Makita believes that bolstering its supervision of management is a crucial means of enhancing management transparency. It has strengthened the functions of the Board of Directors and the Board of Auditors and is working to enhance its corporate governance system further. In view of the need to ensure that corporate governance systems function effectively, the Company is endeavoring to proactively and promptly disclose information in a manner that promotes proper and transparent operations. The Company is also working to use the Internet to disclose financial information and otherwise undertake a broad range of information disclosure initiatives.

Corporate Governance

• Makita adopts a board-of-auditors system.

  The Company has 11 directors. One of these is an outside, part-time director who is not from the Company.

  The Board of Auditors is constituted from four auditors, among these three persons are outside auditors who are not from the Company, and two of them are part-time service. Two full-time auditors are the organization which can always inspect directional execution of the duties. Two of four auditors are familiar with financial affairs and accounting.
  In addition, the auditors share information within the Company by receiving periodic reports from the accounting auditor, reports on the condition of the Company, and other related documents.

• As its shares are listed on NASDAQ, in accordance with U.S. Public Company Accounting Reform and Investor Protection Act (Sarbanes-Oxley Act), the Company is taking the following active initiatives to improve its corporate governance.

  1. The Company has formed a Disclosure Committee comprising representatives from each of its principal departments with the objective of substantially increasing the accuracy and reliability of information disclosed through the clarification of procedures and other matters related to disclosure.
  2. To strengthen the auditing functions of the auditing firm, the Board of Auditors has established its "Policy and Procedures Regarding Prior Approval of Matters to Be Audited and Those Excluded from Auditing." The prior approval of the Company's Board of Auditors is required when contracting for the services of the auditing firm according to legally specified contracts.

• The Company issues its Business Ethics Guidelines to provide guidance for actions of management and staff, clarify activities that are ethical, forbid conflicts of interest, ensure compliance with relevant laws and regulations, and provide guidelines for disclosure.

• As measures to ensure strict adherence to corporate ethical and compliance standards, the Company has prepared rules related to internal notifications and set up a consultation facility (the "Help Line") with the aim of creating systems in which opinions and information from within the Company will be communicated to the proper persons. In addition, the Company has also provided a facility for receiving and responding to inquiries regarding accounting, internal controls, and auditing matters via its Web site.

• The Internal Auditing Office, which is responsible for internal audits, has 16 staff members.

Code of Ethics

The Code

1. Honest and ethical conduct; no conflict of interest
2. Compliance with applicable laws and regulations
3. Full, fair, timely and understandable disclosure
4. Accountability for adhering to this Code
5. Enforcement mechanism
6. Approval for waiver of this Code

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