture in Japan. This gain is recorded in the Japan segment. In FY2005, Makita's
factories disposed of or sold some equipment, and the Company sold a portion of land in Sapporo,
Hokkaido in Japan. These dispositions and sales were recorded as a loss in the Japan segment. Most
of the dispositions and sales resulting in the loss were in connection with Makita's ordinary
course of business.
Impairment of long-lived assets
FASB Statement No. 144 "Accounting for the Impairment or Disposal of Long-Lived Assets" requires an
asset impairment adjustment if the sum of the estimated asset's related undiscounted future cash
flows is less than the current carrying value of the asset. If an asset is deemed to be impaired,
the value of the asset is written down to its estimated fair value.
Makita made a decision to discontinue the use of a certain information technology facility located
in zoning area in Japan during FY 2005. In accordance with FASB No. 144, Makita recorded a ¥577
million impairment loss on this facility in the Japan segment. The estimated fair value of ¥196
million represents the fair value of the land as determined by a third party appraiser considering
the estimated net cash flows from effecting the sale to a third party purchaser. Current zoning
regulations require that a buyer utilize the facility on substantially the same basis. Therefore,
the combination of the limitations imposed by the zoning rules and the fact that the facility is
located in a rural, non industrial section of Japan has caused management to determine that the
recoverable value on an as is basis will be most likely limited to the estimated fair value of the
land.
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Transfer to the government of the substitutional portion of pension plan
Until June, 2004, Makita had an employee pension fund in Japan, which was a defined benefit pension
fund established under the Japanese pension law. This domestic contributory plan was composed of a
corporate defined benefit portion established by the Company and a substitutional portion based on
benefits prescribed by the Japanese government. The Company was exempted from contributing to the
Japanese Pension Insurance program that would otherwise have been required if it had not elected to
fund the government substitutional portion of the benefit through a domestic contributory plan
arrangement. The plan assets of the domestic contributory plan were invested and managed as a
single portfolio for the entire domestic contributory plan and were not separately attributed to
the substitutional and corporate portions. In June 2001, the Japanese pension law was amended to
permit an employer to elect to transfer the entire substitutional portion benefit obligation from
the domestic contributory plan to the government together with a specified amount of plan assets
pursuant to a government formula. After such transfer, the employer would be required to make
periodic contributions to the Japanese Pension Insurance program, and the Japanese government would
be responsible for all benefit payments. The corporate portion of the domestic contributory plan
would continue to exist exclusively as a corporate defined benefit pension plan. Makita has
accounted for the transfer in accordance with EITF 03-02 "Accounting for the Transfer to the
Japanese Government of the Substitutional Portion of Employee Pension Fund Liabilities". As
specified in EITF 03-02, the entire separation process has been accounted for at the time of
completion of the transfer to the government of the benefit obligation and related plan assets as a
settlement in accordance with SFAS No.88 "Employers' Accounting for Settlements and Curtailments of
Defined Benefit Pension Plans and for Termination Benefits". The aggregate effect of this
separation was determined based on the Company's pension benefit obligation as of the date the
transfer was completed and the amount of plan assets required to be transferred.
The Company received an approval of exemption from the Minister of Health, Labor and Welfare in
January 2003, from the obligation for benefits related to future employee service with respect to
the substitutional portion of its domestic contributory plan. The Company received government
approval of exemption from the obligation for benefits related to past employee service in April
2004 with respect to the substitutional portion of its domestic contributory plan. The transfer to
the government was completed on June 28, 2004.
As a result of the transfer, the Company recognized a subsidy from the Japanese government equal to
the difference between the fair value of the obligation deemed "settled" with the Japanese
government and the assets required to be transferred to the government in the amount of ¥9,128
million in FY2005. In addition, the Company recognized a settlement loss equal to the amount
calculated as the ratio of the obligation settled to the total employee's pension fund obligation
immediately prior to settlement, both of which exclude the effect of future salary progression
relating to the substitutional portion, times the net unrecognized gain/loss immediately prior to
settlement, which amounted to ¥ 4,687 million. The resulting net gain of ¥4,441 million was
recorded as a "transfer to the government of the substitutional portion of pension plan" in the
accompanying consolidated income statement in FY 2005.
Operating Income
As a result of the factors indicated above, operating income grew 113.6%, to ¥31,398 million, in FY
2005, and the ratio of operating income to net sales rose 8.1 percentage points, from 8.0% to
16.1%.
Other Income (Expenses)
Other income dropped 17.2%, or ¥254 million, to ¥1,220 million, in FY 2005. This decrease reflects
a decrease in realized gains on securities and other income by 56.5%, or ¥798 million, to ¥614
million, in FY 2005. The foregoing decrease was partially offset by the following factors. (1)
Interest and dividend income increased 33.1%, or ¥288 million, to ¥1,157 million, in FY 2005. This
resulted from the increase in the amount of cash equivalents with foreign subsidiaries and the
average balance of Securities. (2)As a result of decreases of weighted average interest rates on
borrowings, interest expense decreased by 2.8%, or ¥17 million, to ¥588 million, in FY 2005. (3)The
balance of foreign exchange gains and losses improved by ¥239 million to a ¥37 million gain in
FY2005 from a ¥202 million loss in FY2004. This reflects the Euro appreciating against the Japanese
yen and the U.S. dollar depreciating against the Japanese yen in this period.
Income before income taxes
Income before income taxes in FY 2005 increased by 101.7%, or ¥16,448 million, to ¥32,618 million,
and the ratio of operating income to net sales rose 7.9 percentage points, from 8.8% in FY 2004 to
16.7% in FY 2005.
Provision for income taxes
Total provision for income taxes increased by 23.6% as compared with FY2004 and amounted to ¥10,482
million in FY 2005, mainly because of a rise in the taxable income of Makita.
The effective income tax rate was 32.1%, compared with the statutory income tax rate of 40.3%. The
difference between these rates was mainly attributed to the effect of tax treaties, through which
Japanese corporations can claim a tax credit against Japanese income taxes on income earned in
certain countries, even though that income is exempted from income taxes or is reduced by special
tax incentive measures in those countries, as if no special exemption
or reduction was provided. The Company applied such "tax sparing" mainly to China with the indicated
tax reduction effect.
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Net income
As a result of the foregoing, net income for FY 2005 increased 187.8% or ¥14,445 million, to
¥22,136 million.
Earnings per share
Basic earnings per share of common stock amounted to ¥153.9, compared with ¥53.2 in FY 2004.
Diluted earnings per share amounted to ¥148.8, compared with ¥51.9 in FY 2004.
Regional Segments
Segment information described below is determined by the location of the Company and its relevant
subsidiaries.
Japan Segment
In FY 2005, sales in the Japan segment grew 10.9%, to ¥98,741 million. Sales to outside customers
advanced 5.3% to ¥50,955 million, which accounted for 26.2% of consolidated net sales. The increase
reflects a 0.6% rise in sales in the domestic market as well as a 24.9% surge in export sales
mainly to Asia. Segment operating income climbed 11.0 times, to ¥15,915 million, owing to a 5.4%
fall in operation expenses to ¥82,826 million. The decrease in operating expenses resulted from a
gain of ¥4,441 million in connection with the return of the substitutional portion of the Company's
Employee Pension Fund to the government in FY2005, versus an impairment loss of ¥5,996 million
related to its golf course subsidiary in FY2004, and due to improved productivity in the Japanese
factory and the Chinese factories.
North America Segment
In FY 2005, sales in the North America segment dropped 7.6%, to ¥42,190 million. Sales to outside
customers fell 7.4% to ¥38,607 million, which accounted for 19.8% of consolidated net sales. This
decline in sales to outside customers mainly due to overall declining demand in North America, as
home centers in the United States and Canada enhanced production and distribution of products under
their own brand name and, as a result, Makita's sales to home centers declined. Segment operating
income surged 123.9% to ¥1,610 million, principally owing to a 9.7% fall in operating expenses to
¥40,580 million. The decrease in operating expenses reflected lower expenses due to restructuring
measures that reduced personnel expenses and due to improved productivity in the Chinese factories.
Europe Segment
In FY 2005, sales in the Europe segment grew 13.7% to ¥81,666 million. Sales to outside customers
advanced 13.0%, to ¥75,864 million, which accounted for 39.0% of consolidated net sales. Segment
operating income surged 35.4%, to ¥10,125 million, principally owing to a rise in net sales on a
local currency basis as well as to a rise in operating profit rates resulting from the strength of
the euro and the improved cost efficiency following the shift of a portion of our manufacturing
processes to factories in China.
Asia Segment
In FY 2005, sales in the Asia segment increased 46.0% to ¥42,315 million. Sales to outside
customers advanced 11.6%, to ¥7,378 million, which accounted for 3.8% of consolidated net sales.
Segment operating income grew 68.2%, to ¥4,926 million in FY 2005. The decrease in operating
expenses reflected improved productivity in the Chinese factories.
Other Segment
In FY 2005, sales in the other segment increased 8.3% to ¥22,101 million. Sales to outside
customers increased by 8.1%, to ¥21,933 million, which accounted for 11.3% of consolidated net
sales. Segment operating income fell 29.0%, to ¥955 million in FY 2005.
CRITICAL ACCOUNTING POLICIES
As disclosed in Note 3 of the Notes to the accompanying consolidated financial statements, the
preparation of Makita's consolidated financial statements in accordance with U.S. generally
accepted accounting principles requires management to make certain estimates and assumptions. These
estimates and assumptions were determined by management's judgment based on currently known facts,
situations and plans for future activities, which may change in the future. Certain accounting
estimates are particularly sensitive because of their significance to the consolidated financial
statements and accompanying notes and due to the possibility that future events affecting the
estimates may differ significantly from management's current judgments. Accordingly, any change in
the facts, situations, future plans or other factors on which management bases its estimates may
result in a significant difference between earlier estimates and the actual results achieved.
Makita believes that the following are the critical accounting policies and related judgments and
estimates used in the preparation of its consolidated financial statements and accompanying notes.
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Revenue Recognition
Makita believes that revenue recognition is critical for its financial statements because net
income is directly affected by the estimation of sales incentives. In recognizing its sales
incentives, Makita is required to make estimates based on assumptions about matters that are highly
uncertain at the time the estimate is made. Makita principally generates revenue through the sale
of power tool products. Makita's general revenue recognition policy follows the provisions of Staff
Accounting Bulletin No. 104 ("SAB 104"). In accordance with SAB 104 and as disclosed in the
consolidated financial statements, Makita recognizes revenue when persuasive evidence of an
arrangement exists, delivery has occurred or services are rendered, the sales price is fixed and
determinable and collectibility is reasonably assured. Makita believes the foregoing conditions are
satisfied upon the shipment or delivery of Makita's product.
With respect to "Revenue Recognition," Makita offers sales incentives to qualifying customers
through various incentive programs. Sales incentives primarily involve volume-based rebates,
cooperative advertising and cash discounts, and are accounted for in accordance with the Emerging
Issues Task Force Issue No. 01-9.
Volume-based rebates are provided to customers only if customers attain a pre-determined cumulative
level of revenue transactions within a specified period of a year or less. Liabilities for
volume-based rebates are recognized within a corresponding reduction to 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.
If expected sales levels are not achieved or achieved in levels higher than anticipated resulting
in a greater magnitude of incentive, the result could have a material impact on Makita's financial
statements.
Cooperative advertisings are provided to certain customers as a contribution to or as sponsored
funds 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. Cash discounts are
substantially all taken within 30 days following the date of sale. Estimates of expected cash
discounts are evaluated and adjusted periodically based on actual sales transactions and historical
trends.
The following table shows the changes in accruals for volume-based rebates, cooperative advertising
and cash discounts for the years ended March 31, 2004, 2005 and 2006:
Yen
U.S. Dollars
(millions)
(thousand)
For the year ended March 31,
2004
2005
2006
2006
Volume-based rebates:
Actual payment for the year
(3,607
)
(3,836
)
(5,104
)
(43,624
)
Income statement impact for the year
3,903
4,333
5,726
48,940
Accrued expenses (BS) as of March 31,
1,605
2,102
2,724
23,282
Cooperative advertisings:
Actual payment for the year
(2,076
)
(1,900
)
(2,127
)
(18,179
)
Income statement impact for the year
2,147
1,812
2,196
18,769
Accrued expenses (BS) as of March 31,
596
508
577
4,932
Cash discounts:
Actual payment for the year
(3,503
)
(3,682
)
(4,311
)
(36,846
)
Income statement impact for the year
3,661
3,684
4,371
37,359
Accrued expenses (BS) as of March 31,
429
431
491
4,197
Inventory valuation and reserve
Inventories are valued at the lower of cost or market price, with cost determined based on the
average cost method. The valuation of inventory requires Makita to estimate obsolete or excess
inventory as well as inventory that is not of saleable quality. The determination of obsolete or
excess inventory requires Makita to estimate the future demand for products taking into
consideration such factors as macro and micro economic conditions, competitive pressures,
technological obsolescence, changes in consumer buying habits and others. The estimates of future
demand that Makita uses in the valuation of inventory are the basis for revenue forecasts, which
are also consistent with short-term manufacturing plans. If demand forecast for specific products
is greater than actual demand and Makita fails to reduce manufacturing output accordingly, Makita
could be required to write down additional on-hand inventory, which would have a negative impact on
gross profit and, consequently, a potential material adverse impact on net income.
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However, sales of previously written-down or written-off inventory is not significant to any of the periods
presented and Makita believes that the gross profit of the resulting sales of such inventory items
is similar to that realized on all of its sales for the respective periods presented. Accordingly,
the impact on Makita's consolidated gross profit margin by sales of previously written-down or
written-off inventory is not material. Makita usually sells or scraps remaining inventory items
within a few years after write off and/or write down.
Unrealized Losses on Securities
Makita holds marketable securities and investment securities, which are accounted for in accordance
with SFAS No. 115. Makita believes that impairment on securities is critical because it holds
significant amounts of securities and any resulting impairment loss could have a material adverse
impact on net income. Makita utilizes significant judgment based on subjective as well as objective
factors in determining when an investment is other-than-temporarily impaired. Makita regularly
reviews available-for sale securities and held-to-maturity securities for possible impairment based
on criteria that include, but are not limited to, the extent to which cost exceeds market value,
the duration of a market decline, our intent and ability to hold to recovery and the financial
health, specific prospects and creditworthiness of the issuer. Makita performs comprehensive market
research and analysis and monitors market conditions to identify
potential impairment losses.
Allowance for Doubtful Receivables
Makita performs ongoing credit evaluations of its customers and adjusts credit limits based upon
payment history and the customer's current creditworthiness, as determined by Makita's review of
their current credit information. Makita continuously monitors collections and payments from its
customers and maintains a provision for probable estimated credit losses based upon its historical
experience and any specific customer collection issues that Makita has identified. Such credit
losses have historically been within Makita's expectations and the provisions established. However,
Makita cannot guarantee that it will continue to experience the same credit loss rates that it has
in the past. Changes in the underlying financial condition of its customers could result in a
material impact to Makita's consolidated results of operations and financial condition.
Impairment of Long-Lived Assets
Makita believes that impairment of long-lived assets is critical for its financial statements
because Makita has significant amounts of property, plant and equipment, the recoverability of
which could significantly affect its operating results and financial condition.
Makita periodically performs an impairment review for long-lived assets held and used whenever
events or changes in circumstances indicate that the carrying value of the assets may not be
recoverable. This review is based upon Makita's projections of expected undiscounted future cash
flows. Estimates of the future cash flows are based on the historical trends adjusted to reflect
the best estimate of future operating conditions. Makita believes that its estimates are
reasonable. However, different assumptions regarding such cash flows could materially affect
Makita's evaluations. Recoverability of assets to be held and used is assessed by comparing the
carrying amount of an asset or asset group to the expected future undiscounted cash flows of the
asset or group of assets. If an asset or group of assets is considered to be impaired due to
factors such as a significant decline in market value of an asset, current period operating or cash
flow losses and significant changes in the manner of the use of an asset, the impairment charge to
be recognized is measured as the amount by which the carrying amount of the asset or group of
assets exceeds fair value. Long-lived assets meeting the criteria to be considered as held for sale
are reported at the lower of their carrying amount or fair value less costs to sell.
Fair value is determined based on recent transactions involving sales of similar assets or on
appraisals prepared internally or externally, or by discounting future expected cash flows, or by
using other valuation techniques. If actual market and operating conditions under which assets are
operated are less favorable than those projected by management, resulting in lower expected future
cash flows or a shorter expected future period to generate such cash flows, additional impairment
charges may be required. In addition, changes in estimates resulting in lower fair values due to
unanticipated changes in business or operating assumptions could adversely affect the valuations of
long-lived assets and in turn affect Makita's consolidated results of operations and financial
condition.
Accrued Retirement and Termination Benefits
Makita believes that pension accounting is critical for its financial statements because
assumptions used to estimate pension benefit obligations and pension expenses can have a
significant effect on its operating results and financial condition. Accrued retirement and
termination benefits are determined based on consideration of the levels of retirement and
termination liabilities and plan assets at the end of a given fiscal year. The levels of projected
benefit obligations and net periodic benefit cost are calculated based on various annuity actuarial
calculation assumptions. Principal assumptions include discount rates, assumed rates of increase in
future compensation levels, mortality rates and some other assumed rates. Discount rates employed
by Makita are reflective of rates available on long-term, high quality fixed-income debt
instruments. Discount rates are determined annually on the measurement date.
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The expected long-term rate of return on plan assets is determined annually based on the
composition of the pension asset portfolios and the expected long-term rate of return on these
portfolios. The expected long-term rate of return on plan assets is designed to approximate the
long-term rate of return actually earned on the plan assets over time to ensure that funds are
available to meet the pension obligations that result from the services provided by employees.
A number of factors are used to determine the reasonableness of the expected long-term rate of
return, including actual historical returns on the asset classes of the plans' portfolios and
independent projections of returns of the various asset classes.
Accordingly, these assumptions are evaluated annually and retirement and termination liabilities
are recalculated at the end of each fiscal year based on the latest assumptions. In accordance with
U.S. generally accepted accounting principles, actual results that differ from the assumptions are
accumulated and amortized over the future periods and therefore, generally affect Makita's results
of operations in such future periods.
Makita has a contributory retirement plan in Japan, which covers substantially all of the employees
of the Company. The discount rate assumed to determine the pension obligation for the pension plan was 2.2% for the
year ended March 31, 2006.
As of March 31, 2006, Makita allocated 54.6%, and 30.8% of plan assets to equity securities and
debt securities. The value of these plan assets are influenced by fluctuations in world securities
market. Significant depreciation or appreciation will have an impact on future expenses.
The
following table illustrates the sensitivity to changes in the discount rate and the expected
return on pension plan assets, while holding all other assumptions constant, for Makita's pension
plans as of March 31, 2006.
Change in
Change in
Change in assumption
projected benefit
pre-tax pension
obligation
expenses
Yen (millions)
50 basis point increase / decrease in discount rate
-2,300 / +2,600
-7 / +6
50 basis point increase / decrease in expected return on assets
—
-140/+140
While Makita believes that the assumptions are appropriate, significant differences in its actual
experience or significant changes in its assumptions may materially affect Makita's accrued
retirement and termination benefits and future expenses.
Realizability of Deferred Income Tax Assets
Makita is required to estimate its income taxes in each of the jurisdictions in which Makita
operates. This process involves estimating Makita's current tax provision together with assessing
temporary differences resulting from differing treatment of items for income tax reporting and
financial accounting and reporting purposes. Such differences result in deferred income tax assets
and liabilities, which are included within Makita's consolidated balance sheets. Makita must then
assess the likelihood that Makita's deferred income tax assets will be recovered from future
taxable income, and to the extent Makita believes that recovery is not more likely than not, Makita
must establish a valuation allowance.
Significant management judgment is required in determining our provision for income taxes, deferred
income tax assets and liabilities and any valuation allowance recorded against our gross deferred
income tax assets. We have recorded a valuation allowance of ¥2,973 million as of March 31, 2006
due to uncertainties about our ability to utilize certain deferred income tax assets mainly for net
operating loss carry forwards before they expire. For the balance of deferred income taxes,
although realization is not assured, management believes, judging from an authorized business plan,
it is more likely than not that all of the deferred income tax assets, less the valuation
allowance, will be realized. The amount of such net deferred income tax assets that are considered
realizable, however, could change in the near term and any such change may have a material effect
on Makita's consolidated results of operations and financial position if estimates of future
taxable income are different.
New Accounting Standards
In November 2004, the FASB issued SFAS No. 151, "Inventory Costs – an amendment of ARB No. 43,
Chapter 4" ("SFAS No. 151"). SFAS No. 151 amends the guidance in ARB No. 43, Chapter 4, "Inventory
Pricing," to clarify the accounting for abnormal amounts of idle facility expense, freight,
handling costs, and wasted material (spoilage). Among other provisions, the new statement requires
that items such as idle facility expense, excessive spoilage, double freight, and rehandling costs
be recognized as current period charges regardless of whether they
meet the criterion of "so abnormal" as stated in ARB No. 43.
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Additionally, SFAS No. 151 requires that the allocation of
fixed production overheads to the costs of conversion be based on the normal capacity of the
production facilities. SFAS No. 151 is effective for the year ended March 31, 2007. Makita does not
expect the adoption of SFAS No. 151 will have a material impact on its consolidated results of
operations and financial condition.
In December 2004, the FASB issued SFAS No. 153, "Exchanges of Non-monetary Assets – an amendment of
APB Opinion No. 29." SFAS No. 153 eliminates the exception from fair value measurement for
non-monetary exchanges of similar productive assets in paragraph 21(b) of APB Opinion No. 29,
"Accounting for Non-monetary Transactions," and replaces it with an exception for exchanges that do
not have commercial substance. SFAS No. 153 specifies that a non-monetary exchange has commercial
substance if the future cash flows of the entity are expected to change significantly as a result
of the exchange. SFAS No. 153 is effective for fiscal periods beginning after June 15, 2005 and is
required to be adopted by Makita, in the fiscal year beginning April 1, 2006. Makita does not
expect the adoption of SFAS No. 153 will have a material impact on its consolidated results of
operations and financial condition.
In May 2005, the FASB issued SFAS No. 154, "Accounting Changes and Error Corrections—a replacement
of APB Opinion No. 20 and FASB Statement No. 3." SFAS No. 154 replaces APB Opinion No. 20,
"Accounting Changes" and SFAS No. 3,"Reporting Accounting Changes in Interim Financial Statements,"
and provides guidance on the accounting for and reporting of accounting changes and error
corrections. SFAS No. 154 establishes retrospective application, or the latest practicable date, as
the required method for reporting a change in accounting principle and the reporting of a
correction of an error. SFAS No. 154 is effective for accounting changes and corrections of errors
made in fiscal years beginning after December 15, 2005.
In June 2005, the FASB issued FASB Staff Position (FSP) FAS 143-1, "Accounting for Electronic
Equipment Waste Obligations" ("FSP 143-1"). FSP 143-1 provides guidance on the accounting for
certain obligations associated with the Waste Electrical and Electronic Equipment Directive (the
"Directive"), adopted by the European Union ("EU"). Under the Directive, the waste management
obligation for historical equipment (products put on the market on or prior to August 13, 2005)
remains with the commercial user until the customer replaces the equipment. FSP 143-1 is required
to be applied to the later of the first reporting period ending after June 8, 2005 or the date of
the Directive's adoption into law by the applicable EU member countries. Makita does not expect the
adoption of FSP 143-1 will have a material impact on its consolidated results of operations and
financial condition.
In November 2005, the FASB issued FSP FAS 115-1 and FAS 124-1, "The Meaning of Other-Than-Temporary
Impairment and Its Application to Certain Investments" ("FSP 115-1"). FSP 115-1 provides guidance
on determining when investments in certain debt and equity securities are considered impaired,
whether that impairment is other-than-temporary, and on measuring such impairment loss. FSP 115-1
also includes accounting considerations subsequent to the recognition of an other-than-temporary
impairment and requires certain disclosures about unrealized losses that have not been recognized
as other-than-temporary impairments. FSP 115-1 is required to be applied to reporting periods
beginning after December 15, 2005. Makita does not expect the
adoption of FSP 115-1 will have a
material impact on its consolidated results of operations and financial condition.
B. Liquidity and capital resources
Makita's principal sources of liquidity are cash on hand, cash provided by operating activities and
borrowings within credit lines. As of March 31, 2006, Makita held cash and cash equivalents
amounting to ¥39,054 million and the Company's subsidiaries have credit lines up to ¥23,846
million. As of March 31, 2006, ¥1,638 million of its credit lines was used and ¥22,208 million was
unused. As of March 31, 2006, Makita had ¥1,728 million in short-term borrowing, which included
bank borrowings and capital lease obligations. For further information regarding our short-term
borrowings, including the average interest rates see Note 11 to our accompanying consolidated
financial statements.
As of March 31, 2006, Makita's total short-term borrowings and long-term indebtedness amounted to
¥1,832 million, representing a decrease from the ¥9,148 million reported for the previous fiscal
year-end. Makita's ratio of indebtedness to shareholders' equity declined by 3.5%, to 0.7%. The
reduction in the balance of indebtedness and the decline in the ratio of total indebtedness to
shareholders' equity reflect the efforts of management to improve the efficiency of the usage of
Makita's capital by reducing the level of unused net cash provided by operating activities. As a
result of these efforts, Makita repaid long-term indebtedness of ¥6,000 million in FY2006.
Except as disclosed above, Makita expects to continue to incur additional debt from time to time as
required to finance working capital needs. Makita has no potentially significant refinancing
requirements in fiscal 2006.
Makita has historically maintained a high level of liquid assets. Management estimates that the
cash and cash equivalents level of ¥39,054 million as of March 31, 2006, together with Makita's
available credit facilities, cash flow from operations and funds available from long-term and
short-term debt financing, will be sufficient to satisfy our future working capital needs, capital expenditure, research and
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development
and debt service requirement through fiscal 2006 and thereafter.
Makita requires operating capital mainly to purchase materials required for production, to conduct
research and development, to respond to cash flow fluctuations related to changes in inventory
levels and to cover the payment cycle of receivables from wholesalers. Makita further requires
funds for capital expenditures, mainly to expand production facilities and purchase metal molds.
