Komatsu : Corporate Governance Report

August 26, 2020 at 12:01 am EDT

Corporate Governance Report

Last Update: Aug 26, 2020

Komatsu Ltd.

President: Hiroyuki Ogawa Contact: +81-3-5561-2616 Securities Code: 6301 https://home.komatsu/en/

In the following, the Company expresses Komatsu Ltd. on a non-consolidated basis, while the Komatsu Group, on a

consolidated basis.

Basic Views on Corporate Governance, Capital Structure, Corporate Profile and Other

Basic Information

1. Basic Views

The Company believes its corporate value is the total sum of trust given to the Company by society and all stakeholders. To become a company which enjoys more trust from shareholders and all other stakeholders, the Company is working to strengthen corporate governance, improve management efficiency, advocate corporate ethics and ensure sound management on a group-wide basis.

To further improve the transparency of management for its shareholders and investors, the Company discloses information in a fair and timely manner and actively engages in investor relations' activities by holding meetings with shareholders and investors.

[Reasons for Non-compliance with the Principles of the Corporate Governance Code]

The Company implements all principles of the Corporate Governance Code.

[Disclosure Based on the Principles of the Corporate Governance Code]

[Principle 1-4:Cross-shareholdings]cross-shareholding>

In light of avoiding risks resulting from stock price fluctuations and improving asset efficiency, the Company owns no listed shares except for the cases in which business relationships with invested companies and/or business cooperation with the Company are needed.

<_standards2c_ etc="" for="" voting="" rights="">

When executing the voting rights of cross-shareholdings, the Company evaluates and judges individually and specifically in light of maintaining and/or improving its corporate value, primarily by considering the business relationships, conditions of business cooperation with the Company, and mid- to long-term return on investment.

In cases where the Company owns listed shares, the Company also holds review meetings of concerned departments in order to decide voting rights and monitor the voting conditions. Concerning the appropriation of retained earnings, election of directors and auditors, director remuneration, changes in the articles of incorporation, organizational changes, issuance of new shares, anti-takeover measures and other important matters, the Company has also formulated its Basic Policy for the exercise of voting rights which stipulate the matters to be carefully assessed.

[Principle 1-7: Related Party Transactions]

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When transactions might be considered as applicable to those between the Company and director(s) and/or executive officer(s), the said person checks with the executive officer in charge of supervising compliance for individual cases in accordance with its internal rules. The Company also conducts investigations of related party transactions with directors, Audit & Supervisory Board Members, executive officers and senior managers to confirm the non-existence of any conflict-of-interest transactions every year.

Based on Companies Act and the Company's standards for matters to be referred to a meeting of the Board of Directors, when the director intends to engage in conflict-of-interest transactions, concerned transactions need to be approved by the Board of Directors. Important matters related to any conflict-of- interest transactions must be reported to the Board of Directors.

[Principle 2-6: Execution of Functions of a Corporate Pension Plan as the Asset Owner]

To ensure the steady payment of postretirement benefits to beneficiaries into the future, the Company manages its pension fund for the goal of securing the necessary comprehensive earnings within the scope of acceptable risks for a long period of time. Accordingly, the Company has developed a basic portfolio, consisting of an appropriate combination of stocks, bonds, and other financial instruments, after considering a long-term expected rate of return.

The Company has created the Pension and Postretirement Benefit Committee, consisting of the CFO, a representative of its labor union, an executive officer who supervises human resources, and other senior officers. Based on the Basic Policy related to Pension Fund Management, which was defined according to Japan's Ministry of Health, Labor and Welfare's guidelines, the Committee periodically and comprehensively evaluates and monitors whether or not the pension fund is being appropriately managed (e.g., to decide the need for reassessing the basic portfolio by evaluating the amount of gap between the expected rate of return and actual earnings), and whether there is any conflict of interest between the Company and the beneficiaries.

To take full advantage of the monitoring function concerning the institutions of payments for corporate pension, the Company not only works with fund management consultant(s), but also works to allocate qualified personnel with the necessary experience and professional capabilities and to develop such personnel in a planned manner.

[Principle 3-1] Full Disclosure]

Company objectives (e.g., business principles), business strategies and business plans
The cornerstone of Komatsu Group's management lies in commitment to pursue Quality and Reliability and to maximize its corporate value. The Company believes its corporate value is the total sum of trust given to the Company by society and all stakeholders.

The KOMATSU Way embodies the values that all employees of the Komatsu Group, including top management, must eternally inherit at their respective workplaces. The KOMATSU Way states in writing the Company's strengths, beliefs that support the strengths, basic mindset and perspectives toward working at the Company, and patterns (styles) of behavior, all of which have been built by its forerunners in the course of growth of the Company and based on its founder's guiding principles. The Company works to inherit and anchor it among all Komatsu Group employees.

Komatsu formulated its CSR themes in 2010, placing CSR activities as the ones to respond to social needs through core business, upon much discussion on defining initiatives that would both be of value to society and to Komatsu. Also, in the Mid-Term Management Plan announced in April 2019, we touch upon the growth strategy in our core business in relation with our CSR themes, and are striving for sustainable growth through a positive cycle of improving earnings and solving ESG issues. In addition, even in social contribution activities that do not aim at direct profitability, we strive to contribute to society in a way that draws on the strengths of our core business through initiatives aligned with our CSR themes.

Published annually, KOMATSU REPORT (integrated report) provides financial and non-financial information on the Company's efforts to realize continuous, long-term improvements in corporate value. Separate reports (Annual Securiteis Report and ESG Databook) are prepared and disclosed to provide detailed financial information and information on environmental and social initiatives.
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Management principles of the Company and The KOMATSU Way are explained on the Company's website below.

https://home.komatsu/en/company/basics-management/

The relationship between management and CSR of the Company is explained on the Company's website below.

https://home.komatsu/en/ir/library/annual/pdf/KMT_AR19E_Print.pdf#page=3

KOMATSU REPORT (Integrated Report) is explained on the Company's website below. https://home.komatsu/en/ir/library/annual/

< Business strategies and Business plans >

In April 2019, the Komatsu Group aiming for growth toward its 100th Anniversary (2021) and beyond, has started a new three-yearmid-term management plan (FY2019-FY2021) entitled "DANTOTSU Value - FORWARD Together for Sustainable Growth."

For this new mid-term management plan, we uphold three new strategies of 1) value creation by means of innovation, 2) growth strategies based on business reforms, and 3) structural reforms for growth. By making priority investment in growth areas based on the three pillars of growth strategies, we will strive for sustainable growth through a positive circle of improving earnings and solving ESG issues without being affected by changes in market demand. To promote the three pillars of growth strategies, we need to advance and enhance the level of DANTOTSU products, DANTOTSU service, and DANTOTSU solutions, for which we have continued to make efforts, at a faster speed, and realize safe, highly productive, smart and clean workplace of the future with customers by creating DANTOTSU value (ESG solutions through the creation of customer value and improvement of earnings). In this manner, we will help solve ESG issues through our core business by offering high-quality,high-performance products, service and solutions ensuring safety and reduction of environmental impact in response to climate change. We will strive for sustainable growth through linking every workplace and generate value through DANTOTSU with our global teams, customers, distributors, partners and communities.

In formulating the new mid-term management plan, we first decided on the future vision Komatsu should pursue from a long-term perspective and then drafted a roadmap toward this vision. Afterward, a backcasting approach was taken to examine what Komatsu should do in the present in order to move forward with this vision. Clarifying our vision enabled us to establish a better understanding of the strengths that can be exercised toward the realization of this vision, the existing businesses needing to be reinforced, and the lacking resources. The scenario based on this understanding was discussed exhaustively, and growth strategies and management targets were set based on this scenario.

The Komatsu Group will strive for sustainable growth through linking every workplace and generate value through DANTOTSU with our global teams, customers, distributors, partners and communities.

https://home.komatsu/en/company/pdf/2019_midmgtplan_e.pdf

2) Basic views and guidelines on corporate governance

The Company's basic view is the same as expressed in "1. Basic Views ".

The Company works to strengthen its corporate governance by complying with the idea and principles of the Corporate Governance Code as its basic policy.

3) Policies and procedures in determining the remuneration of the senior management and directors

They are the same as expressed in the "Disclosure of Policy on Determining Remuneration Amounts and Calculation Methods" to be described later.

Policies and procedures in the appointment of the senior management and the nomination of directors and Audit & Supervisory Board Members candidates
The Human Resource Advisory Committee, consisting of three (3) Outside Directors (one of them as Committee Chairperson), Chairperson of the Board and President, appoints the candidates for directors and auditors, and discusses appointment and discharge of executive officers and other senior management officers including President (CEO), and reports the results to the Board of Directors. Based on the report, the Board of Directors discusses and decides appointments of the candidates for directors and Audit & Supervisory Board Members as well as appointments and discharges of executive and other officers.
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5) Explanations with respect to the individual appointments and nominations based on (iv)

Career summaries of individual candidates for directors and Audit & Supervisory Board Members are shown in notices of Ordinary General Meetings of Shareholders and Annual Securities Report.

The reasons for appointing Outside Directors and Outside Audit & Supervisory Board Members are the same as expressed, respectively, in "II. Business Management Organization and Other Corporate Governance Systems regarding Decision-making, Execution of Business, and Oversight in Management", "Directors", "Outside Directors' Relationship with the Company (2)", and "Audit & Supervisory Board Members", "Outside Audit & Supervisory Board Members' Relationship with the Company (2)".

[Principle 4-1: Roles and Responsibilities of the Board (1)] Supplementary Principle 4-1-1

The Company specifies the standards for matters to be referred to a meeting of the Board of Directors which includes the base amount according to their importance to management and covers more matters than stipulated in laws and the Articles of Incorporation. Concerning the matters to be decided on other management levels, the Company stipulates the authority standards in the "Decision-making Authority Rule" of its internal rules, which clearly defines the job authorization of concerned positions.

[Principle 4-9: Independence Standards and Qualification for Independent Directors]

The standards for independence of Outside Directors and Audit & Supervisory Board Members of the Company are disclosed on the Company's website below. https://home.komatsu/en/ir/profile/corporate-governance/independence-criterion.html

[Principle4-11: Preconditions for Board and Audit & Supervisory Board Members Board Effectiveness ] Supplementary Principle 4-11-1

The Company strives to maintain transparency and soundness of management by appointing Outside Directors and Outside Audit & Supervisory Board Members, while limiting the members of the Board of Directors small so that discussions at the Board of Directors are more substantial. At present, the Board of Directors consists of eight (8) members, three (3) of whom are independent Outside Directors. Inside Directors are appointed from senior managers of different core functions of the Company, such as development, production, marketing, human resources, and accounting and finance, etc. The Company clearly identifies in light of on-going management tasks what specialization, knowledge and experience it expects to Outside Directors and Audit & Supervisory Board Members and then selects Outside Directors and Audit & Supervisory Board Members. When selecting the candidates, the Committee also considers diversity, as represented by gender, nationality and race. The Human Resource Advisory Committee, consisting of three

Outside Directors (one of them as Committee Chairperson), Chairperson of the Board and President, discusses appointment and discharge of senior management officers including President (CEO), and reports the results to the Board of Directors. Based on the report, the Board of Directors discusses and decides appointments of the candidates for directors and Audit & Supervisory Board Members as well as appointments and discharges of executive and other officers.

