KOMATSU : REPORT 2020 (A3 pdf for viewing) (13,246KB)

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KOMATSU REPORT

2020

Contents

Komatsu's Business Model	Resolution of ESG Issues through
01	Management Principle	Growth Strategies
02	History of Business Reforms in Response to Changes in	32	Komatsu's CSR Themes and Mid-Term
	the Operation Environment		Management Plan KPIs
04	Overview of Business	34	Enhancing Quality of Life
06	Special Feature 1: Business Model Characteristics		-Initiatives Based on TCFD Framework
	-Ever-Evolving DANTOTSU Initiatives	40	Developing People
	-Reman and Rebuild Operations	42	Growing with Society
	-Flexible Global Production and Procurement Systems		-Social Contribution Activities
11	Business Segments	44	Corporate Governance

					Resolution of ESG Issues
	Komatsu's Business Model		Komatsu's Growth Strategies			Corporate Profile
			through Growth Strategies

Komatsu's Business Model

Management Principle

The cornerstone of Komatsu's management principle is to commit ourselves to quality and reliability and maximize the total sum of trust given to us by all stakeholders and society, which it defines as corporate value. Maximizing trust requires corporate activities that are founded on social responsibility along with efforts to strengthen corporate governance and enhance manufacturing competitiveness. With the addition of Komatsu Brand Management into this princi- ple, we are promoting awareness reforms that inspire all Komatsu Group employees to adopt the perspective of the customer from their standpoint in the Company as we move forward with human resource development to become a stronger company.

Komatsu's Growth Strategies	Corporate Profile
12	Message from the President	54	Directors and Audit & Supervisory Boad Members
16	Message from CFO	58	11-Year Summary
22	Special Feature 2: Value Creation Story	60	Non-Financial Highlights
	-SMARTCONSTRUCTION	61	External Evaluations and Index Inclusion
	-Forestry Machinery Business	62	Corporate Information
28	Mid-Term Management Plan (FY2019-FY2021)	63	About KOMATSU REPORT
	DANTOTSU Value
	FORWARD Together for Sustainable Growth

Cautionary Notice regarding Forward-Looking Statements

This report contains predictions, plans, forecasts, and other forward-looking statements that have been judged by management to be rational based on the information available at the time of publication. Factors that may cause actual results to differ materially from those predicted by such forward-looking statements include, but are not limited to, changes in economic conditions or product demand in major markets, foreign exchange rate fluctuations, domestic or overseas regulatory revisions, or changes to accounting standards or practices.

Enhancing the

trust placed in us

by society Further growth

Management

Policy

Is management

in line with

societal needs? Management Strategy

 Always monitor

"DANTOTSU Value - FORWARD Together for Sustainable Growth" Mid-Term Management Plan

The KOMATSU Way

Corporate Citizenship

Resolution of Needs

of Society

Implementation of management principle

Contributing to

society

Maximizing the trust given to us by our stakeholders and society through a commitment to quality

and reliability

Mid-term Management Plan for securing sustainable growth

Defines Komatsu's Values, basic attitudes, and ­patterns of behavior

1. Leadership/Top Management

1. "Monozukuri" for all employees
2. Brand Management

1. Komatsu's Worldwide Code of Business Conduct
2. Policies, standards, and principles
3. Komatsu's CSR Themes

Enhancing Quality of Life/Developing People/Growing with Society

Global principles and international standards

• The U.N. Global Compact

• ISO 26000

• Keidanren (Japan Business Federation) Charter of Corporate Behavior
• The U.N. Sustainable Development Goals (SDGs)

Reporting Period: April 1, 2019-March 31, 2020

• This report also includes information on activities after the report- ing period in order to provide readers with the latest information.
• "FY2019" refers to the period from April 1, 2019 to March 31, 2020, unless otherwise noted.

Editorial Policy

issues through its business. In preparation of this report, we referenced the International Integrated Reporting Framework released by the International Integrated Reporting Council and the Guidance for Integrated Corporate Disclosure and Company-Investor Dialogue for Collaborative Value Creation:

All Stakeholders and Society

Society

KOMATSU REPORT 2020 was published for the purpose of providing clear explanations for all stakeholders on Komatsu's medium- to long-term business strategies and the virtuous cycle generated as the Company resolves environmental, social, and governance (ESG)

ESG Integration, Non-Financial Information

Disclosure, and Intangible Assets into Investment released by the Ministry of Economy, Trade and Industry.

Distributors	Suppliers	Employees	Customers	Shareholders	Investors and	Mass media Communities
Analysts

01

					Resolution of ESG Issues
	Komatsu's Business Model		Komatsu's Growth Strategies			Corporate Profile
			through Growth Strategies

Komatsu's Business Model

History of Business Reforms in Response to Changes in the Operation Environment

Net Sales and Demand for 7 Major Products

Japan

North America

Europe

Other

China

Consolidated net sales (right scale)

(Demand, Units)

(Net sales, Billions of yen)

600,000

2000s (2002~)

3,000

Era of

Resource-Rich

and Emerging

1990s

Countries

450,000

Maturity of

2,250

Japanese, U.S.,

and European

Markets

																			1980s
																		Japan and
																		Western
300,000																		Europe Era																																						1,500
										1970s
									United
									States Era
150,000																																																										750
0																									1986	1987 1988																																0
1960	1961	1962	1963	1964	1965	1966	1967	1968	1969	1970	1971	1972	1973	1974	1975	1976	1977 1978	1979	1980	1981	1982	1983	1984	1985	1989	1990	1991	1992	1993	1994	1995	1996	1997	1998	1999	2000	2001	2002	2003	2004	2005	2006	2007	2008	2009	2010	2011	2012	2013	2014	2015	2016	2017	2018	2019	(FY)

Competition with Foreign Companies	Expansion of Exports	Expansion of Overseas Production	Selective Focus and Global Consolidated Management
		Diversification	(DANTOTSU Product DANTOTSU Service DANTOTSU Solution)

Chapter 7 2019~

DANTOTSU Value

Realization of the safe, highly productive, smart, and clean workplaces of the future

Digital Transformation of Entire

Construction Workplaces

Chapter 1 1960s

Era of Competition with Foreign Companies in the Domestic Market

Prioritization of Quality, Exhaustive Product

Research on Rival Bulldozers

Trade deregulation prompted world-leading manufacturers of construction equipment, Caterpillar Tractor Co. to enter into the Japanese market. Komatsu thus found itself faced with a pressing need to improve the quality of its products. The Company therefore commenced quality control measures and launched a Companywide quality control program. We also kicked off an exhaustive product research campaign targeting the bulldozers of our rivals. These efforts culminated in the September 1963 launch of the Model D50A-11 Super Bulldozer. At this time, we also doubled our warranty period, effectively cutting complaints to one-third.

Chapter 2 1970s

Era of Growing Exports

Improvement of Durability and Reliability,

Establishment of Sales Systems in European

and U.S. Markets

As it began a full-fledged expansion into global mar- kets, it became necessary for Komatsu to bring the performance and functionality of its large-sized bull- dozers, a mainstay product at the time, up to world- leading levels. To this end, we rolled out campaigns to earn greater levels of reliability based on performance data from the markets we served. These campaigns were advanced side-by-side with efforts to improve systems in areas spanning from development to sales and services. The result was improved reliability in the European and U.S. markets for major products and the reinforcement of the foundations of our export platforms.

Chapter 3 1980s-1990s

Expansion of Overseas Production

and Diversification

3G Management Strategy

In the 1980s, Komatsu accelerated local production in overseas markets in conjunction with the growth of demand in these markets. However, from the 1990s, demand grew stagnant in the Japanese, European, and U.S. markets as these markets matured in the latter half of the decade. In preparation for the inevitable intensification of global competitiveness, Komatsu enacted its 3G (Global, Growth, Groupwide) management strategy in which it sought to become a global group with a solid manufacturing base that was resilient to fluctuations in construction equipment demand. This strategy led us to diversify our business by expanding operations in electronics and other non-construction equipment businesses.

Chapter 4 2001~

1st Structural Reforms

Selective Focus and Introduction of

DANTOTSU Products

Komatsu enacted its 1st structural reforms in response to the stagnant construction equipment demand in the maturing Japanese, European, and U.S. markets, the struggling performance of its electronics business, and its first operating loss (in FY2001), which was incurred as a result of the Company's high-cost,low-profit model that was oriented toward growth. These reforms were enacted based on the policies of separation of costs from growth, enhancing strengths and improving weak- nesses. Guided by these policies, we pursued fixed cost reductions, the strengthening of our position in Asia, and the development of DANTOTSU Products.

Chapter 5 2007~

2nd Structural Reforms

Promotion of Global Cross-Sourcing

Through these reforms, we promoted global cross- sourcing to reform our value chain through the optimization of the production, sales, and inventory areas of the supply chain. We were thereby able to respond to fluctuations in demand and foreign exchange rate fluctuations while minimizing investment. Furthermore, KOMTRAX (Komatsu Machine Tracking System), which had become standard equipment at the beginning of the 2000s, was utilized to propose methods of supporting fuel-efficiency operation and reducing maintenance costs as we accelerated the bolstering of services powered by information and communication technologies (ICT).

Chapter 6 2013~

Innovation and Reinforcement of Mining

Equipment Business

Introduction of DANTOTSU Solutions

In its mining equipment business, Komatsu's Autonomous Haulage System (AHS) has received high praise for its safety and productivity, and more than 100 AHS units have come to be in operation as mining businesses have grown. Also, we acquired Joy Global Inc. (currently, Komatsu Mining Corp.) in 2017, thereby strengthening our operations in the area of super-large surface and underground mining equipment, an area in which Komatsu previously lacked offerings.

In the construction equipment business, mean- while, we were pursuing growth through innovation via such means as introducing the SMARTCONSTRUCTION ICT workplace solution as a DANTOTSU Solution.

Hydraulic Power Excavator 15H-1	Silicon wafers produced by Komatsu	Announcement ceremony for MR-2	KOMTRAX (Komatsu Machine Tracking	Komatsu Mining Corp. rope shovel and
	Electronic Metals Co., Ltd.	Series, the first DANTOTSU Product	System)	Komatsu super-large dump truck

Bulldozer D50A-11

02

03

Komatsu's Business Model		Komatsu's Growth Strategies		Resolution of ESG Issues		Corporate Profile
		through Growth Strategies

Komatsu's Business Model

Overview of Business

In the pursuit of sustainable growth, companies are expected to build robust yet flexible earnings structures that respond to changes in the operating environment while addressing the increasingly more important ESG issues. With the strength of the manufacturing platform it has forged over the years, Komatsu will respond to social needs by linking customers, distributors, partners, and communities and all Komatsu workplaces through its DANTOTSU excellence.

Major Inputs

Production / Logistics Komatsu production bases: 85* Parts distribution bases: 45*

* As of April 1, 2020

Capital investment ¥86.5 billion

and Activities Business

Research and Development		Procurement and Production	Operations at Customer Workplaces

Product Cycles

Intellectual Properties

Products

Services Solutions

Development bases: Nine mother plants and Asia Development Center R&D expenses: ¥74.7 billion

(3.1% of net sales)

Utilization of information: Equipment with KOMTRAX: Approx. 600,000 units

Human Resources

Number of consolidated employees:

62,823

Partners

Machine population over past 10 years: Approx. 580,000 units*

* Estimate of construction equipment operational

at customer workplaces based on aggregate 10-year

• In-housedevelopment andproduction of key components underpinning product performance (engines, hydraulic components, power trains, etc.)
• Accelerated technological innova- tion achieved by merging core Komatsu technologies with external insight (Open innovation)
• Digital transformation P.22
• Product development systems tailored to global market needs

• Collaboration with suppliers(Midori-kai)enabling the following:

P.43

1.	"Monozukuri" (improvement of
	product quality, reliability, and
	competitiveness)
2.	Stable supply of high-quality
	materials
• Linking plants(visualization)
utilizing ICT
• Cross-sourcing:Flexible global
production and procurement systems
that are resilient to demand and
foreign exchange fluctuations P.10
• Mother plantsstructure enabling:
Improvement of QCD (Quality,
Cost, Delivery)

• DANTOTSU Product Unrivaled prod- ucts in terms of environment, safety, ICT capacities, and productivityP.6
• Full lineup of construction and mining equipment
• Product creation focused on quality and reliability

• Enhancement of mainte- nance contract servicesP.7
• Improvement of QCD (Quality, Cost, Delivery) achieved through close alignment of sales forecasts and production of spare parts

Construction equipment

• Utilization of information acquired through KOMTRAX

P.7

Mining equipment

• Utilization of information acquired through
  KOMTRAX Plus
• Detailed support from directly owned distributors

Construction equipment

• SMARTCONSTRUCTION
  P.24

Mining equipment

• Autonomous Haulage System

P.8

• Global supply of high-quality used equipment, etc.
• Remanufacturing and rebuilding*

P.9

• Systems for selling used engines, transmissions, and other components that have been repaired to be of the same quality as new products

Targets for

FY2021

Accomplishment of

targets of

Mid-Term

Management

Plan

"DANTOTSU Value -

FORWARD Together for Sustainable Growth"

sales volumes

Sales and service distributors: 210 distributors in 148 countries

• Skill transferand TQM (Total

Quality Management)

• Global distributor network  • Cultivation of distributor personnel  • Brand management

P.28-P.31

(construction, mining and utility equipment business) Suppliers: Approx. 2,700 Shareholders: 230,041

Environment

Energy use: 8.1 PJ

Including renewable energy use: 259 TJ

Note: 1 PJ (petajoule) = 1015 J (joules); 1 TJ (terajoule) = 1012 J

Water use: 3.6 million m3

Steel (iron) use: 846,000 tons

• Finance

Consolidated net sales: ¥2,444.8 billion

Operating income: ¥250.7 billion

Free cash flow: ¥104.2 billion

Total assets: ¥3,653.6 billion

Note: Amounts are either for FY2019 or as of March 31, 2020 , unless otherwise noted.

