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UNITED STATES SECURITIES AND
EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

Form 20-F

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

For the fiscal year ended March 31, 2003
Commission file number 0-12602



KABUSHIKI KAISHA MAKITA
(Exact name of registrant as specified in its charter)

MAKITA CORPORATION
(Translation of registrants name into English)

Japan
(Jurisdiction of incorporation or organization)

3-11-8, Sumiyoshi-cho, Anjo City, Aichi Prefecture, Japan
(Address of principal executive offices)

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

|                   
|-------------------
|Title of each class
|                   
|None               
|                   

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

* American Depositary Shares
(Title of Class)

** Common Stock
(Title of Class)

|   |  |                                                                                                                                                                                                                        
|-- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|*  |  | American Depositary Receipts evidence American Depositary Shares,
each American Depositary Share representing one share of the
registrants Common Stock.                                                              
|  
|** |  | Effective October 1, 2001, no par value per share. Not for trading,
but only in connection with the registration of American Depositary
Shares, pursuant to the requirements of the Securities and Exchange
Commission.

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

None
(Title of Class)





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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, 2003    |             | March 31, 2003 
|Title of Class                                                          |  | (Tokyo time)      |             | (New York time)
|                                                                        |  |                   |             |                
|Common Stock                                                            |  |                   | 153,006,992 |                 |  |  |           | 
|                                                                        |  |                   |             |                 |  |  |           | 
|American Depositary Shares, each
representing one share of Common Stock |  |                   |             |                 |  |  | 3,824,200 | 

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.

|        |  |       
|------- |  | ------
|Yes [X] |  | No [_]

Indicate by check mark which financial statement item the registrant has elected to follow.

|            |  |            
|----------- |  | -----------
|Item 17 [_] |  | Item 18 [X]





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TABLE OF CONTENTS



|                                  |                                                                                        |                                                                                                       |  |  |  |  |  | 
|--------------------------------- | -------------------------------------------------------------------------------------- | ----------------------------------------------------------------------------------------------------- |  |  |  |  |  | 
|PART I                           
|                                  | Item 1. Identity of Directors, Senior Management and Advisers                         
|                                  | Item 2. Offer Statistics and Expected Timetable                                       
|                                  | Item 3. Key Information                                                               
|                                  |                                                                                        | A. Selected Financial Data                                                                           
|                                  |                                                                                        | B. Capitalization and indebtedness                                                                   
|                                  |                                                                                        | C. Reasons for the offer and use of proceeds                                                         
|                                  |                                                                                        | D. Risk factors                                                                                      
|                                  | Item 4. Information on the Company                                                    
|                                  |                                                                                        | A. History and development of the Company                                                            
|                                  |                                                                                        | B. Business overview                                                                                 
|                                  |                                                                                        | C. Organizational structure                                                                          
|                                  |                                                                                        | D.  Property, plants and equipment                                                                   
|                                  | Item 5. Operating and Financial Review and Prospects                                  
|                                  |                                                                                        | A. Operating results                                                                                 
|                                  |                                                                                        | B. Liquidity and capital resource                                                                    
|                                  |                                                                                        | C. Research and development, patents and licenses                                                    
|                                  |                                                                                        | D. Trend information                                                                                 
|                                  | Item 6. Directors, Senior Management and Employees                                    
|                                  |                                                                                        | A. Directors and senior management                                                                   
|                                  |                                                                                        | B. Compensation                                                                                      
|                                  |                                                                                        | C. Board practies                                                                                    
|                                  |                                                                                        | D. Employees                                                                                         
|                                  |                                                                                        | E. Share ownership                                                                                   
|                                  | Item 7. Major Shareholders and Related Party Transaction                              
|                                  |                                                                                        | A. Major Shareholders                                                                                
|                                  |                                                                                        | B. Related party transactions                                                                        
|                                  |                                                                                        | C. Interest of experts and counsel                                                                   
|                                  | Item 8. Financial Information                                                         
|                                  |                                                                                        | A. Consolidated statement and other financial information                                            
|                                  |                                                                                        | B. Significant changes                                                                               
|                                  | Item 9. The Offer and Listing                                                         
|                                  |                                                                                        | A. Offer and listing details                                                                         
|                                  |                                                                                        | B. Plan of distribution                                                                              
|                                  |                                                                                        | C. Markets                                                                                           
|                                  |                                                                                        | D. Selling shareholder                                                                               
|                                  |                                                                                        | E. Dilution                                                                                          
|                                  |                                                                                        | F. Expenses of the issue                                                                             
|                                  | Item 10. Additional Information                                                       
|                                  | A. Share capital                                                                      
|                                  | B. Memorandum and articles of association                                             
|                                  |                                                                                        | C. Material contracts                                                                                
|                                  |                                                                                        | D. Exchange Controls                                                                                 
|                                  |                                                                                        | E. Taxation                                                                                          
|                                  |                                                                                        | F. Dividends and paying agents                                                                       
|                                  |                                                                                        | G. Statement by experts                                                                              
|                                  |                                                                                        | H. Documents on display                                                                              
|                                  |                                                                                        | I. Subsidiary information                                                                            
|                                  | Item 11. Quantitative and Qualitative Disclosures about Market Risk                   
|                                  | Item 12. Description of Securities Other than Equity Securities                       
|PART II                          
|                                  | Item 13. Defaults, Dividend Arrearages and Delinquencies                              
|                                  | Item 14. Material Modifications to the Rights of Security Holders and Use of Proceeds.
|                                  | Item 15. Control and Procedures                                                       
|                                  | Item 16A. [Reserved]                                                                  
|                                  | Item 16B. Code of Ethics                                                              
|                                  | Item 16C. [Reserved]                                                                  
|                                  | Item 17. Financial Statements                                                         
|                                  | Item 18. Financial Statements                                                         
|                                  | Item 19. Exhibits                                                                     
|                                  |                                                                                        | 1.1 The Articles of Incorporation, as amended and effective as of June 27, 2003 (English translation)
|                                  |                                                                                        | 2.1 Share Handling Regulation, as amended and effective as of June 27, 2003 (English translation)    
|                                  |                                                                                        | 11.1 Code of Ethics                                                                                  
|                                  |                                                                                        | 99.1 906 Certification                                                                               
|SIGNATURES                       
|EX-1.1 ARTICLES OF INCORPORATION 
|EX-2.1 SHARE HANDLING REGULATIONS
|EX-11.1 CODE OF ETHICS           
|EX-99.1 906 CERTIFICATION        



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Table of Contents

PART I

|                                                              |                                                           |  |    |    | 
|------------------------------------------------------------- | --------------------------------------------------------- |  | -- | -- | 
|Item 1. Identity of Directors, Senior Management and Advisors |                                                           |  | 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. Reason for the offer and use of proceed                |  |    | 3  | 
|                                                              | D. Risk Factors                                           |  |    | 3  | 
|Item 4. Information on the Company                            |                                                           |  | 5  |   
|                                                              | A. History and development of the Company                 |  |    | 5  | 
|                                                              | B. Business overview                                      |  |    | 6  | 
|                                                              | C. Organizational structure                               |  |    | 11 | 
|                                                              | D. Property, plant and equipment                          |  |    | 13 | 
|Item 5. Operating and Financial Review and Prospects          |                                                           |  | 14 |   
|                                                              | A. Operating results                                      |  |    | 14 | 
|                                                              | B. Liquidity and capital resources                        |  |    | 22 | 
|                                                              | C. Research and development, patents and licenses         |  |    | 25 | 
|                                                              | D. Trend information                                      |  |    | 26 | 
|Item 6. Directors, Senior Management and Employees            |                                                           |  | 27 |   
|                                                              | A. Directors and senior management                        |  |    | 27 | 
|                                                              | B. Compensation                                           |  |    | 30 | 
|                                                              | C. Board practices                                        |  |    | 30 | 
|                                                              | D. Employees                                              |  |    | 31 | 
|                                                              | E. Share ownership                                        |  |    | 31 | 
|Item 7. Major Shareholders and Related Party Transactions     |                                                           |  | 32 |   
|                                                              | A. Major shareholders                                     |  |    | 32 | 
|                                                              | B. Related party transactions                             |  |    | 33 | 
|                                                              | C. Interest of experts and counsel                        |  |    | 34 | 
|Item 8. Financial Information                                 |                                                           |  | 34 |   
|                                                              | A. Consolidated statement and other financial information |  |    | 34 | 
|                                                              | B. Significant Changes                                    |  |    | 34 | 
|Item 9. The Offer and Listing                                 |                                                           |  | 35 |   
|                                                              | A. Offer and listing details                              |  |    | 35 | 
|                                                              | B. Plant of distribution                                  |  |    | 35 | 
|                                                              | C. Markets                                                |  |    | 36 | 
|                                                              | D. Selling shareholders                                   |  |    | 36 | 
|                                                              | E. Dilution                                               |  |    | 36 | 
|                                                              | F. Expenses of the issue                                  |  |    | 36 | 
|Item 10. Additional Information                               |                                                           |  | 36 |   
|                                                              | A. Share Capital                                          |  |    | 36 | 
|                                                              | B. Memorandum and Articles of Association                 |  |    | 36 | 





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|                                                                                      |                                                                                                             |                                |          |         |    |  |  | 
|------------------------------------------------------------------------------------- | ----------------------------------------------------------------------------------------------------------- | ------------------------------ | -------- | ------- | -- |  |  | 
|                                                                                      |                                                                                                             | C. Material contracts          |          |         | 44 | 
|                                                                                      |                                                                                                             | D. Exchange controls           |          |         | 44 | 
|                                                                                      |                                                                                                             | E. Taxation                    |          |         | 45 | 
|                                                                                      |                                                                                                             | F. Dividends and paying agents |          |         | 49 | 
|                                                                                      |                                                                                                             | G. Statement by experts        |          |         | 50 | 
|                                                                                      |                                                                                                             | H. Documents on display        |          |         | 50 | 
|                                                                                      |                                                                                                             | I. Subsidiary information      |          |         | 50 | 
|Item 11. Quantitative and Qualitative Disclosures about Market Risk                   |                                                                                                             |                                | 50       |        
|Item 12. Description of Securities Other than Equity Securities                       |                                                                                                             |                                | 52       |        
|                                                                                      |                                                                                                             |                                |          |        
|                                                                                      |                                                                                                             |                                |          | PART II |    |  |  | 
|                                                                                      |                                                                                                             |                                |          |        
|Item 13. Defaults, Dividend Arrearages and Delinquencies                              |                                                                                                             |                                | 53       |        
|Item 14. Material Modifications to the Rights of Security Holders and Use of Proceeds |                                                                                                             |                                | 53       |        
|Item 15. Controls and Procedures                                                      |                                                                                                             |                                | 53       |        
|Item 16A. [Reserved]                                                                  |                                                                                                             |                                | 53       |        
|Item 16B. Code of ethics                                                              |                                                                                                             |                                | 53       |        
|Item 16C. [Reserved]                                                                  |                                                                                                             |                                | 53       |        
|                                                                                      |                                                                                                             |                                |          |        
|                                                                                      |                                                                                                             |                                | PART III |         |    |  | 
|                                                                                      |                                                                                                             |                                |          |        
|Item 17. Financial Statements                                                         |                                                                                                             |                                | 54       |        
|Item 18. Financial Statements                                                         |                                                                                                             |                                | 54       |        
|Item 19. Exhibits                                                                     |                                                                                                             |                                | 54       |        
|                                                                                      | 1.1       The Articles of Incorporation, as amended and effective as of June 27, 2003
(English translation) |                                |          |         |   
|                                                                                      | 2.1       Share Handling Regulation, as amended and effective as of June 27, 2003
(English translation)     |                                |          |         |   
|                                                                                      | 11.1     Code of Ethics                                                                                     |                                |          |         |   
|                                                                                      | 99.1     906 Certification                                                                                  |                                |          |         |   





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As used in this annual report, the term fiscal preceding a year means the
twelve -month period ended March 31 of the year referred to. For example,
fiscal 2003 refer to the twelve-month period ended March 31, 2003. All other
references to years refer to the applicable calendar year.

All information contained in this annual report is as of March 31, 2003 unless
otherwise specified.

In parts of this annual report, amounts reported in Japanese yen have been
translated into U.S. dollars for the convenience of readers. Unless otherwise
noted, the rate used for this translation was ¥118 = U.S.$1, the approximate
exchange rate on the noon buying rate for yen in New York City as certified
for customs purposes by the Federal Reserve Bank of New York on March 31,
2003. On July 25, 2003 the noon buying rate for yen cable transfer in New York
City as reported by the Federal Reserve Bank of New York was ¥118.82 = $1.

As used herein, Makita refers to Makita Corporation (the Company) and its
consolidated subsidiaries unless the context otherwise indicates.

Cautionary Statement with Respect to Forward-Looking Statements

Except for the historical information contained herein, the statements made in
this annual report with respect to Makitas plans, strategies, beliefs and
other prospective matters are forward-looking statements that involve risks
and uncertainties. From time to time, oral or written forward-looking
statements may also be included in other materials released to the public.
Potential risks and uncertainties include, without limitation:

|       |  |                                                                                                                            
|------ |  | ---------------------------------------------------------------------------------------------------------------------------
|(i)    |  | Economic conditions may affect Makitas Sales;                                                                             
|(ii)   |  | Geographic concentration of Makitas main facilities may cause adverse
effects to Makitas business activities;            
|(iii)  |  | Environmental or other regulations may adversely affect Makitas
financial results;                                        
|(iv)   |  | Currency exchange rate fluctuations may harm Makitas financial
statements;                                                
|(v)    |  | Fluctuation of securities market may adversely affect Makitas financial
statements;                                       
|(vi)   |  | If Makita cannot respond to changes of construction method and demand,
Makitas sales may be adversely affected;           
|(vii)  |  | The rapidly expanding presence of China-based power tools manufacturers
may harm Makitas sales results                    
|(viii) |  | If Makita is not capable to develop attractive products, Makitas sales
activities may be adversely affected;              
|(ix)   |  | If Makita fails to maintain cooperative relationships with significant
customers, Makitas sales may be seriously affected;
|(x)    |  | If suppliers fail to deliver as scheduled, Makitas production
activities may be adversely affected; and                   
|(xi)   |  | Product Liability litigation or recalls may harm Makitas financial
statements.                                            

These risks, uncertainties and other factors also include those identified in
Operating and Financial Review and Prospects, Key
Information Risk
Factors and Information on the Company  set forth elsewhere in this annual
report. Makita does not undertake to release the results of any revisions of
forward-looking statements to reflect future events or circumstances.





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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, 2003 has
been derived from Makitas audited consolidated financial statements. It should
be read in conjunction with Makitas audited consolidated balance sheets as of
March 31, 2002 and 2003, the related consolidated statements of income,
shareholders equity and cash flows for each of the three years ended March 31,
2003 and the notes thereto that appear elsewhere in this annual report.
Makitas consolidated financial statements were prepared in conformity with
accounting principles generally accepted in the United States, or U.S. GAAP and
were included in its Japanese Securities Reports filed with the Director of the
Kanto Local Finance Bureau.

|                                                  |         |   |                                             |      |  |             |         |      |      |   |         |      |  |   |         |     |  |      |         |      |  |   |              |      | 
|------------------------------------------------- | ------- | - | ------------------------------------------- | ---- |  | ----------- | ------- | ---- | ---- | - | ------- | ---- |  | - | ------- | --- |  | ---- | ------- | ---- |  | - | ------------ | ---- | 
|                                                  |         |   |                                             |      |  |             |         |      |      |   |         |      |  |   |         |     |  |      |         |      |  |   | U.S. Dollars |     
|                                                  |         |   | (Millions of yen, except per share amounts) |      |  | (thousands) |        
|                                                  |         |   |                                             |      |  |             |        
|                                                  |         |   | Year ended March 31,                        |     
|                                                  |         |   |                                             |     
|                                                  |         |   | 1999                                        |      |  | 2000        |         |      | 2001 |   |         | 2002 |  |   | 2003    |     |  | 2003 |        
|                                                  |         |   |                                             |      |  |             |         |      |      |   |         |      |  |   |         |     |  |      |        
|Net sales                                         |         | ¥ | 180,791                                     |      |  | ¥           | 170,227 |      |      | ¥ | 156,314 |      |  | ¥ | 166,169 |     |  | ¥    | 175,603 |      |  | $ | 1,488,161    |     
|Operating income                                  |         |   | 12,838                                      |      |  |             | 9,924   |      |      |   | 7,093   |      |  |   | 5,873   |     |  |      | 12,468  |      |  |   | 105,661      |     
|Net income                                        |         |   | 3,246                                       |      |  |             | 4,187   |      |      |   | 2,133   |      |  |   | 133     |     |  |      | 6,723   |      |  |   | 56,975       |     
|Net income per share of
Common stock and per ADS: |         |   |                                             |      |  |             |         |      |      |   |         |      |  |   |         |     |  |      |         |      |  |   |              |     
|                                                  | Basic   |   |                                             | 20.2 |  |             |         | 26.2 |      |   |         | 13.6 |  |   |         | 0.9 |  |      |         | 45.3 |  |   |              | 0.38 | 
|                                                  | Diluted |   |                                             | 20.1 |  |             |         | 25.9 |      |   |         | 13.6 |  |   |         | 0.9 |  |      |         | 44.2 |  |   |              | 0.37 | 

Notes:

|1 |  | Effective April 1, 2002, the Company adopted Emerging Issues Task Force
(EITF) Issue 01-9, Accounting for Consideration Given by a Vendor to a
Customer or a Reseller of the Vendors Products (EITF 01-9), issued by
the EITF in November 2001. The Companys adoption of EITF 01-9 resulted
in a change in the classification of certain incentive offerings.
Previously, marketing incentive payments and similar payments were
accounted for within selling, general and administrative expenses or
nonoperating expenses. Currently, the portion of those payments that are
effectively the same as price discounts are deducted from net sales. As a
result of this change, the Company has adjusted its results for prior
fiscal years to conform to the new accounting classification.
|- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|2 |  | Certain reclassifications have been made to the prior years
consolidated financial statements to conform to the presentation used for
the year ended March 31, 2003. Certain gains and losses on sale and
disposal of property, plant and equipment, which were previously recorded
in other income (expenses), are recorded in SG&A expenses in the fiscal
year ended March 31, 2003.                                                                                                                                                                                                                                                                                                                                                                                                           

1



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|                                                                   |  |                                             |         |  |             |  |         |      |  |  |         |  |  |      |         |  |      |  |         |  |  |              |           | 
|------------------------------------------------------------------ |  | ------------------------------------------- | ------- |  | ----------- |  | ------- | ---- |  |  | ------- |  |  | ---- | ------- |  | ---- |  | ------- |  |  | ------------ | --------- | 
|                                                                   |  |                                             |         |  |             |  |         |      |  |  |         |  |  |      |         |  |      |  |         |  |  | U.S. Dollars |          
|                                                                   |  | (Millions of yen, except per share amounts) |         |  | (thousands) | 
|                                                                   |  |                                             |         |  |             | 
|                                                                   |  | Year ended March 31,                        |        
|                                                                   |  |                                             |        
|                                                                   |  | 1999                                        |         |  | 2000        |  |         | 2001 |  |  | 2002    |  |  | 2003 |         |  | 2003 | 
|                                                                   |  |                                             |         |  |             |  |         |      |  |  |         |  |  |      |         |  |      | 
|Cash and cash
equivalents, time
deposits and
marketable
securities |  |                                             | ¥71,971 |  |             |  | ¥79,104 |      |  |  | ¥71,340 |  |  |      | ¥63,393 |  |      |  | ¥64,083 |  |  |              | $543,076  | 
|Net working capital                                                |  |                                             | 145,581 |  |             |  | 143,049 |      |  |  | 142,700 |  |  |      | 144,929 |  |      |  | 141,759 |  |  |              | 1,201,347 | 
|Total assets                                                       |  |                                             | 303,690 |  |             |  | 288,847 |      |  |  | 293,995 |  |  |      | 285,138 |  |      |  | 278,600 |  |  |              | 2,361,017 | 
|Short-term borrowings                                              |  |                                             | 13,784  |  |             |  | 10,786  |      |  |  | 17,743  |  |  |      | 8,984   |  |      |  | 2,892   |  |  |              | 24,508    | 
|Long-term
indebtedness                                             |  |                                             | 28,983  |  |             |  | 24,479  |      |  |  | 21,135  |  |  |      | 20,102  |  |      |  | 19,843  |  |  |              | 168,161   | 
|Shareholders equity                                               |  |                                             | 204,698 |  |             |  | 197,834 |      |  |  | 192,547 |  |  |      | 189,939 |  |      |  | 182,400 |  |  |              | 1,545,763 | 

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:

|                    |  |        |  |  |        |  |  |         |  |  |          |  |  |  |  | 
|------------------- |  | ------ |  |  | ------ |  |  | ------- |  |  | -------- |  |  |  |  | 
|Year ended March 31 |  | High   |  |  | Low    |  |  | Average |  |  | Year-end | 
|                    |  |        |  |  |        |  |  |         |  |  |          | 
|1999                |  | 108.83 |  |  | 147.14 |  |  | 128.10  |  |  | 118.43   | 
|2000                |  | 101.53 |  |  | 124.45 |  |  | 110.02  |  |  | 102.73   | 
|2001                |  | 104.19 |  |  | 125.54 |  |  | 111.65  |  |  | 125.54   | 
|2002                |  | 115.89 |  |  | 134.77 |  |  | 125.64  |  |  | 132.70   | 
|2003                |  | 115.71 |  |  | 133.40 |  |  | 121.94  |  |  | 118.07   | 

|     |  |         |  |  |          |  |  |        |  |  |        |  |  |        |  |  |        |  |  |  |  |  |  | 
|---- |  | ------- |  |  | -------- |  |  | ------ |  |  | ------ |  |  | ------ |  |  | ------ |  |  |  |  |  |  | 
|2003 |  | January |  |  | February |  |  | March  |  |  | April  |  |  | May    |  |  | June   | 
|     |  |         |  |  |          |  |  |        |  |  |        |  |  |        |  |  |        | 
|High |  | 117.80  |  |  | 117.14   |  |  | 116.47 |  |  | 118.25 |  |  | 115.94 |  |  | 117.46 | 
|Low  |  | 120.18  |  |  | 121.30   |  |  | 121.42 |  |  | 120.55 |  |  | 119.50 |  |  | 119.87 | 

On July 25, 2003 the noon buying rate for yen cable transfer in New York City
as reported by the Federal Reserve Bank of New York was ¥118.82 =$1.

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

|                    |  |         |  |  |                 |  |  |         |  |  |          |  |  |  |  | 
|------------------- |  | ------- |  |  | --------------- |  |  | ------- |  |  | -------- |  |  |  |  | 
|                    |  | In Yen  |  |  | In U.S. Dollars | 
|                    |  |         |  |  |                 | 
|Year ended March 31 |  | Interim |  |  | Year-end        |  |  | Interim |  |  | Year-end | 
|                    |  |         |  |  |                 |  |  |         |  |  |          | 
|1999                |  | 9.0     |  |  | 9.0             |  |  | 0.07    |  |  | 0.07     | 
|2000                |  | 9.0     |  |  | 10.0            |  |  | 0.08    |  |  | 0.10     | 
|2001                |  | 9.0     |  |  | 9.0             |  |  | 0.07    |  |  | 0.07     | 
|2002                |  | 9.0     |  |  | 9.0             |  |  | 0.07    |  |  | 0.07     | 
|2003                |  | 9.0     |  |  | 9.0             |  |  | 0.07    |  |  | 0.07     | 

Note:

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

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B.     Capitalization and indebtedness

Not applicable

C.     Reasons for the offer and use of proceeds

Not applicable

D.     Risk factors

This section contains forward-looking statements that are subject to the
Cautionary Statement with Respect to Forward-Looking Statements appearing
elsewhere in this annual report. Risks to Makita are also discussed elsewhere
in this annual report.

Economic conditions may affect Makitas Sales.
The demand for power tools is greatly influenced by economic conditions,
especially the trend of housing starts and corporate capital expenditure. The
economic stagnation or downturn in the main markets for Makita, such as Japan,
North America, Europe, and Asia, may thus adversely affect the sales,
consolidated financial condition and results of operations of Makita. At
present, Makita expects for the foreseeable future as follows.



| |  |  |  Inactivity of demand related to housing will continue in Japan.
| |  |  | -----------------------------------------------------------------
| |  |  |  The economic trend in North America will be uncertain.         
| |  |  |  Stagnation of business will continue in Western Europe.        
| |  |  |  Economical recovery in Asia will be slow.                      

Geographic concentration of Makitas main facilities may cause adverse effects
to Makitas business activities.
Makitas main operational facilities including its headquarters, factories and
its information system center, as well as those of its main suppliers, are
located in Aichi, Japan. Further, each of Makitas manufacturing facilities in
Aichi, Japan and Kunshan, China accounts for a substantial portion of Makitas
manufacturing operations. The aggregate production volume at such factories
located in Japan and China constituted approximately 70% of Makitas total
production volume in fiscal 2003. Due to this geographic concentration of
operational activities, Makitas operations may be significantly affected by
natural disasters and catastrophic losses including earthquakes, floods, fire,
power outage and suspension of water supply. For instance, Makitas main
facilities are located in a region where the danger of an earthquake is
considered to be relatively high, and a major earthquake may cause serious
damage resulting in a substantial reduction in Makitas operating capabilities.
In addition, Makitas operations in China may be further restricted by reasons
such as changes in laws and regulations, tariffs, labor disputes and other
emergencies. There is no assurance that Makita can prevent or mitigate the
damages caused by such events and as a result, such events may adversely affect
Makitas consolidated financial condition and results of operations.

Environmental or other regulations may adversely affect Makitas financial
results.
Makitas business is subject to various regulations including environmental,
commercial, export and import, taxation and product safety standards. If Makita
is unable to comply with these regulations, its activity may be substantially
restricted. Even if Makita is able to comply, the costs related to compliance
may significantly increase overall costs. As a result, Makitas consolidated
financial condition and results of operations may be adversely affected.
With respect to environmental regulations, Makita, at present, is working to
devise measures to comply with two EU directives announced on February 13,
2003. One is Waste Electrical and Electronic Equipment (WEEE),

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which requires
recycling and reproduction of almost all electric products. The other is
Restriction of the Use of Certain Hazardous Substances (RoHS), which forbids
the use of toxic substances, such as a lead, for products. The effects of these
directives may adversely affect Makitas consolidated financial condition and
results of operations.

Currency exchange rate fluctuations may seriously harm Makitas financial
statements.
Local currency denominated financial results in each of Makitas subsidiaries
around the world are translated into yen by applying the average market rate
during each financial period and recorded on Makitas consolidated statement of
income. Local currency-denominated assets and liabilities/shareholders equity
are translated into yen by applying the market rate at the end of each
financial period and recorded on Makitas consolidated balance sheets.
Accordingly, the operating results, assets, and liabilities/shareholders
equity are subject to foreign exchange fluctuations. In recent periods, net
sales reported in yen in accordance with U.S. GAAP have generally been more
favorable than those results in local currency reflecting the depreciation of
yen against major currencies in which products were sold.
Makita derives a majority of its net sales from products sold to customers
located outside of Japan. Approximately 78% of Makitas fiscal 2003 net sales
were derived from products sold overseas. A strengthening in the yen relative
to the local currency in which Makita conducts business, in particular the U.S.
dollar and euro, would increase the prices of Makitas products as stated in
such local currencies and may adversely affect the sales in such countries.
In addition, operating income and losses are highly sensitive to the yens
appreciation because Makitas research and development and headquarter
functions are concentrated in Japan so that the ratio of yen-denominated costs
to total costs is quite high. Although Makita engages in hedging transactions
for actual requirements to minimize the negative effects from short-term
fluctuations of foreign exchange rates among major currencies such as the U.S.
dollar, euro and yen, mid-to-long-term volatile changes of the exchange rate
levels make it difficult for Makita to execute planned procurement, production,
logistics, and sales activities and may adversely affect Makitas consolidated
financial condition and results of operations.

Fluctuation of securities market may adversely affect Makitas financial
statements.
Makita owns Japanese equity and Japanese equity-related financial commodity as
available-for-sale securities. The value of equity owned by Makita is
influenced by the relevant price of equity quoted on the security markets, and
has generally decreased in recent years in accordance with the continuing
Japanese economic stagnation. A further decline in the securities market may
adversely affect the consolidated financial condition and results of operations
of Makita.

If Makita cannot respond to changes of construction method and demand, Makitas
sales may be adversely affected.
In recent years, the demand for various power tools is changing significantly
following the shift in the housing construction method, especially in Japan.
For example, with the prevalence of the prefabrication construction method, use
of power tools by carpenters at construction sites has been decreasing. In
addition, the demand for conventional woodworking tools has been decreasing,
while the demand for cutting tools and connecting tools has been increasing.
Accordingly, in the event Makita is incapable of responding to rapid shift in
demand for various power tools, Makitas sales will decrease and may adversely
affect Makitas consolidated financial condition and results of operations.

The rapidly expanding presence of China-based power tools manufacturers may
harm Makitas sales results.
Power tool companies in China are currently expanding their presence in the
global market, in particular with products in the low price range, and as a
result price competition in certain product categories in certain regions is
intensifying. In the event technology and marketing activities of Chinese
companies further improve, competition in

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high-end products may also intensify,
and may adversely affect the future consolidated financial condition and
results of operations of Makita.

If Makita is not capable to develop attractive products, Makitas sales
activities may be adversely affected.
Makitas main competitive strengths are in its diversified lineup of
high-quality and high-performance products as well as its extensive sales and
after-sales service network that covers regions worldwide. Despite these
efforts, there can be no assurance that newly developed products will be
successfully accepted in the market, nor can there be assurance that Makita
will be able to respond timely to changes in the customer needs. If Makita
fails to develop attractive products, Makitas consolidated financial condition
and results of operations will be adversely affected as a result of decreased
sales.

If Makita fails to maintain cooperative relationships with significant
customers, Makitas sales may be seriously affected.

Makita has several significant customers. To lose these customers or to face a
situation in which cooperative relationship is ruined with these customers
could materially harm Makitas business. If Makita loses these customers and
cannot develop new distribution channels to replace these customers, Makitas
consolidated financial condition and results of operations will be adversely
affected as a result of decreased sales.

If suppliers fail to deliver as scheduled, Makitas production activities may
be adversely affected.
Makitas production activity is greatly dependent on materials and parts being
supplied and delivered as scheduled. In addition, Makita purchases certain
parts only from one supplier. If such supplier cannot deliver the required
quality and quantity of materials and parts in a timely manner, for reasons
such as natural disasters, regulations and inadequate production capacity,
Makitas production may be harmed and Makitas consolidated financial condition
and results of operations can be adversely affected.

Product Liability litigation or recalls may harm Makitas financial statements.
Although Makita manufactures various power tools at factories worldwide
according to internationally accepted quality control standards, Makita cannot
guarantee that products will not have defects or be subject to recalls in the
future. A large-scale recall or a product liability litigation resulting in
large damages may have a serious adverse effect to the consolidated financial
condition and results of operations of Makita.

Item 4. Information on the Company

A. History and development of the Company

The Company traces its origin to an electrical repair workshop founded in
Nagoya in 1915, and was incorporated under the laws of Japan on March 21, 1938
under the name of Makita Electric Works, Ltd. as a joint stock corporation
under the Commercial Code of Japan. Under the presidency of the late Mr.
Jujiro Goto, commenced in 1958 the manufacture of electric power tools and, by
1969 had reached its present leading position in the Japanese market. In 1970,
the Company decided to take advantage of the relatively greater potential for
growth in the market for its products outside Japan 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 existing European subsidiaries. At
present, Makita sells its products in over 100 countries around the world.

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Initially 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, the name of which was changed to Dolmar
GmbH (Dolmar) in September 1991, 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.

Makita presently manufactures power tools in seven countries globally: the
United States, Canada, Brazil, the United Kingdom, Germany, China, and Japan.
Our production facilities in each of these countries play a key role in
allowing us to respond promptly to the needs of customers in specific
geographic markets.
Also in March 2001, Makita established Makita (Shanghai) Trading Co., Ltd., to
handle the export of Chinese-manufactured low-cost components to our other
global manufacturing plants as well as to our sales companies throughout the
world.

Makita Corporations registered office is located at 3-11-8, Sumiyoshi-cho,
Anjo, Aichi 446-8502, Japan, and its telephone number is +81-566-98-1711.

Capital expenditures
Total capital expenditures amounted to ¥ 8,558 million, ¥5,958 million and
¥5,691 million for fiscal 2001, 2002 and 2003, respectively. Capital
expenditures in fiscal 2003 were mainly for the purchase of molds for new
products and construction of a new office building for the headquarters in
Japan. The capital investments of the Company amounted to approximately ¥3.1
billion, while the capital investments of overseas subsidiaries including
manufacturing subsidiaries in such countries as Germany, China, and the United
States amounted to approximately ¥2.6 billion. As of July 23, 2003, Makita
(Kunshan) Co., Ltd., was constructing an assembly plant that is scheduled to
be completed by the end of October 2003. These capital expenditures have been
funded through internal sources.

B.     Business overview

Makitas power tools consist of portable woodworking tools, primarily saws and
planers, and portable general purpose tools, primarily drills, grinders and
sanders. In addition, Makita produces a line of stationary woodworking
machines. For the fiscal year ended March 31, 2003, approximately 22.1% of
Makitas sales were made in Japan, most of which, Makita estimates, were to
commercial and professional users such as those engaged in timber and metal
processing, carpentry, and concrete and masonry works.

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Products
The following table sets forth consolidated net sales of Makita by product
categories for the respective periods indicated:

|                                |       |   |                                                  |         |              |  |      |       |      |   |        |         |  |  |      |       |   |   |        |         |  |  |      |       |   |   |         |           | 
|------------------------------- | ----- | - | ------------------------------------------------ | ------- | ------------ |  | ---- | ----- | ---- | - | ------ | ------- |  |  | ---- | ----- | - | - | ------ | ------- |  |  | ---- | ----- | - | - | ------- | --------- | 
|                                |       |   | (Millions of yen, except for percentage amounts) |         | U.S. Dollars
|                                |       |   | Consolidated Net Sales by Product Categories     |         | (thousands) 
|                                |       |   |                                                  |         |             
|                                |       |   | Year ended March 31,                            
|                                |       |   |                                                 
|                                |       |   | 2001                                             |         | 2002         |  | 2003 |       | 2003
|                                |       |   |                                                  |         |              |  |      |       |     
|Portable
woodworking tools      |       | ¥ | 29,088                                           |         |              |  | 18.6 | %     |      | ¥ | 32,571 |         |  |  | 19.6 | %     |   | ¥ | 33,637 |         |  |  | 19.1 | %     |   | $ | 285,059 |          
|Portable general
purpose tools  |       |   | 80,609                                           |         |              |  | 51.6 | %     |      |   | 85,215 |         |  |  | 51.3 | %     |   |   | 92,144 |         |  |  | 52.5 | %     |   |   | 780,882 |          
|Stationary
woodworking
machines |       |   | 2,580                                            |         |              |  | 1.6  | %     |      |   | 2,244  |         |  |  | 1.3  | %     |   |   | 1,924  |         |  |  | 1.1  | %     |   |   | 16,305  |          
|Other                           |       |   | 17,200                                           |         |              |  | 11.0 | %     |      |   | 17,916 |         |  |  | 10.8 | %     |   |   | 19,142 |         |  |  | 10.9 | %     |   |   | 162,220 |          
|Parts and repairs               |       |   | 26,837                                           |         |              |  | 17.2 | %     |      |   | 28,223 |         |  |  | 17.0 | %     |   |   | 28,756 |         |  |  | 16.4 | %     |   |   | 243,695 |          
|                                |       |   |                                                  |         |              |  |      |       |      |   |        |         |  |  |      |       |   |  
|                                | Total |   |                                                  | 156,314 |              |  |      | 100.0 | %    |   |        | 166,169 |  |  |      | 100.0 | % |   |        | 175,603 |  |  |      | 100.0 | % |   |         | 1,488,161 | 
|                                |       |   |                                                  |         |              |  |      |       |      |   |        |         |  |  |      |       |   |  

Note:

| | Effective April 1, 2002, the Company adopted Emerging Issues Task Force
(EITF) Issue 01-9, Accounting for Consideration Given by a Vendor to a
Customer or a Reseller of the Vendors Products (EITF 01-9), issued by the
EITF in November 2001. The Companys adoption of EITF 01-9 resulted in a
change in the classification of certain incentive offerings. Previously,
marketing incentive payments and similar payments were accounted for within
selling, general and administrative expenses or nonoperating expenses.
Currently, the portion of those payments that are effectively the same as
price discounts are deducted from net sales. As a result of this change, the
Company has adjusted its results for prior fiscal years to conform to the new
accounting classification.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Portable woodworking tools

Portable woodworking tools consist mainly of saws, planers, mortisers, groove
cutters, routers, trimmers, nailers and tackers. Circular saws, which are
primarily sold to carpenters in the homebuilding industry, account for a
substantial portion of Makitas output of saws. The balance of the saw output
is made up of jigsaws, sold primarily to carpenters and other woodworkers for
delicate work, and recipro saws used for working in confined spaces unsuited
to conventional saws.
Planers, which are used exclusively for woodworking, are sold principally to
carpenters. Apart from flat-surfaced planers, which are manufactured in
varying widths, Makita also produces curved planers for use on concave
surfaces. Mortisers are used for chiseling holes in wood, and groove cutters
are used to install sliding windows, in each case almost exclusively by
carpenters in Japan.