Supplementary Principle 4-11-2

In the event that Director or Audit & Supervisory Board Member, (excluding Outside Directors or Outside Audit & Supervisory Board Members) concurrently assumes office as executive officers of a listed company other than the Company, the Director or Audit & Supervisory Board Member is required to get approval of the Board of Directors based on the standards for matters to be referred to a meeting of the Board of Directors. State of cross-assumption of office is described in the Company's notices of ordinary shareholders meetings and Annual Securities Report.

Supplementary Principle 4-11-3

As in the case of the previous year, the Company assessed the effectiveness of the Board of Directors for FY2019 in compliance with the corporate governance code.

Process of analysis and assessment

In its meeting, the Board of Directors discussed the assessment methods for effectiveness in the current fiscal year based on the assessment methods applied in the previous year and the results thereof as well as Japan's corporate governance code which was revised in 2018. The Company conducted a survey after considering

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in what ways the Board of Directors should be effective. Applicable to all Directors and Audit & Supervisory Board Members, the survey concerned (1) the composition of the Board of Directors, (2) the contents of agendas, (3) straightforward and meaningful discussions, (4) the provision of information and presentation of agendas by executives, (5) the structure in which important matters are reported, proposed and followed up,

the succession plans for CEO, and (7) other matters. The Company received replies from all of those surveyed. Based on the survey findings, Outside Directors and Auditors further engaged in discussions, and they reported the results thereof to the Board of Directors, analyzed and assessed the effectiveness of the Board of Directors, and discussed the matters for improvement.

Outline of the results

The assessment shows a generally high level of achievement for each item and confirms that there were no serious problems concerning the effectiveness.

The Company received excellent evaluations for factors, such as the following: the timely sharing of issues, problems, and other information provided in monthly reports by the President himself in Board meetings, the fact that Board members discussed the directions of overall business multiple times from a variety of viewpoints, and the fact that Board members followed up the conditions of resolutions which were regularly reported.

With respect to the conducting of Board meetings, there were a few suggestions for improvement. The Company will make those improvements and work to make the Board of Directors further effective in the future.

[Principle 4-14: Director and Audit & Supervisory Board Members Training] Supplementary Principle: 4-14-2

The Company explains to Outside Directors and Audit & Supervisory Board Members its business, financial position, organization and the like at the time of their assuming office. The Company trains inside Directors and Audit & Supervisory Board Members as needed before they assume office. The Company also provides continuous training to Directors and Audit & Supervisory Board Members as needed even after they have assumed office.

[Principle 5-1: Policy for Constructive Dialogue with Shareholders]

Policies on operations and efforts to promote constructive dialogue with shareholders and investors are described as follows:

The Company engages in fair and timely disclosure of information to all stakeholders, including shareholders and investors, and emphasizes the importance of direct communication by the President.
The Company appoints the Director or Senior Executive Officer in charge of supervising investor relations (IR), defines the departments responsible for IR activities, and promotes collaborations among all related departments.
The Company works to endeavor to identify its shareholder Ownership structure and create a means of dialogue other than individual meetings.
(Investor briefings of business results, information for shareholders and investors on the website, meeting and plant tours with individual shareholders, meeting with individual and institutional investors in Japan and abroad, etc.)
The President and Senior Executive Officer in charge of supervising IR periodically reports on the state of dialogue to the Board of Directors, executive officers and related departments.
The Company stipulates the internal rule to control insider information and sets the Information Disclosure Committee which checks on the contents of statutory disclosures and controls insider information.

2. Capital Structure

	Foreign Shareholding Ratio		More than 30%

[Status of Major Shareholders]

	Name / Company Name			Number of Shares Held	Shareholding Ratio (%)
	The Master Trust Bank of Japan,	Ltd. (Trust	75,533,800	7.99
	Account)
	Japan Trustee Services Bank, Ltd. (Trust Account)	45,657,100	4.83
		- 5 -

STATE STREET BANK AND TRUST		32,244,280	3.41
COMPANY 505223
(standing proxy: Mizuho Bank, Ltd., Settlement &
Clearing Services Division)
Taiyo Life Insurance Company			27,200,716	2.87
Nippon Life Insurance Company			26,626,423	2.81
(standing proxy: The Master Trust Bank of Japan,
Ltd.)
Japan Trustee Services Bank, Ltd. (Trust Account	22,815,000	2.41
7)
Japan Trustee Services Bank, Ltd. (Trust Account	18,449,400	1.95
5)
Sumitomo Mitsui Banking Corporation		17,835,711	1.88
JP Morgan Chase Bank 385151			15,951,084	1.68
(standing proxy: Mizuho Bank, Ltd., Settlement &
Clearing Services Division)
THE BANK OF NEW YORK MELLON AS	14,237,077	1.50
DEPOSITARY BANK	FOR	DEPOSITARY
RECEIPT HOLDERS
(standing proxy: Sumitomo Mitsui Banking
Corporation)

	Controlling Shareholder	(except	for Parent	-
	Company)

	Parent Company			None

Supplementary Explanation

Conditions as of March 31, 2020 are described above.
The figures of "Shareholding ratio (excluding treasury stock) (%)" in the table are rounded down to the second decimal place.
27,479,956 shares of treasury stock held by the Company are excluded from the list.
All shares held by The Master Trust Bank of Japan, Ltd. (Trust Account), Japan Trustee Services Bank, Ltd. (Trust Account), Japan Trustee Services Bank, Ltd. (Trust Account 7) and Japan Trustee Services Bank, Ltd. (Trust Account 5) are held through trusts.
The Change Report No.1 pertaining to Report of Possession of Large Volume relating to the Company's shares was filed in the joint names of BlackRock Japan Co., Ltd. and nine joint holders at the date of February 21, 2017 under the Financial Instruments and Exchange Act of Japan. However, the description in the table is as the same with that in the shareholders' list of the Company and does not reflect the information in the Report, because the Company is not able to confirm the actual state of shareholdings as of March 31, 2020.
The Change Report No.2 pertaining to Report of Possession of Large Volume relating to the Company's shares was filed in the joint names of Nomura Securities Co., Ltd. and two joint holders at the date of June 19, 2019 under the Financial Instruments and Exchange Act of Japan. However, the description in the table is as the same with that in the shareholders' list of the Company and does not reflect the information in the Report, because the Company is not able to confirm the actual state of shareholdings as of March 31, 2020.
The Change Report No.1 pertaining to Report of Possession of Large Volume relating to the Company's shares was filed in the joint names of Capital Research and Management Company at the date of March 6, 2020 under the Financial Instruments and Exchange Act of Japan. However, the description in the table is as the same with that in the shareholders' list of the Company and does not reflect the information in the Report, because the Company is not able to confirm the actual state of shareholdings as of March 31, 2020.

3. Corporate Attributes

Listed Stock Market and Market Section		Tokyo Stock Exchange
	First Section

		- 6 -

	Fiscal Year-End		March
	Type of Business		Machinery
	Number of Employees (consolidated) as of the		More than 1000
	End of the Previous Fiscal Year

	Sales (consolidated) as of the End of the		More than JPY1 trillion
	Previous Fiscal Year

	Number of Consolidated Subsidiaries as of the		From 100 to less than 300
	End of the Previous Fiscal Year

Policy on Measures to Protect Minority Shareholders in Conducting Transactions with Controlling Shareholder
-
Other Special Circumstances which may have Material Impact on Corporate Governance

None

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II. Business Management Organization and Other Corporate Governance Systems regarding Decision-making, Execution of Business, and Oversight in Management

1. Organizational Composition and Operation

	Organization Form			Company with Audit & Supervisory Board

[Directors]

	Maximum Number of Directors Stipulated	in	15
	Articles of Incorporation

	Term of Office Stipulated in	Articles	of	1 year
	Incorporation

	Chairperson of the Board			Company Chairperson
	Number of Directors			8
	Number of Outside Directors			3
	Number of Independent Directors			3

Outside Directors' Relationship with the Company (1)

Name

Attribute

Relationship with the Company*

Makoto Kigawa

From another company

Takeshi Kunibe

From another company

△

Arthur M, Mitchell

Lawyer

categories for "Relationship with the Company"
"○" when the director presently falls or has recently fallen under the category; "△" when the director fell under the category in the past
"●" when a close relative of the director presently falls or has recently fallen under the category; "▲"when a close relative of the director fell under the category in the past
1. Executive of the Company or its subsidiaries
2. Non-executivedirector or executive of a parent company of the Company
3. Executive of a fellow subsidiary company of the Company
4. A party whose major client or supplier is the Company or an executive thereof
5. Major client or supplier of the listed company or an executive thereof
6. Consultant, accountant or legal professional who receives a large amount of monetary consideration or other property from the Company besides compensation as a director/Audit & Supervisory Board Member
7. Major shareholder of the Company (or an executive of the said major shareholder if the shareholder is a legal entity)
8. Executive of a client or supplier company of the Company (which does not correspond to any of d, e, or f) (the director himself/herself only)
9. Executive of a company, between which and the Company outside directors/Audit & Supervisory Board Members are mutually appointed (the director himself/herself only)
10. Executive of a company or organization that receives a donation from the Company (the director himself/herself only)
11. Others

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Outside Directors' Relationship with the Company (2)

Designation as

Supplementary

Name

Independent

Explanation of

Reasons of Appointment

Director

the Relationship

Having

served

Representative

Director of Yamato Holdings, Co., Ltd.

and Yamato Transport Co., Ltd., Mr.

Makoto

Kigawa

has

considerable

knowledge and rich experience in the

business world, including use of ICT,

business model innovation and so forth,

and engaging in strategic and advanced

corporate management, among others.

Utilizing this knowledge and experience,

his recommendations

concerning

the

overall management of the Company are

expected to contribute to appropriate

monitoring of the management strategies

of the Company, and to the enhancement

of the Company's medium-andlong-term

corporate value.

Therefore, the Company appointed him

as an Outside Director.

Mr. Makoto Kigawa is unlikely to have a

conflict of interest with general

shareholders.

For

this

reason,

the

Company considers him as an

Independent Director and has submitted

the relevant notification to the Tokyo

Makoto Kigawa

○

Stock Exchange.