Issues ESG Resolving for Initiatives operations) equipment mining and (Construction Strengths

Climate change impacts-Total CO2 emissions: 22,529,000 tons	CO2 emissions from product use: 19,236,000 tons (85.4% of total)

Enhancing Quality of Life

-Providing Products Required by Society-

Developing People

Growing with Society

Responsible Corporate Behavior

The KOMATSU Way P.41

P.32-P.53

Building

foundations

for 100th

anniversary and beyond

04

05

Komatsu's Business Model

Special Feature 1: Business Model Characteristics

01 DANTOTSU Product

Enhancement and Acceleration of Initiatives Pertaining toThree DANTOTSUs

Ever-Evolving

DANTOTSU Initiatives

Realization of DANTOTSU Value

DANTOTSU has been a keyword in Komatsu's business strategies throughout the 2000s.

In Japanese, this word expresses a level of excellence that is a cut above that of rivals, and this word rings with the same degree of strength found in Komatsu's mainstay construction equipment.

At Komatsu, we are accelerating initiatives pertaining to DANTOTSU Product, DANTOTSU Service, and DANTOTSU Solution while enhancing and evolving these initiatives to realize DANTOTSU Value (a positive cycle of resolving ESG issues and improving earnings through the creation of value for customers).

DANTOTSU	Pursuit of New Heights of Quality and Value
Product	Komatsu refers to products with features in safety, environmental friendliness, ICT, and productivity to which no
	competitors can catch up with in the next several years as DANTOTSU products.
	By taking the technological advantage of in-house development and production of key components and
	through seamless coordination between development, production, and suppliers in product development, we
	have been able to introduce the world to numerous industry-leading products. Today, we are developing auto-
	mation, autonomous, electric, and remote-control technologies to create next-generation DANTOTSU products
	that contribute to the realization of the safe, highly productive, smart and clean workplaces of the future.
Case Examples

Komatsu's Business Model		Komatsu's Growth Strategies		Resolution of ESG Issues		Corporate Profile
		through Growth Strategies

DANTOTSU Solution

		DANTOTSU Service
DANTOTSU		Visualization of Operating Status and
Service		Reduction of Lifecycle Costs
		Komatsu develops a value chain business in which it pursues reduction of lifecycle costs by means
		of the visualization of machine operations and multifaceted customer support that begin when
		new equipment is delivered and continue through to machine maintenance, parts supply, over-
		hauls, and finally trade-ins of used equipment.

Case Examples

ICT-Powered Lifecycle Support

Business Model Encompassing Everything from New Equipment Sales toTrade-Ins of Used Equipment

Komatsu installs the KOMTRAX (Komatsu Machine Tracking System) remote management system on its products as a standard feature. This system tracks information on equipment condition and operating status along with other metrics. By using this information to propose measures for supporting fuel-efficient operation and reducing maintenance costs, we are able to help customers increase the operating ratios and lower the maintenance costs of their equipment.

In addition, we are enhancing the extended warranty programs we offer on a global basis. Through these pro- grams, we aim to raise the rate of equipment for which we continue to provide services and offer ongoing support to customers by encouraging them to use genuine parts to keep their equipment in top condition and offering trade-ins that realize high resale prices when they no longer need a piece of equipment.

Moreover, we are planning the launch of a next-generation KOMTRAX system. This system will make greater contributions to improvements in customer productivity by enabling them to acquire the data they desire via smart- phone applications.

Comprehensive Lifecycle Support Leveraging Komatsu Group's

Collective Strength to Enhance Customer Relationships

Start of value chain business

First-step in process of building long-term relationships

Hybrid Hydraulic	Environment
Excavators

ICT-Intensive Models

(2013)

ICT

New Equipment

Sales

(2008)

Komatsu launched the first hybrid hydraulic excavator for market sale in 2008. By equipping these excavators with pro- prietarily developed systems,

we have succeeded in achieving reductions in CO2 emissions and fuel consumption of more than 20%. In 2016, we began expanding our lineup of 30-ton class models to complement the existing 20-ton class models. To date, an aggregate of approximately 5,000 Komatsu hybrid hydraulic excavators have been sold in 40 countries worldwide.

The world was introduced to Komatsu's first ICT-intensive model, an ICT- intensive bulldozer, in 2013. This was the first piece of equipment in the world to feature automated blade control for processes ranging from rough dozing to finish grading. Meanwhile, our first ICT-

intensive hydraulic excavator was launched in 2014. The bucket teeth of this excavator are automatically maneuvered along the target surface to enable the operator to continue excavating without worrying about overcutting.

Used Equipment	Service
Sale	Contracts
Realization of high resale	Extended warranty
prices by maintaining equip-	programs for maintaining
ment in top condition	condition of equipment

Electric Mini Excavators

Environment

(2020)

Rentals of electric mini excavators were commenced in April 2020. These excavators feature excavating capacity equivalent to that of engine-powered excavators coupled with zero emissions and greatly reduced noise pollution. Anticipated to be used for indoor

and nighttime construction, we will work to popularize and expand use of these excavators, which are friendly both toward the environment and people.

Human Detection & Collision	Safety
Mitigation System

(2019)

Our proprietary KomVision Human Detection & Collision Mitigation System was introduced into the Japanese market in December 2019 as a standard feature on hydraulic excavators, an industry first.

When the system detects

a person while driving or turning, it will stop the equipment to contribute to reduced accidents from collisions with people.

Repairs /	Rental / Lease
Maintenance
Monitoring of equipment condition data	Rental of high-quality equipment
through KOMTRAX

Operational Support

Support for improving customer pro-

ductivity using KOMTRAX data

06

07

Komatsu's Business Model

Special Feature 1:

Business Model Characteristics	DANTOTSU Product
	DANTOTSU Service

DANTOTSU Solution

Komatsu's Business Model		Komatsu's Growth Strategies		Resolution of ESG Issues		Corporate Profile
		through Growth Strategies

02 Global Component Recycling

Reman and Rebuild Operations

DANTOTSU Solution

Case Examples

Workplace Solutions Provided Using ICT

Komatsu utilizes cutting-edge ICT to facilitate the visualization of construction by compiling data on all people, equipment, and materials at workplaces. We thereby aim to help improve the safety of customer workplaces, shorten construction periods, minimize costs, and otherwise optimize construction. This is the DANTOTSU Solution Komatsu aspires to deliver.

By promoting digital transformations in construction, we aim to create the safe, highly pro- ductive, smart and clean workplaces of the future together with customers.

Reuse and Recycling Business Made Possible by In-House

Development and Production of Key Components

Komatsu Group develops global remanufacturing ("Reman") operations in which it restores the engine and transmission components collected during regular replacements to the same status as if they were new so that these products can once again be sold on the market. Restoring these products entails a process with various steps including disassembly, wash- ing, parts replacement, reassembly, painting, and shipping inspections.The restoration of components through Reman operations has the following benefits for customers.

• Guaranteed quality and performance on a level with	• Shorter equipment downtimes through supply of
new products	appropriately stocked Reman components
• Lower prices than new products	• Resource conservation and waste reduction through

World-First Autonomous Haulage System Launched in 2008

Safe, Efficient, and Coordinated Operation Achieved through Fleet Management System

In FY2019, we worked toward our goal of deploying 41 units of our latest model of super-large dump trucks, which can be retrofitted with the Autonomous Haulage System (AHS) to be operated autonomously, in the Pilbara region of Western Australia. At Northern Brazil's Carajás iron ore mine, which is one of the largest in the world, in addition to taking steps to deploy 37 of the super-large dump trucks and introduce AHS, we opened Komatsu's first "AHS Training Center" in the vicinity of the Carajás mine and promoted activities to provide training over a wide area of northern Brazil in relation to AHS operations and maintenance. Since its commercial launch in 2008, a total of 221 AHS-equipped vehicles have been deployed in Australia, North America, and South America (as of March 31, 2020).

Acquisition of Mine Operator Training Company

Contributions to Safe and Productive Mine Operations

In July 2019, the Company acquired Immersive Corporation Pty Ltd, a mine operator training company.

Immersive develops, manufactures, and sells mining equipment simulators for training machine operators for surface and underground mines. Immersive also offers educational programs using simulators and provides training solutions by proposing improvements.

The inclusion of Immersive's solutions into our lineup has made us even better poised to contribute to the improvement of safety and productivity and the optimization of operations at customer mines.

component reuse and recycling

Reman operations are a strength of Komatsu made possible by in-house development and production of key components.

Rebuild operations involve replacing perishable parts inside components with new parts whereas Reman operations involve recycling and reusing perishable parts to contribute to greater resource conservation and waste reduction amounts.

Case Examples

Two Global Bases

To provide customers worldwide with Reman components, Komatsu has established two global bases, one in Indonesia and one in Chile. The base in Indonesia handles engine, transmission, and hydraulic cylinders for large-sized construction equipment while the base in Chile is responsible for components for electric dump trucks. Components that have been collected from around the world and restored are then stocked at the global bases to be shipped to locations across the globe as necessitated by demand. In addition, Komatsu has 13 regional Reman and rebuild bases around the world.

Sharing of Reman Techniques through

Network to Facilitate Quality

Improvements and Development

Our Reman bases are linked through a network that allows for information on the necessary Reman techniques to be shared on a global basis. In addition, the restoration history of Reman components is managed via IC tags and 2D-barcode to track information on component durability and allow for important information for developing components with optimal lifespans to be fed back into the development process.

08

09

Komatsu's Business Model

Special Feature 1: Business Model Characteristics

03 Flexible Global Production and

Komatsu's Business Model		Komatsu's Growth Strategies		Resolution of ESG Issues		Corporate Profile
		through Growth Strategies

Komatsu's Business Model

Business Segments

Procurement Systems

That Are Resilient to Demand and Foreign Exchange Fluctuations and Responsive to Wide-Ranging Market Changes through Global Cross-Sourcing

Characteristic 1: Global Cross-Sourcing

Komatsu has positioned assembly factories in the major markets it supplies and produces the same models at multiple facto- ries. This system enables the Company to practice cross-sourcing while manufacturing products in the optimal locations with consideration for demand and foreign exchange fluctuations as well as the need to evenly distribute production load. Komatsu also has global cross-sourcing systems in place for part procurement. In this manner, we have made it possible to maintain supply chains no matter how markets may change.

Consolidated Net Sales

2,501.1	2,725.2
	¥2,444.8 billion
FY2017	FY2018	FY2019

Operating Income / Operating Income Ratio

	397.8
268.5	14.6%
	¥250.7 billion
10.7%		10.3%
FY2017	FY2018	FY2019

Net Income Attributable to Komatsu Ltd. / Return on Equity

	256.4
196.4	14.7%
12.1%		¥153.8 billion
		8.6%
FY2017	FY2018	FY2019

Mid-Sized Hydraulic Excavator

Cross-Sourcing

Produced in nine countries

Japan, United States,

United Kingdom, Brazil,

China,Thailand,

Indonesia, Russia, India

Benefits	Necessary Conditions
1. Responsiveness to
1. Base equipment standardization
foreign exchange
fluctuations
2. Responsiveness to	2. Production management system standardization
production

Construction, Mining,

and Utility Equipment Business

• 2,205.9 billion

FY2019 Consolidated

Net Sales

¥ 2,444.8 billion

fluctuations
3. Production and design bill of materials standardization
3. Reduced costs
4. Effective utilization of
production capacity	4. Manufacturing process and quality requirement standardization
5. Minimized investment

Characteristic 2: Balanced Development of Global Operations

Komatsu establishes worldwide sales and services systems and utilizes the strength of its flexible production and procurement systems to develop its global operations while maintaining close ties with customers and local communities.

FY2019 Construction, Mining and Utility Equipment Business Sales (to Outside Customers) by Region

Komatsu supplies a wide range of products, services, and solutions including construction and mining equipment for use in construction and mining workplaces around the world as well as forklift trucks, forest machines, recycling equipment, and tunneling machines. We have established a position as the international leader in the construction and mining equipment field by delivering unrivaled

quality and technological innovation together with this full lineup.Dump truck

Retail Finance

¥ 62.9 billion

Komatsu conducts a retail finance business aimed at helping reduce customers' funding burdens and otherwise assisting in the purchase of its products. Our strengths in this field include the prevention

Strategic

Markets

50%

Latin America	¥309.2 billion
CIS	¥127.4 billion
China	¥127.0 billion
Asia	¥205.7 billion
Oceania	¥203.3 billion
Middle East	¥30.6 billion
Africa	¥98.2 billion

FY2019

¥ 2,205.9 billion

Traditional

Markets

50%

Japan	¥310.8 billion
North America	¥573.5 billion
Europe	¥219.7 billion

of overdue debt through effective utilization of KOMTRAX (location information, operating status information, engine locks, etc.) technologies, swift credit screening, and competitive financing condi- tions. These strengths have enabled us to build long-term relationships with customers.