Routers and trimmers are used principally by carpenters in the homebuilding
industry for door and window cutting, pattern cutting and other interior
decorative work. Nailers are used primarily for light woodwork in homebuilding
and tackers are used to make temporary attachments in house-finishing and for
furniture-making, in each case principally in Japan.

Among the Companys main products newly developed during the fiscal year are a
slide compound miter saw with a laser function, top-handle-type and
barrel-handle-type jig saws, and electronic circular saws that are lighter than
previous models and have electronic blade-speed controls.

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Portable general purpose tools

Portable general purpose tools include drills, hammer drills, rotary hammers,
electric breakers (jackhammers), grinders, sanders, cutters, cutting machines,
nibblers and shears, screwdrivers and
impact wrenches. Most of these tools are used for working on metal and
materials other than wood, although many may be used in woodworking as well.

Drills are typical power tools used for drilling in metals, wood and plastics.
They are classified into pistol-grip drills, D-handle drills, spade-handle
drills and angle drills, according to their configuration. Various kinds of
cordless drills are also available. Some of them are equipped with a
screwdriving mechanism and called cordless driver drills. Hammer drills are
equipped with a hammering function, but can also be used as conventional
drills; they are used principally on metal and masonry in the civil
engineering and electrical contracting industries. Rotary hammers, which are
used exclusively on concrete in the construction industry, are equipped with a
rotary function, but can also be used as ordinary hammers. Breakers are used
for shattering hard surfaces, principally concrete.

Grinders and sanders are used for smoothing and finishing. Sanders may also be
used for polishing. Grinders are used on metal, and sanders are used on metal,
wood, stone and concrete. Grinders are divided into portable disc grinders and
bench grinders, and sanders are classified into portable disc sanders and belt
sanders.

Cutters and cutting machines have similar functions, although cutters are
designed to be hand-held and cutting machines are stationary. Cutters have a
diamond cutting surface and are used on tile, brick, concrete and stone.
Cutting machines have a carborundum cutting surface and are used principally
on metal.

Impact wrenches are used mainly in the construction industry and screwdrivers
are used in construction work and by electricians.

Among the Companys main products newly developed during the fiscal year are
an impact driver drills that features both increased driving speed and
reduced weight, a high-precision rechargeable screwdriver for use in
factories, and an demolition hammer that meets the 2006 European
anti-noise-pollution standards. Newly developed products in the
relatively low-priced Maktec line designed to overcome competition from
low-priced power tools of Chinese manufacturers include hammer drills,
disc grinders, and drills.

Stationary woodworking machines

Stationary woodworking machines consist mainly of planer-jointers, wood
surfacers, band saws and table saws, all of which are installed in the
workshop and used for surfacing and cutting wood.

Other products

Other products include chain saws, hand-held vacuum cleaners for home use,
industrial vacuum cleaners, submersible pumps and garden tools such as hedge
trimmers.

Among the Companys main products newly developed during the fiscal year are a
hedge trimmer with increased clipping power.

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Parts, repairs and accessories

Makita manufactures and markets a variety of parts for its products and
performs repair work as part of its after-sale services.

In product development, Makita focuses on creating user-friendly products that
enhance the work environment. Makita has developed and introduced such user-
and environment-friendly products as circular saws with dust bags to prevent
the dispersion of sawdust while cutting, low-noise impact drivers, and
low-vibration hammer drills.

Principal Markets, Distribution and After-Sale Services
The following table sets forth consolidated net sales by geographic area for
the respective periods indicated:

|               |       |   |                                             |         |              |  |      |       |      |   |        |         |  |  |      |       |   |   |        |         |  |  |      |       |   |   |         |           | 
|-------------- | ----- | - | ------------------------------------------- | ------- | ------------ |  | ---- | ----- | ---- | - | ------ | ------- |  |  | ---- | ----- | - | - | ------ | ------- |  |  | ---- | ----- | - | - | ------- | --------- | 
|               |       |   | (Millions of yen, except percentage amount) |         | U.S. Dollars | 
|               |       |   | Consolidated Net Sales by Geographic Area   |         | (thousands)  | 
|               |       |   |                                             |         |              | 
|               |       |   | Year ended March 31,                        |        
|               |       |   |                                             |        
|               |       |   | 2001                                        |         | 2002         |  | 2003 |       | 2003 |  
|               |       |   |                                             |         |              |  |      |       |      |  
|Japan          |       | ¥ | 41,849                                      |         |              |  | 23.8 |       |      | ¥ | 39,510 |         |  |  | 23.8 |       |   | ¥ | 38,781 |         |  |  | 22.1 |       |   | $ | 328,653 |          
|North America  |       |   | 42,390                                      |         |              |  | 27.1 |       |      |   | 48,337 |         |  |  | 29.1 |       |   |   | 45,573 |         |  |  | 26.0 |       |   |   | 386,212 |          
|Europe         |       |   | 43,221                                      |         |              |  | 27.7 |       |      |   | 48,486 |         |  |  | 29.2 |       |   |   | 57,648 |         |  |  | 32.8 |       |   |   | 488,542 |          
|Southeast Asia |       |   | 12,006                                      |         |              |  | 7.7  |       |      |   | 12,373 |         |  |  | 7.4  |       |   |   | 13,774 |         |  |  | 7.8  |       |   |   | 116,729 |          
|Other          |       |   | 16,848                                      |         |              |  | 13.7 |       |      |   | 17,463 |         |  |  | 10.5 |       |   |   | 19,827 |         |  |  | 11.3 |       |   |   | 168,025 |          
|               |       |   |                                             |         |              |  |      |       |      |   |        |         |  |  |      |       |   |  
|               | Total |   | ¥                                           | 156,314 |              |  |      | 100.0 | %    |   | ¥      | 166,169 |  |  |      | 100.0 | % |   | ¥      | 175,603 |  |  |      | 100.0 | % |   | $       | 1,488,161 | 
|               |       |   |                                             |         |              |  |      |       |      |   |        |         |  |  |      |       |   |  

Note:

| | Effective April 1, 2002, the Company adopted Emerging Issues Task Force
(EITF) Issue 01-9, Accounting for Consideration Given by a Vendor to a
Customer or a Reseller of the Vendors Products (EITF 01-9), issued by the
EITF in November 2001. The Companys adoption of EITF 01-9 resulted in a
change in the classification of certain incentive offerings. Previously,
marketing incentive payments and similar payments were accounted for within
selling, general and administrative expenses or nonoperating expenses.
Currently, the portion of those payments that are effectively the same as
price discounts are deducted from net sales. As a result of this change, the
Company has adjusted its results for prior fiscal years to conform to the new
accounting classification.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Japan

Makita estimates that most of the domestic sales of Makitas products are made
to commercial users. The Japanese Do It Yourself, or DIY, market for power
tools is growing but the pace of growth is gradual.

Makita attributes its leading position in the Japanese market to the close and
frequent contact that maintains with retailers and users of Makita products.
While Makitas major competitors rely primarily on wholesale distributors for
all aspects of distribution and servicing, Makita has approximately 700
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. Each such employee
carries a small inventory of Makitas products in a light truck or van, takes
orders directly from retailers and makes deliveries.

In addition, Makita has two distribution centers in Osaka and Saitama
prefecture. These distribution centers strengthen Makitas distribution and
after-sale service functions.
Although technically most of Makitas products are sold through 15
distributors, Makita generally limits the function of these distributors to
the collection of payments from retailers. Each distributor bears the risk of
any bad debts of the retailers for which it has responsibility. The payments
by the distributors to
Makita are in most cases

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made within 30 to 60 days after sale. The effect of
this arrangement is that, while Makita has direct access to its customers for
sales, deliveries and after-sale services, payments are collected from a small
number of distributors. Makita believes that this unique sales and
distribution system has been successful. With respect to customer-oriented
products, Makita is increasing its direct sales efforts to retailers as part
of its strategy for capturing a larger market share.

During the fiscal year ended March 31, 2003, Makita sold, directly or through
distributors, to approximately 30,000 retail outlets, and no single retailer
accounted for more than 4%of Makitas domestic sales. During the year,
Makitas three largest distributors accounted, in the aggregate, for
approximately 35% of Makitas domestic net sales.

Makita does not have a written warranty policy. Repairs, including free repair
service and after-sale services are carried out by Makitas sales offices.

Overseas

In the fiscal year ended March 31, 2003, 77.9% of Makitas net sales were
made outside Japan.

Overseas sales, distribution, and servicing are carried out through a
network of 31 sales subsidiaries and 117 service centers located in the United
States, Canada, Brazil, Mexico, Argentina, Chile, Australia, New Zealand,
Singapore, Taiwan, China, Korea, the United Kingdom, France, Holland, Belgium,
Italy, Greece, Germany, Denmark, Austria, Poland, the Czech Republic, Hungary,
Spain, the United Arab Emirates, Romania, Switzerland, and Finland. As of the
end of June 2003, the number of service stations stood at 97 owing to a
decrease of 20 service stations in the United States. 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, with the remaining portion being sold under the Dolmar and
Maktec brand names

Makita offers warranties to overseas customers. After-sales 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. Overseas, Makita has over 100 service depots. As of the fiscal year
ended March 31, 2003, 46 of these service depots were located in the United
States. As of the end of June 2003, the number of service stations in the
United States had decreased by 20, to 26. The labor costs of service and
repairs to products under warranty for overseas customers are borne by Makita
and the local service agents, with any spare parts being provided by Makita.
In the fiscal year ended March 31, 2003, 77.9% of Makitas net sales were made
outside Japan.

Seasonality
Makitas business has no significant seasonality in terms of sales or profits.

Competition
Both in Japan and overseas, the markets in which Makita sells its products are
highly competitive. The portable electric power tool market is characterized
by competition as to price, product reliability, design and after-sale
services. Makita believes that it is competitive as to price and enjoys an
advantage in its reputation in 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 company, accounts for a predominant
portion 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 markets.

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Raw Materials and Sources of Supply
Makita purchases raw materials and parts for use in the manufacture of its
products. The principal raw materials and parts purchased by Makita include
plastics, pressed steel plates, aluminum castings, copper wires, switches,
gears, blades, batteries, and bearings. The Company procures most of its raw
materials from multiple sources, although most components are obtained from
single suppliers. The
procurement cost of aluminum, copper, and certain other raw materials is
affected by fluctuations in commodity markets, although such fluctuations were
not substantial during fiscal 2003.

Purchases of raw materials and parts in the fiscal year ended March 31, 2003
amounted to ¥ 74,307 million. Raw materials and parts are purchased from
approximately 250 suppliers in Japan and a number of local suppliers in each
country in which Makita performs manufacturing operations, with the largest
single source accounting for approximately 5% of Makitas total purchases of
raw materials and parts.

Makita also purchases from outside sources finished products such as
vacuum cleaners, electric generators, brushcutters, cordless laser plumb and
level, and wood surfacers.

Makita has not experienced any difficulty in obtaining raw materials, parts or
finished products.

Government Regulations
Makita is subject to various regulations by governments in countries in which
Makita does business, such as required business/investment approvals, export
regulations based on national-security or other reasons and other export/import regulations such as tariffs, as well as commercial, antitrust, patent,
consumer and business taxation, exchange control, and environment/recycling
laws and regulations.
If Makita is unable to comply with these regulations, it may result in
limiting Makitas activities in such countries.

Industrial Property Rights
As of March 31, 2003, Makita owned 208 patents and 64 utility model
registrations in Japan and 251 patents outside Japan. A utility model
registration is a right granted under Japanese law to inventions having a
practical utility in terms of form, composition or assembly, but embodying
less originality than that required for patents. As of March 31, 2003, Makita
had made applications for 631 additional patents and utility model
registrations in Japan as well as for 173 patents outside Japan. While Makita
considers all of its intellectual property to be important, it dose not
consider any one or group of patents, trademarks or utility model
registrations to be so important that their expiration or termination would
materially affect Makitas business.
Makita is not a party to any material licensing agreement.

C.     Organizational structure

As of July 23, 2003, the Makita Group is comprised of 39 consolidated
subsidiaries.
Makita Corporation (the Company) is the parent company of the Makita Group.
The Company heads the development of products. Domestic sales are made by
the Company and overseas sales are made almost entirely through sales
subsidiaries and distributors.

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The following is a listing of significant subsidiaries.

---

|                                    |  |                          |  | Proportion of Ownership
|----------------------------------- |  | ------------------------ |  | -----------------------
|Company Name                        |  | Country of Incorporation |  | and Voting Interest    
|                                    |  |                          |  |                        
|Makita U.S.A., Inc.                 |  | U.S.A                    |  |                        
|Makita Corporation of America       |  | U.S.A                    |  |                        
|Makita Canada Inc.                  |  | Canada                   |  |                        
|Makita Mexico, S.A. de C.V.         |  | Mexico                   |  |                        
|Makita do Brasil                    |  |                          |  |                        
|Ferramentas Eletricas Ltda.         |  | Brazil                   |  |                        
|Makita Herramientas                 |  |                          |  |                        
|Electricas de Argentina S.A.        |  | Argentine                |  |                        
|Makita Chile Ltda.                  |  | Chile                    |  |                        
|Makita (Australia) Pty. Ltd.        |  | Australia                |  |                        
|Makita (New Zealand) Ltd.           |  | New Zealand              |  |                        
|Makita International Europe Ltd.    |  | U.K.                     |  |                        
|Makita (U.K.) Ltd.                  |  | U.K.                     |  |                        
|Makita Manufacturing Europe Ltd.    |  | U.K.                     |  |                        
|Makita France S.A.                  |  | France                   |  |                        
|Makita Benelux B.V.                 |  | The Netherlands          |  |                        
|Euro Makita Corporation B.V.        |  | The Netherlands          |  |                        
|S.A. Makita N.V.                    |  | Belgium                  |  |                        
|Makita S.p.A.                       |  | Italy                    |  |                        
|Makita Werkzeug GmbH                |  | Germany                  |  |                        
|Dolmar GmbH                         |  | Germany                  |  |                        
|Makita Werkzeug Gesellschaft
m.b.H. |  | Austria                  |  |                        
|Makita SA                           |  | Switzerland              |  |                        
|Makita, S.A.                        |  | Spain                    |  |                        
|Makita Gulf FZE                     |  | U.A.E.                   |  |                        
|Makita Singapore Pte. Ltd.          |  | Singapore                |  |                        
|Makita (Taiwan) Ltd.                |  | Taiwan                   |  |                        
|Makita Power Tools (HK) Ltd.        |  | China                    |  |                        
|Makita (China) Co., Ltd.            |  | China                    |  |                        
|Makita (Kunshan) Co., Ltd.          |  | China                    |  |                        
|Makita Korea Co., Ltd.              |  | Korea                    |  |                        
|Joyama Kaihatsu Ltd.                |  | Japan                    |  |                        
|Makita Ichinomiya Corporation       |  | Japan                    |  |                        
|And 8 other subsidiaries            |  |                          |  |                        

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D.     Property, plants and equipment

The following table sets forth information as of March 31, 2003 with respect
to principal production facilities.

|         
|---------
|         
|         
|         
|In Japan;
|         
|         
|         
|Overseas;
|         
|         
|         
|         
|         
|         

In addition, the Company owns an aggregate of 117,181 square meters of floor
space occupied by the head office, warehouse facilities, a R&D laboratory, a
training center, dormitories and sales offices.

Makitas overseas manufacturing operations are conducted in the United States,
Canada, Brazil, United Kingdom, Germany and China. All buildings and the land
in these countries, except for China are owned by Makita.

None of the buildings or land that Makita owns in Japan is subject to any
mortgage or lien. Makita leases 88 sales offices in Japan and all of Its
overseas sales offices and premises, except the following locations, all of
which are owned by the respective companies;



| |  |  | Head office and certain branch offices of Makita U.S.A., Makita Canada,
and Makita Australia
| | - |  | --------------------------------------------------------------------------------------------



| |  |  | Head office of Makita Germany, Makita France, Makita Benelux (The
Netherlands), Makita Belgium, 
Makita Italy, Makita Brazil,
Makita Taiwan, and Makita Singapore.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------

Makita considers all of its principal manufacturing facilities and other
significant properties to be in good condition and adequate to meet the needs
of its operations. Makita does not maintain internal records of the exact
productive capacity and extent of utilization of its manufacturing facilities
as it would require unreasonable effort and expense to determine this
information because Makita adjusts the volume, quantity and nature of its
manufactured products based on its assessment of market needs and prospects.
However, Makita believes that its manufacturing facilities are currently
operating at utilization levels that are substantially in line with prevailing
market demand for its products.

Makita believes that there does not exist any material environmental issues
that may affect Makita utilization of its assets.

As of July 23, 2003, Makita (Kunshan) Co., Ltd., was constructing an assembly
plant that is scheduled to be completed by the end of October 2003.

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Item 5. Operating and Financial Review and Prospects

A.     Operating results

Summarized results of operations for each of the years ended March 31, 2001,
2002 and 2003 are as follows:

|                                             |  |                                                  |         |   |                         |  |       |      |  |   |         |   |  |  |       |  |  |   |         |   |  |  |       |  |  |   |           |  
|-------------------------------------------- |  | ------------------------------------------------ | ------- | - | ----------------------- |  | ----- | ---- |  | - | ------- | - |  |  | ----- |  |  | - | ------- | - |  |  | ----- |  |  | - | --------- | -
|                                             |  | (Millions of yen, except for percentage amounts) |         |   | U.S. Dollars(thousands) | 
|                                             |  |                                                  |         |   |                         | 
|                                             |  | 2001                                             |         |   | 2002                    |  |       | 2003 |  |   | 2003    |  
|                                             |  |                                                  |         |   |                         |  |       |      |  |   |         |  
|                                             |  |                                                  |         |   |                         |  | %     |      |  |   |         |   |  |  | %     |  |  |   |         |   |  |  | %     |  |  |   |           |  
|Net sales                                    |  | ¥                                                | 156,314 |   |                         |  | 100.0 |      |  | ¥ | 166,169 |   |  |  | 100.0 |  |  | ¥ | 175,603 |   |  |  | 100.0 |  |  | $ | 1,488,161 |  
|Cost of sales                                |  |                                                  | 101,827 |   |                         |  | 65.1  |      |  |   | 109,182 |   |  |  | 65.7  |  |  |   | 110,226 |   |  |  | 62.8  |  |  |   | 934,119   |  
|Gross profit                                 |  |                                                  | 54,487  |   |                         |  | 34.8  |      |  |   | 56,987  |   |  |  | 34.3  |  |  |   | 65,377  |   |  |  | 37.2  |  |  |   | 554,042   |  
|Selling,
general and
administrative
expenses |  |                                                  | 47,394  |   |                         |  | 30.3  |      |  |   | 51,114  |   |  |  | 30.8  |  |  |   | 52,909  |   |  |  | 30.1  |  |  |   | 448,381   |  
|Operating income                             |  |                                                  | 7,093   |   |                         |  | 4.5   |      |  |   | 5,873   |   |  |  | 3.5   |  |  |   | 12,468  |   |  |  | 7.1   |  |  |   | 105,661   |  
|Other income (expenses)                      |  |                                                  | (449    | ) |                         |  |       |      |  |   | (2,470  | ) |  |  |       |  |  |   | (3,176  | ) |  |  |       |  |  |   | (26,915   | )
|Income before income
taxes                   |  |                                                  | 6,644   |   |                         |  | 4.3   |      |  |   | 3,403   |   |  |  | 2.0   |  |  |   | 9,292   |   |  |  | 5.3   |  |  |   | 78,746    |  
|Provision for income
taxes                   |  |                                                  | 4,511   |   |                         |  |       |      |  |   | 3,270   |   |  |  |       |  |  |   | 2,569   |   |  |  |       |  |  |   | 21,772    |  
|Net income                                   |  |                                                  | 2,133   |   |                         |  |       |      |  |   | 133     |   |  |  |       |  |  |   | 6,723   |   |  |  |       |  |  |   | 56,974    |  

Notes:

|1 |  | Effective April 1, 2002, the Company adopted Emerging Issues Task Force
(EITF) Issue 01-9, Accounting for Consideration Given by a Vendor to a
Customer or a Reseller of the Vendors Products (EITF 01-9), issued by
the EITF in November 2001. The Companys adoption of EITF 01-9 resulted
in a change in the classification of certain incentive offerings.
Previously, marketing incentive payments and similar payments were
accounted for within selling, general and administrative expenses or
nonoperating expenses. Currently, the portion of those payments that are
effectively the same as price discounts are deducted from net sales. As a
result of this change, the Company has adjusted its results for prior
fiscal years to conform to the new accounting classification.
|- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|2 |  | Certain reclassifications have been made to the prior years
consolidated financial statements to conform to the presentation used for
the year ended March 31, 2003. Certain gains and losses on sale and
disposal of property, plant and equipment, which were previously recorded
in other income (expenses), are recorded in SG&A expenses in the fiscal
year ended March 31, 2003.                                                                                                                                                                                                                                                                                                                                                                                                           

Fiscal 2003 compared to Fiscal 2002
Net Sales
In fiscal 2003, ended March 31, 2003, Makitas consolidated net sales amounted
to ¥175,603 million, up 5.7% (or ¥9,434 million) from fiscal 2002 consolidated
net sales levels.

In fiscal 2003, the average level of the yen-dollar exchange rate was
¥122.0=$1, representing a 2.4% appreciation of the yen compared with the
average level of the yen-dollar exchange rate in the previous fiscal year. The
average level of the yen-euro exchange rate was ¥120.9=E1, representing a 9.5%
depreciation of the yen. Excluding the appreciation of the Euro and the
depreciation of the U.S. dollar, net sales would have increased by 3.9%.

Sales by region
Net sales in Japan declined 1.8%, to ¥38,781 million and accounted for 22.1% of
fiscal 2003 consolidated net sales, reflecting such factors as a decrease in
housing construction starts that reduced demand for power tools and the desire
of marketing outlets to maintain low inventory levels amid deflationary
conditions that showed no signs of recovery. In contrast, net sales overseas
increased 8.0% from ¥126,659 million in fiscal 2002, to ¥136,822 million in
fiscal 2003, owing to such factors as
increased sales in each region other than North America as well as a tendency
in currency exchange rates toward yen depreciation.

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Looking at sales in individual overseas regions, sales in North America fell
5.7%, to ¥45,573 million, and accounted for 26.0% of fiscal 2003 consolidated
net sales. The drop in sales reflected the perception of economic slowdown
during the latter half of the fiscal year against the backdrop of the Iraq
crisis as well as the increasing market share of Chinese-made products and a
2.4% appreciation of the yen against the U.S. dollar. Sales in Europe surged 18.9%,
to ¥57,648 million, and accounted for 32.8% of fiscal 2003 consolidated net
sales. Despite continued overall sluggishness in European markets which
reflected a lack of growth in domestic demand in principal European countries
due to the weakness of personal consumption and other factors, Makita
considerably boosted its sales in the region owing to its launch of popular new
products, its expansion of marketing activities in Eastern Europe and Russia,
and the 9.5% depreciation of the yen against the euro. Sales in Southeast Asia
increased 11.3%, to ¥13,774 million and accounted for 7.8% of fiscal 2003
consolidated net sales. Despite the perception of a temporary slackening of
demand in the region, Makita recorded strong sales due to the launch of a new
product series. Sales in Oceania grew 19.7%, to ¥8,517 million, and accounted
for 4.9% of fiscal 2003 consolidated net sales. Reflecting a rise in the number
of African countries and other countries where the marketing of Makita products
was newly initiated, sales in other regions increased 9.3%, to ¥11,310 million,
and accounted for 6.4% of fiscal 2003 consolidated net sales.

Review of Performance by Product Group
Portable Woodworking Tools
Principal products in Makitas portable woodworking tools group include
circular saws, jig saws, recipro saws, planers, routers, trimmers, and
pneumatic nailers. In fiscal 2003, Makita recorded a 3.3% increase in sales of
portable woodworking tools, to ¥33,637 million, or 19.1% of consolidated net
sales. Domestic sales of portable woodworking tools increased 2.2%, to ¥6,786
million, and accounted for 17.5% of total domestic sales. Makita posted a 3.5%
increase in overseas sales of portable woodworking tools, to ¥26,851 million,
which accounted for 19.6% of total overseas sales in fiscal 2003.

Portable General Purpose Tools
The portable general purpose tools group offers a wide range of dependable
cordless drills, hammer drills, rotary hammers, demolition hammers, grinders,
drills, sanders, screwdrivers, impact wrenches, shears, nibblers, and cutters.
This group generates the largest portion of Makitas consolidated net sales. In
fiscal 2003, sales of portable general purpose tools grew 8.1%, to ¥92,144
million, accounting for 52.5% of consolidated net sales. In Japan, sales of
portable general purpose tools decreased 3.9%, to ¥13,452 million, and
constituted 34.7% of total domestic sales. Overseas sales of portable general
purpose tools increased 10.5%, to ¥78,692 million, or 57.5% of total overseas
sales.

Stationary Woodworking Machines
Makitas extensive lineup of stationary woodworking machines encompasses table
saws, planer-jointers, and band saws. Sales of stationary woodworking machines
in fiscal 2003 declined 14.3%, to ¥1,924 million, and constituted 1.1% of
consolidated net sales. Domestic sales of stationary woodworking machines
dropped 8.6%, to ¥1,030 million, and constituted 2.7% of total domestic sales.
Overseas sales of stationary woodworking machines were ¥894 million, a 20.0%
decrease from the previous fiscal year, and accounted for 0.7% of Makitas
total overseas sales.

Other Products
Makitas other products category includes industrial-use dust collectors and
generators as well as various products for garden and home use, including chain
saws, brush cutters, grass cutters, hedge trimmers, blowers, and cordless
cleaners. In fiscal 2003, sales of other products grew 6.8%, to ¥19,142
million, accounting for 10.9% of net sales. In Japan, Makita recorded a 4.6%
decrease in sales of other products, to ¥8,140 million, or 21.0% of total
domestic sales. Overseas sales of other products increased 17.3%, to ¥11,002
million, or 8.0% of total overseas sales.

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Parts, Repairs, and Accessories
Makitas after-sales services include the sale of parts and accessories and
repairs. In fiscal 2003, parts, repairs, and accessories sales rose 1.9%, to
¥28,756 million, or 16.4% of consolidated net sales. Domestic sales of parts,
repairs, and accessories rose 1.7%, to ¥9,373 million, and contributed to 24.1%
of total
domestic sales. Overseas sales of parts, repairs, and accessories increased
2.0%, to ¥19,383 million, or 14.2% of total overseas sales.

Cost of sales
Cost of sales increased 1.0%, to ¥110,226 million. The ratio of cost of sales
to net sales improved to 62.8%, from 65.7%, primarily owing to a shift of
manufacturing operations to subsidiaries in China, which has a lower labor cost
than our factories in Japan and other countries, improvement of productivity of
overseas factories, and the reduction of inventory reserve due to decrease of
the inventory.

Gross profit
As a result, gross profit in fiscal 2003 increased 14.7%, to ¥65,377 million.
The ratio of gross profit to net sales improved to 37.2%, from 34.3%.

Selling, general and administrative (SG&A) expenses
Selling, general and administrative (SG&A) expenses grew 3.5%, or ¥1,795
million, to ¥52,909 million in fiscal 2003, principally as a result of increase
in labor expenses and increase in losses in connection with disposal of certain
assets of Joyama Kaihatsu Ltd., a golf course owned by Makita.The ratio of SG&A
expenses to net sales edged down to 30.1%, from 30.8%, principally as a result
of drops in the ratios of shipping expenses and advertising and promotional
expenses to net sales.

Operating income
As a result of the factors indicated above, operating income grew 112.3%, to
¥12,468 million in fiscal 2003, and the ratio of operating income to net sales
rose from 3.5% to 7.1%.

Other income (expenses)
The balance of other income and expenses worsened to a net expense of ¥3,176
million in fiscal 2003, from a net expense of ¥2,470 million in the previous
year. This decline resulted mainly from a foreign exchange loss associated with
the appreciation of the yen against the U.S. dollar and the depreciation of Latin
American currencies against the U.S. dollar.

Income before income taxes
Income before income taxes in fiscal 2003 surged 173.1%, to ¥9,292 million, and
the ratio of operating income to net sales rose from 2.0% in fiscal 2002 to
5.3% in fiscal 2003.

Provision for income taxes
Total provision for income taxes decreased 21.4%, to ¥2,569 million in fiscal
2003. The effective tax rate dropped to 27.6%, from 96.1% in the previous
fiscal year, owing to a decrease in the net losses of subsidiaries for which
tax benefits were previously not recognized due to concern our reliability as
well as the recording of Japan-US advance pricing agreement repayments. In 1997,
Makita USA and the Company entered into a bilateral advance pricing
agreement (APA) negotiation with the Internal Revenue Service (IRS) and
National Tax Authority of Japan (NTA) to avoid double taxation resulting from
transfer price adjustments. The APA covers fiscal years 1995 through 2001. In
July 2002, the IRS and the NTA reached an agreement, which resulted in
additional taxable income and reduced operating loss carryforwards in the U.S.,
and a reduction of taxable income and tax liability in Japan. Consequently the
effects of the APA resulted in an overall decrease to income taxes in fiscal
2003. According to the

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provisions of tax treaties which have been concluded
between Japan and 19 countries, Japanese corporations can claim a tax credit
against Japanese income taxes on income earned in one of those 19 countries,
even though that income is exempted from income taxes or is reduced by special
tax incentive measures in those countries, in the manner as if no special
exemption or reduction was provided. Makita applied tax sparing mainly to
China. Consequently the effects of tax sparing caused the tax rate difference
in fiscal 2003.
As a result of the enactment of an amendment to the Japanese local tax law on
March 31, 2003, the effective tax rate used for the calculation of deferred tax
assets and liabilities has been changed form 41.4% to 40.2% for years beginning
after March 31, 2004. The effect of this tax rate change of
¥312 million was
charged to income taxes.

Net income
As a result, net income for fiscal 2003 increased 4954.9%, to ¥6,723 million.

Earnings per share
Basic net income per share of common stock and American Depositary Share (ADS)
amounted to ¥45.3, compared with ¥0.9 in fiscal 2002. Diluted net income per
share amounted to ¥44.2, compared with ¥0.9 in fiscal 2002.

Fiscal 2002 compared to Fiscal 2001
Net sales
In fiscal 2002, consolidated net sales by Makita increased 6.3%, from ¥156,314
million in fiscal 2001 to ¥166,169 million in fiscal 2002.

In fiscal 2002, the average level of the yen-dollar exchange rate was
¥125.0=$1, representing a 13.1% depreciation of the yen compared with the
average level of the yen-dollar exchange rate in the previous fiscal year. The
average level of the yen-euro exchange rate was ¥110.4=E1, representing a
10.0% depreciation of the yen. Excluding the appreciation of the Euro and the
depreciation of the U.S. dollar, net sales would have decreased by 0.5%.

Sales by region
In Japan, the slackness of housing investment caused demand for power tools to
decrease, and a deflationary trend spurred efforts by our distributors to
control their inventory levels. As a consequence, Makitas domestic sales
decreased by 5.6% from fiscal 2001 levels, to ¥39,510 million in fiscal 2002.
On the other hand, overseas sales increased 10.7%, to ¥126,659 million in
fiscal 2002, reflecting a trend of yen depreciation as well as moderate rises
in local sales in the United States and Europe.
By geographic area, sales in North America increased 14.0%, to ¥48,337 million,
and accounted for 29.1% of consolidated net sales in fiscal 2002. This increase
reflected the depreciation of the yen, which had an average dollar-denominated
value 13.1% lower than in fiscal 2001. The 10.0% depreciation of the yen
vis-a-vis the euro along with double-digit sales growth in Eastern Europe and
Russia boosted European sales 12.2%, to ¥48,486 million, or 29.2% of
consolidated net sales in fiscal 2002. Such factors as the weakening of local
demand due to the low level of housing demand in Taiwan and Singapore caused a
decline in sales in Southeast Asia on a local currency basis. However, the
depreciation of the yen supported a 3.1% increase in yen-denominated sales in
Southeast Asia, to ¥12,373 million, constituting 7.4% of consolidated net
sales. Sales in Oceania grew 6.6%, to ¥7,116 million, accounting for 4.3% of
consolidated net sales in fiscal 2002. The economic crisis in Argentina brought
Makitas marketing activities in that country to an almost-complete halt, but
the situation had little effect on performance in other Latin American
countries.
Makita recorded sales of ¥10,347 million or 6.2% of consolidated net sales in
fiscal 2002, in other geographic regions, up 1.7% from the previous fiscal
year.

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Review of Performance by Product Group
Portable Woodworking Tools
Principal products in Makitas portable woodworking tools group include
circular saws, jig saws, recipro saws, planers, routers, trimmers, and
pneumatic nailers. In fiscal 2002, Makita recorded a 12.0% increase in sales of
portable woodworking tools, to ¥32,571 million, or 19.6% of consolidated net
sales. Domestic sales of portable woodworking tools decreased 6.2%, to ¥6,642
million, and accounted for 16.8% of total domestic sales. Makita posted a 17.8%
rise in overseas sales of portable woodworking tools, to ¥25,929 million, which
accounted for 20.5% of total overseas sales in fiscal 2002.

Portable General Purpose Tools
The portable general purpose tools group offers a wide range of dependable
cordless drills
, hammer drills, rotary hammers, demolition hammers, grinders,
drills, sanders, screwdrivers, impact wrenches, shears, nibblers, and cutters.
This group generates the largest portion of Makitas consolidated net sales. In
fiscal 2002, sales of portable general purpose tools grew 5.7%, to ¥85,215
million, accounting for 51.3% of consolidated net sales. In Japan, sales of
portable general purpose tools decreased 10.0%, to ¥13,993 million, and
constituted 35.4% of total domestic sales. Overseas sales of portable general
purpose tools were up 9.5%, to ¥71,222 million, or 56.2% of total overseas
sales.

Stationary Woodworking Machines
Makitas extensive lineup of stationary woodworking machines encompasses table
saws, planer-jointers, and band saws. Sales of stationary woodworking machines
in fiscal 2002 declined 13.0%, to ¥2,244 million, and constituted 1.3% of
consolidated net sales. Domestic sales of stationary woodworking machines
dropped 20.0%, to ¥1,127 million, and constituted 2.9% of total domestic sales.
Overseas sales of stationary woodworking machines were ¥1,117 million, a 4.7%
decrease from the previous fiscal year, and accounted for 0.9% of Makitas
total overseas sales.

Other Products
Makitas other products category includes industrial-use dust collectors and
generators as well as various products for garden and home use, including chain
saws, brush cutters, grass cutters, hedge trimmers, blowers, and cordless
cleaners. In fiscal 2002, sales of other products grew 4.2%, to ¥17,916
million, accounting for 10.8% of net sales. In Japan, Makita recorded a 2.7%
decrease in sales of other products, to ¥8,535 million, or 21.6% of total
domestic sales. Overseas sales of other products increased 11.3%, to ¥9,381
million, or 7.4% of total overseas sales.

Parts, Repairs, and Accessories
Makitas after-sales services include the sale of parts and accessories and
repairs. In fiscal 2002, parts, repairs, and accessories sales advanced 5.2%,
to ¥28,223 million, or 17.0% of consolidated net sales. Domestic sales of
parts, repairs, and accessories grew 1.9%, to ¥9,213 million, and contributed
23.3% of total domestic sales. Overseas sales of parts, repairs, and
accessories increased 6.8%, to ¥19,010 million, or 15.0% of total overseas
sales.

Cost of sales
During fiscal 2002, the cost of sales rose 7.2% from the previous fiscal year,
to ¥109,182 million. The cost of sales ratio increased from 65.1% to 65.7%,
principally owing to a reduction of production in the United States with the
objective of lowering inventory levels. This reduction in production resulted
in higher costs on a per unit sold basis.

Gross profit
As a result, gross profit in fiscal 2002 increased 4.6%, to ¥56,987 million.
The ratio of gross profit to net sales fell to 34.3%, from 34.9%.

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Selling, general and administrative (SG&A) expenses
Selling, general and administrative (SG&A) expenses amounted to ¥51,114 million
in fiscal 2002, an increase of 7.8% from the previous fiscal year. SG&A
expenses as a percentage of net sales rose from 30.3% to 30.8%, mainly because
of a rise in the personnel, advertising, and promotional expenses of sales
subsidiaries in the United States and Europe that were striving to strengthen
their marketing power.

Operation income
As a result of the preceding developments, operating income fell 17.2% from the
previous fiscal year, to ¥5,873 million in fiscal 2002. The ratio of operating
income to net sales was 3.5%, down from 4.5% in the previous fiscal year.

Other income (expenses)
In other income (expenses), Makita recorded other expenses of ¥2,470
million in fiscal 2002, compared with ¥449 million in the previous fiscal year.
This was mainly because the weakness of stock markets caused net realized
losses on securities to greatly exceed those of the previous fiscal year.

Income before income taxes
As a result of the preceding factors, income before income taxes decreased
48.8%, to ¥3,403 million in fiscal 2002, and the ratio of operating income to
net sales rose from 4.2% to 2.0%.

Provision for income taxes
Due to the recording of a loss before income taxes which is more than expected
income in next few years in the United States, the effective tax rate increased
because the related tax effect on the loss was offset by a corresponding
increase in valuation allowance

Net income
As a result, net income for fiscal 2002 dropped 93.8%, to ¥133 million from
¥2,133 million.