Mr. Kigawa held the positions of

Representative

Managing

Director,

Representative Director

and

Managing

Executive

Officer,

Representative

Director and Senior Managing Executive

Officer,

Representative

Director

and

Executive

Officer,

Representative

Director,

President

and

Executive

Officer, and Chairman of the Board and

Representative

Director of

Yamato

Holdings Co., Ltd from November 2005

to April 2018. However, he currently has

no involvement with the execution of

business at Yamato Holdings Co., Ltd.

The Company and its consolidated

subsidiaries have

transactions

with

Yamato

Holdings

Co.,

Ltd.'s

subsidiaries, including Yamato Transport

Co., Ltd. for payment of transportation

expenses, etc. However, the amount of

the payment is less than 0.1% of sum of

the consolidated cost of sales and selling,

general and administrative expenses of

the Company and its consolidated

subsidiaries for the most recent fiscal

year. In

addition,

the

amount of

the

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payment is less than 0.1% of the consolidated operating revenue of Yamato Holdings Co., Ltd. for the most recent fiscal year.

Takeshi Kunibe has considerable knowledge and rich experience in the business world, including the field of finance and in group company management, etc., having served successively as Representative Director, President and Chief Executive Officer of SMBC, as well as Representative Director and President, Director President and Representative Executive Officer, and Chairman of the Board of SMFG.

Utilizing this knowledge and experience, his recommendations concerning the overall management of the Company are expected to contribute to sustaining and improving transparency and soundness of management as well as enhancing corporate governance.

Therefore, the Company appointed him as an Outside Director.

Mr. Takeshi Kunibe is unlikely to have a conflict of interest with general shareholders. For this reason, the Company considers him as an

Independent Director and has submitted

Takeshi Kunibe○the relevant notification to the Tokyo Stock Exchange.

Mr. Kunibe serves as Chairman of the Board of Sumitomo Mitsui Financial Group, Inc. and served as Representative Director, President and Chief Executive Officer of Sumitomo Mitsui Banking Corporation from April 2011 to April

2017． However, more than three (3)

years have passed since his retirement from Sumitomo Mitsui Banking Corporation, and he currently has no involvement with the execution of business at the said bank. Because the

Company and its consolidated subsidiaries have several lenders and the said bank is only one lender among the several lenders of the Company and its consolidated subsidiaries, the said bank is not a business partner which has a significant impact on the Company's decision making. As of the end of the most recent fiscal year, the balance of loans from the said bank was JPY 145.2billion, which was 14.4% of the total amount of loans.

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Mr. Arthur M. Mitchell has worked for

many years as a New York state attorney

and foreign law attorney in Japan, and

has considerable knowledge and rich

experience in the field of international

legal affairs.

Utilizing this knowledge and experience,

his

recommendations concerning

the

overall management of the Company are

expected to contribute to the mitigation

and avoidance of risk in the Company's

Arthur M, Mitchell

○

global business operations, and to the

enhancement of the Company's medium-

and long-term corporate value.

Therefore, the Company appointed him

as an Outside Director.

Mr. Arthur M. Mitchell is unlikely to

have a conflict of interest with general

shareholders.

For this reason, the Company considers

him as an Independent Director and has

submitted the relevant notification to the

Tokyo Stock Exchange.

Voluntary Establishment

of Committee(s)

Corresponding to Nomination Committee or

Established

Remuneration Committee

Committee's Name, Composition, and Attributes of Chairperson

Committee

Corresponding

Committee

Corresponding

Nomination Committee

Remuneration Committee

Committee's Name

Human

Resource

Advisory

Compensation Advisory Committee

Committee

All Committee Members

Full-time Members

Inside Directors

Outside Directors

Outside Experts

Other

Chairperson

Outside Directors

Outside Experts

Supplementary Explanation

The Human Resource Advisory Committee, consisting of three (3) Outside Directors (one of them as Committee Chairperson), Chairperson of the Board and President, appoints the candidates for directors and auditors, and discusses appointment and discharge of executive officers and other senior management officers including President (CEO), and reports the results to the Board of Directors. When selecting the candidates, the Committee also considers diversity, as represented by gender, nationality and race. Based on the report, the Board of Directors discusses and decides appointments of the candidates for directors and Audit & Supervisory Board Members as well as appointments and discharges of executive and other officers.

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[Members of the Human Resource Advisory Committee] Chairperson: Masayuki Oku. Members: Mitoji Yabunaka, Makoto Kigawa, Tetsuji Ohashi and Hiroyuki Ogawa. (As of March 31, 2020)

In an effort to maintain an objective and transparent remuneration system, the policy and levels of remuneration for Directors and Audit & Supervisory Board Members of the Company are deliberated by the Compensation Advisory Committee, which consists of four (4) external members (one (1) outside expert, one

(1) Outside Director and two (2) Outside Audit & Supervisory Board Members) and one (1) internal member. Taking its reports and recommendations into consideration, the remuneration for Directors is determined by the Board of Directors, and the remuneration for Audit & Supervisory Board Members is determined by discussions by the Audit & Supervisory Board Members, respectively, within the range previously determined by resolution of the General Meeting of Shareholders.

Similarly, the Audit and Supervisory Board discusses and decides the amounts for Audit & Supervisory Board Members. The chairperson of the Committee is elected by mutual vote from the four (4) external members every year.

[Members of the Compensation Advisory Committee] Chairperson: Tsuguoki Fujinuma. Members: Masayuki Oku, Hirohide Yamaguchi, Eiko Shinotsuka, and Tetsuji Ohashi. (As of March 31, 2020)

[Audit & Supervisory Board Members]

Establishment of Audit & Supervisory Board	Established
Maximum Number of Audit & Supervisory
Board Members Stipulated in Articles of	5
Incorporation
Number of Audit & Supervisory Board Members	5

Collaboration between Audit & Supervisory Board Members, the Independent Public Accounting Firm and

the Internal Audit Departments

[Collaboration between audits by Audit & Supervisory Board Members and accounting audit]

To complete the audit process effectively and efficiently, Audit & Supervisory Board Members exchange opinions with the contracted independent public accounting firm concerning audit policies, audit items to be focused upon and audit approaches. Audit & Supervisory Board Members also observe the independent public accounting firm, when the firm audits the Company's business bases and subsidiaries, and Audit & Supervisory Board Members and the independent public accounting firm hold meetings to exchange audit information as needed during a given fiscal year. These exchanges lead to better collaboration between Audit

Supervisory Board Members and the independent public accounting firm and a more expeditious audit process. In addition, Audit & Supervisory Board Members receive reports of the independent public accounting firm's review at the end of the first, second and third quarters, and review and confirm important financial statement matters at the end of the second quarter and the fiscal year-end. Furthermore, Audit & Supervisory Board Members evaluate the methods and results of the independent public accounting firm's review and audit by listening to their summaries and receiving their review and audit reports at the meetings of the Audit & Supervisory Board Members.
The Audit & Supervisory Board exchanges information with the accounting firm as needed, and confirms the independence of the accounting firm concerning its service to the Company and its consolidated subsidiaries.

[Collaboration between audits by Audit & Supervisory Board Members and internal audits]

Audit & Supervisory Board Members observe audits by the Internal Audit Department, form their own audit opinions, and give advice and recommendations to the Internal Audit Department. In addition to the audit results reported by the Internal Audit Department to the Audit & Supervisory Board, the Audit & Supervisory Board closely maintains substantive cooperation with the Internal Audit Department, such as receiving various pieces of information relevant to their duties on a routine basis.

[Collaboration between internal audits and accounting audits]

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In the assessment of internal control over financial reporting, etc. implemented by the Internal Audit Department, the Independent Public Accounting Firm collaborates with the Internal Audit Department as needed by exchanging opinions and sharing information.

[Relationship between audits by Audit & Supervisory Board Members, accounting audits and internal audits, and the Internal Control Department]

In their respective audit procedures, Audit & Supervisory Board Members, the Independent Public Accounting Firm and the Internal Audit Department share information with the accounting and finance departments and other relevant internal control departments as needed, and exchange opinions on risk assessment, effectiveness of internal control and other matters.

	Appointment of Outside Audit & Supervisory		Appointed
	Board Members

	Number of Outside Audit & Supervisory Board		3
	Members

	Number of Independent Audit & Supervisory		3
	Board Members

Outside Audit & Supervisory Board Members' Relationship with the Company (1)

Name

Attribute

Relationship with the Company*

Hirohide Yamaguchi

From another company

Eiko Shinotsuka

Academic

Kotaro Ohno

Lawyer

Categories for "Relationship with the Company"
"○" when the Audit & Supervisory Board Member presently falls or has recently fallen under the category; "△" when the Audit & Supervisory Board Member fell under the category in the past
"●" when a close relative of the Audit & Supervisory Board Member presently falls or has recently fallen under the category;
1. "▲"when a close relative of the Audit & Supervisory Board Member fell under the category in the past
2. Executive of the Company or its subsidiary
3. Non-executivedirector or accounting advisor of the Company or its subsidiaries
4. Non-executivedirector or executive of a parent company of the Company
5. Audit & Supervisory Board Member of a parent company of the Company
6. Executive of a fellow subsidiary company of the Company
7. A party whose major client or supplier is the Company or an executive thereof
8. Major client or supplier of the Company or an executive thereof
9. Consultant, accountant or legal professional who receives a large amount of monetary consideration or other property from the Company besides compensation as an Audit & Supervisory Board Member
10. Major shareholder of the Company (or an executive of the said major shareholder if the shareholder is a legal entity)
11. Executive of a client or supplier company of the Company (which does not correspond to any of f, g, or h) (the Audit & Supervisory Board Member himself/herself only)
12. Executive of a company, between which and the Company outside directors/Audit & Supervisory Board Members are mutually appointed (the Audit & Supervisory Board Members himself/herself only)
13. Executive of a company or organization that receives a donation from the Company (the Audit & Supervisory Board Member himself/herself only)
14. Others

Outside Audit & Supervisory Board Members' Relationship with the Company (2)

- 13 -

Designation

Independent

Supplementary

Name

Audit

Explanation of

Reasons of Appointment

Supervisory

the Relationship

Board Member

Having served as Deputy Governor of

the Bank of Japan, Mr. Hirohide

Yamaguchi

has

been

active

internationally in the financial field and

has considerable insight and rich

experience in the finance world.

Utilizing this insight and experience, the

Company expects him to execute his

Hirohide Yamaguchi

○

duties as Outside Audit & Supervisory

Board Member from the standpoint of a

specialist.

Therefore,

the

Company

appointed him as an Outside Audit &

Supervisory Board Member.