Industrial Machinery and Others

¥ 175.9 billion

The industrial machinery and others business stands alongside the construction, mining, and utility
equipment business as a core business of Komatsu. Offerings in this business include the large
presses used to mold automobile hoods and side panels as well as sheet-metal machines, machine
tools, and light sources for semiconductor lithography systems (excimer lasers). In this business, we
also contribute to the business activities of various customers through production of specialty
equipment for Japan's Ministry of Defense.	Large press

10

11

Komatsu's Growth Strategies

Message from the President

Komatsu's Business Model		Komatsu's Growth Strategies		Resolution of ESG Issues		Corporate Profile
		through Growth Strategies

At Komatsu, we aim to reach new, unrivaled heights of excellence in our products, services, and solutions and generate DANTOTSU Value, by which we refer to a positive cycle of resolving ESG issues and improving earnings through the creation of value for customers.This is the approach we will take toward pursuing sustainable growth with an eye to the 100th anniversary of

our founding in 2021 and beyond.

Hiroyuki Ogawa

President and Chief Executive Officer

in March 2020, we announced our "SMARTCONSTRUCTION Digital Transformation." (Please see page 22) This solution comprises four new IoT devices and eight new applications that allow for digitization of entire construction and production processes ("horizontal digitiza- tion"). Through this "horizontal digitization," which connects all construction processes digitally, this solution allows for worksite operations to be optimized by synchronizing the real worksite with its digital twin, thereby realizing drastic improvement in the safety, productivity, and environmental performance of the entire worksite. We have also announced our plans to introduce the "SMARTCONSTRUCTION Digital Transformation" solution into the markets of the United States, the United Kingdom, Germany, France, and Denmark. In this manner, SMARTCONSTRUCTION, which has previously built its track record primarily in the Japanese market, is finally prepared for its global launch. With its ability to contribute to improved safety and productivity across construction and production processes spanning from measurement to inspection, SMARTCONSTRUCTION is a business model not found anywhere else. We therefore see substantial potential for SMARTCONSTRUCTION to be used as a tool for fostering relationships with customers. Furthermore, we introduced the

conventional equipment.

Next, I would like to discuss our initiatives pertaining to growth strategies based on business reforms. In April 2017, we acquired Joy Global Inc. (currently, Komatsu Mining Corp.). We have since been carrying out initiatives to create synergies between Komatsu and Komatsu Mining Corp. (KMC) by utilizing the management resources of both companies. A great deal of success has been generated through this approach. With a history in the mining equipment business spanning more than a century, KMC is a global manufacturer, seller, and service provider dealing in super-large surface and underground mining equipment, an area in which Komatsu previously lacked offerings. We had originally put forth the target of achieving synergies that accounted for more than 10% of KMC's net sales. In FY2019, the third year since the acquisition of KMC, synergies produced benefits equivalent to ¥9.0 billion when including gross profit gains and cost reduction benefits. We have therefore judged that the efforts to integrate KMC into the Group are going smoothly.

We will also expand applications of our equipment by introducing the next-generation KOMTRAX construction equipment operation management system, engage in preventive maintenance by applying Internet of Things (IoT) and artificial intelligence (AI) pre-

I would first like to take this opportunity to extend our sincere condolences and prayers to anyone who has lost loved ones to COVID- 19 or has fallen victim to this virus. I also want to express our appreciation to all of the healthcare professionals and others who are working diligently to stop the spread of this virus.

Komatsu Group is combating the global COVID-19 pandemic

based on the government policies of the relevant countries, with the

health and safety of our customers, business partners, community members, employees, and their families as our top priority. Recognizing we are positioned as an essential business that supports social infrastructure, and the obligation this represents to customers that are continuing their operations, we are committed to ensuring an ongoing supply of products, parts, services, and solutions while taking precautions against the spread of COVID-19.

SMARTCONSTRUCTION Retrofit Kit to the Japanese market in April 2020. This offering can be installed on conventional construction equipment to endow such equipment with the same ICT functions as ICT-intensive equipment, such as 3D machine guidance and pay- load functions. More than 98% of the equipment operating at construction worksites in Japan is conventional equipment without ICT functions. Accordingly, the SMARTCONSTRUCTION Retrofit Kit has the potential to quickly spread digital transformations throughout

diction technologies, and introduce serial number-based manage- ment. These initiatives will enable us to provide lifecycle support (lifetime warranties) for our customers' machines, ranging from new machines to their disposal, and increase our after-sales service businesses that are resilient to fluctuations in demand.

Elsewhere, our remanufacturing operations for engines, axles, cyl- inders, and other components, are a business which we can pursue because of our ability to develop and produce key components in-

Pursuit of DANTOTSU Value

Japan's construction industry by installing digital functions into such

house, a strength of Komatsu. These operations also constitute a

Under DANTOTSU Value - FORWARD Together for Sustainable Growth, the three-yearmid-term management plan covering the period from FY2019 to FY2021, we are moving forward with initiatives based on the three pillars of our growth strategies: 1) value creation by means of innovation, 2) growth strategies based on business reforms, and 3) structural reforms for growth.

Our greatest focus is to achieve DANTOTSU Value, which is the slogan of this plan. DANTOTSU Value entails the evolution of our

prior DANTOTSU Product (advancement of products), DANTOTSU Service (advancement of machine operations), and DANTOTSU Solution (advancement of construction) initiatives. Through these efforts, we aim to generate a positive cycle of resolving environmen- tal, social, and governance (ESG) issues and improving earnings through the creation of value for customers. We thereby look to build the safe, highly productive, smart, and clean workplaces of the future together with customers.

State of Progress of Focused Activity Items and Challenges from the Next Term Onward

Three Management		Examples of Activities
Strategies
		• Expanded deployments of SMARTCONSTRUCTION (cumulative number of sites in Japan now exceeds 10,000)
		• Announced the provision of "SMARTCONSTRUCTION Digital Transformation," starting from April 2020
	FY2019	• Announced the deployment of retrofit kits for hydraulic excavators to enable 3D construction, starting from April 2020
	• Achieved a total of 221 dump truck units operating under the Autonomous Haulage System (AHS)
	achievements
1. Value Creation by	• Acquired Immersive Corporation Pty Ltd, an operator training company for mining customers
Means of Innovation		• Exhibited a battery-powered mini excavator at bauma 2019, and rolled it out as a rental machine for the Japanese
		market
	Challenges for	• Expand SMARTCONSTRUCTION overseas
	the NextTerm	• Develop a new platform for mining
	and Onward	• Development of technology for automation, autonomous operation, electrification and remote control
		• Consolidation of facilities with Komatsu Mining Corp. ("KMC")

Steady Progress in Priority Initiatives Pertaining to Three Pillars of Growth Strategies

	FY2019	• Launched aggregate/cement models
	• Made model changes for hydraulic excavator for strategic regions
	achievements
	• Introduced the KomVision Human Detection & Collision Mitigation System as a standard fitment to hydraulic excavators
2. Growth Strategies
	in the Japanese market
Based on Business
	• Improve the market position of the hard rock mining business
Reforms

We faced an opaque economic outlook in FY2019, the first year of the mid-term management plan, due to factors such as the trade friction between the United States and China and the United Kingdom's decision to withdraw from the European Union. Amid this uncertainty, the global COVID-19 pandemic that struck in the fourth quarter of the fiscal year drove down demand in China, North America, Europe, and Asia, resulting in declines in sales and income

and making for disappointing performance for the first year of the plan. In this environment, we made steady progress in advancing key

initiatives based on the three pillars of growth strategies aimed at realizing DANTOTSU Value.

Looking first at value creation by means of innovation, we made substantial progress in developing SMARTCONSTRUCTION opera- tions. At CONEXPO-CON/AGG 2020, a tradeshow held in Las Vegas

	Challenges for	• Launch next-generation KOMTRAX
	the NextTerm	• Continue to promote value-chain reforms aimed at realizing full lifecycle support
	and Onward	• Reforms of the industrial machinery business (Expansion of synergy with the construction equipment business and
		growth by capitalizing on core technologies)
	FY2019	• Steadily implemented cost improvement activities
	• Won the Prime Minister's Prize at the Monodzukuri Nippon Grand Awards for KOM-MICS realizing "connected plants"
	achievements
3. Structural Reforms for	• Began construction on the new KMC Milwaukee plant and the new Komatsu Forest AB plant in Umeå, Sweden
Growth	Challenges for	• Promote work reforms using ICT and IoT
	the NextTerm	• Promote continuous cost improvement activities
	and Onward	• Develop human resources with global perspective and promote diversity

12

13

Komatsu's Growth Strategies

Message from the President

Komatsu's Business Model		Komatsu's Growth Strategies		Resolution of ESG Issues		Corporate Profile
		through Growth Strategies

cyclical business that helps reduce waste and recycle and reuse components amid rising global environmental awareness. We therefore look to proactively strengthen our systems in this business.

Moving on to structural reforms for growth, a major initiative underway on this front is the promotion of KOM-MICS (KOMatsu Manufacturing Innovation Cloud System)-a proprietarily developed production platform. KOM-MICS makes it possible to realize improvements in manufacturing sites using IoT technologies. These improvements are achieved through equipment operating status tracking and optimization made possible by collecting and analyzing data from machine tools and robots. The use of KOM-MICS allows

for efficient production control to be realized on a global scale by linking Komatsu factories with the factories of business partners, making it possible to understand the operating status of various factory equipment at a glance.

KOM-MICS won the Prime Minister's Prize in the manufacturing and production process categories of the Eighth Monodzukuri Nippon Grand Awards. This honor was a reflection of the system's contributions to the improvement and innovation of production processes at the Company's production sites as well as at business partners.

Ratio of Coal Related Sales (FY2019)
Consolidated net sales:	Mining
¥2,444.8 billion	equipment
39%
Of which, coal-related
¥357.2 billion

sales of 30-ton class excavators in Europe, a market characterized by high environmental awareness. We believe that this is a product warranting attention amid the recent rise in the importance of environmental issues.

The third of our key initiatives for addressing climate change is to expand our forest machine business. While forestry work is increasingly being performed by machines in Europe and the United States, it is still common for such work to be conducted using manpower in Japan and Asia. I was positioned in Indonesia over the period from 2015 to 2016. During this period, I visited customers engaged in forestry work on several occasions. These visits made me aware of the large potential for forestry businesses, particularly in densely for-

Issues Arising from the COVID-19 Pandemic

Thermal coal   Coking coal   Iron, copper, etc.   Non-mining equipment

ested areas, while also giving me a strong interest in resolving the various issues faced by these businesses. Sustainable forestry businesses are circular businesses in which the CO2 emitted into the

The global COVID-19 pandemic is impacting Komatsu in a variety of ways. Of these impacts, I have particularly noticed the way in which the pandemic has changed our customer worksites, workstyles, and how we engage with stakeholders.

With regard to customer worksites, there is a need to take steps to avoid crowded and confined spaces and close interactions. In terms of equipment, we can therefore expect rising demand for remote, automated, and unmanned operation. On the nontangible side of operations, it is likely that the use of construction digitization and digital twin methodologies will accelerate at customer work- places. To swiftly respond to these needs, Komatsu will accelerate delivery of the "SMARTCONSTRUCTION Digital Transformation" and automation solutions in the construction equipment field, and provide solutions such as new platforms, the Autonomous Haulage System, and remote operation in the mining equipment field.

telecommuting system to streamline and revise work processes with the aim of realizing highly productive workstyles to facilitate operations during and after the global COVID-19 pandemic. In addition, we recognize that the change in the nature of meetings, which include embracing both web conferences and face-to-face meetings, represent opportunities for Komatsu. We will capitalize on such opportunities to realize further improvements in operation efficiency. We are also considering the distribution of wearable devices to employees for use in the management of their health.

Engagement with stakeholders is important to us. However, the ways of engaging are clearly changing. For example, we must be careful to avoid crowded and confined spaces and close interactions in our investor relations activities. To this end, we are examining the potential of arranging online events for institutional investors and private investors. We are also looking at the possibility of a virtual

order to do so, we will pursue synergies through joint development with KMC while launching products with characteristics that respond to customer needs.