Earnings per share
Basic net income per share of common stock and American Depositary Share (ADS)
amounted to ¥0.9, compared with ¥13.6 in fiscal 2001. There was no dilution
effect on earnings per share in either fiscal 2002 or 2001.

CRITICAL ACCOUNTING POLICIES
The preparation of financial statements in accordance with accounting
principles in the United States of America requires management to make certain
estimates and assumptions. These estimates and assumptions exert an influence
on the level of assets and liabilities reported as of the balance sheet date,
the disclosure of incidental liabilities, and the level of revenues and
expenses during the fiscal period. These consolidated financial statements
include figures determined by management based on its best estimates and
judgments regarding currently knowable situations and plans for future
activities. Accordingly, when there are changes regarding the factors that
serve as the basis for estimates and judgments, actual results may differ from
the previously estimated results. The following accounting policies that affect
Makitas consolidated financial statements have the potential for resulting in
figures that differ considerably from reported figures in case of changes in
estimates or assumptions. Regarding accounting policies that affect Makitas
consolidated financial statements; the following items have the potential for
figures to differ considerably from reported figures in case of changes in
estimates or assumptions.

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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 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 can not guarantee that it will continue
to experience the same credit loss rates that it has in the past. Changes in
the underlying financial condition of its customers could result in a material
impact to Makitas consolidated results of operation and financial position.

Impairment of Long-Lived Assets
Makita periodically reviews the carrying value of its long-lived assets for
continued appropriateness. This review is based upon Makitas projections of
anticipated future cash flows. Makita believes that its estimates of future
cash flows are reasonable. However, different assumptions regarding such cash
flows could materially affect Makitas evaluations.

Makita reviews long-lived assets with a definite life for impairment whenever
events or changes in circumstances indicate that the carrying amount of an
asset or group of assets may not be recoverable. 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 net cash flows of the asset or
group of assets. If an asset or group of assets is considered to be impaired
due to significant decline in market value of an assets and current period
operating cash flow loss, the impairment charge to be recognized is measured as
the amount by which the carrying amount of the asset or group of assets exceeds
fair value. Long-lived assets meeting the criteria to be considered as held for
sale are reported at the lower of their carrying amount or fair value less
costs to sell.

Estimated Retirement and Termination Allowances
Estimated retirement and termination allowances 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 retirement and termination liabilities and plan assets are
calculated based on various annuity actuarial calculation assumptions
(experience assumptions). Principal assumptions include discount rates, assumed
rates of increase in future compensation levels, and expected long-term rates
of return on plan assets. Discount rates, expected long-term rates on plan
assets, and other assumptions that are employed by Makita must be optimized in
light of market developments related to debt securities, stocks, and other
factors. 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 accounting principles
generally accepted in the United States of America, actual results that differ
from the assumptions are accumulated and amortized over the future periods and
therefore, generally affect Makitas result of operation in such future
periods. While Makita believes that the assumptions are appropriate,
significant differences in its actual experience or significant changes in its
assumptions may materially affects Makitas estimated retirement and
termination allowances and future expenses.

Reliability of Deferred Tax Assets
Makita is required to estimate its income taxes in each of the jurisdictions in
which Makita operates. This process requires Makita to estimate its current tax
exposure together with assessing temporary differences resulting from differing
treatment of items for tax and accounting purposes. These differences result in
deferred tax assets and liabilities, which are included within Makitas
consolidated balance sheet. Makita must then assess the likelihood that
Makitas deferred 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.

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In establishing the appropriate valuation allowance for tax loss
carry-forwards, all available evidence, both positive and negative, needs to be
considered. Information on historical results is supplemented by all currently
available information on future years, as realization of tax loss
carry-forwards is dependent on each company generating sufficient taxable
income prior to expiration of the loss carryforwards. Although realization is
not assured, management believes, judging from an authorized business plan, it
is
more likely than not that all of the deferred tax assets, less valuation
allowance, will be realized. The amount of such net deferred tax assets which
are considered realizable, however, could change in the near term and have
material effect on the consolidated results of operation and financial position
if estimates of future taxable income during the carryforward period are
changed.

NEW ACCOUNTING STANDARDS
In June 2001, the Financial Accounting Standards Board (FASB) issued SFAS
No. 143,  Accounting for Asset Retirement Obligations. SFAS No. 143 requires
that a liability for an asset retirement obligation be recognized at the fair
value. Makita has adopted SFAS No. 143 on April 1, 2003. The adoption of SFAS
No. 143 did not have a material effect on the Companys consolidated results
of operations and financial position.
In April 2002, the FASB issued SFAS No. 145, Rescission of FASB statements
No. 4, 44, and 64, Amendment of FASB Statement No. 13 and Technical
Corrections. SFAS No. 145 updates, clarifies and simplifies existing
accounting pronouncements. While the technical corrections to existing
pronouncements are not substantive in nature, in some instances, they may
change accounting practice. Makita has adopted the provision related to
rescission of FASB No. 4 on April 1, 2003. The adoption of SFAS No. 145 did
not have a material effect on the Makitas consolidated results of operations
and financial position.
In December 2002, the FASB issued SFAS No. 148,  Accounting for Stock-Based
Compensation  Transition and Disclosure, an amendment of SFAS No. 123. SFAS
No. 148 provides alternative methods of transition for a voluntary change to
the fair value based method of accounting for stock-based employee
compensation. In addition, SFAS No. 148 amends the disclosure requirements of
SFAS No. 123 to require prominent disclosure in financial statements about the
method of accounting for stock-based employee compensation and the effect of
the method used on reported results. Makita does not have any stock-based
employee compensation arrangements as of March 31, 2003.
In April 2003, the FASB issued SFAS No. 149, Amendment of Statement 133 on
Derivative Instruments and Hedging Activities. SFAS No. 149 amends and
clarifies financial accounting and reporting for derivative instruments,
including certain derivative instruments embedded in other contracts and for
hedging activities under SFAS No. 133. SFAS No. 149 is effective for
contracts entered into or modified after June 30, 2003, except as stated below
and for hedging relationships designated after June 30, 2003. The provisions
that relate to SFAS No. 133 implementation issues that have been effective for
fiscal quarters that began prior to June 15, 2003 should continue to be
applied in accordance with their respective effective dates. In addition,
provisions which relate to forward purchases or sales or when-issued
securities or other securities that do not exist yet, should be applied to
both existing contracts and new contracts entered into after June 30, 2003.
The Adoption of SFAS No. 149 is not expected to have a material effect on
Makitas consolidated results of operations and financial position.
In May 2003, the FASB issued SFAS No. 150, Accounting for Certain
Financial Instruments with Characteristics of both Liabilities and Equity.
SFAS No. 150 establishes standards for how an issuer classifies and measures
certain financial instruments with characteristics of both liabilities and
equity. SFAS No. 150 requires that an issuer classify a financial instrument
that is within its scope as a liability (or an asset in some circumstances).
SFAS No. 150 is effective for financial instruments entered into or modified
after May 31, 2003 and otherwise is effective at the
 beginning of the first
interim period beginning after June 15, 2003. The adoption of SFAS No. 150 is
not expected to have a material effect on Makitas consolidated results of
operations and financial position.
In January 2003, the FASB issued FIN No. 46, Consolidation of Variable
Interest Entities  an Interpretation of ARB No. 51. FIN No. 46 provides
guidance on the consolidation of certain entities that do not have sufficient
equity to cover expected losses of certain entities in which equity holders
lack adequate decision-making ability. Such entities are referred to as
variable interest entities (VIEs), and FIN No. 46 requires a company to
consolidate

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VIEs if the company has interests that give it a majority of the
expected losses or a majority of the expected residual returns of the entity.
FIN No. 46 is currently effective for VIEs created after January 31, 2003, and
for VIEs created before February 1, 2003 in fiscal periods beginning after
June 15, 2003. Makita has invested in bonds issued by an unrelated VIE.
However, such investment is an insignificant variable interest in the VIE and
the adoption of FIN No. 46 will have no material effect on Makitas
consolidated financial statements.
In November 2002, EITF reached a consensus on Issue No. 00-21,Accounting for
Revenue Arrangements with Multiple Deliverables. EITF No. 00-21 provides
guidance on when and how to separate elements of an arrangement that may
involve the delivery of performance of multiple products, services and rights
to use
assets into separate units of accounting. The guidance in the consensus is
effective for revenue arrangements entered into in fiscal years beginning after
June 15, 2003. Makita will adopt EITF No. 00-21 on July 1, 2003. The adoption
of EITF No. 00-21 is not expected to have a material effect on the Companys
consolidated results of operations and financial position.

Pension information
Makita has an employee defined benefit pension plan which is established under
the Japanese Welfare Pension Insurance Law (JWPIL). This plan is composed of
a substitutional portion of the pension benefits prescribed by JWPIL and (ii) a
corporate portion based on a contributory defined benefit pension arrangement
established by Makita. The substitutional portion represented 30% of the total
projected benefit obligation of the pension plan as of March 31, 2003.

The substitutional portion could be elected to be transferred to the Japanese
government by JWPIL which was amended on June 15, 2001. Makita obtained an
approval of the transfer of the substitutional portion by as of January 30,
2003. In order for Makita to completely separate the substitutional portion,
Makita will in the future be required to obtain approval to separate the
remaining past substitutional portion.

With respect to the accounting treatment of this transfer under generally
accepted accounting principles of the United States, Makita will account for
the transfer in accordance with Emerging Issues Task Force Issue No. 03-02
Accounting for the Transfer to the Japanese Government of the Substitutional
Portion of Employee Pension Fund Liabilities (EITF 03-02). As specified in
EITF 03-02, the entire separation process and transfer is to be accounted for
at the time of completion of the transfer to the government of the
substitutional portion of the benefit obligation and related plan assets in
accordance with Statement of Financial Accounting Standards No. 88 Employers
Accounting for Settlements and Curtailments of Defined Benefit Pension Plans
and for Termination Benefits. Since this separation and transfer is expected
to occur in the next calendar year, there has been no effect on Makitas
consolidated financial statements for the fiscal year ended March 31, 2003.

Management plan
For Makita, reduction of its manufacturing cost of quality products is a very
important issue to keep up its position on the global power tools market.
To achieve the objective, Makita is planning to expand its production
capability and capacity of factories in China as a main factory. The factories
in China are planning to expand their supply of a new series of power tools to
the global market and manufacturing components to other Makitas factories.
In the United States, Makita USA is implementing a restructuring plan
which is the integration of distribution centers and the closing of about half
of factory service centers to reduce its operating cost in fiscal year 2004.

B.     Liquidity and capital resource

Makitas principal sources of liquidity are a combination of cash and cash
equivalents on hand, cash provided from operations and various forms of debt
including lines of credit. As of March 31, 2003, Makita had ¥20,370 million in
cash and cash equivalents. Further certain subsidiaries of Makita also had
¥29,111 million in lines of credit. Of the

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¥29,111 million lines of credit,
¥2,779 million was used by overseas subsidiaries as of March 31, 2003, and
¥26,332 million was unused as of March 31, 2003. Short-term borrowings amounting
to ¥2,892 million in Makitas balance sheet as of March 31, 2003, consisting of
above bank borrowings, amounting to ¥2,779 million, and capital lease
obligations, amounting to ¥113 million.

Makitas total debt at March 31, 2003 amounted to ¥22,735 million, down from
¥29,086 million at March 31, 2002. The debt-to-equity ratio improved 2.8
percentage points, to 12.5%. The drop in the balance of debt and the
debt-to-equity ratio reflects Makitas efforts to improve capital utilization
efficiency by using the surplus portion of net cash from operating activities
and cash reserves to repay debt. Long-term debt is comprised of convertible
bonds and borrowings from banks and capital lease obligations. At March
31,2003, Makitas credit ratings by leading outside credit rating institutions
were A by Standard & Poors and A2 by Moodys Investors Service, and A+ by
another local agency in Japan, and Makita is confident that it will be able to
raise sufficient funds in the forms of bank borrowings or
debt financing when the need arises. Makitas contractual obligations and other
commercial commitments as of March 31, 2003, were as follows:

|                                                      |                  |  |      |                |  |   |         |         |  |      |        |                                                |      |   |         |         |  |   |        |        |  |      |     |       |            |   |     |       |  |   |     |       |  | 
|----------------------------------------------------- | ---------------- |  | ---- | -------------- |  | - | ------- | ------- |  | ---- | ------ | ---------------------------------------------- | ---- | - | ------- | ------- |  | - | ------ | ------ |  | ---- | --- | ----- | ---------- | - | --- | ----- |  | - | --- | ----- |  | 
|                                                     
|                                                      |                  |  |      |                |  |   |         |         |  |      |        | Yen (millions)                                 |     
|                                                      |                  |  |      |                |  |   |         |         |  |      |        |                                                |     
|                                                      |                  |  |      |                |  |   |         |         |  |      |        | Expected maturity date, year ending

March 31, |     
|                                                      |                  |  |      | Average        |  |   |         |         |  |      |        |                                               
|                                                      |                  |  |      | Interest rates |  |   | Total   |         |  | 2004 |        |                                                | 2005 |   |         | 2006    |  |   | 2007   |        |  | 2008 |     |       | Thereafter |  
|                                                     
|Japanese yen
convertible bonds                        |                  |  | 1.5% |                |  | ¥ | 12,994  |         |  |      |       |                                                |      | ¥ | 12,994  |         |  | ¥ |       |        |  | ¥    |    |       |            | ¥ |    |       |  | ¥ |    |      
|Foreign

currency
loans from bank                     |                  |  | 3.4% |                |  |   | 2,779   |         |  |      | 2,779  |                                                |      |   |        |         |  |   |       |        |  |      |    |       |            |   |    |       |  |   |    |      
|Japanese yenloans from banks
and insurance companies  |                  |  | 3.4% |                |  |   | 6,587   |         |  |      |       |                                                |      |   |        |         |  |   | 6,587  |        |  |      |    |       |            |   |    |       |  |   |    |      
|Japanese yen
Capital lease                            |                  |  | 1.9% |                |  |   | 375     |         |  |      | 113    |                                                |      |   | 90      |         |  |   | 87     |        |  |      | 41  |       |            |   | 13  |       |  |   | 31  |      
|                                                      |                  |  |      |                | 
|                                                      | Total            |  |      |                |  |   | ¥       | 22,735  |  |      | ¥      | 2,892                                          |      |   | ¥       | 13,084  |  |   | ¥      | 6,674  |  |      | ¥   | 41    |            |   | ¥   | 13    |  |   | ¥   | 31    | 
|                                                      |                  |  |      |                | 
|                                                      | Operating

lease |  |      |                |  |   | ¥       | 2,460   |  |      | ¥      | 613                                            |      |   | ¥       | 506     |  |   | ¥      | 384    |  |      | ¥   | 277   |            |   | ¥   | 207   |  |   | ¥   | 473   | 
|                                                      |                  |  |      |                | 
|                                                     
|                                                      |                  |  |      |                |  |   |         |         |  |      |        | U.S. Dollars (thousands)                       |     
|                                                      |                  |  |      |                |  |   |         |         |  |      |        |                                                |     
|                                                      |                  |  |      |                |  |   |         |         |  |      |        | Expected maturity date, year ending

March 31, |     
|                                                      |                  |  |      | Average        |  |   |         |         |  |      |        |                                               
|                                                      |                  |  |      | Interest rates |  |   | Total   |         |  | 2004 |        |                                                | 2005 |   |         | 2006    |  |   | 2007   |        |  | 2008 |     |       | Thereafter |  
|                                                     
|Japanese yen
convertible bonds                        |                  |  | 1.5% |                |  | $ | 110,119 |         |  | $    |       |                                                |      | $ | 110,119 |         |  | $ |       |        |  | $    |    |       |            | $ |    |       |  | $ |    |      
|Foreign

currency
loans from bank                     |                  |  | 3.4% |                |  |   | 23,550  |         |  |      | 23,550 |                                                |      |   |        |         |  |   |       |        |  |      |    |       |            |   |    |       |  |   |    |      
|Japanese

yenloans from banks
and insurance companies |                  |  | 3.4% |                |  |   | 55,822  |         |  |      |       |                                                |      |   |        |         |  |   | 55,822 |        |  |      |    |       |            |   |    |       |  |   |    |      
|Japanese yen
Capital lease                            |                  |  | 1.9% |                |  |   | 3,178   |         |  |      | 958    |                                                |      |   | 762     |         |  |   | 737    |        |  |      | 348 |       |            |   | 110 |       |  |   | 263 |      
|                                                      |                  |  |      |                | 
|                                                      | Total            |  |      |                |  |   | $       | 192,669 |  |      | $      | 24,508                                         |      |   | $       | 110,881 |  |   | $      | 56,559 |  |      | $   | 348   |            |   | $   | 110   |  |   | $   | 263   | 
|                                                      |                  |  |      |                | 
|                                                      | Operating

lease |  |      |                |  |   | $       | 20,847  |  |      | $      | 5,195                                          |      |   | $       | 4,288   |  |   | $      | 3,254  |  |      | $   | 2,347 |            |   | $   | 1,754 |  |   | $   | 4,009 | 
|                                                     

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Fiscal year 2003

Cash Flows

During fiscal 2003, Makitas cash flows from operating activities served as the
basic financing source for funds required for operating activities, capital
investment, research and development cost and the payment of dividends. Capital
investment was restrained to below the level of depreciation during fiscal
2003, just as in the previous fiscal year.
Net cash provided by operating activities was ¥27,141 million, compared with
¥20,196 million in the previous fiscal year, mainly reflecting an increase in
net income from ¥133 million in fiscal 2002 to ¥6,723 million in fiscal 2003
and increase in loss on disposal or sales property from ¥339 million in fiscal
2002 to ¥1,330 million in fiscal 2003. Net cash used in investing activities
amounted to ¥9,659 million, compared with ¥1,151 million in net cash used in
investing activities in the previous fiscal year. This reflected cash outflow
due to capital expenditures, which were mainly for the construction of a new
headquarters facility in Japan and the net outflow in connection with the
purchase and sales of
marketable and investment securities. Marketable and investment securities are
available for current operations and redemption of convertible bonds due Fiscal
2005.
Principally reflecting a drop in short-term borrowings, due to the promotion of
intra-Group financing transactions as well as the purchase of common stock of
Makita, net cash used in financing activities amounted to ¥13,381 million,
compared with ¥16,318 million in the previous fiscal year. As a result of the
preceding activities as well as the effects of exchange rate changes on cash
and cash equivalents, cash and cash equivalents, end of year, increased ¥4,640
million, to ¥20,370 million.

Capital Expenditures

Makita has continued to allocate sizable amounts of funds for capital
expenditures, which Makita believes is crucial to sustaining long-term growth.
In view of the harshness of the operating environment, however, Makita limited
its capital expenditures in fiscal 2003 to ¥5,691 million, which was mainly
used for the construction of a new head quarters facility and the productive
purchase of molds for new products in Japan and China. Makitas budget of
capital expenditures in fiscal 2004 is estimated at ¥6,000 million, which are
for the expansion of factory in China, purchase of new warehouse in Australia,
and productive purchase of molds for new products.
Makitas projection is that net cash used for capital expenditures will be
provided by operating activities.

Fiscal year 2002

Cash Flows

During fiscal 2002, Makitas cash flows from operating activities served as the
basic financing source for funds required for operating activities, capital
investment, research and development cost and the payment of dividends. Capital
investment was restrained to below the level of depreciation during fiscal
2002, just as in the previous fiscal year.
Net cash provided by operating activities was ¥20,196 million, compared with
¥6,145 million in the previous fiscal year, mainly reflecting a considerable
reduction of inventories. Net cash used in investing activities amounted to
¥1,151 million, compared with ¥912 million in net cash provided by investing
activities in the previous fiscal year. This reflected cash outflow due to
capital expenditures, which greatly exceeded net cash inflow from purchases of
securities. Reflecting a drop in short-term borrowings, due to the promotion of
intra-Group financing transactions as well as the purchase and sales of common
stock, net cash used in financing activities amounted to ¥16,318 million,
compared with ¥6,038 million in the previous fiscal year.

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As a result of the preceding activities as well as the effects of exchange rate
changes on cash and cash equivalents, cash and cash equivalents, end of year,
increased ¥1,742 million, to ¥15,730 million.

Capital Expenditures

Makita has continued to allocate sizable amounts of funds for capital
expenditures, which Makita believes is crucial to sustaining long-term growth.
In view of the harshness of the operating environment, however, Makita
restrained its capital expenditures in fiscal 2002, to ¥5,958 million, which
were mainly for the purchase of new machinery and molds for new products.
Capital investment in fiscal 2001 amounted to ¥8,558 million.

Financial Position

Total assets at the end of fiscal 2003 declined 2.3% from the previous fiscal
year-end to ¥278,600 million. Total current assets decreased 4.3%, to ¥173,565
million, owing to production cutbacks in the United States and Japan that
enabled the reduction of inventory levels. Property, plant and equipment, at
cost decreased 10.6%, to ¥67,798 million, as capital investment was restrained
to a considerably lower level than in previous years and continued to be made
at annual rate lower than the rate of depreciation. Investments and other
assets increased 33.4% to ¥37,237 million because investment securities and
deferred income taxes were increased. Total current liabilities dropped 12.8%,
to ¥31,806 million, reflecting Makitas promotion of intra-Group financing,
which led to a noteworthy fall in consolidated short-term borrowings. Although
long-term indebtedness declined, long-term liabilities expanded 9.5%,
to ¥63,235 million, mainly because of a rise in estimated retirement and
termination allowances due to a drop, from 2.6% to 2.1%, in the assumed
discount rate. Working capital amounted to ¥141,759 million at the end of
fiscal 2003. The current ratio was 5.5, compared with 5.0 at the previous
year-end, as Makita continued to maintain a high rate of liquidity.
Shareholders equity declined 4.0%, to ¥182,400 million, because of a ¥2,881
million purchase of common stock that is being held as treasury stock and the
increase in accumulated other comprehensive loss which caused by ¥5,518 million
increased in the minimum pension liabilities.
As a result, the shareholders equity ratio decreased to 65.5%, from 66.6% at
the previous fiscal year-end.

C.     Research and development, patents and licenses

Approximately 360 of Makitas employees are engaged in research and
development activities and product design.
Makita also employs approximately 120 trained personnel in production
engineering, and has developed a number of machine tools presently in use in
its factories. The majority of such personnel are engaged in research and
development of mechanical innovations, and the remainder in electric,
electronic and other applications.

Makita places high priority on R&D and believes that strong capabilities in R&D
are crucial to the continued development of high-quality, reliable products
that meet user needs. In fiscal 2003, Makita allocated ¥3,856 million for R&D,
up 2.9% from the allocation in the previous year. This was equivalent to 2.2%
of net sales, down from 2.3% in the previous fiscal year. In fiscal 2002,
Makita allocated ¥3,746 million for R&D, up 9.1% from the ¥3,435 million
allocations in the previous year. The ratio of R&D expenses to net sales in
fiscal 2002 was 2.3% compared to 2.2% in the previous fiscal year.
Makita is pursuing environment-friendly product development, making individual
products dustless, vibration-free, soundproof, and generally easier to use
from the ergonomic standpoint, and aiming to minimize adverse effects of
products on both users and the surrounding environment.

Currently, the Company has a policy of allocating development resources to R&D
related to technology-intensive products that are unlikely to be affected by
price competition from low-priced products.

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The Companys Development Department is responsible for development
operations. Staffs are sent on long-term trips to perform market surveys and
thereby obtain information on diverse customer needs in the Americas and
Europe. In recent years, a new line of products suited for Southeast Asian
markets and marketed under a new brand (Maktec) has been developed with a
portion of development work handled by Makita (China) Co., Ltd.

Makita plans to expand its current product lines with an emphasis on cordless
electric
 tools, further development of smaller lightweight tools, the
incorporation of more electronics technology into its products, and
strengthening its product line of garden tools.

D.     Trend information

Expectation

In the United States, consumer spending and housing investment remained strong
during fiscal 2003. In light of such developments as the Iraq crisis, however,
companies curtailed their capital investments and new hiring during the latter
half of the year, and the effects of a general downturn was felt in all sectors
of the economy. Amid these circumstances, Makita strove to improve
profitability by strengthening its marketing in the professional market with an
aim to reinforce its brand image as well as by reducing manufacturing costs,
marketing expenses and inventory levels. In fiscal 2004, Makita plans to
continue its efforts to compress fixed costs through the consolidation of sales
branch, reduction of the number of service centers, and other aggressive
restructuring measures.
In Europe, general economic conditions remained weak in fiscal 2003 as the
downturn in consumer spending and other adverse factors restrained growth in
domestic demand in principal European
countries. However, the appreciation of the euro increased Makitas price
competitiveness vis a vis Europe-based competitors and resulted in an increase
in Makitas profitability. Makita expects to increase sales further by
proceeding with measures to enhance services, in growth markets in Eastern
Europe and Russia as well as in the Middle East and Africa.
In Asia, despite a temporary downturn in domestic demand, the regions economy
was generally headed towards recovery as manufacturing and exports saw
substantial growth. Sales of Makita products were strong and benefited from the
contribution of a newly introduced line of products marketed under a different
brand name. In consideration of the effects of SARS, Makitas marketing
companies in the region increased the inventories of products manufactured at
factories in China, and the level of inventories has continued to rise.
With respect to the Japanese economy, there was no improvement on the
deflationary trend as stock prices continued to generally decline. In view of
these factors, there remained little prospect of economic recovery and economic
conditions remained weak.

Forward-Looking Statements

This report contains forward-looking statements based on Makitas own
projections and estimates. The power tools market, where Makita is mainly
active, is subject to the effects of rapid shifts in economic conditions,
demand for housing, currency exchange rates, changes in competitiveness, and
other factors. Due to the risks and uncertainties involved, actual results
could differ substantially from the content of these statements. Therefore,
these statements should not be interpreted as representation that such
objectives will be fulfilled.

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Item 6. Directors, Senior Management and Employees

A.     Directors and senior management.

The Directors and Statutory Auditors of the Company as of June 27, 2003 are as
follows:

Masahiko Goto
Current Position: President, Representative Director since May 1989
Date of Birth: November 16,1946
Director since: May 1984

Masami Tsuruta
Current Position: Managing Director, General Manager of Domestic Sales Headquarters since June 2003
Date of Birth: December 26,1942
Director since: June 1995
Business Experience:
June 1995: Director, Assistant General Manager of Domestic Sales Headquarters
June 1997: Director, General Manager of Domestic Sales Marketing Headquarters

Yasuhiko Kanzaki
Current Position: Director, General Manager of International Sales Headquarters (Europe Area) since June 2003
Date of Birth: July 9,1946
Director since: June 1999
Business Experience:
April 1995: Director of Makita International Europe Ltd.
June 1999: Director, Assistant General Manager of International Sales Headquarters 1

Ken-ichiro 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

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Tomoyasu Kato
Current Position: Director, General Manager of Research and Development Headquarters since June 2001
Date of Birth: March 25,1948
Director since: June 2001
Business Experience:
March 1999: General Manager of Technical Administration Department

Kazuya Nakamura
Current Position: Director, General Manager of International Sales Headquarters (Asia and Oceania Area) since June 2003
Date of Birth: April 13,1948
Director since: June 2001
Business Experience:
October 2000: General Manager of Asia and Oceania Sales Department
June 2001: Director, General Manager of International Sales Headquarters 2

Masahiro Yamaguchi
Current Position: Director, General Manager of Purchasing Headquarters since June 2003
Date of Birth: May 9, 1945
Director since: June 2003
Business Experience:
April 1995: Assistant Manager of International Sales Department
August 1995: Transferred to Makita Manufacturing Europe Ltd.
May 2003: Assistant General Manager of Purchasing Headquarters (Makita Corporation)

Shiro Hori
Current Position: Director, General Manager of Overseas Sales Headquarters (America Area and International Administration) since June 2003
Date of Birth: February 24, 1948
Director since: June 2003
Business Experience:
April 1997: Assistant General Manager of Europe Sales Department
March 1999: General Manager of Europe Sales Department

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

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Hisayoshi Niwa
Current Position: Director, General Manager of Quality Control Headquarters since June 2003
Date of Birth: February 24, 1949
Director since: June 2003
Business Experience:
April 1995: Assistant General Manager of Production Control Department
October 1999: General Manager of Production Control Department

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

Ryota Ichikawa
Current Position: Standing Statutory Auditor since June 2001
Date of Birth: June 27,1941
Statutory Auditor since: June 2001
Business Experience:
June 1995: Director, General Manager of Administration Headquarters

Ken-ichi Ikeda
Current Position: Standing Statutory Auditor since June 1998
Date of Birth: April 5, 1942
Statutory Auditor since: June 1998
Business Experience:
October 1995: General Manager of General Affairs Department

Keiichi Usui
Current Position: Outside Statutory Auditor since June 1994
Date of Birth: August 9,1933
Statutory Auditor since: June 1994

Shoichi Hase
Current Position: Outside Statutory Auditor since June 2001
(Patent attorney, Hase International Patent office)
Date of Birth: March 30,1934
Statutory Auditor since: June 2001
April 1967:Established Hase Patent Attorney Office

The term of each director listed above expires in June 2005. The term of each
of Mr. Ichikawa and Mr. Ikeda as Standing Statutory Auditor and Mr. Hase as
Statutory Auditor expires in June 2004. The term of Mr. Usui as Statutory
Auditor expires in June 2007.

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B.     Compensation

The aggregate amount of remuneration, including bonuses but excluding
retirement allowances, paid by the Company during the fiscal year ended March
31, 2003 to all Directors and Statutory Auditors, who served during the fiscal
year ended March 31, 2003, totaled ¥ 129 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
certain Directors and Statutory Auditors.

September 30, 2001, the Company has 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 ¥ 373 million as of March 31, 2002 and was increased to
¥ 427 million as of March 31, 2003.

C.     Board practices

The Companys Articles of Incorporation provide for a Board of Directors of 15
or less members and for 5 or less (but not less than 3) Statutory Auditors. All
Directors and Statutory Auditors are elected at general meetings of
shareholders. In general, the term of office of Directors expires at the
conclusion of the ordinary general meeting of shareholders held with respect to
the last closing of accounts within 2 years after their assumption of office,
and in the case of Statutory Auditors, within 4 years (in the case of Statutory
Auditors elected at the ordinary general meeting of shareholders held with
respect to the fiscal year ended on or prior to May 1, 2002, 3 years) after
their assumption of office; however, Directors and Statutory Auditors may serve
any number of consecutive terms. With respect to each expiration of the term of
office of Directors and Statutory Auditors, see above A. Directors and senior
management in this Item.

The Directors constitute the Board of Directors, which has the ultimate
responsibility for administration of our affairs. 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 of the Representative Directors has the
authority individually to represent the Company in the conduct of the affairs
of the Company.

The Statutory Auditors of the Company are not required to be and are not
certified public accountants. However, at least one of the Statutory Auditors
is required to be a person who has not been a Director, general manager or
employee of the Company or any of its subsidiaries during the 5-year period
prior to his election as a Statutory Auditor. After the conclusion of an
ordinary general meeting of shareholders to be held with respect to the first
fiscal year ending on and after May 1, 2005, at least half of the Statutory
Auditors is required to be a person who has not been a Director, general
manager or employee of the Company or any of its subsidiaries. The Statutory
Auditors may not at the same time be Directors, general managers or employees
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 financial
statements and business reports to be submitted by the Board of Directors at
the general meeting of shareholders. They shall 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 general meetings of shareholders. Such independent certified
public accountants or audit corporation have, as their primary statutory
duties, the duties to examine the financial statements proposed to be submitted
by the Board of Directors at general meetings of shareholders and to report
their opinion thereon to the Statutory Auditors and the Directors.

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The Statutory Auditors constitute the Board of Statutory Auditors. The Board of
Statutory Auditors has a statutory duty to prepare and submit its audit report
to the Board of Directors each year. A Statutory Auditor may note his or her
opinion in the audit report if his or her opinion is different from the opinion
expressed in the audit report. The Board of Statutory Auditors is empowered to
establish audit principles,
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.

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.

D.     Employees

The following table sets forth information about number of employees:

|                                |          |  |                      |       |      |  |      |       |  |  |  |       | 
|------------------------------- | -------- |  | -------------------- | ----- | ---- |  | ---- | ----- |  |  |  | ----- | 
|                                |          |  | Year ended March 31,
|                                |          |  |                     
|                                |          |  | 2001                 |       | 2002 |  | 2003
|                                |          |  |                      |       |      |  |     
|Categorized by Geographic Areas |          |  |                      |       |      |  |      |       |  |  |  |      
|                                | Domestic |  |                      | 3,302 |      |  |      | 3,245 |  |  |  | 3,057 | 
|                                | Overseas |  |                      | 4,651 |      |  |      | 4,912 |  |  |  | 5,287 | 
|                                |          |  |                      |       |      |  |     
|                                | Total    |  |                      | 7,953 |      |  |      | 8,157 |  |  |  | 8,344 | 

During the fiscal year ended March 31, 2003, in the domestic area, Makita
averaged approximately 129 temporary employees 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 Union covering wages and
conditions of employment. All full-time employees of the Company in Japan,
except management, and certain other employees, must become 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.

E.     Share ownership

The total number of shares of the Companys Common Stock owned by the
Directors and Statutory Auditors as a group is as follows:

| |                    |  |              |           |               |  |  |      |  
| | ------------------ |  | ------------ | --------- | ------------- |  |  | ---- | -
| | Identity of        |  | Number of    |           | Percentage of
| | Person or Group    |  | Shares Owned |           | voting right 
| |                    |  |              |           |              
| | Directors and      |  |              | 2,059,543 |               |  |  | 1.35 | %
| | Statutory Auditors |  |              |           |               |  |  |      |  

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The following table lists the number of shares owned by the Directors and
Statutory Auditors of the Company as of June 27, 2003.

|                   |  |                                    |  |                 
|------------------ |  | ---------------------------------- |  | ----------------
|Name               |  | Position                           |  | Number of shares
|                   |  |                                    |  |                 
|Masahiko Goto      |  | President, Representative Director |  | 1,943,943       
|Masami Tsuruta     |  | Managing Director                  |  | 13,722          
|Yasuhiko Kanzaki   |  | Director                           |  | 9,469           
|Ken-ichiro Nakai   |  | Director                           |  | 10,270          
|Tadayoshi Torii    |  | Director                           |  | 11,000          
|Tomoyasu Kato      |  | Director                           |  | 10,672          
|Kazuya Nakamura    |  | Director                           |  | 5,000           
|Masahiro Yamaguchi |  | Director                           |  | 4,773           
|Shiro Hori         |  | Director                           |  | 6,657           
|Tadashi Asanuma    |  | Director                           |  | 3,574           
|Hisayoshi Niwa     |  | Director                           |  | 4,867           
|Zenji Mashiko      |  | Director                           |  | 5,296           
|Ryota Ichikawa     |  | Standing Statutory Auditor         |  | 7,100           
|Ken-ichi Ikeda     |  | Standing Statutory Auditor         |  | 4,000           
|Keiichi Usui       |  | Outside Statutory Auditor          |  | 6,200           
|Shoichi Hase       |  | Outside Statutory Auditor          |  | 13,000          

Item 7. Major Shareholders and Related Party Transaction

A.     Major Shareholders

The following is shareholders 5% or more of the Companys common stock on the
list of shareholder as of March 31, 2003.

|                                                          |  |              |            |               |  |  |      |  
|--------------------------------------------------------- |  | ------------ | ---------- | ------------- |  |  | ---- | -
|Identity of                                               |  | Number of    |            | Percentage of
|Person or Group                                           |  | Shares Owned |            | voting right 
|                                                          |  |              |            |              
|Northern Trust Company (AVFC)
Sub-account American Client |  |              | 10,090,700 |               |  |  | 7.01 | %
|                                                         
|The UFJ Bank, Limited                                     |  |              | 7,370,229  |               |  |  | 5.12 |  

Except for Masahiko Goto holding 1.27% as of March 31 2003, none of the
Companys Directors and Statutory Auditors is the owner of more than one
percent of the Companys Common Stock.

As of March 31, 2003, 153,006,992 shares of the Companys common stock were
outstanding. 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 and 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.

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Based on publicly available information, the following table sets forth the
beneficial ownership of holders of more than 5% of the Companys common stock
as of the dates indicated in the reports described below.

|                                           |  |                  |           |            |  |  |      |  
|------------------------------------------ |  | ---------------- | --------- | ---------- |  |  | ---- | -
|Name of Beneficial Owner                   |  | Number of Shares |           | Percentage
|                                           |  |                  |           |           
|Silchester International Investors Limited |  |                  | 9,267,000 |            |  |  | 6.06 | %

The number of shares owned by Silchester International Investors Limited and
its related entities is based on a report filed under the Securities and
Exchange Law of Japan stating that Silchester International and its related
entities held or was deemed to hold beneficially, as of June 21, 2002,
9,267,000 shares of the Companys common stock.