Mr. Hirohide Yamaguchi is unlikely to

have a conflict of interest with general

investors. For this reason, the Company

considered him as an Independent Audit

& Supervisory Board Member.

After engaging in research in economic

fields at Japan Center for Economic

Research,

Ms.

Eiko

Shinotsuka,

addition to professor emeritus at

Ochanomizu

University,

has

the

experience of having served as a member

of the Policy Board of the Bank of Japan,

Chairperson

of the

Cooperation

Conference for the Gender Equality

Promotion of the Cabinet Office,

Executive Director of the Japan Legal

Support Center and Commissioner of the

National Personnel Authority, etc. and

Eiko Shinotsuka

○

she

has held numerous other official

posts in public office up until now.

Accordingly, she possesses wide-ranging

knowledge and abundant experience, the

Company expects her to execute her

duties as Outside Audit & Supervisory

Board Member from the standpoint of a

specialist.

Therefore,

the

Company

appointed her as an Outside Audit &

Supervisory Board Member.

Ms. Eiko Shinotsuka is unlikely to have

a conflict of interest with general

investors. For this reason, the Company

considered her as an Independent Audit

& Supervisory Board Member.

Having served as Prosecutor-General of

the Supreme Public Prosecutors Office,

Kotaro Ohno

○

Mr. Kotaro Ohno has rich experience in

the

legal

profession.

Utilizing

this

experience, the Company expects him to

execute his duties as Outside Audit &

- 14 -

Supervisory Board Member from the standpoint of a specialist. Therefore, the Company appointed him as an Outside Audit & Supervisory Board Member.

Although Mr. Ohno has no experience in participating in the management of other companies directly, the Company judged that he would be able to execute the duties of Outside Audit & Supervisory Board Member adequately because of the reason above.

Mr. Kotaro Ohno is unlikely to have a conflict of interest with general shareholders and is considered as an Independent Audit & Supervisory Board Member.

[Independent Directors/Audit & Supervisory Board Members]

Number of Independent Directors/Audit &

Supervisory Board Members

Matters relating to Independent Directors/Audit & Supervisory Board Members

The Board of Directors of the Company has defined the standards for the independence of Outside Directors and Outside Audit & Supervisory Board Members.

Outside Directors Makoto Kigawa, Takeshi Kunibe and Arthur M. Mitchell and Outside Audit & Supervisory Board Members Hirohide Yamaguchi, Eiko Shinotsuka and Kotaro Ohno are unlikely to have a conflict of interest with general investors, because there are no special interests between them and the Company. Accordingly, they are considered to be Independent Directors or Audit & Supervisory Board Members.

[Incentives]

Incentive Policies for Directors	Performance-linked Remuneration

Supplementary Explanation

To the Directors, excluding the Outside Directors, the Company shall pay two-thirds (2/3) of the total amount of performance-based remuneration linked to the Company's consolidated performance for a single year in the form of cash as Directors' bonuses. Concerning the remaining one-third (1/3) of the aforementioned total amount as well as the performance-based remuneration which will reflect the degree of achievement of the targets raised in the mid-term management plan, the Company shall offer stock acquisition rights in order to foster the same perspective on corporate value with the shareholders and consequently clarifying their incentive to enhance the long-term corporate value of the Company.

Recipients of Stock Options

Supplementary Explanation

- 15 -

None

[Director Remuneration]

Disclosure of Individual Directors'

Remuneration

Supplementary Explanation

Selected Directors

Remunerations related to amounts of remunerations for Directors and Audit & Supervisory Board Members [151th term (April 1, 2019 - March 31, 2020)]

						Amount of Remuneration Paid

		Number	Monetary Remuneration		Non-monetary
		of		Remuneration

	Classification	Persons		Bonus			Stock-Based
	Paid	Basic			Remuneration
		(Performance
		(Persons	Remuneration			(Performance-
		-Based	Total
		)	(Fixed		Based
		Remuneratio
			Remuneration)			Remuneration
				n)			)

Director	10	JPY 399 mil	JPY130 mil	JPY 529 mil		JPY 147 mil	JPY676 mil

	(Outside Director	3	JPY 54 mil	-	JPY 54 mil		-	JPY 54 mil
	included above)

Audit & Supervisory	5	JPY 141 mil	-	JPY 141 mil		-	JPY 141 mil
Board Member

	(Outside Audit &
	Supervisory	3	JPY 54 mil	-	JPY 54 mil		-	JPY 54 mil
	Board Member

	included above)
Total	15	JPY 540 mil	JPY 130 mil	JPY 670 mil		JPY 147 mil	JPY 817 mil

	(Outside Director
	and Outside
	Audit &	6	JPY 108 mil	-	JPY 108 mil		-	JPY 108 mil
	Supervisory

	Board Member
	included above)

Notes:

As of the end of the fiscal year ended March 31, 2020, there are eight (8) Directors (three (3) of whom are Outside Directors) and five (5) Audit & Supervisory Board Members (three (3) of whom are Outside Audit & Supervisory Board Members). However, the numbers and amounts in the table include that for two (2) Directors who retired as of the close of the 150th Ordinary General Meeting of Shareholders in June 2019.
It was resolved at the 149th Ordinary General Meeting of Shareholders, held in June 2018, that the maximum amount of remuneration to be paid to Directors per year, which is the total of basic remuneration and bonus in cash, shall not exceed JPY 1.5 billion (of which, payment to the Outside Directors shall not exceed JPY 100 million per year) and that the maximum amount of remuneration to be paid to Audit & Supervisory Board Members shall not exceed JPY 0.2 billion. Furthermore, in the same Ordinary General Meeting of Shareholders, the limit for remuneration, etc. related to the restricted stock granted to internal Directors as stock-based remuneration was decided as an amount that shall not exceed JPY 360 million annually for Stock-Based Remuneration A linked to the Company's consolidated performance for a single year and as an amount that shall not exceed JPY 180 million annually for Stock-Based Remuneration B linked to the performance of the Mid-Term Business Plan. Note that each of the aforementioned remuneration amounts resolved by the
- 16 -

shareholders does not include the employee salary portion of remuneration to Directors concurrently serving as employees.

Stock-basedremuneration represents the amounts of expense allocated as remuneration for Directors which are not monetary in accounting for the fiscal year ended March 31, 2020. Specifically, the total amount of remuneration expenses for stock-based remuneration in the fiscal year ended March 31, 2020 stated above comprises (1) the amount of expense recorded as remuneration for the fiscal year ended March 31, 2020 paid by newly issuing shares as restricted stock compensation with the pay-in date of September 2, 2019, following the resolution passed at the Board of Directors meeting held on July 12, 2019 (Japan time), and (2) the amount of expense, recorded as the estimate of the payment in the form of restricted stock compensation of Stock-Based Remuneration A, for which payment level was determined by the operating results of the fiscal year ended March 31, 2020.
The portions of salaries as employees for Directors concurrently serving as employees are not paid.
Amounts of less than JPY one (1) million are rounded to the nearest million yen.

Remunerations related to individually disclosed remunerations, etc. for Directors [the 151th term (April 1, 2019

- March 31, 2020)]

Hiroyuki Ogawa, Director: JPY190 million (including bonus and stock acquisition rights)

Tetsuji Ohashi, Director: JPY171 million (including bonus and stock acquisition rights)

Notes:

Stock-basedremuneration represents the amount of expense allocated as remuneration for Directors which are not monetary in accounting for the fiscal year ended March 31, 2020. Specifically, the total amount of remuneration expenses for stock-based remuneration in the fiscal year ended March 31, 2020 stated above comprises (1) the amount of expense recorded as remuneration for the fiscal year ended March 31, 2020 paid by newly issuing shares as restricted stock compensation with the pay-in date of September 2, 2019, following the resolution passed at the Board of Directors meeting held on July 12, 2019 (Japan time), and (2) the amount of expense, recorded as the estimate of the payment in the form of restricted stock compensation
of Stock-Based Remuneration A, for which payment level was determined by the operating results of the fiscal year ended March 31, 2020.
The portions of salaries as employees for Directors concurrently serving as employees are not paid.
Amounts of less than one (1) million yen are rounded to the nearest million yen.

Policy on Determining Remuneration Amounts

and Calculation Methods

Established

Disclosure of Policy on Determining Remuneration Amounts and Calculation Methods

Outside Director and two (2) Outside Audit & Supervisory Board Members) and one (1) internal member. Taking its reports and recommendations into consideration, the remuneration for Directors is determined by the Board of Directors, and the remuneration for Audit & Supervisory Board Members is determined by discussions by the Audit & Supervisory Board Members, respectively, within the range previously determined by resolution of the General Meeting of Shareholders.
With regards to remuneration levels, their comparison by position at other key, globally active manufacturers in Japan is made by the Compensation Advisory Committee and is reflected in its reports and recommendations.
The remuneration for Directors excluding the Outside Directors (hereinafter "Internal Director") comprises basic remuneration (fixed remuneration) and performance-based remuneration linked to the Company's consolidated performance for a single fiscal year (bonus in cash and the Stock-Based Remuneration A) as well as the performance-based remuneration (Stock-Based Remuneration B) that will reflect the degree of achievement of the targets raised in the mid-term management plan, so that it will further contribute to the enhancement of the medium- and long-term corporate value of the Company, by linking the remuneration.
The remuneration for Outside Directors only consists of basic remuneration (fixed remuneration) designed to
- 17 -

support their role to make recommendations with respect to the overall management of the Company as a member of the Board of Directors.

Furthermore, the remuneration for Audit & Supervisory Board Members only consists of basic remuneration (fixed remuneration) designed to support their independent position with authority to audit the execution of duties by Directors without getting fettered by the movements of corporate performance of the Company.

The retirement allowance system for Directors and Audit & Supervisory Board Members was terminated as of June 2007.

[System of Remuneration for Internal Director]

Basic remuneration	Performance-Based Remuneration for a Single	Performance-Based
(Fixed Remuneration)		Year	Remuneration Linked to
	(Monthly Remuneration x 0 ~ 24 months)	Performance of Mid-
				Term Management Plan
				(Monthly Remuneration
				x 0 ~ 3 months)
Monthly Remuneration	Bonus in Cash		Stock-Based	Stock-Based
x 12 months	(2/3, in principle)	Remuneration A	Remuneration "B"
	[up to the equivalent of	(1/3, in principle)	Restricted Stocks
	12	months'	Restricted Stock
	remuneration]

a) Performance-based remuneration for a single year

The total amount paid for performance-based remuneration shall be calculated each year by evaluating the single-fiscal-year consolidated performance against the basic indicators, comprising consolidated ROE*1, consolidated ROA*2 and the consolidated operating income ratio, using the respective percentages indicated in the table below as benchmarks, and making adjustments for growth (growth rate of consolidated sales).

