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, 2008

o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) THE SECURITIES EXCHANGE ACT OF 1934

o		SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) THE SECURITIES EXCHANGE ACT OF 1934

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)

Minobu Kato
General Manager of Financial Department
Telephone: +81.566.97.1718     Facsimile: +81.566.98.6907
Address: 3-11-8, Sumiyoshi-cho, Anjo City, Aichi Prefecture, Japan
(Name, telephone, e-mail and/or facsimile number and address of registrant’s contact person)

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 Select Market
** Common Stock

Securities registered or to be registered pursuant to Section 12(g) of the Act.

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act.

None

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, 2008				March 31, 2008
Title of Class		(Tokyo time)				(New York time)
Common Stock, excluding 235,135 shares of Treasury Stock			143,773,625
American Depositary Shares, each representing one share of Common Stock							2,562,744

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 filero

Indicate by check mark basis of accounting the registrant has used to prepare the financial statements included in this filing:

U.S.GAAP þ       International Financial Reporting Standards as issued by the International Accounting Standards Board o       Other o

     If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow.

     Item 17 o     Item 18 o

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

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

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

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, “FY 2008” refers to the twelve-month period ended March 31, 2008. All other references to years refer to the applicable calendar year.

All information contained in this annual report is as of March 31, 2008 unless otherwise specified.

In parts of this annual report, amounts reported in Japanese yen have been translated into US dollars for the convenience of readers. Unless otherwise noted, the rate used for this translation was ¥100 = U.S.$1.00, the approximate exchange rate of the noon buying rate for Japanese yen in New York City as certified for customs purposes by the Federal Reserve Bank of New York on March 31, 2008. On July 7, 2008 the noon buying rate for Japanese yen cable transfer in New York City as reported by the Federal Reserve Bank of New York was ¥107.55= $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. Such risks and uncertainties are generally set forth in Item 3.D. “Risk Factors” of this Form 20-F include but are not limited to:

•		The levels of construction activities and capital investments in Makita’s markets
•		Fluctuations in currency exchange rates
•		Intense competition in global power tools market for professional use
•		Makita’s inability to develop attractive products
•		Geographic concentration of Makita’s main facilities
•		Failure to maintain cooperative relationships with significant customers
•		Failure to deliver materials or parts required for production as scheduled
•		Makita’s overseas activities and entry into overseas markets
•		Failure to protect Makita’s intellectual property rights or infringing intellectual property rights of third parties
•		Procurement of raw materials or their escalating prices
•		Product liability litigation or recalls
•		Fluctuations in stock market prices

•		Environmental or other government regulations
•		The effectiveness of Makita’s internal control over financial reporting and the related attestation provided by Makita’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.

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, 2008 have been derived from Makita’s audited consolidated financial statements. They should be read in conjunction with Makita’s audited consolidated balance sheets as of March 31, 2007 and 2008, the related consolidated statements of income, shareholder’s equity and cash flows for each of the three years ended March 31, 2008, 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.

		Japanese yen																				U.S. dollars
		(millions)																				(thousands)
		Fiscal year ended March 31,
Income Statement Data:		2004				2005				2006				2007				2008				2008
Net sales		¥	184,117			¥	194,737			¥	229,075			¥	279,933			¥	342,577			$	3,425,770
Operating income			14,696				31,398				45,778				48,176				67,031				670,310
Net income			7,691				22,136				40,411				36,971				46,043				460,430

Net income per share of Common stock and per ADS:		Japanese yen																				U.S. dollars
Basic			53.2				153.9				281.1				257.3				320.3				3.20
Diluted			51.9				148.8				281.1				257.3				320.3				3.20

		Japanese yen																				U.S. dollars
		(millions)																				(thousands)
		Fiscal year ended March 31,
Balance Sheet Data:		2004				2005				2006				2007				2008				2008
Total assets		¥	278,116			¥	289,904			¥	326,038			¥	368,494			¥	386,467			$	3,864,670
Cash and cash equivalents, time deposits and marketable securities			92,616				91,189				88,672				102,211				98,142				981,420
Net working capital			147,822				149,666				181,808				212,183				230,699				2,306,990
Short-term borrowings			14,128				9,060				1,728				1,892				1,724				17,240
Long-term indebtedness			7,364				88				104				53				908				9,080
Common stock			23,803				23,805				23,805				23,805				23,805				238,050
Treasury stock			(3,316	)			(3,517	)			(258	)			(298	)			(263	)			(2,630	)
Shareholders’ equity			193,348				219,640				266,584				302,675				316,498				3,164,980
Total number of shares outstanding			143,893,191				143,777,607				143,711,766				143,701,279				143,773,625				143,773,625

Note: Net working capital equals current assets less current liabilities.

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
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
2007			110.07				121.81				116.92				117.56
2008			96.88				124.09				114.31				99.85
2009 (through July 7, 2008)			100.87				108.29				104.76				107.55

		(Japanese yen per U.S. $1.00)
2008		January				February				March				April				May				June
High			105.42				104.19				96.88				100.87				103.01				104.41
Low			109.70				108.15				103.99				104.56				105.52				108.29

On July 7, 2008 the noon buying rate for Japanese yen cable transfer in New York City as reported by the Federal Reserve Bank of New York was ¥107.55 = US$1.00

Cash dividends declared per share of common stock and per ADS:

		Japanese yen								U.S. dollars
Fiscal year ended March 31,		Interim				Year-end				Interim				Year-end
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
2007			19.0				55.0				0.16				0.47
2008			30.0				67.0				0.30				0.67

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 Japanese 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 Japanese 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

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, capital investment and consumption trends in the relevant regions. Generally speaking, the levels of construction activities and capital investment and consumption trends 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, Western Europe, Eastern Europe and Russia, North America, Asia, The Middle East, Central and South America, and Oceania, this may have an adverse impact on Makita’s consolidated financial condition and results of operations. Specifically, the economic slowdown, caused by, among others, the sub-prime loan problem in the U.S. since the summer of 2007, the volatile stock market causing the global economic downturn and the soaring price of crude oil or mineral resources, may have a direct or indirect negative impact on Makita’s financial condition.

Currency exchange rate fluctuations may 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 Japanese 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. Among others, Makita is affected by fluctuations in the value of the euro, the U.S. dollar and Chinese Renmin yuan, the euro and the U.S. dollar being the primary foreign currency on which Makita bases its foreign sales and the U.S. dollar and Chinese Renmin yuan being the primary foreign currency on which Makita bases its foreign costs and liabilities. In an effort to minimize the impact of short-term exchange rate fluctuations between major currencies, mainly the euro, the U.S. dollar, and the Japanese yen, Makita engages in hedging transactions. However, medium-to-long-term fluctuations of exchange rates may affect for Makita to execute procurement, production, logistics, and sales activities as planned and may have an impact on Makita’s consolidated financial condition and results of operations.

Makita faces intense competition in the global market for its power tools for professional use.
The global market for power tools for professional use is highly competitive. Factors that affect competition in the markets for Makita’s products include the quality, functionality of products, technological developments, the pace of new product development, price, reliability, durability, after-sale service and the rise of new competitors.

While Makita strives to ensure its position as a leading international supplier of power tools for professional use, there is no guarantee that it will be able to compete effectively in the future. If Makita is unable to compete effectively, it may lose market share and its earnings may be adversely affected. Moreover, economic slowdown tends to result in intensified competition and increased downward pressure. Accordingly if Makita is unable to compete effectively, Makita’s sales volumes may decrease and inventories may increase, resulting in a downward pressure on the prices for Makita’s products to sell the inventory, which in turn could have an adverse impact on Makita’s consolidated financial condition and results of operations.

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 strong 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 and correspond the market price for high-end, professional users, it 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 most of suppliers 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, account for 23% and 58%, respectively, of Makita’s total production volume on a consolidated basis during the year under review. 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 infectious 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.

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.

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. Purchases of production-use materials from Chinese manufacturers have increased in recent years. When launching new products, sales commencement dates can slip if Chinese manufacturing technology does not satisfy our demands, or if it takes an inordinate amount of time in order to satisfy our demands. There is a concern that this can result in lost sales opportunities. Makita purchases its significant component parts from sole suppliers. 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.

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 significant majority of its sales in markets located outside of Japan, including Western Europe, Eastern Europe and Russia, North America, Asia, the Middle East, Central and South America, and Oceania. During the year under review, approximately 85% of Makita’s consolidated net sales were derived from products sold overseas. Moreover, 77% of global production volume were derived from overseas production. The high percentage of overseas sales and production 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.
(6)		The interruption of or disruption to Makita’s operation due to labor disputes

In the area where our sales and production are significant, Makita applies for the patent, design and trademark, and strives for protection of intellectual property rights positively. However, Makita may be unable to eliminate completely the product of the third party who infringes on the intellectual property rights of our group, or the product of the party similar to our product. In that case, it may have a negative influence on the achievements of our group.

Moreover, Makita corresponds so that it may not infringe on a third party’s intellectual property rights, but it may be claimed that it is infringing on intellectual property rights from the third party. When infringement of intellectual property rights is investigated from a third party, the obligation of the payment of reparations may arise or halt in production and sales stop of a product may be ordered. In that case, it may have a negative influence on the business performance and the financial condition of our group.

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 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 has risen substantially. Some suppliers are operating at over-capacity and prices of certain production materials, especially crude oil, steel products and copper wire, have increased. Under these circumstances, if Makita is unable to obtain the necessary quantities of these materials, especially in China and Japan, this may have an adverse effect on production schedules. In addition, the shortage of capacity among suppliers is a factor leading to increased prices of production materials.

If Makita 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 Makita.

Product liability litigation or recalls may harm Makita’s financial statements and reputation.
Makita is developing a variety of products including power tools under the safety standard of each country, and is manufacturing them globally based on the quality standards of the factory. However, a large-scale recall and a large-scale product liability lawsuit may significantly damage Makita’s brand image and reputation. In addition, the related cost and time incurred through the recall or lawsuit may affect business performance and financial condition of Makita in case insurance policy does not cover the related cost.

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 and investment securities on its consolidated financial statements. The values of these investments are influenced by fluctuations in the quoted market prices. A fluctuation in the value of these securities will have an impact on Makita’s consolidated financial condition and results of operations.

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 and areas in which it 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.