Based on information made publicly available on or after April 1, 2000, 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.

|                                           |  |                    |  |                      |            |            |  |         |       |             |  |            |            |              |  |  |            |  |  |  |      |  
|------------------------------------------ |  | ------------------ |  | -------------------- | ---------- | ---------- |  | ------- | ----- | ----------- |  | ---------- | ---------- | ------------ |  |  | ---------- |  |  |  | ---- | -
|                                           |  |                    |  |                      |            |            |  |         |       |             |  | Number of  |            | Shares Owned |  |  |            | 
|                                           |  | Date of            |  | Shares Owned         |            |            |  |         |       | Shares      |  | After the  |            |              |  | 
|Name of Shareholder                        |  | Transaction        |  | Prior to Transaction |            | Percentage |  | Changed |       | Transaction |  | Percentage
|                                           |  |                    |  |                      |            |            |  |         |       |             |  |           
|Templeton Global Advisors
Limited          |  | September 25, 2000 |  |                      | 16,347,080 |            |  |         | 10.22 | %           |  |            | (1,812,142 | )            |  |  | 14,534,938 |  |  |  | 9.20 | %
|Templeton Global Advisors
Limited          |  | February 27, 2001  |  |                      | 14,534,938 |            |  |         | 9.20  | %           |  |            | (2,013,027 | )            |  |  | 12,521,911 |  |  |  | 8.18 | %
|Templeton Global Advisors
Limited          |  | March 9, 2001      |  |                      | 12,521,911 |            |  |         | 8.18  | %           |  |            | (1,687.072 | )            |  |  | 10,834,839 |  |  |  | 7.08 | %
|Templeton Global Advisors Limited          |  | May 1, 2001        |  |                      | 10,834,839 |            |  |         | 7.08  | %           |  |            | (1,537,588 | )            |  |  | 9,297,251  |  |  |  | 6.08 | %
|Silchester International Investors Limited |  | April 23, 2001     |  |                      |           |            |  |         |      |             |  |            |           |              |  |  | 7,661,000  |  |  |  | 5.01 | %
|Templeton Global Advisors
Limited          |  | September 30, 2001 |  |                      | 9,297,251  |            |  |         | 6.08  | %           |  |            | (1,613,275 | )            |  |  | 7,683,976  |  |  |  | 5.02 | %
|Goldman Sachs International                |  | September 30, 2001 |  |                      |           |            |  |         |      |             |  |            |           |              |  |  | 9,095,000  |  |  |  | 5.94 | %
|Silchester International
Investors Limited |  | June 21, 2002      |  |                      | 7,661,000  |            |  |         | 5.01  | %           |  |            | 1,606,000  |              |  |  | 9,267,000  |  |  |  | 6.06 | %
|Goldman Sachs International                |  | March 31, 2002     |  |                      | 9,095,000  |            |  |         | 5.94  | %           |  |            | (2,762,100 | )            |  |  | 6,332,900  |  |  |  | 4.14 | %
|Templeton Global Advisors
Limited          |  | September 30, 2002 |  |                      | 7,683,976  |            |  |         | 5.02  | %           |  |            | (1,657,000 | )            |  |  | 6,026,976  |  |  |  | 3.94 | %

As of March 31, 2003, the Company had 153,006,992 outstanding shares of common
stock. According to the Bank of New York, depositary for the Companys ADSs, as
of March 31, 2003, 3,824,200 shares of the Companys common stock were held in
the form of ADRs and there were 54 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, 2003, there were 12,666 holders of common stock of
record worldwide and the number of record holder in the United States was 44.

The major shareholders do not have different voting rights.

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.

As far as is known to 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

None

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C.     Interest of experts and counsel

Not applicable

Item 8. Financial Information

A.     Consolidated statement 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 in this annual report has been
audited by Makitas auditors.
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 proceeding 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 aims to carry out stable operations over the long term by bolstering its
internal reserves in preparation for the future and strengthening its business
structure. Subject to Makitas earnings and financial condition and other
factors, including legal restrictions with respect to the payment of dividends,
Makita believes that annual cash dividends per share of ¥18 represent a stable
dividend, and as a past of its basic policy, Makita will strive to maintain
these dividend levels.

In keeping with this basic policy, the Company paid cash dividends in fiscal
2003 of ¥18.0 per share, the same amount as fiscal 2002. In fiscal 2000, the
Company paid a special commemorative 85th anniversary cash dividend per share
and ADS of ¥1, and thus cash dividends per share for fiscal 2000 amounted to
¥19.0.

The following table sets forth cash dividends per share of Common Stock
declared in Japanese yen and as translated into U.S. dollars, the U.S. dollar
amounts being based on the exchange rates at the respective payment date, using
the noon buying rates for cable transfers in yen in New York City as certified
for customs purposes by the Federal Reserve Bank of New York:

|                    |  |         |     |                 |  |         |      |          |  |  |      |  |  |  |      | 
|------------------- |  | ------- | --- | --------------- |  | ------- | ---- | -------- |  |  | ---- |  |  |  | ---- | 
|                    |  | In Yen  |     | In U.S. Dollars
|                    |  |         |     |                
|Year ended March 31 |  | Interim |     | Year-end        |  | Interim |      | Year-end
|                    |  |         |     |                 |  |         |      |         
|1999                |  |         | 9.0 |                 |  |         | 9.0  |          |  |  | 0.07 |  |  |  | 0.07 | 
|2000                |  |         | 9.0 |                 |  |         | 10.0 |          |  |  | 0.08 |  |  |  | 0.10 | 
|2001                |  |         | 9.0 |                 |  |         | 9.0  |          |  |  | 0.07 |  |  |  | 0.07 | 
|2002                |  |         | 9.0 |                 |  |         | 9.0  |          |  |  | 0.07 |  |  |  | 0.07 | 
|2003                |  |         | 9.0 |                 |  |         | 9.0  |          |  |  | 0.07 |  |  |  | 0.07 | 

B.     Significant changes

No significant changes have occurred since the date of Makitas latest annual
financial statements.

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Item 9. The Offer and Listing

A.     Offer and listing details

The shares of common stock of the Company have been listed on the First
Section of the Tokyo Stock Exchange, the Osaka Securities Exchange and the
Nagoya Stock Exchange since 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 have
been listed on the Amsterdam Stock Exchange (Euronext Amsterdam) since 1973,
initially in the form of Continental Depositary Receipts. The Companys
American Depositary Shares, each representing five shares (from April 1, 1991,
one share) of common stock and evidenced by American Depositary Receipts
(ADRs), have been quoted since 1977 through the National Association of
Securities Dealers Automated Quotation (NASDAQ) System under MKTAY.

The following table shows the high and low sales prices of the Common Stock on
the Tokyo Stock Exchange for the periods indicated and the reported high and
low bid prices of American Depositary Shares through the NASDAQ system.

|                            |                                      |      |      |     |                            |       |                               |     |  |       |  |      |  |       |  |      |  |      | 
|--------------------------- | ------------------------------------ | ---- | ---- | --- | -------------------------- | ----- | ----------------------------- | --- |  | ----- |  | ---- |  | ----- |  | ---- |  | ---- | 
|                            |                                      |      |      |     | Tokyo Stock Exchange Price |       | NASDAQ Price                 
|                            |                                      |      |      |     | Per Share of Common Stock  |       | Per American Depositary Share
|                            |                                      |      |      |     | (Yen)                      |       | (U.S. Dollars)               
|                            |                                      |      |      |     |                            |       |                              
|Fiscal year ended March 31, |                                      | High |      | Low |                            | High  |                               | Low
|                            |                                      |      |      |     |                            |       |                               |    
|                            |                                      |      | 1999 |     |                            | 1,699 |                               |     |  | 1,080 |  |      |  | 12.63 |  |      |  | 8.94 | 
|                            |                                      |      | 2000 |     |                            | 1,426 |                               |     |  | 865   |  |      |  | 12.38 |  |      |  | 7.88 | 
|                            |                                      |      | 2001 |     |                            | 1,100 |                               |     |  | 711   |  |      |  | 9.88  |  |      |  | 5.94 | 
|                            |                                      |      | 2002 |     |                            | 871   |                               |     |  | 615   |  |      |  | 6.85  |  |      |  | 4.88 | 
|                            |                                      |      | 2003 |     |                            | 909   |                               |     |  | 654   |  |      |  | 7.55  |  |      |  | 5.35 | 
|                           
|Quarterly                   |                                      |      |      |     |                            |       |                               |     |  |       |  |      |  |       |  |     
|                            |                                      |      |      |     |                            |       |                               |    
|Fiscal year 2002            |                                      |      |      |     |                            |       |                               |     |  |       |  |      |  |       |  |     
|                            | 1st quarter ended June 30, 2001      |      |      | 830 |                            |       |                               | 713 |  |       |  | 6.85 |  |       |  | 5.80 | 
|                            | 2nd quarter ended September 30,
2001 |      |      | 799 |                            |       |                               | 615 |  |       |  | 6.30 |  |       |  | 5.21 | 
|                            | 3rd quarter ended December 31,
2001  |      |      | 766 |                            |       |                               | 640 |  |       |  | 6.00 |  |       |  | 5.12 | 
|                            | 4th quarter ended March 31, 2002     |      |      | 871 |                            |       |                               | 648 |  |       |  | 6.64 |  |       |  | 4.88 | 
|                           
|Fiscal year 2003            |                                      |      |      |     |                            |       |                               |     |  |       |  |      |  |       |  |     
|                            | 1st quarter ended June 30, 2002      |      |      | 909 |                            |       |                               | 755 |  |       |  | 6.95 |  |       |  | 6.25 | 
|                            | 2nd quarter ended September 30,
2002 |      |      | 837 |                            |       |                               | 661 |  |       |  | 6.95 |  |       |  | 5.89 | 
|                            | 3rd quarter ended December 31,
2002  |      |      | 898 |                            |       |                               | 654 |  |       |  | 7.25 |  |       |  | 5.35 | 
|                            | 4th quarter ended March 31, 2003     |      |      | 890 |                            |       |                               | 756 |  |       |  | 7.55 |  |       |  | 6.45 | 
|                           
|Monthly                     |                                      |      |      |     |                            |       |                               |     |  |       |  |      |  |       |  |     
|                            |                                      |      |      |     |                            |       |                               |    
|                            | January 2003                         |      |      | 885 |                            |       |                               | 756 |  |       |  | 7.55 |  |       |  | 6.50 | 
|                            | February 2003                        |      |      | 884 |                            |       |                               | 762 |  |       |  | 6.95 |  |       |  | 6.45 | 
|                            | March 2003                           |      |      | 890 |                            |       |                               | 790 |  |       |  | 7.25 |  |       |  | 6.78 | 
|                            | April 2003                           |      |      | 910 |                            |       |                               | 834 |  |       |  | 7.66 |  |       |  | 7.05 | 
|                            | May 2003                             |      |      | 942 |                            |       |                               | 890 |  |       |  | 7.90 |  |       |  | 7.24 | 
|                            | June 2003                            |      |      | 978 |                            |       |                               | 923 |  |       |  | 8.30 |  |       |  | 7.76 | 

B.     Plan of distribution

Not applicable

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C.     Markets

See Item 9. A

D.     Selling shareholder

Not applicable

E.     Dilution

Not applicable

F.     Expenses of the issue

Not applicable

Item 10. Additional Information

A.     Share capital

Not applicable

B.     Memorandum and articles of association

Organization

The Company is a joint stock corporation (kabushiki kaisha)incorporated in
Japan under the Commercial Code (shoho)of Japan. It is registered in the
Commercial Register (shogyo tokibo)maintained by the Anjo Branch Office of the
Nagoya Legal Affairs Bureau of the Ministry of Justice.

Objects and purposes

Article 2 of the Articles of Incorporation of the Company provides that its
purpose is to engage in the following lines of business:



| |  | Manufacture and sale of machine tools including electric power tools, pneumatic tools, etc., and wood-working tools;                                    
|- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Manufacture and sale of electric machinery and equipment and various other machinery and equipment;                                                     
| |  | Manufacture and sale of interior furnishings and household goods and their installation work;                                                           
| |  | Purchase, sale, lease and management of real estate;                                                                                                    
| |  | Operation of sporting and recreational facilities;                                                                                                      
| |  | Casualty insurance agency and business relating to offering of life insurance;                                                                          
| |  | Tourist business under the Travel Agency Law;                                                                                                           
| |  | Acquisition, assignment and licensing of industrial property right, copyright and other intellectual property right and
provision of technical guidance;
| |  | Investment in various kinds of business; and                                                                                                            
| |  | All other business incidental or relative to any of the preceding items.                                                                                

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Directors

Under the Commercial Code, each Director has executive powers and duties to
manage the affairs of the Company and each Representative Director, who is
elected from among the Directors by the Board of Directors, has the statutory
authority to represent the Company in all respects. Under the Commercial Code,
the Directors must refrain from engaging in any business competing with the
Company unless approved by the Board of Directors and any Director who has a
material interest in the subject matter of a resolution to be taken by the
Board of Directors cannot vote on such resolution. The total amount of
remuneration to Directors and that to Statutory Auditors are subject to the
approval of the general meeting of shareholders. Within such authorized amounts
the Board of Directors and the Board of Statutory Auditors respectively
determine the compensation to each Director and Statutory Auditor.

Except as stated below, neither the Commercial Code nor the Companys Articles
of Incorporation make special provisions as to:



| |  | the Directors or Statutory Auditors power to vote in connection with their compensation;                                                          
|- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------
| |  | the borrowing power exercisable by a Representative Director (or a Director who is given
power by a Representative Director to exercise such power);
| |  | their retirement age; or                                                                                                                            
| |  | requirement to hold any shares of capital stock of the Company.                                                                                     

The Commercial Code specifically requires the resolution of the Board of Directors for a company:



| |  | to acquire or dispose of material assets;                                                
|- |  | -----------------------------------------------------------------------------------------
| |  | to borrow a substantial amount of money;                                                 
| |  | to employ or discharge from employment important employees, such as general managers; and
| |  | to establish, change or abolish material corporate organization such as a branch office. 

The Regulations of the Board of Directors of the Company require a resolution
of the Board of Directors for the Company to borrow money in an amount of 100
million yen or more or to give a guarantee in an amount of 10 million yen or
more.

Common stock

General

Set forth below is information relating to the Companys Common Stock,
including brief summaries of the relevant provisions of the Companys Articles
of Incorporation and Share Handling Regulations, as currently in effect, and of
the Commercial Code of Japan and related legislation.

In order to assert shareholders rights against the Company, a shareholder must
have its name and address registered or recorded on the Companys register of
shareholders in writing or digitally, in accordance with the Companys Share
Handling Regulations. The registered beneficial holder of deposited shares
underlying the ADSs is the Depositary for the ADSs. Accordingly, holders of
ADSs will not be able directly to assert shareholders rights against the
Company.

A holder of shares may choose, at its discretion, to participate in the central
clearing system for share certificates under the Law Concerning Central
Clearing of Share Certificates and Other Securities of Japan. Participating
shareholders must deposit certificates representing all of the shares to be
included in this clearing system with the

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Japan Securities Depository Center,
Inc. (JASDEC). If a holder is not a participating institution in JASDEC, it
must participate through a participating institution, such as securities
company or bank having a clearing account with JASDEC. All shares deposited
with JASDEC will be registered in the name of JASDEC on the Companys register
of shareholders. Each participating shareholder will in turn be registered on
the Companys register of beneficial shareholders and be treated in the same
way as shareholders registered on the Companys register of shareholders. For
the purpose of transferring deposited shares, delivery of share certificates is
not required. Entry of the share transfer in the books maintained by JASDEC for
participating institutions, or in the book maintained by a
participating institution for its customers, has the same effect as delivery of
share certificates. The registered beneficial shareholders may exercise the
rights attached to the shares, such as voting rights, and will receive
dividends (if any) and notices to shareholders directly from the Company. The
shares held by a person as a registered shareholder and those held by the same
person as a registered beneficial shareholder are aggregated for these
purposes. Beneficial shareholders may at any time withdraw their shares from
deposit and receive share certificates.

Authorized capital

Article 5 of the Articles of Incorporation of the Company provides that the
total number of shares authorized to be issued by the Company is 292,000,000
shares.

As of March 31, 2003, 153,006,992 shares of Common Stock were issued and
outstanding.

All shares of Common Stock of the Company have no par value.

Dividends

The Articles of Incorporation of the Company provide that the accounts shall be
closed on March 31 of each year and that dividends, if any, shall be paid to
shareholders, beneficial shareholders and pledgees of record as of the end of
such day. After the close of the fiscal period, the Board of Directors
prepares, among other things, a proposed allocation of profits for dividends
and other purposes; this proposal is submitted to the Board of Statutory
Auditors of the Company and to independent certified public accountants and
then submitted for approval to the ordinary general meeting of shareholders,
which is normally held in June each year. In addition to provisions for
dividends, if any, and for the legal reserve and other reserves, the allocation
of profits customarily includes a bonus to Directors and Statutory Auditors. In
addition to dividends, the Board of Directors may by its resolution declare a
cash distribution pursuant to Article 293-5 of the Commercial Code (an interim
dividend) to shareholders, beneficial shareholders and pledgees of record as
of the end of each September 30, without shareholders approval, but subject to
the limitations described below.

The Commercial Code provides that a company may not make any distribution of
profit by way of dividends or interim dividends for any fiscal period unless it
has set aside in its legal reserve an amount equal to at least one-tenth of the
amount paid by way of appropriation of retained earnings for such fiscal period
or equal to one-tenth of the amount of such interim dividends until the
aggregate amount of additional paid-in capital and legal reserve equals to
one-quarter of its stated capital. Under the Commercial Code, the Company is
permitted to distribute profits by way of dividends or interim dividends out of
the excess of its net assets over the aggregate of:



|(i)   |  | its stated capital;                                                             
|----- |  | --------------------------------------------------------------------------------
|(ii)  |  | its additional paid-in capital;                                                 
|(iii) |  | its accumulated legal reserve;                                                  
|(iv)  |  | the legal reserve to be set aside in respect of the fiscal period concerned; and

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|(v) |  | other amounts as provided for by an ordinance of Ministry
of Justice.
|--- |  | ---------------------------------------------------------------------

In the case of interim dividends, the net assets are calculated by reference to
the non-consolidated balance sheet as at the last closing of the Companys
accounts, but adjusted to reflect:



|(x) |  | any subsequent payment by way of appropriation of retained earnings and
transfer to legal reserve in respect thereof;                                                                                                                                                                                                            
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(y) |  | any subsequent transfer of retained earnings to stated capital; and                                                                                                                                                                                                                                                              
|(z) |  | if the Company has been authorized, pursuant to a resolution of an
ordinary general meeting of shareholders, to purchase shares of Common
Stock (see Acquisition by the Company of Common Stock below), the total
amount of the purchase price of such shares so authorized by such
resolution that may be paid by the Company,

provided that interim dividends may not be paid where there is a risk that at
the end of the fiscal year there might not be any excess of net assets over the
aggregate of the amounts referred to in (i) through (v) above.

Under its Articles of Incorporation, the Company is not obligated to pay any
dividends which are left unclaimed for a period of 3 years after the date on
which they first became payable.

Stock splits

The Company may at any time split shares in issue into a greater number of
shares by resolution of the Board of Directors, and may amend its Articles of
Incorporation to increase the number of the authorized shares to be issued to
allow the stock split pursuant to a resolution of the Board of Directors rather
than a special resolution of a general meeting of shareholders, which is
otherwise required for amending the Articles of Incorporation.

In the event of a stock split, generally, shareholders will not be required to
exchange share certificates for new share certificates, but certificates
representing the additional shares resulting from the stock split will be
issued to shareholders. When a stock split is to be made, the Company must give
public notice of the stock split, specifying the record date therefor, at least
2 weeks prior to such record date. In addition, promptly after the stock split
takes effect, the Company must give notice to each shareholder specifying the
number of shares to which such shareholder is entitled by virtue of the stock
split.

General meeting of shareholders

The ordinary general meeting of shareholders of the Company for each fiscal
year is normally held in June in each year in or near Anjo, Aichi, Japan. In
addition, the Company may hold an extraordinary general meeting of shareholders
whenever necessary by giving notice of convocation thereof at least 2 weeks
prior to the date set for the meeting.

Notice of convocation of a shareholders meeting setting forth the place, time
and purpose thereof, must be mailed to each shareholder having voting rights
(or, in the case of a non-resident shareholder, to his or her standing proxy or
mailing address in Japan) at least 2 weeks prior to the date set for the
meeting. Such notice may be given to shareholders by electronic means, subject
to the consent of the relevant shareholders. The record date for an ordinary
general meeting of shareholders is March 31 of each year.
Any shareholder or group of shareholders holding at least 3 percent of the
total number of voting rights for a period of 6 months or more may require the
convocation of a general meeting of shareholders for a particular purpose.
Unless such shareholders meeting is convened promptly or a convocation notice
of a meeting which is to be held

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not later than 8 weeks from the day of such
demand is dispatched, the requiring shareholder may, upon obtaining a court
approval, convene such shareholders meeting.

Any shareholder or group of shareholders holding at least 300 voting rights or
one percent of the total number of voting rights for a period of 6 months or
more may propose a matter to be considered at a general meeting of shareholders
by submitting a written request to a Representative Director at least 8 weeks
prior to the date set for such meeting.

Voting rights

So long as the Company maintains the unit share system (see -Unit share
system below; currently 1,000 shares constitute one unit) a holder of shares
constituting one or more whole units is entitled to one voting right per unit
of shares subject to the limitations on voting rights set forth in the
following 2 sentences. A corporate shareholder more than one-quarter of whose
total voting rights are directly or indirectly owned by the Company may not
exercise its voting rights with respect to shares of Common Stock of the
Company that it owns. In addition, the Company may not exercise its voting
rights with respect to its shares that it owns. If the Company eliminates from
its Articles of Incorporation the provisions relating to the unit of shares,
holders of shares of Common Stock will have one voting right for each share
they hold. Except as otherwise provided by law or by the Articles of
Incorporation, a resolution can be adopted at a general meeting of shareholders
by a majority of the number of voting
rights of all the shareholders represented at the meeting. The Commercial Code
and the Companys Articles of Incorporation provide, however, that the quorum
for the election of Directors and Statutory Auditors shall not be less than
one-third of the total number of voting rights of all the shareholders. The
Companys shareholders are not entitled to cumulative voting in the election of
Directors. Shareholders may exercise their voting rights through proxies,
provided that the proxies are also shareholders holding voting rights. The
Companys shareholders also may cast their votes in writing. Shareholders may
also exercise their voting rights by electronic means when the Board of
Directors decides to permit such method of exercising voting rights.

The Commercial Code and the Companys Articles of Incorporation provide that in
order to amend the Articles of Incorporation and in certain other instances,
including, a reduction of stated capital, the removal of a Director or
Statutory Auditor, dissolution, merger or consolidation with a certain
exception under which shareholders resolution is not required, the transfer of
the whole or an important part of the business, the taking over of the whole of
the business of any other corporation with a certain exception under which
shareholders resolution is not required, share exchange or share transfer for
the purpose of establishing 100 percent parent-subsidiary relationships with a
certain exception under which shareholders resolution is not required,
splitting of the corporation into 2 or more corporations with a certain
exception under which shareholders resolution is not required, or any offering
of new shares at a substantially favorable price (or any offering of stock
acquisition rights to subscribe for or acquire shares of capital stock (stock
acquisition rights) or bonds with stock acquisition rights under
substantially favorable exercise conditions) to any persons other than
shareholders, the quorum shall be one-third of the total voting rights of all
the shareholders and the approval by at least two-thirds of the voting rights
of all the shareholders represented at the meeting is required (the special
shareholders resolutions).

Issue of additional shares and pre-emptive rights

Holders of the Companys shares of Common Stock have no pre-emptive rights
under its Articles of Incorporation. Authorized but unissued shares may be
issued at such times and upon such terms as the Board of Directors determines,
subject to the limitations as to the offering of new shares at a substantially
favorable price mentioned under Voting rights above. The Board of Directors
may, however, determine that shareholders shall be given subscription rights
regarding a particular issue of new shares, in which case such rights must be
given on uniform

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terms to all shareholders as at a record date of which not
less than 2 weeks prior public notice must be given. Each of the shareholders
to whom such rights are given must also be given notice of the expiry thereof
at least 2 weeks prior to the date on which such rights expire.

Rights to subscribe for new shares may be made generally transferable by the
Board of Directors. Whether the Company will make subscription rights generally
transferable in future rights offerings will depend upon the circumstances at
the time of such offerings. If subscription rights are not made generally
transferable, transfers by a non-resident of Japan or a corporation organized
under the laws of a foreign country or whose principal office is located in a
foreign country will be enforceable against the Company and third parties only
if the Companys prior written consent to each such transfer is obtained. When
such consent is necessary in the future for the transfer of subscription
rights, the Company intends to consent, on request, to all such transfers by
such a non-resident or foreign corporation.

Subject to certain conditions, the Company may issue stock acquisition rights
by a resolution of the Board of Directors, subject to the limitations as to the
offering of stock acquisition rights on substantially favorable exercise
conditions mentioned under Voting rights above. Holders of stock acquisition
rights may exercise their rights to acquire a certain number of shares within
the exercise period as prescribed in the terms of their stock acquisition
rights. Upon exercise of stock acquisition rights, the Company will be obliged
to issue the relevant number of new shares or alternatively to transfer the
necessary number of treasury stock held by it.

Liquidation rights

In the event of a liquidation of the Company, the assets remaining after
payment of all debts and liquidation expenses and taxes will be distributed
among shareholders in proportion to the respective numbers of shares of Common
Stock held.

Record date

March 31 is the record date for the Companys dividends. So long as the Company
maintains the unit share system, the shareholders and beneficial shareholders
who are registered or recorded as the holders of one or more full unit of
shares in the Companys registers of shareholders and/or beneficial
shareholders in writing or digitally at the end of each March 31 are also
entitled to exercise shareholders rights at the ordinary general meeting of
shareholders with respect to the fiscal year ending on such March 31. September
30 is the record date for interim dividends. In addition, the Company may set a
record date for determining the shareholders and/or beneficial shareholders
entitled to other rights and for other purposes by giving at least 2 weeks
prior public notice.

The price of shares generally goes ex-dividends or ex-rights on Japanese stock
exchanges on the third business day prior to a record date (or if the record
date is not a business day, the fourth business day prior thereto), for the
purpose of dividends or rights offerings.

Acquisition by the Company of Common Stock

The Company may acquire its own shares through a stock exchange on which such
shares are listed (pursuant to an ordinary resolution of an ordinary general
meeting of shareholders), by way of tender offer (pursuant to an ordinary
resolution of an ordinary general meeting of shareholders), or by purchase from
a specific party other than a subsidiary of the Company (pursuant to a special
resolution of an ordinary general meeting of shareholders) or from a subsidiary
of the Company (pursuant to a resolution of the Board of Directors). When such
acquisition is made by the Company from a specific party other than a
subsidiary of the Company, any other shareholder may make a

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request to a
Representative Director, more than 5 calendar days prior to the relevant
shareholders meeting, to include him/her as the seller in the proposed
purchase. Any such acquisition of shares must satisfy certain requirements,
including that, in cases other than the acquisition by the Company of its own
shares from a subsidiary of the Company, the total amount of the purchase price
may not exceed the amount of the retained earnings available for dividend
payments after taking into account any reduction, if any, of the stated
capital, additional paid-in capital or legal reserve (if such reduction of the
stated capital, additional paid-in capital or legal reserve has been authorized
pursuant to a resolution of the relevant ordinary general meeting of
shareholders), minus the amount to be paid by way of appropriation of retained
earnings for the relevant fiscal year and the amount to be transferred to
stated capital. If the Company purchase shares from its subsidiaries, the total
amount of the purchase price may not exceed the amount of the retained earnings
available for an interim dividend payment minus the amount of any interim
dividend the Company actually paid. However, if it is anticipated that the net
assets on the balance sheet as at the end of the relevant fiscal year will be
less than the aggregate amount of the stated capital, additional paid-in
capital and other items as described in (i) through (v) to Dividends above,
the Company may not acquire such shares.

Shares acquired by the Company may be held by it for any period or may be
cancelled by resolution of the Board of Directors. The Company may also
transfer to any person the shares held by it, subject to a resolution of the
Board of Directors, and subject also to other requirements similar to those
applicable to the issuance of new shares, as described in Issue of additional
shares and pre-emptive rights above. The Company may also utilize its treasury
stock for the purpose of transfer to any person upon exercise of stock
acquisition rights or for the purpose of acquiring another company by way of
merger, share exchange or corporate split through exchange of treasury stock
for shares or assets of the acquired company.

Unit share system

The Articles of Incorporation of the Company provide that 1,000 shares
constitute one unit of shares of stock. Although the number of shares
constituting one unit is included in the Articles of Incorporation,
any amendment to the Articles of Incorporation reducing (but not increasing)
the number of shares constituting one unit or eliminating the provisions for
the unit of shares may be made by the resolution of the Board of Directors
rather than by the special shareholders resolution, which is otherwise required
for amending the Articles of Incorporation. The number of shares constituting
one new unit, however, cannot exceed 1,000 or one-two hundredth of all issued
shares.

Under the unit share system, shareholders shall have one voting right for each
unit of shares that they hold. Any number of shares less than a full unit will
carry no voting rights.

Unless the Companys shareholders amend the Articles of Incorporation by a
special shareholders resolution to eliminate the provision not to issue share
certificates for less than a unit of shares, a share certificate for any number
of shares less than a unit will in general not be issued. As the transfer of
shares normally requires the delivery of the share certificates therefor, any
fraction of a unit for which no share certificates are issued is not
transferable.
A holder of shares constituting less than one unit may require the Company to
purchase such shares at their market value in accordance with the provisions of
the Share Handling Regulations of the Company.

The Articles of Incorporation of the Company provide that a holder of shares
constituting less than one full unit may request the Company to sell to such
holder such amount of shares which will, when added together with the shares
constituting less than one full unit, constitute one full unit of stock, in
accordance with the provisions of the Share Handling Regulations of the
Company.

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A holder who owns ADRs evidencing less than 1,000 ADSs will indirectly own less
than one full unit of shares of Common Stock. Although, as discussed above,
under the unit share system holders of less than one full unit have the right
to require the Company to purchase their shares or sell shares held by the
Company to such holders, holders of ADRs evidencing ADSs that represent other
than integral multiples of full units are unable to withdraw the underlying
shares of Common Stock representing less than one full unit and, therefore, are
unable, as a practical matter, to exercise the rights to require the Company to
purchase such underlying shares or sell shares held by the Company to such
holders unless the Companys Articles of Incorporation are amended to eliminate
the provision not to issue share certificates for the numbers of shares less
than a unit. As a result, access to the Japanese markets by holders of ADRs
through the withdrawal mechanism will not be available for dispositions of
shares of Common Stock in lots less than one full unit. The unit share system
does not affect the transferability of ADSs, which may be transferred in lots
of any size.

Sale by the Company of shares held by shareholders whose address is unknown

The Company is not required to send a notice to a shareholder if a notice to
such shareholder fails to arrive at the registered address of the shareholder
in the Companys register of shareholders or at the address otherwise notified
to the Company continuously for 5 years or more.

In addition, the Company may sell or otherwise dispose of shares of Common
Stock for which the location of the shareholder is unknown. Generally, if (i)
notices to a shareholder fail to arrive continuously for 5 years or more at the
shareholders registered address in the Companys register of shareholders or
at the address otherwise notified to the Company, and (ii) the shareholder
fails to receive dividends on the shares continuously for 5 years or more at
the address registered in the Companys register of shareholders or at the
address otherwise notified to the Company, the Company may sell or otherwise
dispose of the shareholders shares by a resolution of the Board of Directors
and after giving at least 3 months prior public and individual notice, and
holding or depositing the proceeds of such sale or disposal of shares at the
then market price of the shares for the shareholder, the location of which is
unknown.

Reporting of substantial shareholdings

The Securities and Exchange Law of Japan and regulations thereunder requires
any person, regardless of residence, who has become, beneficially and solely or
jointly, a holder of more than 5 percent of the total issued shares of capital
stock of a company listed on any Japanese stock exchange or whose shares are
traded on the over-the-counter market in Japan to file with the
Director-General of a competent Local Finance Bureau of Ministry of Finance
within 5 business days a report concerning such shareholdings.

A similar report must also be filed in respect of any subsequent change of one
percent or more in any such holding or any change in material matters set out
in reports previously filed, with certain exceptions. For this purpose, shares
issuable to such person upon conversion of convertible securities or exercise
of share subscription warrants or stock acquisition rights are taken into
account in determining both the number of shares held by such holder and the
issuers total issued share capital. Copies of such report must also be
furnished to the issuer of such shares and all Japanese stock exchanges on
which the shares are listed or (in the case of shares traded over-the-counter)
the Japan Securities Dealers Association.
Except for the general limitation under Japanese anti-trust and anti-monopoly
regulations against holding of shares of capital stock of a Japanese
corporation which leads or may lead to a restraint of trade or monopoly, and
except for general limitations under the Commercial Code or the Companys
Articles of Incorporation on the rights of shareholders applicable regardless
of residence or nationality, there is no limitation under Japanese laws and
regulations applicable to the Company or under its Articles of Incorporation on
the rights of non-resident or foreign shareholders to hold the shares of Common
Stock of the Company or exercise voting rights thereon.

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There is no provision in the Companys Articles of Incorporation that would
have an effect of delaying, deferring or preventing a change in control of the
Company and that would operate only with respect to merger, consolidation,
acquisition or corporate restructuring involving the Company.

C.     Material contracts

All material contracts concluded by the Company during the 2 years preceding
the date of this report were entered into in the ordinary course of business.

D.     Exchange Controls

The Foreign Exchange and Foreign Trade Law of Japan and its related cabinet
orders and ministerial ordinances (the Foreign Exchange Regulations) govern
the acquisition and holding of shares of Common Stock of the Company by
exchange non-residents and by foreign investors. The Foreign Exchange
Regulations currently in effect do not, however, affect transactions between
exchange non-residents to purchase or sell shares outside Japan using
currencies other than Japanese yen.

Exchange non-residents are:



| |  | individuals who do not reside in Japan; and                    
|- |  | ---------------------------------------------------------------
|  |  |                                                                
| |  | corporations whose principal offices are located outside Japan.

Generally, branches and other offices of non-resident corporations that are
located within Japan are regarded as residents of Japan. Conversely, branches
and other offices of Japanese corporations located outside Japan are regarded
as exchange non-residents.

Foreign investors are:



| |  | individuals who are exchange non-residents;                                                                                                                                                                                                                                                                                                                                                        
|- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  |  |                                                                                                                                                                                                                                                                                                                                                                                                    
| |  | corporations that are organized under the laws of foreign countries or
whose principal offices are located outside of Japan; and                                                                                                                                                                                                                                                                   
|  |  |                                                                                                                                                                                                                                                                                                                                                                                                    
| |  | corporations (1) of which 50 percent or more of their shares are held
by individuals who are exchange non-residents and/or corporations (a)
that are organized under the laws of foreign countries or (b) whose
principal offices are located outside of Japan or (2) a majority of
whose officers, or officers having the power of representation, are
individuals who are exchange non-residents.

In general, the acquisition of shares of a Japanese company (such as the shares
of Common Stock of the Company) by an exchange non-resident from a resident of
Japan is not subject to any prior filing requirements. In certain limited
circumstances, however, the Minister of Finance may require prior approval of
an acquisition of this type. While prior approval, as described above, is not
required, in the case where a resident of Japan transfers shares of a Japanese
company (such as the shares of Common Stock of the Company) for consideration
exceeding 100 million yen to an exchange non-resident, the resident of Japan
who transfers the shares is required to report the transfer to the Minister of
Finance within 20 days from the date of the transfer, unless the transfer was
made through a bank, securities company or financial futures trader licensed
under Japanese law.

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If a foreign investor acquires shares of a Japanese company that is listed on a
Japanese stock exchange (such as the shares of Common Stock of the Company) or
that is traded on an over-the-counter market in Japan and, as a result of the
acquisition, the foreign investor, in combination with any existing holdings,
directly or indirectly holds 10 percent or more of the issued shares of the
relevant company, the foreign investor must file a report of the acquisition
with the Minister of Finance and any other competent Ministers having
jurisdiction over that Japanese company within 15 days from and including the
date of the acquisition, except where the offering of the companys shares was
made overseas. In limited circumstances, such as where the foreign investor is
in a country that is not listed on an exemption schedule in the Foreign
Exchange Regulations, a prior notification of the acquisition must be filed
with the Minister of Finance and any other competent Ministers, who may then
modify or prohibit the proposed acquisition.
Under the Foreign Exchange Regulations, dividends paid on and the proceeds from
sales in Japan of shares of Common Stock of the Company held by non-residents
of Japan may generally be converted into any foreign currency and repatriated
abroad.

E.     Taxation

The discussion below is not intended to constitute a complete analysis of all
tax consequences relating to the acquisition, ownership and disposition of
shares of Common Stock and ADSs. Prospective purchasers and holders of the
shares of Common Stock or ADSs should consult their own tax advisors concerning
the tax consequences of their particular situations.

The following is a general summary of the major Japanese national and U.S.
federal income tax consequences of the acquisition, ownership and disposition
of shares of Common Stock or ADSs by a U.S. Holder (as defined below) that hold
shares of Common Stock or ADSs as capital assets for U.S. federal income tax
purposes (generally, property held for investment). This summary does not
purport to address all material tax consequences that may be relevant to
holders of shares of Common Stock or ADSs, and does not take into account the
specific circumstances of any particular investors, some of which (such as
tax-exempt entities, banks, insurance companies, broker-dealers, investors
liable for alternative minimum tax, investors that own or are treated as owning
10 percent or more of the Companys voting stock, investors that hold shares of
Common Stock or ADSs as part of a straddle, hedge, conversion transaction or
other integrated transaction, persons that hold shares of Common Stock or ADSs
through a partnership or other pass-through entity and investors whose
functional currency is not the U.S. dollar) may be subject to special tax
rules. This summary is based on the national or federal tax laws of Japan and
of the United States as in effect on the date hereof, as well as on the current
income tax convention between the United States and Japan (the Treaty), all
of which are subject to change (possibly with retroactive effect) and to
differing interpretations. In addition, this summary is based in part upon the
representations of the depositary and the assumption that each obligation in
the deposit agreement for ADSs and in any related agreement will be performed
in accordance with its terms.