Makita also requires funds for financial expenditures, primarily to pay dividends and to repurchase
treasury stock. Maintaining the level of Makita's production and marketing activities requires
capital investments of approximately ¥5 billion to ¥7 billion annually. Please see "– Fiscal Year
2006 – Capital Expenditures" below in this section for a description of our principal capital
expenditures for fiscal 2006 and the main planned expenditures for fiscal 2006. At the Regular
General Meeting of Shareholders held in June 2006, the Company's shareholders approved a cash
dividend of ¥38 per share. The total cash dividend payments amount to ¥5,461 million, which the
Company paid in June 2006.
Makita believes it will continue to be able to access the capital markets on terms and for amounts
that will be satisfactory to it and as necessary to support the business and to engage in hedging
transactions on commercially acceptable terms.
Makita is rated at "A+" by Standard & Poor's at March 31, 2006.
Fiscal year 2006
Cash Flows
Cash flow provided by operating activities is primarily composed of cash received from customers,
and cash used in operating activities, principally payments by Makita for parts and materials,
selling, general and administrative expenses, and income taxes.
For FY2006, cash inflow from cash received from customers increased by 16.3% to ¥224,064 million,
as a result of an increase in net sales.
This increase was within the range of the increase in net sales, as there were no significant
changes in Makita's collection rates.
Cash used in operating activities increased by 13.1% to ¥198,997 million. This increase was caused
by greater purchases of parts and raw materials, increased production as well as the increase in
sales and administrative expenses.
As a result of these factors, net cash provided by operating activities increased 48.8% (¥8,225
million) from ¥16,842 million in FY2005 to ¥25,067 million in FY 2006.
In FY2006, cash outflow for capital expenditure increased ¥4,728 million to ¥11,383 million.
In addition, to 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 Corp. as of January 1, 2006 for a total of ¥1,853 million. Of the ¥1,853 million
purchase price including related costs, the Company paid ¥1,204 million during FY2006 and paid ¥649
million in April 2006.
The purchase of securities totaled ¥21,844 million during the previous fiscal year and ¥21,248
million during FY2006.
To engage in investing and financing activities, Makita increased its cash by ¥40,864 million from
sales and maturities of securities in the amount of ¥34,350 million and the cancellation of a time
deposit in the amount of ¥6,514 million.
In FY2006, net cash inflow from sales and maturities of securities increased by ¥6,168 million
from ¥28,182 million.
As a result, net cash flow resulting from investing activities increased ¥7,501 million from the
previous fiscal year's ¥154 million to ¥7,655 million.
In FY2006, following the confirmation of the civil rehabilitation plan for Joyama Kaihatsu, Ltd.,
the Company paid ¥150 million towards ¥800 million in long-term indebtedness, and ¥6,375 million
towards ¥12,836 million in club members' deposits. In addition, the Company also repaid ¥6,000
million long-term indebtedness of its subsidiary. Cash used in repayments of long-term indebtedness
and club members' deposits totaled ¥12,525 million. This cash outflow was ¥674 million less than
the ¥13,199 million cash used in repayment in FY2005, which included a total of ¥12,990 million for
redemption of convertible bonds and ¥209 million for repayment of club members' deposits. On the
other hand, cash used in the payment of dividends increased ¥4,454 million from ¥3,453 million
during the previous fiscal year to ¥7,907 million.
As a
result, net cash used in financial activities increased
¥3,371 million from ¥16,177 million
during previous fiscal year to ¥19,548 million.
As a result of these activities as well as the effect of exchange rate changes, our cash and cash
equivalents as of March 31, 2006 amounted to ¥39,054 million, up ¥13,670 million from the end of
fiscal 2005.
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Capital Expenditures
Makita has continued to allocate sizable amounts of funds for capital expenditures, which it
believes is crucial for sustaining long-term growth. In light of the severity of the current market
competition, however, Makita has focused its capital investments on expanding its plant in China
and purchasing metal molds for new products to be manufactured, which required Makita to increase
the amount of its capital expenditures in FY 2006 compared to FY 2005. Total capital expenditures
amounted to ¥4,494 million, ¥6,655 million and ¥11,383 million for FY 2004, 2005 and 2006
respectively.
Capital expenditure in FY2006 was mainly for expansion and remodeling to reinforce the earthquake
resistance of buildings at the main production factories in Japan, and for the purchase of
facilities such as Chinese factories. Capital investments of the Company amounted to approximately
¥6.4 billion, while the capital investments of overseas subsidiaries including manufacturing
subsidiaries amounted to approximately ¥5.0 billion. Capital expenditures for Makita's consolidated
subsidiaries consisted primarily of the purchase of metal molds for new products of Dolmar GmbH.
and the acquisition of production equipment by Makita (China) Co., Ltd. and Makita (Kunshan) Co.,
Ltd. All of Makita's capital expenditures in FY 2006 were funded through internal sources.
Under its investment plans for FY 2007, the Makita Group is scheduled to make capital investments
totaling ¥15.5 billion, 36% higher than for FY 2006. Of this total, the Company plans to make
direct investments of ¥9.9 billion and its consolidated subsidiaries will invest ¥5.6 billion.
In continuation from the FY2006, our Company's main capital investment plan is to expand and
renovate buildings to strengthen earthquake resistance in some of the head office buildings and
main factories. The main facilities investments by consolidated subsidiaries include new factories
in Europe and production facilities for Makita (China) Co., Ltd., and Makita (Kunshan) Co., Ltd.
These are all scheduled to be funded with internal capital.
Fiscal year 2005
Cash Flows
Net cash provided by operating activities in FY 2005 decreased by ¥12,099 million to ¥16,842
million from ¥28,941 million in the previous fiscal year. The cash inflow is primarily composed of
cash received from customers, and the cash outflow is primarily composed of payments by Makita for
parts and materials, selling, general and administrative expenses, and income taxes.
For FY 2005, cash inflow from cash received from customers increased, as a result of an increase in
net sales. This increase in cash inflow was within the range of the increase in net sales, as there
were no significant changes in Makita's collection rates. Cash inflow in operating activities
increased by 5.6%, to ¥192,742 million, and cash outflow in operating activities increased by
14.5%, to ¥175,900 million.
Cash outflow for payments for parts and- materials increased as a result of increased production.
This increase was greater than the increase in net sales. Cash outflow for income taxes payments
increased due to an increase in taxable income.
Net cash inflow from investing activities was ¥154 million, compared with a ¥17,262 million cash
outflow in the previous year. The increase in net cash inflow resulted mainly from the ¥13,510
million of proceeds from maturities of held to maturity securities. Net cash inflow from sales and
maturities of securities of purchase of securities for FY 2005 was ¥7,172 million, compared with
¥16,762 million of net securities purchase to accumulate funds in preparation for the payments
needed to redeem our outstanding convertible bonds maturing in March 2005. In addition, Makita
spent less cash on time deposits, at ¥38 million for FY 2005 compared with ¥1,162 million for FY
2004. The foregoing was partially offset by reduced proceeds from sales of property, plants and
equipment at ¥320 million for FY 2005 compared with ¥5,154 million for FY 2004, and the increase in
cash used for capital expenditure by ¥2,161 million, to ¥6,655 million.
Net cash used in financing activities amounted to ¥16,177 million, compared with ¥6,596 million in
the previous fiscal year. This included ¥12,990 million used to redeem our outstanding convertible
bond and ¥3,453 million used to pay cash dividends. In FY 2005, net cash outflow from financing
activities increased by ¥9,581 million to ¥16,177 million mainly due to an increase in redemption
of convertible bond and an increase in payment of cash dividends.
As a result of these activities as well as the effects of exchange rate changes, our cash and cash
equivalents as of March 31, 2005 amounted to ¥25,384 million, up ¥808 million from the end of
fiscal 2004.
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Capital Expenditures
Makita has continued to allocate sizable amounts of funds for capital expenditures, which Makita
believes is crucial for sustaining long-term growth. In the light of the severity of its current
market competition however, Makita has focused its capital investments on expanding its plant in
China and purchasing metal molds for new products to be manufactured in Japan and China and in
certain other areas, which required Makita to increase the amount of its capital expenditures in FY
2005 compared to FY 2004. Total capital expenditures amounted to ¥5,691 million, ¥4,494 million and
¥6,655 million for FY 2003, 2004 and 2005, respectively. Capital expenditures in FY 2005 were
mainly for the purchase of molds for new products, acquisition of production equipment in the
Chinese plant and the construction of a headquarters building for Makita (Australia) Pty. Ltd.
Capital investments of the Company amounted to approximately ¥2.0 billion, while the capital
investments of overseas subsidiaries including manufacturing subsidiaries in such countries as
Germany, China, and the United States amounted to approximately ¥4.7 billion. Capital expenditures
for Makita's consolidated subsidiaries consisted primarily of the construction of a headquarters
building for Makita (Australia) Pty. Ltd., the purchase of metal molds for new products of Dolmar
GmbH, and the acquisition of production equipment by Makita (China) Co., Ltd. and Makita (Kunshan)
Co., Ltd. All of Makita's capital expenditures in FY 2005 were funded through internal sources.
Under its investment plans for FY 2006, the Makita Group is scheduled to make capital investments
totaling ¥11.0 billion, 65% higher than for FY 2005, which is scheduled to be funded through
internal sources. Of this total, the Company plans to make direct investments of ¥7.0 billion and
its consolidated subsidiaries will invest ¥4.0 billion.
Financial Position
Total assets at the end of FY 2006 were ¥326,038 million, up 12.5% from the previous fiscal
year-end. Total current assets increased 9.6% to ¥227,769 million, owing to such factors as an
increase of inventories.
This increase was partially offset by a decrease in marketable securities.
Property, plant and equipment, at cost less accumulated depreciation, increased 12.1%, to ¥59,203
million. Investments and other assets increased 33.8%, to ¥39,066 million. Total current
liabilities decreased 21.1%, to ¥45,961 million mainly due to decrease in club member's deposit and
short-term borrowing.
Long-term liabilities increased 11.5%, to ¥11,858 million, mainly due to an increase in deferred
income tax liabilities incurred as a result of the increase in unrealized gains on securities we
hold. The current ratio was 5.0 times, compared with 3.6 at the previous year-end. Shareholders'
equity increased 21.4%, to ¥266,584 million.
The main reasons for this increase are an increase in retained earning, and accumulated other
comprehensive income of ¥5,345 million in FY2006, which compares to accumulated other comprehensive
loss of (¥9,249) in FY2005.
Fluctuations in the accumulated other comprehensive income (losses) are due to reductions in the
minimum pension liabilities adjustment resulting from the increase in actual return on plan assets
of defined benefit pension plan adopted by the Company, reductions in foreign currency translation
adjustments due to the decline of yen against the US dollar and euro etc., and the increase in the
unrealized gains on securities as a result of the appreciation of the market value of the Company's
securities holding.
As a result, the shareholders' equity ratio rose to 81.8%, from 75.8% at the previous fiscal
year-end.
C. Research and development, patents and licenses, etc.
Approximately 500 of Makita's employees are engaged in research and development activities and
product design. Makita also employs approximately 100 trained personnel in production engineering,
and has developed a number of the machine tools currently used in its factories. The majority of
such personnel are engaged in research and development of mechanical innovations, and the rest are
engaged in the research and development of electric, electronic and other applications.
Makita places a high priority on R&D and believes that strong capability in R&D is crucial to its
continuing development of high-quality, reliable products that meet users' needs. In FY 2006,
Makita allocated ¥4,826 million to R&D, approximately 2.1% of net sales. In FY 2005, Makita
allocated ¥4,446 million for R&D, up 1.6% from the ¥4,377 million allocation in FY 2004. The ratio
of R&D expenses to net sales was approximately 2.3% in FY 2004.
Makita is placing higher priority on designing power tools that are smaller and lighter, featuring
electronic controls, and that have internal power sources allowing a cordless operation. Additional
design priorities include developing units that feature low noise, low vibration, measures to
restrain dust emissions and new safety features. Still another priority is to design units that can
be recycled to address environmental concerns. In order to respond quickly to customers needs,
Makita is also placing an emphasis on shortening the time needed for new product development. To
strengthen initiatives that reduce costs, Makita focused development activities on a more limited range of
items and
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set objectives for developing models that use more standard parts. New products developed
in FY 2006 included cordless 4-mode impact driver, high-pressure air nailer and other products.
Makita developed a battery recharging system that employs digital communication functions to
provide information on the state of a battery's charge. Through the use of this new system, the
total volume of work can be increased substantially by enabling batteries to be used up to their
capacity. In addition, Makita adopted lithium ion batteries, which doubles the total volume of work
in comparison with Makita's batteries that must be inserted. Makita also developed an original
battery checker system using the previously mentioned digital communication functions. Using this
system, customers can check on the state of charge of their batteries and Makita can provide
customers with information on how to make their batteries last longer.
In FY2006, by combining lithium ion batteries with the Company's proprietary optimum charging
system, Makita created a series of rechargeable products featuring small size and high output, and
released new products such as rotary hammers featuring newly developed low-vibration designs.
Further, a line of products for the North American market was created through the development of
circular saws and air tools among other product. In order to consolidate our product line, we are
developing, among others, a rechargeable impact driver and slide compound saws.
On January 1, 2006, the Kanematsu-NNK Corporation's automatic nailer business was acquired by the
Company to reinforce the air tools business department. Due to this transfer of business, various
air tools with superior quality are being developed. We are planning to develop
competitively-priced air tools for overseas and high-pressure air tools for Japan.
D. Trend information
With regard to the outlook for the future, while the domestic economy is shrugging off deflation
and heading for recovery, we anticipate that harsh conditions will continue. Given the escalation
of raw material prices, including that of crude oil, and with the increasing trend to employ
prefab/precut materials in residential construction, the demand for power tools will decline. A
number of uncertainties also remain in the business environment. In addition to the global trend in
interest rate hikes, there are also concerns about the US economy where we are starting to see a
decline in personal consumption. There are also concerns regarding the future course of Asia, where
changes in the economy tend to be severe.
Under these circumstances, we acquired the automatic nailer business from Kanematsu-NNK Corporation
on January 1, 2006. We started the aggressive sales of air tools and the nails for nailers in
Japan, and the automatic nailer business is expected to make a significant contribution throughout
the FY2007.
In addition, tools with rechargeable lithium ion batteries introduced to the market in the second
half of FY2006 contributed to the increased sales in FY2006. Inventory volume increased ¥13,818
million (¥8,646 million of the increase due to conversion of the weak yen is excluded) from March
31, 2006 to ¥79,821 million, in anticipation of orders and forecasts for the increased sales of
lithium ion battery products in FY2007. These inventories are expected to decrease during FY2007.
We expect that demand for high-value-added products in the industrialized nations will continue,
and competition will intensify in the global market for professional power tools, including the
Japanese and North American markets.
Performance in the European market will be stable as the Company sustains its competitiveness and
Chinese power tool manufacturers will work to expand their positions primarily in the Asian
markets.
E. Off-balance sheet arrangements
Makita did not have any off-balance sheet arrangements as of March 31, 2006.
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F. Tabular disclosure of contractual obligations
Yen (millions)
Expected payment date, year ending March 31,
Total
2007
2008
2009
2010
2011
Thereafter
Capital lease
194
90
37
27
20
11
9
Interest expenses on Capital lease
18
9
4
2
2
1
–
Operating lease
1,680
546
401
275
166
86
206
Contributions to defined benefit plan
3,101
3,101
–
–
–
–
–
Derivative financial instruments
24,498
24,498
–
–
–
–
–
Purchase Obligation
6,373
6,373
–
–
–
–
–
Total
¥
35,864
¥
34,617
¥
442
¥
304
¥
188
¥
98
¥
215
U.S. Dollars (thousands)
Expected payment date, year ending March 31,
Total
2007
2008
2009
2010
2011
Thereafter
Capital lease
1,658
769
316
231
171
94
77
Interest expenses on Capital
lease
154
77
34
17
17
9
–
Operating lease
14,359
4,667
3,427
2,350
1,419
735
1,761
Contributions to defined
benefit plan
26,504
26,504
–
–
–
–
–
Derivative financial instruments
209,385
209,385
–
–
–
–
–
Purchase Obligation
54,470
54,470
–
–
–
–
–
Total
$
306,530
$
295,872
$
3,777
$
2,598
$
1,607
$
838
$
1,838
Note:
Calculation of contributions to
defined benefit plan after 2007 is not practicable.
G.
Safe harbor
All
information that is not historical in nature disclosed under "Item 5.
Operating and Financial Review and Prospect - Trend Information" and
" - tabular Disclosure of Contractual Obligations" is deemed to be a
forward-looking Statements. See "Cautionary Statement with
Respect to Forward-Looking Statements" for additional information.
Item 6.
Directors, Senior Management and Employees
A. Directors and senior management
The Directors and Statutory Auditors of the Company as of June 29, 2006 are as follows:
Masahiko Goto
Current Position: President, Representative Director since May 1989
Date of Birth: November 16, 1946
Director since: May 1984
Masami Tsuruta
Current Position: Managing Director, General Manager of Domestic Sales Headquarters since June 2003
Date of Birth: December 26, 1942
Director since: June 1995
Business Experience:
June 1995: Director, Assistant General Manager of Domestic Sales Headquarters
June 1997: Director, General Manager of Domestic Sales Marketing Headquarters
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Yasuhiko Kanzaki
Current Position: Director, General Manager of International Sales Headquarters (Europe Area) since June 2003
Date of Birth: July 9, 1946
Director since: June 1999
Business Experience:
April 1995: Director of Makita International Europe Ltd.
June 1999: Director, Assistant General Manager of International Sales Headquarters 1
Kenichiro Nakai
Current Position: Director, General Manager of Administration Headquarters since June 2001
Date of Birth: November 17, 1946
Director since: June 2001
Business Experience:
October 2000: Assistant General Manager of Production Headquarters
April 2001: General Manager of Personnel Department
Tadayoshi Torii
Current Position: Director, General Manager of Production Headquarters since June 2003
Date of Birth: December 10, 1946
Director since: June 2001
Business Experience:
October 1998: General Manager of Production Department
June 2001: Director, General Manager of Quality Control Headquarters
Tomoyasu Kato
Current Position: Director, General Manager of Research and Development Headquarters since June 2001
Date of Birth: March 25, 1948
Director since: June 2001
Business Experience:
March 1999: General Manager of Technical Administration Department
Kazuya Nakamura
Current Position: Director, General Manager of International Sales Headquarters (Asia and Oceania Area) since June 2003
Date of Birth: April 13, 1948
Director since: June 2001
Business Experience:
October 2000: General Manager of Asia and Oceania Sales Department
June 2001: Director, General Manager of International Sales Headquarters 2
Masahiro Yamaguchi
Current Position: Director, General Manager of Purchasing Headquarters since June 2003
Date of Birth: May 9, 1945
Director since: June 2003
Business Experience:
April 1995: Assistant Manager of International Sales Department
August 1995: Transferred to Makita Manufacturing Europe Ltd.
May 2003: Assistant General Manager of Purchasing Headquarters (Makita Corporation)
Shiro Hori
Current Position: Director, General Manager of Overseas Sales Headquarters (America Area and
International Administration) since June 2003
Date of Birth: February 24, 1948
Director since: June 2003
Business Experience:
April 1997: Assistant General Manager of Europe Sales Department
March 1999: General Manager of Europe Sales Department
Tadashi Asanuma
Current Position: Director, Assistant General Manager of Domestic Sales Marketing Headquarters
since June 2003
Date of Birth: January 4, 1949
Director since: June 2003
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Business Experience:
April 1995: Manager of Saitama Branch Office
April 2001: General Manager of Osaka Sales Department
Hisayoshi Niwa
Current Position: Director, General Manager of Quality Control Headquarters since June 2003
Date of Birth: February 24, 1949
Director since: June 2003
Business Experience:
April 1995: Assistant General Manager of Production Control Department
October 1999: General Manager of Production Control Department
Zenji Mashiko
Current Position: Director, Assistant General Manager of Domestic Sales Marketing Headquarters since June 2003
Date of Birth: May 28, 1949
Director since: June 2003
Business Experience:
April 1995: Manager of Tokyo Branch Office
Motohiko Yokoyama
Current Position: Director, since June 2005
Date of Birth: May 13, 1944
Director since: June 2005
Business Experience:
June 2004: President and Representative Director of Toyoda Machine Works, Ltd.
January 2006: Vice President and Representative Director of JTEKT Corporation, which is the entity
created by the merger of Toyoda Machine Works, Ltd. with Koyo Seiko Co., Ltd.
Akio Kondo
Current Position: Standing Statutory Auditor since June 2004
Date of Birth: February 3, 1946
Statutory Auditor since: June 2004
Business Experience:
October 1995: General Manager of Accounting & Finance Department
Hiromichi Murase
Current Position: Standing Statutory Auditor since June 2004
Date of Birth: April 5, 1946
Statutory Auditor since: June 2004
Business Experience:
June 1998: General Manager of General Affairs Department
Keiichi Usui
Current Position: Outside Statutory Auditor since June 1994
Date of Birth: August 9, 1933
Statutory Auditor since: June 1994
Shoichi Hase
Current Position: Outside Statutory Auditor since June 2001
(Patent attorney, Hase International Patent office)
Date of Birth: March 30, 1934
Statutory Auditor since: June 2001
April 1967: Established Hase Patent Attorney Office
The term of each director listed above expires in June 2007. The terms of Mr. Akio Kondo and Mr.
Hiromichi Murase as Standing Statutory Auditors and Mr. Shoichi Hase as Statutory Auditor expire in
June 2008. The term of Mr. Usui as Statutory Auditor expires in June 2007.
There is no family relationship between any of the persons named above. There is no arrangement or
understanding with major shareholders, customers, suppliers, or others pursuant to which any person
named above was selected as a Director or a Statutory Auditor.
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B. Compensation
The aggregate amount of remuneration, including bonuses but excluding retirement allowances, paid
by the Company during the fiscal year ended March 31, 2006 to all Directors and Statutory Auditors,
who served during the fiscal year ended March 31, 2006, totaled ¥ 163 million. Remuneration paid by
the Company during the fiscal year ended March 31, 2005 to all Directors and Statutory Auditors,
who served during the fiscal year ended March 31, 2005, totaled ¥ 152 million. Some of the fringe
benefits provided by the Company to its employees in Japan, such as medical and dental service
insurance and welfare pension insurance are also made available to Directors and Standing Statutory
Auditors.
The Company had an unfunded retirement and termination allowances program for Directors and
Statutory Auditors. Under such program, the aggregate amount set aside as retirement
allowances for Directors and Statutory Auditors was ¥477 million as of March 31, 2005 and was
increased to ¥490 million as of March 31, 2006. However, this Executive retirement and
termination allowances program was abolished by the Annual General Meeting of Shareholders
held in June 2006, because the program featured minimal correlation with Company results while
presenting strong seniority-based elements. With regard to retirement bonuses accrued through
that day, the accrued bonuses will be paid to eligible executives upon their retirement.
Furthermore, beginning July 2006, amounts equal to the retirement benefit accruals will be
added to their monthly compensation.
Beginning in July 2006, the Company introduced a new remuneration program which links the
directors' compensation to Makita's stock prices. Under this remuneration program, a portion or all
of the directors' monthly compensation representing their retirement benefit will be contributed to
the Executive Stock Ownership Plan, which in turn will acquire the Company's stock. The acquired
stock will be retained for the duration of the director's tenure. The purpose of this system is to
effectively link a portion of the directors' remuneration to the stock price, and thereby provide
further transparency of directors' managerial responsibility with respect to improving the
Company's value.
C. Board practices
Under the Company Law, the Company has elected to structure its corporate governance system as a
company with a Board of Statutory Auditors as set out below.
The Company's Articles of Incorporation provide for 15 or less Directors and five or less Statutory
Auditors. All Directors and Statutory Auditors are elected at general meetings of shareholders. In
general, the term of offices of Directors expires at the conclusion of the ordinary general meeting
of shareholders held with respect to the last business year ending within two years from their
election, and in the case of Statutory Auditors, within four years from their election; however,
Directors and Statutory Auditors may serve any number of consecutive terms. With respect to each
expiration date of the term of offices of Directors and Statutory Auditors, see "A. Directors and
senior management" in this Item above.
The Directors constitute the Board of Directors, which has the ultimate responsibility for
administration of the affairs of the Company. The Board of Directors may elect from among its
members a Chairman and Director, one or more Vice Chairmen and Directors, a President and Director,
one or more Executive Vice Presidents and Directors, Senior Managing Directors and Managing
Directors. From among the Directors referred to above, the Board of Directors elects one or more
Representative Directors. Each Representative Director has the authority to individually represent
the Company in the conduct of the affairs of the Company.
The Statutory Auditors of the Company are not required to be and are not certified public
accountants. However, at least half of the Statutory Auditors are required to be persons who have
never been in the past a director, accounting counselor, corporate executive officer, general
manager or any other employee of the Company or any of its subsidiaries. The Statutory Auditors may
not, while acting as such, be a director, accounting counselor, corporate executive officer,
general manager or any other employee of the Company or any of its subsidiaries. Each Statutory
Auditor has the statutory duty to supervise the administration by the Directors of the Company's
affairs and also to examine the Company's annual consolidated and non-consolidated financial
statements and business report proposed to be submitted by a Representative Director at the general
meeting of shareholders and, based on such examination and a report of an Accounting Auditor
referred to below, to individually prepare their audit reports. They are required to attend
meetings of the Board of Directors but are not entitled to vote. In addition to Statutory Auditors,
independent certified public accountants or an audit corporation must be appointed by a general
meeting of shareholders as Accounting Auditor. Such Accounting Auditor has, as their primary
statutory duties, a duty to examine the Company's annual consolidated and non-consolidated
financial statements proposed to be submitted by a Representative Director at general meetings of
shareholders and to report their opinion thereon to certain Statutory Auditors designated by the
Board of Statutory Auditors to receive such report (if such Statutory Auditors are not designated,
all Statutory Auditors) and the Directors designated to receive such report (if such Directors are
not designated, the Directors who prepared the financial statements).