Investor confidence and the value of Makita’s ADRs and ordinary shares may be adversely impacted if Makita’s management concludes that Makita’s internal control over financial reporting is not effective or if Makita’s independent registered public accounting firm is unable to provide adequate attestation over the adequacy of the internal control over Makita’s financial reporting as required by Section 404 of the Sarbanes-Oxley Act of 2002
The Securities and Exchange Commission, as directed by Section 404 of the Sarbanes-Oxley Act of 2002, adopted rules requiring public companies to include a report in its Annual Report that contains an assessment by management of the effectiveness of corporate internal control over financial reporting. In addition, Makita’s independent registered public accounting firm must attest to the effectiveness of Makita’s internal control over financial reporting. If Makita’s management concludes that Makita’s internal control over financial reporting is not effective, or if Makita’s independent registered public accounting firm is not satisfied with Makita’s internal control over its financial reporting or the level at which its controls are documented, designed, operated or reviewed, and declines to attest or issues a report that is qualified, there could be an adverse reaction in the financial marketplace due to a loss of investor confidence in the reliability of Makita’s financial statements, which ultimately could negatively impact the market price of Makita’s ADRs and ordinary shares.

Item 4.		Information on the Company

A. History and development of the Company

The Company is a limited liability, joint-stock company incorporated under the Commercial Code of Japan and continues to exist under the Corporation Act of Japan. The Company traces its origin to an electrical repair workshop founded in Nagoya in 1915 and was incorporated on December 10, 1938 under the name of Makita Electric Works, Ltd. as a joint stock corporation. Under the presidency of Mr. Jujiro Goto, Makita commenced the manufacture of electric power tools in 1958 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. As a result, the number of consolidated subsidiaries increased to 45.

Makita presently manufactures power tools in eight countries globally: Japan, China, the United Kingdom, the United States, Germany, Brazil, Canada and Romania. In 2007, Makita expanded production capacity of its China factory by constructing a second production facility. In addition, starting in April 2007, a new factory in Romania commenced production which should have the effect of reducing foreign exchange risks, and de-concentrating, the current high production volume in China and to seek stable supply capacity for the growing European market. Makita financed these investments through internal sources.

In 2007, Makita acquired all outstanding shares of Makita Numazu Corporation (“Makita Numazu”), formerly Fuji Robin Industries, Ltd., or Fuji Robin, for approximately ¥2.7 billion in cash and 81,456 Makita shares. Makita believes that the acquisition of Makita Numazu does not currently have a material impact on Makita. Fuji Robin’s principal activity is to manufacture and distribute engines, agricultural and forestry machinery, and firefighting pumps. Makita Numazu’s original engine technology includes the “mini-4 cycle engine,” which is globally recognized as an environmentally “clean engine.” Makita’s agricultural and gardening equipments are expected to have synergistic effect with Makita Numazu’s original engine.

For the period from May 15, 2007 to March 31, 2008, Makita Numazu Corporation had net sales of ¥8,031 million. Accordingly, Makita has 48 consolidated subsidiaries and 1 equity method affiliate as of March 31, 2008.

Makita Corporation’s registered office is located at 3-11-8, Sumiyoshi-cho, Anjo City, Aichi Prefecture446-8502, Japan, and its telephone number is +81.566.97.1718.

B. Business overview

Makita’s principal activity is the manufacture and sale of a wide range of power tools for professional users worldwide. Makita’s power tools consist of drills, grinders and sanders and portable woodworking tools, primarily saws and planers. Makita also produces gardening and household products and provides parts, repairs and accessories. For FY2008, approximately 85% of Makita’s sales were outside of Japan. Makita estimates that most of its worldwide sales were made to commercial and professional users such as those engaged in timber and metal processing, carpentry, forestry and concrete and masonry works.

Makita aims to improve performance not only by continuing efforts to increase its market share of the power tool market for professionals but also by expanding its market share of the air tools and gardening equipment markets. To achieve this, Makita is improving its global sales, service framework and developing hi-value-added products. 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 extraction.

Products
The following table sets forth Makita’s consolidated net sales by product categories for periods presented. Effective FY2007, the following changes were made to product group classifications. Makita specializes in power tools manufacturing and sales, as a single line of business, and conducts its business globally. Makita also provides “Gardening and Household Products” based on the mainstay products in that product category. Gardening products, including petrol brushcutter, sprayer, petrol blower, electric hedge trimmer, are used for agricultural and forestry operations. Household products, including vacuum cleaner and cordless cleaner, are used not only for housekeepers but also for professional cleaners. Makita is making efforts to extend the sales of cordless power tools to professional users and also to general users.

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

Power Tools

Power tools consist mainly of drills, grinders and sanders, rotary hammers and hammer drills, demolition hammers and electric breakers, cordless impact drivers, circular saws, slide compound saws, and cutters.

Drills are typical power tools used to drill 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.

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.

Rotary hammers, which are used primarily on concrete in the construction industry, are equipped with a rotary function, but can also be used as ordinary hammers.

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. Demolition hammers and electric breakers are used to shatter hard surfaces, principally concrete. Makita aims to improve the working environment in the construction industry through the provision of power tools which incorporate Makita proprietary low vibration mechanisms. These tools meet the strong demand of drilling holes in stone and concrete, and of other uses.

Cordless impact drivers are particularly in high demand across Japanese construction sites. In February 2005, Makita introduced cordless impact drivers powered by lithium-ion batteries instead of conventional nickel- metal-hydride batteries for the first time in the industry. Cordless impact drivers employing lithium-ion batteries are smaller and lighter, and batteries last much longer. Combined with Makita’s proprietary Optimum Charging System, this new product has been well received within Japan by professional users. The Optimal Charge System communicates with individual batteries, when charging, and recognizes charging records, and analyzes the condition, such as the heat, over-discharge, and weakening of the battery. This is Makita’s original technology, which can prolong the life of a battery through optimal and gradual charge carrying out “Active Current Control,” “Active Thermal Control”, and “Active Voltage Control” based on the above analysis result. It marks a strong addition to our Japanese product line-up of new 14.4V cordless power tools powered by lithium-ion batteries including cordless circular saws, cordless angle grinders, cordless nailers, cordless four-mode impact drivers, cordless hammer drills, cordless percussion drills, and cordless recipro saws. Makita began offering cordless power tools powered by lithium-ion batteries in the United States through major home centers in the fall of 2005. In addition to 14.4V cordless power tools available in Japan and the United States, Makita offers 18V Combo kits of cordless drills, cordless percussion drills, cordless circular saws, and cordless lights in the United States where users demand more powerful tools. Makita also rolled out its 18V cordless power tools powered by lithium-ion batteries across major European markets since the summer of 2006, amid a strong construction industry interest.

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 unsuitable for conventional saws.

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. Our angle cutters, used for precision wood cutting at construction sites, feature functions designed to meet precision carpentry needs in Japan.

Subsequent to taking over the operations of Kanematsu-NNK Corp. in January 2006, Makita introduced into the Japanese market its Red Series of high-pressure air nailer, which are as popular as cordless impact drivers used in housing construction, completing our mainstay product line-up.

Gardening and Household Products

Gardening household products consist mainly of petrol brushcutters, chain saws, hand-held vacuum cleaners for home use, industrial vacuum cleaners, submersible pumps and gardening equipments such as hedge trimmers. There is a strong need for dust collectors at construction sites because cutting, drilling and grinding work using power tools generates debris. Small, light and high-suction power cleaners offered to home users are increasingly popular.

Makita also offers engine-equipped grass cutters, lawn mowers in addition to gardening tools for trimming tree fences and cutting grass. Acquisition of Fuji Robin is contributing to strengthening Makita’s lineup of gardening and engine-powered gardening tools.

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. In particular, Makita offers a variety of parts and accessories with respect to high-quality and durable professional power tools, and at the same time commits major management resources to enhancing post-sales services. Makita is working hard toward strengthening its parts supply system and three-day repair program, while developing a worldwide sales network. Makita is also working to strengthen its range of authentic Makita accessories such as saw blades, drill bits, and grinding wheels.

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

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 has maintained 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 786 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 prefectures. These distribution centers strengthen Makita’s distribution and after-sale service functions.

The majority of Makita’s products are sold through its 14 independent 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. In FY 2008, 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. In FY 2008, Makita’s three largest wholesalers accounted, in the aggregate, for approximately 30% 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

As a leading manufacturer and marketer of power tools, Makita operates a network of production, with its offices in more than 30 countries and areas around the world. The ratio of overseas production exceeds 75% on a unit basis, and 85% of consolidated sales come from overseas market in FY2008. Overseas sales, distribution, and service are carried out through a network of 34 sales subsidiaries and 124 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, the United Arab Emirates, Romania, Switzerland, Finland, Russia, Ukraine, Slovakia and Bulgaria. 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” or “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, 2008, Makita had over 100 service depots outside of Japan. As of March 31, 2008, 28 of these service depots were located in the United States and 19 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
The markets in which Makita sells its products are generally 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 parts are obtained from single suppliers. The procurement cost of steel plates, copper, and certain other raw materials is affected by fluctuations in international commodity markets, and these material prices appreciated during fiscal 2008.

Makita’s purchases of raw materials and parts in FY 2008, amounted to ¥174,860 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 9.0% of Makita’s total purchases of raw materials and parts.

Makita also purchases from outside sources finished products such as vacuum cleaners, electric generators, petrol brushcutters, and laser levels and resells to its customers under the Makita brand.

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 and areas 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 and areas may be limited.

Intellectual Property Rights
As of March 31, 2008, Makita owned 503 patents and 12 utility model registrations in Japan and 465 patents and 98 utility model registrations 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, 2008, Makita had made 641 applications for additional patents and utility model registrations in Japan as well as 427 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.

C. Organizational structure

As of March 31, 2008, the Makita Group consisted of 48 consolidated subsidiaries and 1 equity method affiliate. 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 Numazu Corporation		Japan			100.0	%
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 International Europe Ltd.		U.K.			100.0

				Proportion of
		Country of		Ownership and
Company Name		Incorporation		Voting Interest
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
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 Oy		Finland			100.0
Makita (China) Co., Ltd.		China			100.0
Makita (Kunshan) Co., Ltd.		China			100.0
Makita (Australia) Pty. Ltd.		Australia			100.0
Makita Gulf FZE		U.A.E.			100.0

D. Property, plant and equipment

 

The following table sets forth information relating to Makita’s principal production facilities as of March 31, 2008.