The Compensation Advisory Committee decided on the remuneration standard for FY2019 based on the results of 8.6% for consolidated ROE, 6.1% for consolidated ROA, 10.3% for consolidated operating income ratio, and (10.3)% for rate of sales growth.

Such valuation indicators may be changed in the future by a resolution of the Board of Directors.

[Indicators with respect to single-fiscal-year consolidated performance-based remuneration]

	Indicator	Ratio
Basic Indicators	Consolidated ROE*1	50%
	Consolidated ROA*2	25%
	Consolidated operating income	25%
	ratio
Adjustment Indicators	Adjustment according to growth rate of consolidated sales

*1 ROE=Net income attributable to Komatsu Ltd. for the year/[(Komatsu Ltd. shareholders' equity at the beginning + Komatsu Ltd. shareholders' equity at the end of the fiscal year)/2]

*2 ROA=Income before income taxes and equity in earnings of affiliated companies/[(total assets at the beginning + total assets at the end of the fiscal year)/2]

With regards to the single-fiscal-year consolidated performance-based remuneration levels, the upper limit shall be twice the basic remuneration

(12 × monthly remuneration) of the Director, and the lower limit shall be zero (0) payment (remuneration in this case will comprise only the basic remuneration).

The equivalent of two-thirds (2/3) of the total paid amount of performance-based remuneration linked to the Company's consolidated performance for a single year shall be paid in the form of bonus in cash and the amount remaining after deducting the bonus in cash shall be paid by granting restricted stock as stock-based remuneration in order to further promote the same perspective on corporate value with the shareholders (Stock-Based Remuneration A); provided, however, that for the bonus in cash, the upper limit shall be the equivalent of a 12 month portion of the monthly remuneration, and for any amount exceeding 12 months, the Company shall pay the Stock-BasedRemuneration A in substitution for the bonus in cash. Note that as a

- 18 -

general rule, concerning the Stock-Based Remuneration A, the restriction of transfer of the shares will be lifted after three years from delivery.

b) Performance-Based Remuneration Linked to Performance of Mid-Term Management Plan

The Company will pay Internal Directors the equivalent of a three-month portion of monthly remuneration every fiscal year as remuneration linked to the period of the Company's Mid-Term Management Plan by granting restricted stock as stock-based remuneration (Stock-Based Remuneration B). In deciding Stock- Based Remuneration B, after the expiry of the period of the mid-term management plan, the number of shares on which to lift transfer restrictions (within range of 0-100%) will be decided based on the achievement of the management targets of the Mid-Term Management Plan presented in the following table and as a general rule, the restriction of transfer on the shares will be lifted after three years from delivery.

If a new mid-term management plan is prepared in the future, the management indicators and management targets as shown in the table below may be changed by a resolution of the Board of Directors.

[Management Targets, Valuation Bases and Valuation Indicators in Mid-Term Management Plan (FY2019- FY2021)]

Management Indicators	Management Targets
Growth	Sales growth rate	Growth rate above the industry's
		average*1
Profitability	Operating income ratio	Industry's top-level operating income
		ratio*1
Efficiency	ROE	ROE of 10% or higher
Financial Position	Net debt-to-equity ratio*2	Industry's top-level financial position
Retail finance business	ROA	ROA 1.5% to 2.0%
	Net debt-to-equity ratio*2	5.0 or under for net debt-to-equity ratio*2
ESG	Reduction	CO2 emissions: Decrease by 50% in 2030
	of environmental impact	from 2010
		Renewable energy use: Increase to 50% of
		total energy
		use in 2030
	Evaluation	Selected for DJSI*3 (World & Asia
	by external organizations	Pacific) and for CDP*4 A-list (Climate
		Changes and Water Risk), etc.

*1 Relative comparison with domestic and foreign major competitors in the same industry.

*2 Net debt-to-equity ratio = (Interest-bearing debt - Cash and cash equivalents - Time deposits) / Shareholders'

equity of the Company

*3 Dow Jones Sustainability Indices: SRI indices generated by S&P Dow Jones of the United States and RobecoSAM of Switzerland.

*4 International non-profit organization which advocates the reduction of greenhouse gas emissions and protection of water resources and forests by companies and governments.

[Supporting System for Outside Directors and/or Audit & Supervisory Board Members]

As general rule, the Company provides materials for Board of Directors to Outside Directors and Outside Audit & Supervisory Board Members in advance of the meetings so that they have sufficient time to review the matters that are to be discussed. With respect to matters that may be of particular importance, the Board of Directors discusses them at the Board of Directors prior to the Board of Directors where such matters are scheduled for resolution. In this manner, the Company ensures that the Directors have sufficient time to review the matters before decisions are made and that they will have an opportunity to consider the points noted in earlier discussions before deciding upon such matters.

- 19 -

[Conditions of Retired Representative Directors, etc.]

Names and other information concerning Councilors and Advisers who were former Representative Directors,

etc.

Name	Positions	Business	Working form	Date of	The terms
			and terms(Full-	retirement from	of office
			time, Part-time,	executive
			Remuneration,	positions
			etc.)
Kunio Noji	Councilor and	Public-interest	Working	March 31, 2013	exist
	Senior	activities	form:Full time
	Adviser*1	outside of the	work
		company	Remuneration:
			exist
Masahiro	*2	No	Remuneration:	June 22, 2007	―
Sakane		consignment	None
Tetsuya	*2	No	Remuneration:	June 29, 1995	―
Katada		consignment	None

Number of Retired Representative Directors,

etc.

[Other matters]

[Remarks]

*1 Mr. Noji's activities outside of the company follow.

Chairperson, Committee on the System of Evaluating Incorporated Administrative Agencies, Ministry of Internal Affairs and Communications
Member, Cabinet Office University Support Forum PEAKS Member
- PEAKS：Leaders' Forum on Promoting the Evolution of Academia for Knowledge Society
President, The Flower Association of Japan

*2 Mr.Sakane and Mr. Katada are given the titles only, and no consignments are offered.

2. Matters on Functions of Business Execution, Auditing, Oversight, Nomination and Remuneration Decisions (Overview of Current Corporate Governance System)

Overview of Current Corporate Governance System (the reference material at the end of this Report: see the schematic diagram.)
The Company positions the Board of Directors as the core of corporate governance. To enhance the effectiveness of the Board, the Company has worked to improve the Board organizationally and operationally so that it can discuss important management matters more thoroughly and make prompt decisions. To this end, having introduced the Executive Officer System in 1999, the Company has worked to separate management decision making and supervisory functions from executive functions to the extent permitted by laws and regulations. The Company also limits the Board of Directors to a small number of members and appoints Outside Directors and Outside Audit & Supervisory Board Members. To improve the effectiveness of discussions at meetings of the Board of Directors, the Company has worked to reform their operational aspect, primarily by putting in place a system to ensure thorough discussions of important management matters and prompt decision making.
The Company holds Board of Directors' meetings periodically at least once every month. The Board of Directors deliberates and makes resolutions on important matters, determines management policies of the Company, and rigorously controls and supervises the execution of duties by all members of the executive management team including Representative Directors. Of the eight (8) Directors on the Board, three (3) are Outside Directors to ensure transparent and objective management.
- 20 -

In FY2019, the Board of Directors met fifteen (15) times, made decisions on important management matters based on the Board agenda criteria, and reported business execution. While the business execution reports cover virtually 100% of businesses on a consolidated basis, that of very small operations are also reported, centering on their safety, compliance and risk matters, in Board meetings. To ensure thorough discussions by the Board of Directors, the Company secures ample time for thorough discussions and has adopted the process in which the Board of Directors meet twice to separately discuss and resolve important agenda.

In monthly Board meetings, the President and CEO directly reports latest conditions and topics of important matters, including safety, compliance and risk management, CFO also reports conditions of sales, income, orders received and borrowings.

In FY2019, the attendance at Board meetings (average attendance rates) is shown below.

Directors: 99%
Auditors: 100%

Audit & Supervisory Board Members attend important meetings such as meetings of the Board of Directors, Strategy Review Committee, Compliance Committee, and Risk Management Committee, visit and inspect offices and plants of the Company and its subsidiaries in Japan and overseas, exchange opinions with the representative directors, other Directors and Audit & Supervisory Board Members, and management of the Company and its main subsidiaries, and hold liaison meetings and individual interviews with the standing Audit & Supervisory Board Members of subsidiaries in Japan. Through these activities, they monitor the upgrading and implementation status of the internal control system. They also periodically exchange opinions with the Internal Auditing Department and the Accounting Auditors and maintain close contact to enhance the effectiveness of audits.

The Audit & Supervisory Board consists of five (5) Audit & Supervisory Board Members, including three (3) or more Outside Audit &Supervisory Board Members. The Board meets periodically at least once every month in principle and determines audit policies and the division of duties among Audit & Supervisory Board Members. Based on audit policies, each Audit & Supervisory Board Member audits the execution of duties by Directors and hears reports from members of the executive management team on their execution of duties, thereby performing appropriate audits. To assist the Audit & Supervisory Board Members in their duties, the Company has established the Office of Corporate Auditors' Staff, allocates necessary staff, and budgets expenses, which are regarded as necessary to perform their duties based on audit plans, thereby performing appropriate management and execution.

To promote efficient management of the Board of Directors, the Company has established a Strategy Review Committee consisting of Senior Executive Officers and senior managers. Based on the reviews of the Committee, Executive Officers and senior managers execute their duties within the authority delegated by the Board of Directors.

As a means to supplement executive functions, the Company established the International Advisory Board (IAB) in 1995. Through the IAB, the Company aims to secure objective advice and suggestions from experts from Japan and abroad about how to function as a global company by exchanging opinions and holding discussions.

The Human Resource Advisory Committee, consisting of three (3) Outside Directors, Chairperson of the Board and President, discusses appointment and discharge of senior management officers and offers advice and suggestions to the Board of Directors. When selecting the candidates, the Committee also considers diversity, as represented by gender, and nationality and race. Based on the report, the Board of Directors discusses and decides appointments of the candidates for directors and Audit & Supervisory Board Members as well as appointments and discharges of executive and other officers.

Outside Director and two (2) Outside Audit & Supervisory Board Members) and one (1) internal member. Taking its reports and recommendations into consideration, the remuneration for Directors is determined by the Board of Directors, and the remuneration for Audit & Supervisory Board Members is determined by discussions by the Audit & Supervisory Board Members, respectively, within the range previously determined by resolution of the General Meeting of Shareholders.
- 21 -

Furthermore, the Company works to mitigate legal risks by securing timely advice from expert law offices regarding important legal issues.