Our second key initiative for addressing climate change is to launch and promote fuel-efficient products with low environmental impacts. In addition to our electric mini excavators and compact battery-powered forklifts, we also look to focus on the sale of hybrid excavators. Komatsu's hybrid excavators use our proprietary technologies to substantially reduce CO2 emissions. Approximately 5,000 such excavators are currently in operation around the world, and we are gradually building our track record with regard to this equipment. In 2019, we launched a 30-ton hybrid excavator, and this product has already come to represent more than 40% of

atmosphere during the process of cultivating seedlings is then absorbed by trees to help mitigate climate change. Komatsu is supporting sustainable forestry with equipment that is capable of performing all processes from tree planting to harvesting grown trees, improving soil, and planting new trees. There currently exists demand for more than 10,000 forest machines on a global scale, and I therefore see the potential for consistent growth in this business going forward. Eventually, we will look to promote smart forestry by digitally linking all forestry processes through our SMARTCONSTRUCTION solution. In this manner, I hope to help address the various issues facing forestry businesses while cultivating new pillars of earnings.

Moving on to workstyles, we had more than 90% of headquarters employees and over 50% of employees at indirect factory divi-

General Meeting of Shareholders, although we will have to wait until we can confirm the legality of such meetings before moving forward.

Milestone of 100th Anniversary and Beyond

sions telecommute during the period of Japan's state of emergency declaration. Going forward, we will plan to introduce a full-fledged

We will work to achieve high levels of quality in our communication with stakeholders, even as we maintain safe physical distance.

We will celebrate the 100th anniversary of Komatsu's founding in 2021. However, we recognize that this milestone is just that, a checkpoint to be passed. Accordingly, we remain committed to working toward the resolution of the issues faced by society

offering electric mini excavators in the Japanese rental market. We have established a roadmap for promoting the spread of electric equipment going forward, and we look to make steady progress down this path through open innovation.

Acceleration of Growth Strategies toward the Solution of ESG Issues

and customers through flexible management in response to changes in the external environment.

Komatsu is committed to sincerely addressing the issues faced by society and thereby raising its value as a company that grows

Komatsu's mid-term management plan delineates our intent to address ESG issues through growth strategies in our core business. In accordance with this intent, we have defined material ESG issues in areas in which Komatsu is poised to make particularly large contributions through its business. Key performance indicators have been disclosed for these issues in our integrated reports, and we have also established new ESG management targets.

I would now like to explain some of our key initiatives for addressing climate change, an area in which there is a great deal of interest from investors.

The first of our initiatives on this front is to enhance our hard rock mining businesses. Hard rock mining is the process of excavating minerals other than coal, such as copper and nickel. In FY2019,

roughly 4% of the Company's total consolidated net sales came from coking coal used in iron refining processes and approximately 10% was attributable to thermal coal, which itself is viewed as problematic in terms of its contribution to CO2 emissions. We do not expect any sharp declines in thermal coal demand to be seen over the short term as it is still functioning as an important source of energy underpinning people's daily lives in emerging countries. However, it can be anticipated that demand for thermal coal will decline gradually out of consideration for climate change and other environmental issues. Komatsu looks to counter the risk of future declines in thermal coal sales by expanding its hard rock mining busi- nesses, in which we expect to see growth going forward, while also lowering the portion of net sales accounted for by thermal coal. In

One of the assumptions in the background of the formulation of the mid-term management plan was that we cannot anticipate significant growth in demand for construction equipment over the foreseeable future and must rather expect short-term fluctuations. As of today, demand has become highly volatile as a result of the global COVID-19 pandemic. Regardless, there will be no change to our basic approach during or after the pandemic. What will be important, however, will be the speed at which we act. Collaboration with partners who share our vision will be key to enhancing our products, services, and solutions. In launching the "SMARTCONSTRUCTION Digital Transformation," we are benefiting from collaboration with 20 start-up companies and other development partners located in Japan, the United States, and Europe. In addition, we have begun

together with society. We will also proactively participate in the United Nations Global Compact, the World Business Council for Sustainable Development, the Task Force on Climate-related Financial Disclosures, and other initiatives as we work to fulfill our obligations to society and the environment as a global company. I continue to thank all of our stakeholders and ask for your continued support.

Hiroyuki Ogawa

President and Chief Executive Officer

14

15

Komatsu'sats 's Growthr th Strategiestrate ies

Message from CFO

Komatsu's Business Model		Komatsu's Growth Strategies		Resolution of ESG Issues		Corporate Profile
		through Growth Strategies

Review of FirstYear of Mid-Term Management Plan (FY2019-FY2021)

FY2019, the first year of Komatsu's mid-term management plan, DANTOTSU Value - FORWARD Together for Sustainable Growth, proved to be a challenging year. Factors behind this difficulty included declines in demand in strategic markets as well as the impacts of the global COVID-19 pandemic that emerged in the fourth quarter of the fiscal year. During the year, Komatsu continued to pursue sustainable increases in its corporate value by building a sound financial position and strengthening its competitiveness. We made steady progress

integration of the operations of acquired companies. In FY2019, we were able to absorb the rise in expenses for increased costs stemming from investments in growth areas through reductions in general expenses. As a result, total fixed costs were relatively unchanged year on year. As for financial soundness and asset efficiency, we began working to cut inventory assets in the first quarter of FY2019. These efforts saw us systematically adjusting production levels while seeking to lessen the impact on our suppliers from these efforts. As a result, inventories stood at ¥805.3 billion on March 31, 2020, down ¥32.2 billion from the previous fiscal year-end. However, the inventory turnover period

remains slightly above our ideal level, due in part to the impacts of the global COVID-19 pandemic. There is thus a need to further shorten this period as we move toward the end of FY2020.

When selecting fund procurement sources, we aspired to secure funding reliability by considering factors such as source diversification and continuity along with procurement costs. Komatsu also issued its first green bond in July 2020. Through these bonds, we hope to spread awareness regarding Komatsu's efforts to address environmental issues while also expanding our investor base.

during FY2019 in advancing key initiatives based on the three pillars of growth strategies described in the mid-term management plan. Examples of this progress included the introduction of the SMARTCONSTRUCTION solution and the launch of electric mini excavators. Faced with the current adverse operating environment, we are now pressed to demonstrate the true value of Komatsu that we have cultivated through our efforts to date.

Takeshi Horikoshi

Senior Executive Officer and CFO

Growth (Fund Allocation Policy)

In order to achieve sustainable growth, we are targeting a well-balanced allocation of our funds to 1) investment for growth, 2) improvement of the balance sheet (maintaining financial soundness), and 3) shareholder return.

In FY2019, net cash used in investing activities totaled ¥190.9 billion, an amount equivalent to roughly 65% of the net cash provided by operating activities of ¥295.1 billion. One specific target of investments was the

There is currently no clear end in sight for the global COVID-19 pan- demic. Accordingly, we must continue to take a flexible approach in responding to the massive changes seen in the operating environment while setting priorities based on cost-benefit analyses and assessments of strategic value. By advancing key initiatives based on our three pillars of growth strategies through this approach, Komatsu will target sustainable growth.

Financial Strategies Formulated in Response to Operating Environment Changes

acquisition of mining- and forestry-related companies for the purpose of fueling future growth. Meanwhile, we accumulated cash and deposits to

• Sales growth rate

Investment

To maximize growth and profits, our accounting and finance departments are responsible for the roles of developing business plans, managing business performance, and studying indices and methods thereof, as well as setting up investment decision-making criteria and making judgment on investment projects.

At the same time, we monitor management indices pertaining to profitability, financial soundness, and asset efficiency, areas for which

we have defined management targets, in light of the volatility in demand in the construction and mining equipment business.

In regard to profitability, we strive to build a financial position capable of weathering drastic market changes, and we will continue to thoroughly control fixed costs to this end. Fixed costs have been on the rise over the past several years as a result of M&A activities. However, we have also made steady gains in efficiency through post-merger

ensure our future ability to meeting funding demands in light of the global COVID-19 pandemic. As a result, interest-bearing debt on March 31, 2020 rose to ¥1,012.3 billion, up ¥81.6 billion from a year earlier, while the net debt-to-equity ratio was 0.43 times, unchanged from the previous fiscal year-end. As for shareholder returns, we adhered to the consolidated payout ratio target announced together with our financial results for the six months ended September 30, 2019, issuing returns that made for a ratio of 57.7%, regardless of the impacts of the COVID-19 pandemic.

(Growth strategies)	• Operating income ratio
	• ROI
ROE

Improvement of the balance

sheetShareholder return

(Maintaining financial soundness)

• Net debt-to-equity ratio

• Consolidated payout ratio

		Domestic construction, mining and utility equipment		Overseas construction, mining and utility equipment
Net Sales and Operating Income Ratio
	Industrial machinery and others		Retail finance		Electronics		Operating income ratio (right scale)
(Billions of yen)											(%)
		14.8			14.6	15.0

Response to the COVID-19 Pandemic

3,000						12.9	12.1	12.9		12.3	12.2
																				11.2				10.7
						10.1															11.2						10.3	10.0
																											9.7
		7.7				7.1
6.5		7.0							7.5
	5.2
2,000																																							5.0
4.2			3.9													4.7
	4.2	4.5	2.5	2.3
			3.2		2.6
	2.1	2.7
	1.6	1.8	1.6
			0.4																																					0.0

Even prior to the global COVID-19 pandemic, Komatsu has been practicing global cross-sourcing and procurement for equipment bodies and parts. The goal of these efforts has been to absorb the impacts of demand and foreign exchange rate fluctuations. After the COVID-19 pandemic struck, these prior efforts enabled us to minimize the impacts on production by procuring the necessary articles from alternative sources and reallocating inventories. As a result, no issues have been faced with regard to our supply chain as of this point in time. We also are providing support as needed by distributors and suppliers suf-

payment moratoriums to and purchasing the inventories of these distributors and suppliers.

Moreover, we have taken a number of steps to ensure sufficient liquidity to meet funding needs in this challenging environment. In addition to accumulating cash and deposits, we have concluded new commitment line agreements, namely a yen-denominated line in the amount of ¥300.0 billion and a U.S. dollar-denominated line in the amount of USD1.3 billion. The funds procured through these commitment lines can be distributed to other countries through the Group's

1,000

-1.3

-5.0

fering in this challenging environment. This support includes offering

global cash management system.

0																							-10.0
1985	1986	1987	1988	1989	1990	1991	1992	1993	1994	1995	1996	1997	1998	1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010	2011	2012	2013	2014	2015	2016	2017	2018	2019 (FY)

Business

Construction equipment

Diversification

Selective focus (DANTOTSU Product   DANTOTSU Service   DANTOTSU Solution)

strategies

and industrial machinery

Mid-Term

3G ((G)97, (G)2000)

G to the

Move the

Global Teamwork

Together We Innovate

DANTOTSU

Management Plan

21st

World

GEMBA World Wide

Value

Structural

1st structural

2nd structural

reforms

reforms

reforms

Note: Concerning the figures for the fiscal year ended March 31, 2002 and earlier, Komatsu Electronic Metals Co., Ltd. and its subsidiaries and outdoor power equipment (OPE) of Komatsu Zenoah Co. and its subsidiaries engaging in the OPE business were not reclassified as discontinued operations resulting from the sale thereof.

Issuance of Green Bonds	TOPICS
In July 2020, Komatsu issued its first green bonds, unsecured straight bonds. Komatsu plans to use the proceeds from these green
bonds to research and develop, promote, and popularize its products, such as hybrid hydraulic excavators and electric construction

equipment; fuel-efficient operation support services utilizing offerings like KOMTRAX (Komatsu Machine Tracking System); and SMARTCONSTRUCTION and other ICT-intensive construction equipment. With these products, we will aim to contribute to reduced CO2 emissions from product use. Komatsu also plans to use these proceeds for capital investment in facilities and equipment that help reduce CO2 emissions in manufacturing and increase the ratio of renewable energy use.

In this manner, the issuance of green bonds has enabled for the diversification of procurement sources and the expansion of our investment base while also supporting the accomplishment of targets set for environmental, social, and governance (ESG) factors in the mid-term management plan. Going for- ward, the proactive and ongoing issuance of such bonds will be positioned as an ESG initiative to be advanced by our accounting and finance departments.

16

17

Komatsu'sats 's Growthr th Strategiestrate ies

Message from CFO

Komatsu's Business Model		Komatsu's Growth Strategies		Resolution of ESG Issues		Corporate Profile
		through Growth Strategies

Profitability

Operating Income Ratio

As the industry leader, it is important for Komatsu to maintain and increase sales prices while pursuing ongoing reductions in cost of sales and fixed costs. The operating income ratio is an index that comprehensively reflects our success in these tasks and is therefore an important indicator for evaluating this success. In the mid-term management plan, we have set the target of maintaining an indus- try's top-level operating income ratio. In FY2019, operating income came to 10.3%. This outcome was largely due to the heavy impacts of reduced sales volume, as partially affected by the global COVID- 19 pandemic, a change in the geographic composition of sales, and

unfavorable circumstances outweighed the benefits of our efforts to increase selling prices and absorb the rises in fixed expenses attributable to investment in growth areas.

Cost Control

While making investments in growth areas, we have taken exhaustive steps to reduce cost of sales and fixed costs, thereby working to secure profitability (separation of costs from growth). In FY2019, we pursued steady decreases in cost of sales while also cutting general and other standard fixed costs. Meanwhile, efforts were made to limit fix costs associated with investments in growth areas

Efficiency

ROE (return on equity) is a general index, covering profitability, asset efficiency, and financial leverage. Thus, we monitor it as one of our management indices while continuously keeping close attention to cost of shareholders' equity.