		Floor space
Location		(Square meters)				Principal products manufactured
Japan;
Makita Corporation
Okazaki Plants			174,508			Electric power tools, etc.
Makita Numazu Corporation			21,199			Agricultural and gardening equipments
Overseas;
Makita (China) Co., Ltd.			61,302			Electric power tools, etc.
Makita Corporation of America			24,053			Electric power tools, etc.
Makita (Kunshan) Co., Ltd.			17,969			Electric power tools, etc.
Dolmar GmbH			17,747			Electric power forestry equipments
Makita Manufacturing Europe Ltd.			11,520			Engine powered tools, etc.
Makita EU S.R.L			6,975			Electric power tools, etc. (Commencement of production: April 2007)

In addition, the Company owns an aggregate of 142,097 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 China, United Kingdom, the United States, Brazil, Romania, Germany and Canada. All buildings and land in these countries, except for land in China which is held under long term land lease, are owned by Makita.

None of the buildings or land that Makita owns in Japan is subject to any mortgage or lien. Makita leases 89 sales offices in Japan and all of its overseas sales offices and premises, except for the following locations which are owned by the respective subsidiary companies;

	•		Head offices and certain branch offices of Makita U.S.A., Makita Canada, and Makita Australia; and
	•		Head offices of Makita Germany, Makita France, Makita Benelux (the Netherlands), Makita Belgium, Makita Italy, Makita Brazil, Makita Taiwan, and Makita Singapore.

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.

In 2007, Makita rebuilt the Okazaki Plant, and the R&D and office complexes at the head office in Japan, to meet new earthquake resistance standards. This reconstruction work was done in order to enhance resistance to seismic activities, and represents no significant change in production capacity. Makita believes that there are no material environmental issues that may affect Makita’s current use of its assets. In December 2007, Makita transferred the production facilities of Makita Ichinomiya Corporation, its consolidated subsidiary as manufacturer of stationary woodworking machines, to the Okazaki Plant in order to streamline the production function in Japan.

Item 4A.   Unresolved Staff Comments

None

Item 5. Operating and Financial Review and Prospects

A. Operating Results

The following table sets forth a summary of Makita’s operations results for each of the years ended March 31, 2006, 2007 and 2008.

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

General Overview

Makita’s principal business is the manufacture and sale of power tools for professional use worldwide. Principal products include drills, rotary hammers, hammer drills, demolition hammers, grinders and cordless impact drivers. Makita has eleven manufacturing centers, three located in Japan, two in China and one each in the United States, Canada, Brazil, the United Kingdom, Germany, and Romania.

For FY2008, 84.8% of Makita’s sales were outside of Japan. Makita is therefore affected to a large extent by demand for power tools worldwide, which in turn is influenced by factors including new housing construction, demand for household renovations, public investment and private capital expenditures. The nature and the extent to which each of these factors influence Makita differ in each country and region in which Makita sells its products.

In developed countries such as North America and Europe where there is an established DIY market, demand for power tools is relatively affected by changes in consumer spending. Demand for power tools in developing countries is expected to expand as economic growth increases.

Technological developments have also driven the market for power tools. In particular, in recent years the development of rechargeable electric tools featuring small, light and high-capacity lithium-ion batteries has resulted in increased demand as users began to replace their conventional power tools which used NiCad or nickel hydride batteries.

Makita has established a solid presence worldwide as a provider of portable power tools, however, competition is becoming more severe on a global basis.

Makita’s business is subject to risks associated with cross-border transactions, and its business could be affected by governmental, economic, financial or tax-related or political policies or factors, including trade protection measures and import or export licensing requirements. Such factors may materially impact Makita’s business and operation going forward.

Currency Fluctuations

Makita is affected by fluctuations in foreign currency exchange rates due to its place in the global market. Makita is primarily exposed to fluctuations of the Japanese yen against the euro, the U.S. dollar, as well as other currencies of countries where Makita does business. Makita’s consolidated financial statements, presented in yen, are affected by currency exchange fluctuations through both translation and transaction risks.

Translation risk is the risk that Makita’s consolidated financial statements for a particular period or for a particular date will be affected by changes in the prevailing exchange rates between the yen and the currencies in which the subsidiaries prepare their financial statements. Even though the fluctuations of currencies against the Japanese yen can be substantial and, therefore, significantly impact comparisons with prior accounting periods and among various geographic markets, the translation effect is a reporting consideration and does not reflect Makita’s underlying results of operations. Transaction risk is the risk that the currency structure of Makita’s costs and liabilities will deviate from the currency structure of sales proceeds and assets. Makita enters into foreign exchange forward contracts in order to hedge a portion of its transaction risk. Doing so has reduced, but not eliminated, the effects of exchange rate fluctuations against the Japanese yen, which in some years can be significant.

Generally, the depreciation of the Japanese yen against other currencies, particularly the euro, has a positive effect on Makita’s operating income and net income. Conversely, the appreciation of the Japanese yen against other currencies, particularly the euro, has the opposite effect. The Japanese yen generally weakened against the euro from FY 2006 to FY 2008, but strengthened against the U.S. dollar in FY2008.

Overview

In Europe for FY 2008, Eastern Europe and Russia saw the highest economic growth, while signs of a slowdown in Western Europe became evident as consumer spending remained weak during the second half of the year. In the U.S., for FY 2008, a decline in residential property investments and turmoil in the financial markets in the wake of the sub-prime loan problem increased concerns of an economic slowdown.

In Asia for FY 2008, business conditions for the most part remained strong, particularly in China where robust growth continues. In Oceania and Middle East for FY2008, net sales increased against the backdrop of high crude oil and natural resources prices. However, in Japan, the number of new housing constructions declined due to the tightening of the procedures for granting building permits under the revised Building Standard Law of Japan. Moreover, steep rises in the prices of crude oil, raw materials and sharp appreciation of the yen to the U.S. dollar have suppressed corporate earnings, and slowed down consumer spending in Japan.

Makita focused its product development efforts on meeting marketplace needs, such as creating and expanding its line up of lithium-ion battery products that have been highly rated by both domestic and overseas markets since the initial launch in February 2005. In its overseas operations in FY2008, Makita increased production at the China plant and expanded the Romania plant in order to enhance its ability to supply products to the markets to meet the strong demand. In Central and South Americas, Makita began construction of its second plant in Brazil. Moreover, Makita has devoted efforts to increase management efficiency and cooperation with group companies to take full advantage of the technical expertise of Makita Numazu which was acquired as a subsidiary in May 2007. Although Makita does not believe this acquisition has a material impact on its current year consolidated financial statements, it is essential to strengthen the business area of gardening tools including engine-powered tools in order to realize our growth strategies.

On a consolidated basis, Makita’s net sales in FY 2008 amounted to ¥342,577 million, up 22.4% FY 2007. This is Makita’s fourth consecutive year of record sales, and its seventh consecutive year of sales growth. In FY 2007, Makita’s operating income climbed 39.1%, to ¥67,031 million and net income amounted to ¥46,043 million, 24.5% higher than FY 2007.

FY 2008 compared to FY 2007

Net sales

Makita’s consolidated net sales for the fiscal year ended March 31, 2008 (“FY 2008”) amounted to ¥342,577 million, an increase of 22.4%, or ¥62,644 million, from the fiscal year ended March 31, 2007 (“FY 2007”). In FY 2008, the average yen-dollar exchange rate was ¥114.44 for $1.00, representing a 2.2% appreciation of the yen compared with the average exchange rate in FY 2007. The average level of the Japanese yen-euro exchange rate in FY 2008 was ¥161.59 for 1.00 euro, representing a 7.7% depreciation of the yen compared with the average exchange rate in FY 2007. Excluding the effect of currency fluctuations, consolidated net sales would have increased by 17.6% in FY 2008.

Makita’s consolidated net sales of products increased by 24.0% in FY 2008, as did the overall number of units of products sold. The significant increase in the quantity of goods sold in FY 2008 primarily reflected strong sales of power tools such as drills, hammer drills, rotary hammers and grinders. In Europe, competitiveness improved due to the strength of the euro against the Japanese yen. In other regions, against the backdrop of high crude oil and natural resources prices, net sales increased in Oceania, Latin America and the Middle East. Sales of new products, such as lithium ion battery products, comprised 10.4% of consolidated net sales of Makita in FY 2008, or ¥35,798 million.

In terms of product type, the sales of power tools increased by 21.3%, or ¥44,975 million, gardening and household products increased by 43.7%, or ¥12,287 million, and revenue from parts, repairs and accessories increased by 13.2%, or ¥5,382 million. In particular, sales of drills, hammer drills, rotary hammers and grinders increased.

Sales by region

The increase in consolidated net sales in FY 2008 can be attributed to an increase in sales in Japan by 11.4%, or ¥5,333 million, to ¥52,193 million, an increase in sales in Europe by 29.3%, or ¥36,340 million, to ¥160,360 million and, an increase in sales in North America, by 9.6%, or ¥4,950 million, to ¥56,422 million, increased sales in Asia (excluding Japan) by 16.2%, or ¥3,160 million, to ¥22,629 million and an increase in sales in other regions, including Australia, Latin America and the Middle East, by 33.7% or ¥12,861 million, to ¥50,973 million.

The increased sales in Japan in FY 2008 primarily reflected strong sales of lithium ion battery based impact drivers. In addition, Makita Numazu, which became a subsidiary in May 2007 to strengthen the area of gardening tools including engine-powered tools, contributed to the overall increased sales in Japan.

The increased sales in Europe in FY 2008 primarily reflected the appreciation of the euro against the Japanese yen, as well as the introduction of new products, particularly rotary hammers with AVT(Anti Vibration Technology) and lithium ion battery products. Net sales in yen terms increased in Russia and Eastern Europe by 44.0%, in the United Kingdom by 24.6%, in Germany by 30.7% and in France by 18.4% compared to FY 2007. Excluding the effect of fluctuations of the local currencies, net sales in Europe would have increased by 20.4%, or ¥25,298 million in FY 2008.

The increased sales in North America in FY 2008 primarily reflected strong sales of lithium ion battery products, despite falls in housing investments in the wake of the sub-prime loan problem. Excluding the effect of fluctuations of the local currencies, net sales in North America would have increased by 9.7%, or ¥5,013 million in FY 2008, compared with FY 2007.

The increased sales in Asia excluding Japan in FY 2008 primarily reflected the increased sales in Singapore and Indonesia, particularly with respect to power tools, such as grinders and rotary hammers. Excluding the effect of fluctuations of the local currencies, net sales in Asia would have increased by 15.1%, or ¥2,947 million in FY 2008.

