Effects of Impairment of Investment Securities and Change of the Corporate Enterprise Tax System at March 31, 2003

1) Effects on Non-consolidated Business Results
Komatsu Ltd. has conventionally adopted the market price method, primarily based on the market prices at the end of each fiscal year, for investment securities with market value. Please be advised that impairment losses of such investment securities totaled approximately 8.2 billion yen at March 31, 2003 against the backdrop of sluggish stock market conditions.
As the Company already recorded impairment losses of0.6 billion yen at September 30, 2002, the closing date of the six-month period for fiscal 2002, ended March 31, 2003, through write off, the effects on projected non-consolidated business results announced by the Company on November 8, 2002 should amount to approximately 7.6 billion yen.
2) Effects on Consolidated Business Results
Consolidated financial statements of Komatsu Ltd. are prepared in accordance with the generally accepted accounting principles of the United States of America. Therefore, in compliance with SFAS No. 115, "Accounting for Certain Investments in Debt and Equity Securities," the Company does not treat appraisal gains (losses) on investment securities as gains (losses) for the corresponding fiscal year but includes the amount after considering tax effects as a component of the shareholders' equity column. However, concerning the investment securities whose prices are believed to have least prospect for recovery, the Company plans to decrease their appraised amounts to fair value in the Consolidated Statements of Income. The Company anticipates impairment losses of 8.9 billion yen for the fiscal year.
At September 30, 2002, the closing date of the six-month period for fiscal 2002, the Company recorded impairment losses of ¥0.5 billion through write off. Accordingly, the effects on projected consolidated business results announced by the Company on November 8, 2002 should amount to approximately 8.4 billion yen.

In compliance with the "Act Concerning Partial Reform of the Local Tax Law" which was officially announced by the Japanese government on March 31, 2003, the Pro Forma Standard Taxation will be introduced to the Corporate Enterprise Tax effective for fiscal year starting April 1, 2004 and thereafter, and the standard tax rate will be lowered for income. Accordingly, deferred income tax assets and liabilities of the Balance Sheets at March 31, 2003 as well as income taxes of the Statements of Income for fiscal year ended March 31, 2003 will be affected.
The Company estimates non-consolidated net income and consolidated net income for the fiscal year will be affected by approximately 1.3 billion yen and 0.5 billion yen, respectively. Because the Company did not suppose these effects above in the projected non-consolidated and consolidated business results announced by the Company on November 8, 2002, these effects will result in negative factors on the projected business results.

Concerning the business results for fiscal year ended March 31, 2003, which reflect the above effects of impairment losses on investment securities and the change of the Corporate Enterprise Tax System, the Company is currently computing and plans to announce them on May 9, 2003.

Kosuke Yamane,
General Manager, Corporate Communications.
Phone: +81-(0)3-5561-2616