We estimate that our cost of equity is around 8% on a global basis. Thus, we have set an ROE of 10% or higher as the management target. To expand equity spread (ROE - cost of shareholders' equity), we will work to both improve ROE and reduce cost of share- holders' equity.

To promote improvement of ROE, we will work to improve

profitability by giving weight to growth. Concerning asset efficiency, we apply ROIC (return on invested capital) to internal control. To control working capital appropriately in response to the volatility of market demand, we periodically monitor the cash conversion cycle of working capital through ROIC, for which invested capital in the ROIC formula is defined by the corresponding working capital plus tangible fixed assets. We recognize that improving asset efficiency is a task that we will need to emphasize over the foreseeable future, and we intend to ramp up efforts to curtail inventory assets to this end going forward.

adverse effects of the Japanese yen's appreciation. These

Fixed Costs

(Billions of yen)

by assessing and prioritizing investments based on strategic value.

Acquisition of Joy Global Inc.

ROE Profitability

Separation of costs from growth

Thorough control of fixed costs

ROE

(%)

20.0

17.2 17.3

600

Efficiency

Fixed assets:

Assessment of investment

15.0

14.7

300
0
2009	2010	2011	2012	2013	2014	2015	2016	2017	2018	2019 (FY)

Note: Amounts for performance from FY2009-FY2019 have been translated based on the foreign exchange rates in the projection for FY2019 performance (JPY108.7 = USD1, etc.).

Decision-Making of Investment

Financial leverage

Outstanding days of working capital

(overdue receivables and slow-moving inventory)

To set up the guidelines for financial indexes which subsidiaries should achieve

To optimize funding on a

consolidated basis

To manage net debt-to-equity ratio by considering business characteristics

12.4

12.1

11.510.6

10.0

9.0

8.6

7.3

5.0

4.1

0

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 (FY)

Concerning specific investment projects, we make careful decisions	ability above the industry's average. As for key initiatives
after considering strategic value and payback periods in our Strategy	currently underway, we will be sure to collect the returns on our
Review Committee and Steering Committee meetings. Based on	investments after the initiatives have been completed to fuel
these efforts, we are working to achieve growth and improve profit-	ongoing growth.

Investments in Production Facilities and Others and Depreciation	Construction, mining, and utility equipment	Industrial machinery and others
(Billions of yen)							Depreciation (right scale)				(Billions of yen)
								60.1	57.7
150	55.3								56.4	60
51.8					52.6
		48.7	49.9		50.2	49.2
			43.6
100				79.8							86.5	40
	63.9	54.5	63.9		67.8	66.1	56.8	52.7	56.5	67.6
50								20
0												0
	2009	2010	2011	2012	2013	2014	2015	2016	2017	2018	2019 (FY)

Note: Excludes investments in rental assets

R&D Expenses		Construction, mining, and utility equipment		Industrial machinery and others		Ratio of R&D expenses to net sales (right scale)

(Billions of yen)						3.6	3.8	3.9				(%)
100	3.2			3.2	3.3	2.9		3.1	4.0
2.7	2.8				2.7
						70.7	70.7	70.5	73.6	73.4	74.7
					64.4

Cross-Shareholdings

On March 31, 2009, Komatsu held shares of stock in 34 listed companies in the form of cross-shareholdings. Since then, we have proceeded to curtail such shareholdings while confirming those holdings that we continued to hold offered quantitative and qualitative benefits that exceeded the associated cost of shareholders' equity. As a result, these holdings had been decreased to five companies on March 31, 2017. It was during this period that the Tokyo Stock Exchange enacted Japan's Corporate Governance Code in 2015. In response to this code, Komatsu put forth a policy of not owning stocks of listed companies, unless they are necessary due

Cross-Shareholdings(Non-Consolidated)

(Number of holdings)

40

3433

30

to business relations or collaboration with the Company, for the purpose of avoiding the risk of stock price fluctuation as well as ensuring the efficiency of assets.

Later, a revision to U.S. GAAP standards prompted the Company to adjust profit figures to reflect gains and losses on valuation of marketable securities from FY2018. It was judged that the remaining five holdings, in general, offered satisfactory quantitative benefits. However, it was decided to sell all of these holdings through a reevaluation of the relations between the Company and the invest- ees and the potential impacts of stock price fluctuations on profits. All of these holdings were sold as of December 2017.

			49.0	54.8	60.8
50		46.4																					0
0																								-4.0
		2009	2010	2011	2012	2013	2014	2015	2016	2017	2018	2019 (FY)

20			19
			15
					12		11
							9
10									7	5	0
0
2008	2009	2010	2011	2012	2013	2014	2015	2016	2017 (FY)

(March 31, 2018)

18

19

Komatsu's Growth Strategies

Message from CFO

Financial Position

Komatsu's Business Model		Komatsu's Growth Strategies		Resolution of ESG Issues		Corporate Profile
		through Growth Strategies

Total Assets and ROA of Retail Finance Business

Japan

North America

Europe

China

Oceania

Others

ROA (right scale)

(Billions of yen)

(%)

Monitoring of Net Debt-to-Equity Ratio

We believe it is important to maintain a sound financial position in order for us to achieve sustainable growth while being free from

Interest-Bearing Debt and Net Debt-to-Equity Ratio

(Billions of yen)

2,000

changes in market demand. Taking into account the business characteristics of retail finance and future investment opportunities, we monitor net debt-to-equity ratio as an index of soundness.

  excl. Retail finance business   Retail finance business

• Net debt-to-equity ratio (consolidated) (right scale) (Times)

0.9

900

3.5

		2.9								3.0
			2.5	2.5						2.5
600									2.2
2.0
			2.4
								2.0
						2.0		1.9		1.5
								1.5
300										1.0
0.9							0.7			0.5
0										0
2009	2010	2011	2012	2013	2014	2015	2016	2017	2018	2019 (FY)

	0.60
	0.56
1,500		0.50																0.6
			0.49
																	0.43	0.43
								0.37								0.40
										0.32
												0.23
1,000													0.18					0.3

500										0
0										-0.3
2009	2010	2011	2012	2013	2014	2015	2016	2017	2018	2019 (FY)

Shareholder Return

Concerning cash dividends, we have the policy of continuing stable payment of dividends after comprehensively considering consolidated business results and reviewing future investment plans, cash flows, and the like. Specifically, we have the policy of maintaining a

from FY2018, out of reflection of performance in this fiscal year as well as the future business outlook. These payments made for a consolidated payout ratio of 57.7%, an increase of 17.2 percentage points year on year.

Optimization of Funding on a Consolidated Basis

To optimize funding on a group-wide basis and reduce foreign exchange risks by matching assets and liabilities in each currency,

Furthermore, a global CMS has been established to link all regional headquarter companies, including the company in Japan. Through this system, we practice efficient funding on a consolidated

consolidated payout ratio of 40% or higher. In FY2019, we issued dividend payments of ¥94 per share, a decrease of ¥16 per share

Concerning stock buybacks, we plan to do so timely and flexibly in response to market and financial conditions.

we have built a funding system by region and maintain the policy of local funding. Equipped with a local funding function, each regional headquarter company advances funds to Komatsu Group companies regardless of business segment in the corresponding region mainly through the cash management system (CMS) for the region.

basis to complement the funding sources used in each region under normal circumstances. In addition, we have established new yen- and U.S. dollar-denominated commitment lines through which the procured funds can to be supplied to different regions to function as a safety net for times of emergency.

Cash Flows		Net cash provided by operating activities		Net cash used in investing activities		Free cash flow
(Billions of yen)

400
200			151.9	161.8	170.9
109.1		82.6		122.8	104.2
	61.8
		-18.9			15.3
0
-200

Retail Finance Business

Role of the Retail Finance Business

Our retail finance business, which handles financial products to help customers purchase our products, was separated into an independent business segment in FY2016. This segment is pursuing its own segment-specific management targets (1.5%-2.0% for ROA and 5 or under for net debt-to-equity ratio) to ensure transparency of

Risk Management of the Retail Finance Business

In an effort to reduce risks in the retail finance business, we diversify portfolios and match the currencies, interest rates, and periods of lending and funding. In addition, we also work to safekeep our credits by taking advantage of our strengths, for example, by using KOMTRAX, installed in our construction equipment as a standard feature, for credit management (monitoring the location and operating conditions of construction equipment).

profitability and financial conditions. This segment is also responsible for promoting sales our products. From this perspective, we are focused on generating synergies in this segment through measures such as financing forest machines, a key initiative of the mid-term management plan, in addition to financing mainstay construction and mining equipment.

Risk management is now more important than ever given that it is currently unclear when the global COVID-19 pandemic will end. We have received requests for payment moratoriums from certain customers and distributors as a result of the pandemic, and we are responding to these requests while confirming factors such as past histories of overdue payments.

								-229.3
-400
2009	2010	2011	2012	2013	2014	2015	2016	2017	2018	2019 (FY)

Cash Dividends per Share

(Yen)
120									110	94
Stock buyback of approx. ¥30.0 billion
conducted in FY2008, FY2011, and FY2014						84
in addition to dividend payments
60				58	58	58	58
		48
		42
	38
16
0
2009	2010	2011	2012	2013	2014	2015	2016	2017	2018	2019 (FY)

Dividend policy		20%-40%			30%-50%			40%-60%		40%~
Consolidated
payout ratio	38.0%*	24.4%	24.2%	36.2%	34.7%	35.8%	39.8%	48.2%	40.3%	40.5%	57.7%
(Total return	[42.2%]	[55.2%]
ratio)
* Excluding structural reform expenses

20

21

Komatsu's Growth Strategies

Special Feature 2: Value Creation Story

KOMATSU offers SMARTCONSTRUCTION in the USA and four countries in Europe.

(United Kingdom, Germany, France, and Denmark)

A video of the presentation by Rod Schrader, Chairman & CEO of Komatsu America Corp., at CONEXPO-CON/AGG 2020, a construction equipment tradeshow held in Las Vegas in March 2020, can be found below.

https://www.youtube.com/watch?v=dd7oeh6MkCM&t=23s

Realization of the Safe, Highly Productive, Smart, and Clean Workplaces of the Future

Launch of "SMARTCONSTRUCTION Digital Transformation"

Komatsu launched "SMARTCONSTRUCTION DigitalTransformation," a solution comprising four new IoT devices and eight new applications that accelerate digital transformations through SMARTCONSTRUCTION, in April 2020.

While the previous version of SMARTCONSTRUCTION only digitized part of the construction process ("vertical digi- tization"), these new IoT devices and applications will allow for digitization of the entire process ("horizontal digitiza- tion").This will enable worksite operations to be optimized by synchronizing the real workplace with its digital twin, thereby realizing drastic improvement in the safety, productivity, and environmental performance of the entire worksite.

Customer Construction Process

Surveying

Planning

Construction

Inspection

Traditional

Analog Process

"Vertical digitization": Digitization of individual construction processes (previous SMARTCONSTRUCTION)

	Drone 3D	Construction	3D construction /
	management with	Drone 3D
	measurement /	simulation /	ICT-intensive	finished landform
Digital	visualization	digital task preparation	equipment and apps	inspection
Transformation					Solution
"DX"
Digital
Process

"Horizontal digitization": Digitization and connection of all processes to optimize entire construction process

Digital transformation of construction

("SMARTCONSTRUCTION Digital Transformation")

Komatsu's Business Model		Komatsu's Growth Strategies		Resolution of ESG Issues		Corporate Profile
		through Growth Strategies

Rodney Schrader

コマツアメリカ（株）会長（兼）CEO

Senior Executive Officer

RodneyChairman & CEO,Schrader

Komatsu America Corp.

Optimization of construction through synchronization

between real workplace and its digital twin

22

23

Komatsu's Business Model		Komatsu's Growth Strategies		Resolution of ESG Issues		Corporate Profile
		through Growth Strategies

Komatsu'st 's Growthr th Strategiestr t i

01Special Feature 2: Value Creation Story

SMART

CONSTRUCTION

Profitability and Growth

Compared with other industries, the construction industry is lacking in terms of safety and productivity and has significant room for improvement via digitization.

SMARTCONSTRUCTION is still in the early stages of its introduction. Nonetheless, we have verified its significant benefits for contributing to improved safety and productivity at adopting workplaces. We therefore anticipate that the use of this solution will spread steadily against the backdrop of labor shortfalls and aging workplace operators. The global COVID-19 pandemic also presents an opportunity in the form of potential for the rapid digitization of construction workplaces.

Since its introduction in February 2015, SMARTCONSTRUCTION has addressed the labor shortages facing the Japanese construction industry by realizing improved productivity and safety at customer worksites.This has been made possible by openly employing digital technologies in both Japan and overseas; domestically, these technologies have been introduced to more than 10,000 customer worksites. Komatsu is dedicated to contributing to the realization of the safe, highly productive, smart, and clean workplaces of the future by digitally transforming both products (automation and autonomation operation) and processes (optimization).

SMARTCONSTRUCTION promotional videos and introduction case studies can be found below.