The increased sales in other regions including Australia, Latin America and the Middle East in FY 2008 were primarily due to an increase in the number of units sold, particularly with respect to power tools such as grinders, hammer drills and rotary hammers. With regard to other regions, construction investment was strong due to continued economic growth with a backdrop of an increase in the price of mineral resources and crude oil. Accordingly, excluding the effect of fluctuations of the local currencies, net sales in other regions would have increased by 27.9%, or ¥10,616 million in FY 2008.

Review of Performance by Product Group

Power Tools
The group offers a wide range of dependable drills, rotary hammers, hammer drills, demolition hammers, grinders, cordless impact driver and sanders. This group generates the largest portion of Makita’s consolidated net sales. In FY 2008, sales of power tools grew by 21.3%, to ¥255,869 million, accounting for 74.7% of consolidated net sales. In Japan, sales of power tools decreased by 6.6%, to ¥23,605 million, accounting for 45.2% of total domestic sales. Overseas sales of power tools increased by 25.1%, to ¥232,264 million, or 80.0% of total overseas sales.

Gardening and Household Products
Principal products in Makita’s gardening and household products group include chain saws, petrol brushcutter, vacuum cleaners and cordless cleaners. In FY 2008, Makita recorded a 43.7% increase in sales of gardening and household products, to ¥40,410 million, or 11.8% of consolidated net sales. Domestic sales of gardening and household products increased by 69.0%, to ¥15,340 million, accounting for 29.4% of total domestic sales. Makita Numazu, which became a subsidiary in May 2007 to strengthen the area of gardening tools including engine- powered tools, contributed to increased sales in Japan. Makita recorded a 31.6% increase in overseas sales of gardening and household products, to ¥25,070 million, which accounted for 8.6% of total overseas sales in FY 2008.

Parts, Repairs and Accessories
Makita’s after-sales services include the sales of parts, repairs and accessories. In FY 2008, parts, repairs and accessories sales increased by 13.2%, to ¥46,298 million, accounting for 13.5% of consolidated net sales. Domestic sales of parts, repairs, and accessories increased by 5.9%, to ¥13,248 million, accounting for 25.4% of total domestic sales. Overseas sales of parts, repairs, and accessories grew by 16.4%, to ¥33,050 million, accounting for 11.4% of total overseas sales.

Cost of Sales
Cost of sales increased by 21.5%, or ¥35,311 million from FY 2007 to ¥199,220 million. The sales cost ratio improved by 0.4 points from 58.6% in FY 2007 to 58.2% due mainly to an increased production rate in China, as well as sales growth resulting from favorable exchange rate fluctuations, primarily the depreciation of the Japanese yen against the euro.

Gross Profit
Gross profit on sales increased by 23.6%, or ¥27,333 million to ¥143,357 million. Gross profit margin rose by 0.4 points from 41.4% in FY 2007 to 41.8%.

Selling, General and Administrative Expenses
Selling, general and administrative expenses for FY 2008 increased by 14.1%, or ¥9,396 million from FY 2007 to ¥76,198 million. The main factors were a rise in shipping costs due to increased sales, increased personnel costs due to an increase in the number of employees, and increased advertising costs due to sales promotion activities by overseas subsidiaries. Additionally, selling, general and administrative expenses excluding the impact of currency fluctuations increased by 10.2%.

On the other hand, the ratio of selling, general and administrative expenses to sales fell by 1.7 points from 23.9% to 22.2%, due to increased sales.

Losses (Gains) on Disposal or Sales of Property, Plant and Equipment
In FY 2008, the Company demolished parts of its headquarters building. Also, certain subsidiaries recorded losses on disposal of fixed assets. Accordingly, Makita recognized net losses on disposal or sales of property, plant and equipment of ¥128 million in FY 2008, compared with net gains of ¥249 million in FY 2007.

Operating Income
As a result of the above, operating income for FY 2008 increased by 39.1% to ¥67,031 million. Operating income margin increased by 2.4points, from 17.2% in FY 2007 to 19.6% in FY 2008.

Other Income (Expense)
In FY 2008, other expense was ¥1,260 million, compared with other income of ¥1,147 million in FY 2007.

The major components of other expense were as follows:

(1) Realized losses on securities amounted to ¥1,384 million, compared with realized gains on securities of ¥918 million in FY 2007. This result was due mainly to the decline of stock prices.

(2) The amount of foreign exchange losses increased by ¥815 million, to ¥1,233 million, in FY 2008 due to foreign exchange losses mainly in China and Japan.

Income before Income taxes
Income before income taxes for FY 2008 increased by 33.3%, or ¥16,448 million as compared with FY 2007 to ¥65,771 million. The ratio of income before income taxes to sales for FY 2008 increased by 1.6 points, from 17.6% in FY 2007 to 19.2%.

Provision for Income taxes
Provision for income taxes for FY 2008 amounted to ¥19,728 million, an increase of 59.7%, or ¥7,376 million, as compared with FY 2007 due mainly to an increase in taxable income. In FY 2007, Makita reversed the valuation allowance on deferred tax assets in the amount of ¥2,701 million related to certain subsidiaries based on both improved performance in recent years and a steady outlook for the future performance of these subsidiaries, and thus the valuation allowance decreased by ¥2,655 million, including the effect of translation. However, in FY 2008, the balance of valuation allowance remained relatively unchanged compared with FY 2007. As a result, the effective tax rate for FY 2008 was 30.0%, a 5.0% increase from 25.0% for FY 2007.

Net Income
As a result of the above, net income for FY 2008 increased by 24.5%, or ¥9,072 million compared with FY 2007, to ¥46,043.

Earnings per Share
Basic earnings per share of common stock amounted to ¥320.3, compared with ¥257.3 in FY 2007.

Regional Segments
Segment information described below is based on the location of the Company and its relevant subsidiaries.

Japan Segment
In FY 2008, sales in the Japan segment grew by 12.9%, to ¥142,006 million. Sales to external customers increased by 17.3% to ¥72,466 million, which accounted for 21.2% of consolidated net sales. The increase reflects a 11.4% rise in sales in the domestic market as well as a 35.9% increase in export sales mainly to Africa and Asia. Segment operating expenses in Japan increased by 10.7%, to ¥120,020 million, operating income increased by 26.3%, to ¥21,986 million in FY 2008.

Europe Segment
In FY 2008, sales in the Europe segment grew by 26.9% to ¥165,824 million. Sales to external customers increased by 28.3%, to ¥160,218 million, which accounted for 46.8% of consolidated net sales.

This increase is mainly due to strong sales of the rotary hammer and lithium ion battery products, and the high growth achieved in the Eastern Europe and Russian economies. Segment operating income increased by 49.4%, to ¥26,974 million.

North America Segment
In FY 2008, sales in the North America segment climbed by 8.3%, to ¥61,446 million. Sales to external customers increased by 9.3% to ¥56,234 million, which accounted for 16.4% of consolidated net sales. This increase was mainly due to higher sales of lithium ion battery products. However, operating income for FY 2008 decreased by 31.6%, to ¥1,719 million. This decrease is mainly due to a decrease in a gain on disposal of property, plant and equipment in FY 2008.

Asia Segment (excluding Japan)
In FY 2008, sales in the Asia segment increased by 46.6% to ¥112,482 million. The increase in sales in this segment is primarily due to higher inter-segment sales from two factories in China to Europe and North America. Sales to external customers increased by 16.2%, to ¥11,271 million, which accounted for 3.3% of consolidated net sales. This increase is primarily due to an increase in sales in Singapore. Segment operating income grew by 41.5%, to ¥14,014 million in FY 2008.

Other Segment
In FY 2008, sales in the other segment increased by 32.0% to ¥42,560 million. Sales to external customers increased by 32.0%, to ¥42,388 million, which accounted for 12.4% of consolidated net sales. Sales increase in this segment is primarily due to an increase in sales in Latin America and Middle East. Segment operating income grew by 61.5%, to ¥5,596 million, in FY 2008. The reason for this increase is mainly an improvement of cost ratio of sales in Oceania.

FY 2007 Compared to FY 2006

Net sales
Makita’s consolidated net sales for the FY 2007 amounted to ¥279,933 million, an increase of 22.2%, or ¥50,858 million, from the fiscal year ended March 31, 2006(“FY 2006”). In FY 2007, the average yen-dollar exchange rate was ¥116.97 for $1.00, representing a 3.2% depreciation of the yen compared with that in FY 2006. The average level of the yen-euro exchange rate in FY 2007 was ¥150.02 for 1.00 euro, representing an 8.8% depreciation of the yen compared with that in FY 2006. Excluding the effect of currency fluctuations, consolidated net sales would have increased by 16.0% in FY 2007.

The company’s consolidated net sales increased by 22.2% in FY 2007, as well as the overall number of units of products sold. Excluding the effect of the decrease in prices of products and the currency fluctuations, Makita’s consolidated net sales would have increased by 14.5%, or ¥33,311 million. The significant increase in the quantity of goods sold in FY 2007 primarily reflected strong sales of Makita’s power tools, such as drills, grinders and rotary hammers, hammer drills. In Europe, competitiveness has improved due to the strength of the euro against the Japanese yen. Further, demand for the rotary hammer in Europe has been strong. In North America, sales increased in part due to the sales of lithium ion battery products.

The average price of Makita’s products declined in FY 2007, and excluding the effect of the increase in the number of units sold, the price cutting would have decreased Makita’s net sales by 0.6%, or ¥1,347 million.

Sales of new products comprised 10.4% of consolidated net sales of Makita in FY 2007, or ¥29,209 million.

In terms of product type, there was an increase in the sales of power tools by 23.1% or ¥39,518 million, gardening and household products increased by 20.0% or ¥4,689 million and income from parts, repairs and accessories increased by 19.4% or ¥6,651 million. In particular, sales of drills, grinders, rotary hammers and cordless impact drivers increased.

Sales by region

The increase in consolidated net sales in FY 2007 can be attributed to an increase in sales in Japan by 12.6%, or ¥5,260 million, to ¥46,860 million, an increase in sales in Europe by 37.0%, or ¥33,516 million, to ¥124,020 million and, an increase in sales in North America, by 8.0%, or ¥3,799 million, to ¥51,472 million, increased sales in Asia (excluding Japan) by 14.6%, or ¥2,476 million, to ¥19,469 million and an increase in sales in other regions including Australia, Latin America and Middle East by 18.0% or ¥5,807 million, to ¥38,112 million.

The increased sales in Japan in FY 2007 primarily reflected strong sales of lithium ion battery based impact drivers. In addition, the automatic nailer business acquired from Kanematsu-NNK Corp in January 2006, contributed to the increased sales in Japan.