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The Statutory Auditors constitute the Board of Statutory Auditors. The Board of Statutory Auditors
has a statutory duty to, based upon the reports prepared by respective Statutory Auditors, prepare
and submit its audit report to the Accounting Auditor and certain Directors designated to
receive such report (if such Directors are not designated, the Directors who prepared the financial
statements and the business report). A Statutory Auditor may note his or her opinion in the audit
report if his or her opinion expressed in his or her audit report is different from the opinion
expressed in the audit report. The Board of Statutory Auditors shall elect one or more
full-time Statutory Auditors from among its members. The Board of Statutory Auditors is empowered
to establish audit principles, the method of examination by Statutory Auditors of the Company's
affairs, and the financial position and other matters concerning the performance of the Statutory
Auditors' duties. For names of the Statutory Auditors that constitute the Board of Statutory
Auditors, see Item 6. A.
There are no contractual arrangements providing for benefits to Directors upon termination of
service. Also see "B. Memorandum and articles of association – Directors" in Item 10.
Exemptions from certain NASDAQ Corporate Governance Rules
Pursuant to exemptions granted by the National Association of Securities Dealers Automated
Quotations (the "NASDAQ"), the Company is permitted to follow certain corporate governance
practices complying with Japanese laws, regulations, stock exchange rules, or generally accepted
business practices in lieu of the NASDAQ rules on corporate governance (the "NASDAQ Rules"). Set
forth below are the corporate governance exemptions the Company currently receives from NASDAQ.
1. Directors. The Company is exempt from the NASDAQ requirement relating to directors that
currently requires the Company's Board of Directors to be comprised of a majority of independent
directors. Unlike the NASDAQ Rules, the Company Law of Japan and related legislation do not require
Japanese companies with boards of statutory auditors such as the Company to have any independent
directors on its board of directors.
2. Audit Committee. The Company plans to avail itself of paragraph (c)(3) of Rule 10A-3 of the
Securities Exchange Act of 1934, as amended, which provides a general exemption from the audit
committee requirements to a foreign private issuer with a board of statutory auditors, subject to
certain requirements which continue to be applicable under Rule 10A-3. The Company is exempt from
the NASDAQ requirement relating to audit committees that currently requires the Company to have,
and certify that it has and will continue to have, an audit committee of at least three members,
each of whom must be independent. Unlike the NASDAQ Rules, under the Company Law, at least half of
the statutory auditors will be required to be persons who have not been a director, accounting
counselor, corporate executive officer, general manager or any other employee of the Company or any
of its subsidiaries at any time prior such statutory auditor's election. Statutory auditors may not
at the same time be a director, accounting counselor, corporate executive officer, general manager,
or any other employee of the Company or any of its subsidiaries.
3. Meetings of Ordinary Shareholders. The Company is exempt from the quorum requirement of the
NASDAQ, which currently requires each issuer to provide for a quorum as specified in its by-laws
for any meeting of the holders of common stock, which shall in no case be less than 33 1/3 percent
of the outstanding shares of a company's common voting stock. In keeping with the Company Law and
generally accepted business practices in Japan, the Company's Articles of Incorporation provide
that except as otherwise provided by law or by the Articles of Incorporation, a resolution can be
adopted at a general meeting of shareholders by a majority of the total number of voting rights of
all the shareholders represented at the meeting. The Company Law and the Company's Articles of
Incorporation provide, however, that the quorum for the election of Directors and Statutory
Auditors shall not be less than one-third of the total number of voting rights of all the
shareholders. The Company Law and the Company's Articles of Incorporation also provide that in
order to amend the Company's Articles of Incorporation and in certain other instances, including:
(1)
acquisition of its own shares from specific persons other than its subsidiaries;
(2)
consolidation of shares;
(3)
any offering of new shares at a "specially favorable" price (or any offering of stock acquisition rights to acquire shares of capital stock, 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 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;
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(9)
the transfer of the whole or a material part of the business;
(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,
the quorum shall be one-third of the total number of voting rights of all the shareholders, and the
approval by at least two-thirds of the voting rights of all the shareholders represented at the
meeting is required.
D. Employees
The following table sets forth information about number of employees:
As of March 31,
2004
2005
2006
Categorized by Geographic Areas
Japan
3,041
2,996
3,038
Overseas
5,392
5,564
5,591
Total
8,433
8,560
8,629
During the fiscal year ended March 31, 2006, the Company hired on average approximately 1,300
temporary employees in China, and approximately 100 temporary employees in Japan who were not
entitled to retirement or certain other fringe benefits which regular full-time employees receive.
The Company has a labor contract with the Makita Workers' Union covering wages and
conditions of employment. All full-time employees of the Company in Japan, except management and
certain other employees, must be union members. The Makita Union is affiliated with the Japanese
Electrical Electronic & Information Union. The Company has not been materially affected by any work
stoppages or difficulties in connection with labor negotiations in the past.
The
Company's employees are members of the labor union formed on
September 13, 1947 that comprises,
starting February 9, 1989, the Japanese Electrical Electronic & Information Union. As of March 31,
2006, there are 2,742 members of the labor union and Makita considers its relationship with the labor
union to be good.
37
Table of Contents
E. Share ownership
The total number of shares of the Company's Common Stock owned by the Directors and Statutory
Auditors as a group as of March 31, 2006 is as follows:
Identity of
Number of
Percentage of
Person or Group
Shares Owned
voting right
Directors and Statutory Auditors
2,113,316
1.47 %
The following table lists the number of shares owned by the Directors and Statutory Auditors of the
Company as of March 31, 2006.
Name
Position
Number of shares
Masahiko Goto
President, Representative Director
1,974,143
Masami Tsuruta
Managing Director
16,022
Yasuhiko Kanzaki
Director
11,569
Kenichiro Nakai
Director
11,700
Tadayoshi Torii
Director
12,900
Tomoyasu Kato
Director
12,072
Kazuya Nakamura
Director
7,400
Masahiro Yamaguchi
Director
5,900
Shiro Hori
Director
8,400
Tadashi Asanuma
Director
4,900
Hisayoshi Niwa
Director
6,000
Zenji Mashiko
Director
5,900
Akio Kondo
Standing Statutory Auditor
6,400
Hiromichi Murase
Standing Statutory Auditor
4,610
Keiichi Usui
Outside Statutory Auditor
8,000
Shoichi Hase
Outside Statutory Auditor
17,400
The shareholders listed above do not have voting rights that are different from other shareholders
of the Company.
Item 7.
Major Shareholders and Related Party Transactions
A. Major Shareholders
Except for Masahiko Goto holding 1.37% of the Company's outstanding common stock as of March 31,
2006, none of the Company's Directors and Statutory Auditors owns more than one percent of the
Company's Common Stock.
Beneficial ownership of the Company's common stock in the table below was prepared from publicly
available records of the filings made by the Company's shareholders regarding their ownership of
the Company's common stock under the Securities and Exchange Law of Japan.
Under the Securities and Exchange Law of Japan, any person who becomes beneficially, solely or
jointly, a holder, including, but not limited to, a deemed holder who manages shares for another
holder pursuant to a discretionary investment agreement, of more than 5% of the shares with voting
rights of a company listed on a Japanese stock exchange (including ADSs representing such shares),
must file a report concerning the shareholding with the Director of the relevant local finance
bureau. A similar report must be filed, with certain exceptions, if the percentage of shares held
by a holder, solely or jointly, of more than 5% of the total issued shares of a company increases
or decreases by 1% or more, or if any change to a material matter set forth in any previously filed
reports occurs.
Based on publicly available information, the following table sets forth the beneficial ownership of
holders of more than 5% of the Company's common stock as of the dates indicated in the reports
described below.
Name of Beneficial Owner
Number of Shares
Percentage
The Master Trust Bank of Japan, Ltd.
(Trust account)
9,041,000
6.27
%
Japan Trustee Services Bank, Ltd.
(Trust account)
8,902,500
6.18
%
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Table of Contents
Based on information made publicly available on or after April 1, 2003, the following table
describes transactions resulting in a 1% or more change in the percentage ownership held by major
beneficial owners of the Company's common stock.
Shares Owned
Number of
Shares Owned
Date of
Prior to
Shares
After the
Name of Shareholder
Transaction
Transaction
Percentage
Changed
Transaction
Percentage
Nippon 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
%
Mitsubishi 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
May 15, 2006
9,022,123
7.35
%
1,556,200
10,578,323
7.35
%
As of March 31, 2006, the Company had 143,711,766, outstanding shares of common stock,
excluding 296,994 shares of Treasury Stock. According to the Bank of New York, depositary for the
Company's ADSs, as of March 31, 2006, 3,160,984 shares of the Company's common stock were held in
the form of ADRs and there were 49 ADR holders of record in the United States. According to the
Company's register of shareholders and register of beneficial owners as of March 31, 2006, there
were 12,342 holders of common stock of record worldwide and the number of record holders in the
United States was 94.
The major shareholders do not have voting rights that are different to the other shareholders of
the Company.
As far as is known to the Company, there is no arrangement, the operation of which may at a
subsequent date result in a change in control of the Company.
To the knowledge of the Company, it is not directly or indirectly owned or controlled by any other
corporation or by the Japanese or any foreign government.
B. Related party transactions
Makita sells and purchases products, materials, supplies and services to and from affiliated
companies in the ordinary course of business.
No Director or Statutory Auditor has been indebted to the Company or any of its subsidiaries at any
time during the latest three fiscal years. Neither the Company nor any of its subsidiaries expects
to make any loans to Directors or Statutory Auditors in the future.
39
Table of Contents
See Note 20 to the consolidated financial statements.
C. Interest of experts and counsel
Not applicable
Item 8.
Financial Information
A. Consolidated statements and other financial information
1-3. Consolidated Financial Statements
.
Makita's audited consolidated financial statements are included under "Item 18 – Financial
Statements". Except for Makita's consolidated financial statements included under Item 18, no other
information included in this annual report has been audited by Makita's Independent Registered
Public Accounting Firm.
4. Not applicable.
5. Not applicable.
6. Export Sales.
See "Information on the Company – Business Overview – Principal Markets, Distribution and
After-Sale Services".
7. Legal or arbitration proceedings
There are no material pending legal or arbitration proceedings to which Makita is a party and which
may have, or have had in the recent past, significant effects on Makita's financial position or
profitability.
8. Dividend Policy
Makita's basic policy on the distribution of profits is to maintain a dividend payout ratio of 30%
or greater, with a lower limit on annual cash dividends of 18 yen per share. However, in the event
special circumstances arise, computation of the amount of dividends will be based on consolidated
net income after certain adjustments. In addition, Makita aims to implement a flexible capital
policy, augment the efficiency of its capital employment, and thereby boost shareholder profit.
Makita continues to consider repurchases of its outstanding shares in light of trends in stock
prices. The Company intends to retire treasury stock when necessary based on consideration of the
balance of treasury stock and its capital policy.
Makita intends to maintain a financial position strong enough to withstand the challenges
associated with changes in its operating environment and other changes and allocate funds for
strategic investments aimed at expanding its global operations.
According to this basic policy, the Company paid interim cash dividends in fiscal 2005 of ¥19.0 per
share and ADS. The Company has declared a cash dividend of ¥38.0 per share and ADS, including a
special dividend of ¥29 per share, all of which were approved by the shareholders' meeting held on
June 29, 2006.
The following table sets forth cash dividends per share of Common Stock declared in Japanese yen
and as translated into U.S. dollars, the U.S. dollar amounts being based on the exchange rates at
the respective payment date, using the noon buying rates for cable transfers in yen in New York
City as certified for customs purposes by the Federal Reserve Bank of New York:
In Yen
In U.S. Dollars
Fiscal year ended March 31
Interim
Year-end
Interim
Year-end
2002
9.0
9.0
0.07
0.07
2003
9.0
9.0
0.07
0.07
2004
9.0
13.0
0.09
0.11
2005
11.0
36.0
0.10
0.34
2006
19.0
38.0
0.16
0.32
Note: Cash dividends in U.S. dollars are based on the exchange rates at the
respective payment date, using the noon buying rates for cable transfers in yen
in New York City as certified for customs purposes by the Federal Reserve Bank
of New York.
40
Table of Contents
B. Significant changes
Not applicable
Item 9.
The Offer and Listing
A. Offer and listing details
The shares of common stock of the Company were listed on the First Section of the Tokyo Stock
Exchange, the Osaka Securities Exchange and the Nagoya Stock Exchange in 1970. The Company decided
to discontinue its listing on the Osaka Securities Exchange due to the low level of trading volume
in its shares on that exchange, and it was delisted from that exchange at the end of February 2003.
The shares of common stock of the Company were listed on the Amsterdam Stock Exchange (Euronext
Amsterdam) in 1973, initially in the form of Continental Depositary Receipts. The Company decided
to discontinue its listing on the Euronext Amsterdam Stock Exchange due to the extremely low level
of trading volume in its shares on that exchange, and it was delisted from that exchange at the end
of January 2005.
The Company's American Depositary Shares, each representing one share (prior to April 1, 1991, five
shares) of common stock and evidenced by American Depositary Receipts ("ADRs"), have been quoted
since 1977 through the National Association of Securities Dealers Automated Quotation ("NASDAQ")
System under "MKTAY".
The following table shows the high and low sales prices of the Common Stock on the Tokyo Stock
Exchange for the periods indicated and the reported high and low bid prices of American Depositary
Shares through the NASDAQ system.
Tokyo Stock Exchange Price
NASDAQ Price
Per Share of Common Stock
Per American Depositary Share
(Yen)
(U.S. Dollars)
Fiscal year ended March 31,
High
Low
High
Low
2002
871
615
6.85
4.88
2003
909
654
7.55
5.35
2004
1,343
834
15.45
10.00
2005
2,115
1,315
20.27
12.00
2006
3,820
1,755
34.19
16.15
Quarterly
Fiscal year 2005
1
st
quarter ended June 30, 2004
1,686
1,315
15.34
12.00
2
nd
quarter ended September 30, 2004
1,675
1,463
15.45
13.20
3
rd
quarter ended December 31, 2004
1,874
1,379
17.75
13.17
4
th
quarter ended March 31, 2005
2,115
1,705
20.27
16.56
Fiscal year 2006
1
st
quarter ended June 30, 2005
2,355
1,755
21.75
16.15
2
nd
quarter ended September 30, 2005
2,540
2,150
21.59
19.06
3
rd
quarter ended December 31, 2005
3,070
2,255
24.40
19.55
4
th
quarter ended March 31, 2006
3,820
2,830
34.9
24.22
Monthly
January 2006
3,420
2,830
28.90
24.22
February 2006
3,820
3,150
31.69
27.76
March 2006
3,690
3,180
31.49
27.62
April 2006
3,720
3,290
31.50
29.00
May 2006
3,830
3,260
34.34
29.82
June 2006(through June 15)
3,660
3,400
31.98
26.03
B. Plan of distribution
Not applicable
C. Markets
See Item 9. A
41
Table of Contents
D. Selling shareholders
Not applicable
E. Dilution
Not applicable
F. Expenses of the issue
Not applicable
Item 10. Additional Information
A. Share capital
Not applicable
B. Memorandum and articles of association
Organization
The Company is a joint stock corporation
(kabushiki kaisha)
incorporated in Japan under the Company
Law
(kaishaho)
of Japan. It is registered in the Commercial Register
(shogyo tokibo)
maintained by
the Kariya Branch Office of the Nagoya Legal Affairs Bureau of the Ministry of Justice of Japan.
Objects and purposes
Article 2 of the Articles of Incorporation of the Company provides that the purposes of the Company
are to engage in the following businesses:
•
Manufacture and sale of machine tools including electric power tools, 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
Under the Company Law, each Director has executive powers and duties to manage the affairs of the
Company and each Representative Director, who is elected from among the Directors by the Board of
Directors, has the statutory authority to represent the Company in all respects. Under the Company
Law, the Directors must refrain from engaging in any business competing with the Company unless
approved by the Board of Directors and any Director who has a material interest in the subject
matter of a resolution to be taken by the Board of Directors cannot vote on such resolution. The
total amount of remuneration to Directors and that to Statutory Auditors are subject to the
approval of the general meeting of shareholders. Within such authorized amounts the Board of
Directors and the Board of Statutory Auditors respectively determine the compensation to each
Director and Statutory Auditor.
Except as stated below, neither the Company Law nor the Company's Articles of Incorporation make
special provisions as to:
•
the Directors' or Statutory Auditors' power to vote in connection with their compensation;
•
the borrowing power exercisable 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.
42
Table of Contents
The Company Law specifically requires the resolution of the Board of Directors for a 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 decline conditions concerning offering of corporate bonds; and
•
to establish and maintain an
internal control system.
The Regulations of the Board of Directors and operational regulations thereunder of the Company
require a resolution of the Board of Directors for the Company to borrow money in an amount of ¥100
million or more or to give a guarantee in an amount of ¥10 million or more.
Common stock
General
Unless indicated otherwise, set forth below is information relating to the Company's Common Stock,
including brief summaries of the relevant provisions of the Company's Articles of Incorporation and
Share Handling Regulations, as currently in effect, and of the Company Law, which came into effect
on May 1, 2006, of Japan and related legislation.
All issued shares are fully-paid and non-assessable, and are in registered form. Transfer of shares
is effected by delivery of share certificates, but in order to assert shareholders' rights against
the Company, a shareholder must have its name and address registered or recorded on the Company's
register of shareholders in writing or digitally (or electronically), in accordance with the
Company's Share Handling Regulations. The registered beneficial holder of deposited shares
underlying the ADSs is the Depositary for the ADSs. Accordingly, holders of ADSs will not be able
to directly assert shareholders' rights against the Company.
A holder of shares may choose, at its discretion, to participate in the central clearing system for
share certificates under the Law Concerning Central Clearing of Share Certificates and Other
Securities of Japan. Participating shareholders must deposit certificates representing all of the
shares to be included in this clearing system with the Japan Securities Depository Center, Inc.
("JASDEC"). If a holder is not a participating institution in JASDEC, it must participate through a
participating institution, such as a securities company or a commercial bank having a clearing
account with JASDEC. All shares of Common Stock deposited with JASDEC will be registered in the
name of JASDEC on the Company's register of shareholders. Each participating shareholder will in
turn be registered on the Company's register of beneficial shareholders and be treated in the same
way as shareholders registered on the Company's register of shareholders. For the purpose of
transferring deposited shares, delivery of share certificates is not required. Entry of the share
transfer in the books maintained by JASDEC for participating institutions, or in the book
maintained by a participating institution for its customers, has the same effect as delivery of
share certificates. The registered beneficial shareholders may exercise the rights attached to the
shares, such as voting rights, and will receive dividends (if any) and notices to shareholders
directly from the Company. The shares held by a person as a registered shareholder and those held
by the same person as a registered beneficial shareholder are aggregated for these purposes.
Beneficial shareholders may at any time withdraw their shares from deposit and receive share
certificates.
A law to establish a new central clearing system for shares of listed companies and to eliminate
the issuance and use of certificates for such shares was promulgated in June 2004 and the relevant
part of the law will come into effect within five years of the date of the promulgation. On the
effective date, a new central clearing system will be established and the shares of all Japanese
companies listed on any Japanese stock exchange, including the shares of Common Stock of the
Company, will be subject to the new central clearing system. On the same day, all existing share
certificates will become null and void. The transfer of such shares will be effected through entry
in the books maintained under the new central clearing system.
Authorized capital
Article 5 of the Articles of Incorporation of the Company provides that the total number of shares
authorized to be issued by the Company is 496,000,000 shares.
As of March 31, 2006, 144,008,760 shares of Common Stock were in issue.
All shares of Common Stock of the Company have no par value.
43
Table of Contents
Dividends from Surplus
Dividends from Surplus – General
Under the Company Law, distributions of cash or other assets by joint stock corporations to their
shareholders, so called "dividends", are referred to as "dividends from Surplus" ("Surplus" is
defined in "— Restriction on dividends from Surplus"). The Company may make dividends from Surplus
to the shareholders any number of times per business year, subject to certain limitations described
in "— Restriction on dividends from Surplus." Dividends from Surplus are required in principle to
be authorized by a resolution of a general meeting of shareholders, but may also be made pursuant
to a resolution of the Board of Directors if:
(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, as
required by ordinances of the Ministry of Justice.
Moreover, even if the requirements described in (a) through (c) are not met, the Company may make
dividends from Surplus in cash to the shareholders by resolutions of the Board of Directors once
per business year, but only if the Articles of Incorporation so provide. Such distribution of
Surplus is called "interim dividends".
Dividends from Surplus may be made in cash or in kind in proportion to the number of shares of
Common Stock held by each shareholder. A resolution of a general meeting of shareholders or Board
of Directors authorizing a dividend from Surplus must specify the kind and aggregate book value of
the assets to be distributed, the manner of allocation of such assets to shareholders, and the
effective date of the distribution. If a dividend from Surplus is to be made in kind, the Company
may, pursuant to a resolution of a general meeting of shareholders or, as the case may be, the
Board of Directors, grant a right to the shareholders to require the Company to make such
distribution in cash instead of in kind. If no such right is granted to shareholders, the relevant
dividend from Surplus must be approved by a special shareholders resolution (see "- Voting Rights"
with respect to a "special shareholders resolution").
Under the Articles of Incorporation, year-end dividends and interim dividends may be distributed to
shareholders of record as of March 31 and September 30 each year, respectively, in proportion to
the number of shares of Common Stock held by each shareholder following approval by the general
meeting of shareholders or the Board of Directors. The Company is not obliged to pay any dividends
unclaimed for a period of three years after the date on which they first became payable.
In Japan, the ex-dividend date and the record date for dividends precede the date of determination
of the amount of the dividends to be paid. The price of the shares of Common Stock generally goes
ex-dividend on the third business day prior to the record date.
Restriction on dividends from Surplus
When the Company makes a dividend from Surplus, the Company must, until the sum of its additional
paid-in capital and legal reserve reaches one quarter of the stated capital, set aside in its
additional paid-in capital and/or legal reserve an amount equal to one-tenth of the amount of
Surplus so distributed.
The amount of Surplus at any given time must be calculated in accordance with the following
formula:
A
+ B + C + D - (E + F + G)
In the above formula:
"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)
44
Table of Contents
"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.
The aggregate book value of surplus distributed by the Company may not exceed a prescribed
distributable amount (the "Distributable Amount"), as calculated on the effective date of such
distribution. The Distributable Amount at any given time shall be equal to the amount of Surplus
less the aggregate of the followings:
(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.
If the Company has become at its option a company with respect to which consolidated balance sheets
should also be considered in the calculation of the Distributable Amount (
renketsu haito kisei
tekiyo kaisha
), the Company shall further deduct from the amount of Surplus the excess amount, if
any, of (x) the total amount of stockholders' equity appearing on the non-consolidated balance
sheet as of the end of the last business year and certain other amounts set forth by an ordinance
of the Ministry of Justice over (y) the total amount of stockholders' equity and certain other
amounts set forth by an ordinance of the Ministry of Justice appearing on the consolidated balance
sheet as of the end of the last business year.
If the Company has prepared interim financial statements as described below, and if such interim
financial statements have been approved by the Board of Directors or (if so required by the Company
Law) by a general meeting of shareholders, then the Distributable Amount must be adjusted to take
into account the amount of profit or loss, and the amount of consideration for any of the treasury
stock disposed of by the Company, during the period in respect of which such interim financial
statements have been prepared. The Company may prepare non-consolidated interim financial
statements consisting of a balance sheet as of any date subsequent to the end of the last business
year and an income statement for the period from the first day of the current business year to the
date of such balance sheet. Interim financial statements so prepared by the Company must be audited
by the Statutory Auditors and Accounting Auditors, as required by ordinances of the Ministry of
Justice.
Stock splits
The Company may at any time split shares of Common Stock in issue into a greater number of shares
by resolution of the Board of Directors, and may amend its Articles of Incorporation to increase
the number of the authorized shares to be issued to allow such stock split pursuant to a resolution
of the Board of Directors rather than relying on a special shareholders resolution, which is
otherwise required for amending the Articles of Incorporation.
In the event of a stock split, generally, shareholders will not be required to exchange share
certificates for new share certificates, but certificates representing the additional shares
resulting from the stock split will be issued to shareholders. When a stock split is to be made,
the Company must give public notice of the stock split, specifying the record date therefor, at
least 2 weeks prior to such record date.
Consolidation of shares
The Company may at any time consolidate shares in issue into a smaller number of shares by a
special shareholders resolution (as defined in "
Voting Rights
"). When a consolidation of shares is
to be made, the Company must give public notice and notice to each shareholder that, within a
period of not less than one month specified in the notice, share certificates must be submitted to
the Company for exchange. The Company must disclose the reason for the consolidation of shares at
the general meeting of shareholders.
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General meeting of shareholders
The ordinary general meeting of shareholders of the Company for each business year is normally held
in June in each year in or near Anjo, Aichi, Japan. In addition, the Company may hold an
extraordinary general meeting of shareholders whenever necessary by giving notice of convocation
thereof at least 2 weeks prior to the date set for the meeting.
Notice of convocation of a general meeting of shareholders setting forth the place, time and
purpose thereof, must be mailed to each shareholder having voting rights (or, in the case of a
non-resident shareholder, to his or her standing proxy or mailing address in Japan) at least 2
weeks prior to the date set for the meeting. Such notice may be given to shareholders by electronic
means, subject to the consent of the relevant shareholders. The record date for an ordinary general
meeting of shareholders is March 31 of each year.
Any shareholder or group of shareholders holding at least 3 percent of the total number of voting
rights for a period of 6 months or more may require the convocation of a general meeting of
shareholders for a particular purpose. Unless such general meeting of shareholders is convened
promptly or a convocation notice of a meeting which is to be held not later than 8 weeks from the
day of such demand is dispatched, the requiring shareholder may, upon obtaining a court approval,
convene such general meeting of shareholders. Any shareholder or group of shareholders holding at
least 300 voting rights or 1 percent of the total number of voting rights for a period of 6 months
or more may propose a matter to be considered at a general meeting of shareholders by submitting a
written request to a Representative Director at least 8 weeks prior to the date set for such
meeting.
If the Articles of Incorporation so provide, any of the minimum voting rights or percentages, time
periods and number of voting rights necessary for exercising the minority shareholder rights
described above may be decreased or shortened.