2) Accounting Auditor

The Company has entered into an audit contract with KPMG AZSA LLC and receives audit services for its accounts in connection with both consolidated and non-consolidated financial statements. Certified public accountants who executed an accounting audit of the Company and other information are as follows:

[Certified public accountants]

Masafumi Tanabu (engaged for five (5) consecutive years in auditing) Tomoo Nishigori (engaged for one (1) consecutive year in auditing) Daisuke Toyama (engaged for one (1) consecutive year in auditing)

[Audit Corporation]

KPMG AZSA LLC

[Assistants involved in auditing work] Thirty-two (32) other certified public accountants Forty-one (41) associates

3) Outside Directors and outside Audit & Supervisory Board Members

Outside Directors of the Company perform their duty of contributing to the maintenance of management transparency and soundness by providing advice and suggestions based on their considerable insight and rich experience from an independent standpoint for proposed items and their discussions at the meetings of the Board of Directors. Outside Audit & Supervisory Board Members perform their duty of enforcing audit activities throughout the fiscal year based on the audit policy, audit plan, audit method and assignment of duties, which they discussed and decided at the meeting of the Audit & Supervisory Board in collaboration with Standing Audit & Supervisory Board Members, as well as provide comments as necessary based on their professional standpoint and rich experience at the meetings of the Board of Directors and of the Audit & Supervisory Board.

4) Succession Plans

One of the items that has been contained in the Code of Conduct for Leadership/Top Management described in the KOMATSU Way since its establishment in 2006 is "continue to think about your succession plan." The KOMATSU Way positions the cultivation of management successors as an important task that can only be entrusted to top management. Members of top management are thus expected to always have clearly defined successors and to take steps to foster within these successors the capacity to identify the underlying causes of issues by providing them with opportunities to experience and gain understanding of various work sites.

The Human Resource Advisory Committee, which comprises the chairman of the Board, the president, and outside directors, consistently engages in discussions regarding the selection and cultivation of candidates for positions as next the president (CEO) and the next president (CEO) to follow.

3. Reasons for Adoption of Current Corporate Governance System

The Company organizes the above framework to ensure effective and adequate performance of matters related to decision making, management and supervision, such as separation of corporate management from business execution, enhancement of corporate management decision making by the Board of Directors, strict management and supervision of business execution, measures undertaken by Outside Directors to improve transparency and objectivity of management, and measures undertaken by the Audit & Supervisory Board to appropriately audit Directors' execution of duties.

Implementation of Measures for Shareholders and Other Stakeholders
- 22 -

1. Measures to Vitalize the General Meetings of Shareholders and Smooth Exercise of Voting Rights Supplementary Explanations

	Early	Notification of	General		The Company sends out the notice of convocation about three (3) weeks in
	Meeting of Shareholders		advance of the date of the meeting. See below for the dates of sending the
							notices and the dates (bracketed) of General Meetings of Shareholders held
							for the last three (3) years.
							June 2, 2020 and (June 18): 16 days in advance
							Note: The Company changed the date of disclosing financial results to
							May18 (originally scheduled for April 30), as affected by COVID-19
							pandemic. As a result, the period between sending out the notice of
							convocation and the date of General Meetings of Shareholders was short.
							May 27, 2019 and (June 18): 22 days in advance
							May 28, 2018 and (June 19): 22 days in advance

	Scheduling	General Meetings		Since the General Meeting of Shareholders in 2003 the Company has held
	of Shareholders Avoiding the		Ordinary General Meeting of Shareholders earlier than the date when the
	Peak Day					largest number of Japanese companies hold general meetings of shareholders.
	Allowing Electronic	Exercise		Since the General Meeting of Shareholders in 2004, the Company has allowed
	of Voting Rights				for electronic exercise of voting rights in addition to in writing.
							Electronic exercise of voting rights allowed for by the company is a
							measure that shareholders access to the Company's website via personal
							computers, smart phones or mobile phones and exercise their voting right.
	Participation	in	Electronic		The Company participates in the Electronic Voting Platform operated and
	Voting	Platform	and other		managed by ICJ, Inc. for institutional investors.
	improvements		in	voting
	environments	geared	towards
	institutional investor
	Providing Convocation Notice		The Company sends the notices of convocation in English to standing proxies
	in English					of foreign shareholders, etc., as requested, while simultaneously sending the
							notices in Japanese. The Company also provides the notices in English on its
							website for browsing.
	Other						Since the General Meeting of Shareholders in 2015, the Company disclosed
						the notices of convocation (in Japanese and English) on the TDnet and The

							Company's website for browsing prior to sending the notices. (Date of
							disclosure in 2020: May 28 or three (3) business days in advance of sending
							the notices).
2. IR Activities

							Supplementary Explanations
	Preparation and Publication of		The Company defines the basic policy, methods of information disclosure,
	Disclosure Policy				practice of the silent periods and future business outlook as its policy on
							information disclosure, and posts them on its website.
	Regular Investor Briefings for		The Company holds meetings with individual shareholders at different
	Individual Investors			locations in Japan twice a year as a general rule, where top management
							explains business performance and strategies. The Company also invites them
							to plant tours a few times a year. Additionally, the Company holds meetings
							with individual investors a few times a year.
							Note: The Company has cancelled some plant tours and meetings, as
							affected by COVID-19 pandemic.
	Regular Investor Briefings for		The Company holds meetings with securities analysts and institutional
	Analysts	and	Institutional		investors, when (on the same days, as a general rule) it discloses the second-
	Investors					quarter and full-year business performances, where top management explains
							business performance and strategies. When the Company discloses the first
							and third-quarter business performances, it holds teleconferences to explain
						- 23 -

			its performance. The Company also holds meetings to introduce its business
			operations and offers plant tours in Japan and abroad periodically.
			Note: The Company has cancelled some plant tours, as affected by
			COVID-19 pandemic. Concerning meetings, the Company has held
			teleconferences.
	Regular Investor Briefings for		For foreign investors, the Company holds meetings in mainly the United
	Overseas Investors		States and Europe twice or three times a year, as a general rule, where top
			management explains business performance and strategies.
	Posting of IR Materials on		The Company discloses sales and profit gains reports, Komatsu Reports
	Website		(integrated reports), corporate information, annual securities reports,
			quarterly reports and IR materials on its website promptly after their official
			disclosure.
			The Company also discloses interview videos of the President
			concerning business performance and strategies, and audio recordings of
			Q&A comments during briefings for securities analysts.
			URL in Japanese: https://home.komatsu/jp/ir/
			URL in English: https://home.komatsu/en/ir/
	Establishment of Department		The Company has established the department in charge of investor relations
	and/or Manager in Charge of		and appointed the director in charge of investor relations. Through them, the
	IR		Company ensures fair and timely disclosure of information, while working to
			further improve the transparency of management through active IR activities
			in Japan and abroad.
	Other		-

3. Measures to Ensure Due Respect for Stakeholders Supplementary Explanations

Stipulation of	Internal Rules	Komatsu's Worldwide Code of Business Conduct, which stipulates the Rules
for Respecting the Position of	of the Business Community to be followed by executives and employees of
Stakeholders			the Komatsu Group companies around the world, requires timely and fair
			disclosure of accurate information in order to develop and maintain the long-
			term relationship of trust.
Implementation	of	The Company has created the Komatsu Earth Environment Charter, in which
Environmental Activities, CSR	the Earth environment is defined as one of the most important management
Activities etc.			tasks of the Company, and thoroughly promotes environmental conservation
			efforts.
			The Company has published our integrated report, Komatsu Report, for our
			stakeholders to introduce the Group's efforts to realize sustainable growth in
			corporate value. The Komatsu Report mainly focuses on the value creation
			business model of working for sustainable growth by turning a positive cycle
			of improving earnings (financial indexes) and solving ESG issues (non-
			financial indexes) as it implements growth strategies in the mid-term
			management plan. Separate reports (ESG Databook) are prepared and
			disclosed to provide detailed CSR & Environmental information.
Development	of Policies	on	The Company works to actively disclose information related to all areas of
Information	Provision	to	management to shareholders and other stakeholders after thoroughly
Stakeholders			considering safekeeping confidential information.
Other			The Company established its Human Rights Policy in September 2019,
		thereby declaring its commitment to promoting respect for human rights in

			line with internationally accepted standards. Through human rights due
			diligence based on the United Nations Guiding Principles on Business and
			Human Rights, we will implement measures for preventing or mitigating
			negative impacts on human rights. In addition, frameworks will be put in
			place to allow for corrective measures to be instituted should it be found that
			the Company was directly or indirectly involved in activities that had a
			negative impact on human rights.
			- 24 -

[LGBT support, work-life balance, promotion of women's participation and

advancement in the workplace, etc.]

The Company engages in a variety of measures designed to create workplaces where all employees feel comfortable working.

To support LGBTs, the Company revised the Komatsu's Worldwide Code of Business Conduct in 2017, prohibiting discriminatory treatment because of sexual orientation and identity, and thoroughly informing that discriminatory words and action against LGBT employees would be included in and applicable to sexual harassment. The Company is improving its programs and systems to establish an in-house consultation desk concerning LGBT, recognize same-sex partnerships, and expand the scope of applications concerning welfare benefits, holidays, and leave of absence. It is also working to foster a better understanding of LGBT through E-learning designed for managers in order to create workplaces where all employees feel comfortable working.

The Company also promotes the work-life balance practice among all employees by not only working to reduce total working hours but also improving a variety of supporting programs.

Reduction of total working hours: The Company is currently engaged in co-operative undertakings with labor unions in order to formulate specific quantifiable targets to reduce the total number of working hours for its employees. The Company establishes commendable goals of less than 2,100 working hours per year, along with the provision of an average of at least 18 days of paid leave per year for each employee. In addition, based on compliance with the Article 36 Agreement or agreement on overtime, the Company is working to realize an efficient way of working. As of FY2018, the Company has started an "interval system", promoting a "safe and healthy" manner of working.
Improvement of supporting programs: The Company is establishing systems such as child-care leave and shorter working hours is one of the factors which ensure a sustainable workplace environment. In 2007, the Company was certified by the Japan Ministry of Health, Labour and Welfare to display the "Kurumin" symbol as a company that supports the development of the next generation. The Company subsequently launched the "Panel on Fostering Future Generations" as well as the "Research Group on Solutions against Low Birthrate and Longevity" in our company and have continued to work on expansion measures for the child-care support systems. In addition to the improvement in the paid leave systems such as extending periods of child-care leave (to a maximum of three years) in 2011 and granting child-care leave for employees in case whose spouse is transferred to another place, the Company review its personnel evaluation systems by offering options such as temporary part-time work for those who raise children and goal setting methods corresponding to each employee's working condition. These options are designed to motivate employees who are working part-time due to child-care.
The Company is also focusing on ways to support employees who are working while providing nursing care. In 2013 we introduced an allowance that can be received during family-care leave as a measure of financial support, and in 2014 the Company introduced an option of home teleworking for employees who are engaged in nursing care for children and/or other family members. In addition to improving the programs and systems, the Company has provided opportunities for employees to think about their stance on nursing and work-life balance as well as monthly consultations by outside experts for individual employees, offering individually tailored support.
- 25 -

The Company has also established a consultation desk at each plant, where employees can receive information about keeping a balance between medical treatment and work from the viewpoints of health and safety. In FY2019, the Company introduced the leave of absence program for fertility treatment to increase options for employees to maintain their work while receiving treatments. This helps create workplaces where employees who need medical treatment can feel comfortable and safe to continue working. The Company continues to support employees to achieve a healthy work and life balance.