The increased sales in Europe in FY 2007 primarily reflected the appreciation of the euro against the yen in addition to higher building demand in construction due to an unusual warm winter. Net sales in yen terms increased in Russia and Eastern Europe by 63.6%, in the United Kingdom by 27.0%, in Germany by 38.4% and in France by 30.3% compared to FY 2006. In addition, the introduction of new products, particularly lithium ion battery products 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 26.0%, or ¥23,493 million in FY 2007.

The increased sales in North America in FY 2007 primarily reflected strong sales of lithium ion battery products despite the decline of new housing starts. Excluding the effect of fluctuations of the local currencies, net sales in North America would have increased by 3.7%, or ¥1,786 million in FY 2007, compared with FY 2006.

The increased sales in Asia excluding Japan in FY 2007 primarily reflected the increased sales in Singapore and Indonesia, particularly with respect to power tools, such as grinders, hammer drills and rotary hammers. Excluding the effect of fluctuations of the local currencies, net sales in Asia would have increased by 11.4%, or ¥1,937 million in FY 2007.

The increased sales in Other regions including Australia, Latin America and the Middle East in FY 2007 were primarily due to an increased number of units sold, particularly with respect to power tools such as grinders, hammer drills and rotary hammers sold. In FY 2007 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, grinders. Excluding the effect of fluctuations of the local currencies, other net sales would have increased by 13.0%, or ¥4,203 million in FY 2007.

Review of Performance by Product Group

Power Tools

The group offers a wide range of dependable drills, rotary hammers, hammer drills, demolition hammers, grinders, cordless impact driver and sanders. This group generates the largest portion of Makita’s consolidated net sales. In FY 2007, sales of power tools grew by 23.1%, to ¥210,894 million, accounting for 75.3% of consolidated net sales. In Japan, sales of power tools increased by 7.2%, to ¥25,268 million, accounting for 53.9% of total domestic sales. Overseas sales of power tools increased by 25.6%, to ¥185,626 million, or 79.6% of total overseas sales.

Gardening and Household Products
Principal products in Makita’s gardening and household products group include chain saws, petrol brushcutter, vacuum cleaners and cordless cleaners. In FY 2007, Makita recorded a 20.0% increase in sales of gardening and household products, to ¥28,123 million, or 10.0% of consolidated net sales. Domestic sales of gardening and household products increased by 8.5%, to ¥9,079 million, accounting for 19.4% of total domestic sales. Makita recorded a 26.4% increase in overseas sales of gardening and household products, to ¥19,044 million, which accounted for 8.2% of total overseas sales in FY 2007.

Parts, Repairs and Accessories
Makita’s after-sales services include the sales of parts, repairs and accessories. In FY 2007, parts, repairs and accessories sales increased by 19.4%, to ¥40,916 million, accounting for 14.7% of consolidated net sales. Domestic sales of parts, repairs, and accessories increased by 29.4%, to ¥12,513 million, accounting for 26.7% of total domestic sales. Overseas sales of parts, repairs, and accessories grew by 15.5%, to ¥28,403 million, accounting for 12.2% of total overseas sales.

Cost of Sales
Cost of sales increased by 23.3%, or ¥31,012 million from FY 2006 to ¥163,909 million. The sales cost ratio increased by 0.6 points from 58.0% in FY 2006 to 58.6% as a result of the rise in materials costs and depreciation expenses.

Gross Profit
Gross profit on sales increased by 20.6%, or ¥19,846 million to ¥116,024 million. Gross profit margin fell by 0.6 points from 42.0% in FY 2006 to 41.4%, due to increasing cost of sales. The increasing cost of sales was primarily a result of rising raw material costs, which were subject to price fluctuation in the global market, partially offset by the positive effect of the weak yen.

Selling, General and Administrative Expenses
Selling, general and administrative expenses for FY 2007 increased by 13.8%, or ¥8,076 million from FY 2006 to ¥66,802 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 increased advertising costs due to activities of sales promotion in overseas subsidiaries. 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 8.7%.

On the other hand, the ratio of selling, general and administrative expenses to sales fell by 1.7 points from 25.6% to 23.9%, due to increased sales.

Losses (Gains) on Disposal or Sales of Property, Plant and Equipment

In FY 2007, the expenses for demolishing some of the Company’s headquarters buildings are recorded as loss on disposal of property, plant and equipment. Additionally, land and buildings selling with the review of American subsidiary’s sales office are recorded as gain on disposal of property, plant and equipment. Accordingly, Makita recognized net gains on disposal or sales of property, plant and equipment of ¥249 million, a 97% decrease from ¥8,326 in FY 2006. The main reason for the decrease from FY 2006 was a gain from the sale of the golf course of the Joyama Kaihatsu Ltd. subsidiary.

Impairment of Long lived assets
In FY 2007, the Company decided to transfer the manufacturing business (stationary woodworking machines) of its consolidated subsidiary, Makita Ichinomiya Corporation to Makita’s Okazaki plant in order to streamline the production function in Japan no later than December 2007.

As a result of this decision, the Company performed an impairment assessment pursuant to the provisions of SFAS No. 144 and estimated the carrying amounts would not be recovered by the future cash flows. Consequently, the Company recorded an impairment charge totaling ¥1,295 million, before tax, to reflect the estimated fair value of the assets.

Operating Income
As a result of the above, operating income for FY 2007 increased by 5.2% to ¥48,176 million. Operating income margin decreased by 2.8points, from 20.0% in FY 2006 to 17.2% in FY 2007.

Other Income (Expenses)
In FY 2007, other income was ¥1,147 million, a 65.9% decrease from FY 2006. The reasons for the decrease were as follows:

(1) Realized gains on securities decreased by ¥2,000 million to ¥918 million due to the gain on securities, net, in the amount of ¥2,528 million resulting from the merger of UFJ Holdings Co., Ltd., and Mitsubishi Tokyo Financial Group Co., Ltd., in FY 2006 that did not reoccur in FY 2007.

(2) The amount of foreign exchange losses increased by ¥160 million, to ¥418 million in FY 2007 due to foreign exchange losses in China caused by the appreciation of the Chinese Renmin yuan against the U.S. dollar.

Income before Income taxes

Income before income taxes for FY 2007 increased by 0.4% (¥180 million) as compared with the previous fiscal year to ¥49,323 million, while the ratio of income before income taxes to sales for current year decreased by 3.9 points, from 21.5% in FY 2006 to 17.6% in FY 2007.

Provision for Income taxes
Provision for income taxes for FY 2007 amounted to ¥12,352 million, an increase of 41.5% (¥3,620 million) as compared with the previous year due mainly to an increase in taxable income of Makita. In FY 2007, Makita reversed the valuation allowance on deferred tax assets in the amount of ¥2,701 million related to certain subsidiaries based on both improved performance in recent years and a steady outlook for the future performance of these subsidiaries, and thus the valuation allowance decreased by ¥2,655 million, including the effect of translation. However, in FY 2006, the valuation allowance of ¥5,782 million was reversed related to the sale of the golf course. As a result, the effective tax rate for FY 2007 was 25.0%, a 7.2% increase from 17.8% for FY 2006, due mainly to the above mentioned decrease in the reversal of the valuation allowance.

Net Income

Primarily as a result of a gain of ¥8,479 million from the sale of the golf course in FY 2006, net income for FY 2007 fell by ¥3,440 million to ¥36,971 million, which is an 8.5% decrease from the previous fiscal year.

Earnings per Share
Basic earnings per share of common stock amounted to ¥257.3, compared with ¥281.1 in FY 2006.

Regional Segments
Segment information described below is based on the location of the Company and its relevant subsidiaries.

Japan Segment
In FY 2007, sales in the Japan segment grew by 12.7%, to ¥125,816 million. Sales to external customers increased by 14.9% to ¥61,776 million, which accounted for 22.1% of consolidated net sales. The increase reflects a 12.6% rise in sales in the domestic market as well as a 22.4% increase in export sales mainly to Asia. Even though segment operation expenses increased by 23.9%, to ¥108,403 million, operating income decreased by 27.9%, to ¥17,413 million in FY 2007. This was attributable to the ¥8,479 million gain on the sale of the golf course in FY 2006 and increase of depreciation cost in FY 2007.

Europe Segment
In FY 2007, sales in the Europe segment grew by 33.9% to ¥130,633 million. Sales to external customers increased by 36.9%, to ¥124,924 million, which accounted for 44.6% of consolidated net sales. This increase is mainly due to strong sales of the rotary hammer, and the high growth achieved in the Eastern Europe and Russian economies, both investment in plant and equipment, and consumer spending were brisk in Western Europe. Segment operating income increased by 49.8%, to ¥18,056 million.

North America Segment
In FY 2007, sales in the North America segment climbed by 8.5%, to ¥56,729 million. Sales to external customers increased by 7.2% to ¥51,432 million, which accounted for 18.4% of consolidated net sales. This increase in sales to external customers was mainly due to better sales of lithium ion battery products. As a result, operating income for FY 2007 increased by 34.8%, to ¥2,512 million.

Asia Segment (excluding Japan)
In FY 2007, sales in the Asia segment increased by 45.8% to ¥76,719 million. The increase in sales in this segment is primarily due to higher inter-segment sales from two factories in China to Europe. Sales to external customers increased by 12.2%, to ¥9,698 million, which accounted for 3.5% of consolidated net sales. This increase is primarily due to an increase in sales in Singapore. Segment operating income grew by 53.3%, to ¥9,904 million in FY 2007.

Other Segment
In FY 2007, sales in the other segment increased by 16.9% to ¥32,252 million. Sales to external customers increased by 17.1%, to ¥32,103 million, which accounted for 11.4% of consolidated net sales. Sales increase in this segment is primarily due to an increase in sales in Latin America and Middle East. Segment operating income grew by 36.1%, to ¥3,466 million, in FY 2007.The reason for this increase is mainly improved cost of sales in Latin America.

CRITICAL ACCOUNTING POLICIES
As disclosed in Note 3 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 changes 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.

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 tools. Makita’s general revenue recognition policy follows the provisions of Staff Accounting Bulletin No. 104, SAB 104, Revenue Recognition, and Emerging Issues Task Force Issue, EITF No. 01-9, Accounting for consideration Given by a Customer (including a Reseller of the Vendor’s Products). 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 EITF 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 with 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. 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, 2006, 2007 and 2008:

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

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 microeconomic 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. 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.

Impairment 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 uses 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, Makita’s 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 impairments loss.

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 similar 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 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, if any, 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 expected future 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, expected return on plan assets, 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.