Voting rights
So long as the Company maintains the unit share system (see "–
Unit share system
" below; currently
100 shares of Common Stock constitute one unit), a holder of shares constituting one or more full
units is entitled to one voting right per unit of shares subject to the limitations on voting
rights set forth in the following 2 sentences. A corporate or certain other entity more than
one-quarter of whose total voting rights are directly or indirectly owned by the Company may not
exercise its voting rights with respect to shares of Common Stock of the Company that it owns. In
addition, the Company may not exercise its voting rights with respect to shares of Common Stock
that it owns. If the Company eliminates from its Articles of Incorporation the provisions relating
to the unit of shares, holders of shares of Common Stock will have one voting right for each share
they hold. Except as otherwise provided by law or by the Articles of Incorporation, a resolution
can be adopted at a general meeting of shareholders by a majority of the total number of voting
rights of all the shareholders represented at the meeting. The Company Law and the Company's
Articles of Incorporation provide, however, that the quorum for the election of Directors and
Statutory Auditors shall not be less than one-third of the total number of voting rights of all the
shareholders. The Company's shareholders are not entitled to cumulative voting in the election of
Directors. Shareholders may exercise their voting rights through proxies, provided that the proxies
are also shareholders of the Company holding voting rights. The Company's shareholders also may
cast their votes in writing, or exercise their voting rights by electronic means when the Board of
Directors decides to permit such method of exercising voting rights.
The Company Law and the Company's Articles of Incorporation provide that in order to amend the
Company's Articles of Incorporation and in certain other instances, including:
(1)
acquisition of its own shares from specific persons other than its subsidiaries;
(2)
consolidation of shares;
(3)
any offering of new shares at a "specially favorable" price (or any offering of stock acquisition rights
to acquire shares of capital stock, 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 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;
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(9)
the transfer of the whole or a material part of the business;
(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,
the quorum shall be one-third of the total voting rights of all the shareholders, and the approval
by at least two-thirds of the voting rights of all the shareholders represented at the meeting is
required (the "special shareholders resolutions").
Issue of additional shares and pre-emptive rights
Holders of shares of Common Stock have no pre-emptive rights under the Articles of Incorporation of
the Company. Authorized but unissued shares may be issued at such times and upon such terms as the
Board of Directors determines, subject to the limitations as to the offering of new shares at a
"specially favorable" price mentioned under "
Voting rights
" above. The Board of Directors may,
however, determine that shareholders shall be given subscription rights regarding a particular
issue of new shares, in which case such rights must be given on uniform terms to all shareholders
as at a record date of which not less than 2 weeks' prior public notice must be given. Each of the
shareholders to whom such rights are given must also be given notice of the expiry thereof at least
2 weeks prior to the date on which such rights expire.
The Company may issue stock acquisition rights by a resolution of the Board of Directors, subject
to the limitations as to the offering of stock acquisition rights on "specially favorable" exercise
conditions mentioned under "Voting rights" above. Holders of stock acquisition rights may exercise
their rights to acquire a certain number of shares within the exercise period as prescribed in the
terms of their stock acquisition rights. Upon exercise of stock acquisition rights, the Company
will be obliged to issue the relevant number of new shares or alternatively to transfer the
necessary number of treasury stock held by it.
In cases where a particular issue of new shares or stock acquisition rights (i) violates laws and
regulations or the Company's Articles of Incorporation, or (ii) will be performed in a manner
materially unfair, and shareholders may suffer disadvantages therefrom, such shareholder may file
an injunction to enjoin such issue with a court.
Liquidation rights
In the event of a liquidation of the Company, the assets remaining after payment of all debts,
liquidation expenses and taxes will be distributed among shareholders in proportion to the
respective numbers of shares of Common Stock held by them.
Record date
As mentioned above, March 31 is the record date for the Company's year-end dividends. So long as
the Company maintains the unit share system, the shareholders and beneficial shareholders who are
registered or recorded as the holders of one or more full units of shares in the Company's
registers of shareholders and/or beneficial shareholders in writing or digitally (or
electronically) at the end of each March 31 are also entitled to exercise shareholders' rights at
the ordinary general meeting of shareholders with respect to the business year ending on such March
31. September 30 is the record date for interim dividends. In addition, the Company may set a
record date for determining the shareholders and/or beneficial shareholders entitled to other
rights pertaining to the Common Stock and for other purposes, by giving at least 2 weeks' prior
public notice.
Acquisition by the Company of Common Stock
The Company may acquire shares of Common Stock (i) by soliciting all the shareholders to offer to
sell shares held by them (in this case, the certain terms of such acquisition, such as the total
number of shares to be purchased and the total amount of consideration, shall be set by an ordinary
resolution of a general meeting of shareholders in advance, and acquisition shall be effected
pursuant to a resolution of the Board of Directors), (ii) from a specific shareholder other than
any of its subsidiaries (pursuant to a special shareholders resolution), (iii) from any of its
subsidiaries (pursuant to a resolution of the Board of Directors), or (iv) by way of purchase on
any Japanese stock exchange on which Common Stock is listed or by way of tender offer (in either
case pursuant to an ordinary resolution of a general meeting of shareholders or a resolution of the
Board of Directors). In the case of (ii) above, any other shareholder may make a request to the
Representative Director that such other shareholder be included as a seller in the proposed
purchase, provided that no such right will be available if the purchase price or any other
consideration to be received by the relevant specific shareholder will not exceed the last trading
price of the shares on the relevant stock exchange on the day immediately preceding the date on
which the resolution mentioned in (ii) above was adopted (or, if there is no
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trading in the shares on the stock exchange or if the stock exchange is not open on such day, the
price at which the shares are first traded on such stock exchange thereafter).
The total amount of the purchase price of shares of Common Stock may not exceed the Distributable
Amount, as described in "– Dividends from Surplus – Restriction on dividends from Surplus."
Shares of Common Stock acquired by the Company may be held by it for any period or may be cancelled
by resolution of the Board of Directors. The Company may also transfer to any person the shares of
Common Stock held by it, subject to a resolution of the Board of Directors, and subject also to
other requirements similar to those applicable to the issuance of new shares, as described in
"
Issue of additional shares and pre-emptive rights
" above. The Company may also utilize its
treasury stock for the purpose of transfer to any person upon exercise of stock acquisition rights
or for the purpose of acquiring another company by way of merger, share exchange or corporate split
through exchange of treasury stock for shares or assets of the acquired company.
Unit share system
The Articles of Incorporation of the Company provide that 100 shares of Common Stock constitute one
unit of shares. Although the number of shares constituting one unit is included in the Articles of
Incorporation, any amendment to the Articles of Incorporation reducing (but not increasing) the
number of shares constituting one unit or eliminating the provisions for the unit of shares may be
made by the resolution of the Board of Directors rather than by a special shareholders resolution,
which is otherwise required for amending the Articles of Incorporation. The number of shares
constituting one new unit, however, cannot exceed 1,000.
Under the unit share system, shareholders shall have one voting right for each unit of shares that
they hold. Any number of shares less than a full unit carries no voting rights.
Unless the Company's shareholders amend the Articles of Incorporation of the Company by a special
shareholders resolution to eliminate the provision not to issue share certificates for shares of
Common Stock constituting less than a full unit, a share certificate for any number of shares of
Common Stock constituting less than a full unit will in general not be issued. As the transfer of
shares normally requires the delivery of the share certificates therefor, any fraction of a unit
for which no share certificates are issued is not transferable. Moreover, holders of shares
constituting less than a full unit will have no other shareholder rights if the Articles of
Incorporation so provide, except that such holders may not be deprived of certain rights specified
in the Company Law or an ordinance of the Ministry of Justice, including the right to receive
dividends from Surplus.
A holder of shares of Common Stock constituting less than a full unit may require the Company to
purchase such shares at their market value in accordance with the provisions of the Share Handling
Regulations of the Company.
In addition, the Articles of Incorporation of the Company provide that a holder of shares of Common
Stock constituting less than a full unit may request the Company to sell to such holder such amount
of shares of Common Stock which will, when added together with the shares of Common Stock
constituting less than a full unit, constitute a full unit of shares, in accordance with the
provisions of the Share Handling Regulations of the Company.
A holder who owns ADRs evidencing less than 100 ADSs will indirectly own shares of Common Stock
constituting less than a full unit. Although, as discussed above, under the unit share system
holders of shares of Common Stock constituting less than a full unit have the right to require the
Company to purchase such shares held by them or sell shares of Common Stock held by the Company to
such holders, holders of ADRs evidencing ADSs that represent other than integral multiples of full
units are unable to withdraw the underlying shares of Common Stock constituting less than a full
unit and, therefore, are unable, as a practical matter, to exercise the rights to require the
Company to purchase such underlying shares or sell shares of Common Stock held by the Company to
such holders, unless the Company's Articles of Incorporation are amended to eliminate the provision
not to issue share certificates for shares of Common Stock constituting less than a full unit. As a
result, access to the Japanese markets by holders of ADRs through the withdrawal mechanism will not
be available for dispositions of shares of Common Stock in lots less than a full unit. The unit
share system does not affect the transferability of ADSs, which may be transferred in lots of any
size.
Sale by the Company of shares held by shareholders whose location is unknown
The Company is not required to send a notice to a shareholder if a notice to such shareholder fails
to arrive at the registered address of the shareholder in the Company's register of shareholders or
at the address otherwise notified to the Company continuously for 5 years or more.
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In addition, the Company may sell or otherwise dispose of shares of Common Stock for which the
location of the shareholder is unknown. Generally, if (i) notices to a shareholder fail to arrive
continuously for 5 years or more at the shareholder's registered address in the Company's register
of shareholders or at the address otherwise notified to the Company, and (ii) the shareholder fails
to receive dividends from Surplus on the shares of Common Stock continuously for 5 years or more at
the address registered in the Company's register of shareholders or at the address otherwise
notified to the Company, the Company may, by a resolution of the Board of Directors, sell or
otherwise dispose of the shareholder's shares at the then market price of shares of Common Stock
and after giving at least 3 months' prior public and individual notice, and hold or deposit the
proceeds of such sale or disposal of shares of Common Stock for such shareholder.
Reporting of substantial shareholdings
The Securities and Exchange Law of Japan and regulations thereunder require any person, regardless
of residence, who has become, beneficially and solely or jointly, a holder of more than 5 percent
of the total issued shares of capital stock of a company listed on any Japanese stock exchange or
whose shares are traded on the over-the-counter market in Japan to file with the Director-General
of a competent Local Finance Bureau of the Ministry of Finance within 5 business days a report
concerning such shareholdings.
A similar report must also be filed in respect of any subsequent change of one percent or more in
any such holding or any change in material matters set out in reports previously filed, with
certain exceptions. For this purpose, shares issuable to such person upon conversion of convertible
securities or exercise of share subscription warrants or stock acquisition rights are taken into
account in determining both the number of shares held by such holder and the issuer's total issued
share capital. Copies of such report must also be furnished to the issuer of such shares and all
Japanese stock exchanges on which the shares are listed.
Except for the general limitation under Japanese anti-trust and anti-monopoly regulations against
holding of shares of capital stock of a Japanese corporation which leads or may lead to a restraint
of trade or monopoly, and except for general limitations under the Company Law or the Company's
Articles of Incorporation on the rights of shareholders applicable regardless of residence or
nationality, there is no limitation under Japanese laws and regulations applicable to the Company
or under its Articles of Incorporation on the rights of non-resident or foreign shareholders to
hold the shares of Common Stock of the Company or exercise voting rights thereon. There is no
provision in the Company's Articles of Incorporation that would have an effect of delaying,
deferring or preventing a change in control of the Company and that would operate only with respect
to merger, consolidation, acquisition or corporate restructuring involving the Company.
C. Material contracts
In connection with the civil rehabilitation process of Makita's consolidated subsidiary, Joyama
Kaihatsu, Ltd. ("Joyama"), Makita entered into a Sponsorship Agreement (the "Sponsorship
Agreement") dated January 17, 2005 with Tokyo Tatemono, Ltd. ("Tokyo Tatemono") and Joyama, in
order to rehabilitate Joyama's golf club. Under the Sponsorship Agreement, Joyama is to satisfy at
least 50% of the outstanding debt obligations in connection with its rehabilitation, Joyama will
retire and extinguish all Joyama shares held by Makita for no consideration to Makita, and, as a
result of issuing new Joyama shares to Tokyo Tatemono, Makita will transfer its management of
Joyama to Tokyo Tatemono. In addition, in order to execute the Joyama rehabilitation plan, a
memorandum of understanding regarding the Sponsorship Agreement was executed on May 26, 2005.
D. Exchange controls
The Foreign Exchange and Foreign Trade Law of Japan and its related cabinet orders and ministerial
ordinances (the "Foreign Exchange Regulations") govern the acquisition and holding of shares of
Common Stock of the Company by "exchange non-residents" and by "foreign investors." The Foreign
Exchange Regulations currently in effect do not, however, affect transactions between exchange
non-residents to purchase or sell shares outside Japan using currencies other than Japanese yen.
Exchange non-residents are:
•
individuals who do not reside in Japan; and
•
corporations whose principal offices are located outside Japan.
Generally, branches and other offices of non-resident corporations that are located within Japan
are regarded as residents of Japan. Conversely, branches and other offices of Japanese corporations
located outside Japan are regarded as exchange non-residents.
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Foreign investors are:
•
individuals who are exchange non-residents;
•
corporations that are organized under the laws of foreign countries or
whose principal offices are located outside of Japan; and
•
corporations (1) of which 50 percent or more of their shares are held
by individuals who are exchange non-residents and/or corporations (a)
that are organized under the laws of foreign countries or (b) whose
principal offices are located outside of Japan or (2) a majority of
whose officers, or officers having the power of representation, are
individuals who are exchange non-residents.
In general, the acquisition of shares of a Japanese company (such as the shares of Common Stock of
the Company) by an exchange non-resident from a resident of Japan is not subject to any prior
filing requirements. In certain limited circumstances, however, the Minister of Finance may require
prior approval of an acquisition of this type. While prior approval, as described above, is not
required, in the case where a resident of Japan transfers shares of a Japanese company (such as the
shares of Common Stock of the Company) for consideration exceeding 100 million yen to an exchange
non-resident, the resident of Japan who transfers the shares is required to report the transfer to
the Minister of Finance within 20 days from the date of the transfer, unless the transfer was made
through a bank, securities company or financial futures trader licensed under Japanese law.
If a foreign investor acquires shares of a Japanese company that is listed on a Japanese stock
exchange (such as the shares of Common Stock of the Company) or that is traded on an
over-the-counter market in Japan and, as a result of the acquisition, the foreign investor, in
combination with any existing holdings, directly or indirectly holds 10 percent or more of the
issued shares of the relevant company, the foreign investor must file a report of the acquisition
with the Minister of Finance and any other competent Ministers having jurisdiction over that
Japanese company within 15 days from and including the date of the acquisition, except where the
offering of the company's shares was made overseas. In limited circumstances, such as where the
foreign investor is in a country that is not listed on an exemption schedule in the Foreign
Exchange Regulations, a prior notification of the acquisition must be filed with the Minister of
Finance and any other competent Ministers, who may then modify or prohibit the proposed
acquisition.
Under the Foreign Exchange Regulations, dividends paid on and the proceeds from sales in Japan of
shares of Common Stock of the Company held by non-residents of Japan may generally be converted
into any foreign currency and repatriated abroad.
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.
The following is a general summary of the principal U.S. federal income and Japanese national tax
consequences of the acquisition, ownership and disposition of shares of Common Stock or ADSs. This
summary does not address any aspects of U.S. federal tax law other than income taxation, and does
not discuss any aspects of Japanese tax law other than such income taxation as limited to national
taxes and inheritance and gift taxation. This summary also does not cover any state or local, or
non-U.S. non-Japanese tax considerations. Investors are urged to consult their tax advisors
regarding the U.S. federal, state and local and Japanese and other tax consequences of acquiring,
owning and disposing of shares of Common Stock or ADSs. Also, this summary does not purport to
address all the material tax consequences that may be relevant to the holders of shares of Common
Stock or ADSs, and does not take into account the specific circumstances of any particular
investors, some of which (such as tax-exempt entities, banks, insurance companies, broker-dealers,
traders in securities that elect to use a mark-to-market method of accounting for their securities
holdings, regulated investment companies, real estate investment trusts, partnerships and other
pass-through entities, investors liable for alternative minimum tax, investors that own or are
treated as owning 10 percent or more of the Company's voting stock, investors that hold shares of
Common Stock or ADSs as part of a straddle, hedge, conversion or constructive sale transaction or
other integrated transaction, and U.S. Holders (as defined below) whose functional currency is not
the U.S. dollar) may be subject to special tax rules. This summary is based on the federal income
tax laws and regulations of the United States and tax laws of Japan, judicial decisions, published
rulings and administrative pronouncements, all as in effect on the date hereof, as well as on the
current income tax convention between the United States and Japan (the "Treaty"), all of which are
subject to change (possibly with retroactive effect), and/or to differing interpretations.
For purposes of this discussion, a "U.S. Holder" is any beneficial owner of shares of Common Stock
or ADSs that is, for U.S. federal income tax purposes:
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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; or
4.
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.
An "Eligible U.S. Holder" is a U.S. Holder that:
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; and
3.
is eligible for benefits under the Treaty, with respect to income and
gain derived in connection with shares of Common Stock or ADSs.
In addition, this summary is based in part upon the representations of the depositary and the
assumption that each obligation in the deposit agreement for ADSs, and in any related agreement,
will be performed in accordance with its terms.
In general, for purposes of the Treaty and for U.S. federal income and Japanese national income tax
purposes, owners of ADRs evidencing ADSs will be treated as the owners of shares of Common Stock
represented by those ADSs, and exchanges of shares of Common Stock for ADSs, and exchanges of ADSs
for shares of Common Stock, will not be subject to U.S. federal income or Japanese national income
tax.
Japanese Taxation
The following is a summary of the principal Japanese tax consequences (limited to national taxes)
to holders of shares of Common Stock and of ADRs evidencing ADSs representing shares of Common
Stock who are either individuals who are non residents of Japan or non-Japanese corporations,
without a permanent establishment in Japan ("non-resident Holders").
Generally, a non-resident of Japan or a non-Japanese corporation is subject to Japanese withholding
tax on dividends paid by Japanese corporations. Stock splits are, in general, not a taxable event.
In the absence of an applicable tax treaty, convention or agreement reducing the maximum rate of
Japanese withholding tax or allowing exemption from Japanese withholding tax, the rate of Japanese
withholding tax applicable to dividends paid by Japanese corporations to individuals who are
non-residents of Japan or non-Japanese corporations is generally 20 percent, provided, with respect
to dividends paid on listed shares issued by a Japanese corporation (such as shares of Common
Stock) to any corporate or individual shareholders (including those shareholders who are
non-Japanese corporations or Japanese non-resident individuals, such as non-resident Holders) other
than any individual shareholder who holds 5 percent or more of the total shares issued by the
relevant Japanese corporation, the aforementioned 20 percent withholding tax rate is reduced to (i)
7 percent for dividends due and payable on or before March 31, 2008, and (ii) 15 percent for
dividends due and payable on or after April 1, 2008. As of the date of this annual report, Japan
has income tax treaties, conventions or agreements whereby the above-mentioned withholding tax rate
is reduced, in most cases to 15 percent for portfolio investors with, among other countries,
Australia, Belgium, Canada, Denmark, Finland, France, Germany, Ireland, Italy, Luxembourg, the
Netherlands, New Zealand, Norway, Singapore, Spain, Sweden, Switzerland, and the U.K.
Under the Treaty, the maximum rate of Japanese withholding tax which may be imposed on dividends
paid by a Japanese corporation to an Eligible U.S. Holder that is a portfolio investor is generally
reduced to 10 percent of the gross amount actually distributed, and Japanese withholding tax with
respect to dividends paid by a Japanese corporation to an Eligible U.S. Holder that is a pension
fund is exempt from Japanese taxation by way of withholding or otherwise unless such dividends are
derived from the carrying on of a business, directly or indirectly, by such pension fund.
If the maximum tax rate provided for in the income tax treaty applicable to dividends paid by the
Company to any particular non-resident Holder is lower than the withholding tax rate otherwise
applicable under Japanese tax law or any particular non-resident Holder is exempt from Japanese
income tax with respect to such dividends under the income tax treaty applicable to such particular
non-resident Holder, such nonresident Holder is required to submit an Application Form for Income
Tax Convention Regarding Relief from Japanese Income Tax on Dividends (together with any other
required forms and documents) in advance through the Company to the relevant tax authority before
the payment of dividends. A standing proxy for non-resident Holders of a Japanese corporation may
provide this application service. With respect to ADSs, this reduced rate or exemption is
applicable if the Depositary or its agent submits two Application Forms (one before payment of
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dividends and the other within 8 months after the
Company's business year-end or semi-business year-end). To claim this reduced rate or exemption,
any relevant non-resident Holder of ADSs will be required to file a proof of taxpayer status,
residence and beneficial ownership (as applicable) and to provide other information or documents as
may be required by the Depositary. A non-resident Holder who is entitled, under an applicable
income tax treaty, to a reduced rate which is lower than the withholding tax rate otherwise
applicable under Japanese tax law or an exemption from the withholding tax, but failed to submit
the required application in advance will be entitled to claim the refund of taxes withheld in
excess of the rate under an applicable tax treaty (if such non-resident Holder is entitled to a
reduced treaty rate under the applicable income tax treaty) or the full amount of tax withheld (if
such non-resident Holder is entitled to an exemption under the applicable income tax treaty) from
the relevant Japanese tax authority.
Gains derived from the sale of shares of Common Stock or ADSs outside Japan by a non-resident
Holder holding such shares of Common Stock or ADSs as portfolio investors are, in general, not
subject to Japanese income tax or corporation tax. Eligible U.S. Holders are not subject to
Japanese income or corporation tax with respect to such gains under the Treaty.
Japanese inheritance and gift taxes at progressive rates may be payable by an individual who has
acquired shares of Common Stock or ADSs as a legatee, heir or donee even though neither the
individual nor the deceased nor donor is a Japanese resident.
Holders of shares of Common Stock or ADSs should consult their tax advisors regarding the effect of
these taxes and, in the case of U.S. Holders, the possible application of the Estate and Gift Tax
Treaty between the U.S. and Japan.
U.S. Federal Income Taxation
U.S. Holders
The following discussion is a summary of the principal U.S. federal income tax consequences to
holders of shares of Common Stock and ADSs that are U.S. Holders and that hold those shares or ADSs
as capital assets (generally, for investment purposes).
Taxation of Dividends
Subject to the passive foreign investment company rules discussed below, under U.S. federal income
tax law, the gross amount of any distribution made by us in respect of shares of Common Stock or
ADSs (without reduction for Japanese withholding taxes) will constitute a taxable dividend to the
extent paid out of current or accumulated earnings and profits, as determined under U.S. federal
income tax principles. The U.S. dollar amount of such a dividend generally will be included in the
gross income of a U.S. Holder, as ordinary income, when actually or constructively received by the
U.S. Holder, in the case of shares of Common Stock, or by the depositary, in the case of ADSs.
Dividends paid by us will not be eligible for the dividends received deduction generally allowed to
U.S. corporations in respect of dividends received from other U.S. corporation.
Subject to certain exceptions for short-term and hedged positions, and provided that we are not a
passive foreign investment company (as discussed below), dividends received by certain U.S. Holders
(including individuals) with respect to the Common Stock or ADSs will currently be subject to U.S.
federal income taxation at a maximum rate of 15 percent. Investors should be aware that the U.S.
Treasury Department has announced its intention to promulgate rules pursuant to which shareholders
(and intermediaries) will be permitted to rely on certifications from issuers to establish that
dividends qualify for the reduced rate of U.S. federal income taxation. Because such procedures
have not yet been issued, we are not certain that we will be able to comply with them. U.S. Holders
of ADSs or Common Stock should consult their own tax advisors regarding the availability of the
reduced rate in the light of their own particular circumstances.
The U.S. dollar amount of a dividend paid in Japanese yen will be determined based on the Japanese
yen/U.S. dollar exchange rate in effect on the date that dividend is included in the income of the
U. S. Holder, regardless of whether the payment is converted into U.S. dollars on such date.
Generally, any gain or loss resulting from currency exchange fluctuations during the period from
the date the dividend payment is included in the gross income of a U.S. Holder through the date
that payment is converted into U.S. dollars (or the U.S. Holder otherwise disposed of the Japanese
yen) will be treated as U.S. source ordinary income or loss. U.S. Holders should consult their own
tax advisors regarding the calculation and U.S. federal income tax treatment of foreign currency
gain or loss.
To the extent, if any, that the amount of any distribution received by a U.S. Holder in respect of
shares of Common Stock or ADSs exceeds our current and accumulated earnings and profits, as
determined under U.S. federal income tax principles, the distribution first will be treated as a
tax-free return of the U.S. Holder's adjusted tax basis in those shares or ADSs, and thereafter as
U.S. source capital gain. Distributions of additional shares of Common Stock that are made
52
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to U.S. Holders with respect to their shares of Common Stock or ADSs and that are part of a pro
rata distribution to all the Company's shareholders generally will not be subject to U.S. federal
income tax.
For U.S. foreign tax credit purposes, dividends included in gross income by a U.S. Holder in
respect of shares of Common Stock or ADSs will constitute income from sources outside the United
States and will be subject to various classifications and other limitations U.S. federal law and
the Treaty, any Japanese withholding tax imposed in respect of a company dividend may be claimed
either as a credit against the U.S. federal income tax liability of a U.S. Holder or, if the U.S.
Holder elects not to take a credit for any foreign taxes that year, as a deduction from that U.S.
Holder's taxable income. Special rules will generally apply to the calculation of foreign tax
credits in respect of dividend income that qualifies for preferential U.S. federal income tax
rates. Additionally, special rules may apply to individuals whose foreign source income during the
taxable year consists entirely of "qualified passive income" and whose creditable foreign taxes
paid or accrued during the taxable year do not exceed $300 ($600 in the case of a joint return).