For purposes of this discussion, a U.S. Holder is any beneficial owner of
shares of Common Stock or ADSs that is:



| |  | a citizen or individual resident of the United States;                                                                                                                                                                      
|- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | a corporation or other entity taxable as a corporation organized under the laws of the United States, any State, or the
District of Columbia;                                                                               
| |  | an estate the income of which is subject to U.S. federal income tax without regard to its source; or                                                                                                                        
| |  | a trust that is subject to the primary supervision of a U.S. court and the control of one or more U.S. persons, or that has
a valid election in effect under applicable Treasury regulations to be treated as a U.S. person.

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If a partnership hold shares of Common Stock or ADSs, the tax treatment of a
partner generally will depend upon the status of the partner and upon the
activities of the partnership. Partners of partnerships holding shares of
Common Stock or ADSs should consult their own tax advisor.

An Eligible U.S. Holder is a U.S. Holder that:



| |  | is a resident of the United States for purposes of the Treaty;                                                                                                                                                                                                                                      
|- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | does not maintain a permanent establishment or fixed base in Japan to
which shares of Common Stock or ADSs are attributable and through
which the U.S. Holder carries on or has carried on business (or, in
the case of an individual, performs or has performed independent
personal services); and
| |  | is not otherwise ineligible for benefits under the Treaty with respect
to income and gain derived in connection with the shares of Common
Stock or ADSs.                                                                                                                                            

This summary does not address any aspects of U.S. federal tax law other than
income taxation, and does not discuss any aspects of Japanese tax law other
than national income taxation, inheritance and gift taxation. Investors are
urged to consult their tax advisor regarding the U.S. federal, state and local
and Japanese and other tax consequences of acquiring, owning and disposing of
shares of Common Stock or ADSs. In particular, where relevant, investors are
urged to confirm their status as Eligible U.S. Holders with their tax advisors
and to discuss with their tax advisors any possible consequences of their
failure to qualify as Eligible U.S. Holders. In general, taking into account
the earlier assumptions, for purposes of the Treaty and for U.S. federal income
and Japanese tax purposes, beneficial owners of ADRs evidencing ADSs will be
treated as the owners of the shares of Common Stock represented by those ADSs,
and exchanges of shares of Common Stock for ADSs, and exchanges of ADSs for
shares of Common Stock, will not be subject to U.S. federal income tax or
Japanese tax.

Japanese taxation

The following is a summary of the principal Japanese tax consequences (limited
to national taxes) to Eligible U.S. Holders of shares of Common Stock or ADRs
evidencing ADSs representing shares of Common Stock of the Company.
Generally, a non-resident of Japan or a non-Japanese corporation is subject to
Japanese withholding tax on dividends paid by a Japanese corporation. The
Company withholds taxes from dividends it pays as required by Japanese law.
Stock splits in themselves are not subject to Japanese income tax.

Under Japanese tax law, the rate of Japanese withholding tax applicable to
dividends paid by Japanese corporations to non-residents of Japan or
non-Japanese corporations is generally 20 percent. However, with respect to
dividends paid on listed shares issued by a Japanese corporation (such as the
shares of Common Stock of the Company) to any corporate or individual
shareholders (including those shareholders who are U.S. Holders), except for
any individual shareholder who holds 5 percent or more of the outstanding total
of the shares issued by the relevant Japanese corporation, the aforementioned
20 percent withholding tax rate is reduced to (i) 10 percent for dividends due
and payable on or after April 1, 2003 but on or before December 31, 2003, (ii)
7 percent for dividends due and payable on or after January 1, 2004 but on or
before March 31, 2008, and (iii) 15 percent for dividends due and payable on or
after April 1, 2008.

Under the Treaty, as currently in force, the maximum rate of Japanese
withholding tax which may be imposed on dividends paid by a Japanese
corporation to an Eligible U.S. Holder generally is limited to 15 percent or,
if certain conditions (as provided in the Treaty) are fulfilled, 10 percent of
the gross amount actually distributed. An Eligible U.S. Holder who is entitled,
under the Treaty, to a reduced rate of Japanese withholding tax below the rate
otherwise applicable under Japanese tax law on payment of dividends on the
Companys shares of Common Stock is required

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to submit an Application Form for
Income Tax Convention Regarding Relief from Japanese Income Tax on Dividends in
advance through
the Company to the relevant tax authority before such payment of dividends.
With respect to ADRs, the Depositary or its agent will apply for this reduced
treaty rate, if it is below the rate otherwise applicable under Japanese tax
law, on behalf of Eligible U.S. Holders by submitting two Application Forms
(one before payment of dividends, the other within 8 months after the Companys
fiscal year-end) to the Japanese tax authorities. To claim this reduced rate,
any relevant Eligible U.S. Holder of ADRs will be required to file a proof of
taxpayer status, residence and beneficial ownership (as applicable) and to
provide other information or documents as may be required by the Depositary. An
Eligible U.S. Holder who is entitled, under the Treaty, to a reduced rate of
Japanese withholding tax below the rate otherwise applicable under Japanese tax
law, but fails to submit the required application in advance will be entitled
to claim the refund of withholding taxes withheld in excess of the rate under
the Treaty from the relevant Japanese tax authority. The Company does not
assume any responsibility to ensure withholding at the reduced treaty rate for
shareholders who would be eligible under the Treaty but do not follow the
required procedures as stated above.

Gains derived from the sale of shares of Common Stock or ADRs outside Japan by
an Eligible U.S. Holder holding such shares or ADRs are not subject to Japanese
income or corporation tax with respect to such gains under the Treaty.

Japanese inheritance or gift tax at progressive rates may be payable by an
individual who has acquired shares of Common Stock or ADRs as a legatee, heir
or donee even though neither the individual nor the deceased nor donor is a
Japanese resident.

U.S. Holders of shares of Common Stock of the Company or ADRs should consult
their tax advisors regarding the effect of these taxes as well as the possible
application of the Estate and Gift Tax Treaty between the U.S. and Japan.

U.S. federal income taxation

U.S. Holders

Taxation of Dividends

Subject to the passive foreign investment company rules discussed below, under
U.S. federal income tax law, the gross amount of any distribution made by us in
respect of shares of common stock or ADSs (without reduction for Japanese
withholding taxes) will constitute a taxable dividend to the extent paid out of
current or accumulated earnings and profits, as determined for U.S. federal
income tax purposes. A dividend generally will be included in the gross income
of a U.S. Holder, as ordinary income, when the dividend is actually or
constructively received by the U.S. Holder, in the case of shares of common
stock, or by the depositary, in the case of ADSs. The dividend will not be
eligible for the dividends received deduction generally allowed to U.S.
corporations. As further discussed below, any such dividend may be eligible for
preferential rates of U.S. federal income tax under recently enacted
legislation. A dividend paid in yen will be included in gross income in a U.S.
dollar amount based on the yen/U.S. dollar exchange rate in effect on the date
that dividend is included in the income of the U. S. Holder, regardless of
whether the payment is converted into U.S. dollars. Generally, any gain or loss
resulting from currency exchange fluctuations during the period from the date
the dividend payment is included in the gross income of a U.S. Holder through
the date that payment is converted into U.S. dollars (or otherwise disposed of)
will be treated as U.S. source ordinary income or loss.

To the extent, if any, that the amount of any distribution received by a U.S.
Holder in respect of shares of common stock or ADSs exceeds our current and
accumulated earnings and profits, the distribution first will be treated as a

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tax-free return of the U.S. Holders adjusted tax basis in those shares or
ADSs, and any balance in excess of that adjusted tax basis will be treated as
capital gain. We do not expect to compute our earnings and profits under U.S.
federal income tax principles, and therefore holders should assume that our
distributions generally will be treated as paid out of our earnings and profits
for U.S. federal income tax purposes.

Distributions of additional shares of common stock that are made to U.S.
Holders with respect to their shares of common stock or ADSs and that are part
of a pro rata distribution to all the Companys shareholders generally will not
be subject to U.S. federal income tax.

For U.S. foreign tax credit purposes, dividends included in gross income by a
U.S. Holder in respect of shares of common stock or ADSs will constitute income
from sources outside the United States and generally will be treated
separately, together with other items of passive income (or, in the case of
some holders, financial services income) in computing foreign tax credit
limitations. Subject to generally applicable limitations under U.S. federal
income tax law and the Treaty, any Japanese withholding tax imposed in respect
of a company dividend may be claimed either as a credit against the U.S.
federal income tax liability of a U.S. Holder or, if the U.S. Holder elects not
to take a credit for any foreign taxes that year, as a deduction from that
holders taxable income. Additionally, special rules apply to individuals whose
foreign source income during the taxable year consists entirely of qualified
passive income and whose creditable foreign taxes paid or accrued during the
taxable year do not exceed $300 ($600 in the case of a joint return).
Further, under some circumstances, a U.S. Holder that:



| |  | has held shares of common stock or ADSs for less than a specified minimum period, or
|- |  | ------------------------------------------------------------------------------------
| |  | is obligated to make payments related to our dividends,                             

will not be allowed a foreign tax credit for foreign taxes imposed on our
dividends. Finally, foreign tax credits may not be allowed in respect of
arrangements in which the Holders expected economic return, after non-U.S.
taxes, is insubstantial. The rules with respect to foreign tax credits are
complex and involve the application of rules that depend on a U.S. Holders
particular circumstances, and accordingly, U.S. Holders are urged to consult
their tax advisors regarding the availability of the foreign tax credit under
their particular circumstances.

Taxation of Capital Gains

Upon a sale or other disposition of shares of common stock or ADSs, a U.S.
Holder will recognize gain or loss for U.S. federal income tax purposes in an
amount equal to the difference between the amount realized and the U.S.
Holders tax basis in those shares or ADSs. In general, subject to the passive
foreign investment company rules discussed below, that gain or loss
will be capital gain or loss and, if the U.S. Holders holding period for those
shares or ADSs exceeds one year, will be long-term capital gain or loss. As
further discussed below, certain U.S. Holders, including individuals, are
eligible for various preferential rates of U.S. federal income tax in respect
of net long-term capital gain. Under U.S. federal tax law, the deduction of
capital losses is subject to limitations. Any gain or loss recognized by a U.S.
Holder in respect of the sale or other disposition of shares of common stock or
ADSs generally will be treated as U.S. source income or loss for foreign U.S.
tax credit purposes.

Passive Foreign Investment Companies

We do not believe that we are, for U.S. federal income tax purposes, a passive
foreign investment company (a PFIC), and we intend to continue our operations
in such a manner that we do not expect that we would become a PFIC in the
future. However, there can be no assurance in this regard because, the PFIC determination is made annually and is based on the portion of
our assets (including goodwill) or the portion of our income that is
characterized as passive under the PFIC rules. If we become a PFIC, unless a
U.S. Holder elects to be taxed annually on a mark-to-market basis with respect
to its shares of common

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stock or ADSs, any gain realized on a sale or other
disposition of shares of common stock or ADSs and certain excess
distributions would be treated as realized ratably over the U.S. Holders
holding period for the shares of common stock or ADSs; amounts allocated to
prior years while we are a PFIC would be taxed at the highest tax rate in
effect for each such year, and an additional interest charge would be added in
respect of the tax attributable to each such year. In addition, a U.S. Holder
would not be entitled to (if otherwise eligible for) the preferential reduced
rate of tax payable on certain dividend income under recently enacted United
States tax legislation as discussed
below. If a mark-to-market election were made, a U.S. Holder would take into
account each year the appreciation or depreciation in value of its shares of
common stock or ADS, which would be treated as ordinary income or (subject to
limitations) ordinary
 loss, as would gains or losses on actual dispositions of
common stock or ADSs. Any U.S. Holder who owns shares of
common stock or ADSs during any year that we are a PFIC would be required to
file Internal Revenue Service Form 8621. U.S. Holders should consult their own
tax advisors regarding the application of the PFIC rules to the shares of
Common Stock or ADSs and the availability and advisability of making an
election to avoid the adverse tax consequences of the PFIC rules should we be
considered a PFIC for any taxable year.

Recent United States Tax Law Changes Applicable to Individual

Recently enacted U.S. tax legislation (the 2003 Tax Act) generally has
reduced the rates of tax payable by individuals (as well as certain trusts and
estates) on certain items of income. For example, for capital assets held for
over one year and sold or exchanged on or after May 6, 2003 but in taxable
years beginning before January 1, 2009, the maximum rate of tax generally will
be 15%(rather than the higher rates of tax generally applicable to items of
ordinary income). Further, qualified dividend income received by individuals
in taxable years beginning after December 31, 2002 and beginning before January
1 2009, generally will be taxed at the rates applicable to these capital gains
(i.e., a maximum rate of 15%) rather than the higher rates applicable to other
items of ordinary income. For this purpose, qualified dividend income
generally includes dividends paid on stock in United States corporations as
well dividends paid on stock in foreign corporations if, among other things,
(1) the stock of the foreign corporations is readily tradable on an established
securities market in the United States, or (2) the foreign corporation is
eligible for the benefits of a comprehensive income tax treaty with the United
States, such qualifying treaties to be identified by the Secretary of the
United States Treasury Department. The precise
extent to which dividends paid on stock by foreign corporations will constitute
qualified dividend income and the effect of such status on the ability of a
taxpayer to utilize associated foreign tax credits is not entirely clear, but
it is anticipated that there will be administrative pronouncements concerning
these provisions in the future. Holders are urged to consult their own tax
advisors regarding the impact of the provisions of the 2003 Tax Act on their
particular situations.

Backup withholding and information reporting

In general, information reporting requirements will apply to dividends on
shares of common stock or ADSs paid to U.S. Holders in the United States or
through certain U.S. related financial intermediaries and to the proceeds
received upon the sale, exchange or redemption of shares of common stock or
ADSs by U.S. Holders within the United States or through certain U.S. related
financial intermediaries. Furthermore, backup withholding may apply to those
amounts if a U.S. Holder fails to provide an accurate tax identification number
or to report interest and dividends required to be shown on its U.S. federal
income tax returns. The amount of backup withholding imposed on a payment to a
U.S. Holder will be allowed as a credit against the holders U.S. federal
income tax liability.

F.     Dividends and paying agents

Not applicable

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G.     Statement by experts

Not applicable

H.     Documents on display

Makita files annual report on Form 20-F and reports on Form 6-K with the SEC.
You may read and copy documents referred to in this annual report on Form 20-F
that have been filed with the SEC at the SECs public reference room located at
450 Fifth Street, NW, Washington, D.C. 20549 or by accessing the SECs home
page (http://www.sec.gov)

I.     Subsidiary information

Not applicable

Item 11. Quantitative and Qualitative Disclosures about Market Risk

Market Risk Exposure
Makita is exposed to various market risks, including those related to changes
in foreign exchange rates, interest rates, and the prices of marketable
securities and investment securities. In order to hedge the risks of
fluctuations in foreign exchange rates and interest rates, Makita uses
derivative financial instruments. Makita does not hold or use derivative
financial instruments for trading purposes. Although the use of derivative
financial instruments exposes Makita to the risk of credit-related losses in
the event of nonperformance by counterparties, Makita believes that its
counterparties are creditworthy because they are required to have a credit
rating of a specified level or above, and Makita does not expect credit-related
losses, if any, to be significant.

Equity Price Risk
Makita classified investments of debt securities for current operations as
marketable securities within current assets. Other investments are classified
as investment securities as a part of
investments and other assets in the consolidated balance sheets. Makita does
not hold marketable securities and investment securities for trading purposes.
The fair value of certain of the investments expose Makita to equity price
risks. These investments are subject to changes in the market prices of the
securities. The maturities and fair values of such marketable securities and
investment securities at March 31, 2002 and 2003 were as follows:

|                                      |  |                |        |                          |  |          |        |       |  |          |        |       |  |   |        |  |  |   |         |  |  |   |         |  | 
|------------------------------------- |  | -------------- | ------ | ------------------------ |  | -------- | ------ | ----- |  | -------- | ------ | ----- |  | - | ------ |  |  | - | ------- |  |  | - | ------- |  | 
|                                      | 
|                                      |  | Yen (millions) |        | U.S. Dollars (thousands) | 
|                                      |  |                |        |                          | 
|                                      |  | 2002           |        | 2003                     |  | 2003     |       
|                                      |  |                |        |                          | 
|                                      |  | Carrying       |        | Fair                     |  | Carrying |        | Fair  |  | Carrying |        | Fair  | 
|                                      |  | Amount         |        | Value                    |  | Amount   |        | Value |  | Amount   |        | Value | 
|                                      |  |                |        |                          | 
|Due within one year                   |  | ¥              | 36,446 |                          |  | ¥        | 36,656 |       |  | ¥        | 34,018 |       |  | ¥ | 34,112 |  |  | $ | 288,289 |  |  | $ | 289,085 |  | 
|Due after one year
through five years |  |                | 5,974  |                          |  |          | 5,839  |       |  |          | 8,104  |       |  |   | 8,207  |  |  |   | 68,678  |  |  |   | 69,551  |  | 
|Due after five years                  |  |                | 230    |                          |  |          | 228    |       |  |          | 3,092  |       |  |   | 3,175  |  |  |   | 26,203  |  |  |   | 26,906  |  | 
|Indefinite periods                    |  |                | 1,400  |                          |  |          | 1,405  |       |  |          | 1,437  |       |  |   | 1,415  |  |  |   | 12,178  |  |  |   | 11,992  |  | 
|Equity securities                     |  |                | 11,559 |                          |  |          | 14,446 |       |  |          | 10,365 |       |  |   | 11,626 |  |  |   | 87,839  |  |  |   | 98,525  |  | 
|                                      |  |                |        |                          | 
|                                      |  | ¥              | 55,609 |                          |  | ¥        | 58,574 |       |  | ¥        | 57,016 |       |  | ¥ | 58,535 |  |  | $ | 483,187 |  |  | $ | 496,059 |  | 
|                                      |  |                |        |                          | 
|                                      | 

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Foreign Exchange Risk
Makitas international operations and indebtedness denominated in foreign
currencies expose Makita to the risk of fluctuation in foreign currency
exchange rates. To manage this exposure, Makita enters into certain foreign
exchange contracts with respect to a part of such international operations and
indebtedness. The following table provides information about Makitas major
derivative financial instruments related to foreign currency transactions as of
March 31, 2002, and March 31, 2003. Figures are translated into yen at the
rates prevailing at March 31, 2002, and March 31, 2003, together with the
relevant weighted average contractual exchange rates at March 31, 2003. All of
the foreign exchange contracts listed in the following
table have contractual maturities in fiscal 2002 and 2003.

|                                              |             |       |   |                                                   |       |  |                          |     |     |                         |   |        |                 |  |   |           |        |  |                         |     |     |                 |   |        |            |  |   |        |         |  |   |       |       | 
|--------------------------------------------- | ----------- | ----- | - | ------------------------------------------------- | ----- |  | ------------------------ | --- | --- | ----------------------- | - | ------ | --------------- |  | - | --------- | ------ |  | ----------------------- | --- | --- | --------------- | - | ------ | ---------- |  | - | ------ | ------- |  | - | ----- | ----- | 
|                                              |             |       |   | Yen (millions) (except average contractual rates) |       |  | U.S. Dollars (thousands) |    
|                                              |             |       |   |                                                   |       |  |                          |    
|                                              |             |       |   | 2002                                              |       |  | 2003                     |     |     | 2003                    |  
|                                              |             |       |   |                                                   |       |  |                          |    
|                                              |             |       |   | Contractamounts                                   |       |  | FairValue                |     |     | Averagecontractualrates |   |        | Contractamounts |  |   | FairValue |        |  | Averagecontractualrates |     |     | Contractamounts |   |        | Fair Value | 
|                                              |             |       |   |                                                   |       |  |                         
|Foreign currency contracts;                   |             |       |   |                                                   |       |  |                          |     |     |                         |   |        |                 |  |   |           |        |  |                         |     |     |                 |   |        |            |  |   |        |        
|                                              | Assets      |       |   |                                                   |       |  |                          |     |     |                         |   |        |                 |  |   |           |        |  |                         |     |     |                 |   |        |            |  |   |        |         |  |   |       |      
|                                              | U.S.$/Yen   |       | ¥ | 133                                               |       |  | ¥                        | 0   |     |                         | ¥ | 133.25 |                 |  | ¥ | 506       |        |  | ¥                       | 2   |     |                 | ¥ | 120.52 |            |  | $ | 4,288  |         |  | $ | 17    |      
|                                              | Euro/Yen    |       |   | 637                                               |       |  |                          | 3   |     |                         |   | 115.92 |                 |  |   |          |        |  |                         |    |     |                 |   |       |            |  |   |       |         |  |   |      |      
|                                              | STG/Yen     |       |   | 95                                                |       |  |                          | 0   |     |                         |   | 189.53 |                 |  |   | 68        |        |  |                         | 2   |     |                 |   | 193.76 |            |  |   | 576    |         |  |   | 17    |      
|                                              | Other       |       |   | 659                                               |       |  |                          | 0   |     |                         |   |       |                 |  |   |          |        |  |                         |    |     |                 |   |       |            |  |   |       |         |  |   |      |      
|                                              |             |       |   |                                                   |       |  |                          |     |     |                         |   |        |                 |  |   |           |        | 
|                                              |             | Total |   | ¥                                                 | 1,524 |  |                          | ¥   | 3   |                         |   |        |                 |  |   | ¥         | 574    |  |                         | ¥   | 4   |                 |   |        |            |  |   | $      | 4,864   |  |   | $     | 34    | 
|                                              |             |       |   |                                                   |       |  |                          |     |     |                         |   |        |                 |  |   |           |        | 
|Foreign currency contracts;                   |             |       |   |                                                   |       |  |                          |     |     |                         |   |        |                 |  |   |           |        |  |                         |     |     |                 |   |        |            |  |   |        |        
|                                              | Liabilities |       |   |                                                   |       |  |                          |     |     |                         |   |        |                 |  |   |           |        |  |                         |     |     |                 |   |        |            |  |   |        |         |  |   |       |      
|                                              | U.S.$/Yen   |       | ¥ | 2,374                                             |       |  | ¥                        | 83  |     |                         | ¥ | 128.30 |                 |  | ¥ | 2,354     |        |  | ¥                       | 27  |     |                 | ¥ | 118.49 |            |  | $ | 19,949 |         |  | $ | 229   |      
|                                              | Euro/Yen    |       |   | 4,131                                             |       |  |                          | 145 |     |                         |   | 111.65 |                 |  |   | 2,531     |        |  |                         | 60  |     |                 |   | 126.56 |            |  |   | 21,449 |         |  |   | 508   |      
|                                              | A$/Yen      |       |   | 33                                                |       |  |                          | 2   |     |                         |   | 66.40  |                 |  |   | 247       |        |  |                         | 5   |     |                 |   | 70.58  |            |  |   | 2,094  |         |  |   | 42    |      
|                                              | Other       |       |   | 1,744                                             |       |  |                          | 14  |     |                         |   |       |                 |  |   | 38        |        |  |                         | 0   |     |                 |   |       |            |  |   | 322    |         |  |   | 0     |      
|                                              |             |       |   |                                                   |       |  |                          |     |     |                         |   |        |                 |  |   |           |        | 
|                                              |             | Total |   | ¥                                                 | 8,282 |  |                          | ¥   | 244 |                         |   |        |                 |  |   | ¥         | 5,170  |  |                         | ¥   | 92  |                 |   |        |            |  |   | $      | 43,814  |  |   | $     | 780   | 
|                                              |             |       |   |                                                   |       |  |                          |     |     |                         |   |        |                 |  |   |           |        | 
|Foreign currency swaps:                       |             |       |   |                                                   |       |  |                          |     |     |                         |   |        |                 |  |   |           |        |  |                         |     |     |                 |   |        |            |  |   |        |        
|                                              | Assets      |       |   |                                                   |       |  |                          |     |     |                         |   |        |                 |  |   |           |        |  |                         |     |     |                 |   |        |            |  |   |        |         |  |   |       |      
|                                              | U.S.$/Yen   |       |   |                                                  |       |  |                          |    |     |                         |   |       |                 |  | ¥ | 184       |        |  | ¥                       | 4   |     |                 | ¥ | 122.70 |            |  | $ | 1,559  |         |  | $ | 34    |      
|                                              |             |       |   |                                                   |       |  |                          |     |     |                         |   |        |                 |  |   |           |        | 
|                                              |             | Total |   | ¥                                                 |      |  |                          | ¥   |    |                         |   |        |                 |  |   | ¥         | 184    |  |                         | ¥   | 4   |                 |   |        |            |  |   | $      | 1,559   |  |   | $     | 34    | 
|                                              |             |       |   |                                                   |       |  |                          |     |     |                         |   |        |                 |  |   |           |        | 
|Foreign currency swaps:                       |             |       |   |                                                   |       |  |                          |     |     |                         |   |        |                 |  |   |           |        |  |                         |     |     |                 |   |        |            |  |   |        |        
|                                              | Liabilities |       |   |                                                   |       |  |                          |     |     |                         |   |        |                 |  |   |           |        |  |                         |     |     |                 |   |        |            |  |   |        |         |  |   |       |      
|                                              | U.S.$/Yen   |       | ¥ | 4,830                                             |       |  | ¥                        | 428 |     |                         | ¥ | 127.80 |                 |  | ¥ | 5,564     |        |  | ¥                       | 105 |     |                 | ¥ | 118.39 |            |  | $ | 47,153 |         |  | $ | 890   |      
|                                              | Euro/Yen    |       |   | 2,435                                             |       |  |                          | 171 |     |                         |   | 108.24 |                 |  |   | 6,367     |        |  |                         | 456 |     |                 |   | 121.28 |            |  |   | 53,957 |         |  |   | 3,864 |      
|                                              | A$/Yen      |       |   |                                                  |       |  |                          |    |     |                         |   |       |                 |  |   | 992       |        |  |                         | 21  |     |                 |   | 70.85  |            |  |   | 8,407  |         |  |   | 178   |      
|                                              | CAN$/Yen    |       |   |                                                  |       |  |                          |    |     |                         |   |       |                 |  |   | 646       |        |  |                         | 8   |     |                 |   | 80.70  |            |  |   | 5,474  |         |  |   | 68    |      
|                                              | NZ$/Yen     |       |   |                                                  |       |  |                          |    |     |                         |   |       |                 |  |   | 428       |        |  |                         | 4   |     |                 |   | 65.77  |            |  |   | 3,627  |         |  |   | 34    |      
|                                              | SFr./Yen    |       |   | 139                                               |       |  |                          | 18  |     |                         |   | 69.49  |                 |  |   | 164       |        |  |                         | 12  |     |                 |   | 82.00  |            |  |   | 1,390  |         |  |   | 102   |      
|                                              |             |       |   |                                                   |       |  |                          |     |     |                         |   |        |                 |  |   |           |        | 
|                                              |             | Total |   | ¥                                                 | 7,404 |  |                          | ¥   | 617 |                         |   |        |                 |  |   | ¥         | 14,161 |  |                         | ¥   | 606 |                 |   |        |            |  |   | $      | 120,008 |  |   | $     | 5,136 | 
|                                              |             |       |   |                                                   |       |  |                          |     |     |                         |   |        |                 |  |   |           |        | 
|Options purchased to sell
foreign currencies: |             |       |   |                                                   |       |  |                          |     |     |                         |   |        |                 |  |   |           |        |  |                         |     |     |                 |  
|                                              | Assets      |       |   |                                                   |       |  |                          |     |     |                         |   |        |                 |  |   |           |        |  |                         |     |     |                 |   |        |            |  |   |        |         |  |   |       |      
|                                              | U.S.$/Yen   |       | ¥ | 1,096                                             |       |  | ¥                        | 2   |     |                         | ¥ | 128.94 |                 |  | ¥ | 309       |        |  | ¥                       | 3   |     |                 | ¥ | 116.75 |            |  | $ | 2,618  |         |  | $ | 25    |      
|                                              | Euro/Yen    |       |   | 1,231                                             |       |  |                          | 1   |     |                         |   | 111.91 |                 |  |   | 505       |        |  |                         | 1   |     |                 |   | 126.19 |            |  |   | 4,280  |         |  |   | 9     |      
|                                              | Other       |       |   | 133                                               |       |  |                          | 0   |     |                         |   |       |                 |  |   | 366       |        |  |                         | 15  |     |                 |   |       |            |  |   | 3,102  |         |  |   | 127   |      
|                                              |             |       |   |                                                   |       |  |                          |     |     |                         |   |        |                 |  |   |           |        | 
|                                              |             | Total |   | ¥                                                 | 2,460 |  |                          | ¥   | 3   |                         |   |        |                 |  |   | ¥         | 1,180  |  |                         | ¥   | 19  |                 |   |        |            |  |   | $      | 10,000  |  |   | $     | 161   | 
|                                              |             |       |   |                                                   |       |  |                          |     |     |                         |   |        |                 |  |   |           |        | 
|Options written to buy
foreign currencies:    |             |       |   |                                                   |       |  |                          |     |     |                         |   |        |                 |  |   |           |        |  |                         |     |     |                 |  
|                                              | Liabilities |       |   |                                                   |       |  |                          |     |     |                         |   |        |                 |  |   |           |        |  |                         |     |     |                 |   |        |            |  |   |        |         |  |   |       |      
|                                              | U.S.$/Yen   |       | ¥ | 1,144                                             |       |  | ¥                        | 10  |     |                         | ¥ | 134.58 |                 |  | ¥ | 316       |        |  | ¥                       | 6   |     |                 | ¥ | 119.33 |            |  | $ | 2,678  |         |  | $ | 51    |      
|                                              | Euro/Yen    |       |   | 1,283                                             |       |  |                          | 10  |     |                         |   | 116.65 |                 |  |   | 519       |        |  |                         | 5   |     |                 |   | 129.86 |            |  |   | 4,398  |         |  |   | 42    |      
|                                              | Other       |       |   | 140                                               |       |  |                          | 3   |     |                         |   |       |                 |  |   | 147       |        |  |                         | 0   |     |                 |   |       |            |  |   | 1,246  |         |  |   | 0     |      
|                                              |             |       |   |                                                   |       |  |                          |     |     |                         |   |        |                 |  |   |           |        | 
|                                              |             | Total |   | ¥                                                 | 2,567 |  |                          | ¥   | 23  |                         |   |        |                 |  |   | ¥         | 982    |  |                         | ¥   | 11  |                 |   |        |            |  |   | $      | 8,322   |  |   | $     | 93    | 
|                                              |             |       |   |                                                   |       |  |                          |     |     |                         |   |        |                 |  |   |           |        | 

51



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##### Table of Contents



Interest Rate Risk
Makitas exposure to market risk due to changes in interest rates relates
primarily to its debt obligations. The Companys long-term debt bears fixed
rates. Interest rate swaps may be entered into from time to time by Makita to
hedge fair values of debt in accordance with Makitas internal rules.
Regarding obligations as of March 31, 2003, the following tables present
information translated into yen at the rate prevailing at the balance sheet
date, together with the relevant weighted average contractual interest rates at
March 31, 2003.

|                                                      |       |  |      |                |  |   |         |         |  |      |        |                                   |      |   |         |         |  |   |        |        |  |      |     |     |            |   |     |     |  |   |     |     |  | 
|----------------------------------------------------- | ----- |  | ---- | -------------- |  | - | ------- | ------- |  | ---- | ------ | --------------------------------- | ---- | - | ------- | ------- |  | - | ------ | ------ |  | ---- | --- | --- | ---------- | - | --- | --- |  | - | --- | --- |  | 
|                                                     
|                                                      |       |  |      |                |  |   |         |         |  |      |        | Yen (millions)                    |     
|                                                      |       |  |      |                |  |   |         |         |  |      |        |                                   |     
|                                                      |       |  |      |                |  |   |         |         |  |      |        | Fair Value, year ending March 31, |     
|                                                      |       |  |      | Average        |  |   |         |         |  |      |        |                                  
|                                                      |       |  |      | Interest rates |  |   | Total   |         |  | 2004 |        |                                   | 2005 |   |         | 2006    |  |   | 2007   |        |  | 2008 |     |     | Thereafter |  
|                                                     
|Japanese yen
Convertible bonds                        |       |  | 1.5% |                |  | ¥ | 13,267  |         |  |      |       |                                   |      | ¥ | 13,267  |         |  | ¥ |       |        |  | ¥    |    |     |            | ¥ |    |     |  | ¥ |    |    
|Foreign
currency
loans from bank                      |       |  | 3.4% |                |  |   | 2,779   |         |  |      | 2,779  |                                   |      |   |        |         |  |   |       |        |  |      |    |     |            |   |    |     |  |   |    |    
|Japanese yenloans from banks
and insurance companies  |       |  | 3.4% |                |  |   | 6,587   |         |  |      |       |                                   |      |   |        |         |  |   | 6,587  |        |  |      |    |     |            |   |    |     |  |   |    |    
|Japanese yen
Capital lease                            |       |  | 1.9% |                |  |   | 375     |         |  |      | 113    |                                   |      |   | 90      |         |  |   | 87     |        |  |      | 41  |     |            |   | 13  |     |  |   | 31  |    
|                                                      |       |  |      |                | 
|                                                      | Total |  |      |                |  |   | ¥       | 23,008  |  |      | ¥      | 2,892                             |      |   | ¥       | 13,357  |  |   | ¥      | 6,674  |  |      | ¥   | 41  |            |   | ¥   | 13  |  |   | ¥   | 31  | 
|                                                      |       |  |      |                | 
|                                                      |       |  |      |                | 
|                                                     
|                                                      |       |  |      |                |  |   |         |         |  |      |        | U.S. Dollars (thousands)          |     
|                                                      |       |  |      |                |  |   |         |         |  |      |        |                                   |     
|                                                      |       |  |      |                |  |   |         |         |  |      |        | Fair Value, year ending March 31, |     
|                                                      |       |  |      | Average        |  |   |         |         |  |      |        |                                  
|                                                      |       |  |      | Interest rates |  |   | Total   |         |  | 2004 |        |                                   | 2005 |   |         | 2006    |  |   | 2007   |        |  | 2008 |     |     | Thereafter |  
|                                                     
|Japanese yen
Convertible bonds                        |       |  | 1.5% |                |  | $ | 112,433 |         |  | $    |       |                                   |      | $ | 112,433 |         |  | $ |       |        |  | $    |    |     |            | $ |    |     |  | $ |    |    
|Foreign

currency
loans from bank                     |       |  | 3.4% |                |  |   | 23,550  |         |  |      | 23,550 |                                   |      |   |        |         |  |   |       |        |  |      |    |     |            |   |    |     |  |   |    |    
|Japanese

yenloans from banks
and insurance companies |       |  | 3.4% |                |  |   | 55,822  |         |  |      |       |                                   |      |   |        |         |  |   | 55,822 |        |  |      |    |     |            |   |    |     |  |   |    |    
|Japanese yen
Capital lease                            |       |  | 1.9% |                |  |   | 3,178   |         |  |      | 958    |                                   |      |   | 762     |         |  |   | 737    |        |  |      | 348 |     |            |   | 110 |     |  |   | 263 |    
|                                                      |       |  |      |                | 
|                                                      | Total |  |      |                |  |   | $       | 194,983 |  |      | $      | 24,508                            |      |   | $       | 113,195 |  |   | $      | 56,559 |  |      | $   | 348 |            |   | $   | 110 |  |   | $   | 263 | 
|                                                      |       |  |      |                | 
|                                                     




Item 12. Description of Securities Other than Equity Securities

Not applicable

52



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##### Table of Contents






PART II




Item 13. Defaults, Dividend Arrearages and Delinquencies

None




Item 14. Material Modifications to the Rights of Security Holders and Use of Proceeds.

None




Item 15. Control and Procedures

(a)  Within 90 days prior to the date of this report, Makita performed an
evaluation of the effectiveness of the design and operation of our disclosure
controls and procedures. Disclosure controls and procedures are designed to
ensure that the material financial and non-financial information required to
be disclosed in Form 20-F and filed with the SEC is recorded, processed,
summarized and reported timely. The evaluation was performed under the
supervision of Masahiko Goto, Makitas chief executive officer, and Ken-ichiro
Nakai, Makitas principal financial and accounting officer. In designing and
evaluating the disclosure controls and procedures, management recognized that
any controls and procedures, no matter how well designed and operated, can
provide only reasonable, rather than absolute, assurance of achieving the
desired control objectives. Managerial judgment was necessary to evaluate the
cost-benefit relationship of possible controls and procedures. Based on the
foregoing, Mr. Goto and Mr. Nakai concluded that Makitas disclosure controls
and procedures were effective.

(b)  There have been no significant changes in Makitas internal controls or in
other factors that could significantly affect these controls subsequent to the
date of the evaluation described in the preceding paragraph. Therefore, no
corrective actions were taken.




Item 16A. [Reserved]




Item 16B. Code of Ethics
Makita has adopted a code of ethics that applies to its directors and executive
officers, including its principal executive officer, principal financial
officer, principal accounting officer or controller, or persons performing
similar functions.




Item 16C. [Reserved]

53



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##### Table of Contents



PART III




Item 17. Financial Statements

We have responded to Item 18 in lieu of responding to this Item.