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.GAAP, actual results that differ from the assumptions are accumulated and amortized over the average remaining service 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 2.4% as of March 31, 2008.

As of March 31, 2008, Makita allocated 45.7% and 36.8% of plan assets to equity securities and debt securities, respectively. The value of these plan assets are influenced by fluctuations in world securities markets. Significant depreciation or appreciation will have corresponding 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, 2008.

		Change in				Change in
		projected benefit				pre-tax pension
Change in assumption		obligation				expenses
		Japanese yen (millions)
50 basis point increase / decrease in discount rate			-2,305 / +2,582				-2 / +1
50 basis point increase / decrease in expected return on assets			—				-171/ +171

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 Makita’s provision for income taxes, deferred income tax assets and liabilities and any valuation allowance recorded against Makita’s gross deferred income tax assets. During FY 2007 and FY 2008 Makita reversed a portion of the valuation allowance in the amount of ¥2,701 million and ¥237 million, respectively. Makita has recorded a valuation allowance of ¥331 million as of March 31, 2008 against certain deferred income tax assets because of no tax planning strategy and an anticipated expiration of net operating loss carry forwards. 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 September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements.” SFAS No. 157 has been subsequently amended by FASB Staff Position FAS157-1, “Application of FASB Statement No. 157 to FASB Statement No. 13 and Other Accounting Pronouncements That Address Fair Value Measurements for Purposes of Lease Classification or Measurement under Statement 13” and FASB Staff Position FAS157-2, “Effective Date of FASB Statement No. 157.” SFAS No. 157, as amended, defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements for instruments within its scope. SFAS No. 157, as amended, is effective from the fiscal period beginning after November 15, 2007, except for items that are not recognized or disclosed at fair value in an entity’s financial statements on a recurring basis (at least annually), for which it is effective from the fiscal period beginning after November 15, 2008. SFAS No. 157, as amended, is required to be adopted by Makita in the fiscal year beginning April 1, 2008. Makita does not expect the adoption of SFAS No. 157 will have a material impact on its consolidated results of operations and financial condition.

In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities—Including an amendment of FASB Statement No. 115”, which permits an entity to measure many financial assets and financial liabilities at fair value that are not currently required to be measured at fair value. Entities that elect the fair value option will report unrealized gains and losses in earnings. SFAS No 159 is effective for fiscal periods beginning after November 15, 2007 and is required to be adopted by Makita, in the fiscal year beginning April 1, 2008. Makita does not expect the adoption of SFAS No. 159 will have a material impact on its consolidated results of operations and financial condition.

In December 2007, the FASB issued SFAS No. 141(R), “Business Combinations”, and No. 160, “Non-controlling Interests in Consolidated Financial Statements, an amendment of ARB No. 51”. These statements aim to improve, simplify, and converge internationally the accounting for business combinations and the reporting of non-controlling interests in consolidated financial statements. These statements are effective for fiscal years beginning after December 15, 2008 and are required to be adopted by Makita, in the fiscal year beginning April 1, 2009.

Under SFAS No. 141(R), an acquiring entity will be required to recognize all the assets acquired and liability assumed in a transaction at the acquisition date at fair value with limited exceptions. SFAS No. 141(R) also establishes disclosure requirements to enable the evaluation of the nature and financial effects of the business combination. SFAS No. 160 establishes new accounting and reporting standards for the non-controlling interest in a subsidiary and for the deconsolidation of a subsidiary. Specifically, this statement requires the recognition of non-controlling interests (minority interests) as equity in the consolidated financial statements and separates from the parent’s equity. The amount of net income attributable to non-controlling interests will be included in consolidated net income on the face of the consolidated income statement. This statement also establishes disclosure requirements that clearly identify and distinguish between the interests of the parent and the interests of the non-controlling owners. Makita is currently evaluating the effect that the adoption of these statements will have on its consolidated financial statements.

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, 2008, Makita held cash and cash equivalents amounting to ¥46,306 million and the Company’s subsidiaries have credit lines up to ¥24,246 million, of which ¥1,582 million was used and ¥22,664 million was unused and available. As of March 31, 2008, Makita had ¥1,724 million in short-term borrowing, which included bank borrowings and the current portion of capital lease obligations. Short-term borrowing was used for daily operations at the subsidiaries. The amount excluding current maturities of long-term indebtedness was ¥1,582 million, a decrease of 12.9% (¥234 million) from FY 2007. For further information regarding Makita’s short-term borrowings, including the average interest rates see Note 11 to the accompanying consolidated financial statements.

As of March 31, 2008, Makita’s total short-term borrowings and long-term indebtedness amounted to ¥2,632 million, representing an increase from ¥1,945 million reported for FY 2007. Makita’s ratio of indebtedness to shareholders’ equity increased by 0.2 points to 0.8%, mainly due to an increase of long-term borrowing, which increased from ¥53 million to ¥908 million. 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 FY 2009 and thereafter.

Makita has historically maintained a high level of liquid assets. Management estimates that the cash and cash equivalents level of ¥46,306 million as of March 31, 2008, 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 its future working capital needs, capital expenditure and research and development through fiscal 2009 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 ¥10 billion annually. Please see “– Fiscal Year 2008 – Capital Expenditures” below in this section for a description of Makita’s principal capital expenditures for fiscal 2008 and the main planned expenditures for fiscal 2008. At the Regular General Meeting of Shareholders held in June 2008, the Company’s shareholders approved a cash dividend of ¥67 per share.

The total cash dividend payments amount to ¥9,633 million, and were made in June 2008. In 2007, Makita acquired all outstanding shares of Makita Numazu for approximately ¥2.7 billion in cash and 81,456 Makita shares. Makita financed the cash portion of the purchase price from internal sources.

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.

FY 2008

Cash Flows
Net cash provided by operating activities decreased by ¥3,085 million from ¥32,360 million in FY 2007 to ¥29,275 million in FY 2008 as a result of the following:

•		¥65,664 million decrease due to higher levels of cash used in operating activities such as purchases of parts and raw materials, selling, general and administrative expenses, and income tax payments
•		¥62,579 million increase due to higher levels of cash received from customers as a result of net sales growth

Net cash used in investing activities decreased by ¥22,768 million from ¥27,276 million in FY 2007 to ¥4,508 million in FY 2008 primarily as a result of the following:

•		¥6,357 million decrease due to lower purchases of available-for-sale securities and held-to-maturity securities
•		¥8,101 million decrease due to higher proceeds from sales and maturities of securities
•		¥9,266 million decrease due to withdrawals of time deposits
•		¥2,056 million increase due to higher capital expenditures for reconstruction of the Okazaki plant, improvements to the headquarters buildings, and new plant constructions of Makita China, Makita Brazil and Makita Romania
•		¥1,385 million increase due to an acquisition of Makita Numazu for ¥2,034 million, net of cash acquired

Net cash used in financing activities increased by ¥5,508 million from ¥8,307 million in FY 2007 to ¥13,815 million in FY 2008 primarily as a result of the following:

•

¥4,025 million increase due to higher dividends paid

Accounting for all these activities and the effect of exchange rate changes, Makita’s cash and cash equivalents increased by ¥9,178 million from ¥37,128 million as of the end of FY 2007 to ¥46,306 million as of the end of FY 2008.

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. This required Makita to increase the amount of its capital expenditures in FY 2008 compared to FY 2007, amounting to ¥11,383 million, ¥12,980 million and ¥15,036 million for FY 2006, 2007 and 2008, respectively.

Capital expenditures in FY 2008 were mainly used for expansion and rebuilding of the Okazaki plant, improvements to the Company’s headquarters buildings, purchases of metal molds for new products, construction of the China plant, Brazil plant and Romania plant along with purchases of manufacturing facilities which make it easier to increase production capacities or maintain high production capacities. Capital investments of the Company amounted to approximately ¥8.6 billion, while capital investment of overseas subsidiaries amounted to approximately ¥6.4 billion. All of Makita’s capital expenditures in FY 2008 were funded through internal sources.

Under its investment plans for FY 2009, the Makita Group is scheduled to make capital investments totaling ¥25 billion, which is 66% higher than for FY 2008. Of this total, the Company plans to make direct investments of ¥8 billion and its consolidated subsidiaries will invest ¥17 billion.

In continuation from FY 2008, the Company’s main capital investment plan is to rebuild the Okazaki plant, Nagoya Branch in Japan, and purchase of metal molds for new products. The main facilities investments by consolidated subsidiaries include production facilities for Makita (China) Co., Ltd., and Makita Romania S.R.L. and the purchase of metal molds for new products. Due to the expansion of its business in Europe, the Company plans to invest approximately ¥10 billion in upgrading and expanding of its European and Asian sales subsidiaries, including Makita France, Makita Switzerland, Makita Benelux, Makita Poland, Makita Germany and Makita Taiwan. The remaining ¥7 billion will continue to be invested in the construction of the Romania plant, China plant and Brazil factories. These are all scheduled to be funded with internal sources.

FY 2007

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 FY 2007, cash received from customers increased by 22.1% to ¥273,535 million, as a result of an increase in net sales.

This increase was within the range of the increase in all regions’ net sales, as there were no significant changes in Makita’s collection rates.

Cash used in operating activities increased by 21.2% to ¥241,175 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, and the increase in income taxes paid.

As a result of these factors, net cash provided by operating activities increased by 29.1% (¥7,293 million) from ¥25,067 million in FY 2006 to ¥32,360 million in FY 2007.

In FY 2007, cash outflow for capital expenditures increased by ¥1,597 million to ¥12,980 million. This increase was caused by the followings:

•		Rebuilding of Okazaki plant,
•		Improvements to the Headquarters buildings,
•		Construction of Makita Romania plant,
•		Purchases of machine and equipment for Makita China plant,

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

The Company purchased available-for-sale securities and held-to-maturity securities with the money left over from financing activities and capital expenditures. Purchase of securities increased by ¥6,049 million to ¥27,297 million this year from ¥21,248 million last year.

As a result, net cash outflow resulting from investing activities were ¥27,276 million in FY 2007 compared to net cash inflow of ¥7,655 million in FY 2006.

Cash used for the payment of dividends increased by ¥285 million from ¥7,907 million during the previous fiscal year to ¥8,192 million in FY 2007. During FY 2006, Makita made aggregate payments of ¥12,525 million related to outstanding debt amounting to ¥6,375 million in connection with the civil rehabilitation proceedings of Joyama Kaihatsu, Ltd. and repayment of long-term indebtedness amounting to ¥6,150 million of the financing subsidiary company. There were no such payments in FY 2007.