Further, under some circumstances, a U.S. Holder that:
•
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,
will not be allowed a foreign tax credit for foreign taxes imposed on our dividends. The rules with
respect to foreign tax credits are complex and involve the application of rules that depend on a
U.S. Holder's particular circumstances, and accordingly, U.S. Holders are urged to consult their
tax advisors regarding the availability of the foreign tax credit under their particular
circumstances. The Internal Revenue Service ("IRS") has expressed concern that parties to whom ADSs
are released may be taking actions that are inconsistent with the claiming of foreign tax credits
by U.S. Holders of ADSs. Accordingly, investors should be aware that the discussion above regarding
the creditability of Japanese withholding tax on dividends could be affected by future actions that
may be taken by the IRS.
Taxation of Capital Gains and Losses
In general, upon a sale or other taxable disposition of shares of Common Stock or ADSs, a U.S.
Holder will recognize gain or loss for U.S. federal income tax purposes in an amount equal to the
difference between the amount realized on the sales or other taxable disposition and the U.S.
Holder's adjusted tax basis in those Common Stock or ADSs. A U.S. Holder generally will have an
adjusted tax basis in a share of Common Stock or an ADS equal to its U.S. dollar cost. In general,
subject to the passive foreign investment company rules discussed below, such gain or loss
recognized on a sale or other taxable disposition of shares of Common Stock or ADSs will be capital
gain or loss and, if the U.S. Holder's holding period for those shares or ADSs exceeds one year,
will be long-term capital gain or loss. Certain U.S. Holders, including individuals, are eligible
for preferential rates of U.S. federal income tax in respect of long-term capital gains. Under U.S.
federal tax law, the deduction of capital losses is subject to limitations. Any gain or loss
recognized by a U.S. Holder in respect of the sale or other taxable disposition of shares of Common
Stock or ADSs generally will be treated as derived from U.S. sources for U.S. foreign tax credit
purposes.
Deposits and withdrawals of Common Stock in exchange for ADSs will not result in the realization of
gain or loss for U.S. federal income tax purposes.
Passive Foreign Investment Companies
Based on current estimates of our income and assets, we do not believe that we are, for U.S.
federal income tax purposes, a passive foreign investment company (a "PFIC"), and we intend to
continue our operations in such a manner that it is highly unlikely that we would become a PFIC in
the future. However, there can be no assurance in this regard, because the PFIC determination is
made annually and is based on the portion of our assets (including goodwill) or the portion of our
income that is characterized as passive under the PFIC rules. If we become a PFIC, unless a U.S.
Holder elects to be taxed annually on a mark-to-market basis with respect to its shares of Common
Stock or ADSs, any gain realized on a sale or other taxable disposition of shares of Common Stock
or ADSs and certain "excess distributions" (generally distributions in excess of 125 percent of the
average distribution over a three-year period, or shorter holding period for the shares of Common
Stock or ADSs) would be treated as realized ratably over the U.S. Holder's holding period for the
shares of Common Stock or ADSs; amounts allocated to prior years while we are a PFIC would be taxed
at the highest tax rate in effect for each such year, and an additional interest charge may apply
to the portion of the U.S. federal income tax liability on such gains or distributions treated
under the PFIC rules as having been deferred by the U.S. Holder. Amounts allocated to the year of
sale and to any year before we became a PFIC would be taxed as ordinary income in the year of sale.
Moreover, dividends that a U.S. Holder receives from us will not be eligible for the reduced U.S.
federal income tax rates described above if we are a PFIC either in the taxable year of the
distribution or the preceding taxable year (and instead will be taxable at rates applicable to
ordinary income).
If a market-to-market election were made, a U.S. Holder would take into account each year the
appreciation or depreciation in value of its shares of Common Stock or ADS, which would be treated
as ordinary income or (subject to limitations) ordinary loss, as would gains or losses on actual
dispositions of Common Stock or ADSs. Any U.S. Holder who owns shares of Common Stock or ADSs
during any year that we are a PFIC would be required to file IRS Form 8621. U.S. Holders should consult their own tax advisors regarding the application of
53
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the PFIC
rules to the shares of Common Stock or ADSs and the availability and advisability of making an
election to avoid the adverse tax consequences of the PFIC rules should we be considered a PFIC for
any taxable year.
Non-U.S. Holders
The following discussion is a summary of the principal U.S. federal income tax consequences to
beneficial holders of shares of Common Stock or ADSs that are neither U.S. Holders nor partnerships
for U.S. federal income tax purposes ("Non-U.S. Holders").
Subject to the discussion below under "Backup Withholding and Information Reporting", a Non-U.S.
Holder generally will not be subject to any U.S. federal income or withholding tax on distributions
received in respect of shares of Common Stock or ADSs unless the distributions are effectively
connected with the conduct by the Non-U.S. Holder of a trade or business within the United States
(and, if an applicable tax treaty requires, are attributable to a U.S. permanent establishment or
fixed base of such Non-U.S. Holder).
Subject to the discussion below under "Backup Withholding and Information Reporting", a Non-U.S.
Holder generally will not be subject to U.S. federal income tax in respect of gain recognized on a
sale or other disposition of shares of Common Stock or ADSs, unless:
(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
In general, except in the case of certain exempt recipients (such as corporations), information
reporting requirements will apply to dividends on shares of Common Stock or ADSs paid to U.S.
Holders in the United States or through certain U.S. related financial intermediaries and to the
proceeds received upon the sale, exchange or redemption of shares of Common Stock or ADSs by U.S.
Holders within the United States or through certain U.S. related financial intermediaries.
Furthermore, backup withholding (currently at a rate of 28 percent) may apply to those amounts if a
U.S. Holder fails to provide an accurate tax identification number, to certify that such holder is
not subject to backup withholding or to otherwise comply with the applicable requirements of the
backup withholding requirements.
Dividends paid to a Non-U.S. Holder in respect of shares of Common Stock or ADSs, and proceeds
received in the sale, exchange or redemption of shares of Common Stock or ADSs by a Non-U.S.
Holder, generally, are exempt from information reporting and backup withholding under current U.S.
federal income tax law. However, a Non-U.S. Holder may be required to provide certification of
non-U.S. status in order to obtain that exemption. Persons required to establish their exempt
status generally must provide such certification on IRS Form W-9, entitled Request for Taxpayer
Identification Number and Certification, in the case of U.S. persons, and on IRS Form W-8BEN,
entitled Certificate of Foreign Status (or other appropriate IRS Form W-8), in the case of non-U.S.
persons.
Backup withholding is not an additional tax. The amount of backup withholding imposed on a payment
to a U.S. Holder will be allowed as a credit against the holder's U.S. federal income tax liability
provided that the required information is properly furnished to the IRS.
THE SUMMARY OF U.S. FEDERAL INCOME AND JAPANESE TAX CONSEQUENCES SET OUT ABOVE IS INTENDED FOR
GENERAL INFORMATION PURPOSES ONLY. INVESTORS IN THE COMMON STOCK OR ADSs ARE URGED TO CONSULT WITH
THEIR OWN TAX ADVISORS WITH RESPECT TO THE PARTICULAR TAX CONSEQUENCES TO THEM OF OWNING OR
DISPOSING OF COMMON STOCK OR ADSs, BASED ON THEIR PARTICULAR CIRCUMSTANCES.
F. Dividends and paying agents
Not applicable
G. Statement by experts
Not applicable
54
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H. Documents on display
Makita files its annual report on Form 20-F and press releases or reports for shareholders or
investors on Form 6-K with the SEC. You may read and copy documents referred to in this annual
report on Form 20-F that have been filed with the SEC at the SEC's public reference room located at
100F Street, N.E., Room 1580, Washington, D.C. 20549 or by accessing the SEC's home page
(http://www.sec.gov)
I. Subsidiary information
Not applicable
Item 11.
Quantitative and Qualitative Disclosures about Market Risk
Market
Risk Exposure
Makita is exposed to various market risks, including those related to changes in foreign exchange
rates, interest rates, and the prices of marketable securities and investment securities. In order
to hedge the risks of fluctuations in foreign exchange rates and interest rates, Makita uses
derivative financial instruments. Makita does not hold or use derivative financial instruments for
trading purposes. Although the use of derivative financial instruments exposes Makita to the risk
of credit-related losses in the event of nonperformance by counterparties, Makita believes that its
counterparties are creditworthy because they are required to have a credit rating of a specified
level or above, and Makita does not expect credit-related losses, if any, to be significant.
Equity
and Debt Securities Price Risk
Makita classified investments of debt securities for current operations as marketable securities
within current assets. Other investments are classified as investment securities as a part of
investments and other assets in the consolidated balance sheets. Makita does not hold marketable
securities and investment securities for trading purposes. The fair value of certain of these
investments expose Makita to equity price risks. These investments are subject to changes in the
market prices of the securities. The maturities and fair values of such marketable securities and
investment securities at March 31, 2005 and 2006 were as follows:
Yen (millions)
U.S. Dollars (thousands)
2005
2006
2006
Carrying
Fair
Carrying
Fair
Carrying
Fair
Amount
Value
Amount
Value
Amount
Value
Due within one year
¥
53,504
¥
53,504
¥
42,810
¥
42,810
$
365,897
$
365,897
Due after one year through five years
2,343
2,348
2,455
2,436
20,983
20,821
Due after five years
2,150
2,144
1,986
1,880
16,974
16,068
Indefinite periods
1,614
1,614
—
—
—
—
Equity securities
20,433
20,433
30,961
30,961
264,624
264,624
¥
80,044
¥
80,043
¥
78,212
¥
78,087
$
668,478
$
667,410
55
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Foreign
Exchange Risk
Makita's international operations and indebtedness denominated in foreign currencies expose Makita
to the risk of fluctuation in foreign currency exchange rates. To manage this exposure, Makita
enters into certain foreign exchange contracts with respect to a part of such international
operations and indebtedness. The following table provides information about Makita's major
derivative financial instruments related to foreign currency transactions as of March 31, 2005 and
March 31, 2006. Figures are translated into yen at the rates prevailing at March 31, 2005 and March
31, 2006, together with the relevant weighted average contractual exchange rates at March 31, 2006.
All of the foreign exchange contracts listed in the following table have contractual maturities in
FY 2006 and 2007.
Yen (millions) (except average contractual rates)
U.S. Dollars (thousands)
2005
2006
2006
Average
Average
Contract
contractual
Contract
contractual
Contract
amounts
Fair Value
rates
amounts
Fair Value
rates
amounts
Fair Value
Foreign currency
contracts;
U.S.$/Yen
¥
3,934
¥
(112
)
¥
104.09
¥
4,368
¥
(11
)
¥
116.49
$
37,333
$
(94
)
Euro/Yen
3,166
(36
)
137.05
4,148
(67
)
140.14
35,453
(573
)
A$/Yen
329
(9
)
80.12
344
10
85.91
2,940
85
STG/Yen
129
(2
)
197.94
8
–
201.98
68
–
Euro/STG
1,413
16
–
1,421
(10
)
–
12,145
(85
)
Other
1,299
6
–
1,538
8
–
13,145
69
Total
¥
10,270
¥
(137
)
¥
11,827
¥
(70
)
$
101,084
$
(598
)
-
Foreign currency swaps:
U.S.$/Yen
¥
749
¥
–
¥
107.02
¥
9,099
¥
(88
)
¥
116.65
$
77,769
$
(752
)
Euro/Yen
–
–
–
1,133
(12
)
141.68
9,684
(103
)
CAN$/Yen
424
(19
)
84.74
305
–
101.8
2,607
–
A$/Yen
3,144
(187
)
78.60
1,661
(32
)
83.06
14,197
(274
)
SFr./Yen
174
(5
)
86.99
173
(8
)
86.45
1,478
(68
)
Total
¥
4,491
¥
(211
)
¥
12,371
¥
(140
)
$
105,735
$
(1,197
)
-
Options purchased to
sell foreign
currencies:
U.S.$/Yen
¥
406
¥
1
¥
101.56
¥
–
¥
–
¥
–
$
–
$
–
Euro/Yen
298
1
135.51
–
–
–
–
–
Other
63
–
–
–
–
–
–
–
Total
¥
767
¥
2
¥
–
¥
–
$
–
$
–
-
Options written to buy
foreign currencies:
U.S.$/Yen
¥
424
¥
(8
)
¥
106.12
¥
–
¥
–
¥
–
$
–
$
–
Euro/Yen
305
(3
)
138.84
–
–
–
–
–
Other
67
–
–
–
–
–
–
–
Total
¥
796
¥
(11
)
¥
–
¥
–
$
–
$
–
-
56
Table of Contents
Item 12.
Description of Securities Other than Equity Securities
Not applicable
PART II
Item 13.
Defaults, Dividend Arrearages and Delinquencies
None
Item 14.
Material Modifications to the Rights of Security Holders and Use of Proceeds
None
Item 15.
Controls and Procedures
A. Disclosure controls and procedures
Makita performed an evaluation of the effectiveness of the design and operation of its disclosure
controls and procedures as of the end of the fiscal 2006. Disclosure controls and procedures are
designed to ensure that the material financial and non-financial information required to be
disclosed in the reports that Makita files under the Exchange Act is accumulated and communicated
to its management including the chief executive officer and the principal accounting and financial
officer, to allow timely decisions regarding required disclosure.
The Company's disclosure controls and procedures also ensure that the reports that it files or
submits under the Exchange Act are recorded, processed, summarized and reported within the time
periods specified in the Commission's rules and forms. The evaluation was performed under the
supervision of Masahiko Goto, Makita's Chief Executive Officer, President and Representative
Director and Kenichiro Nakai, Makita's Principal Financial and Accounting Officer, Director. Makita's
disclosure and controls and procedures are designed to provide reasonable assurance of achieving
its objectives. Managerial judgment was necessary to evaluate the cost-benefit relationship of
possible controls and procedures. Masahiko Goto and Kenichiro Nakai have concluded that Makita's
disclosure controls and procedures are effective at the reasonable assurance level.
B. Changes in internal control over financial reporting
There have been no changes in Makita's internal control over financial reporting during fiscal 2006
that have materially affected, or are reasonably likely to materially affect, Makita's internal
control over financial reporting.
Item 16A.
Audit Committee Financial Expert
Makita's Board of Directors has determined that Akio Kondo qualifies as an "audit committee
financial expert" as defined by the rules of the SEC. Mr. Kondo is not independent, as that term is
defined in the listing standards of Nasdaq applicable to the Company. Mr. Kondo began his career at Makita in
1969, and from May 1979 to June 2004 he has worked in the field of finance and accounting. From
April 1991, he served as an Assistant General Manager of the Accounting & Finance Department, and
from October 1995 he served as a General Manager of the Accounting & Finance Department, the
division responsible for Makita's consolidated reporting. Mr. Kondo was elected as one of Makita's
corporate auditors at an ordinary general meeting of shareholders held in June 2004. See Item 6.A.
for additional information regarding Mr. Kondo.
Item 16B.
Code of ethics
On May 20, 2003, Makita adopted a code of ethics. On March 17, 2004, Makita amended the code of
ethics to: (1) ensure the protection of individuals who report questionable behavior to our
board of statutory auditors and (ii) clarify that waivers to our code of ethics for employees must be
requested in writing to our board of statutory auditors and for executive officers, directors and
statutory auditors can only be granted by the board of directors, only if truly necessary and
warranted, and must be promptly disclosed to shareholders.
57
Table of Contents
Makita's code of ethics is publicly available on our website at www.makita.co.jp.
If we make any substantive amendments to the code of ethics or grant any waivers, including any
implicit waiver, from a provision of this code to our directors and executive officers, including
our principal executive officer, principal financial officer, principal accounting officer or
controller, or persons performing similar functions, we will disclose the nature of such amendment
or waiver on our website.
Item 16C.
Principal Accountant Fees and Services
KPMG AZSA & Co. have served as our independent public accountants for each of the financial years
in the three-year period ended March 31, 2006, for which audited financial statements appear in
this annual report on Form 20-F.
The following table presents the aggregate fees for professional services and other services
rendered by KPMG AZSA & Co. and the various member firms of KPMG International, a Swiss Cooperative
to Makita in fiscal 2006 and fiscal 2005:
Yen (millions)
2005
2006
Audit Fees (1)
¥
189
248
Audit- related Fees (2)
14
31
Tax Fees (3)
66
74
All Other Fees (4)
83
71
Total
¥
352
¥
424
(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.
(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.
Policy on Pre-Approval of Audit and Non-Audit Services of Independent Registered Public Accounting
Firm
The Board of Statutory Auditors of Makita Corporation consisting of four members, including two
outside corporate auditors, is responsible for the oversight of its Independent Registered Public
Accounting Firm's work. The Board of Statutory Auditors has established "Audit and Non-Audit
Services Pre-approval Policies and Procedures," effective as of August 7, 2003. The policies and
procedures stipulate three means by which audit and non-audit services may be pre-approved,
depending on the content of and the fee for the services.
Under the United States Sarbanes-Oxley Act of 2002 (the "Act"), the Board of Statutory Auditors is
required to pre-approve all audit and non-audit services to be provided by the Independent Registered
Public Accounting Firm to the Company in order to assure that they do not impair their independence
from the Company. To implement these provisions of the Act, the US Securities and Exchange
Commission has issued rules specifying the types of services that an Independent Registered Public
Accounting Firm may not provide to its audit client, as well as the Board of Statutory Auditors'
administration of the engagement of the Independent Registered Public Accounting Firm.
Accordingly, the Board of Statutory Auditors has adopted this Audit and Non-Audit Services
Pre-approval Policy and Procedure, which sets forth the policies, procedures and the conditions for
which such services proposed to be performed by the Independent Registered Public Accounting Firm
may be pre-approved. Under this policy, the Board of Statutory Auditors authorizes general
pre-approval of all such services, including Audit Services, Audit-related Services, Tax Services
and All other Services. Under General Pre-approval protocol, the pre-approved services do not
require specific pre-approval from the Board of Statutory Auditors or its delegated member on a
case-by-case basis.
The term of any general pre-approval is 12 months from the date of pre-approval, unless the Board
of Statutory Auditors considers a different period and states otherwise in the relevant appendix.
The Board of Statutory Auditors
58
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will annually review this policy, including the services that may
be provided by the Independent Registered Public Accounting Firm without obtaining specific
pre-approval from the Board of Statutory Auditors, and make any necessary or appropriate changes to
this policy. This policy is designed (1) to be detailed as to the particular services to be
provided by the independent auditor, (2) to ensure that the Board of Statutory Auditors is informed
of each service provided by the independent auditor and (3) to ensure that the policies and
procedures set forth herein do not include delegation of the Board of Statutory Auditors'
responsibilities under the US Securities Exchange Act of 1934 to management. Nothing in this policy
shall be interpreted to be a delegation of the Board of Statutory Auditors' responsibilities under
the Securities Exchange Act of 1934 to management of the Company.
Item 16D.
Exemptions from the Listing Standards for Audit Committees
Makita does not have an audit committee and is relying on the general exemption contained in Rule
10A-3(c)(3) under the Exchange Act, which provides and exemption from NASDAQ's listing standards
relating to audit committees for foreign companies such as Makita, that has a board of corporate
auditors. Makita's reliance on Rule 10A-3(c)(3) does not, in its opinion, materially adversely
affect the ability of its board of corporate auditors to act independently and to satisfy the other
requirements of Rule 10A-3.
Item 16E.
Purchases of Equity Securities by the Issuer and Affiliated Purchasers
The following table sets out all purchases of common stock of the Company by the Company
during the fiscal year ended March 31, 2006. The Company did not resolve any repurchase plan or
program by the board of directors or Annual General Meeting of Shareholders, therefore, there is no
publicly announced plan or program regarding repurchase of common stock. The reason for these
repurchases of Common Stock is the purchase requests of holders of shares of common stock
constituting less than one full unit in accordance with the provisions of the Share Handling
Regulations of the Company.
Total Number of
Average Price Paid
Shares Purchased
per Share
Period
(shares)
(¥)
From April 1, 2005 to April 30, 2005
2,377
1,928
From May 1, 2005to May 31, 2005
3,386
2,049
From June 1, 2005 to June 30, 2005
10,289
2,199
From July 1, 2005 to July 31, 2005
15,105
2,234
From August 1, 2005 to August 31, 2005
13,663
2,328
From September 1, 2005 to September 30, 2005
10,542
2,229
From October 1, 2005 to October 30, 2005
6,132
2,320
From November 1, 2005 to November 30, 2005
1,889
2,806
From December 1, 2005 to December 31, 2005
3,212
2,908
From January 1, 2006 to January 31, 2006
1,316
3,037
From February 1, 2006 to February 28, 2006
1,374
3,421
From March 1, 2006 to March 31, 2006
892
3,452
Total Number of Shares Purchased and Average Price Paid per Share
70,177
2,335
PART III
Item 17.
Financial Statements
We have responded to Item 18 in lieu of responding to this Item.
Item 18.
Financial Statements
The following financial statements are filed as part of this annual report on Form 20-F.
59
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Item 19.
Exhibits
1.1
Articles of Incorporation, as amended and effective as of June 29, 2006 (English translation)
1.2
Regulations of Board of Directors, as amended and effective as of June 29, 2006 (English translation)
1.3
The Share Handling Regulations, as amended and effective as of June 29, 2006 (English translation)
1.4
Regulations of Board of Statutory Auditors effective as of July 7, 2006 (English translation)
4.1
Summary translation of the Sponsorship Agreement, dated January 17, 2005 and as supplemented on May
26, 2005, among Makita Corporation, Joyama Kaihatsu Ltd., and Tokyo Tatemono Co., Ltd., relating to
the civil rehabilitation of Joyama Kaihatsu Ltd and the operation of Castle Hill Country Club.
(incorporated by reference to Exhibit 4.1 of Makita's annual report on Form 20-F filed with the SEC
on July 5, 2005 (file no.000-12602))
12.1
302 Certification of President and Representative Director
12.2
302 Certification of Director, General Manager of Administration Headquarters
13.1
906 Certifications of President and Representative Director and Director, General Manager of
Administration Headquarters
60
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SIGNATURES
The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and
that it has duly caused and authorized the undersigned to sign this annual report on its behalf.
MAKITA CORPORATION
By:
/s/ Masahiko Goto
Name:
Masahiko Goto
Title:
President and Representative Director
Date: July 7, 2006
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Makita Corporation and Consolidated Subsidiaries
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULES
Report of Independent Registered Public Accounting Firm
F-2
Consolidated Balance Sheets as of March 31, 2005 and 2006
F-3 and F-4
Consolidated Statements of Income for the years ended March 31, 2004, 2005 and 2006
F-5
Consolidated Statements of Shareholders' Equity for the years ended March 31, 2004, 2005 and 2006
F-6
Consolidated Statements of Cash Flows for the years ended March 31, 2004, 2005 and 2006
F-7 and F-8
Notes to Consolidated Financial Statements
F-9 to F-45
(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, 2004, 2005 and
2006
F-47
(All schedules not listed above have been omitted because they are not applicable, or are not required,
or the information has been otherwise supplied in the consolidated financial statements.)
F-1
Table of Contents
Report of Independent Registered Public Accounting Firm
To the Shareholders and the Board of Directors
of Makita Corporation:
We have audited the consolidated financial statements of Makita Corporation (a Japanese
corporation) and subsidiaries as listed in the accompanying index. In connection with our audits of
the consolidated financial statements, we have also audited the financial statement schedule as
listed in the accompanying index. These consolidated financial statements and financial statement
schedule are the responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements and financial statement schedule based on our
audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all
material respects, the financial position of Makita Corporation and subsidiaries as of March 31,
2005 and 2006, and the results of their operations and their cash flows for each of the years in
the three-year period ended March 31, 2006, in conformity with U.S. generally accepted accounting
principles. Also in our opinion, the related financial statement schedule, when considered in
relation to the basic consolidated financial statements taken as a whole, presents fairly, in all
material respects, the information set forth therein.
The accompanying consolidated financial statements as of and for the year ended March 31, 2006,
have been translated into United States dollars solely for the convenience of the reader. We have
audited the translation and, in our opinion, the consolidated financial statements, expressed in
yen, have been translated into dollars on the basis set forth in Note 4 to the consolidated
financial statements.
/s/ KPMG
AZSA & CO.
Tokyo, Japan
April 27, 2006
F-2
Table of Contents
MAKITA CORPORATION AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
MARCH 31, 2005 AND 2006
A S S E T S
Yen
U.S. Dollars
(millions)
(thousands)
2005
2006
2006
CURRENT ASSETS:
Cash and cash equivalents
¥
25,384
¥
39,054
$
333,795
Time deposits
7,867
1,845
15,769
Marketable securities
57,938
47,773
408,316
Trade receivables-
Notes
1,687
1,936
16,547
Accounts
38,997
46,074
393,795
Less- Allowance for doubtful receivables
(1,178
)
(1,016
)
(8,684
)
Inventories
66,003
79,821
682,231
Deferred income taxes
3,831
3,661
31,291
Prepaid expenses and other current assets
7,363
8,621
73,684
Total current assets
207,892
227,769
1,946,744
PROPERTY, PLANT AND EQUIPMENT, AT COST:
Land
17,673
17,737
151,598
Buildings and improvements
51,085
55,470
474,103
Machinery and equipment
73,356
74,501
636,761
Construction in progress
790
2,340
20,000
142,904
150,048
1,282,462
Less- Accumulated depreciation
(90,080
)
(90,845
)
(776,453
)
52,824
59,203
506,009
INVESTMENTS AND OTHER ASSETS:
Investment securities
22,106
30,439
260,162
Goodwill
–
779
6,658
Other intangible assets, net
841
1,354
11,573
Deferred income taxes
390
698
5,966
Other assets
5,851
5,796
49,538
29,188
39,066
333,897
¥
289,904
¥
326,038
$
2,786,650
The accompanying notes to consolidated financial statements are
an integral part of these balance sheets.