For FY2019, the number of paid holidays taken by employees was nineteen point nine (19.9) days on average and the number of employees who used the childcare leave was one hundred sixty-one (161) (including forty- three (43) men). The reinstatement rate from childcare leave was 99.4%, and five (5) employees took advantage of the subsidies program for caring for family members.

For more information concerning the Company's efforts on the life- work commitment, see the website below. https://komatsu.disclosure.site/en/themes/89

The Company is vigorously pushing ahead with various measures for making concerted efforts to employ and train more women, and providing a working environment in which female employees can continue developing their careers after maternity leave. The Company appointed the first female executive officer in April 2011 and the first director in June 2018. Because the Company considers the low number of female managers in comparison to male managers to be an issue in need of further improvement, not only does it support the combining of work with life events such as childbirth, child raising and caregiving, but it also supports women's career development and actively appoints them to managerial roles.

While the Company has set a target of bringing the ratio of female managers to 10% by April 2021, the respective Komatsu Group companies in Japan and overseas have also set quantitative targets particularly in terms of ratios of female employees in their workforces and ratios of female managers, and furthermore they have been taking action accordingly through various initiatives geared to achieving those benchmarks.

Since March 2019, the Company held the "Diversity & Inclusion Development Seminar," for female managers of the Company and of its overseas subsidiaries. This seminar is designed for participants themselves to not only gain a deeper understanding of such issues as the history of the Company, The KOMATSU Way, and the management strategy, but also to receive support to become leaders who will drive the activities to promote diversity at each company.

As a measure to develop female employees in Japan, since FY2015, the Company has held the career plan seminar where participants think about their future and ways of working, and the Career Development Program where they plan their mid to long-range career plans with their supervisors. Since FY2016, jointly with other manufacturers, the Company has continued to engage in the exchange seminars for female employees. Since FY2015, the Company has periodically dispatched female managers to outside training programs, working to develop management officers.

Because measures to promote the active involvement of women lead to the creation of systems and work environments that are comfortable for everybody to work in, and that allow individuals to maximize the expression of their abilities, the Komatsu Group will continue to promote such initiatives going forward.

- 26 -

IV. Matters Related to the Internal Control System

1. Basic Views on Internal Control System and the Progress of System Development

The Company implements internal control measures in accordance with the Basic Policy on Internal Control. 1) Basic Policy on Internal Control

The Company defines its corporate value as the total sum of trust given to us by society and all stakeholders. To increase this corporate value, the Company recognizes the importance of strengthening corporate governance. The Company strives to maintain transparency and soundness of management by

appointing Outside Directors and Outside Audit & Supervisory Board Members, while limiting the members of the Board of Directors small so that discussions at the Board of Directors are more substantial. The Company also does its utmost to improve the operation of the Board of Directors, aiming at more effective governance by the Board, ample discussions and quick decision making.

2) Systems for Retention and Management of Information Related to Directors' Execution of Duties

The Company shall adequately retain and manage important information related to Directors' execution of duties, including the record of Board meetings and other approved documents, as stipulated by laws and regulations, and the Company's internal rules.

3) Rules and Other Systems for Risk Management

While continuing to make efforts to raise its corporate value, the Company recognizes the problems related to compliance, environment, product quality, accidents and information security in particular, and other matters, as major risks for continuous growth and has been thus implementing the following countermeasures. i ) The Company shall establish Risk Management Rules to correctly recognize and manage risks. In accordance with the rules, the Company has appointed personnel in charge of individual risks, further promoting the build-up of a solid foundation for risk management.

The Company shall establish Risk Management Committee to devise risk management policies of Komatsu, evaluate risk measures in place, and take control of risks when they surface. The Risk Management Committee regularly reports its reviews and activities to the Board of Directors.
The Company shall establish an emergency headquarters when serious risks surface, and work to minimize damage(s) and implement appropriate measures.

4) Systems for Ensuring Efficient Execution of Duties by Directors

To ensure the efficient execution of duties by Directors, the Company shall implement the following:

The Board of Directors shall meet in principle at least once every month and more often as needed. It shall strive to maintain transparency and soundness of management through the participation of Outside Directors. It shall also establish the Regulations of the Board of Directors and the Company's standards for matters to be referred to a meeting of the Board of Directors, thereby clarifying the matters on which the Board of Directors should make decisions.
Together with the introduction of the Executive Officer System, the Company shall define the separation of duties for Directors, Executive Officers and senior managers, and set up internal rules including the Regulations of Decision-Making Authority, to ensure appropriate and effective execution of duties by Directors, Executive Officers and other senior managers.
To promote efficient management of the Board of Directors, the Company shall establish a Strategy Review Committee consisting of Senior Executive Officers and senior managers. Based on the reviews of the Committee, Executive Officers and senior managers execute their duties within the authority delegated by the Board of Directors.

Systems for Ensuring that the Execution of Duties by Directors and Employees Complies with Laws and Regulations, and the Company's Articles of Incorporation
The Board of Directors makes decisions on important management matters in accordance with laws and regulations and the Regulations of the Board of Directors. In accordance with the decisions made by the Board of Directors, each Director not only executes his or her own duties but also supervises employees for the execution of their duties, and reports the conditions thereof to the Board of Directors.
The Company shall establish the Compliance Committee as Komatsu to oversee compliance, and the Committee regularly reports its reviews and activities to the Board of Directors. The Company shall also establish a system to ensure Directors and employees thorough compliance to business rules as well as laws
- 27 -

and regulations through a variety of measures, including the provision of Komatsu Code of Worldwide Business Conduct, appointment of the Executive Officer in charge of compliance, and establishment of the Compliance Department. Through all of these, we work to supervise, educate and train Directors, Audit & Supervisory Board Members and employees.

In addition, the Company shall establish the internal reporting system where those who are discretely reporting questionable actions in light of laws and regulations and business rules will not be given any disadvantageous treatment.

6) Systems for Ensuring the Proper Operation of Komatsu Comprising the Company and Its Subsidiaries

The Company shall establish the Affiliated Company Regulations and relevant rules to contribute to proper and efficient operation of Group management. It shall also position the Komatsu Code of Worldwide Business Conduct, as the code to be applied by all companies affiliated with Komatsu. Each department or division of the Company in charge of affiliated companies shall manage and support each relevant company, and each company in Komatsu shall stipulate various regulations for the proper promotion of duties.
The Company shall assign and dispatch persons for Directors and Audit & Supervisory Board Members of major affiliated companies as needed, in order to strengthen corporate governance on a group-wide basis and monitor their management.
Important committees of the Company, including the Compliance Committee, Risk Management Committee and Export Control Committee, shall take actions with the entire Group in view, and allow representatives of affiliated companies to take part in their meetings on occasion.
The Company shall make particularly important affiliated companies regularly report to the Board of Directors of the Company on the status of business, including risks and compliance.
The Internal Auditing Department of the Company shall audit each division of the Company and implement or supervise auditing of major affiliated companies that belong to Komatsu. It shall also monitor and instruct each affiliated company regarding internal control systems built by them in accordance with Company requirements and the appropriate operation. The Internal Auditing Department shall also regularly report to the Board of Directors and the Audit & Supervisory Board about the building, operational status and results of internal control systems across the Komatsu Group.

6)-1 Systems for Ensuring Items Related to the Implementation of Duties by Directors and Other Employees at Subsidiaries are Reported to the Company

Each division/department of the Company that has affiliated companies under its supervision shall make each affiliated company report on the management status, financial status, and other important matters of management in accordance with the Affiliated Company Regulations and relevant rules.

6)-2 Rules and Other Systems for Risk Management at Subsidiaries

The Company comprehensively manages risk across the Komatsu Group applying the risk management system explained in (3) Rules and Other Systems for Risk Management to the Komatsu Group as a whole.

6)-3 Systems for Ensuring Efficient Execution of Duties by Directors and Other Employees at Subsidiaries In the case where a subsidiary executes a matter that has a significant impact on the consolidated business operations of the Company, it is necessary either that the Company provides approval beforehand or that the Company receives notification of the matter beforehand in accordance with the Affiliated Company Regulations and relevant rules. In addition, to ensure the Company carries out the efficient operation of the entire Group based on a continual grasp of the status of the affiliated company's status of business execution, the Company receives reports on the affiliated company's standards for the agenda of board meetings, the frequency of board of directors meetings, the status of attendance, and agenda proposals.

6)-4 Systems for Ensuring that the Execution of Duties by Directors and Employees at Subsidiaries Complies with Laws and Regulations, and the Company's Articles of Incorporation

The internal control systems and compliance systems described in (5) Systems for Ensuring that the Execution of Duties by Directors and Employees Complies with Laws and Regulations, and the Company's Articles of Incorporation are implemented across the Komatsu Group, ensuring that Directors and employees of each company in Komatsu carry out their duties in accordance with laws and regulations and the Company's Articles of Incorporation.

- 28 -

Employees Assisting Audit & Supervisory Board Members for Execution of Their Duties, When They Ask for Such Employees
The Company shall set up the Office of Corporate Auditors' Staff, which shall assist Audit & Supervisory Board Members in their duties, and allocate employees who work as assistants to Audit & Supervisory Board Members either exclusively or concurrently in another position within the Company.
Matters Regarding the Independence of the Assistants to Audit & Supervisory Board Members from Directors and the Effectiveness of Instructions Issued to the Assistants
i) Handling of personnel affairs (employment, appointment and personnel changes) of the employees who belong to the Office of Corporate Auditors' Staff shall be premised on approval of the Standing Audit & Supervisory Board Members.
ii) The employees who exclusively assist the Office of Corporate Auditors' Staff are independent of control and command of the Directors, and their performance shall be rated by the Standing Audit & Supervisory Board Members.
iii) The Company's Standing Audit & Supervisory Board Members shall hold regular meetings with employees of the Office of Corporate Auditors' Staff to confirm the execution of duties by the office.
Systems for Directors and Employees Reporting to Audit & Supervisory Board Members; Systems Relating to Other Reports to Audit & Supervisory Board Members and Ensuring Effective Audits by Audit & Supervisory Board Members
i) In accordance with laws and regulations, Audit & Supervisory Board Members shall receive reports by Directors, Executive Officers and other senior managers concerning the conditions of execution of their respective duties.
ii) In the event that Directors find a serious violation of laws and regulations or other important facts regarding compliance at the Company or affiliated companies of Komatsu, they shall report to the Audit & Supervisory Board Members immediately.
iii) The Audit & Supervisory Board Members shall attend various committees and principal meetings concerning internal control as observers, and also read circulars per management approval sent around to obtain the sanction of executives, which are important decision-making documents of the Company, and essential prior settlement documents.
iv) Audit & Supervisory Board Members may appoint legal counsels and other advisors needed for the execution of their duties.