As a result, net cash used in financing activities decreased by ¥11,241 million from ¥19,548 million in FY 2006 to ¥8,307 million in FY 2007.

As a result of these activities in addition to the effect of exchange rate changes, Makita’s cash and cash equivalents as of March 31, 2007 amounted to ¥37,128 million, dropping by ¥1,926 million compared the end of FY 2006.

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. This required Makita to increase the amount of its capital expenditures in FY 2007 compared to FY 2006, amounting to ¥6,655 million, ¥11,383 million and ¥12,980 million for FY 2005, 2006 and 2007, respectively.

Capital expenditures in FY 2007 were mainly for expansion and rebuilding of the Okazaki plant, improvements to the Company’s headquarter buildings, construction of the Romania plant, and for the purchase of metal molds for new products, acquisition of production equipment in connection with facilities, such as China factories and Makita Romania S.R.L. Capital investments of the Company amounted to approximately ¥7.3 billion, while capital investments of overseas subsidiaries amounted to approximately ¥5.7 billion. All of Makita’s capital expenditures in FY 2007 were funded through internal sources.

Financial Position
Total assets at the end of FY 2008 were ¥386,467 million, up 4.9% from the previous fiscal year-end. Total current assets increased by 9.0% to ¥290,355 million, owing to such factors as an increase of cash and cash equivalents, and inventories.

Inventories increased by ¥19,387 million from ¥92,800 million at the end of FY 2007 to ¥112,187 million at the end of FY 2008. Since demand for Makita products is growing steadily, Makita increased inventories so that sales opportunities would not be lost.

Property, plant and equipment, at cost less accumulated depreciation, increased by 9.0%, to ¥69,058 million. Investments and other assets decreased by 29.9%, to ¥27,054 million. Total current liabilities increased by 9.8%, to ¥59,656 million mainly due to increase in income taxes payable, trade notes and accounts payable.

Long-term liabilities decreased by 16.8%, to ¥7,797 million, mainly due to a decrease in deferred income tax liabilities incurred as a result of the decrease in unrealized gains on securities and long-term prepaid pension expenses. The current ratio was 4.9 times as same as at March 31, 2007. Shareholders’ equity increased by 4.6%, to ¥316,498 million. The main reasons for this increase are an increase in retained earnings, from ¥215,365 million in FY 2007 to ¥249,191 in FY2008.

Fluctuations in the accumulated other comprehensive income (losses) are due to the following reasons:

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

As a result, the shareholders’ equity ratio slightly decreased to 81.9%, from 82.1% in the previous fiscal year-end.

C. Research and development, patents and licenses, etc.

Approximately 660 of Makita’s employees are engaged in research and development activities and product design. Makita also employs approximately 110 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 R&D of electric, electronic and other applications.

Makita regards R&D as a high priority 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 2008, Makita allocated ¥5,922 million to R&D, approximately 1.7% of net sales, up 8.5% from FY2007. In FY 2007, Makita allocated ¥5,460 million for R&D, up 13.1% from the ¥4,826 million allocated in FY 2006. The ratio of R&D expenses to net sales was approximately 2.0% in FY 2007 and 2.1% in FY 2006.

Makita is placing more emphasis on designing power tools that are smaller and lighter, featuring electronic controls, and that have internal power sources allowing for cordless operation. Additional design priorities include developing units that feature low level of noise and low vibration, measures to restrain dust emissions and new safety systems. 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 set objectives for developing models that use more standard parts.

New products developed in FY 2008 included rotary hammer, 10.8V Li-ion impact driver and other products. Makita also created a medium-to-long-term program on priority categories which includes gardening tools.

Makita has 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 the old typed batteries. Makita also developed an original battery verification system using the previously mentioned digital communication functions. Using this system, customers can check the state of charge of their batteries and Makita can provide customers with information on how to make their batteries last longer.

D. Trend information

With regard to the outlook for the future, there is still an uncertain outlook for the business environment in which Makita operates, due to concerns including the state of the global economy, such as the down-turn in the U.S. economy and the sub-prime loan problem, the uncertainty with respect to the Western European economy, the weak Japanese housing investment, fluctuations in exchange rates and the prices of oil and raw materials.

In the light of this outlook, Makita aims to improve performance by not only continuing efforts to increase its market share of the power tool market for professionals but also to expand its share of the air tools and gardening equipment markets. To achieve this, Makita is improving its global sales, and service framework and developing high-value-added products.

In the North American market, Makita entered into a sales agreement in March 2008 with Home Depot U.S.A., Inc. which is the largest home improvement chain in the U.S.

Makita’s goal is to continue to distribute its products through the home improvement channel which has a significant influence on the sales trend of electric power tools in the North American market and to consistently increase sales and raise awareness of Makita’s brand name.

Accordingly, Makita aims to meet its goals by solidifying a business partnership with Home Depot in the North American market, through which new and innovative Makita products will be distributed in the home improvement channel.

Makita will seek to strengthen its relationship with important specialty stores such as independent construction supply and hardware stores which carry Makita products and offer enhanced after-sales services.

E. Off-balance sheet arrangements

Makita did not have any off-balance sheet arrangements as of March 31, 2008 except for certain operating leases entered into in the ordinary course of business. See Note 15 to the accompanying consolidated financial statements.

F. Tabular disclosure of contractual obligations

						Japanese yen (millions)
						Expected payment date, year ending March 31,
		Total				2009				2010				2011				2012				2013				Thereafter
Capital lease			550				142				117				57				16				218				—
Interest expenses on capital lease			40				20				13				6				1				—				—
Operating lease			1,821				573				404				284				201				156				203
Unsecured loans from bank			500				—				—				—				500				—				—
Contributions to defined benefit plan			3,058				3,058				—				—				—				—				—
Purchase obligation			9,632				8,901				731				—				—				—				—
Total		¥	15,601			¥	12,694			¥	1,265			¥	347			¥	718			¥	374			¥	203

						U.S. dollars (thousands)
						Expected payment date, year ending March 31,
		Total				2009				2010				2011				2012				2013				Thereafter
Capital lease			5,500				1,420				1,170				570				160				2,180				—
Interest expenses on capital lease			400				200				130				60				10				—				—
Operating lease			18,210				5,730				4,040				2,840				2,010				1,560				2,030
Unsecured loans from bank			5,000				—				—				—				5,000				—				—
Contributions to defined benefit plan			30,580				30,580				—				—				—				—				—
Purchase obligation			96,320				89,010				7,310				—				—				—				—
Total		$	156,010			$	126,940			$	12,650			$	3,470			$	7,180			$	3,740			$	2,030

Note:		1.Determination of contributions to defined benefit plan after 2009 is not practicable.
		2.The notional amount of derivative financial instruments that are expected to settle in FY 2009 is ¥26,519 million and their estimated fair value is ¥380 million at March 31, 2008. Please see note 17 to the consolidated financial statements for further information.

G. Safe harbor

All information that is not historical in nature disclosed under “Item 5. Operating and Financial Review and Prospects-Trend Information” and “-Tabular disclosure of contractual obligations” is deemed to be a forward-looking statement. 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 26, 2008 are as follows:

Masahiko Goto
Current Position: President, Representative Director since May 1989
Date of Birth: November 16, 1946
Director since: May 1984
Business Experience:
May 1984: Director, General Manager of General Planning Department
July 1987: Managing Director of Administration Headquarters

Masami Tsuruta
Current Position: Managing Director, in charge of Domestic Business since June 2007
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
June 2003: Managing Director, General Manager of Domestic Sales Marketing Headquarters

Yasuhiko Kanzaki
Current Position: Managing Director, General Manager of International Sales Headquarters (Europe Area) since
June 2007Date 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
June 2003: Director, General Manager of International Sales Headquarters (Europe Area)

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

Shiro Hori
Current Position: Director, General Manager of Overseas Sales Headquarters (America, Asia, and
Oceania Area and International Administration) since September 2007
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
June 2003: Director, General Manager of International Sales Headquarters: America Area and International Administration

Tadashi Asanuma
Current Position: Director, General Manager of Domestic Sales Marketing Headquarters: Tokyo Area
since July 2007
Date of Birth: January 4, 1949
Director since: June 2003
Business Experience:
April 1995: Manager of Saitama Branch Office
April 2001: General Manager of Osaka Sales Department
June 2003: Director, Assistant General Manager of Domestic Sales Marketing Headquarters: Osaka Area

Hisayoshi Niwa
Current Position: Director, General Manager of Quality Headquarters since April 2005
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
June 2003: Director, General Manager of Quality Control Headquarters

Zenji Mashiko
Current Position: Director, General Manager of Domestic Sales Marketing Headquarters: Nagoya Area since July 2007
Date of Birth: May 28, 1949
Director since: June 2003
Business Experience:
April 1995: Manager of Tokyo Branch Office
June 2003: Director, Assistant General Manager of Domestic Sales Marketing Headquarters: Tokyo Area

Toshio Hyuga
Current Position: Director, General Manager of Domestic Sales Marketing Headquarters: Osaka Area
since July 2007
Date of Birth: March 14, 1948
Director since: June 2007
Business Experience:
April 1992: Manager of Takamatsu Branch Office
October 1997: Manager of Osaka Branch Office

Shinichiro Tomita
Current Position: Director, Assistant General Manager of Production Headquarters: China Plant since June 2007
Date of Birth: January 11, 1951
Director since: June 2007
Business Experience:
October 2001: Manager of Production Engineering Department
September 2003: Transfer to Makita (China) Corporation

Tetsuhisa Kaneko
Current Position: Director, General Manager of Purchasing Headquarters since June 2007
Date of Birth: April 6, 1956
Director since: June 2007
Business Experience:
April 2004: Manager of Technical Research Department
August 2005: Manager of 2nd Production Department
October 2006: Manager of 1st Production Department

Motohiko Yokoyama
Current Position: Outside 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.
June 2007: President and Representative Director of JTEKT Corporation

Toshihito Yamazoe
Current Position: Standing Statutory Auditor since June 2008
Date of Birth: October 16, 1949
Statutory Auditor since: June 2008
Business Experience:
April 1999: Assistant General Manager of Asia and Oceania Sales Department of International Sales Headquarters
August 2000: President of Makita (China) Co., Ltd.
April 2006: General Manager of Europe Sales Department of International Sales Headquarters

Haruhito Hisatsune
Current Position: Outside Standing Statutory Auditor since June 2008
Date of Birth: February 7, 1947
Statutory Auditor since: June 2008
Business Experience:
May 1990: Manager of Government Securities Service Section of Operation Department of The Nippon Bank
May 1991: Officer of Examination Department of The Nippon Bank
April 1997: General Manager of Overseas Section of The Hekikai Shinkin Bank
January 2001: Managing Director of Business Center of The Hekikai Shinkin Bank
August 2003: Management Director and Corporate Officer, Director of Business Center

Masafumi Nakamura
Current Position: Outside Statutory Auditor since June 2007
Date of Birth: September 17, 1942
Outside Statutory Auditor since: June 2007
Business Experience:
May 1983: Representative partner of SAN-AI Audit Corporation
April 2001: Representative partner of Tohmatsu & Co.
January 2006: Representative partner of Masafumi NakamuraAccountancy Firm
April 2006: Associate professor in Graduate School of Business at Aichi Shukutoku University
June 2006: Outside Statutory Auditor for SUZUKEN CO., LTD.
June 2007: Outside Statutory Auditor for Taiyo Kagaku Co., Ltd.