Item 18. Financial Statements

The following financial statements are filed as part of this annual report on
Form 20-F.
















Item 19. Exhibits

|     |  |                                                                                                        
|---- |  | -------------------------------------------------------------------------------------------------------
|1.1  |  | The Articles of Incorporation, as amended and effective as of June 27, 2003
      (English translation)
|     |  |                                                                                                        
|2.1  |  | Share Handling Regulation, as amended and effective as of June 27, 2003
      (English translation)    
|     |  |                                                                                                        
|11.1 |  | Code of Ethics                                                                                         
|     |  |                                                                                                        
|99.1 |  | 906 Certification                                                                                      

54



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##### Table of Contents






SIGNATURES

The registrant hereby certifies that it meets all of the requirements for
filing on Form 20-F and that it has duly caused and authorized the undersigned
to sign this annual report on its behalf.

|                     |  |                    |  |                                      
|-------------------- |  | ------------------ |  | -------------------------------------
|                     |  | MAKITA CORPORATION
|                    
|                    
|                    
|                    
|                    
|                    
|                     |  | By:                |  | /s/ Masahiko Goto                    
|                     |  | Name:              |  | Masahiko Goto                        
|                     |  | Title:             |  | President and Representative Director
|Date: August 8, 2003 |  |                    |  |                                      





---



##### Table of Contents



CERTIFICATION

I, Masahiko Goto, President and Representative Director of Makita Corporation,
certify that:



|1. |  | I have reviewed this annual report on Form 20-F of Makita Corporation;                                                                                                                                                                                                                                                  
|-- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|2. |  | Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this annual report;
|  
|3. |  | Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the registrant as of, and for, the periods presented in this annual
report;                   
|  
|4. |  | The registrants other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
have:                                                                                                  



| | (a) |  | Designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this annual report is
being prepared;
| | --- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | (b) |  | Evaluated the effectiveness of the registrants disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this annual report (the Evaluation Date); and                                                                                                  
|
| | (c) |  | Presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;                                                                                                                        



|5. |  | The registrants other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrants auditors and the audit
committee of registrants board of directors (and persons performing the
equivalent function):
|-- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (a) |  | All significant deficiencies in the design or operation of internal
controls which could adversely affect the registrants ability to
record, process, summarize and report financial data and have
identified for the registrants auditors any material weaknesses in
internal controls; and
| | --- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | (b) |  | Any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrants
internal controls; and                                                                                                                                        



|6. |  | The registrants other certifying officers and I have indicated in this
annual report whether there were significant changes in internal controls
or any other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any
corrective actions with regard to significant deficiencies and material
weaknesses.
|-- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                     |  |                    |  |                                      
|-------------------- |  | ------------------ |  | -------------------------------------
|Date: August 8, 2003 |  |                    |  |                                      
|                     |  |                    |  |                                      
|                     |  | MAKITA CORPORATION
|                     |  |                    |  |                                      
|                     |  | By:                |  | /s/ Masahiko Goto                    
|                     |  |                    |  |                                      
|                     |  | Name:              |  | Masahiko Goto                        
|                     |  | Title:             |  | President and Representative Director





---



##### Table of Contents



CERTIFICATION

I, Ken-ichiro Nakai, Director, General Manager of Administration Headquarters
of Makita Corporation, certify that:



|1. |  | I have reviewed this annual report on Form 20-F of Makita Corporation;                                                                                                                                                                                                                                                  
|-- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|2. |  | Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this annual report;
|  
|3. |  | Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the registrant as of, and for, the periods presented in this annual
report;                   
|  
|4. |  | The registrants other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
have:                                                                                                  



| | (a) |  | Designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this annual report is
being prepared;
| | --- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | (b) |  | Evaluated the effectiveness of the registrants disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this annual report (the Evaluation Date); and                                                                                                  
|
| | (c) |  | Presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;                                                                                                                        



|5. |  | The registrants other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrants auditors and the audit
committee of registrants board of directors (and persons performing the
equivalent function):
|-- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (a) |  | All significant deficiencies in the design or operation of internal
controls which could adversely affect the registrants ability to
record, process, summarize and report financial data and have
identified for the registrants auditors any material weaknesses in
internal controls; and
| | --- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | (b) |  | Any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrants
internal controls; and                                                                                                                                        



|6. |  | The registrants other certifying officers and I have indicated in this
annual report whether there were significant changes in internal controls
or any other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any
corrective actions with regard to significant deficiencies and material
weaknesses.
|-- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                     |  |                    |  |                                                         
|-------------------- |  | ------------------ |  | --------------------------------------------------------
|Date: August 8, 2003 |  |                    |  |                                                         
|                     |  |                    |  |                                                         
|                     |  | MAKITA CORPORATION
|                     |  |                    |  |                                                         
|                     |  | By:                |  | /s/ Ken-ichiro Nakai                                    
|                     |  |                    |  |                                                         
|                     |  | Name:              |  | Ken-ichiro Nakai                                        
|                     |  | Title:             |  | Director, General Manager of Administration Headquarters





---



##### Table of Contents



Makita Corporation and Consolidated Subsidiaries

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULES

|                                                                                                                                          |                                                                                                                                                                                                   |             |      |  | 
|----------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ----------- | ---- |  | 
|Independent Auditors Report                                                                                                              |                                                                                                                                                                                                   |             | F-2  | 
|                                                                                                                                          |                                                                                                                                                                                                   |            
|Consolidated Balance Sheets as of March 31, 2002 and 2003                                                                                 |                                                                                                                                                                                                   | F-3 and F-4
|                                                                                                                                          |                                                                                                                                                                                                   |            
|Consolidated Statements of Income for the years ended
March 31, 2001, 2002 and 2003                                                       |                                                                                                                                                                                                   |             | F-5  | 
|                                                                                                                                          |                                                                                                                                                                                                   |            
|Consolidated Statements of Shareholders Equity for
the years ended March 31, 2001, 2002 and 2003                                         |                                                                                                                                                                                                   |             | F-6  | 
|                                                                                                                                          |                                                                                                                                                                                                   |            
|Consolidated Statements of Cash Flows for the years ended
March 31, 2001, 2002 and 2003                                                   |                                                                                                                                                                                                   | F-7 and F-8
|                                                                                                                                          |                                                                                                                                                                                                   |            
|Notes to Consolidated Financial Statements                                                                                                |                                                                                                                                                                                                   | F-9 to F-35
|                                                                                                                                          |                                                                                                                                                                                                   |            
|(Financial Statements of 50% or less owned persons accounted for by the equity method have been omitted because they are not applicable.) |                                                                                                                                                                                                   |             |      | 
|                                                                                                                                          |                                                                                                                                                                                                   |            
|Schedules:                                                                                                                                |                                                                                                                                                                                                   |             |      | 
|                                                                                                                                          |                                                                                                                                                                                                   |            
|II. Valuation and Qualifying Accounts and Reserves for the years
ended March 31, 2001, 2002 and 2003                                      |                                                                                                                                                                                                   |             | F-36 | 
|                                                                                                                                          |                                                                                                                                                                                                   |            
|                                                                                                                                          | (All schedules not listed above have been omitted because they
are not applicable, or are not required, or the information has
been otherwise supplied in the consolidated financial
statements.) |             |      |  | 

F-1



---



##### Table of Contents



Independent Auditors Report

To the Shareholders and the Board of Directors
of Makita Corporation:

We have audited the consolidated financial statements of Makita Corporation (a
Japanese corporation) and subsidiaries as listed in the accompanying index. In
connection with our audits of the consolidated financial statements, we have
also audited the financial statement schedule as listed in the accompanying
index. These consolidated financial statements and financial statement
schedule are the responsibility of the Companys management. Our
responsibility is to express an opinion on these consolidated financial
statements and financial statement schedule based on our audits.

We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Makita Corporation
and subsidiaries as of March 31, 2002 and 2003, and the results of their
operations and their cash flows for each of the years in the three-year period
ended March 31, 2003, in conformity with accounting principles generally
accepted in the United States of America. Also in our opinion, the related
financial statement schedule, when considered in relation to the basic
consolidated financial statements taken as a whole, presents fairly, in all
material respects, the information set forth therein.

As discussed in Note 3 to the consolidated financial statements, the Company
changed its method of accounting for certain incentive payments made to vendors
on a retroactive basis as required by Emerging Issues Task Force Issue No.
01-09. Also as discussed in Note 3, the Company changed its method of
accounting for derivative instruments and hedging activities effective April 1,
2001.

The accompanying consolidated financial statements as of and for the year ended
March 31, 2003 have been translated into United States dollars solely for the
convenience of the reader. We have recomputed the translation and, in our
opinion, the consolidated financial statements, expressed in yen, have been
translated into dollars on the basis set forth in Note 2 to the consolidated
financial statements.

/s/KPMG

Tokyo, Japan
April 24, 2003

F-2



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##### Table of Contents



MAKITA CORPORATION AND CONSOLIDATED SUBSIDIARIES CONSOLIDATED BALANCE SHEETS MARCH 31, 2002 AND 2003 A S S E T S Yen
    
    U.S. Dollars(millions)
    
    (thousands)2002
    
    2003
    
    2003CURRENT ASSETS:Cash and cash equivalents
    
    ¥
    15,730
    
    
    ¥
    20,370
    
    
    $
    172,627Time deposits
    
    
    4,572
    
    
    
    4,520
    
    
    
    38,305Marketable securities
    
    
    43,091
    
    
    
    39,193
    
    
    
    332,144Trade receivables-Notes
    
    
    2,453
    
    
    
    2,122
    
    
    
    17,983Accounts
    
    
    35,680
    
    
    
    34,630
    
    
    
    293,475Less- Allowance for doubtful receivables
    
    
    (1,519
    )
    
    
    (1,456
    )
    
    
    (12,339
    )Inventories
    
    
    69,507
    
    
    
    62,606
    
    
    
    530,559Deferred income taxes
    
    
    4,197
    
    
    
    3,515
    
    
    
    29,788Prepaid expenses and other current assets
    
    
    7,706
    
    
    
    8,065
    
    
    
    68,348Total current assets
    
    
    181,417
    
    
    
    173,565
    
    
    
    1,470,890PROPERTY, PLANT AND EQUIPMENT, AT COST:Land
    
    
    21,907
    
    
    
    21,497
    
    
    
    182,178Buildings and improvements
    
    
    69,205
    
    
    
    66,738
    
    
    
    565,576Machinery and equipment
    
    
    83,720
    
    
    
    78,221
    
    
    
    662,890Construction in progress
    
    
    
    
    
    
    2,165
    
    
    
    18,347174,832
    
    
    
    168,621
    
    
    
    1,428,991Less- Accumulated depreciation
    
    
    (99,022
    )
    
    
    (100,823
    )
    
    
    (854,432
    )75,810
    
    
    
    67,798
    
    
    
    574,559INVESTMENTS AND OTHER ASSETS:Investment securities
    
    
    15,483
    
    
    
    19,342
    
    
    
    163,915Deferred income taxes
    
    
    4,724
    
    
    
    10,386
    
    
    
    88,017Other assets
    
    
    7,704
    
    
    
    7,509
    
    
    
    63,63627,911
    
    
    
    37,237
    
    
    
    315,568¥
    285,138
    
    
    ¥
    278,600
    
    
    $
    2,361,017
 F-3




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##### Table of Contents



MAKITA CORPORATION AND CONSOLIDATED SUBSIDIARIES CONSOLIDATED BALANCE SHEETS MARCH 31, 2002 AND 2003 LIABILITIES AND SHAREHOLDERS EQUITY Yen
    
    U.S. Dollars(millions)
    
    (thousands)2002
    
    2003
    
    2003CURRENT LIABILITIES:Short-term borrowings
    
    ¥
    8,984
    
    
    ¥
    2,892
    
    
    $
    24,508Trade notes and accounts payable
    
    
    14,681
    
    
    
    13,956
    
    
    
    118,271Accrued payroll
    
    
    6,568
    
    
    
    7,162
    
    
    
    60,695Accrued expenses and other
    
    
    3,173
    
    
    
    3,535
    
    
    
    29,958Income taxes payable
    
    
    3,043
    
    
    
    3,858
    
    
    
    32,695Deferred income taxes
    
    
    39
    
    
    
    403
    
    
    
    3,415Total current liabilities
    
    
    36,488
    
    
    
    31,806
    
    
    
    269,542LONG-TERM LIABILITIES:Long-term indebtedness
    
    
    20,102
    
    
    
    19,843
    
    
    
    168,161Club members deposits
    
    
    16,628
    
    
    
    14,207
    
    
    
    120,398Estimated retirement and termination allowances
    
    
    19,050
    
    
    
    27,778
    
    
    
    235,407Deferred income taxes
    
    
    1,986
    
    
    
    1,407
    
    
    
    11,92457,766
    
    
    
    63,235
    
    
    
    535,890MINORITY INTERESTS
    
    
    945
    
    
    
    1,159
    
    
    
    9,822COMMITMENTS AND CONTINGENT LIABILITIES (Note 13)
    
    
    
    
    
    
    
    
    
    
    SHAREHOLDERS EQUITY:Common stock,Authorized - 292,000,000 shares in 2002 and 2003Issued - 153,006,992 shares in 2002 and 2003
    
    
    23,803
    
    
    
    23,803
    
    
    
    201,721Additional paid-in capital
    
    
    45,419
    
    
    
    45,419
    
    
    
    384,907Legal reserve
    
    
    5,669
    
    
    
    5,669
    
    
    
    48,042Retained earnings
    
    
    133,723
    
    
    
    137,753
    
    
    
    1,167,398Accumulated other comprehensive income (loss)
    
    
    (16,446
    )
    
    
    (25,134
    )
    
    
    (213,000
    )Treasury stock, at cost: - 3,333,250 shares in 20027,039,116 shares in 2003
    
    
    (2,229
    )
    
    
    (5,110
    )
    
    
    (43,305
    )189,939
    
    
    
    182,400
    
    
    
    1,545,763¥
    285,138
    
    
    ¥
    278,600
    
    
    $
    2,361,017
 The accompanying notes to consolidated financial statements are
an integral part of these balance sheets. F-4




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##### Table of Contents



MAKITA CORPORATION AND CONSOLIDATED SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME FOR THE YEARS ENDED MARCH 31, 2001, 2002 AND 2003 Yen
    
    U.S. Dollars(millions)
    
    (thousands)2001
    
    2002
    
    2003
    
    2003NET SALES
    
    ¥
    156,314
    
    
    ¥
    166,169
    
    
    ¥
    175,603
    
    
    $
    1,488,161Cost of sales
    
    
    101,827
    
    
    
    109,182
    
    
    
    110,226
    
    
    
    934,119GROSS PROFIT
    
    
    54,487
    
    
    
    56,987
    
    
    
    65,377
    
    
    
    554,042Selling, general and administrative expenses
    
    
    47,394
    
    
    
    51,114
    
    
    
    52,909
    
    
    
    448,381OPERATING INCOME
    
    
    7,093
    
    
    
    5,873
    
    
    
    12,468
    
    
    
    105,661OTHER INCOME (EXPENSES):Interest and dividend income
    
    
    1,453
    
    
    
    848
    
    
    
    786
    
    
    
    6,661Interest expense
    
    
    (1,430
    )
    
    
    (968
    )
    
    
    (665
    )
    
    
    (5,635
    )Exchange gains (losses) on foreign currency
transactions, net
    
    
    (203
    )
    
    
    273
    
    
    
    (1,460
    )
    
    
    (12,373
    )Realized losses on securities, net
    
    
    (661
    )
    
    
    (2,740
    )
    
    
    (2,590
    )
    
    
    (21,949
    )Other, net
    
    
    392
    
    
    
    117
    
    
    
    753
    
    
    
    6,381Total
    
    
    (449
    )
    
    
    (2,470
    )
    
    
    (3,176
    )
    
    
    (26,915
    )INCOME BEFORE INCOME TAXES
    
    
    6,644
    
    
    
    3,403
    
    
    
    9,292
    
    
    
    78,746PROVISION FOR INCOME TAXES:Current
    
    
    5,547
    
    
    
    4,027
    
    
    
    2,294
    
    
    
    19,441Deferred
    
    
    (1,036
    )
    
    
    (757
    )
    
    
    275
    
    
    
    2,331Total
    
    
    4,511
    
    
    
    3,270
    
    
    
    2,569
    
    
    
    21,772NET INCOME
    
    ¥
    2,133
    
    
    ¥
    133
    
    
    ¥
    6,723
    
    
    $
    56,974Yen
    
    U.S. DollarsPER
SHARE OF COMMON STOCK AND AMERICAN DEPOSITARY SHARE:Earnings
per share (Notes 3(o) and 12):Basic
    
    ¥
    13.6
    
    
    ¥
    0.9
    
    
    ¥
    45.3
    
    
    $
    0.38Diluted
    
    
    13.6
    
    
    
    0.9
    
    
    
    44.2
    
    
    
    0.37Cash
dividends for the year
    
    
    19.0
    
    
    
    18.0
    
    
    
    18.0
    
    
    
    0.15
 The accompanying notes to consolidated financial statements are
an integral part of these statements. F-5




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##### Table of Contents



MAKITA CORPORATION AND CONSOLIDATED SUBSIDIARIES CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY FOR THE YEARS ENDED MARCH 31, 2001, 2002 AND 2003 Yen
    
    U.S. Dollars(millions)
    
    (thousands)2001
    
    2002
    
    2003
    
    2003COMMON STOCK:Beginning balance
    
    ¥
    24,053
    
    
    ¥
    23,803
    
    
    ¥
    23,803
    
    
    $
    201,720Purchase and retirement of common stock
    
    
    (250
    )
    
    
    
    
    
    
    
    
    
    
    Ending balance
    
    ¥
    23,803
    
    
    ¥
    23,803
    
    
    ¥
    23,803
    
    
    $
    201,720ADDITIONAL PAID-IN CAPITAL:Beginning balance
    
    ¥
    45,419
    
    
    ¥
    45,419
    
    
    ¥
    45,419
    
    
    $
    384,907Ending balance
    
    ¥
    45,419
    
    
    ¥
    45,419
    
    
    ¥
    45,419
    
    
    $
    384,907LEGAL RESERVE:Beginning balance
    
    ¥
    5,220
    
    
    ¥
    5,525
    
    
    ¥
    5,669
    
    
    $
    48,042Transfer from retained earnings
    
    
    305
    
    
    
    144
    
    
    
    
    
    
    
    Ending balance
    
    ¥
    5,525
    
    
    ¥
    5,669
    
    
    ¥
    5,669
    
    
    $
    48,042RETAINED EARNINGS:Beginning balance
    
    ¥
    141,691
    
    
    ¥
    136,488
    
    
    ¥
    133,723
    
    
    $
    1,133,246Net income
    
    
    2,133
    
    
    
    133
    
    
    
    6,723
    
    
    
    56,974Cash dividends
    
    
    (2,994
    )
    
    
    (2,754
    )
    
    
    (2,693
    )
    
    
    (22,822
    )Transfer to legal reserve
    
    
    (305
    )
    
    
    (144
    )
    
    
    
    
    
    
    Purchase and retirement of common stock
    
    
    (4,037
    )
    
    
    
    
    
    
    
    
    
    
    Ending balance
    
    ¥
    136,488
    
    
    ¥
    133,723
    
    
    ¥
    137,753
    
    
    $
    1,167,398ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS):Beginning balance
    
    ¥
    (18,549
    )
    
    ¥
    (18,688
    )
    
    ¥
    (16,446
    )
    
    $
    (139,373
    )Other comprehensive income (loss) for the year
    
    
    (139
    )
    
    
    2,242
    
    
    
    (8,688
    )
    
    
    (73,627
    )Ending balance
    
    ¥
    (18,688
    )
    
    ¥
    (16,446
    )
    
    ¥
    (25,134
    )
    
    $
    (213,000
    )TREASURY STOCK:Beginning balance
    
    ¥
    
    
    
    ¥
    
    
    
    ¥
    (2,229
    )
    
    $
    (18,890
    )Purchases
    
    
    
    
    
    
    (2,247
    )
    
    
    (2,881
    )
    
    
    (24,415
    )Sales
    
    
    
    
    
    
    18
    
    
    
    
    
    
    
    Ending balance
    
    
    
    
    
    ¥
    (2,229
    )
    
    ¥
    (5,110
    )
    
    $
    (43,305
    )DISCLOSURE OF COMPREHENSIVE INCOME (LOSS):Net income for the year
    
    ¥
    2,133
    
    
    ¥
    133
    
    
    ¥
    6,723
    
    
    $
    56,975Other comprehensive income (loss) for the year (Note 11)
    
    
    (139
    )
    
    
    2,242
    
    
    
    (8,688
    )
    
    
    (73,627
    )Total comprehensive income (loss) for the year (Note 11)
    
    ¥
    1,994
    
    
    ¥
    2,375
    
    
    ¥
    (1,965
    )
    
    $
    (16,652
    )
 The accompanying notes to consolidated financial statements are
an integral part of these statements. F-6




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##### Table of Contents



MAKITA CORPORATION AND CONSOLIDATED SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED MARCH 31, 2001, 2002 AND 2003 Yen
    
    U.S. Dollars(millions)
    
    (thousands)2001
    
    2002
    
    2003
    
    2003CASH FLOWS FROM OPERATING ACTIVITIES:Net income
    
    ¥
    2,133
    
    
    ¥
    133
    
    
    ¥
    6,723
    
    
    $
    56,975Adjustments
to reconcile net income to     net cash
provided by operating     activities-Depreciation and amortization
    
    
    9,167
    
    
    
    9,754
    
    
    
    9,740
    
    
    
    82,542Estimated retirement and termination allowances
    
    
    1,312
    
    
    
    246
    
    
    
    290
    
    
    
    2,458Deferred income taxes
    
    
    (1,036
    )
    
    
    (757
    )
    
    
    275
    
    
    
    2,330Realized losses on securities, net
    
    
    661
    
    
    
    2,740
    
    
    
    2,590
    
    
    
    21,949Loss on disposals or sales of property, plant
and equipment
    
    
    1,944
    
    
    
    339
    
    
    
    1,330
    
    
    
    11,271Changes in assets and liabilities-Trade receivables
    
    
    3,089
    
    
    
    (950
    )
    
    
    647
    
    
    
    5,483Inventories
    
    
    (9,283
    )
    
    
    10,110
    
    
    
    5,446
    
    
    
    46,152Payables and accrued expenses
    
    
    (2,290
    )
    
    
    (1,246
    )
    
    
    343
    
    
    
    2,907Income taxes payable
    
    
    987
    
    
    
    (646
    )
    
    
    33
    
    
    
    280Other, net
    
    
    (539
    )
    
    
    473
    
    
    
    (276
    )
    
    
    (2,339
    )Net cash provided by operating activities
    
    
    6,145
    
    
    
    20,196
    
    
    
    27,141
    
    
    
    230,008CASH FLOWS FROM INVESTING ACTIVITIES:Capital expenditures
    
    
    (8,366
    )
    
    
    (5,958
    )
    
    
    (5,691
    )
    
    
    (48,229
    )Purchases of marketable and investment securities
    
    
    (9,253
    )
    
    
    (16,973
    )
    
    
    (28,056
    )
    
    
    (237,763
    )Proceeds from sales and maturities of marketable
and investment securities
    
    
    15,562
    
    
    
    18,497
    
    
    
    24,061
    
    
    
    203,907Proceeds from sales of property, plant and
equipment
    
    
    1,201
    
    
    
    534
    
    
    
    488
    
    
    
    4,136Decrease (increase) in time deposits
    
    
    1,970
    
    
    
    4,122
    
    
    
    (541
    )
    
    
    (4,585
    )Decrease (increase) in other assets, net
    
    
    (202
    )
    
    
    (1,373
    )
    
    
    80
    
    
    
    678Net cash provided by (used in) investing
activities
    
    
    912
    
    
    
    (1,151
    )
    
    
    (9,659
    )
    
    
    (81,856
    )CASH FLOWS FROM FINANCING ACTIVITIES:Increase (decrease) in short-term borrowings, net
    
    
    5,569
    
    
    
    (7,058
    )
    
    
    (4,254
    )
    
    
    (36,051
    )Redemption of bonds
    
    
    (4,000
    )
    
    
    (128
    )
    
    
    (1,610
    )
    
    
    (13,644
    )Repayment of long-term indebtedness
    
    
    
    
    
    
    (3,727
    )
    
    
    (25
    )
    
    
    (212
    )Repayment of club members deposits
    
    
    (326
    )
    
    
    (422
    )
    
    
    (1,918
    )
    
    
    (16,254
    )Purchases of common stock, net
    
    
    (4,287
    )
    
    
    (2,229
    )
    
    
    (2,881
    )
    
    
    (24,415
    )Cash dividends paid
    
    
    (2,994
    )
    
    
    (2,754
    )
    
    
    (2,693
    )
    
    
    (22,822
    )Net cash used in financing activities
    
    
    (6,038
    )
    
    
    (16,318
    )
    
    
    (13,381
    )
    
    
    (113,398
    )
 The accompanying notes to consolidated financial statements are
an integral part of these statements. F-7




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##### Table of Contents



MAKITA CORPORATION AND CONSOLIDATED SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED MARCH 31, 2001, 2002 AND 2003 Yen
    
    U.S. Dollars(millions)
    
    (thousands)2001
    
    2002
    
    2003
    
    2003EFFECT OF EXCHANGE RATE CHANGES ON CASH AND
CASH EQUIVALENTS
    
    ¥
    1,013
    
    
    ¥
    (985
    )
    
    ¥
    539
    
    
    $
    4,568NET CHANGE IN CASH AND CASH EQUIVALENTS
    
    
    2,032
    
    
    
    1,742
    
    
    
    4,640
    
    
    
    39,322CASH AND CASH EQUIVALENTS,
BEGINNING OF YEAR
    
    
    11,956
    
    
    
    13,988
    
    
    
    15,730
    
    
    
    133,305CASH AND CASH EQUIVALENTS,
END OF YEAR
    
    ¥
    13,988
    
    
    ¥
    15,730
    
    
    ¥
    20,370
    
    
    $
    172,627SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:Cash paid during the year for-Interest
    
    ¥
    1,445
    
    
    ¥
    970
    
    
    ¥
    672
    
    
    $
    5,695Income taxes
    
    
    4,560
    
    
    
    4,673
    
    
    
    2,262
    
    
    
    19,169Noncash investing and financing activities-Capital lease obligations incurred
    
    
    192
    
    
    
    
    
    
    
    
    
    
    
    
 The accompanying notes to consolidated financial statements are
an integral part of these statements. F-8




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##### Table of Contents



MAKITA CORPORATION AND CONSOLIDATED SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  1.
 
 DESCRIPTION OF BUSINESS  Makita Corporation (the Company) is a top manufacturer of portable
electric power tools and a recognized leader globally. The Company and its
consolidated subsidiaries main products include circular saws, jig saws,
planers, drills, hammers, grinders and sanders. The Company and its
consolidated subsidiaries also manufacture and sell stationary woodworking
machines and pneumatic tools as well as garden tools and products for indoor
household use.  Domestic sales are made by the Company, while overseas sales are made under the
Makita brand name, almost entirely through sales subsidiaries and distributors.
Approximately 77.9% of consolidated net sales for the year ended March 31,
2003 were generated from customers outside Japan, with 26.0% from North
America, 32.8% from Europe and 19.1% from other areas.  The Company and its consolidated subsidiaries manufacturing operations are
conducted primarily at two plants in Japan and seven plants overseas, located
in the United States, Germany, the United Kingdom, Brazil, China and Canada.  2.
 
 BASIS OF PRESENTING FINANCIAL STATEMENTS  Foreign subsidiaries translate their financial statements into
Japanese yen from each of their functional currencies. The accounts and the
financial statements of the Company and domestic subsidiaries are maintained
and reported in their functional currency, the Japanese yen.  The books of the Company and its domestic subsidiaries are maintained in
conformity with Japanese accounting principles and practices, while foreign
subsidiaries maintain their books in conformity with the standards of their
country of domicile.  The accompanying consolidated financial statements reflect all necessary
adjustments, not recorded in the Company and its consolidated subsidiaries
books, to present them in conformity with accounting principles generally
accepted in the United States of America (U.S. GAAP).  Solely for the convenience of the reader, the accompanying consolidated
financial statement amounts for the year ended March 31, 2003 are also
presented in U.S. dollars by arithmetically translating all yen amounts using
the approximate prevailing exchange rate at the Federal Reserve Bank of New
York of ¥118 to US$1 at March 31, 2003.  3.
 
 SIGNIFICANT ACCOUNTING AND REPORTING POLICIES  (a)
       
       Principles of Consolidation  The accompanying consolidated financial statements include the accounts of
the Company and all of its majority owned subsidiaries. All significant
intercompany balances and transactions have been eliminated in consolidation.  (b)
       
       Foreign Currency Translation  Under the provisions of the Statement of Financial Accounting Standards
(SFAS) No.52 Foreign Currency Translation, assets and liabilities are
translated at the exchange rate in effect at each fiscal year-end and income
and expenses are translated at the average rates of exchange prevailing
during each fiscal year in translating the financial statements of the
overseas subsidiaries. The local currencies of the overseas subsidiaries are
regarded as their functional currencies. The resulting F-9




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translation adjustments are included in accumulated other comprehensive
income (loss) in shareholders equity.  Transaction gains and losses are recognized in earnings in the period
incurred.  (c)
       
       Cash equivalents  For purposes of the consolidated balance sheets and the consolidated
statements of cash flows, the Company considers highly liquid investments
with an original maturity of three months or less at the date of purchase to
be cash equivalents.  (d)
       
       Marketable and Investment Securities  The Company conforms with SFAS No.115 Accounting for Certain Investments in
Debt and Equity Securities. All marketable securities and investment
securities have been categorized as available-for-sale securities or
held-to-maturity securities. As a matter of policy, the Company does not
engage in trading activities. Except for non-marketable equity securities,
available-for-sale securities are reported at fair value, and unrealized
gains or losses are recorded through other comprehensive income (loss), net
of applicable income taxes. However, the Company and its consolidated
subsidiaries recognize holding losses as realized in respect of
available-for-sale securities for which the market value is below the
carrying value when management determines that the decline is other than
temporary through review of the investees financial condition and operating
performance as well as general market conditions and duration of the decline.  Non-marketable equity securities are carried at cost. Held-to-maturity
securities are reported at amortized cost, adjusted for the amortization or
accretion of premiums or discounts.  The Company and its consolidated subsidiaries classify in current assets
marketable securities which are available for current operations. Other
investments are classified as investment securities as a part of non-current
investments and other assets in the consolidated balance sheets.  (e)
       
       Allowance for Doubtful Receivables  An allowance for doubtful receivables is established in amounts considered to
be appropriate based primarily upon the Companies past credit loss
experience and an evaluation of potential losses in the receivables
outstanding.  (f)
       
       Inventories  Inventories are mainly stated at the lower of average cost or market.
Inventory costs include raw materials, labor and manufacturing overheads.  (g)
       
       Property,Plant and Equipment and Depreciation  Depreciation of property, plant and equipment is computed by using the
declining-balance method over the estimated useful lives. The depreciation
period generally ranges from 10 years to 50 years for buildings and from 3
years to 10 years for machinery and equipment. Effective rates of
depreciation for the years ended March 31, 2001, 2002 and 2003 are summarized
below: 2001
    
    2002
    
    2003Buildings and improvements
    
    
    6.7
    %
    
    
    8.8
    %
    
    
    11.9
    %Machinery and equipment
    
    
    28.0
    %
    
    
    28.1
    %
    
    
    28.3
    %
  Certain leased buildings and improvements and machinery and equipment are
accounted for as capital leases in conformity with SFAS No.13, Accounting
for Leases. The aggregate cost included in property, plant and equipment
and related accumulated depreciation as of March 31, 2002 and 2003 was as
follows: F-10




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##### Table of Contents



Yen
    
    U.S. Dollars(millions)
    
    (thousands)2002
    
    2003
    
    2003Aggregate cost
    
    ¥
    1,139
    
    
    ¥
    946
    
    
    $
    8,017Accumulated depreciation
    
    
    636
    
    
    
    606
    
    
    
    5,136
  Expenditures for ordinary maintenance and repairs are expensed as incurred.
Major replacements and improvements are capitalized. When properties are
retired or otherwise disposed of, the property and related accumulated
depreciation accounts are relieved of the applicable amounts and any
differences are included in earnings.  (h)
       
       Goodwill and Other Intangible Assets  In June 2001, the Financial Accounting Standards Board (FASB) issued SFAS
No. 141, Business Combinations, and SFAS No. 142, Goodwill and Other
intangible Assets.  SFAS No. 141 requires that the purchase method of accounting be used for all
business combinations initiated after June 30, 2001 and further clarifies the
criteria for recognition of intangible assets separately from goodwill. SFAS
No. 142 requires that goodwill and indefinite-lived intangible assets no longer
be amortized, but instead requires that an annual review for impairment be
performed. The Company fully adopted the provisions of SFAS No. 141 and SFAS
No. 142 on April 1, 2002. The adoption of SFAS No. 141 and SFAS No. 142 did
not have any material effect on consolidated financial statements.  (i)
       
       Research and Development and Advertising Costs  Research and development costs included in selling, general and
administrative expenses on the consolidated statements of income are expensed
as incurred and totaled ¥3,435 million, ¥3,746 million and ¥ 3,856 million ($
32,678 thousand) for the years ended March 31, 2001, 2002 and 2003,
respectively.  Advertising costs are also expensed as incurred and totaled ¥3,164 million,
¥3,738 million and ¥3,616 million ($30,644 thousand) for the years ended
March 31, 2001, 2002 and 2003, respectively.  (j)
       
       Shipping and Handling Costs  Shipping and handling costs, which mainly include transportation to
customers, are included in selling, general and administrative expenses on
the consolidated statements of income. Shipping and handling costs were
¥3,730 million, ¥4,759 million and ¥4,003 million ($33,924 thousand) for the
years ended March 31, 2001, 2002 and 2003, respectively.  (k)
       
       Income Taxes  The Company conforms with SFAS No.109, Accounting for Income Taxes, which
requires an asset and liability approach for financial accounting and
reporting for income taxes. Deferred tax assets and liabilities are
recognized for the future tax consequences attributable to differences
between the financial statement carrying amounts of existing assets and
liabilities and their respective tax bases and operating loss carryforwards.
Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years the temporary differences
and carryforwards are expected to be recovered or settled. The effect on
deferred tax assets and liabilities of a change in tax rates is recognized in
income in the period that includes the enactment date.  (l)
       
       Product Warranties  A liability for the estimated product warranty related cost is established at
the time revenue is recognized and is included in accrued expenses and cost
of sales. Estimates for accrued product F-11




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##### Table of Contents



warranty cost are primarily based on historical experience, and are affected
by ongoing product failure rates, specific product class failures outside of
the baseline experience, material usage and service delivery costs incurred
in correcting a product failure.  (m)
       
       Pension Plans  The Company conforms with SFAS No.87, Employers Accounting for Pensions,
in accounting for retirement and termination benefit plans. Under SFAS 87,
changes in the amount of either the projected benefit obligation or plan
assets resulting from actual results different from that assumed and from
changes in assumptions can result in gains and losses not yet recognized in
the consolidated financial statements. Amortization of an unrecognized net
gain or loss is included as a component of the net periodic benefit plan cost
for a year if, as of the beginning of the year, that unrecognized net gain or
loss exceeds 10 percent of the greater of (1) the projected benefit
obligation or (2) the fair value of that plans assets. In such case, the
amount of amortization recognized is the resulting excess divided by the
average remaining service period of active employees expected to receive
benefits under the plan. The expected long-term rate of return on plan assets
used for pension accounting is determined based on the historical long-term
rate of return on plan assets and assessment of current plan assets. The
discount rate is determined based on the rates of return of high-quality
fixed-income investments currently available consistent with the maturity of
the pension benefits.  (n)
       
       Accounting for Stock Splits  The Commercial Code of Japan (the Code) permits Japanese companies, upon
approval of the Board of Directors, to make a share distribution to existing
shareholders in the form of a stock split. The Code requires no accounting
recognition for such share distribution to existing shareholders in the form
of a stock split.  U.S. GAAP requires most such stock splits to be accounted for as stock
dividends by reducing retained earnings by an amount equal to the market
value of the shares issued. Had such prior stock splits been accounted for
in this manner, additional paid-in capital as of March 31, 2003 would have
been increased by approximately ¥115,072 million ($975,186 thousand) with a
corresponding decrease in retained earnings. Total shareholders equity would
have remained unchanged.  (o)
       
       Earnings Per Share  The Company conforms with SFAS No.128, Earnings per Share, which
establishes standards for computing and presenting earnings per share. SFAS
No.128 also requires dual presentation of basic and diluted earnings per
share on the face of the consolidated statements of income for all entities
with complex capital structures and requires a reconciliation of the
numerator and denominator of the basic and diluted earnings per share
computation (see Note 12).  Basic earnings per share has been computed by dividing net income available
to common shareholders by the weighted-average number of common shares
outstanding during each year. Diluted earnings per share reflects the
potential dilution and has been computed on the basis that all convertible
bonds were converted at the beginning of the year or at the time of issuance
unless they were antidilutive.  (p)
       