F-3
Table of Contents
MAKITA CORPORATION AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
MARCH 31, 2005 AND 2006
LIABILITIES AND SHAREHOLDERS' EQUITY
Yen
U.S. Dollars
(millions)
(thousands)
2005
2006
2006
CURRENT LIABILITIES:
Short-term borrowings
¥
9,060
¥
1,728
$
14,769
Trade notes and accounts payable
10,574
13,908
118,872
Other payables
3,197
5,417
46,299
Accrued expenses
5,998
6,427
54,932
Accrued payroll
7,695
8,224
70,291
Club members' deposits
12,836
–
–
Income taxes payable
5,695
6,701
57,274
Deferred income taxes
118
176
1,504
Other liabilities
3,053
3,380
28,889
Total current liabilities
58,226
45,961
392,830
LONG-TERM LIABILITIES:
Long-term indebtedness
88
104
889
Accrued retirement and termination benefits
5,126
2,901
24,795
Deferred income taxes
4,538
7,923
67,718
Other liabilities
887
930
7,948
10,639
11,858
101,350
MINORITY INTERESTS
1,399
1,635
13,974
COMMITMENTS AND CONTINGENT LIABILITIES
–
–
–
SHAREHOLDERS' EQUITY:
Common stock,
Authorized - 287,000,000 shares in 2005
496,000,000 shares in 2006
Issued and outstanding
- 148,008,760 shares and 143,777,607 shares in 2005
144,008,760 shares and 143,711,766 shares in 2006
23,805
23,805
203,462
Additional paid-in capital
45,430
45,437
388,350
Legal reserve
5,669
5,669
48,453
Retained earnings
157,502
186,586
1,594,752
Accumulated other comprehensive income (loss)
(9,249
)
5,345
45,684
Treasury stock, at cost: - 4,231,153 shares in 2005
296,994 shares in 2006
(3,517
)
(258
)
(2,205
)
219,640
266,584
2,278,496
¥
289,904
¥
326,038
$
2,786,650
The accompanying notes to consolidated financial statements are
an integral part of these balance sheets.
F-4
Table of Contents
MAKITA CORPORATION AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEARS ENDED MARCH 31, 2004, 2005 AND 2006
Yen
U.S. Dollars
(millions)
(thousands)
2004
2005
2006
2006
NET SALES
¥
184,117
¥
194,737
¥
229,075
$
1,957,906
Cost of sales
110,322
113,323
132,897
1,135,872
GROSS PROFIT
73,795
81,414
96,178
822,034
Selling, general and administrative expenses
53,698
52,646
58,726
501,931
Losses (gains) on disposals or sales of property, plant and
equipment
(2,379
)
1,234
(8,326
)
(71,162
)
Impairment of long-lived assets
7,780
577
–
–
Transfer to the government of the substitutional portion of
pension plan
–
(4,441
)
–
–
OPERATING INCOME
14,696
31,398
45,778
391,265
OTHER INCOME (EXPENSES):
Interest and dividend income
869
1,157
1,301
11,120
Interest expense
(605
)
(588
)
(364
)
(3,111
)
Exchange gains (losses) on foreign currency transactions, net
(202
)
37
(258
)
(2,205
)
Realized gains on securities, net
555
453
2,918
24,940
Other, net
857
161
(232
)
(1,983
)
Total
1,474
1,220
3,365
28,761
INCOME BEFORE INCOME TAXES
16,170
32,618
49,143
420,026
PROVISION FOR INCOME TAXES:
Current
8,745
10,071
9,365
80,043
Deferred
(266
)
411
(633
)
(5,410
)
Total
8,479
10,482
8,732
74,633
NET INCOME
¥
7,691
¥
22,136
¥
40,411
$
345,393
Yen
U.S. Dollars
2004
2005
2006
2006
PER SHARE OF COMMON STOCK AND ADS:
Net income
Basic
¥
53.2
¥
153.9
¥
281.1
$
2.40
Diluted
51.9
148.8
281.1
2.40
Cash dividends paid for the year
18.0
24.0
55.0
0.47
The accompanying notes to consolidated financial statements are
an integral part of these statements.
F-5
Table of Contents
MAKITA CORPORATION AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED MARCH 31, 2004, 2005 AND 2006
Yen
U.S. Dollars
(millions)
(thousands)
2004
2005
2006
2006
COMMON STOCK:
Beginning balance
¥
23,803
¥
23,803
¥
23,805
$
203,462
Conversion of convertible bonds; 1,768 shares in 2005
–
2
–
–
Ending balance
¥
23,803
¥
23,805
¥
23,805
$
203,462
ADDITIONAL PAID-IN CAPITAL:
Beginning balance
¥
45,419
¥
45,421
¥
45,430
$
388,290
Conversion of convertible bonds
–
2
–
–
Gain on sales of treasury stock
2
7
7
60
Ending balance
¥
45,421
¥
45,430
¥
45,437
$
388,350
LEGAL RESERVE:
Beginning balance
¥
5,669
¥
5,669
¥
5,669
$
48,453
Ending balance
¥
5,669
¥
5,669
¥
5,669
$
48,453
RETAINED EARNINGS:
Beginning balance
¥
137,753
¥
138,819
¥
157,502
$
1,346,171
Net income
7,691
22,136
40,411
345,393
Cash dividends
(2,610
)
(3,453
)
(7,907
)
(67,581
)
Retirement of treasury stock
(4,015
)
–
(3,420
)
(29,231
)
Ending balance
¥
138,819
¥
157,502
¥
186,586
$
1,594,752
ACCUMULATED OTHER COMPREHENSIVE INCOME, NET OF
TAX:
Beginning balance
¥
(25,134
)
¥
(17,048
)
¥
(9,249
)
$
(79,051
)
Other comprehensive income for the year
8,086
7,799
14,594
124,735
Ending balance
¥
(17,048
)
¥
(9,249
)
¥
5,345
$
45,684
TREASURY STOCK:
Beginning balance
¥
(5,110
)
¥
(3,316
)
¥
(3,517
)
$
(30,060
)
Purchases
(2,227
)
(208
)
(164
)
(1,402
)
Retirement and sales
4,021
7
3,423
29,257
Ending balance
¥
(3,316
)
¥
(3,517
)
¥
(258
)
$
(2,205
)
DISCLOSURE OF COMPREHENSIVE INCOME:
Net income for the year
¥
7,691
¥
22,136
¥
40,411
$
345,393
Other comprehensive income for the year
8,086
7,799
14,594
124,735
Total comprehensive income for the year
¥
15,777
¥
29,935
¥
55,005
$
470,128
The accompanying notes to consolidated financial statements are
an integral part of these statements.
F-6
Table of Contents
MAKITA CORPORATION AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED MARCH 31, 2004, 2005 AND 2006
Yen
U.S. Dollars
(millions)
(thousands)
2004
2005
2006
2006
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income
¥
7,691
¥
22,136
¥
40,411
$
345,393
Adjustments to reconcile net income to net cash provided by
operating activities-
Depreciation and amortization
7,963
5,381
5,922
50,615
Deferred income taxes
(266
)
411
(633
)
(5,410
)
Realized gains on securities, net
(555
)
(453
)
(2,918
)
(24,940
)
Losses (gains) on disposals or sales of property, plant and
equipment
(2,379
)
1,234
(8,326
)
(71,162
)
Impairment of long-lived assets
7,780
577
–
–
Changes in assets and liabilities-
Trade receivables
(1,610
)
(1,995
)
(5,011
)
(42,829
)
Inventories
6,193
(9,203
)
(8,646
)
(73,897
)
Trade notes and accounts payables and accrued expenses
3,175
3,069
5,121
43,769
Income taxes payable
2,368
(770
)
272
2,325
Accrued retirement and termination benefits
(562
)
(4,900
)
(346
)
(2,957
)
Other, net
(857
)
1,355
(779
)
(6,659
)
Net cash provided by operating activities
28,941
16,842
25,067
214,248
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures
(4,494
)
(6,655
)
(11,383
)
(97,291
)
Purchases of available-for-sale securities
(26,691
)
(20,091
)
(19,449
)
(166,231
)
Purchases of held-to-maturity securities
(8,261
)
(1,753
)
(1,799
)
(15,376
)
Proceeds from sales of available-for-sale securities
4,090
2,422
16,750
143,162
Proceeds from maturities of available-for-sale securities
14,100
12,250
17,400
148,718
Proceeds from maturities of held-to-maturity securities
–
13,510
200
1,709
Proceeds from sales of property, plant and equipment
5,154
320
1,012
8,650
Decrease (increase) in time deposits
(1,162
)
(38
)
6,514
55,675
Cash paid for acquisition of business
–
–
(1,204
)
(10,291
)
Other, net
2
189
(386
)
(3,298
)
Net cash provided by (used in) investing activities
(17,262
)
154
7,655
65,427
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase (decrease) in short-term borrowings
(882
)
693
1,073
9,171
Redemption of bonds
–
(12,990
)
–
–
Repayment of long-term indebtedness
–
–
(6,150
)
(52,564
)
Repayment of club members' deposits
(860
)
(209
)
(6,375
)
(54,487
)
Purchases of treasury stock, net
(2,220
)
(194
)
(154
)
(1,316
)
Cash dividends paid
(2,610
)
(3,453
)
(7,907
)
(67,581
)
Other, net
(24
)
(24
)
(35
)
(300
)
Net cash used in financing activities
(6,596
)
(16,177
)
(19,548
)
(167,077
)
The accompanying notes to consolidated financial statements are
an integral part of these statements.
F-7
Table of Contents
MAKITA CORPORATION AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED MARCH 31, 2004, 2005 AND 2006
Yen
U.S. Dollars
(millions)
(thousands)
2004
2005
2006
2006
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH
EQUIVALENTS
¥
(877
)
¥
(11
)
¥
496
$
4,240
NET CHANGE IN CASH AND CASH EQUIVALENTS
4,206
808
13,670
116,838
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR
20,370
24,576
25,384
216,957
CASH AND CASH EQUIVALENTS, END OF YEAR
¥
24,576
¥
25,384
¥
39,054
$
333,795
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the year for-
Interest
¥
605
¥
593
¥
458
$
3,915
Income taxes
6,377
10,841
9,093
77,718
NON-CASH INVESTING AND FINANCING ACTIVITIES:
Amount due seller inconnect with business acquisition
¥
–
¥
–
¥
649
$
5,547
Release from obligation for club members' deposits
–
–
6,461
55,222
Reduction of short-term borrowings and long-term
indebtedness by deconsolidation of a subsidiary
–
–
2,177
18,607
The accompanying notes to consolidated financial statements are
an integral part of these statements.
F-8
Table of Contents
MAKITA CORPORATION AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1.
DESCRIPTION OF BUSINESS
Makita Corporation (the "Company") is a recognized leader in
manufacture and sale of portable electric power tools. The
Company and its consolidated subsidiaries' main products
include impact drivers, circular saws, jig saws, planers,
drills, rotary hammers, grinders and slide compound saws. The
Company and its consolidated subsidiaries (collectively
"Makita") also manufacture and sell stationary woodworking
machines and pneumatic tools as well as garden tools.
Domestic sales in Japan are made by the Company, while
overseas sales are made under the Makita or maktec brand
name, almost entirely through sales subsidiaries and
distributors. Approximately 81.8% of consolidated net sales
for the year ended March 31, 2006, were generated from
customers outside Japan, with 20.8% from North America, 39.5%
from Europe and 21.5% from Asia and other areas.
Makita's manufacturing and assembly operations are conducted
primarily at three plants in Japan and seven plants overseas,
located in the United States, Germany, the United Kingdom,
Brazil, China (two plants) and Canada.
2.
BASIS OF PRESENTING FINANCIAL STATEMENTS
Foreign subsidiaries translate their financial statements
into Japanese yen from each of their functional currencies.
The accounts and the financial statements of the Company and
domestic subsidiaries are maintained and reported in their
functional currency, the Japanese yen.
The 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 country 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 Consolidation
The 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 currently
does not have any consolidated
Variable Interest Entities as
set out in FIN 46R.
(b)
Foreign Currency Translation
Under 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 in shareholders' equity.
F-9
Table of Contents
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 equivalents
For purposes of the consolidated balance sheets and the consolidated
statements of cash flows, Makita considers highly liquid investments
with an original maturity of three months or less at the date of
purchase to be cash equivalents.
(d)
Marketable and Investment Securities
Makita 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 (loss), net of applicable income taxes.
Non-marketable equity securities are carried at cost and reviewed
periodically for impairment. Held-to-maturity securities are reported
at amortized cost, adjusted for the amortization or accretion of
premiums or discounts.
A decline in 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 to
be recognized is measured based on the amount by which the carrying
amount of the investment exceeds the fair value of the investment.
Fair value is determined based on quoted market prices or other
valuation techniques as appropriate.
Makita classifies marketable securities in current assets which are
available for current operations. 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 (loss) into earnings is
determined by the average cost method.
F-10
Table of Contents
(e)
Allowance for Doubtful Receivables
Allowance 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
potential for recovery is considered remote.
(f)
Inventories
Inventory 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 Depreciation
For 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 50 years for buildings and improvements and from 3 years to 10 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, 2004, 2005 and 2006 amounted
to ¥7,692 million, ¥5,175 million and ¥5,710 million, 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, 2005 and 2006, was as follows:
Yen
U.S. Dollars
(millions)
(thousands)
2005
2006
2006
Aggregate cost
¥
677
¥
656
$
5,607
Accumulated amortization
533
510
4,359
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(h)
Goodwill and Other Intangible Assets
Makita follows the provisions of SFAS No. 141 and SFAS No. 142. SFAS
No. 141, "Business Combinations" 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, "Goodwill and Other Intangible Assets"
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 no longer be 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 Liabilities
Liabilities for environmental remediation and other environmental
costs 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.
(j)
Research and Development Costs and Advertising Costs
Research and development costs, included in selling, general and
administrative expenses in the consolidated statements of income, are
expensed as incurred and totaled ¥4,377 million, ¥ 4,446 million and
¥4,826 million ($41,248 thousand) for the years ended March 31, 2004,
2005 and 2006, respectively.
Advertising costs are also expensed as incurred and totaled ¥3,797
million, ¥4,381 million and ¥5,138 million ($43,915 thousand) for the
years ended March 31, 2004, 2005 and 2006, respectively.
(k)
Shipping and Handling Costs
Shipping 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 ¥4,418 million, ¥5,305 million and ¥6,774 million
($57,897 thousand) for the years ended March 31, 2004, 2005and 2006,
respectively.
(l)
Income Taxes
Makita 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.
(m)
Product Warranties
A 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.
F-12
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(n)
Pension Plans
Makita 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.
(o)
Earnings Per Share
Basic 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. Diluted earnings per share
reflects the potential dilution computed on the basis that all
convertible bonds had been converted at the beginning of the year or
at the time of issuance unless they were antidilutive.
(p)
Impairment of Long-Lived Assets
Makita accounts for impairment of long lived assets with finite
useful lives in accordance with the provisions of SFAS No. 144,
"Accounting for the Impairment or Disposal of Long-lived Assets."
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 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 Instruments
Makita 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 measure those instruments at fair
values. 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. Makita dose 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.
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(r)
Use of Estimates in the Preparation of Financial Statements
The preparation of financial statements in conformity with
U.S. generally accepted accounting principles 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 Recognition
Makita recognizes revenue when persuasive evidence of an
arrangement exists, delivery has occurred or services are
rendered, the sales price is fixed and determinable and
collectibility is reasonably assured. Makita believes the
foregoing conditions are satisfied upon shipment or
delivery of the product depending on the terms of the
sales arrangement.
Makita sells its products outside of Japan directly to
retail customers pursuant to sales contracts and purchase
orders. Within Japan, the Company mainly utilizes
wholesalers, which in turn, provide the products to their
associated retail customers. Arrangements with wholesalers
are subject to customary terms and conditions evidenced by
signed contractual arrangements. The use of wholesalers is
a customary point of sale business practice in Japan for
which many companies across multiple industries
participate.
Makita recognizes revenue to its wholesale customers upon
shipment. Makita believes recognition of revenue at this
point is appropriate because (i) the title and risk of
loss passes to the wholesaler upon shipment of a product
to the wholesaler; (ii) Makita is not contractually
obligated nor has Makita accepted returns of the product
historically from the wholesaler other than in the event
of product defect; (iii) payment terms are established
consistent with Makita's normal payment terms for all
other customers; (iv) payment terms are not linked
contractually nor practically to the payment of the
wholesalers invoices by its retail customers and; (v)
sales incentives are offered directly to wholesalers under
terms and conditions similar to arrangements offered to
other customers and are in no way established to provide
relief in lieu of returned products.
Furthermore, Makita periodically reviews readily available
financial statements and other market data on certain of
its wholesale customers in order to assess their overall
financial viability for the purposes of establishing
credit limits. Within Japan, the Company also requires on
average, two months worth of estimated sales be held in
the form of cash collateral with an independent third
party or that the Company be granted a security interest
in the wholesaler's assets of an equivalent value.
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.
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Cooperative advertisings are 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. Cash discounts are substantially all taken within 30
days following the date of sale. 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 Standards
In November 2004, the FASB issued SFAS No. 151, "Inventory Costs – an
amendment of ARB No. 43, Chapter 4" ("SFAS No. 151"). SFAS No. 151
amends the guidance in ARB No. 43, Chapter 4, "Inventory Pricing," to
clarify the accounting for abnormal amounts of idle facility expense,
freight, handling costs, and wasted material (spoilage). Among other
provisions, the new statement requires that items such as idle
facility expense, excessive spoilage, double freight, and rehandling
costs be recognized as current period charges regardless of whether
they meet the criterion of "so abnormal" as stated in ARB No. 43.
Additionally, SFAS No. 151 requires that the allocation of fixed
production overheads to the costs of conversion be based on the
normal capacity of the production facilities. SFAS No. 151 is
effective for the year ended March 31, 2007. Makita does not expect
the adoption of SFAS No. 151 will have a material impact on its
consolidated results of operations and financial condition.
In December 2004, the FASB issued SFAS No. 153, "Exchanges of
Non-monetary Assets – an amendment of APB Opinion No. 29." SFAS No.
153 eliminates the exception from fair value measurement for
non-monetary exchanges of similar productive assets in paragraph
21(b) of APB Opinion No. 29, "Accounting for Non-monetary
Transactions," and replaces it with an exception for exchanges that
do not have commercial substance. SFAS No. 153 specifies that a
non-monetary exchange has commercial substance if the future cash
flows of the entity are expected to change significantly as a result
of the exchange. SFAS No. 153 is effective for fiscal periods
beginning after June 15, 2005 and is required to be adopted by
Makita, in the fiscal year beginning April 1, 2006. Makita does not
expect the adoption of SFAS No. 153 will have a material impact on
its consolidated results of operations and financial condition.
In May 2005, the FASB issued SFAS No. 154, "Accounting Changes and
Error Corrections—a replacement of APB Opinion No. 20 and FASB
Statement No. 3." SFAS No. 154 replaces APB Opinion No. 20,
"Accounting Changes" and SFAS No. 3,"Reporting Accounting Changes in
Interim Financial Statements," and provides guidance on the
accounting for and reporting of accounting changes and error
corrections. SFAS No. 154 establishes retrospective application, or
the latest practicable date, as the required method for reporting a
change in accounting principle and the reporting of a correction of
an error. SFAS No. 154 is effective for accounting changes and
corrections of errors made in fiscal years beginning after December
15, 2005
In June 2005, the FASB issued FASB Staff Position (FSP) FAS 143-1,
"Accounting for Electronic Equipment Waste Obligations" ("FSP
143-1"). FSP 143-1 provides guidance on the accounting for certain
obligations associated with the Waste Electrical and Electronic
Equipment Directive (the "Directive"), adopted by the European Union
("EU"). Under the Directive, the waste management obligation for
historical equipment (products put on the market on or prior to
August 13, 2005) remains with the commercial user until the customer
replaces the equipment. FSP 143-1 is required to be applied to the
later of the first reporting period ending after June 8, 2005 or the
date of the Directive's adoption into law by the applicable EU member
countries. Makita does not expect the adoption of FSP 143-1 will have
a material impact on its consolidated results of operations and
financial condition.
In November 2005, the FASB issued FSP FAS 115-1 and FAS 124-1, "The
Meaning of Other-Than-Temporary Impairment and Its Application to
Certain Investments" ("FSP 115-1"). FSP 115-1 provides guidance on
determining when investments in certain debt and equity securities
are considered impaired, whether that impairment is
other-than-temporary, and on measuring such impairment loss. FSP
115-1 also includes accounting considerations subsequent to the
recognition of an other-than-temporary impairment and
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requires certain disclosures about unrealized losses that have not been
recognized as other-than-temporary impairments. FSP 115-1 is required
to be applied to reporting periods beginning after December 15, 2005.
Makita does not expect the adoption of FSP 115-1 will have a material
impact on its consolidated results of operations and financial
condition.
(u)
Reclassifications
Certain reclassifications have been made to the prior years'
consolidated financial statements to conform with the presentation
used for the year ended March 31, 2006.
4.
TRANSLATION OF FINANCIAL STATEMENTS
Solely for the convenience of readers, the accompanying consolidated
financial statement amounts for the year ended March 31, 2006, 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 ¥117 to US$1 at March 31, 2006. This
translation should not be construed as a representation that the
amounts shown could be or could have been converted into United States
dollars at the rate.
5.
INVENTORIES
Inventories as of March 31, 2005 and 2006 comprised the following:
Yen
U.S. Dollars
(millions)
(thousands)
2005
2006
2006
Finished goods
¥
53,425
¥
64,121
$
548,043
Work in process
1,844
2,338
19,983
Raw materials
10,734
13,362
114,205
¥
66,003
¥
79,821
$
682,231
6.
IMPAIRMENT OF LONG LIVED ASSETS
In December 2003, in connection with the ongoing strategic revenue growth and cost cutting
initiatives, specifically including an evaluation of its corporate wide marketing, promotional
activities, the cost benefit relationship therefrom, and the continued rationalization of
certain personnel related costs, Makita made a decision to no longer consider a golf course
owned by a 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, Makita 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 of ¥ 5,996 million to reduce the carrying value to its estimated fair value, as
determined on a discounted cash flow basis.
On May 7, 2005, the Nagoya District Court confirmed a civil rehabilitation plan for Joyama
Kaihatsu, Ltd. On May 31, 2005, upon confirmation of the civil rehabilitation plan, Makita
transferred its ownership interests in Joyama Kaihatsu, Ltd., to a third party. In connection
with this ownership transfer, Makita recorded a gain on sale of the golf course of ¥ 8,479
million including the release from its obligation for club membership deposits of ¥ 6,461
million in the consolidated income statement in the year ended March 31, 2006.
During the year ended March 31, 2004, Makita made a decision to sell a part of its production
facility in the United Kingdom rather than holding it for future use. As a result of this
decision, Makita recorded an impairment charge of ¥243 million, based on the expected sales
value less cost to sell the facility.
The Company, as part of its facilities integration and cost cutting plans, decided to vacate a
certain research and development facility in Japan and a related administrative facility during
the year ended March 31, 2004, and a certain information technology facility (collectively the
"Facility") during the year ended March 31, 2005. The Company intends to continue to hold the
Facility as is for the foreseeable future considering the expected difficulty in identifying a
buyer with operating plans commensurating with the present zoning requirements. As discussed
above, the Facility was principally used as a research and development facility and provides
training and information technology
F-16
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services. The current zoning regulations require that the
buyer utilize the Facility on a substantially same basis. Therefore, the combination of the
limitations imposed by the zoning rules and the fact that the Facility is located in a rural,
non industrial section of Japan has caused management to determine that the recoverable value on
an as-is basis will most likely be limited to the estimated fair value of the land.
As a result of the decision to vacate the Facility, the Company performed an
impairment assessment pursuant to the provisions of SFAS No. 144 and recorded
an impairment charge of ¥1,541 million and ¥577 million for the years ended
March 31, 2004 and 2005, respectively. This impairment charge reduced the
carrying value of the administrative facility to its estimated fair value of
¥316 million in the year ended March 31, 2004 and the technology facility to
¥196 million in the year ended March 31, 2005. The estimated fair value of ¥316
million and ¥196 million represents the fair value of the land as determined by
a third party appraiser considering the estimated net cash flows from effecting
the sale to a third party purchaser. The carrying value of the building has
been reduced to zero on the basis that the Company anticipates no future use
from the Facility and the expectation of realizing only the value of the land
upon sale. Presently, the Company has not decided how and when to dispose of
the Facility. In addition, the Company currently has no plans regarding the use
of the vacated Facility and as a result, the Company does not expect any future
cash flows from the Facility.
F-17
Table of Contents
7.
MARKETABLE SECURITIES AND INVESTMENT SECURITIES
Marketable securities and investment securities consisted of available-for-sale securities and held-to-maturity securities.