Michiyuki Kondo
Current Position: Outside Statutory Auditor since June 2008
(Attorney-at-law, Kondo Michiyuki Law Firm)
Date of Birth: October 23, 1944
Outside Statutory Auditor since: June 2008
Business Experience:
April 1971: Attorney-at-law, Takasu Hiroo Law Firm
May 1977: Established Kondo Michiyuki Law Firm
May 2005: Outside Statutory Auditor for ELMO Co., Ltd.

The term of each director listed above expires in June 2009. The term of Mr. Masafumi Nakmura as Outside Statutory Auditor expires in June 2011. The terms of Mr. Toshihito Yamazoe as Statutory Auditor and of Mr. Haruhito Hisatsune and Michiyuki Kondo as Outside Statutory Auditor expire in June 2012.

There are no family relationships between any of the individuals 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.

B. Compensation

The aggregate amount of remuneration, including bonuses but excluding retirement allowances, paid by the Company during FY 2008 to all Directors and Statutory Auditors, who served during FY 2008, totaled ¥348 million. Remuneration paid by the Company during FY 2007 to all Directors and Statutory Auditors, who served during FY 2007, totaled ¥266 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 ¥501 million as of March 31, 2007 and was decreased to ¥468 million as of March 31, 2008. However, this Executive retirement and termination allowances program was abolished by the Annual General Meeting of Shareholders held on June 29, 2006, because the program featured minimal correlation with the Company’s results while presenting strong seniority-based elements. With regard to retirement and termination allowances accrued through that day, the retirement allowance will be paid to eligible executives upon their retirement.

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 allowance 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 fewer Directors and 5 or fewer 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 current Directors and Statutory Auditors, see “A. Directors and senior management” of Item 6.A.

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 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 Auditors. Such Accounting Auditors have, 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 to 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). 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 its audit report and Statutory Auditors designated by the Board of Statutory Auditors to submit such report (if such Statutory Auditors are not designated, all Statutory Auditors) submit such report to the Accounting Auditors and 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 of the Board of Statutory Auditors if his or her opinion expressed in his or her audit report is different from the opinion expressed in the audit report of the Board of Statutory Auditors. 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 financial position, and other matters concerning the performance of the Statutory Auditors’ duties. For names of the Statutory Auditors that constitute the current 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”). Setting 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 is relying on 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 committee 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 are 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 to 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 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 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 or existing shares held by the Company as treasury stock at a “specially favorable” price (or any offering of stock acquisition rights, or bonds with stock acquisition rights at “specially favorable” conditions) to any persons other than shareholders;
(4)		the removal of a Statutory Auditor;
(5)		the exemption of liability of a Director, Statutory Auditor or Accounting Auditor with certain exceptions;
(6)		a reduction of stated capital with certain exceptions in which a special shareholders’ resolution is not required;
(7)		a distribution of surplus in kind other than dividends which meets certain requirements;
(8)		dissolution, merger, consolidation or corporate split with certain exceptions in which a shareholders’ resolution is not required;
(9)		the transfer of the whole or a material part of the business with certain exceptions in which a shareholders’ resolution is not required;
(10)		the taking over of the whole of the business of any other corporation with certain exceptions in which a shareholders’ resolution is not required; or
(11)		share exchange or share transfer for the purpose of establishing 100 percent parent-subsidiary relationships with certain exceptions in which a shareholders’ resolution is not required.

D. Employees

The following table sets forth information about number of employees:

		As of March 31,
		2006				2007				2008
Categorized by Geographic Areas
Japan			3,038				3,007				3,206
China			2,325				2,443				3,190
U.S.A.			942				926				995
Overseas			5,591				6,055				7,230
Total			8,629				9,062				10,436

During FY 2008, the Company hired on average approximately 2,200 temporary employees in China, and approximately 510 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, 2008, there are 2,719 members of the labor union and Makita considers its relationship with the labor union to be good.

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, 2008 is as follows:

		Identity of		Number of		Percentage of
		Person or Group		Shares Owned		voting right
		Directors and Statutory Auditors		2,123,335		1.48 %

The following table lists the number of shares owned by the Directors and Statutory Auditors of the Company as of March 31, 2008.

Name		Position		Number of shares
Masahiko Goto		President, Representative Director			1,976,543
Masami Tsuruta		Managing Director			17,522
Yasuhiko Kanzaki		Director			10,669
Kenichiro Nakai		Director			12,700
Tadayoshi Torii		Director			13,700
Tomoyasu Kato		Director			12,872
Shiro Hori		Director			10,313
Tadashi Asanuma		Director			5,700
Hisayoshi Niwa		Director			6,900
Zenji Mashiko		Director			6,700
Toshio Hyuga		Director			9,000
Tetsuhisa Kaneko		Director			5,500
Shinichiro Tomita		Director			2,900
Akio Kondo		Standing Statutory Auditor			6,700
Hiromichi Murase		Standing Statutory Auditor			4,910
Shoichi Hase		Outside Statutory Auditor			18,600
Holding shares by Board of directors					2,106

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, 2008, 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 March 31, 2008, indicated in the reports described below.

Name of Beneficial Owner		Number of Shares				Percentage
Japan Trustee Services Bank, Ltd. (Trust account)			10,695,200				7.44%
Master Trust Bank of Japan, Ltd. (Trust account)			7,767,200				5.40%

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	%

						Shares Owned								Number of				Shares Owned
		Date of				Prior to								Shares				After the
Name of Shareholder		Transaction				Transaction				Percentage				Changed				Transaction				Percentage
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		April 30, 2006					9,022,123				6.10	%			1,556,200				10,578,323				7.35	%
Barclays Global Investors, N.A.		June 30, 2006					9,029,552				6.27	%			(905,026	)			8,124,526				5.64	%
Mitsubishi UFJ Financial Group		July 31, 2006					10,578,323				7.35	%			(625,100	)			9,953,223				6.91	%
Barclays Global Investors, N.A.		September 30, 2006					8,124,526				5.64	%			(2,089,460	)			6,035,066				4.19	%
Nomura Asset Management		January 15, 2007					—				—				—				7,528,400				5.23	%
Mitsubishi UFJ Financial Group		January 22, 2007					9,953,223				6.91	%			(1,408,800	)			8,544,423				5.93	%
Mitsubishi UFJ Financial Group		April 14, 2008					8,544,423				5.93	%			1,478,577				10,023,000				6.97	%

As of March 31, 2008 the Company had 143,773,625, outstanding shares of common stock, excluding 235,135 shares of Treasury Stock. According to the Bank of New York, depositary for the Company’s ADSs, as of March 31, 2008, 2,562,744 shares of the Company’s common stock were held in the form of ADRs and there were 85 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, 2008, there were 13,952 holders of common stock of record worldwide and the number of record holders in the United States was 107.

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

In 2007, Makita acquired all outstanding shares of Makita Numazu for approximately ¥2.7 billion in cash and 81,456 Makita shares. 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.

See Note 19 to the consolidated financial statements.

C. Interest of experts and counsel

     Not applicable

Item 8. Financial Information

A. Consolidated financial 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 Japanese 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 FY 2008 of ¥30.0 per share and ADS. The Company has declared a cash dividend of ¥67.0 per share and ADS, which was approved by the shareholders’ meeting held on June 26, 2008.

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 Japanese yen in New York City as certified for customs purposes by the Federal Reserve Bank of New York:

		In Japanese yen								In U.S. dollars
Fiscal year ended March 31		Interim				Year-end				Interim				Year-end
2003			9				9				0.07				0.07
2004			9				13				0.09				0.11
2005			11				36				0.10				0.34
2006			19				38				0.16				0.32
2007			19				55				0.16				0.47
2008			30				67				0.30				0.67

Note: Cash dividends in US dollars are based on the exchange rates at the respective payment date, using the noon buying rates for cable transfers in Japanese yen in New York City as certified for customs purposes by the Federal Reserve Bank of New York.

B. Significant changes

To Makita’s knowledge, except as a disclosed in this annual report, no significant change has occurred since the date of the annual financial statements and/or since the date of the most recent interim financial statements.

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
		(Japanese Yen)								(U.S. dollars)
Fiscal year ended March 31,		High				Low				High				Low
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
2007			4,630				2,995				39.00				26.03
2008			5,920				2,885				50.60				27.28
Quarterly
Fiscal year 2007
1 st quarter ended June 30, 2006			3,830				2,995				34.34				26.03
2 nd quarter ended September 30, 2006			3,830				3,210				33.16				27.56
3 rd quarter ended December 31, 2006			3,730				3,110				31.49				26.78
4 th quarter ended March 31, 2007			4,630				3,570				39.00				30.23
Fiscal year 2008
1 st quarter ended June 30, 2007			5,650				4,210				45.30				35.64
2 nd quarter ended September 30, 2007			5,820				4,030				47.44				35.20
3 rd quarter ended December 31, 2007			5,920				4,470				50.60				39.86

		Tokyo Stock Exchange Price								NASDAQ Price
		Per Share of Common Stock								Per American Depositary Share
		(Japanese Yen)								(U.S. dollars)
Fiscal year ended March 31,		High				Low				High				Low
4 th quarter ended March 31, 2008			4,510				2,885				42.13				27.28
Monthly
January 2008			4,510				3,340				42.13				31.38
February 2008			4,230				3,640				39.38				33.83
March 2008			3,870				2,885				35.90				27.28
April 2008			3,810				3,000				36.19				29.94
May 2008			4,440				3,600				42.47				36.03
June 2008			4,780				3,860				45.76				36.73