Safety- and Productivity-Related Tasks

Diffusion of Innovation Curve and Earnings Growth

(as Projected by Komatsu)

More dangerous than other industries

• The digitization of construction workplaces is projected to advance more swiftly

No. of deaths per 100,000 employees*1

Financial

0.4

than the popularization of enterprise resource planning (ERP) systems, a similar

Safety

solution launched in the 1980s, due to the current availability of sophisticated and

Information &

1.2

communications

1.9

affordable technologies.

Retail

• The global COVID-19 pandemic is expected to further accelerate this digitization trend.

Manufacturing

2.2

Public utilities

2.6

Service

2.6

Customer type

S-curve

Construction

9.5

Adoption rate

Mining

14.1

Laggards

			Lower than other industries		Smartphone
SMARTCONSTRUCTION promotional videos	SMARTCONSTRUCTION introduction case studies			Adoption in Japan
	Nominal productivity by industry (¥1,000/hr.)*2		(Past Nine Years)	Digitization of
(Japanese only)	(Japanese only)		Late majority
Productivity					construction
http://smartconstruction.komatsu/movie.html	https://smartconstruction.komatsu/case/	Public utilities		12.8			workplaces	Sales at Companies at Which
			Finance & insurance		7.5				ERP Systems Are De Facto
			Information &		7.4			Acceleration due	Standard (Past 40 Years)
			communications
			Manufacturing		5.6	Early majority		to COVID-19
			Retail		4.0			pandemic
			Construction		3.1
			Health		2.8
Strategic Directives			Agriculture, forestry &	1.5		Innovators
			fisheries		Early adopters
		*1 Source: National Census of Fatal Occupational Injuries in 2018, U.S. BUREAU OF LABOR				Time
			STATISTICS				FY2020 N years N+4 years
		*2 Source: Labor Productivity Trends in Major Industries, JAPAN PRODUCTIVITY CENTER

By accelerating the digital transformation of

construction through both products (automa-

Workplaces of the future: Safe, highly productive, smart and clean

tion and autonomation operation) and pro-

cesses (optimization), we will realize the

Level 5

Contributions to Resolution of Environmental and Social Issues

workplaces of the future.

Optimization

Digital Transformation of Construction

of Construction

TOPICS

Processes: Optimization

• Automatic generation of daily tasks from daily

In addition to digitizing individual processes,

optimized construction plans

such as condition surveys by drones ("verti-

Level 4

• Collaboration and autonomous operation of

Launch of SMARTCONSTRUCTION Retrofit kit

cal digitization"), we will link the 3D work-

Construction)of

"Visualization" of workplace data

equipment on the workplace

surement, to conventional construction equipment in Japan in late April through LANDLOG Ltd. Currently, conventional construction equipment

mote the automation and optimization of

Automation of

place information gained from such

Construction

Provision of ICT Capabilities for Conventional Construction Equipment

digitized processes with our LANDLOG

Planning

Komatsu launched SMARTCONSTRUCTION Retrofit kit, the add-on kit to offer ICT capabilities, such as 3D machine guidance and payload mea-

platform ("horizontal digitization") to pro-

entire workplaces.

Level 3

Level

with no ICT capabilities accounts for over 98% of all construction equipment working at construction workplaces in Japan.

3-Dimensional

Products: Automation and Autonomation

Construction

(Optimization

Retrofit kit, Komatsu is going to promote digitization of conventional construction equipment and digital transformation of construction in order to

Level 2

Operation

Planning

To accelerate the pace of achieving digital transformation of construction workplace operations, the SMARTCONSTRUCTION Retrofit kit can

Realizing the safe, highly productive, smart,

be added on not only Komatsu-made models but also other models as long as they are hydraulic excavators. With the SMARTCONSTRUCTION

and clean workplaces of the future will

ICT Construction

require all construction equipment to work

3-Dimensional

Processes

• ICT-intensive

realize safe, highly productive, smart, and clean workplaces of the future soon.

autonomously while collaborating with other

Topographical

construction & machines

equipment at the workplace. At the same

Map

• Visualization of progress

• Utilization of

time, it will be crucial to enhance ICT-

topographical data

intensive equipment, specifically through

ICT-intensive

SMARTCONSTRUCTION

increased automation and through autonomy

Level 1

models

Retrofit kit

Non-ICT-intensive

achieved via communication and coordination

3-Dimensional

models

Design Data

Introduction of advanced ICT-intensive models

among equipment. Komatsu is moving

ahead with research and development on

3D construction based

3D construction:

3D construction:

3D construction:

Advanced

sophisticated automation and autonomy

Conventional

Products (Level of Automation and Autonomous Operation)

ICT-intensive equipment

on 3D design data

Impossible

Possible

Possible

technologies with an eye to the introduction

construction

Possible: Machine

Impossible: Limited

of 5G and other ultrahigh-speed mobile com-

3D control

Impossible

Level 1

Level 2

Level 3

Level 4

Level 5

control

to machined

munications systems and the utilization of

guidance

Limited Operation

Advanced Operation

Advanced Solo

Advanced

Advanced

high-precision global navigation satellite

Support

Support

Automation

Collaborative

Decision-making

Staking & assistant

Autonomous Operation

Autonomous Operation

Necessary

Unnecessary

Unnecessary

system technologies.

workers

3D construction

High-precision 3D

High-precision 3D

Impossible to obtain

data: Possible to

data: Possible to

records

obtain

obtain

24

Equipment with SMARTCONSTRUCTION

25

Retrofit

Kit (provisional name)

Komatsu's Growth Strategies

02Special Feature 2: Value Creation Story

Forestry Machinery Business

Sustainable forestry is an undertaking with the potential to contribute to the accomplishment of the Sustainable

Komatsu's Business Model		Komatsu's Growth Strategies		Resolution of ESG Issues		Corporate Profile
		through Growth Strategies

Profitability and Growth

Komatsu's forest machine business has continued to grow smoothly since the 2004 acquisition of Partek Forest AB (currently, Komatsu Forest AB) of Sweden. Looking ahead, economic growth in emerging countries is expected to drive rises in housing starts and pulp demand. In addition, we anticipate stable growth in timber production volumes as a substitute for plastic amid rising environmental awareness.

Development Goals (SDGs) advocated by the United Nations.These contributions include helping mitigate climate change by reducing the amount of CO2 in the atmosphere and preserving biodiversity and water resources. Komatsu regards a forestry business as an important industry that contributes toward the achievement of the SDGs. In forestry, it is important to contribute to realizing the forest management cycle of planting, cultivating, and harvesting trees, and it is required to operate in a way that places due consideration on forest environments. Komatsu operates a wide-ranging forestry machine business on a global basis to help increase safety and productivity in forestry operation.

Videos on forest machines, including a look at a forestry project adopting ICT in Sweden, can be found here.

https://youtu.be/_D-EfqsrGT0

Strategic Directives

Komatsu is working to mechanize forestry operation, including planting, cultivating, and harvesting trees, to contribute to sustainable forestry. In the realm of planting, we have developed subsoiling machines and automated tree planters based on our bull- dozers. These machines are currently being supplied to the Brazilian market.

Forest Machine Business Sales

(Billions of yen)

140
105
70
35
0												(FY)
2013	2014	2015	2016	2017	2018	2019	2020	2021	2022	2023	2024

Global Timber Production Volumes

(Millions of m3)

2,400

1,800
1,200
600
0			2025 (FY)
2010	2015	2020
Total industrial timber	Sawtimber	Pulp materials

Source: Food and Agriculture Organization of the United Nations (Figures for 2019 forward are the Company's projections.)

Moreover, in the area of timber harvesting and extracting operations, where most forestry-related occupational accidents tend to occur, we are making progress in developing and selling forestry equipment that enables to harvest and extract trees in steep area without people having to descend to the forest floor.

TOPICS

Contributions to Resolution of Environmental and Social Issues

• Introduction of NewTree Planting	• Improvement of Harvesting and
Products	Extracting Productivity and Safety
Planting			Harvesting

	Cultivating
D61EM-23M0 automated tree	Sustainable		PC130F Harvester
Forestry
planter		(forest machine based on hydraulic
Planting		Harvesting	excavators)
Land preparation			Extracting

D85EX subsoiling machine	Forwarder 895
	Forest Forwarder Usable on Slopes

Smart Forestry Powered by ICT

We have been working on a smart forestry concept that makes it possible to visually monitor forestry supply chains. In Japan, we have been using drones to conduct tree planting and growth management surveys including forestry resource quantity estimates. This has enabled us to reduce the labor hours needed for surveys for felling from around five people per hectare per day to one person per hectare per day. Moreover, by using ICT-equipped harvesters for processing and soring logs, we have been able to reduce the labor hours needed from about 13 people per hectare per day to about 0.5 people per hectare per day. We are also focusing our efforts on developing applications that are capable of drawing on the accumulated log processing and timber transport data of the LANDLOG open platform. We will thereby contribute to streamlining operations in the future by sharing information with forestry business operators on lumber markets as well as lumber consumers.

Going forward, we hope to help promote cyclical forestry around the world by facilitating further safety and productivity improvements in forestry.

3D image

Through Komatsu's smart forestry solutions, drone photography can be utilized to prepare 3D images of forests, which can be used to automatically estimate the number of trees, diameters of trees, and the volume of timber to be produced, thereby contributing to higher levels of efficiency in pre-felling forest resource surveys.

26

27

Komatsu's Growth Strategies

Mid-Term Management Plan (FY2019-FY2021)

DANTOTSU Value

Komatsu's Business Model		Komatsu's Growth Strategies		Resolution of ESG Issues		Corporate Profile
		through Growth Strategies

Demand for Construction and Mining Equipment

FORWARD Together for Sustainable Growth

Komatsu's External Environment

Today, protectionism is growing around the world, and multipolarity is becoming evident. We are also witnessing growing concerns over climate change. As the external environment is changing dynamically, in the construction, mining, and utility equipment business, we assume gradual growth of the demand in the medium to long term, but the volatility will remain high in the short term. In the industrial machinery and others business, we anticipate a structural change of demand in the automobile manufacturing industry, mainly resulting from ongoing progress toward electric vehicles. In addition, we anticipate assured growth in demand in the semiconductor manufacturing industry over the medium to long term, while a temporary adjustment phase is also expected. Achieving sustainable growth in this environment will require growth strategies that are not affected by demand fluctuations.

Changes in the External Environment and of ESG Issues

Sales / Demand

Period of the previous plan

• Growth strategies based on innovation
• Growth strategies of existing businesses
• Structural reforms designed to reinforce the business foundation

Demand recovery for mining equipment and in emerging economies

We assumed demand recovery would start in FY2019 in the previous plan.

(Actually it started in FY2017.)

Period of the mid-term

management plan

• Value creation by means of innovation
• Growth strategies based on business reforms
• Structural reforms for growth

Growth above the industry's

average by focusing

investment in growth areas

We assume gradual growth in

the mid to long ranges,

but volatility will remain high

in the short range.

Sustainable

growth

Assumed range of demand change

Politics &	economy		Technologies
• Multipolarization of the world		• Further spread of	IoT, AI, and big data
• Emergence of protectionism		•The progress of electric and
• Growth of emerging economies		autonomous vehicles

Environment	& energy		Society &	values
• Climate change			• Acceleration of diversity in
• Growing demand	for energy, foods and water		advanced countries
• Decarbonization &	renewable energy		• A decline of working-age population
			• Achievement of a recycling-oriented
			society by accelerating the pace of sharing
			• Growing pursuit and needs for safety
			and comfort

FY2016

FY2017

FY2018

FY2019

FY2020

FY2021

FY2022~

Construction, Mining, and Utility Equipment Business Sales (to Outside Customers) by Region

(Billions of yen)

3,000
2,500		2,466.6
2,267.3	Africa
2,000		Middle East	Strategic
	Oceania	Markets
1,566.3		Asia	54%
1,500		China
		CIS
1,000		Latin America	Traditional
		Europe	Markets
500		North America	46%
0		Japan
FY2016	FY2017	FY2018

Expectations of achieving

a sustainable society

Our Tasks in the

Growth Strategies

1. To solve ESG issues through the growth strategies of our core business

2. To promote sustainable growth based on our profit structure which is free of changes in the external environment and market demand

28

29

Komatsu's Growth Strategies

Mid-Term Management Plan (FY2019-FY2021)

Overview of the Mid-Term Management Plan

The mid-term management plan sets forth the future vision Komatsu should aspire to and hope to accomplish as it approaches and moves beyond the 100th anniversary of its founding in 2021. As part of this vision, we seek to become a company that can help realize the safe, highly productive, smart, and clean workplaces of the future together with customers while generating a positive cycle of resolving ESG issues through the creation of value for customers and improving earnings.