The cost, gross unrealized holding gains and losses, fair value and carrying amount for such securities by major security type as of March
31, 2005 and 2006, were as follows:
Yen (millions)
Gross Unrealized
Holding
Carrying
As of March 31, 2005
Cost
Gains
Losses
Fair value
Amount
Available-for-sale:
Marketable securities:
Japanese and foreign government debt securities
¥
100
¥
1
¥
–
¥
101
¥
101
Corporate and bank debt securities
5,580
151
1
5,730
5,730
Investments in trusts
48,391
1,098
14
49,475
49,475
Marketable equity securities
1,403
1,129
–
2,532
2,532
¥
55,474
¥
2,379
¥
15
¥
57,838
¥
57,838
Investment securities:
Corporate and bank debt securities
¥
1,594
¥
20
¥
–
¥
1,614
¥
1,614
Investments in trusts
645
94
–
739
739
Marketable equity securities
7,837
9,481
7
17,311
17,311
Non-marketable equity securities (carried at cost)
590
–
–
590
590
¥
10,666
¥
9,595
¥
7
¥
20,254
¥
20,254
Held-to-maturity:
Marketable securities:
Japanese corporate debt securities
¥
100
¥
–
¥
–
¥
100
¥
100
¥
100
¥
–
¥
–
¥
100
¥
100
Investment securities:
Japanese government debt securities
¥
300
¥
2
¥
–
¥
302
¥
300
Japanese corporate debt securities
1,552
2
5
1,549
1,552
¥
1,852
¥
4
¥
5
¥
1,851
¥
1,852
Total marketable securities
¥
55,574
¥
2,379
¥
15
¥
57,938
¥
57,938
Total investment securities
¥
12,518
¥
9,599
¥
12
¥
22,105
¥
22,106
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Table of Contents
Yen (millions)
Gross Unrealized
Holding
Carrying
As of March 31, 2006
Cost
Gains
Losses
Fair value
Amount
Available-for-sale:
Marketable securities:
Japanese and foreign government
debt securities
¥
1
¥
–
¥
–
¥
1
¥
1
Corporate and bank debt securities
4,376
77
78
4,375
4,375
Investments in trusts
36,874
1,691
57
38,508
38,508
Marketable equity securities
1,496
2,093
–
3,589
3,589
¥
42,747
¥
3,861
¥
135
¥
46,473
¥
46,473
Investment securities:
Corporate and bank debt securities
¥
42
¥
–
¥
–
¥
42
¥
42
Investments in trusts
666
109
–
775
775
Marketable equity securities
10,334
16,466
–
26,800
26,800
Non-marketable equity securities
(carried at cost)
572
–
–
572
572
¥
11,614
¥
16,575
¥
–
¥
28,189
¥
28,189
Held-to-maturity:
Marketable securities:
Japanese corporate debt securities
¥
1,300
¥
–
¥
–
¥
1,300
¥
1,300
¥
1,300
–
–
1,300
1,300
Investment securities:
Japanese government debt securities
¥
300
¥
–
¥
3
¥
297
¥
300
Japanese corporate debt securities
1,950
–
122
1,828
1,950
¥
2,250
¥
–
¥
125
¥
2,125
¥
2,250
Total marketable securities
¥
44,047
¥
3,861
¥
135
¥
47,773
¥
47,773
Total investment securities
¥
13,864
¥
16,575
¥
125
¥
30,314
¥
30,439
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Table of Contents
U.S. Dollars (thousands)
Gross Unrealized
Holding
Carrying
As of March 31, 2006
Cost
Gains
Losses
Fair value
Amount
Available-for-sale:
Marketable securities:
Japanese and foreign government debt
securities
$
9
$
–
$
–
$
9
$
9
Corporate and bank debt securities
37,402
658
667
37,393
37,393
Investments in trusts
315,162
14,453
487
329,128
329,128
Marketable equity securities
12,786
17,889
–
30,675
30,675
$
365,359
$
33,000
$
1,154
$
397,205
$
397,205
Investment securities:
Corporate and bank debt securities
$
358
$
–
$
–
$
358
$
358
Investments in trusts
5,692
932
–
6,624
6,624
Marketable equity securities
88,325
140,735
–
229,060
229,060
Non-marketable equity securities
(carried at cost)
4,889
–
–
4,889
4,889
$
99,264
$
141,667
$
–
$
240,931
$
240,931
Held-to-maturity:
Marketable securities:
Japanese corporate debt securities
$
11,111
$
–
$
–
$
11,111
$
11,111
$
11,111
$
–
$
–
$
11,111
$
11,111
Investment securities:
Japanese government debt securities
$
2,564
$
–
$
25
$
2,539
$
2,564
Japanese corporate debt securities
16,667
–
1,043
15,624
16,667
$
19,231
$
–
$
1,068
$
18,163
$
19,231
Total marketable securities
$
376,470
$
33,000
$
1,154
$
408,316
$
408,316
Total investment securities
$
118,495
$
141,667
$
1,068
$
259,094
$
260,162
Investments in trusts represent funds deposited with trust banks in multiple investor
accounts and managed by the fund managers of the trust banks. As of March 31, 2005 and 2006,
each fund consisted of marketable equity securities and interest-bearing bonds.
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Table of Contents
The following table shows our investments' gross unrealized holding losses and fair value, aggregated by investment category and length of time that individual securities have been in a
continuous unrealized loss position, at March 31, 2006.
Yen (millions)
Less than 12 months
12 months or more
Gross
Gross
Unrealized
Unrealized
Holding
Holding
As of March 31, 2006
Fair value
Losses
Fair value
Losses
Available-for-sale:
Marketable securities:
Corporate and bank debt securities
¥
1,374
¥
78
¥
–
¥
–
Investments in trusts
3,792
57
–
–
¥
5,166
¥
135
¥
–
¥
–
Held-to-maturity:
Investment securities
Japanese government debt securities:
297
3
–
–
Japanese corporate debt securities:
¥
1,828
¥
122
¥
–
¥
–
¥
2,125
¥
125
¥
–
¥
–
U.S. Dollars (thousands)
Less than 12 months
12 months or more
Gross
Gross
Unrealized
Unrealized
Holding
Holding
As of March 31, 2006
Fair value
Losses
Fair value
Losses
Available-for-sale:
Marketable securities:
Corporate and bank debt securities
$
11,744
$
667
$
–
$
–
Investments in trusts
32,410
487
–
–
$
44,154
$
1,154
$
–
$
–
Held-to-maturity:
Investment securities
Japanese government debt securities:
2,539
25
–
–
Japanese corporate debt securities:
$
15,624
$
1,043
$
–
$
–
$
18,163
$
1,068
$
–
$
–
F-21
Table of Contents
Maturities of debt securities classified as available-for-sale and held-to-maturity as of March 31, 2006, regardless of their balance sheet classification, were as follows:
Maturities of debt securities based on Cost as of March 31, 2006
Yen (millions)
U.S. Dollars (thousands)
Available-
Held-to-
Available-
Held-to-
for-sale
maturity
Total
for-sale
maturity
Total
Due within one year
¥
2,925
¥
1,300
¥
4,225
$
25,000
$
11,111
$
36,111
Due after one to five years
30
1,650
1,680
256
14,103
14,359
Due after five to ten years
100
600
700
855
5,128
5,983
Due after ten years
1,364
–
1,364
11,658
–
11,658
Total
¥
4,419
¥
3,550
¥
7,969
$
37,769
$
30,342
$
68,111
Maturities of debt securities based on Fair Value as of March 31, 2006
Yen (millions)
U.S. Dollars (thousands)
Available-
Held-to-
Available-
Held-to-
for-sale
maturity
Total
for-sale
maturity
Total
Due within one year
¥
3,002
¥
1,300
¥
4,302
$
25,658
$
11,111
$
36,769
Due after one to five years
30
1,631
1,661
256
13,940
14,196
Due after five to ten years
94
494
588
803
4,223
5,026
Due after ten years
1,292
–
1,292
11,043
–
11,043
Total
¥
4,418
¥
3,425
¥
7,843
$
37,760
$
29,274
$
67,034
Gross realized gains on sales of marketable securities and investment securities for the years ended March 31, 2004, 2005 and 2006 amounted to ¥862 million and ¥543 million and ¥437 million ($3,736 thousand), respectively. Effective October 1,
2005, UJF Holdings Co., Ltd., and Mitsubishi Tokyo Financial Group Co., Ltd., completed a merge in which, the shares of common stock owned by the Company in UFJ Holdings were exchanged for shares of common stock of the newly merged entity,
Mitsubishi UFJ Financial Group Co., Ltd. As a result of this merger and common share exchange, the Company realized a gain on securities of ¥2,528 million ($21,606 thousand) for the year ended March 31, 2006. Gross realized losses, which included
the gross realized losses considered as other than temporary, during the years ended March 31, 2004, 2005 and 2006 amounted to ¥307 million, ¥90 million and ¥47 million ($402 thousand), respectively. The cost of the securities sold was computed
based on the average cost of all the shares of each such security held at the time of sale. Gross unrealized losses on marketable securities and investment securities of which declines in market value are considered to be other than temporary were
charged to earnings as realized losses on securities, amounting to ¥279 million, ¥82 million and ¥47 million ($402 thousand) for the years ended March 31, 2004, 2005 and 2006, respectively. Proceeds from the sales and maturities of
available-for-sale securities were ¥18,190 million, ¥14,672 million and ¥34,150 million ($291,880 thousand) for the years ended March 31, 2004, 2005 and 2006, respectively. Proceeds from the held-to-maturity securities were ¥13,510 million and
¥200 million ($1,709 thousand) for the years ended March 31, 2005 and 2006, respectively.
F-22
Table of Contents
8.
ACQUISITIONS
To 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 ($15,838 thousand) including direct
acquisition costs of which, ¥649 million was unpaid
and included in other payables in the accompanying
consolidated balance sheet at March 31, 2006 and
which was paid in April 2006.
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 financial position and the
results of the operation of the Business are included
in the Japan segment in Note 19. 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
(the "Goodwill") was ¥779 million ($6,658 thousand) as
of March 31, 2006. The Goodwill is deductible for
Japanese tax purpose.
In connection with this acquisition, intangible assets
of the Business comprised patents of ¥179 million
($1,530 thousand), which were estimated to have a
remaining useful life of 8 years, and customer
relationships of ¥135 million ($1,154 thousand), which
were estimated to have a remaining useful life of 10
years. These assets were recorded and presented as
other intangible assets, net in the accompanying
consolidated balance sheets.
Had the operating result of the Business been included as if the
transaction had been consummated on April 1, 2005, the pro forma
operating results for the Company for the year ended March 31, 2006
would not have been materially different.
9.
INCOME TAXES
Income before income taxes and the provision for income taxes for the years ended March 31, 2004, 2005 and 2006 were as follows:
Yen
U.S. Dollars
(millions)
(thousands)
2004
2005
2006
2006
Income before income taxes:
Domestic
¥
3,237
¥
15,837
¥
26,895
$
229,872
Foreign
12,933
16,781
22,248
190,154
¥
16,170
¥
32,618
¥
49,143
$
420,026
Provision for income taxes:
Current-
Domestic
¥
5,264
¥
5,121
¥
3,171
$
27,103
Foreign
3,481
4,950
6,194
52,940
8,745
10,071
9,365
80,043
Deferred-
Domestic
26
589
(166
)
(1,419
)
Foreign
(292
)
(178
)
(467
)
(3,991
)
(266
)
411
(633
)
(5,410
)
Consolidated provision for income taxes
¥
8,479
¥
10,482
¥
8,732
$
74,633
F-23
Table of Contents
Total income taxes were allocated as follows:
Yen
U.S. Dollars
(millions)
(thousands)
2004
2005
2006
2006
Provision for income taxes
¥
8,479
¥
10,482
¥
8,732
$
74,633
Shareholders' equity:
Foreign currency translation adjustments
(458
)
945
272
2,325
Net unrealized holding gains on
available-for-sale securities
4,168
60
3,363
28,744
Minimum pension liability adjustment
4,392
3,403
1,360
11,623
¥
16,581
¥
14,890
¥
13,727
$
117,325
As a result of the enactment of an amendment to the Japanese local tax law on March 31, 2003, the effective tax rate used for the calculation of deferred income tax assets and liabilities was reduced
from 41.4% to 40.2% for the year ended March 31, 2003, and increased from 40.2% to 40.3% for the year ended March 31, 2004. The effect of this tax rate change for the year ended March 31, 2004 was an
¥11 million increase to total tax expense. For the years ended March 31, 2005 and 2006, residual tax effects of ¥168 million and ¥336 million ($2,872 thousand) previously recorded in accumulated other
comprehensive income (minimum pension liability adjustments) were released and recorded as a reduction to income tax expense in the consolidated statements of income as a result of the elimination of
the minimum pension liability adjustment.
The Company and its domestic subsidiaries are subject to a National Corporate tax of 30.0%, an Inhabitant tax of approximately 5.6% and a deductible Enterprise tax of approximately 7.9%, which in the
aggregate resulted in a combined statutory income tax rate of approximately 40.3% for the years ended March 31, 2005 and 2006.
F-24
Table of Contents
A reconciliation of the combined statutory income tax rates to the effective income tax rates is as follows:
Year ended March 31,
2004
2005
2006
Combined statutory income tax rate in Japan
41.4
%
40.3
%
40.3
%
Non-deductible expenses
0.6
0.6
0.6
Non-taxable dividends received
(0.2
)
(0.1
)
(0.2
)
Change in valuation allowance
15.3
(2.1
)
(11.3
)
Impact of advance pricing agreement finalization
(1.3
)
–
–
Effect of changes in enacted tax rate
0.1
(0.5
)
(0.7
)
Tax sparing impact
(1.8
)
(5.5
)
(3.5
)
Effect of the foreign tax rate differential
(1.3
)
(2.8
)
(6.7
)
Other, net
(0.4
)
2.2
(0.7
)
Effective income tax rate
52.4
%
32.1
%
17.8
%
According to the provisions of the tax treaties which have been concluded between Japan and 15 countries, Japanese corporations can claim a tax credit against Japanese income taxes on income earned in one of those 15 countries, even though that income is
exempted from income taxes or is reduced by special tax incentive measures in those countries, as if no special exemption or reduction was provided. The Company applied such "tax sparing" mainly to China with the indicated tax reduction effect. The effect of
the "tax sparing" resulted in decrease of tax expense by ¥292 million or 1.8%, ¥1,790 million or 5.5% and ¥1,706 million or 3.5% ($14,701 thousand) for the years ended March 31, 2004, 2005 and 2006, respectively.
The net change in the total valuation allowance for the year ended March 31, 2004, was an increase of ¥2,134 million, which was mainly caused by 100% valuation allowance against deferred income tax assets on the impairment loss on long-lived assets of the
subsidiary that operates a golf course in Japan. This increase in valuation allowance, offset by a decrease due to the tax sparing and other miscellaneous adjustments, had the effect of increasing Makita's effective tax rate by 11.0% to the effective tax
rate of 52.4% from the statutory tax rate of 41.4% for the year ended March 31, 2004. The net change in the total valuation allowance for the year ended March 31, 2005, was a decrease of ¥617 million, which was mainly caused by a decrease in net operating
losses carry forwards of certain consolidated subsidiaries. In addition to this decrease in valuation allowance, a decrease in tax sparing and other miscellaneous adjustments had the affect of decreasing Makita's effective tax rate by 8.2% to the effective
tax rate of 32.1% from the statutory tax rate of 40.3% for the year
ended March 31, 2005. In 2006, following the completion of the civil rehabilitation proceedings and the sale of the golf course business, previously unrecognized deferred tax asset were realized in connection with the gain on sale of golf course business and the related valuation
allowance of ¥ 5,782 million ($48,957 thousand) was reversed. Makita also provided a valuation allowance of ¥ 402 million ($3,436 thousand) against deferred tax assets that existed at the beginning of the year because it was determined that such assets were
not more likely than not to be realized in future years. As a consequence, the net change in the total valuation allowance for the year ended March 31, 2006 was a decrease of ¥5,238 million ($ 44,769 thousand), net of effect of translation, resulting in a
reduction of income tax expense. This decrease in valuation allowance as well as a decrease due to the tax sparing and other miscellaneous adjustments had affect of decreasing Makita's effective tax rate by 22.5% to the effective rate of 17.8% from the
statutory tax rate of 40.3% for the year ended March 31, 2006.
F-25
Table of Contents
The significant components of deferred income tax expense attributable to income before income taxes for the years ended March 31, 2004, 2005 and 2006 are as follows:
Yen
U.S. Dollars
(millions)
(thousands)
2004
2005
2006
2006
Deferred tax expense
(exclusive of the effects
of other components below)
¥
(282
)
¥
619
¥
(1,035
)
$
(8,846
)
Adjustment to deferred tax
assets and liabilities for
enacted changes in tax
laws and rates
16
–
–
–
Increase (decrease) in
beginning-of-the-year
balance of the valuation
allowance for deferred
tax assets
–
(208
)
402
3,436
¥
(266
)
¥
411
¥
(633
)
$
(5,410
)
F-26
Table of Contents
Significant components of deferred income tax assets and liabilities as of March 31, 2005 and 2006, were as follows:
Yen
U.S. Dollars
(millions)
(thousands)
2005
2006
2006
Deferred income tax assets:
Marketable securities and investment securities
¥
2,432
¥
1,071
$
9,154
Accrued retirement and termination benefits and other accrued expenses
407
256
2,188
Minimum pension liability
1,193
170
1,453
Inventories
1,331
1,764
15,077
Property, plant and equipment
7,647
1,750
14,957
Accrued payroll
1,951
1,989
17,000
Net operating loss carryforwards
854
868
7,419
Other
949
1,153
9,855
Total gross deferred income tax assets
16,764
9,021
77,103
Valuation allowance
(8,211
)
(2,973
)
(25,410
)
¥
8,553
¥
6,048
$
51,693
Deferred income tax liabilities:
Undistributed earnings of overseas subsidiaries
¥
(3,128
)
¥
(791
)
$
(6,761
)
Unrealized gain on available-for-sale securities
(4,817
)
(8,181
)
(69,923
)
Property, plant and equipment
(942
)
(809
)
(6,915
)
Other
(101
)
(7
)
(59
)
Total gross deferred income tax liabilities
¥
(8,988
)
¥
(9,788
)
$
(83,658
)
Net deferred income tax liabilities
¥
(435
)
¥
(3,740
)
$
(31,965
)
Net deferred income taxes are recorded in the consolidated balance sheets as follows:
Yen
U.S. Dollars
(millions)
(thousands)
2005
2006
2006
Deferred income taxes
Current assets
¥
3,831
¥
3,661
$
31,291
Investment and other assets
390
698
5,966
Current liabilities
(118
)
(176
)
(1,504
)
Long-term liabilities
(4,538
)
(7,923
)
(67,718
)
¥
(435
)
¥
(3,740
)
$
(31,965
)
F-27
Table of Contents
In assessing the realizability of deferred income tax assets, Makita
considers whether it is more likely than not that some portion or all
of the deferred income tax assets will not be realized. The ultimate
realization of deferred income tax assets is dependent upon the
generation of future taxable income during the periods in which those
temporary differences become deductible and net operating loss
carryforwards are utilized. Makita considers the scheduled reversal of
deferred income tax liabilities, projected future taxable income, and
tax planning strategies in making this assessment. Based upon the level
of historical taxable income and projections for future taxable income
over the periods in which the deferred income tax assets are
deductible, Makita believes it is more likely than not that the
benefits of these deductible differences and net operating loss
carryforwards, net of the existing valuation allowance, will be
realized. The actual amount of the deferred income tax assets
realizable, however, would be reduced if estimates of future taxable
income during the carryforward period were not achieved. The valuation
allowance principally relates to the tax effects of net operating
losses recorded by certain subsidiaries.
As of March 31, 2006, certain subsidiaries had net operating loss
carryforwards for income tax purposes of ¥1,827 million ($15,615
thousand) which are available to reduce future income taxes. The net
operating losses will expire as follows:
Yen
U.S. Dollars
(millions)
(thousands)
Within 5 years
¥
425
$
3,632
6 to 20 years
–
–
Indefinite periods
1,402
11,983
¥
1,827
$
15,615
Income taxes have not been accrued on undistributed
earnings of domestic subsidiaries as the tax law provides a
means by which the investment in a domestic subsidiary can
be recovered tax free.
Makita has not recognized deferred tax liabilities for
certain portions of undistributed earnings of foreign
subsidiaries in the total amount of ¥44,524 million
($380,547 thousand) as of March 31, 2006 because Makita
considers these earnings to be permanently reinvested, and
calculation of the unrecognized deferred tax liabilities is
not practicable.
10.
RETIREMENT AND TERMINATION BENEFIT PLANS
The Company and certain of its consolidated subsidiaries
have various contributory and noncontributory employees
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.
Until June, 2004, the domestic contributory plan was composed of a corporate defined benefit portion established by the Company and a
substitutional portion based on benefits prescribed by the Japanese government (similar to social security benefits in the United
States). The Company has been exempted from contributing to the Japanese Pension Insurance program that would otherwise have been
required if it had not elected to fund the government substitutional portion of the benefit through a domestic contributory plan
arrangement. The plan assets of the domestic contributory plan are invested and managed as a single portfolio for the entire domestic
contributory plan and are not separately attributed to the substitutional and corporate portions. In June 2001, the Japanese pension law
was amended to permit an employer to elect to transfer the entire substitutional portion benefit obligation from the domestic
contributory plan to the government together with a specified amount of plan assets pursuant to a government formula. After such
transfer, the employer is required to make periodic contributions to the Japanese Pension Insurance program, and the Japanese government
is responsible for all benefit payments. The corporate portion of the domestic contributory plan continues to exist exclusively as a
corporate defined benefit pension plan. The Company accounted for the transfer in accordance with EITF 03-02, "Accounting for the
Transfer to the Japanese Government of the Substitutional Portion of Employee Pension Fund Liabilities." As specified in EITF 03-02, the
entire separation process is accounted for at the time of completion of the transfer to the government of the benefit obligation and
related plan assets as a settlement in accordance with SFAS
No. 88, "Employers' Accounting for Settlements and Curtailments of Defined
Benefit Pension Plans and for Termination Benefits."
F-28
Table of Contents
The aggregate effect of this separation was determined based on the Company's
pension benefit obligation as of the date the transfer was completed based on the determination of plan assets required to be
transferred.
The Company received an approval of exemption from the Minister of Health, Labor and Welfare in January 2003, from the obligation for
benefits related to future employee service with respect to the substitutional portion of its domestic contributory plan. The Company
received government approval of exemption from the obligation for benefits related to past employee service in April 2004 with respect to
the substitutional portion of its domestic contributory plan. The transfer to the government was completed on June 28, 2004.
As a result of the transfer, the Company recognized a subsidy from the Japanese government equal to the difference between the fair value
of the obligation deemed "settled" with the Japanese government and the assets required to be transferred to the government in the amount
of ¥ 9,128 million in the first fiscal quarter ended June 30, 2004. In addition, the Company recognized a settlement loss equal to the
amount calculated as the ratio of the obligation settled to the total employee's pension fund obligation immediately prior to the
settlement, both of which exclude the effect of future salary progression relating to the substitutional portion, times the net
unrecognized gain or loss immediately prior to the settlement, which amounted to ¥ 4,687 million. This resulting net gain of ¥4,441
million is included in operating income for the year ended March 31, 2005.
Effective April 1, 2004, the Company's employee pension plan was amended by a new defined benefit plan that provides benefits based on
length of service and other factors in a manner similar to the predecessor defined benefit plan, however, at a reduced rate. The
reduction in the pension benefit obligation as of the effective date in the amount of ¥3,089 million was accounted for as a negative plan
amendment and is included in prior service cost which are being amortized into net periodic pension costs over the weighted average
remaining service period of the plan participants.
The net periodic pension costs (benefit) of the defined benefit plans for the years ended March 31, 2004, 2005 and 2006 consisted of the
following components:
Yen
U.S. Dollars
(millions)
(thousands)
2004
2005
2006
2006
Service cost-benefit earned during the year
¥
1,671
¥
1,332
¥
1,565
$
13,376
Interest cost on projected benefit obligation
1,225
852
776
6,632
Expected return on plan assets
(643
)
(590
)
(635
)
(5,427
)
Amortization of prior service cost
14
(176
)
(153
)
(1,308
)
Recognized actuarial loss
975
518
482
4,120
Net gain resulting from transfer to the government
of the substitutional portion of pension plan
–
(4,441
)
–
–
Net periodic pension costs (benefit)
¥
3,242
¥
(2,505
)
¥
2,035
$
17,393
F-29
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)
2005
2006
2006
Change in benefit obligation:
Benefit obligation at beginning of year
¥
54,899
¥
35,853
$
306,436
Service cost
1,332
1,565
13,376
Interest cost
852
776
6,632
Employees' contributions
25
27
231
Plan amendments
(3,089
)
–
–
Curtailment
–
(32
)
(274
)
Actuarial losses
(120
)
(239
)
(2,042
)
Transfer to the government of the substitutional portion of pension plan
(17,276
)
–
–
Business acquired
–
530
4,530
Benefits paid
(938
)
(1,027
)
(8,778
)
Foreign exchange impact
168
127
1,086
Benefit obligation at end of year
35,853
37,580
321,197
Change in plan assets:
Fair value of plan assets at beginning of year
32,981
28,289
241,786
Actual return on plan assets
836
5,099
43,581
Employer contributions
2,354
2,265
19,359
Employees' contributions
25
27
231
Transfer to the government of the substitutional portion of pension plan
(7,082
)
–
–
Business acquired
–
131
1,120
Benefits paid
(843
)
(926
)
(7,915
)
Foreign exchange impact
18
37
317
Fair value of plan assets at end of year
28,289
34,922
298,479
Funded status
(7,564
)
(2,658
)
(22,718
)
Unrecognized net actuarial loss
11,051
5,867
50,145
Prior service cost not yet recognized in net periodic benefit cost
(3,357
)
(3,141
)
(26,846
)
Unrecognized net transition obligation being recognized over 19 years
139
78
667
Net amount recognized
¥
269
¥
146
$
1,248
Amounts recognized in the consolidated balance sheets consisted of;
Accrued benefit cost
¥
(5,126
)
¥
(2,901
)
$
(24,795
)
Prepaid benefit cost
2,399
2,599
22,214
Intangible assets
23
–
–
Accumulated other comprehensive loss, before income taxes
2,973
448
3,829
Net amount recognized
¥
269
¥
146
$
1,248
F-30
Table of Contents
Measurement date
The Company uses a December 31 measurement date for the majority of its plans.
Assumptions
The weighted-average assumptions used to determine benefit obligations at March 31, 2005 and
2006, were as follows:
2005
2006
Discount rate
2.2
%
2.2
%
The assumed rate of increase in future compensation levels
3.3
%
3.3
%
The weighted-average assumptions used to determine net periodic pension cost for each of the
years in the three-year period ended March 31, 2006, were as follows:
2004
2005
2006
Discount rate
2.1
%
2.2
%
2.2
%
Assumed rate of increase in future compensation levels
2.3
%
2.3
%
3.3
%
Expected long-term rate of return on plan assets
2.0
%
2.1
%
2.3
%
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 Assets
The benefit plan weighted-average asset allocations at March 31, 2005, and 2006, by asset
category were as follows:
2005
2006
Asset Category
Equity securities
43.9
%
54.6
%
Debt securities
36.6
30.8
Real estate
4.5
1.2
Life insurance company general accounts
11.8
9.7
Other
3.2
3.7
100.0
%
100.0
%
F-31
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 interest-bearing securities and marketable equity securities.
The mix of equity securities and debt securities is determined 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 include common stock of Makita in the amount of ¥4 million ($34 thousand) at
March 31, 2006.
Information for pension plans with an accumulated benefit obligation in excess of plan
assets
Yen
U.S. Dollars
(millions)
(thousands)
2005
2006
2006
Projected benefit obligation
¥
35,401
¥
2,548
$
21,778
Accumulated benefit obligation
30,564
2,464
21,060
Fair value of plan assets
28,289
328
2,803
An accumulated benefit obligation in excess of plan assets
2,275
2,136
18,257
Cash flows
Contributions
Makita expects to contribute ¥3,101 million ($26,504 thousand) to its domestic and foreign
defined benefit plan in the year ending March 31, 2007.