       Impairment of Long-Lived Assets  In August 2001, FASB issued SFAS No. 144, Accounting for the Impairment or
Disposal of Long-lived Assets, which supersedes SFAS No. 121, Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be
Disposed Of, and the accounting and reporting provisions of APB No. 30,
Reporting the Results of Operations-Reporting the Effects of Disposal of a
Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring
Events and Transactions. SFAS No. 144 retains the fundamental provisions in
SFAS No. 121 for recognizing and measuring impairment losses on long-lived
assets held for use or to be disposed of. SFAS No. 144 requires that
long-lived assets and certain identifiable intangibles having finite useful
lives to be held and used by F-12




---



##### Table of Contents



an entity be reviewed for impairment, based on the undiscounted cash flows
expected to be generated therefrom, whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable. SFAS No. 144 also requires that any such impaired assets and
other long-lived assets and certain identifiable intangibles to be disposed
of be reported at the lower of carrying amount or fair value less cost to
sell. The adoption of SFAS No. 144 on April 1, 2002 did not have a material
effect on the Companys consolidated results of operations and financial
position.  (q)
       
       Derivative Financial Instruments  The Company conforms to SFAS No. 133, Accounting for Derivative Instruments
and Hedging Activities and SFAS No. 138, Accounting for Certain Derivative
Instruments and Certain Hedging Activities, an amendment of SFAS No. 133.
Both statements require the Company and its consolidated subsidiaries to
recognize all derivative instruments as either assets or liabilities in the
consolidated balance sheets and measure those instruments at fair values.
The accounting for changes in the fair value of a derivative instrument
depends on whether it has been designated and qualifies as part of a hedging
relationship, and on the type of hedging relationship.  The Company and its consolidated subsidiaries use various derivative
instruments to manage interest rate and currency exchange rate risk for the
purpose of fair value hedge. To qualify for hedge accounting in accordance
with SFAS No. 133, the Company and its consolidated subsidiaries require that
the derivative instruments are effective in reducing the risk exposure that
they are designated to hedge. The Company and its consolidated subsidiaries
formally designate and document the derivative instruments as a hedge of
specific underlying exposures, as well as the risk management objectives and
strategies for undertaking the hedge transactions. Derivative instruments
that meet established accounting criteria are formally designated as hedges
at the inception of the contract. These criteria demonstrate that the
derivative instruments are expected to be highly effective at offsetting
changes in fair value of the underlying exposure both at the inception of the
hedging relationship and on an ongoing basis.  Changes in the fair value of a derivative instrument that is designated as a
fair value hedge and highly effective, along with offsetting changes in fair
value of the underlying hedged exposure, are recorded in earnings.  When the underlying hedged item ceases to exist, all changes in the fair
value of the derivative instrument are recognized in earnings until the
derivative instrument matures. When the underlying transaction ceases to
exist, a hedged asset or liability is no longer adjusted for changes in its
fair value.  Any changes in the fair value of derivative instruments that are not
designated as hedges, as well as changes in the value of derivatives that do
not offset the underlying hedged item throughout the designated hedge period
(collectively ineffectiveness), are immediately recognized in earnings.  Prior to the adoption of SFAS No. 133 and No. 138 on April 1, 2001, net
interest receivables or payables arising from the interest rate swaps, which
were used as a means of managing interest rate exposures, were accrued over the
contracted periods, and changes in fair values of the interest rate swaps were
not reflected in the consolidated financial statements. Gains and losses
arising from forward exchange contracts, currency swaps and currency options,
which were used as a means of hedge against foreign currency exposure on assets
and liabilities denominated in foreign currencies, were recognized based on
changes in foreign currency exchange rates, and were offset by foreign exchange
gains or losses on the assets and liabilities hedged. The cumulative effect on
net income of adopting SFAS No. 133 and SFAS No. 138, net of related income
taxes, was not material.  (r)
       
       Use of Estimates in the Preparation of Financial Statements  The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and the disclosure
of contingent assets and liabilities at the date of the consolidated F-13




---



##### Table of Contents



financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates.  The Company has identified the following areas where it believes assumptions
and estimates are particularly critical to the consolidated financial
statements. These are revenue recognition, determination of the allowance
for doubtful receivables, impairment on long-lived assets, realizability of
deferred tax assets, the determination of unrealized losses on securities of
which the decline in market value is considered to be other than temporary,
the actuarial assumptions on retirement and termination benefit plans and the
determination of fair value of derivative instruments.  (s)
       
       Revenue Recognition  The Company and its consolidated subsidiaries recognize revenue when
persuasive evidence of an arrangement exists, delivery has occurred and title
and risk of loss has passed to the customers, the sales price is fixed or
determinable and collectibility is reasonably assured, which typically occurs
when products are received by customers.  Effective April 1, 2002, Makita adopted Emerging Issues Task Force (EITF)
Issue 01-9, Accounting for Consideration Given by a Vendor to a Customer or a
Reseller of the Vendors Products (EITF 01-9), issued by the EITF in
November 2001. The Companys adoption of EITF 01-9 resulted in a change in
the method of accounting for certain incentive offerings. Previously,
marketing incentive payments and other similar payments were accounted for
within selling, general and administrative expenses or non-operating
expenses. As a result of this change, net sales and operating income for the
year ended March 31, 2003 were less than they would have been under the
previous accounting treatment by ¥4,965 million and ¥865 million,
respectively. The Company has reclassified prior fiscal years amounts to
conform to the new accounting method which reduced net sales by ¥3,866
million and ¥4,360 million and operating income by ¥748 million and ¥742
million in 2001 and 2002, respectively. However, the change in accounting
does not affect income before income taxes or net income.  (t)
       
       Operating Segment Information  The Company conforms to SFAS No. 131, Disclosures about Segments of an
Enterprise and Related Information, which requires disclosure of financial
and descriptive information about the Companys reportable operating
segments.  (u)
       
       New Accounting Standards  In June 2001, the Financial Accounting Standards Board (FASB) issued SFAS
No. 143,  Accounting for Asset Retirement Obligations. SFAS No. 143
requires that a liability for an asset retirement obligation be recognized at
the fair value. The Company has adopted SFAS No. 143 on April 1, 2003. The
adoption of SFAS No. 143 did not have a material effect on the Companys
consolidated results of operations and financial position.  In April 2002, the FASB issued SFAS No. 145, Rescission of FASB statements
No. 4, 44, and 64, Amendment of FASB Statement No. 13 and Technical
Corrections. SFAS No. 145 updates, clarifies and simplifies existing
accounting pronouncements. While the technical corrections to existing
pronouncements are not substantive in nature, in some instances, they may
change accounting practice. The Company has adopted the provision related to
rescission of FASB No. 4 on April 1, 2003. The adoption of SFAS No. 145 did
not have a material effect on the Companys consolidated results of
operations and financial position.  In December 2002, the FASB issued SFAS No. 148,  Accounting for Stock-Based
Compensation  Transition and Disclosure, an amendment of SFAS No. 123. SFAS
No. 148 provides alternative methods of transition for a voluntary change to
the fair value based method of accounting for stock-based employee
compensation. In addition, SFAS No. 148 amends the disclosure requirements of
SFAS No. 123 to require prominent disclosure in financial statements about
the method of F-14




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##### Table of Contents



accounting for stock-based employee compensation and the effect of the method
used on reported results. The Company does not have any stock-based employee
compensation arrangements as of March 31, 2003.  In April 2003, the FASB issued SFAS No. 149, Amendment of Statement 133 on
Derivative Instruments and Hedging Activities. SFAS No. 149 amends and
clarifies financial accounting and reporting for derivative instruments,
including certain derivative instruments embedded in other contracts and for
hedging activities under SFAS No. 133. SFAS No. 149 is effective for
contracts entered into or modified after June 30, 2003, except as stated
below and for hedging relationships designated after June 30, 2003. The
provisions that relate to SFAS No. 133 implementation issues that have been
effective for fiscal quarters that began prior to June 15, 2003, should
continue to be applied in accordance with their respective effective dates.
In addition, provisions which relate to forward purchases or sales or
when-issued securities or other securities that do not exist yet, should be
applied to both existing contracts and new contracts entered into after June
30, 2003. The Adoption of SFAS No. 149 is not expected to have a material
effect on the Companys consolidated results of operations and financial
position.  In May 2003, the FASB issued SFAS No. 150, Accounting for Certain Financial
Instruments with Characteristics of both Liabilities and Equity. SFAS No.
150 establishes standards for how an issuer classifies and measures certain
financial instruments with characteristics of both liabilities and equity.
SFAS No. 150 requires that an issuer classify a financial instrument that is
within its scope as a liability (or an asset in some circumstances). SFAS No.
150 is effective for financial instruments entered into or modified after May
31, 2003 and otherwise is effective at the beginning of the first interim
period beginning after June 15, 2003. The adoption of SFAS No. 150 is not
expected to have a material effect on the Companys consolidated results of
operations and financial position.  In January 2003, the FASB issued FIN No. 46, Consolidation of Variable
Interest Entities  an Interpretation of ARB No. 51. FIN No. 46 provides
guidance on the consolidation of certain entities that do not have sufficient
equity to cover expected losses of certain entities in which equity holders
lack adequate decision-making ability. Such entities are referred to as
variable interest entities (VIEs), and FIN No. 46 requires a company to
consolidate VIEs if the company has interests that give it a majority of the
expected losses or a majority of the expected residual returns of the entity.
FIN No. 46 is currently effective for VIEs created after January 31, 2003,
and for VIEs created before February 1, 2003 in fiscal periods beginning
after June 15, 2003. The Company has invested in bonds issued by an unrelated
VIE. However, such investment is an insignificant variable interest in the
VIE and the adoption of FIN No. 46 will have no material effect on the
Companys consolidated financial statements.  In November 2002, EITF reached a consensus on Issue No. 00-21,Accounting for
Revenue Arrangements with Multiple Deliverables. EITF No. 00-21 provides
guidance on when and how to separate elements of an arrangement that may
involve the delivery of performance of multiple products, services and rights
to use assets into separate units of accounting. The guidance in the
consensus is effective for revenue arrangements entered into in fiscal years
beginning after June 15, 2003. The Company will adopt EITF No. 00-21 on July
1, 2003. The adoption of EITF No. 00-21 is not expected to have a material
effect on the Companys consolidated results of operations and financial
position.  (v)
       
       Reclassifications  Certain other reclassifications have been made to the prior years
consolidated financial statements to conform with the presentation used for
the year ended March 31, 2003. In this regard, certain gains and losses on
sale and disposal property, plant and equipment, which were previously
classified in other income (expenses), are classified in selling, general and
administrative expenses in the fiscal year ended March 31, 2003. As a result
of the reclassification, operating income for the year ended March 31, 2001
and 2002 decreased by ¥1,944 million and ¥339 million, respectively. F-15




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##### Table of Contents



4.
 
 INVENTORIES  Inventories as of March 31, 2002 and 2003 comprised the following: Yen
    
    U.S. Dollars(millions)
    
    (thousands)2002
    
    2003
    
    2003Finished goods
    
    ¥
    59,796
    
    
    ¥
    53,068
    
    
    $
    449,729Work in process
    
    
    2,030
    
    
    
    1,794
    
    
    
    15,203Raw materials and parts
    
    
    7,681
    
    
    
    7,744
    
    
    
    65,627¥
    69,507
    
    
    ¥
    62,606
    
    
    $
    530,559
  5.
 
 MARKETABLE SECURITIES AND INVESTMENT SECURITIES  Marketable securities and investment securities consisted of
available-for-sale securities as of March 31, 2002 and available-for-sale
securities and held-to-maturity securities as of March 31, 2003.  The cost, gross unrealized holding gains and losses and fair value for such
securities by major security type as of March 31, 2002 and 2003 were as
follows: Yen (millions)Gross UnrealizedHoldingAs of March 31, 2002
    
    Cost
    
    
    Gains
    
    
    Losses
    
    
    Fair valueAvailable-for-sale:Marketable securities:Japanese and foreign governmental
debt securities
    
    ¥
    201
    
    
    ¥
    20
    
    
    ¥
    
    
    
    ¥
    221Corporate and bank debt securities
    
    
    6,111
    
    
    
    19
    
    
    
    166
    
    
    
    5,964Funds in trusts
    
    
    1,123
    
    
    
    1
    
    
    
    
    
    
    
    1,124Investments in trusts
    
    
    33,255
    
    
    
    203
    
    
    
    4
    
    
    
    33,454Marketable equity securities
    
    
    1,944
    
    
    
    413
    
    
    
    29
    
    
    
    2,328¥
    42,634
    
    
    ¥
    656
    
    
    ¥
    199
    
    
    ¥
    43,091Investment securities:Corporate and bank debt securities
    
    ¥
    2,953
    
    
    ¥
    5
    
    
    ¥
    
    
    
    ¥
    2,958Investments in trusts
    
    
    407
    
    
    
    
    
    
    
    
    
    
    
    407Marketable equity securities
    
    
    9,038
    
    
    
    2,669
    
    
    
    166
    
    
    
    11,541Non-marketable equity securities
(carried at cost)
    
    
    577
    
    
    
    
    
    
    
    
    
    
    
    577¥
    12,975
    
    
    ¥
    2,674
    
    
    ¥
    166
    
    
    ¥
    15,483
 F-16




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##### Table of Contents



Yen (millions)Gross UnrealizedHoldingAs of March 31, 2003
    
    Cost
    
    Gains
    
    Losses
    
    Fair valueAvailable-for-sale:Marketable securities:Japanese and foreign governmental
debt securities
    
    ¥
    200
    
    
    ¥
    13
    
    
    ¥
    
    
    
    ¥
    213Corporate and bank debt securities
    
    
    7,597
    
    
    
    112
    
    
    
    1
    
    
    
    7,708Funds in trusts
    
    
    654
    
    
    
    
    
    
    
    
    
    
    
    654Investments in trusts
    
    
    28,837
    
    
    
    44
    
    
    
    26
    
    
    
    28,855Marketable equity securities
    
    
    1,582
    
    
    
    259
    
    
    
    78
    
    
    
    1,763¥
    38,870
    
    
    ¥
    428
    
    
    ¥
    105
    
    
    ¥
    39,193Investment securities:Corporate and bank debt securities
    
    ¥
    2,954
    
    
    ¥
    52
    
    
    ¥
    
    
    
    ¥
    3,006Investments in trusts
    
    
    922
    
    
    
    64
    
    
    
    
    
    
    
    986Marketable equity securities
    
    
    8,175
    
    
    
    1,570
    
    
    
    490
    
    
    
    9,255Non-marketable equity securities
(carried at cost)
    
    
    608
    
    
    
    
    
    
    
    
    
    
    
    608¥
    12,659
    
    
    ¥
    1,686
    
    
    ¥
    490
    
    
    ¥
    13,855Held-to-maturity:Investment securities:Japanese governmental debt securities
    
    ¥
    2,926
    
    
    ¥
    1
    
    
    ¥
    0
    
    
    ¥
    2,927Japanese corporate debt securities
    
    
    2,561
    
    
    
    0
    
    
    
    1
    
    
    
    2,560¥
    5,487
    
    
    ¥
    1
    
    
    ¥
    1
    
    
    ¥
    5,487U.S.
Dollars (thousands)Gross UnrealizedHoldingAs of March 31, 2003
    
    Cost
    
    Gains
    
    Losses
    
    Fair valueAvailable-for-sale:Marketable securities:Japanese and foreign governmental
debt securities
    
    $
    1,695
    
    
    $
    110
    
    
    $
    
    
    
    $
    1,805Corporate and bank debt securities
    
    
    64,382
    
    
    
    949
    
    
    
    9
    
    
    
    65,322Funds in trusts
    
    
    5,542
    
    
    
    
    
    
    
    
    
    
    
    5,542Investments in trusts
    
    
    244,381
    
    
    
    373
    
    
    
    220
    
    
    
    244,534Marketable equity securities
    
    
    13,407
    
    
    
    2,195
    
    
    
    661
    
    
    
    14,941$
    329,407
    
    
    $
    3,627
    
    
    $
    890
    
    
    $
    332,144Investment securities:Corporate and bank debt securities
    
    $
    25,034
    
    
    $
    441
    
    
    $
    
    
    
    $
    25,475Investments in trusts
    
    
    7,814
    
    
    
    542
    
    
    
    
    
    
    
    8,356Marketable equity securities
    
    
    69,280
    
    
    
    13,305
    
    
    
    4,153
    
    
    
    78,432Non-marketable equity securities
(carried at cost)
    
    
    5,152
    
    
    
    
    
    
    
    
    
    
    
    5,152$
    107,280
    
    
    $
    14,288
    
    
    $
    4,153
    
    
    $
    117,415Held-to-maturity:Investment securities:Japanese governmental debt securities
    
    $
    24,797
    
    
    $
    8
    
    
    $
    0
    
    
    $
    24,805Japanese corporate debt securities
    
    
    21,703
    
    
    
    0
    
    
    
    8
    
    
    
    21,695$
    46,500
    
    
    $
    8
    
    
    $
    8
    
    
    $
    46,500
 F-17




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##### Table of Contents



Funds in trusts represent short-term funds deposited with trust banks in
individual accounts and managed by the Company. As of March 31, 2003, all
funds consisted of bank deposits.  Investments in trusts represent funds deposited with trust banks in multiple
investor accounts and managed by fund managers in the trust banks. As of March
31, 2003, each fund consisted of marketable equity securities and
interest-bearing bonds.  Maturities of debt securities classified as available-for-sale or
held-to-maturity as of March 31, 2003, regardless of their balance sheet
classification, were as follows: Yen (millions)
    
    U.S. Dollars (thousands)Cost
    
    Fair value
    
    Cost
    
    Fair valueDue within one year
    
    ¥
    3,694
    
    
    ¥
    3,705
    
    
    $
    31,305
    
    
    $
    31,398Due after one to five years
    
    
    8,015
    
    
    
    8,119
    
    
    
    67,924
    
    
    
    68,805Due after five to ten years
    
    
    1,507
    
    
    
    1,581
    
    
    
    12,771
    
    
    
    13,398Due after ten years
    
    
    1,585
    
    
    
    1,594
    
    
    
    13,432
    
    
    
    13,509Indefinite periods
    
    
    1,437
    
    
    
    1,415
    
    
    
    12,178
    
    
    
    11,992
  Debt securities which have indefinite periods shown above represent investments
in perpetual subordinated bonds with issuers optional redemption rights.
Fixed interest rates, 2.00 or 2.01 per cent per annum have been applied for the
interest period to July 12 or 27, 2005, respectively, and 6 month LIBOR plus
2.25 per cent per annum will be applied for the interest period commencing on
July 13 or 28, 2005, respectively, and thereafter in pursuance of the terms of
the contract.  Gross realized gains on the sales of marketable securities and investment
securities for the years ended March 31, 2001, 2002 and 2003 amounted to ¥713
million, ¥546 million and ¥337 million ($2,856 thousand), respectively, and
gross realized losses, which include the gross realized losses to be considered
as other than temporary, during the years ended March 31, 2001, 2002 and 2003
amounted to ¥1,374 million, ¥3,286 million and ¥2,927 million ($24,805
thousand), respectively. The cost of the securities sold was computed based on
the average cost of all the shares of each such security held at the time of
sale. Gross unrealized losses on marketable securities and investment
securities of which declines in market value are considered to be other than
temporary were charged to income as realized losses on securities, amounting to
¥1,126 million, ¥2,970 million and ¥2,630 million ($22,288 thousand) for the
years ended March 31, 2001, 2002 and 2003, respectively.  Proceeds from the sales and maturities of available-for-sale securities were
¥15,562 million, ¥18,497 million and ¥24,061 million ($203,907 thousand) for
the years ended March 31, 2001, 2002 and 2003, respectively. F-18




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##### Table of Contents



6.
 
 INCOME TAXES  Income before income taxes and the provision for income taxes for the
years ended March 31, 2001, 2002 and 2003 were as follows: Yen
    
    U.S. Dollars(millions)
    
    (thousands)2001
    
    2002
    
    2003
    
    2003Income before income taxes:Domestic
    
    ¥
    6,403
    
    
    ¥
    4,221
    
    
    ¥
    3,029
    
    
    $
    25,670Foreign
    
    
    241
    
    
    
    (818
    )
    
    
    6,263
    
    
    
    53,076¥
    6,644
    
    
    ¥
    3,403
    
    
    ¥
    9,292
    
    
    $
    78,746Provision for income taxes:Current-Domestic
    
    ¥
    4,465
    
    
    ¥
    2,729
    
    
    ¥
    2,433
    
    
    $
    20,619Foreign
    
    
    1,082
    
    
    
    1,298
    
    
    
    (139
    )
    
    
    (1,178
    )5,547
    
    
    
    4,027
    
    
    
    2,294
    
    
    
    19,441Deferred-Domestic
    
    
    (1,217
    )
    
    
    (599
    )
    
    
    687
    
    
    
    5,822Foreign
    
    
    181
    
    
    
    (158
    )
    
    
    (412
    )
    
    
    (3,492
    )(1,036
    )
    
    
    (757
    )
    
    
    275
    
    
    
    2,330Consolidated provision for
income taxes
    
    ¥
    4,511
    
    
    ¥
    3,270
    
    
    ¥
    2,569
    
    
    $
    21,771
  Total income taxes were allocated as follows: Yen
    
    U.S. Dollars(millions)
    
    (thousands)2001
    
    2002
    
    2003
    
    2003Provision for income taxes
    
    ¥
    4,511
    
    
    ¥
    3,270
    
    
    ¥
    2,569
    
    
    $
    21,771Shareholders equity:Foreign currency
translation adjustment
    
    
    (269
    )
    
    
    (619
    )
    
    
    (627
    )
    
    
    (5,314
    )Net unrealized holding
gains (losses) on
available-for-sale
securities
    
    
    (2,376
    )
    
    
    (949
    )
    
    
    (599
    )
    
    
    (5,076
    )Minimum pension
liability adjustment
    
    
    (2,501
    )
    
    
    (1,822
    )
    
    
    (3,899
    )
    
    
    (33,042
    )¥
    (635
    )
    
    ¥
    (120
    )
    
    ¥
    (2,556
    )
    
    $
    21,661
  The Company and its domestic subsidiaries are subject to a National Corporate
tax of 30.0%, an Inhabitant tax of approximately 5.6% and a deductible
Enterprise tax of approximately 9.9%, which in the aggregate resulted in a
combined statutory income tax rate of approximately 41.4%. F-19




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##### Table of Contents



Reconciliations of the combined statutory income tax rate to the effective
income tax rates were as follows: Year ended March 31,2001
    
    2002
    
    2003Combined statutory income tax rate in Japan
    
    
    41.4
    %
    
    
    41.4
    %
    
    
    41.4
    %Non-deductible expenses
    
    
    1.4
    
    
    
    2.2
    
    
    
    1.0Non-taxable dividends received
    
    
    (1.1
    )
    
    
    (1.6
    )
    
    
    (0.3
    )Change in valuation allowance
    
    
    26.9
    
    
    
    56.8
    
    
    
    4.7Advance pricing agreement
    
    
    
    
    
    
    
    
    
    
    (18.2
    )Effect on change in enacted tax rate
    
    
    
    
    
    
    
    
    
    
    3.4Tax sparing
    
    
    (1.2
    )
    
    
    (3.0
    )
    
    
    (3.3
    )Other, net
    
    
    0.5
    
    
    
    0.3
    
    
    
    (1.1
    )Effective income tax rate
    
    
    67.9
    %
    
    
    96.1
    %
    
    
    27.6
    %
  In 1997, Makita USA and the Parent Company entered into a bilateral advance
pricing agreement (APA) negotiation with the Internal Revenue Service (IRS) and
the National Tax Authority of Japan (NTA) to avoid double taxation resulting
from transfer price adjustments. The APA covers fiscal years 1995 through
2001. In July 2002, the IRS and the NTA reached an agreement, which results in
additional taxable income and reduced operating loss carryforwards in the U.S.,
and a reduction of taxable income and tax liability in Japan. Consequently the
effects of the APA resulted in an overall decrease to income taxes in 2003.  According to the provisions of tax treaties which have been concluded between
Japan and 19 countries, Japanese corporations can claim a tax credit against
Japanese income taxes on income earned in one of those 19 countries, even
though that income is exempted from income taxes or is reduced by special tax
incentive measures in those countries, in the manner as if no special exemption
or reduction was provided. The Company applied tax sparing mainly to China.
Consequently the effects of tax sparing caused the tax rate difference shown
above.  As a result of the enactment of an amendment to the Japanese local tax law on
March 31, 2003, the effective tax rate used for the calculation of deferred tax
assets and liabilities has been reduced from 41.4% to 40.2% for years beginning
after March 31, 2004. The effect of this tax rate change of ¥312 million
($2,644 thousand) was charged to income taxes in 2003. F-20




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##### Table of Contents



Significant components of deferred income tax assets and liabilities as of
March 31, 2002 and 2003 were as follows: Yen
    
    U.S. Dollars(millions)
    
    (thousands)2002
    
    2003
    
    2003Deferred income tax assets:Investment securities
    
    ¥
    1,464
    
    
    ¥
    1,671
    
    
    $
    14,161Estimated retirement and termination allowances
and other accrued expenses
    
    
    1,866
    
    
    
    1,906
    
    
    
    16,153Pension liability
    
    
    5,174
    
    
    
    8,810
    
    
    
    74,661Inventories
    
    
    2,941
    
    
    
    1,591
    
    
    
    13,483Fixed assets
    
    
    1,885
    
    
    
    2,726
    
    
    
    23,102Accrued payroll
    
    
    1,496
    
    
    
    1,653
    
    
    
    14,008Net operating loss carryforwards
    
    
    5,872
    
    
    
    2,952
    
    
    
    25,017Other
    
    
    956
    
    
    
    1,481
    
    
    
    12,551Total gross deferred tax assets
    
    
    21,654
    
    
    
    22,790
    
    
    
    193,136Valuation allowance
    
    
    (9,050
    )
    
    
    (6,694
    )
    
    
    (56,729
    )¥
    12,604
    
    
    ¥
    16,096
    
    
    $
    136,407Deferred income tax liabilities:Undistributed earnings of overseas subsidiaries
    
    ¥
    2,596
    
    
    ¥
    2,291
    
    
    $
    19,415Marketable securities
    
    
    1,227
    
    
    
    611
    
    
    
    5,178Inventories
    
    
    1,667
    
    
    
    1,014
    
    
    
    8,593Other
    
    
    218
    
    
    
    89
    
    
    
    754¥
    5,708
    
    
    ¥
    4,005
    
    
    $
    33,940
  The net changes in the total valuation allowances for the years ended March 31,
2002 and 2003 were increases (decreases) of ¥2,258 million and (¥1,679) million
($14,229 thousand), respectively.  In assessing the realizability of deferred tax assets, the Company considers
whether it is more likely than not that some portion or all of the deferred tax
assets will not be realized. The ultimate realization of deferred tax assets is
dependent upon the generation of future taxable income during the periods in
which those temporary differences become deductible. The Company considers the
scheduled reversal of deferred tax liabilities, projected future taxable
income, and tax planning strategies in making this assessment. Based upon the
level of historical taxable income and projections for future taxable income
over the periods in which the deferred tax assets are deductible, the Company
believes it is more likely than not that the benefits of these deductible
differences, net of the existing valuation allowance will be realized. The
amount of the deferred tax asset considered realizable, however, would be
reduced if estimates of future taxable income during the carryforward period
are reduced. The valuation allowance principally relates to the tax effects of
net operating losses and depreciation recorded by certain subsidiaries.  As of March 31, 2003, certain subsidiaries have net operating loss
carryforwards for income tax purposes of ¥7,981 million ($67,636 thousand)
which were available to reduce future income taxes. The net operating losses
will expire as follows: Yen
    
    U.S. Dollars(millions)
    
    (thousands)Within 5 years
    
    ¥
    1,043
    
    
    $
    8,8396 to 20 years
    
    
    5,115
    
    
    
    43,348Indefinite periods
    
    
    1,823
    
    
    
    15,449¥
    7,981
    
    
    $
    67,636
 F-21




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##### Table of Contents



7.
 
 RETIREMENT AND TERMINATION BENEFIT PLANS  The Company and certain of its consolidated subsidiaries have various
contributory and noncontributory employees benefit plans covering substantially
all of the employees. Under the plans, employees are entitled to lump-sum
payments at the time of termination or retirement, or to pension payments. A
domestic contributory plan, which covers substantially all of the employees of
the Company, includes the governmental welfare pension benefits
(substitutional portion) that would otherwise be provided by the Japanese
government in accordance with the Welfare Pension Insurance Law in Japan.  The amounts of lump-sum or pension payments under the plans are generally
determined on the basis of length of service and remuneration at the time of
termination or retirement. These contributory and non contributory plans are
funded in conformity with governmental regulations which basically require an
employer to contribute the unfunded benefit over 20 years. The plans assets
are invested primarily in interest-bearing securities and marketable equity
securities.  The net periodic benefit costs of the defined benefit plans for the years ended
March 31, 2001, 2002 and 2003 consisted of the following components: Yen
    
    U.S. Dollars(millions)
    
    (thousands)2001
    
    2002
    
    2003
    
    2003Service cost-benefit earned
during the year
    
    ¥
    1,970
    
    
    ¥
    1,983
    
    
    ¥
    2,211
    
    
    $
    18,737Interest cost on projected
benefit obligation
    
    
    1,321
    
    
    
    1,386
    
    
    
    1,302
    
    
    
    11,034Expected return on plan assets
    
    
    (930
    )
    
    
    (850
    )
    
    
    (764
    )
    
    
    (6,475
    )Amortization of prior service cost
    
    
    32
    
    
    
    66
    
    
    
    12
    
    
    
    102Recognized actuarial loss
    
    
    138
    
    
    
    340
    
    
    
    584
    
    
    
    4,949Net periodic pension costs
    
    ¥
    2,531
    
    
    ¥
    2,925
    
    
    ¥
    3,345
    
    
    $
    28,347Weighted-average actuarial assumptions:Discount rate
    
    
    3.1
    %
    
    
    2.6
    %
    
    
    2.1
    %Assumed rate of increase in future
compensation levels
    
    
    2.4
    %
    
    
    2.3
    %
    
    
    2.3
    %Expected long-term rate of return on
plan assets
    
    
    3.5
    %
    
    
    3.0
    %
    
    
    2.5
    %
  The domestic plan represents substantially the entire pension obligation as of
March 31, 2003. The discount rate and expected long-term rate of return on
plan assets assumed to determine the pension obligation for the Company
relevant to the domestic plan were 3.0% and 3.5% for the year ended March 31,
2001, 2.5% and 3.0% for the year ended March 31, 2002 and 2.0% and 2.5% for
the year ended March 31, 2003, respectively. F-22




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##### Table of Contents



Reconciliations of beginning and ending balances of the benefit obligations and
the fair value of the plan assets were as follows: Yen
    
    U.S. Dollars(millions)
    
    (thousands)2002
    
    2003
    
    2003Change in benefit obligation:Benefit obligation at beginning of year
    
    ¥
    43,881
    
    
    ¥
    50,651
    
    
    $
    429,246Service cost
    
    
    1,983
    
    
    
    2,211
    
    
    
    18,737Interest cost
    
    
    1,386
    
    
    
    1,302
    
    
    
    11,034Employees contributions
    
    
    267
    
    
    
    226
    
    
    
    1,915Amendments
    
    
    1,161
    
    
    
    (1,472
    )
    
    
    (12,475
    )Actuarial loss
    
    
    2,900
    
    
    
    6,392
    
    
    
    54,169Benefits paid
    
    
    (1,017
    )
    
    
    (1,185
    )
    
    
    (10,042
    )Foreign exchange impact
    
    
    90
    
    
    
    170
    
    
    
    1,441Benefit obligation at end of year
    
    
    50,651
    
    
    
    58,295
    
    
    
    494,025Change in plan assets:Fair value of plan assets at beginning of year
    
    
    27,433
    
    
    
    27,895
    
    
    
    236,398Actual return on plan assets
    
    
    (1,418
    )
    
    
    (3,910
    )
    
    
    (33,136
    )Employer contributions
    
    
    2,549
    
    
    
    3,098
    
    
    
    26,254Employees contributions
    
    
    267
    
    
    
    226
    
    
    
    1,915Benefits paid
    
    
    (945
    )
    
    
    (1,104
    )
    
    
    (9,356
    )Foreign exchange impact
    
    
    9
    
    
    
    (4
    )
    
    
    (33
    )Fair value of plan assets at end of year
    
    
    27,895
    
    
    
    26,201
    
    
    
    222,042Funded status
    
    
    (22,756
    )
    
    
    (32,094
    )
    
    
    (271,983
    )Unrecognized net actuarial loss
    
    
    16,882
    
    
    
    27,455
    
    
    
    232,669Prior service cost not yet recognized in net
periodic benefit cost
    
    
    940
    
    
    
    (507
    )
    
    
    (4,296
    )Unrecognized net transition obligation being
recognized over 19 years
    
    
    227
    
    
    
    190
    
    
    
    1,610Net amount recognized
    
    ¥
    (4,707
    )
    
    ¥
    (4,956
    )
    
    $
    (42,000
    )Amounts recognized in the consolidated balance
sheets consist of;Accrued benefit liability
    
    ¥
    (18,412
    )
    
    ¥
    (26,929
    )
    
    $
    (228,212
    )Prepaid benefit expenses
    
    
    40
    
    
    
    58
    
    
    
    492Intangible assets included in other assets
    
    
    1,167
    
    
    
    
    
    
    
    Accumulated other comprehensive loss, gross
of tax
    
    
    12,498
    
    
    
    21,915
    
    
    
    185,720Net amount recognized
    
    ¥
    (4,707
    )
    
    ¥
    (4,956
    )
    
    $
    (42,000
    )
  Accumulated benefit obligations of the defined benefit plans were ¥46,069
million and ¥53,072 million ($449,762 thousand) as of March 31, 2002 and 2003,
respectively.  As a result of the changes in the discount rates used for the domestic plan in
the years ended March 31, 2002 and 2003, the benefit obligation as of March 31,
2002 and 2003 was approximately ¥4,936 and ¥5,773 million ($48,924 thousand)
more than it would have been using the previous discount rates of 3.0% and
2.5%, respectively.  Certain foreign subsidiaries have defined contribution plans. The total
expenses charged to income under these plans were ¥217 million, ¥252 million
and ¥256 million ($2,169 thousand) for the years ended March 31, 2001, 2002 and
2003, respectively.  As noted above, the domestic contributory plan is composed of a corporate
defined benefit portion established by the Company and a substitutional portion
based on benefits prescribed by the Japanese government (similar to social
security benefits in the United States). The Company has been exempted F-23




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##### Table of Contents



from contributing to the Japanese Pension Insurance program that would
otherwise have been required if it had not elected to fund the government
substitutional portion of the benefit through a domestic contributory plan
arrangement. The plan assets of the domestic contributory plan are invested and
managed as a single portfolio for the entire domestic contributory plan and are
not separately attributed to the substitutional and corporate portions. The
substitutional portion represents approximately 30% of the total projected
benefit obligation of the domestic contributory plan as of March 31, 2003. In
June 2001, the Japanese pension law was amended to permit an employer to elect
to transfer the entire substitutional portion benefit obligation from the
domestic contributory plan to the government together with a specified amount
of plan assets pursuant to a government formula. After such transfer, the
employer would be required to make periodic contributions to the Japanese
Pension Insurance program, and the Japanese government would be responsible for
all benefit payments. The corporate portion of the domestic contributory plan
would continue to exist exclusively as a corporate defined benefit pension
plan. In this regard, the Company has elected to transfer the substitutional
portion of its domestic contributory plan to the government. The process of
separating the substitutional portion from the corporate portion includes
several phases. In January 2003, the Company received government approval of
exemption from the obligation for benefits related to future employee service
with respect to the substitutional portion of its domestic contributory plan.
The Company will account for the transfer in accordance with EITF 03-02
Accounting for the Transfer to the Japanese Government of the Substitutional
Portion of Employee Pension Fund Liabilities. As specified in EITF 03-02, the
entire separation process is to be accounted for at the time of completion of
the transfer to the government of the benefit obligation and related plan
assets as a settlement in accordance with SFAS No.88 Employers Accounting for
Settlements and Curtailments of Defined Benefit Pension Plans and for
Termination Benefits. Accordingly, there has been no effect on the Companys
consolidated financial statements for the fiscal year ended March 31, 2003. The
aggregate effect of this separation will be determined based on the Companys
pension benefit obligation as of the date the transfer is completed and the
amount of plan assets required to be transferred.  8.
 