Management		Make commitment to Quality and Reliability and maximize corporate
Principle		value (the total sum of trust from society and all stakeholders)

Komatsu's Business Model		Komatsu's Growth Strategies		Resolution of ESG Issues		Corporate Profile
		through Growth Strategies

Management Targets of the Mid-Term Management Plan and Related Performance

	Management Target	FY2019 (First year of the plan)
	Indicator	Performance
Growth	• Growth rate above the industry's average	Sales growth rate	10.3%
Profitability	• An industry's top-level operating income ratio	Operating	10.3%
income ratio
Efficiency	• 10%-level ROE	ROE	8.6%
	• Keep a fair balance between investment for growth and	Net debt-to-	0.43
Financial position	shareholder return (including stock buybacks), while placing main
equity ratio
	priority on investment
Shareholder return	• Set the goal of a consolidated payout ratio of 40% or higher	Consolidated	57.7%
payout ratio
		Reduction of	CO2 emissions:
	• Reduction of environmental impact	Decrease by 40% in 2021
	environmental
	Renewable energy use:
	CO2 emissions: Decrease by 50% in 2030 from 2010.	impact
	Increase to 15% of total

		2021
		100th
		anniversary
		and beyond
1		Mid-Term
Previous Plan
Management Plan
(FY2016-FY2018)
(FY2019-FY2021)

Backcasting	2

Growth strategies and management targets by backcasting the roadmap to our future vision

Future Vision

ESG Solutions

ESG	Renewal energy use: Increase to 50% of total energy use in 2030.	Evaluation by	energy use in 2021
	• Evaluation by external organizations: Selected for DJSI (World &
	Selected for DJSI
	Asia Pacific) and CDP A-list (Climate Changes and Water Risk)	external	CDP Climate Change: A
		organizations	CDPWater Risk: A-
Retail finance	• ROA: 1.5%-2.0%	ROA	1.5%
business	• 5.0 or under for net debt-to-equity ratio	Net debt-to-	3.80
	equity ratio

• Growth strategies based on innovation
• Growth strategies of existing businesses
• Structural reforms designed to reinforce the business foundation

3

Three Pillars of Growth Strategies

1. Value creation by means of
	innovation
2.	Growth strategies based on
	business reforms
3.	Structural reforms for

Positive cycle = Sustainable growth

Workplaces of the future: Safe, highly productive, smart and clean

Concepts and Stance of the Mid-Term Management Plan

The mid-term management plan defines three pillars of growth strategies: 1) value creation by means of innovation,

1. growth strategies based on business reforms, and 3) structural reforms for growth. By prioritizing investment on growth areas based on the three pillars of growth strategies, we will seek to achieve sustainable growth through a positive cycle of improving earnings and solving ESG issues that is resilient to fluctuations in demand.

Integration of KMC

(FY2017)

growth

Positive cycle = Sustainable growth

Improvement of earnings

Expectations of society and

stakeholders

Stakeholders

Growth Strategy Aligned with

Management Principles

Maximize Corporate Value which is

the Total Sum of Trust

				• Optimization platform and solutions business strategies
			Value creation	SMARTCONSTRUCTION, Autonomous Haulage System (AHS), and
	1		platforms (LANDLOG and IntelliMine)
		by means of
		• Automation, autonomous operation, electrification and remote-controlling of
			innovation	construction, mining and utility (compact) equipment
				• Smart forestry and agriculture
				• KMC integration synergies and business reinforcement
				• Value chain reforms and redefinition of the aftermarket business
			Growth strategies	Preventive maintenance by applying IoT and AI, and Lifecycle support under serial number-based
			management; logistics reforms; and next-generation key components
	2
		based on business	• Next-generation KOMTRAX
		• Stronger focus on aggregate & cement, forestry, agriculture and other segments
			reforms
			• Efforts for "DANTOTSU No. 1 in Asia" and in the growing markets of India and Africa
				• Reforms of the industrial machinery business (Expansion of synergy with the construction
				equipment­	business and growth by capitalizing on core technologies)
	3		Structural	• Business reforms by means of ICT and IoT
		reforms for	• Structural reforms of development operations Model based development Open innovation
		• Connected plants with Zero impact on environment and workers

growth	• Global human resource development

Communities

		Solutions for
Customers		ESG issues
		Sustainable
		growth
Employees
Distributors
Suppliers
	Shared growth
		based on
Business	growth strategies
partners
Shareholders
Investors		Sustainable
		increase of
		earnings

Enhance Corporate Brand

ESG Solutions

Positive cycle = Sustainable growth

Three Pillars of Growth Strategies

1. Value creation by means of innovation
2. Growth strategies based on business reforms
3. Structural reforms for growth

Positive cycle = Sustainable growth

Improvement of earnings

30

31

Resolution of ESG Issues

Resolution of ESG Issues through Growth Strategies

Komatsu's CSRThemes and Mid-Term Management Plan KPIs

Komatsu seeks to help resolve ESG issues by promoting the three pillars of growth strategies defined in the new mid- term management plan. We strive to realize a positive cycle of sustainable growth through improvements of earnings and resolutions to ESG issues. Our initiatives include reducing environmental impacts to combat climate change and

Komatsu's Business Model		Komatsu's Growth Strategies		Resolution of ESG Issues		Corporate Profile
		through Growth Strategies

supplying high-quality,high-performance products, services, and solutions ensuring safety. KPIs have been set to guide these initiatives solving ESG issues through our core business.

CSRThemes

Enhancing Quality of Life

-Providing Products Required by Society-

Developing

People

Growing with Society

ESG Solutions throughThree Pillars of Growth

Strategies Relevant SDGs

• Provide products, service and solutions contributing to sustainable development of infrastructure, natural resources

and circular environmental protection (remanufacturing and forestry).

• Improve productivity, efficiency, safety and environmental impact (lower CO2 emissions and higher ratio of renewable energy use) through innovations, such as automation in the entire value chain.

• Make commitment to DANTOTSU Value which will realize better Earth and future by means of technology and reliability (creation and maximization of customer value).

• Develop a diverse workforce with a high level of productivity and technical skills.

• Strengthen and develop diverse and global-scope talent to help achieve sustainable workplaces.

• Develop talent with cross-value chain capabilities.

• Offer resolutions for social issues through collaboration with stakeholders.

• Act as a responsible corporate citizen ensuring corporate governance, compliance, and human rights.

	Key Initiatives under Mid-Term Management Plan	FY2019 KPI Performance	FY2021 KPIs
	Reduction of CO2 emissions (in comparison to FY2010)
	• Reduction of CO2 emissions from product use (fuel-efficiency equipment, hybrid hydraulic
	excavator, rate of SMARTCONSTRUCTION use, enhancement of ICT-intensive construc-	14% reduction	16% reduction (in comparison to FY2010)
	tion, mine automation, and underground mining equipment)
	• Reduction of CO2 emissions from production (plants with zero impact on environment	31.5% reduction	40% reduction (in comparison to FY2010)
	and workers)
	Plants with zero impact on environment and workers
	• Rate of renewable energy use (including purchase of renewable energy)	10.7%	15%
	• Work environment burden coefficient (particle matter density)	10.7% reduction	30% reduction (in comparison to FY2018)
	• Water consumption	49.4% reduction	55% reduction (in comparison to FY2010)
	Value chain reforms and redefinition of the aftermarket business
	• Spare parts sales	3% increase	11% increase
	• Reman component lifespan (compared to new components)	26,866 workhours (134% of new components)	20,000 workhours (100% of new components)
	Assurance of mine operation safety and productivity
	• AHS units' population (promotion of mining platform business)	221 units	380 units (aggregate)
	DANTOTSU Product, DANTOTSU Service, and DANTOTSU Solution
	• ICT-intensive equipment introduced (United States, Europe, and Australia)	1,361 units	1,590 units (per year)
	• Sites adopting SMARTCONSTRUCTION	2,440	4,850 (per year)
	• Automation, autonomous operation, electrification, and remote-controlling of equipment
	1. Automation of construction equipment	Verification tests conducted on user sites	Test introduction of hydraulic excavators for automated
	loading
	2. Automation, autonomous operation, and remote operation of mining equipment	Preparations advanced to launch mining bulldozer with	Entry into mining bulldozer market (level 4 automation)
	level 2 automation
	3. Automation of utility equipment	Development of peripheral safety technologies for	Development of technology for automated forklifts
	supporting automation
	4. Enhancement of mining equipment and hard rock mining businesses	Under development	Expansion of product series
	Agricultural solutions and smart forestry
		Japan: Commencement of verification tests at five	Japan: Expand lineup of agricultural loaders
	• Creation of construction equipment demand in agricultural field	agriculture business operators
	Indonesia: Increase number of users of agricultural
	Indonesia: Started mass production and sales of D31PLL
		techniques employing agricultural bulldozers
		agricultural bulldozer
	• Smart forestry projects	10	50
	IoT and ICT work reforms
	• Sales in KOM-MICS platform business (visualization of production equipment operation)	865 units	1,900 units (including for internal use)
	Development of a diverse workforce with a high level of productivity and technical skills
	• Enhancing employee engagement	Scheduled for FY2020	Improvement of global surveys and indexes
	• Work process reforms through expansion of diverse and flexible workstyles	(1) 1,950 workhours per person/year	Total workhours of less than 2,100; introduction of telework
	(2) Commencement of trial in August 2019	system (Japan)
	• Promotion of KOMATSU Way (global dissemination of KOMATSU Way)	•Training hours: 31,625 hours (aggregate hours for all participants)	Training hours and number of participants
	• Number of participants: 1,461 in Japan, 307 overseas
	Strengthening and development of diverse and global-scope talent to help achieve sustainable workplaces
	• Revision of role of Japan in global management	Human resource system revisions started in Japan	Shifting of human resources to projects and improvement
	activities; globalization of organizations on by-function basis
	• Foundations for global measures (systems, frameworks)	Preparations advanced for introduction	Introduction
	• Empowerment of female employees ((1) non-consolidated ratio of female employees,
	(2) non-consolidated ratio of female managers, (3) consolidated ratio of female managers	(1) 12.3%, (2) 7.2%, and (3) 4.5%	(1) 12.5%, (2) 10.0%, and (3) 5.0%
	(Japan))
	• Rate of employment of people with disabilities (comply with requirements in Japan)	2.58% (non-consolidated)	Above 2.3% (legally mandated rate)
	• Support for regional human resource development for job creation	• Human resource development program launched in Chile
	• Ongoing support provided in Peru, South Africa, and	Chile, Australia, South Africa, others
	(regional human resource development with Cummins Inc.)	Australia
		• Participants' success in finding employment tracked
	Development of talent with cross-value chain capabilities
	• Cultivation of SMARTCONSTRUCTION consultants (capable of proposing solutions	396	430 (aggregate)
	using ICT to improve productivity and safety throughout construction workplaces)
	Resolutions to social issues through collaboration with stakeholders
	• Promotion of industry-government-academia collaboration as well as of collaboration	Examination of cutting-edge tools through activities	Promotion of Brand Management and activities creating value
	with customers	with domestic customers and regional dissemination	for customers
	• Shareholders and individual investors (shareholder meetings, shareholder	• Shareholder meetings: 2 times
	• Shareholder factory tours: 10 times
	factory tours, individual investor meetings)	• Individual investor meetings: 7 times	Number of meetings held
		• Certain factory tours and meetings canceled due
		to impacts of global COVID-19 pandemic
	• Institutional investors (ESG meetings)	11 (ESG-related meetings)	Number of meetings held
		Business fairs at nine factories (Awazu, Osaka, Ibaraki,
	• Communities (business site fairs)	Kanazawa, Tochigi, Oyama, Koriyama, Shonan, and	One fair held at each of nine factories per year
	Himi); canceled only at Shonan Plant due to impacts of
		Typhoon Hagibis
	• Employees (meetings)	34 (30 in Japan, 4 overseas)	Number of meetings held
	Action as a responsible corporate citizen addressing corporate governance, compliance, and human rights
	• Occupational health and safety, support for establishing environmental and safety systems
	at suppliers, response to Japan's Corporate Governance Code (corporate governance	Establishment of Human Rights Policy, disclosure in	Ongoing improvements made in reflection of relevant laws
	reports), evaluations of effectiveness of Board of Directors, internal control, and internal	integrated report	and regulations and social expectations
	audits

32

33

Enhancing Quality of Life

-Providing Products Required by Society-

Climate Change Issues

Komatsu established the Komatsu Earth Environment Charter in 1992, launching proactive initiatives for addressing climate change and other environmental issues a step ahead of its peers.

The enactment of the Paris Agreement in 2016 sparked a rapid rise in the importance of initiatives for addressing climate change in the global society. As a global business operator, Komatsu recognizes that contributing to the transition to a low-carbon society is an important management issue in light of the increased frequency of abnormal climate events and natural disasters and changes in resource demand resulting from global warming.

In April 2019, Komatsu announced its endorsement of the recommendations of theTask Force on Climate-related Financial Disclosures (TCFD).Through climate change risk and opportunity assessments and scenario analyses based on these recommendations, we will pursue

increases our resilience toward climate change impacts. At the same time, we will advance climate change response measures through a healthy dialogue with stakeholders. Furthermore, we will supply high-quality,high-performance products, services, and solutions that are designed for reducing environmental impacts, particularly in relation to climate change, and for safety.

Komatsu's Business Model		Komatsu's Growth Strategies		Resolution of ESG Issues		Corporate Profile
		through Growth Strategies

Resolution of ESG Issues

Initiatives Based onTCFD Framework

Governance

Komatsu views climate change as an important management issue, and targets for combating climate change have been incorporated into its business strategies.

