Announcement regarding Expiration of an Important Contract of a Subsidiary
This is to announce that at our board of directors’ meeting held on January 28, 2010, it was decided not to renew the contract manufacturing agreement, which is due to expire at the end of December 2010, between MABUCHI INDUSTRY CO., LTD. (in Hong Kong), one of our consolidated subsidiaries, and Shenzhen Baoan Foreign Economic Development Trade Corporation as follows:
Outline of the contract
| Subsidiary name | MABUCHI INDUSTRY CO., LTD. (wholly-owned subsidiary of Mabuchi Motor Co., Ltd. in Hong Kong) (hereinafter referred to as "HKM") |
| Type of contract | Contract manufacturing agreement (materials processing contract) |
| Name of the other party | Shenzhen Baoan Foreign Economic Development Trade Corporation |
| Description of contract | Contract manufacturing agreement whereby HKM exports production materials to the factory mentioned below for processing and then re-imports the finished products. |
| Term of contract | from December 1995 to December 2010 |
| Materials processing factory name | COFCO PROPERTY WANBAO ELECTRONIC FACTORY (Internal name: Guangdong Factory No.2) |
| Location of the factory | No.11 Dayang Road, Dayang Synthetical Develop District, Fuyong Town, Shenzhen City, Guangdong Province, China |
Reasons for nonrenewal of the contract
HKM has been manufacturing motors at three motor production factories in Guangdong Province on contract manufacturing (materials processing) bases and supplying motors mainly for customers in the South China region.
The materials processing contract for the above mentioned Guangdong Factory No.2 is due to expire at the end of December 2010. Since it is uncertain whether the materials processing contract system in Shenzhen City will remain effective in the future, it was decided not to renew the contract and to restructure the production bases so as to establish a stable supply base and to enhance the managerial efficiency of the Mabuchi Group. In this context, the production at the materials processing factory is to be transferred to other production bases in Guangdong Province and to the recently-expanded Danang factory in Vietnam.
Taking this opportunity, we will accelerate the restructuring of our production bases, which we have been promoting until now, to further strengthen our competitiveness.
Latest production quantity
| Approximately 14 million motors per month (actual monthly result of December 2009) |
Schedule up to the end of the year
| October 2010 (schedule) | Termination of operations in the factory |
| End of December 2010 | Expiration of the materials processing contract |
Effect on financial performance
The accounting impact on our financial performance which may be caused by the expiration of the materials processing contract is currently under evaluation. The result of the evaluation will be announced publicly pursuant to the rules of the Tokyo Stock Exchange.