9)-1 Systems to Ensure Reports from Directors, Audit & Supervisory Board Members and Employees of Subsidiaries are Passed, Directly or via a Person Receiving such Reports, to Audit & Supervisory Board Members of the Company

Audit & Supervisory Board Members shall attend as observers meetings of committees, including the Strategy Review Committee discussing important management matters of the Company and Group companies, Compliance Committee and Risk Management Committee, respectively discussing compliance matters and risk management matters, and Export Control Committee.

In accordance with the Affiliated Company Regulations and relevant rules, reports provided from affiliated companies regarding business operations, financial position and other important management matters are provided also to Audit & Supervisory Board Members.

The Company's Risk Management Rules and Internal Auditing Rules are applicable to affiliated companies and any important matter is reported to Audit & Supervisory Board Members.

9)-2 Systems to Ensure Individuals who Provide Reports to Audit & Supervisory Board Members are not Given any Disadvantageous Treatment for the Provision Thereof

It is clearly stated in general rules on compliance regulated by the Company and each Group company that no disadvantageous treatment will arise from the act of reporting or informing, and the Company and each Group company shall operate in accordance with the aforesaid general rules.

Advance Payments and Reimbursements for Expenses Incurred by Audit & Supervisory Board Members Executing Duties and Policy Related to Expenses or Debts Incurred by Executing Duties
The Audit & Supervisory Board, after discussion with the operating department, shall secure the necessary budget to implement audit plans approved by the Audit & Supervisory Board.
- 29 -

On receiving claims from Audit & Supervisory Board Members for expenses to be incurred related to the execution of their duties, the Company shall promptly pay expenses in all cases except where there is no clear connection with the execution of duties of the Audit & Supervisory Board Members.

Audit & Supervisory Board Members and employees assigned to the Office of Corporate Auditors' Staff shall be responsible for managing and implementing costs related to the execution of duties by Audit & Supervisory Board Members.

11) Basic Policy Pertaining to the Elimination of Antisocial Forces

It shall be the basic policy of the Company to prohibit Komatsu from having any relation whatsoever with antisocial movements or groups that threaten the order and security of civil society, and the Company works on below.

The above policy shall be provided in Komatsu Code of Worldwide Business Conduct and diffused throughout the Company as well as each company in Komatsu.
The Company's General Affairs Department of the Head Office shall oversee the policy, working with the police and other specialized external organizations, in accordance with the above policy, to take a firm and organized stand against unwarranted claims by antisocial movements or groups and to prevent any business relationship with those movements or groups.
The Company will do its utmost to collect information and receive education training from the above external organizations and use above information communally both within the Company and among related Group divisions.

[Risk Management]

The Risk Management Committee evaluates status of implementation of risk measures and works to prevent risks from surfacing. It also reports on its reviews and activities to the Board of Directors. The Committee also works to improve the risk management systems on a group worldwide basis including at subsidiaries.

[Compliance]

The Compliance Committee conducts various activities, such as revising the Komatsu Code of Worldwide Business Conduct, providing various education and disseminating information, and upgrading and operating internal reporting system. It also reports on its reviews and activities to the Board of Directors. Monthly publication of the Company bulletin "Compliance for Everyone" continued into its 15th year. The Committee also conducts periodic audits with regard to major compliance risks and strives to prevent them from surfacing.

[Compliance and Risk Audits]

As a part of its risk management activities, Komatsu has been conducting compliance and risk audits (CR audits) since FY2008. These audits cover areas not included in the J-SOX audits.* CR audits also seek to identify latent compliance risks, with a particular focus on confirming and evaluating the status of legal compliance. Through these audits, we strive to raise the control and compliance awareness levels at each company and in every department. Going forward, we aim to improve our case-by-case audit methods and raise the operational level of CR audits as a part of risk management functions.

Audits conducted in accordance with the Financial Instruments and Exchange Act of Japan to evaluate internal controls related to financial reporting

2. Basic Views on Eliminating Anti-Social Forces

The Company's basic views on eliminating anti-social forces are described in 1. Basic Views on Internal Control System and the Progress of System Development and (11) Basic Policy Pertaining to the Elimination of Anti-social Forces.

V.	Other
1. Adoption of Anti-Takeover Measures

	Adoption of Anti-Takeover Measures	Not Adopted
		- 30 -

Supplementary Explanation

None

2. Other Matters Concerning to Corporate Governance System

[The internal system for ensuring the timely disclosure of information] (the reference material at the end of this Report: see the schematic diagram.)

The Company's internal system related to information disclosure is described in the schematic diagram below. The facts of decisions made, facts of actual events, and financial information related to the Company's performance are first reported to the Corporate Communications Department of the Company.

Under the supervision of an officer responsible for handling information disclosure, the general manager of the Department discloses the information in a proper manner based on the related laws and disclosure rules.

The Information Disclosure Committee not only controls information disclosure but also works to improve the level of information disclosure.

Based on the related laws, the Company is steadfastly strengthening its internal control system required for financial reports. In an effort to further strengthen corporate governance, the Company's directors, executive officers and senior employees concurrently serve as directors or Audit & Supervisory Board Members of major companies of the Komatsu Group worldwide.

1. Information Disclosure Committee

1) Roles of the Information Disclosure Committee

Creation of guidelines related to information disclosure
Decision making on disclosure of important information
Evaluation and reviews of the contents of documents which are legally required for disclosure 2) Members of the Information Disclosure Committee
Chairperson: CFO
Members: Director and senior executive officer supervising Safety & Health Care, Corporate Communications and CSR, General manager of the Business Coordination Department, Executive officer supervising Legal, General Affairs & Compliance, General manager of the General Affairs Department, GM of the IR group of Business Coordination Department, General manager of the Corporate Controlling Department, the Finance and Treasury Department, the Corporate Accounting Department and the Legal Department
Observer: Standing Audit & Supervisory Board Member
Secretariat: General manager of the Corporate Communications Department 3) Schedule of holding the Information Disclosure Committee

Before disclosing financial reports, including quarterly reports
Before issuing important documents for disclosure, such as annual securities report
When there are important facts that should be disclosure concerning the facts of decisions made and facts of actual events
When there are matters to be disclosed regardless of legal requirement

2. Internal rules of information disclosure, etc.

The Company defines the Komatsu's Code of Worldwide Business Conduct as the Rule of the Business Community with which all employees of the Company and other Komatsu Group companies must comply, distribute it to all employees of the Komatsu Group, and discloses it on the Company's website. The Code stipulates that the Komatsu Group actively discloses information related to all aspects of management to shareholders, investors and other stakeholders, except when given information is applicable to confidentiality under the laws or contracts as well as confidential business information. Furthermore, the Company defines the internal rules related to information disclosure in order to ensure timely and properly disclose important information concerning the Komatsu Group.

- 31 -

< Corporate Governance of the Company >

< Internal structure related to timely disclosure >

- 32 -

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Komatsu Ltd. published this content on 26 August 2020 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 26 August 2020 04:01:17 UTC

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Mar. 29	Komatsu Ltd. Appoints Advisors of the International Advisory Board	CI
Feb. 16	Komatsu Ltd. Announces Change of Representative Directors, As of April 1, 2024	CI

Komatsu Ltd. Appoints Advisors of the International Advisory Board	Mar. 28	CI
Komatsu Ltd. Announces Change of Representative Directors, As of April 1, 2024	Feb. 16	CI
Nomura Adjusts Komatsu’s Price Target to 4,800 Yen From 4,300 Yen, Keeps at Buy	Feb. 05	MT
Caterpillar Q4 Earnings May Miss Consensus Amid 'Fundamental Headwinds,' UBS Says	Feb. 01	MT
Federal Reserve, China Factory Outlooks Roil Asian Stock Markets	Jan. 31	MT
Japan's Nikkei shakes off chip blues to post best January since 1998	Jan. 31	RE
Japan's Nikkei set for best January since 1998 despite chip drag	Jan. 30	RE
Komatsu’s Attributable Profit up 31.2% in Fiscal Nine Months on Improved Selling Prices and Weaker Yen	Jan. 30	MT
Transcript : Komatsu Ltd., Q3 2024 Earnings Call, Jan 30, 2024	Jan. 30
Honda, GM fuel cell venture launches commercial production	Jan. 25	RE
Japan's Nikkei hits 1-month high as BOJ gives no hint on policy shift	Dec. 19	RE
Global markets live: BAE Systems, Amazon, Take-Two, Shell, Pfizer...	Dec. 13
GM: agreement with Komatsu on hydrogen fuel cells	Dec. 13	CF
GM, Komatsu to Codevelop Hydrogen Fuel Cell-Powered Mining Truck	Dec. 12	DJ
General Motors and Komatsu Collaborate on Hydrogen Fuel Cell-Powered Mining Truck	Dec. 12	CI
General Motors, Komatsu Team Up for Mining Truck With Hydrogen Fuel Cell	Dec. 12	MT
GM, Komatsu to develop hydrogen fuel cells for electric mining truck	Dec. 12	RE
Komatsu to raise prices, cut costs on firmer yen next year -CEO	Dec. 06	RE
Komatsu Ltd. acquired iVolve Holdings Pty Ltd.	Nov. 30	CI
Jefferies Adjusts Komatsu’s Price Target to 4,000 Yen From 3,500 Yen, Keeps at Hold	Nov. 20	MT
Komatsu Ltd. agreed to acquire American Battery Solutions, Inc.	Nov. 19	CI
Mitsui & Co., Ltd. acquired 60% stake in Komatsu Mining Corp. Perú from Komatsu Ltd..	Nov. 06	CI
Komatsu’s Attributable Income Jumps 26.5% in Fiscal H1; Shares Fall 8%	23-10-29	MT
Transcript : Komatsu Ltd., Q2 2024 Earnings Call, Oct 27, 2023	23-10-27
Komatsu Ltd. Announces Revised Dividend Guidance for the Year Ending March 31, 2024	23-10-27	CI

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