Estimated future benefit payments
The following benefits payments, which reflect expected future service, as appropriate, are
expected to be paid:
Yen
U.S. Dollars
Year ending March 31,
(millions)
(thousands)
2007
¥
1,369
$
11,701
2008
1,960
16,752
2009
1,937
16,556
2010
1,851
15,821
2011
1,906
16,291
2012-2016
9,019
77,085
Certain foreign subsidiaries have defined contribution plans. The total expenses charged to
income under these plans were ¥249 million, ¥227 million and ¥216 million ($1,846 thousand) for
the years ended March 31, 2004, 2005 and 2006, 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 ¥477 million and ¥490 million as of March 31, 2005 and
2006, respectively, and is included in other liabilities in the accompanying balance sheets.
The payment to the Directors and the Statutory Auditors are subject to shareholders approval.
F-32
Table of Contents
11.
SHORT-TERM BORROWINGS AND LONG-TERM INDEBTEDNESS
As of March 31, 2005 and 2006, short-term borrowings consisted of the following:
Yen
U.S. Dollars
(millions)
(thousands)
2005
2006
2006
Bank borrowings
¥
1,968
¥
1,638
$
14,000
Current maturities of long-term indebtedness
7,092
90
769
Total
¥
9,060
¥
1,728
$
14,769
Short-term borrowings, excluding current maturities of long-term indebtedness, amounting
to ¥1,968 million and ¥1,638 million ($14,000 thousand) as of March 31, 2005 and 2006,
respectively, consisted primarily of bank borrowings denominated in foreign currencies by
overseas subsidiaries. As of March 31, 2005 and 2006, the weighted average interest rate on the
borrowings was 6.1% and 9.8%, respectively.
Certain subsidiaries of the Company had unused lines of credit available for immediate
short-term borrowings without restrictions amounting to ¥21,509 million and ¥22,208 million
($189,812 thousand) as of March 31, 2005 and 2006, respectively.
As of March 31, 2005 and 2006, long-term indebtedness consisted of the following:
Yen
U.S. Dollars
(millions)
(thousands)
2005
2006
2006
3.3% (weighted average rate) unsecured loans from banks
and insurance companies in yen, due September and
November 2005
¥
6,205
¥
–
$
–
0.6% (weighted average rate) unsecured loans from
Japanese companies, due May 2005
800
–
–
Capital lease obligations (see Note 3(g))
175
194
1,658
Total
7,180
194
1,658
Less- Current maturities included in short-term borrowings
(7,092
)
(90
)
(769
)
¥
88
¥
104
$
889
In accordance with SFAS No. 133, changes in fair values of fixed rate long-term
indebtedness, amounting to ¥205 million as of March 31, 2005, which are effectively hedged by
using derivative instruments, are reflected in the carrying value of long-term indebtedness in
the accompanying consolidated balance sheets. During the year ended March 31, 2006, the
long-term indebtedness was redeemed and therefore no interest rate swaps were outstanding at
March 31, 2006. There were no covenants or cross default provisions under the Company's
financing arrangements. Furthermore, there were no subsidiary level dividend restrictions under
the financing arrangements.
F-33
Table of Contents
The aggregate annual maturities of long-term indebtedness subsequent to March 31, 2006 are as
summarized below:
Yen
U.S. Dollars
Year ending March 31,
(millions)
(thousands)
2007
¥
90
$
769
2008
37
316
2009
27
231
2010
20
171
2011
11
94
2012 and thereafter
9
77
¥
194
$
1,658
12.
CLUB MEMBERS' DEPOSITS
Makita's club members' deposits as of March 31, 2005, consisted of deposits from individuals
who were members of the Castle Hill Country Club, owned and operated by Joyama Kaihatsu Ltd., a
subsidiary of the Company. On April 11, 2005, the Nagoya District Court approved the civil
rehabilitation plan for Joyama Kaihatsu, Ltd., including its repayment obligation of the club
members' deposits and such plan was confirmed on May 7, 2005. On May 31, 2005, Makita
transferred its ownership interests in Joyama Kaihatsu, Ltd., to a third party. In connection
with the ownership transfer, Makita paid ¥6,375 million ($54,487 thousand), and was released
from its obligation for club member deposits of ¥6,461 million ($55,222 thousand) in the year
ended March 31, 2006. Please see Note 6.
13.
SHAREHOLDERS' EQUITY
The Japanese Commercial Code ("the Code") provides that an amount equal to at least 10% of cash
dividends and other distributions from retained earning paid by the Company be appropriate as a
legal reserve. No further appropriation is required when the total amount of the legal reserve
and additional paid-in capital equals 25% of common stock. The Code also provides that to the
extent that the sum of the additional paid-in capital and the legal reserve exceeds 25% of the
stated capital, the amount of the excess (if any ) is available for appropriations by the
resolution of the shareholders. Legal reserves as of March 31, 2005 and 2006 were ¥5,669
million ($48,453 thousand), and were restricted from being used as dividends. Further, the Code
provides that at least one-half of the proceeds from shares issued be included in common stock.
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 repurchase of the
Company's shares of 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
Code. 4,000,000 shares of treasury stock were retired during the fiscal year ended March 31,
2006.
The Code provides that cash dividends may be approved semiannually by the resolution of the
annual general shareholders' meeting after the end of each fiscal year or by the declaration of
the Board of Directors after the end of each interim six-month period. Such dividends are
payable to shareholders of record at the end of each fiscal year or interim six-month period.
At the general meeting to be held on June 29, 2006, the shareholders will be asked to approve
the declaration of a cash dividend (¥38 per share) on the common stock totaling 5,461 million
($46,675 thousand), which will be paid to shareholders of record as of March 31, 2006. The
declaration of this dividend has not been reflected in the consolidated financial statements as
of March 31, 2006.
The amount of retained earnings legally available for dividend distribution is that recorded in
the Company's non-consolidated books and amounted to ¥122,972 million ($1,051,043 thousand) as
of March 31, 2006.
The Corporate Act, which has been in force since May 1, 2006 ("the Act"), requires a company to
obtain the approval of shareholders for transferring on amount between capital and additional
paid-in capital. The Act also permits a company to transfer an amount of capital or additional
paid-in capital to legal reserve or retained earnings mainly upon approval of shareholders.
F-34
Table of Contents
14.
OTHER COMPREHENSIVE INCOME (LOSS)
Accumulated other comprehensive income (loss) as of March 31, 2004, 2005 and 2006, was as
follows:
Yen
U.S.Dollars
(millions)
(thousands)
2004
2005
2006
2006
Foreign currency translation adjustments:
Beginning balance
¥
(13,022
)
¥
(17,582
)
¥
(14,486
)
$
(123,812
)
Adjustments for the year
(4,560
)
3,096
8,443
72,162
Ending balance
¥
(17,582
)
¥
(14,486
)
¥
(6,043
)
$
(51,650
)
Net unrealized holding gains on available-for-sale securities:
Beginning balance
¥
478
¥
6,592
¥
6,680
$
57,094
Adjustments for the year
6,114
88
4,986
42,615
Ending balance
¥
6,592
¥
6,680
¥
11,666
$
99,709
Minimum pension liability adjustment:
Beginning balance
¥
(12,590
)
¥
(6,058
)
¥
(1,443
)
$
(12,333
)
Adjustments for the year
6,532
4,615
1,165
9,958
Ending balance
¥
(6,058
)
¥
(1,443
)
¥
(278
)
$
(2,375
)
Total accumulated comprehensive income (loss):
Beginning balance
¥
(25,134
)
¥
(17,048
)
¥
(9,249
)
$
(79,051
)
Adjustments for the year
8,086
7,799
14,594
124,735
Ending balance
¥
(17,048
)
¥
(9,249
)
¥
5,345
$
45,684
F-35
Table of Contents
Tax effects allocated to each component of other comprehensive income (loss) and adjustments
were as follows:
Yen (millions)
Tax benefit
Net of tax
Pretax amount
(expense)
amount
As of March 31, 2004
Foreign currency translation adjustment
¥
(5,018
)
¥
458
¥
(4,560
)
Unrealized gains on available-for-sale securities:
Unrealized holding gains arising during the year
10,837
(4,393
)
6,444
Less- Reclassification adjustment for gains realized in net income
(555
)
225
(330
)
Net unrealized gains
10,282
(4,168
)
6,114
Minimum pension liability adjustment
10,924
(4,392
)
6,532
Other comprehensive income
¥
16,188
¥
(8,102
)
¥
8,086
Yen (millions)
Tax benefit
Net of tax
Pretax amount
(expense)
amount
As of March 31, 2005
Foreign currency translation adjustment
¥
4,041
¥
(945
)
¥
3,096
Unrealized gains on available-for-sale securities:
Unrealized holding gains arising during the year
601
(243
)
358
Less- Reclassification adjustment for gains realized in net income
(453
)
183
(270
)
Net unrealized gains
148
(60
)
88
Minimum pension liability adjustment
8,018
(3,403
)
4,615
Other comprehensive income
¥
12,207
¥
(4,408
)
¥
7,799
Yen (millions)
Tax benefit
Net of tax
Pretax amount
(expense)
amount
As of March 31, 2006
Foreign currency translation adjustment
¥
8,715
¥
(272
)
¥
8,443
Unrealized gains on available-for-sale securities:
Unrealized holding gains arising during the year
11,267
(4,539
)
6,728
Less- Reclassification adjustment for gains realized in net income
(2,918
)
1,176
(1,742
)
Net unrealized gains
8,349
(3,363
)
4,986
Minimum pension liability adjustment
2,525
(1,360
)
1,165
Other comprehensive income
¥
19,589
¥
(4,995
)
¥
14,594
F-36
Table of Contents
U.S. Dollars (thousands)
Tax benefit
Net of tax
Pretax amount
(expense)
amount
As of March 31, 2006
Foreign currency translation adjustment
$
74,487
$
(2,325
)
$
72,162
Unrealized gains on available-for-sale securities:
Unrealized holding gains arising during the year
96,299
(38,795
)
57,504
Less- Reclassification adjustment for gains
realized in net income
(24,940
)
10,051
(14,889
)
Net unrealized gains
71,359
(28,744
)
42,615
Minimum pension liability adjustment
21,581
(11,623
)
9,958
Other comprehensive income
$
167,427
$
(42,692
)
$
124,735
15.
EARNINGS PER SHARE
A reconciliation of the numerators and denominators of basic and diluted earnings per share
computations is as follows:
Yen
U.S. Dollars
Numerator
(millions)
(thousands)
2004
2005
2006
2006
Net income available to common
share holders – Basic
¥
7,691
¥
22,136
¥
40,411
$
345,393
Effect of dilutive common shares:
1.5% unsecured convertible
bonds, due March, 2005
119
117
–
–
Net income available to
common share holders– Diluted
¥
7,810
¥
22,253
¥
40,411
$
345,393
Denominator
Number of shares
Weighted average common shares
outstanding – Basic
144,682,696
143,844,383
143,736,927
Dilutive effect of:
1.5% unsecured convertible
bonds, due and fully repaid in
March, 2005
5,749,811
5,748,927
–
Weighted average common
shares outstanding – Diluted
150,432,507
149,593,310
143,736,927
Yen
U.S. Dollars
Earnings per share:
Basic
¥
53.2
¥
153.9
¥
281.1
$
2.40
Diluted
51.9
148.8
281.1
2.40
F-37
Table of Contents
16.
COMMITMENTS AND CONTINGENT LIABILITIES
At March 31, 2006, the Company was contingently liable as a guarantor for housing and education
loans to employees in the amount of ¥14 million ($120 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, 2006, was
insignificant.
Makita was contingently liable for trade notes receivable discounted with banks of ¥653 million
($5,581 thousand) as of March 31, 2006 in the event notes issuers are not able to fulfill their
payment obligations. The fair value of the liabilities for the Company's obligations described
above as of March 31, 2006, was insignificant.
Makita's purchase obligations, mainly for raw materials, were ¥ 6,373 million ($54,470
thousand) as of March 31, 2006.
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 ¥1,745 million, ¥1,796 million and ¥1,714 million ($14,650
thousand) under cancelable and noncancelable operating lease agreements for offices,
warehouses, automobiles and office equipment during the years ended March 31, 2004, 2005 and
2006, respectively. The minimum rental payments required under noncancelable operating lease
agreements as of March 31, 2006, were as follows:
Yen
U.S. Dollars
Year ending March 31,
(millions)
(thousands)
2007
¥
546
$
4,667
2008
401
3,427
2009
275
2,350
2010
166
1,419
2011
86
735
2012 and thereafter
206
1,761
¥
1,680
$
14,359
F-38
Table of Contents
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, 2004, 2005 and 2006 is summarized as follows:
Yen
U.S. Dollars
(millions)
(thousands)
2004
2005
2006
2006
Balance at beginning of year
¥
693
¥
667
¥
804
$
6,872
Addition
529
830
853
7,291
Utilization
(532
)
(728
)
(779
)
(6,658
)
Foreign exchange impact
(23
)
35
50
427
Balance at end of year
¥
667
¥
804
¥
928
$
7,932
17.
DERIVATIVES AND HEDGING ACTIVITIES
(a)
Risk management policy
Makita 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 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 management
Makita 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, 2005 and 2006 of ¥30 million and ¥48
million ($410 thousand) were recorded as assets and ¥387 million and ¥258 million
($2,205 thousand) in liabilities, respectively, and changes in their fair values for the years
ended March 31, 2005 and 2006 amounting to a loss of ¥732 million and a gain of ¥147 million
($1,256 thousand), respectively, were recorded in exchange gains (losses) on foreign currency
transactions.
(c)
Interest rate risk management
Makita executes financing and investing activities through the Company and its financial
subsidiary, Euro Makita Corporation B.V. ("EMC"). To manage the variability in the fair values
of fixed rate long-term indebtedness, time deposit and fixed rate debt securities caused by
fluctuations in interest rates, the Company and EMC enter into interest rate swaps as a fair
value hedge.
As of March 31, 2005, EMC had interest rate swaps with a fair value of ¥205 million, which have
been designated as fair value hedges of underlying long-term indebtedness with fixed interest
rates and were recorded as current assets. Changes in fair values of both the hedging interest
rate swaps and the underlying long-term indebtedness were recorded as equal and offsetting
gains and losses in other income (expenses). There was no hedging ineffectiveness or net gains
or losses excluded from the assessment of hedge effectiveness for the year ended March 31,
2005, as the critical terms of the interest rate swaps match the terms of the hedged long-term
indebtedness. During the year ended March 31, 2006, the long-term indebtedness was
redeemed and therefore the fair value hedge interest rate swaps related to EMC were not
outstanding at March 31, 2006.
F-39
Table of Contents
The Company and EMC had interest rate swaps with a fair value of ¥7 million as of March 31,
2005, and the Company had interest rate swaps with a fair value of ¥5 million ($43 thousand) as
of March 31, 2006. These interest swaps have been designated as fair value hedges of underlying
time deposit and investment securities with fixed interest rates and were recorded as current
liabilities. As the interest rate swaps do not meet hedge accounting criteria, the changes in
fair value of the hedging interest rate swaps which amounted to a loss of ¥19 million and an
gain of ¥2 million ($17 thousand) were recorded in earnings and classified in other income
(expenses) for the years ended March 31, 2005 and 2006, respectively.
18.
DISCLOSURES ABOUT FAIR 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:
(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 Expenses
The carrying amount approximates fair value because of the short maturities of those
instruments.
(b)
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.
(c)
Marketable Securities and Investment Securities
The fair value of marketable securities is estimated based on quoted market prices. For other
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. Non-marketable securities amounted to ¥590 million and ¥572 million ($4,889 thousand) as
of as of March 31, 2005 and 2006, respectively.
(d)
Long-term Indebtedness
The fair value of long-term indebtedness is present value of future cash flows associated with
each instrument discounted using the Company's current borrowing rate for similar debt
instruments of comparable maturities.
(e)
Club Members' Deposits
The fair value of club members' deposits is based on the latest actual transaction price or the
present value of future cash flows.
(f)
Interest Rate Swap Agreements
The 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.
(g)
Other Derivative Financial Instruments
The 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.
F-40
Table of Contents
The estimated fair value of the financial instruments was as follows:
Yen
U.S. Dollars
(millions)
(thousands)
2005
2006
2006
Carrying
Carrying
Carrying
Amount
Fair Value
Amount
Fair Value
Amount
Fair Value
Marketable securities
¥
57,938
¥
57,938
¥
47,773
¥
47,773
$
408,316
$
408,316
Investment securities
22,106
22,105
30,439
30,314
260,162
259,094
Long-term time deposits
2,322
2,316
2,006
2,006
17,145
17,145
Long-term indebtedness
including current maturities
(7,180
)
(6,530
)
(194
)
(194
)
(1,658
)
(1,658
)
Club members' deposits
(12,836
)
(6,375
)
–
–
–
–
Interest rate swap agreements:
Assets
205
205
–
–
–
–
Liabilities
(7
)
(7
)
(5
)
(5
)
(43
)
(43
)
Foreign currency contracts:
Assets
23
23
31
31
265
265
Liabilities
(160
)
(160
)
(101
)
(101
)
(863
)
(863
)
Currency swaps:
Assets
5
5
17
17
145
145
Liabilities
(216
)
(216
)
(157
)
(157
)
(1,342
)
(1,342
)
Currency option contracts:
Assets
2
2
–
–
–
–
Liabilities
(11
)
(11
)
–
–
–
–
(h)
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.
F-41
Table of Contents
19.
OPERATING SEGMENT INFORMATION
The operating segments presented below are defined as components of an 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, 2004, 2005, 2006, Makita's operating structure included the
following geographical operating segments: Japan Group, North America Group, Europe Group, Asia
Group, and Other Group.
Makita evaluates the performance of each operating segment based on U.S. generally accepted
accounting principles.
Segment Products and Services
Makita is a manufacturer and wholesaler of electric power tools and other tools. The operating
segments derive substantially all their revenues from the sale of electric power tools and parts
and repairs.
Year ended March 31, 2004
Yen
(millions)
North
Corporate and
Japan
America
Europe
Asia
Other
Total
Eliminations
Consolidated
Sales:
External customers
¥
48,413
¥
41,699
¥
67,110
¥
6,612
¥
20,283
¥
184,117
¥
–
¥
184,117
Intersegment
40,633
3,978
4,726
22,364
123
71,824
(71,824
)
–
Total
¥
89,046
¥
45,677
¥
71,836
¥
28,976
¥
20,406
¥
255,941
¥
(71,824
)
¥
184,117
Operating expenses
¥
87,594
¥
44,958
¥
64,358
¥
26,048
¥
19,061
¥
242,019
¥
(72,598
)
¥
169,421
Operating income
1,452
719
7,478
2,928
1,345
13,922
774
14,696
Long-lived assets
35,701
3,610
6,386
6,176
1,257
53,130
(165
)
52,965
Identifiable assets
230,165
29,037
69,908
28,526
16,364
374,000
(95,884
)
278,116
Depreciation and amortization
4,804
1,163
1,044
824
172
8,007
(44
)
7,963
Capital expenditures
1,958
256
1,149
1,266
273
4,902
(408
)
4,494
Year ended March 31, 2005
Yen
(millions)
North
Corporate and
Japan
America
Europe
Asia
Other
Total
Eliminations
Consolidated
Sales:
External customers
¥
50,955
¥
38,607
¥
75,864
¥
7,378
¥
21,933
¥
194,737
¥
–
¥
194,737
Intersegment
47,786
3,583
5,802
34,937
168
92,276
(92,276
)
–
Total
¥
98,741
¥
42,190
¥
81,666
¥
42,315
¥
22,101
¥
287,013
¥
(92,276
)
¥
194,737
Operating expenses
¥
82,826
¥
40,580
¥
71,541
¥
37,389
¥
21,146
¥
253,482
¥
(90,143
)
¥
163,339
Operating income
15,915
1,610
10,125
4,926
955
33,531
(2,133
)
31,398
Long-lived assets
33,023
3,431
6,993
6,858
2,686
52,991
(167
)
52,824
Identifiable assets
224,099
30,627
79,309
31,713
19,141
384,889
(94,985
)
289,904
Depreciation and amortization
2,729
668
1,057
794
186
5,434
(53
)
5,381
Capital expenditures
1,966
589
1,289
1,483
1,544
6,871
(216
)
6,655
F-42
Table of Contents
Year ended March 31, 2006
Yen
(millions)
North
Corporate and
Japan
America
Europe
Asia
Other
Total
Eliminations
Consolidated
Sales:
External customers
¥
53,788
¥
47,979
¥
91,249
¥
8,645
¥
27,414
¥
229,075
¥
–
¥
229,075
Intersegment
57,826
4,321
6,306
43,979
181
112,613
(112,613
)
–
Total
¥
111,614
¥
52,300
¥
97,555
¥
52,624
¥
27,595
341,688
¥
(112,613
)
¥
229,075
Operating expenses
¥
87,468
¥
50,437
¥
85,505
¥
46,162
¥
25,048
¥
294,620
¥
(111,323
)
¥
183,297
Operating income
24,146
1,863
12,050
6,462
2,547
47,068
(1,290
)
45,778
Long-lived assets
36,578
3,732
7,529
9,170
2,371
59,380
(177
)
59,203
Identifiable assets
243,553
44,814
85,858
42,275
21,556
438,056
(112,018
)
326,038
Depreciation and amortization
2,917
656
1,217
923
269
5,982
(60
)
5,922
Capital expenditures
6,398
620
1,549
2,537
426
11,530
(147
)
11,383
Year ended March 31, 2006
U.S. Dollars
(thousands)
North
Corporate and
Japan
America
Europe
Asia
Other
Total
Eliminations
Consolidated
Sales:
External customers
$
459,726
$
410,077
$
779,906
$
73,889
$
234,308
$
1,957,906
$
–
$
1,957,906
Intersegment
494,239
36,932
53,897
375,889
1,547
962,504
(962,504
)
–
Total
$
953,965
$
447,009
$
833,803
$
449,778
$
235,855
$
2,920,410
$
(962,504
)
$
1,957,906
Operating expenses
$
747,589
$
431,086
$
730,811
$
394,547
$
214,086
$
2,518,119
$
(951,478
)
$
1,566,641
Operating income
206,376
15,923
102,992
55,231
21,769
402,291
(11,026
)
391,265
Long-lived assets
312,633
31,897
64,350
78,376
20,265
507,521
(1,512
)
506,009
Identifiable assets
2,081,650
383,026
733,829
361,325
184,239
3,744,069
(957,419
)
2,786,650
Depreciation and amortization
24,932
5,607
10,402
7,889
2,299
51,129
(514
)
50,615
Capital expenditures
54,684
5,299
13,239
21,684
3,641
98,547
(1,256
)
97,291
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, 2004, 2005
and 2006.
Segment information is determined by the location of the Company and its relevant subsidiaries.
F-43
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)
U.S. Dollars
Consolidated Net Sales by Product Categories
(thousands)
Year ended March 31,
2004
2005
2006
2006
Portable woodworking tools
¥
34,452
18.7
%
¥
34,507
17.7
%
¥
37,890
16.5
%
$
323,846
Portable general purpose tools
98,176
53.3
105,736
54.3
128,215
56.0
1,095,855
Stationary woodworking
machines
1,711
1.0
1,573
0.8
2,009
0.9
17,171
Other products
19,548
10.6
21,763
11.2
26,696
11.7
228,171
Parts, repairs and accessories
30,230
16.4
31,158
16.0
34,265
14.9
292,863
Total
¥
184,117
100.0
%
¥
194,737
100.0
%
¥
229,075
100.0
%
$
1,957,906
F-44
Table of Contents
20.
RELATED PARTY TRANSACTIONS
One of the Company's consolidated subsidiaries has long-term borrowings from Maruwa Co., Ltd.
("Maruwa"), for which a director of the Company and certain of his family members have a majority
of the voting rights. The amount of these borrowings was ¥500 million as of March 31, 2004, and
2005. In 2005, the Nagoya District Court approved a civil rehabilitation plan for the subsidiary,
and it was released from its obligation for the long-term borrowings
of ¥501 million ($4,282
thousand), including accrued interest. In addition, the transactions between Makita and Maruwa for
the year ended March 31, 2004, and 2005, amounted to ¥3 million for interest on the subsidiary's
borrowings and ¥2 million for advertising expenses. For the year ended March 31, 2006, advertising
expenses amounted to ¥2 million.
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 ¥199 million and ¥215 million, respectively, during the year ended March 31, 2004, ¥55 million
and ¥145 million, respectively, during the year ended March 31, 2005, and ¥11 million and ¥211
million, respectively, during the year ended March 31, 2006. The accounts payable of the Company
related to these transactions were ¥79 million as of March 31, 2004, ¥19 million as of March 31,
2005, and ¥10 million as of March 31, 2006.
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 ¥33 million and ¥118 million, respectively, from January 1, 2006 to
March 31, 2006. The accounts payable by the Company related to these transactions were ¥53 million
as of March 31, 2006.
F-45
Table of Contents
MAKITA CORPORATION AND CONSOLIDATED SUBSIDIARIES
SCHEDULE II – VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
FOR THE YEARS ENDED MARCH 31, 2004, 2005 AND 2006
Japanese Yen (millions)
Additions
Balance at
Charged to
Charged to
Deductions
Balance at
beginning
costs and
other
from
Translation
end of
Descriptions
of year
expenses
Accounts
reserves
adjustments
year
2004:
Allowance for doubtful receivables
1,456
136
–
(135
)
(111
)
1,346
Deferred income tax assets
valuation allowance
6,694
2,938
–
(459
)
(345
)
8,828
2005:
Allowance for doubtful receivables
1,346
98
–
(326
)
60
1,178
Deferred income tax assets
valuation allowance
8,828
234
–
(929
)
78
8,211
2006:
Allowance for doubtful receivables
1,178
114
–
(356
)
80
1,016
Deferred income tax assets
valuation allowance
8,211
698
–
(6,228
)
292
2,973
F-46