 SHORT-TERM BORROWINGS AND LONG-TERM INDEBTEDNESS  Short-term borrowings, excluding current maturities of long-term
indebtedness, amounting to ¥7,220 million and ¥2,779 million ($23,551 thousand)
as of March 31, 2002 and 2003, respectively consisted primarily of bank and
insurance company borrowings denominated in foreign currencies by overseas
subsidiaries. As of March 31, 2002 and 2003, the weighted average interest
rates on the borrowings were 2.9% and 3.4%, respectively.  Certain subsidiaries of the Company had unused lines of credit available for
the short-term borrowings amounting to ¥46,672 million and ¥26,332 million
($223,153 thousand) as of March 31, 2002 and 2003, respectively.  As of March 31, 2002 and 2003, long-term indebtedness consisted of the
following: Yen
    
    U.S. Dollars(millions)
    
    (thousands)2002
     
   2003
    
    20031.6% unsecured convertible bonds,
payable in yen, due 2003
    
    ¥
    1,610
    
    
    ¥
    
    
    
    $
    --1.5% unsecured convertible bonds,
payable in yen, due 2005
    
    
    12,994
    
    
    
    12,994
    
    
    
    110,1193.4% (weighted average rate) unsecured
loans from banks and insurance companies
in various foreign currencies, due 2002
through 2006
    
    
    6,733
    
    
    
    6,587
    
    
    
    55,822Capital lease obligations (see Note 3(g))
    
    
    529
    
    
    
    375
    
    
    
    3,178Total
    
    
    21,866
    
    
    
    19,956
    
    
    
    169,119Less- Current maturities included in
short-term borrowings
    
    
    (1,764
    )
    
    
    (113
    )
    
    
    (958
    )¥
    20,102
    
    
    ¥
    19,843
    
    
    $
    168,161
 F-24




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##### Table of Contents



In accordance with SFAS No. 133, changes in fair values of fixed rate long-term
indebtedness amounting to ¥708 million and ¥587 million ($4,975 thousand) as of
March 31, 2002 and 2003 respectively, which are effectively hedged by using
derivative instruments, are reflected in the carrying value of the long-term
indebtedness in the accompanying consolidated balance sheets.  The convertible bonds are currently convertible into common stock at the option
of the holders at conversion price as follows: Conversion Price(Yen)1.5% convertible bonds
    2,259.90
  The conversion price is subject to adjustment for stock splits and for shares
issued at less than market value. The outstanding convertible bonds are
redeemable at the option of the Company on or after April 1, 2003 at prices
ranging from 101.0% to 100.0% of the principal amount under certain conditions
as provided in the agreements.  If all outstanding bonds were converted as of March 31, 2003, 5,749,811 shares
of common stock would be issuable.  The aggregate annual maturities of long-term indebtedness, excluding SFAS No.
133 fair value adjustments, subsequent to March 31, 2003 are as summarized
below: Yen
    
    U.S. DollarsYear ending March 31,
    
    (millions)
    
    (thousands)2004
    
    ¥
    113
    
    
    $
    9582005
    
    
    13,084
    
    
    
    110,8812006
    
    
    6,087
    
    
    
    51,5852007
    
    
    41
    
    
    
    3472008
    
    
    13
    
    
    
    1102009 and thereafter
    
    
    31
    
    
    
    263¥
    19,369
    
    
    $
    164,144
  9.
 
 CLUB MEMBERS DEPOSITS  The Company owns and operates a golf club in Japan and solicited golf
club members and received noninterest-bearing deposits. All golf club members
are required to maintain such deposits for at least a 10-year term, but they
are refundable if and when members would terminate their memberships.
Accordingly, such deposits are recorded as club members deposits in long-term
liabilities in the accompanying consolidated balance sheets.  10.
 
 SHAREHOLDERS EQUITY  The Commercial Code of Japan (the Code) provides that an amount
equal to at least 10% of cash dividends paid and other cash distributions from
retained earnings with respect to each fiscal year be transferred to the legal
reserve until the aggregated amount of additional paid-in capital and the legal
reserve equals 25% of the stated common stock amount. Under the condition that
the aggregate amount of additional paid-in capital and legal reserve remains at
least equal to 25% of the common stock amount, the excess portion is available
for distribution or release for certain other purposes by the resolution of the
annual general shareholders meeting.  In addition, the Code provides that at least one-half of the issue price of new
shares be included in common stock. In conformity therewith, the Company may
divide the principal amount of bonds converted into common stock equally into
common stock and additional paid-in capital by resolution of the Board of
Directors. F-25




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##### Table of Contents



The Code allows the Company to purchase treasury stock for any reason at any
time by the resolution of the Board of Directors up to the limitation approved
by the shareholders. On June 27, 2002. The shareholders of the Company
approved to purchase of the outstanding shares of the Company up to a maximum
of 4.0 million shares and ¥4,000 million($33,898 thousand). On November 19,
2002, the Board of Directors passed a resolution approving the purchase of the
outstanding shares of the Company up to a maximum of 1.5 million shares and
¥1,500 million($12,712 thousand). In connection therewith, the Company had
purchased such shares totaling 1.4 million shares at a cost of ¥993 million
($8,415 thousand). On December 16, 2002, the Board of Directors passed a
resolution approving the purchase of the outstanding shares of the Company up
to a maximum of 2.3 million shares and ¥1,867 million ($15,822 thousand). In
connection therewith, the Company had purchased such shares totaling 2 million
shares at a cost of ¥1,631 million ($13,822 thousand). In addition, the Company
had purchased 0.3 million odd shares at a cost of ¥257 million ($2,178
thousand) during the year ended March 31, 2003. As a result, the Company
purchased 3.7 million shares at a cost of ¥2,881 million ($24,415 thousand)
during the year ended March 31,2003.  Prior to October 1, 2001, the Code allowed a company to retire a portion of its
outstanding shares upon approval of the shareholders at the annual general
shareholders meeting or of the Board of Directors if stipulated in the
Articles of Incorporation. On June 26, 1998, the Companys annual general
shareholders meeting passed a resolution to enable the Company to purchase and
retire outstanding shares and to approve the retirement of the outstanding
shares up to a maximum of 16.0 million shares. In accordance with the
resolution, the Company repurchased 5.0 million shares amounting to ¥4,287
million for the year ended March 31, 2001. On November 2, 2001, the Board of
Directors passed a resolution approving the purchase of the outstanding shares
of the Company up to a maximum of 4.0 million shares and ¥3,500 million. In
connection therewith, the Company purchased such shares totaling 3.3 million
shares at a cost of ¥2,204 million for the year ended March 31, 2002.  The Code provides that cash dividends may be approved semiannually by the
resolution of the annual general shareholders meeting after the end of each
fiscal year or by the declaration of the Board of Directors after the end of
each interim semi-annual period. Such dividends are payable to shareholders of
record at the end of each fiscal year or semi-annual period. In accordance
with the Code, the resolution or declaration of these dividends and the related
appropriations of retained earnings have not been reflected in the consolidated
financial statements at the end of such fiscal years or interim six-month
periods. The amount of retained earnings legally available under the Code for
distribution is that recorded in the Companys non-consolidated books and
equaled ¥107,687 million ($912,602 thousand) as of March 31, 2003. The Board of
Directors has declared a cash dividend (¥9 per share) totaling ¥1,313 million
($11,127 thousand) to be paid to the shareholders of record on March 31, 2003.
As the dividend is subject to approval at the next annual general shareholders
meeting to be held on June 27, 2003, it has not been reflected in the
accompanying consolidated financial statements at March 31, 2003. F-26




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##### Table of Contents



11.
 
 OTHER COMPREHENSIVE INCOME (LOSS)  Accumulated other comprehensive income (loss) as of March 31,
2001, 2002, 2003 was as follows  ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS): Yen
    
    U.S.Dollars(millions)
    
    (thousands)Foreign currency translation adjustments:
    
    2001
    
    2002
    
    2003
    
    2003Beginning balance
    
    ¥
    (23,634
    )
    
    ¥
    (16,870
    )
    
    ¥
    (10,699
    )
    
    $
    (90,670
    )Adjustment for the year
    
    
    6,764
    
    
    
    6,171
    
    
    
    (2,323
    )
    
    
    (19,686
    )Ending balance
    
    ¥
    (16,870
    )
    
    ¥
    (10,699
    )
    
    ¥
    (13,022
    )
    
    
    (110,356
    )Net unrealized holding gains on securitiesAvailable-for-sale:Beginning balance
    
    ¥
    6,037
    
    
    ¥
    2,674
    
    
    ¥
    1,325
    
    
    $
    11,229Adjustment for the year
    
    
    (3,363
    )
    
    
    (1,349
    )
    
    
    (847
    )
    
    
    (7,178
    )Ending balance
    
    ¥
    2,674
    
    
    ¥
    1,325
    
    
    ¥
    478
    
    
    
    4,051Minimum pension liability adjustment:Beginning balance
    
    ¥
    (952
    )
    
    ¥
    (4,492
    )
    
    ¥
    (7,072
    )
    
    $
    (59,932
    )Adjustment for the year
    
    
    (3,540
    )
    
    
    (2,580
    )
    
    
    (5,518
    )
    
    
    (46,763
    )Ending balance
    
    ¥
    (4,492
    )
    
    ¥
    (7,072
    )
    
    ¥
    (12,590
    )
    
    
    (106,695
    )Total accumulated comprehensive income (loss)Beginning balance
    
    ¥
    (18,549
    )
    
    ¥
    (18,688
    )
    
    ¥
    (16,446
    )
    
    $
    (139,373
    )Adjustment for the year
    
    
    (139
    )
    
    
    2,242
    
    
    
    (8,688
    )
    
    
    (73,627
    )Ending balance
    
    ¥
    (18,688
    )
    
    ¥
    (16,446
    )
    
    ¥
    (25,134
    )
    
    
    (213,000
    )
 F-27




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##### Table of Contents



Tax effects allocated to each component of other comprehensive income (loss)
are as follows: Yen (millions)Tax benefit
    
    Net of taxPretax amount
    
    (expense)
    
    amountAs of March 31, 2001Foreign currency translation adjustment
    
    ¥
    6,495
    
    
    ¥
    269
    
    
    ¥
    6,764Unrealized gain (loss) on securities:Unrealized holding gains (losses)
arising during the year
    
    
    (6,400
    )
    
    
    2,650
    
    
    
    (3,750
    )Less- Reclassification adjustment
for (gains) losses realized in net
income
    
    
    661
    
    
    
    (274
    )
    
    
    387Net unrealized gains (losses)
    
    
    (5,739
    )
    
    
    2,376
    
    
    
    (3,363
    )Minimum pension liability adjustment
    
    
    (6,041
    )
    
    
    2,501
    
    
    
    (3,540
    )Other comprehensive income (loss)
    
    ¥
    (5,285
    )
    
    ¥
    5,146
    
    
    ¥
    (139
    )Yen (millions)Tax benefit
    
    Net of taxPretax amount
    
    (expense)
    
    amountAs of March 31, 2002Foreign currency translation adjustment
    
    ¥
    5,552
    
    
    ¥
    619
    
    
    ¥
    6,171Unrealized gain (loss) on securities:Unrealized holding gains (losses)
arising during the year
    
    
    (5,038
    )
    
    
    2,083
    
    
    
    (2,955
    )Less- Reclassification adjustment
for (gains) losses realized in net
income
    
    
    2,740
    
    
    
    (1,134
    )
    
    
    1,606Net unrealized gains (losses)
    
    
    (2,298
    )
    
    
    949
    
    
    
    (1,349
    )Minimum pension liability adjustment
    
    
    (4,402
    )
    
    
    1,822
    
    
    
    (2,580
    )Other comprehensive income (loss)
    
    ¥
    (1,148
    )
    
    ¥
    3,390
    
    
    ¥
    2,242Yen (millions)Tax benefit
    
    Net of taxPretax amount
    
    (expense)
    
    amountAs of March 31, 2003Foreign currency translation adjustment
    
    ¥
    (2,950
    )
    
    ¥
    627
    
    
    ¥
    (2,323
    )Unrealized gain (loss) on securities:Unrealized holding gains (losses)
arising during the year
    
    
    (4,036
    )
    
    
    1,671
    
    
    
    (2,365
    )Less- Reclassification adjustment
for (gains) losses realized in net
income
    
    
    2,590
    
    
    
    (1,072
    )
    
    
    1,518Net unrealized gains (losses)
    
    
    (1,446
    )
    
    
    599
    
    
    
    (847
    )Minimum pension liability adjustment
    
    
    (9,417
    )
    
    
    3,899
    
    
    
    (5,518
    )Other comprehensive income (loss)
    
    ¥
    (13,813
    )
    
    ¥
    5,125
    
    
    ¥
    (8,688
    )
 F-28




---



##### Table of Contents



U.S. Dollars (thousands)Tax benefit
    
    Net of taxPretax amount
    
    (expense)
    
    amountAs of March 31, 2003Foreign currency translation adjustment
    
    $
    (25,000
    )
    
    $
    5,314
    
    
    $
    (19,686
    )Unrealized gain (loss) on securities:Unrealized holding gains (losses)
arising during the year
    
    
    (34,203
    )
    
    
    14,161
    
    
    
    (20,042
    )Less- Reclassification adjustment
for (gains) losses realized in net
income
    
    
    21,949
    
    
    
    (9,085
    )
    
    
    12,864Net unrealized gains (losses)
    
    
    (12,254
    )
    
    
    5,076
    
    
    
    (7,178
    )Minimum pension liability adjustment
    
    
    (79,805
    )
    
    
    33,042
    
    
    
    (46,763
    )Other comprehensive income (loss)
    
    $
    (117,059
    )
    
    $
    43,432
    
    
    $
    (73,627
    )
  12.
 
 EARNINGS PER SHARE  A reconciliation of the numerators and denominators of the basic and
diluted earnings per share computations is as follows: Yen
    
    U.S. Dollars(millions)
    
    (thousands)2001
    
    2002
    
    2003
    
    2003Net income available to common shareholders
    
    ¥
    2,133
    
    
    ¥
    133
    
    
    ¥
    6,723
    
    
    $
    56,975Effect of dilutive securities:2.1% unsecured convertible bonds,
due 2002
    
    
    2
    
    
    
    
    
    
    
    
    
    
    
    1.6% unsecured convertible bonds, due
2003
    
    
    
    
    
    
    
    
    
    
    13
    
    
    
    1101.5% unsecured convertible bonds, due
2005
    
    
    
    
    
    
    
    
    
    
    115
    
    
    
    974Diluted net income
    
    ¥
    2,135
    
    
    ¥
    133
    
    
    ¥
    6,851
    
    
    $
    58,059
 Number of sharesWeighted average common shares outstanding
    
    
    156,630,908
    
    
    
    151,776,242
    
    
    
    148,444,219Dilutive effect of:2.1% unsecured convertible bonds,
due 2002
    
    
    121,812
    
    
    
    
    
    
    
    1.6% unsecured convertible bonds, due
2003
    
    
    
    
    
    
    
    
    
    
    828,1341.5% unsecured convertible bonds, due
2005
    
    
    
    
    
    
    
    
    
    
    5,749,811Weighted average diluted common shares
outstanding
    
    
    156,752,720
    
    
    
    151,776,242
    
    
    
    155,022,164
 Yen
    
    U.S. DollarsEarnings per share:Basic
    
    ¥
    13.6
    
    
    ¥
    0.9
    
    
    ¥
    45.3
    
    
    $
    0.38Diluted
    
    
    13.6
    
    
    
    0.9
    
    
    
    44.2
    
    
    
    0.37
 F-29




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##### Table of Contents





| |  | 2.1% unsecured convertible bonds were redeemed in February 2002, and 1.6%
unsecured convertible bonds were redeemed in February 2003. The 1.5% and 1.6%
bonds were antidilutive in 2001 and all bonds were antidilutive in 2002.
| |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|13. |  | COMMITMENTS AND CONTINGENT LIABILITIES
|--- |  | --------------------------------------



| |  | In November 2002, the FASB issued FIN No. 45, Guarantors Accounting
and Disclosure Requirements for Guarantees, Including Indirect Guarantees of
Indebtedness to Others. FIN No. 45 elaborates on the disclosures to be made
by a guarantor in its financial statements about its obligations under
guarantees issued. FIN No. 45 also clarifies that a guarantor is required to
recognize, at inception of a guarantee, a liability for the fair value of the
obligation undertaken. The Company adopted FIN No. 45 in fiscal year 2003.
| |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | The Company was contingently liable for guarantees of housing loans to
employees totaling ¥33 million ($280 thousand) as of March 31, 2003.
| |  | -------------------------------------------------------------------------------------------------------------------------------------------



| |  | The Company is involved in various other claims and legal actions arising in
the ordinary course of business. In the opinion of management, the ultimate
disposition of these matters will not have a material adverse effect on the
Companys consolidated financial position, results of operations, or cash
flows.
| |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | The Company and its consolidated subsidiaries made rental payments of ¥1,620
million, ¥1,770 million and ¥1,737 million ($14,720 thousand) under cancelable
and noncancelable operating lease agreements for offices, warehouses,
automobiles and office equipment during the years ended March 31, 2001, 2002
and 2003, respectively. The minimum rental payments required under
noncancelable operating lease agreements as of March 31, 2003 were as follows:
| |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Yen
    
    U.S. DollarsYear ending March 31,
    
    (millions)
    
    (thousands)2004
    
    ¥
    613
    
    
    $
    5,1952005
    
    
    506
    
    
    
    4,2882006
    
    
    384
    
    
    
    3,2542007
    
    
    277
    
    
    
    2,3472008
    
    
    207
    
    
    
    1,7542009 and thereafter
    
    
    473
    
    
    
    4,009¥
    2,460
    
    
    $
    20,847


The company and its consolidated subsidiaries issues contractual product
warranties under which it generally guarantees the performance of products
delivered and services rendered for a certain period or term. Estimates for
product warranty cost are made based on historical warranty claim experience.
Change in accrued product warranty cost for the year ended March 31, 2003 is
summarized as follows: Yen
    
    U.S. Dollars(millions)
    
    (thousands)Balance at beginning of year
    
    ¥
    674
    
    
    $
    5,712Addition
    
    
    467
    
    
    
    3,958Utilization
    
    
    (439
    )
    
    
    (3,720
    )Foreign exchange impact
    
    
    (9
    )
    
    
    (77
    )Balance at end of year
    
    ¥
    693
    
    
    $
    5,873
 F-30




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##### Table of Contents



14.
 
 DERIVATIVES AND HEDGING ACTIVITIES  (a)
       
       Risk management policy  The Company and its consolidated subsidiaries are exposed to market risks,
such as changes in currency exchange rates and interest rates. Derivative
financial instruments are comprised principally of foreign exchange
contracts, currency swaps, currency options and interest rate swaps utilized
by the Company and certain of its consolidated subsidiaries to reduce these
risks. The Company and its consolidated subsidiaries do not use derivative
instruments for trading or speculation purpose.  The Company and its consolidated subsidiaries are also exposed to risk of
credit-related losses in the event of nonperformance by counter parties to
the financial instrument contracts, while it is not expected that any counter
parties will fail to meet their obligations, because most of the counter
parties are internationally recognized financial institutions whom management
deems to be creditworthy and contracts are diversified into a number of major
financial institutions.  (b)
       
       Foreign currency exchange rate risk management  The Company and its consolidated subsidiaries operate internationally, giving
rise to significant exposure to market risks from changes in foreign exchange
rates, and enter into forward exchange contracts, currency swaps and currency
options to hedge the foreign currency exposure.  These derivative instruments are principally intended to protect against
foreign exchange exposure related to intercompany transfer of inventories and
financing activities. The fair value of these derivative instruments as of
March 31, 2002 and 2003 were recorded as ¥6 million and ¥27 million ($229
thousand) in assets and ¥884 million and ¥709 million ($6,008 thousand) in
liabilities, respectively and changes in the fair values as of March 31, 2002
and 2003 amounted to ¥421 million and ¥196 million ($1,661 thousand),
respectively were recorded in earnings and classified in other income
(expenses).  (c)
       
       Interest rate risk management  The Company and its consolidated subsidiaries execute financing and investing
activities through its financial subsidiary, Euro Makita Corporation B.V.
(EMC). To manage the variability in the fair values of long-term
indebtedness and investment securities caused by fluctuations in interest
rates, EMC enters into interest rate swaps for the purpose of fair value
hedge.  As of March 31, 2002 and 2003, EMC had interest rate swaps with a fair value
of ¥708 million and ¥587 million ($4,975 thousand), respectively which have
been designated as fair value hedges of underlying long-term indebtedness
with fixed interest rates and recorded as current assets. Changes in fair
values of both the hedging interest rate swaps and the underlying long-term
indebtedness were recorded as equal and offsetting gains and losses in other
income (expenses). There was no hedging ineffectiveness or net gains or
losses excluded from the assessment of hedge effectiveness for the year ended
March 31, 2002 and 2003, as the critical terms of the interest rate swaps
match the terms of the hedged long-term indebtedness.  As of March 31, 2002 and 2003, EMC also had interest rate swaps with a fair
value of ¥38 million and ¥33 million ($280 thousand), respectively which have
been designated as fair value hedges of underlying investment securities with
fixed interest rates and recorded as current liabilities. As the interest
rate swaps do not meet hedge accounting criteria, changes in fair value of
the hedging interest rate swaps amounted to ¥ 38 million and ¥ 6 million ($51
thousand) were recorded in earnings and classified in other income (expenses)
for the year ended March 31, 2002 and 2003, respectively. F-31




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##### Table of Contents



15.
 
 DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS  The following methods and significant assumptions were used to
estimate the fair value of each class of financial instrument for which it is
practicable to estimate a value:  (a)
       
       Cash and Cash Equivalents, Trade Notes and Accounts Receivable,
Short-term Borrowings, Trade Notes and Accounts Payable, and Other Accrued
Expenses  The carrying amount approximates fair value because of the short or undefined
maturities of those instruments.  (b)
       
       Time Deposits  The fair value is estimated by discounting the future cash flows using the
current rates that the Company and its consolidated subsidiaries would be
offered for deposits with similar terms and remaining maturities.  (c)
       
       Marketable Securities and Investment Securities  The fair value of marketable securities is estimated based on quoted market
prices. For other investments for which there are no quoted market prices,
amounted to ¥ 608 million ($5,153 thousand) a reasonable estimation of fair
value could not be made without incurring excessive cost.  (d)
       
       Long-term Indebtedness  The fair value of long-term indebtedness is based on the quoted price in the
most active market or the present value of future cash flows associated with
each instrument discounted using the current borrowing rate for similar debt
of comparable maturity.  (e)
       
       Club Members Deposits  The fair value of club members deposits is based on the latest actual
transaction price.  (f)
       
       Interest Rate Swap Agreements  The fair values of interest rate swap agreements are based on the estimated
amount that the Company  and its consolidated subsidiaries would receive or pay to terminate the swap
agreements.  (g)
       
       Other Derivative Financial Instruments  The fair values of other derivative financial instruments, foreign currency
contracts, currency swaps and currency option contracts, all of which are
used for hedging purposes, are estimated by obtaining quotes and other
relevant information from brokers. F-32




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##### Table of Contents



The estimated fair value of the financial instruments was as follows: Yen
    
    
    U.S. Dollars(millions)
    
    (thousands)2002
    
    
    2003
    
    
    2003Carrying
    
    
    
    
    
    Carrying
    
    
    
    
    
    CarryingAmount
    
    Fair Value
    
    Amount
    
    Fair Value
    
    Amount
    
    Fair ValueTime deposits
    
    ¥
    4,572
    
    
    ¥
    4,604
    
    
    ¥
    4,520
    
    
    ¥
    4,550
    
    
    $
    38,305
    
    
    $
    38,559Marketable securities
    
    
    43,091
    
    
    
    43,091
    
    
    
    39,193
    
    
    
    39,193
    
    
    
    332,144
    
    
    
    332,144Investment securities
    
    
    15,483
    
    
    
    15,483
    
    
    
    19,342
    
    
    
    19,342
    
    
    
    163,915
    
    
    
    163,915Long-term indebtedness
    
    
    (20,102
    )
    
    
    (20,232
    )
    
    
    (19,843
    )
    
    
    (20,116
    )
    
    
    (168,161
    )
    
    
    (170,475
    )Club members deposits
    
    
    (16,628
    )
    
    
    (9,427
    )
    
    
    (14,207
    )
    
    
    (6,288
    )
    
    
    (120,398
    )
    
    
    (53,288
    )Interest rate swap
agreements:Assets
    
    
    708
    
    
    
    708
    
    
    
    587
    
    
    
    587
    
    
    
    4,975
    
    
    
    4,975Interest rate swap
agreements:Liabilities
    
    
    (38
    )
    
    
    (38
    )
    
    
    (33
    )
    
    
    (33
    )
    
    
    (280
    )
    
    
    (280
    )Foreign currency contracts:Assets
    
    
    3
    
    
    
    3
    
    
    
    4
    
    
    
    4
    
    
    
    34
    
    
    
    34Foreign currency contracts:Liabilities
    
    
    (244
    )
    
    
    (244
    )
    
    
    (92
    )
    
    
    (92
    )
    
    
    (780
    )
    
    
    (780
    )Currency swaps:Assets
    
    
    
    
    
    
    
    
    
    
    4
    
    
    
    4
    
    
    
    34
    
    
    
    34Currency swaps:Liabilities
    
    
    (617
    )
    
    
    (617
    )
    
    
    (606
    )
    
    
    (606
    )
    
    
    (5,136
    )
    
    
    (5,136
    )Currency option contracts:Assets
    
    
    3
    
    
    
    3
    
    
    
    19
    
    
    
    19
    
    
    
    161
    
    
    
    161Currency option contracts:Liabilities
    
    
    (23
    )
    
    
    (23
    )
    
    
    (11
    )
    
    
    (11
    )
    
    
    (93
    )
    
    
    (93
    )
  (h)
       
       Limitation  Fair value estimates are made at a specific point in time, based on relevant
market information and information about the financial instrument. These
estimates are subjective in nature and involve uncertainties and matters of
significant judgment and therefore cannot be determined with precision.
Changes in assumptions could significantly affect the estimates.  16.
 
 OPERATING SEGMENT INFORMATION  The operating segments presented below are defined as components of
an enterprise for which separate financial information is available and
regularly reviewed by the Companys senior management. The Companys senior
management utilizes various measurements to assess segment performance and
allocate resources to the segments.  During the three years ended March 31, 2003, the Companys operating structure
included the following operating segments: Japan Group, North America Group,
Europe Group, Southeast Asia Group, and Other Group.  Segment Products and Services
The Company and its consolidated subsidiaries are manufacturers and wholesalers
of electric power tools and other tools. The operating segments derive
substantially all their revenues from the sale of electric power tools and
parts and repairs. F-33




---



##### Table of Contents



Year ended March 31, 2001 Yen(millions)North
    
    
    
    
    
    
    Southeast
    
    
    
    
    
    
    
    
    
    
    Corporate andJapan
    
    America
    
    Europe
    
    Asia
    
    Other
    
    Total
    
    Eliminations
    
    ConsolidatedSales:External customers
    
    ¥
    49,524
    
    
    ¥
    42,874
    
    
    ¥
    42,627
    
    
    ¥
    6,576
    
    
    ¥
    14,713
    
    
    ¥
    156,314
    
    
    ¥
    
    
    
    ¥
    156,314Intersegment
    
    
    48,223
    
    
    
    2,382
    
    
    
    4,297
    
    
    
    15,391
    
    
    
    111
    
    
    
    70,404
    
    
    
    (70,404
    )
    
    
    Total
    
    ¥
    97,747
    
    
    ¥
    45,256
    
    
    ¥
    46,924
    
    
    ¥
    21,967
    
    
    ¥
    14,824
    
    
    ¥
    226,718
    
    
    ¥
    (70,404
    )
    
    ¥
    156,314Operating expenses
    
    ¥
    90,789
    
    
    ¥
    47,464
    
    
    ¥
    44,490
    
    
    ¥
    20,314
    
    
    ¥
    14,666
    
    
    ¥
    217,723
    
    
    ¥
    (68,502
    )
    
    ¥
    149,221Operating income
    
    
    6,958
    
    
    
    (2,208
    )
    
    
    2,434
    
    
    
    1,653
    
    
    
    158
    
    
    
    8,995
    
    
    
    (1,902
    )
    
    
    7,093Long-lived assets
    
    
    56,866
    
    
    
    8,556
    
    
    
    7,056
    
    
    
    7,466
    
    
    
    1,526
    
    
    
    81,470
    
    
    
    (538
    )
    
    
    80,932Identifiable assets
    
    
    242,085
    
    
    
    54,692
    
    
    
    53,218
    
    
    
    23,862
    
    
    
    14,312
    
    
    
    388,169
    
    
    
    (94,174
    )
    
    
    293,995Depreciation and
amortization
    
    
    5,780
    
    
    
    1,584
    
    
    
    976
    
    
    
    709
    
    
    
    177
    
    
    
    9,226
    
    
    
    (59
    )
    
    
    9,167Capital expenditures
    
    
    4,847
    
    
    
    1,627
    
    
    
    882
    
    
    
    1,071
    
    
    
    178
    
    
    
    8,605
    
    
    
    (47
    )
    
    
    8,558
 Year ended March 31, 2002 Yen(millions)North
    
    
    
    
    
    Southeast
    
    
    
    
    
    
    
    
    
    Corporate andJapan
    
    America
    
    Europe
    
    Asia
    
    Other
    
    Total
    
    Eliminations
    
    ConsolidatedSales:External customers
    
    ¥
    46,029
    
    
    ¥
    48,826
    
    
    ¥
    48,738
    
    
    ¥
    6,659
    
    
    ¥
    15,917
    
    
    ¥
    166,169
    
    
    ¥
    
    
    
    ¥
    166,169Intersegment
    
    
    44,065
    
    
    
    1,584
    
    
    
    4,071
    
    
    
    16,524
    
    
    
    91
    
    
    
    66,335
    
    
    
    (66,335
    )
    
    
    Total
    
    ¥
    90,094
    
    
    ¥
    50,410
    
    
    ¥
    52,809
    
    
    ¥
    23,183
    
    
    ¥
    16,008
    
    
    ¥
    232,504
    
    
    ¥
    (66,335
    )
    
    ¥
    166,169Operating expenses
    
    ¥
    83,458
    
    
    ¥
    54,150
    
    
    ¥
    50,682
    
    
    ¥
    21,043
    
    
    ¥
    15,927
    
    
    ¥
    225,260
    
    
    ¥
    (64,964
    )
    
    ¥
    160,926Operating income
    
    
    6,636
    
    
    
    (3,740
    )
    
    
    2,127
    
    
    
    2,140
    
    
    
    81
    
    
    
    7,244
    
    
    
    (1,371
    )
    
    
    5,873Long-lived assets
    
    
    54,466
    
    
    
    7,920
    
    
    
    7,430
    
    
    
    8,274
    
    
    
    1,540
    
    
    
    79,630
    
    
    
    (625
    )
    
    
    79,005Identifiable assets
    
    
    239,891
    
    
    
    50,059
    
    
    
    63,163
    
    
    
    26,972
    
    
    
    15,162
    
    
    
    395,247
    
    
    
    (110,109
    )
    
    
    285,138Depreciation and
amortization
    
    
    5,807
    
    
    
    1,819
    
    
    
    1,075
    
    
    
    910
    
    
    
    197
    
    
    
    9,808
    
    
    
    (54
    )
    
    
    9,754Capital expenditures
    
    
    2,823
    
    
    
    827
    
    
    
    1,029
    
    
    
    1,210
    
    
    
    116
    
    
    
    6,005
    
    
    
    (47
    )
    
    
    5,958
 F-34




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##### Table of Contents



Year ended March 31, 2003

Yen(millions)North
    
    
    
    
    
    Southeast
    
    
    
    
    
    
    
    
    
    Corporate andJapan
    
    America
    
    Europe
    
    Asia
    
    Other
    
    Total
    
    Eliminations
    
    ConsolidatedSales:External customers
    
    ¥
    46,896
    
    
    ¥
    45,807
    
    
    ¥
    57,995
    
    
    ¥
    7,013
    
    
    ¥
    17,892
    
    
    ¥
    175,603
    
    
    ¥
    
    
    
    ¥
    175,603Intersegment
    
    
    39,943
    
    
    
    3,898
    
    
    
    5,227
    
    
    
    18,775
    
    
    
    82
    
    
    
    67,925
    
    
    
    (67,925
    )
    
    
    Total
    
    ¥
    86,839
    
    
    ¥
    49,705
    
    
    ¥
    63,222
    
    
    ¥
    25,788
    
    
    ¥
    17,974
    
    
    ¥
    243,528
    
    
    ¥
    (67,925
    )
    
    ¥
    175,603Operating expenses
    
    ¥
    82,913
    
    
    ¥
    49,436
    
    
    ¥
    59,343
    
    
    ¥
    23,388
    
    
    ¥
    17,316
    
    
    ¥
    232,396
    
    
    ¥
    (69,261
    )
    
    ¥
    163,135Operating income
    
    
    3,926
    
    
    
    269
    
    
    
    3,879
    
    
    
    2,400
    
    
    
    658
    
    
    
    11,132
    
    
    
    1,336
    
    
    
    12,468Long-lived assets
    
    
    49,082
    
    
    
    5,969
    
    
    
    7,633
    
    
    
    7,130
    
    
    
    1,186
    
    
    
    71,000
    
    
    
    (594
    )
    
    
    70,406Identifiable assets
    
    
    233,165
    
    
    
    37,757
    
    
    
    67,454
    
    
    
    27,424
    
    
    
    14,514
    
    
    
    380,314
    
    
    
    (101,714
    )
    
    
    278,600Depreciation and
amortization
    
    
    6,014
    
    
    
    1,571
    
    
    
    1,125
    
    
    
    932
    
    
    
    149
    
    
    
    9,791
    
    
    
    (51
    )
    
    
    9,740Capital expenditures
    
    
    3,160
    
    
    
    394
    
    
    
    1,287
    
    
    
    754
    
    
    
    149
    
    
    
    5,744
    
    
    
    (53
    )
    
    
    5,691


Year ended March 31, 2003 U.S. Dollars(thousands)CorporateNorth
    
    
    
    
    
    
    Southeast
    
    
    
    
    
    
    
    
    
    
    andJapan
    
    
    America
    
    
    Europe
    
    
    Asia
    
    
    Other
    
    
    Total
    
    
    Eliminations
    
    
    ConsolidatedSales:External customers
    
    $
    397,424
    
    
    $
    388,195
    
    
    $
    491,483
    
    
    $
    59,432
    
    
    $
    151,627
    
    
    $
    1,488,161
    
    
    $
    
    
    
    $
    1,488,161Intersegment
    
    
    338,500
    
    
    
    33,034
    
    
    
    44,297
    
    
    
    159,110
    
    
    
    695
    
    
    
    575,636
    
    
    
    (575,636
    )
    
    
    Total
    
    $
    735,924
    
    
    $
    421,229
    
    
    $
    535,780
    
    
    $
    218,542
    
    
    $
    152,322
    
    
    $
    2,063,797
    
    
    $
    (575,636
    )
    
    $
    1,488,161Operating expenses
    
    $
    702,653
    
    
    $
    418,949
    
    
    $
    502,907
    
    
    $
    198,203
    
    
    $
    146,746
    
    
    $
    1,969,458
    
    
    $
    (586,958
    )
    
    $
    1,382,500Operating income
    
    
    33,271
    
    
    
    2,280
    
    
    
    32,873
    
    
    
    20,339
    
    
    
    5,576
    
    
    
    94,339
    
    
    
    11,322
    
    
    
    105,661Long-lived assets
    
    
    415,949
    
    
    
    50,585
    
    
    
    64,686
    
    
    
    60,424
    
    
    
    10,051
    
    
    
    601,695
    
    
    
    (5,034
    )
    
    
    596,661Identifiable assets
    
    
    1,975,975
    
    
    
    319,974
    
    
    
    571,644
    
    
    
    232,407
    
    
    
    123,000
    
    
    
    3,223,000
    
    
    
    (861,983
    )
    
    
    2,361,017Depreciation and
amortization
    
    
    50,966
    
    
    
    13,313
    
    
    
    9,534
    
    
    
    7,898
    
    
    
    1,263
    
    
    
    82,974
    
    
    
    (432
    )
    
    
    82,542Capital expenditures
    
    
    26,779
    
    
    
    3,339
    
    
    
    10,907
    
    
    
    6,390
    
    
    
    1,263
    
    
    
    48,678
    
    
    
    (449
    )
    
    
    48,229
 Long-lived assets shown above consist of property, plant and equipment,
security deposits and other intangible assets and other. Transfers between segments are made at estimated arms-length prices. No single
external customer accounted for 10% or more of the Company and its consolidated
subsidiaries revenues for each of the years ended March 31, 2001, 2002 and
2003. F-35




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##### Table of Contents



MAKITA CORPORATION AND CONSOLIDATED SUBSIDIARIESSCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS AND RESERVESFOR THE YEARS ENDED MARCH 31, 2001,2002 AND 2003 Japanese Yen (millions)Column A
    
    Column B
    
    Column C
    
    Column D
    
    Column E
    
    Column F
    
    Column GAdditionsBalance at
    
    Charged to
    
    Charged to
    
    Deductions
    
    
    
    
    
    Balance atbeginning
    
    costs and
    
    other
    
    from
    
    Translation
    
    end ofDescriptions
    
    of year
    
    expenses
    
    Accounts
    

reserves(1)
    
    adjustments
    
    year2001:Allowance for
doubtful
receivables
    
    
    1,168
    
    
    
    100
    
    
    
    
    
    
    
    (46
    )
    
    
    141
    
    
    
    1,363Deferred tax assets
valuation allowance
    
    
    3,374
    
    
    
    2,291
    
    
    
    
    
    
    
    
    
    
    
    450
    
    
    
    6,1152002:Allowance for doubtful receivables
    
    
    1,363
    
    
    
    139
    
    
    
    
    
    
    
    (86
    )
    
    
    103
    
    
    
    1,519Deferred tax assets valuation allowance
    
    
    6,115
    
    
    
    2,519
    
    
    
    
    
    
    
    
    
    
    
    416
    
    
    
    9,0502003:Allowance for doubtful receivables
    
    
    1,519
    
    
    
    113
    
    
    
    
    
    
    
    (84
    )
    
    
    (92
    )
    
    
    1,456Deferred tax assets valuation allowance
    
    
    9,050
    
    
    
    832
    
    
    
    
    
    
    
    (2,621
    )
    
    
    (567
    )
    
    
    6,694
 Note: (1) Charges for which reserves were created or reversed. F-36