Discussions regarding climate change are held at meetings of the Earth Environment Committee, the Risk Management Committee, and the CSR Committee, and these committees make suggestions to the Strategy Review Committee and report to the Board of Directors, thereby furnishing a system of appropriate oversight.

Meanwhile, the Executive Meeting fulfills the function of managing progress toward targets.

Climate Change-Related Reporting and Deliberation System

Board of Directors

				提言	Report
	Strategy Review Committee
		Suggest	• Earth Environment Committee
						• Risk Management Committee
	Executive Meeting				• CSR Committee

Major Discussion Items Related to Climate Change

Name	Chairperson	Major Discussion Items Related to Climate Change
	Chairman of the	• Report from Earth Environment Committee (once a year)
	• Reports from research, development, and product planning divisions and the Chief
	Board and
Board of Directors	Technology Officer (once a year)
Representative
	• Reports from production and procurement divisions (once a year)
	Director
	• Mid-term management plan progress report (once a year)
Strategy Review	President	• Growth strategies for major plants (including climate change-related matters, five times a year)
Committee	• Report from Environmental Affairs Department (once a year)
Executive Meeting	President	• Progress in regard to product development and production systems (monthly)
• Climate change lectures by external specialists (once a year)
Name	Chairperson	Major Discussion Items Related to Climate Change
Earth Environment		• Deliberations and reports regarding important environmental matters and key
President	performance indicators (KPIs)
Committee
	• Reports on overall environmental frameworks and activities
Risk Management	Executive officer
supervising	• Reports on responses to natural disaster risks
Committee
general affairs
CSR Committee	President	• Initiatives for addressing ESG issues
• CSR activity reports

34

35

Resolution of ESG Issues

Strategies

Risk and Opportunity Identification

In FY2019, a total of 16 climate change-related risks and opportunities were identified for Komatsu, primarily in relation to construction equipment operations, based on the recommendations of theTask Force on Climate-related Financial Disclosures (TCFD). We then assessed internal factors, which impact sales and earnings, and external factors, which affect projected scenarios.Through this process, the 16 risks and opportunities were grouped based on four major themes.

Komatsu's Business Model		Komatsu's Growth Strategies		Resolution of ESG Issues		Corporate Profile
		through Growth Strategies

Changes in Resource Demand

	Risks	Opportunities
		• Rapid transition from fossil fuel-powered equipment to
	• Regulation of power generation using	electric equipment
2°C	fossil fuels	• Higher demand for copper and other resources
• Massive reductions in coal production	necessary for electric equipment (motors, batteries, fuel
scenario	volumes under IEA scenarios	cells, etc.)
	• Reduced sales to coal-related customers

Risks and Opportunities and Groupings

16 Risks and Opportunities

• Coal demand fluctuations

• Changes in reputation among

customers and investors

• Environmental regulations

•Trend toward electric equipment

• Subsidiaries for renewable energy

and energy conservation projects

• Substitute fuel technologies

• Next-generation technical services

(new market)

• Carbon prices

• Popularization of renewable energy

technologies

• Raw material prices

• Energy prices

• Recycling

Four MajorThemes

Changes in

resource demand

Transition to low-carbon products

Manufacturing

costs

• Reduced coal demand
• Increased resource demand related to electric equipment
• More stringent fuel regulations
• Progress in electrification and next-generation technologies
• Rising manufacturing costs due to higher carbon prices*

*CO2 taxation measures for reducing emissions

Maximized in 2°C scenario

			• Increased sales to copper and other relevant mining-
	by Komatsu	related customers by Komatsu in conjunction with trend
			toward electric equipment
	• Limited regulation of coal in developing nations	• Trend toward electric equipment less
4°C	• Coal production volumes in 2030 in line with	pronounced than in 2°C scenario
• Higher demand for copper and other resources
scenario	current levels under IEA scenarios
necessary for electric equipment
	• Reduced appetite for investment in coal mines
	• Rise in investment for streamlining mine operations
	Exploration of business opportunities arising from climate change through value creation by means of innovation and
	growth strategies based on innovation
	• Increased metal resource demand in conjunction with transition to electric equipment-Expansion of underground mining equip-
Strategies		ment operations
• Contribution to sustainable forestry-Provision of equipment and systems for streamlining processes spanning from
		afforestation to logging
	•	Contribution to rehabilitation of closed mine sites and greenification of deserts-Forest restoration projects at closed mine sites
		and forest machine operations
	•	Transition to circular economies-Expansion of equipment restoration ("Reman") business

Transition to Low-Carbon Products

	Risks		Opportunities
	• Regulations promoting transition to fuel-efficient	equip-	• Higher demand for electric, fuel-efficient, and bio-fuel equipment
2°C	• Expansion of equipment restoration ("Reman") business in
ment, electric equipment, and other low-carbon products
conjunction with transition to circular economies
scenario	• Rapid changes in research and development trends and
• Increased demand for SMARTCONSTRUCTION and other
	competitive climate and market entry by new competitors
	solutions contributing to decarbonization
Strategies	• Respond to transition risks by shifting toward low-carbon products through realization of the safe, highly productive, smart,
and clean workplaces of the future described in the mid-term management plan

• More frequent abnormal weather events

• Increased precipitation amounts and

weather patterns

• Higher average temperatures

• Rising sea levels

• Increased precipitation amounts

Natural	and flood risks	due to abnormal	Maximized in
weather
disasters		4°C scenario
• Higher demand in conjunction
	with national resilience plans

Manufacturing Costs
		Risks	Opportunities
2°C	• Taxation of fossil fuels and CO2 emissions
• Transfer of higher product purchase prices to Komatsu	• Increased competitiveness through production technologies that
scenario	• Rising power fees and energy costs following investment	reduce CO2 emissions
	in power generation facilities with low CO2 emissions
Strategies	• Mitigation of cost increases by achieving CO2 reduction and renewable energy targets defined in the mid-term management plan

Business Risks and Opportunities Based on Climate Change Scenarios

To gauge the potential impacts of climate change-related risks and	Concentration Pathways 2.6 and 8.5) and the Sustainable
opportunities on Komatsu's business, we performed scenario analy-	Development Scenario and Stated Policies Scenario of the
ses of the Company's four major risk and opportunity themes. For	International Energy Agency (IEA).
these scenario analyses, we defined a 2°C scenario and a 4°C sce-	The risks and opportunities pertaining to specific ESG themes
nario based on the Fifth Assessment Report of the	and Komatsu's strategies for addressing these risks and opportuni-
Intergovernmental Panel on Climate Change (Representative	ties are described on the following page.

Natural Disasters
		Risks		Opportunities
	• Increased frequency of heavy rain and floods	due to
4°C	abnormal weather
• Risks of disaster damages to Komatsu plants at high risk	• Increased demand for flood-control works
scenario	of flooding
	• Component supply delays following damages to suppliers
	from disasters
Strategies	• Institute heavy rain and flood countermeasures across the value chain

36

37

Resolution of ESG Issues

Risk Management Please refer to page 52 for information on the Company's risk management systems.

Indicators andTargets

Komatsu is mitigating climate change through its business by supplying high-quality,high-performance products, services, and solutions that include provisions for ensuring safety and reducing climate change-related environmental impacts.

The following three indicators and accompanying targets have been set in the mid-term management plan to facilitate the appropriate assessment and management of climate change-related risks and opportunities.

Climate Change-Related Indicators and Targets

Indicators	Targets
CO2 emissions from product use	Decrease by 50% in 2030 (Base year of 2010, basic unit)
CO2 emissions from production	Decrease by 50% in 2030 (Base year of 2010, basic unit)
Rate of renewable energy use	50% in 2030

Please refer to ESG Databook 2020 for more information. https://komatsu.disclosure.site/en/themes/149

VOICE Message from the CTO (Supervising Research & Development and Environment)

Komatsu's Business Model		Komatsu's Growth Strategies		Resolution of ESG Issues		Corporate Profile
		through Growth Strategies

TOPICS

Afforestation Projects Advanced Worldwide

Surface mining operations are subject to rigorous regulation to protect the environment as they develop resources. The mine rehabilitation process, which includes filling mine sites and restoring them for use in agriculture or as forests, entails a great deal of effort within the confines of this regulatory framework.

However, even such effort does not guarantee that former mine sites can be revived as sustainable forests. If the revegeta- tion process fails, the nutrition will be lost from the top soil, due to its reduced water-holding capacity, and the mine site will decay further.

Komatsu believes that human intervention is needed to break this downward spiral and assist in the forest restoration pro- cess. In addition to helping forge relationships with our mining customers, these efforts utilize our construction equipment and forest machines, making them a social contribution activity that is highly compatible with Komatsu's business.

North America-Originating Forest Restoration Projects

Spreading across the Globe

Komatsu's mid-term management plan puts forth environmental impact reduction targets pertaining to cutting CO2 emissions, which contribute

to mitigating climate change, and the increasing use of renewable energy. Approximately 90% of CO2 emissions from the lifecycles of Komatsu construction equipment, which span from production through to disposal, are attributable to the consumption of fuel during product use at active workplaces. Recognizing this fact, we are dedicated to lowering CO2 emissions from both production and product use.

Efforts to reduce CO2 emissions from production include utilizing ICT to carefully track product manufacturing processes and all of the energy used therein and identifying where energy is wasted in these processes. We are addressing this waste through steadfast small reforms to remove each and every source of energy waste as well as large reforms that entail transforming the very way we do our work. By tracking metrics pertaining to factors such as plant air-conditioning, lighting, and machinery, we are endeavoring to eliminate wastes and switch to more efficient equipment. These energy conservation efforts are being complemented by the increased use of renewable energy. Specific renewable energy initiatives include electricity generation using solar power and thinned wood as well as air-conditioning systems that take advan-

Yuichi Iwamoto

Senior Executive Officer

Chief Technology Officer (CTO)

Supervising Research & Development and Environment

encourage them to use their equipment more efficiently. Meanwhile, the SMARTCONSTRUCTION solution monitors conditions throughout construction workplaces to propose more efficient construction methods and allows

Komatsu's involvement in forest restoration projects can be traced back to projects launched in North America in April 2019. Through one of these projects, we are working to rehabilitate a mine site spanning 1,000 acres (4 square kilometers) in West Virginia over a period of three years. Komatsu provides monetary support, renting equipment, and dispatching employee volunteers for tree planting activities in this project (see KOMATSU REPORT 2019 for details). In FY2019, we planted 50,000 trees across a 93-acre (0.4 square kilometers) stretch of the former mine site.

In March 2020, another forest restoration project was launched in Australia through collaboration between major mineral resource company Anglo American PLC and Komatsu Australia Pty. Ltd. and Komatsu Mining Corp. The current goal of this project is to plant more than 9,000 trees at the former site of Anglo American's Dawson Mine to restore the forest of this site using indigenous tree species and with an eye to converting parts of the site to farmland. At the kickoff event held in March 2020, a total of 120 people, including employees of the three companies, local residents, and elementary school students, gathered to plant 4,000 trees in a single day.

Kickoff event held in Australia in March 2020 at which a total of 120 people gathered to plant 4,000 trees in a single day

tage of differences in temperature between air and underground water.

To reduce CO2 emissions from product use, Komatsu is utilizing its proprietary technology development and production systems to improve efficiency with regard to engines and hydraulic, electronic, and other components. These efforts have led to the reduction of CO2 emissions through the introduction of the world's first hybrid system for construction equipment. Through ongoing development and improvement measures driven by proprietary technologies, we seek to further reduce the CO2 emissions from Komatsu products. For example, we have been promoting the electrification of our products and have launched compact battery-powered forklifts and, more recently, electric mini excavators that do not emit CO2.

Our attempts to improve the fuel efficiency of our products are not limited to performance enhancements to the products themselves; we are also utilizing Internet of Things (IoT) technologies obtained through open innovation to reduce fuel consumption by tracking conditions across active work- places. For example, KOMTRAX includes a function that provides customers with operating status and fuel efficiency improvement recommendations to

us to provide solutions for optimizing customer workplaces.

We are also pursuing CO2 reductions in the forest machine business, which has been identified as a core theme of the mid-term management plan. In this business, we see potential to cut emissions by delivering products with superior safety and productivity to realize recycling-oriented forestry, a woodland management approach entailing a cycle of planting, cultivating, and felling forests. Accordingly, as part of our social contribution activities, we have been participating in forest restoration projects to greenify the sites of mines at which the excavation of underground minerals has been completed.

Komatsu does not view climate change response measures exclusively in terms of the related risks. Rather, we see these measures as representing prime opportunities to create new businesses. For example, we could create businesses that enable us to improve the value of customer workplaces through the provision of solutions that take advantage of products and open innovation capitalizing on the strength of our ability to develop and produce key components in-house.

In Europe, we have partnered with Belgium-based NPO Tree-Nation ASBL, which specializes in afforestation, and we are conducting donation campaigns to fund the afforestation activities this NPO is advancing on five continents. A major characteristic of this initiative is that it allows

donators to check the progress in the tree planting activities they funded and confirm the resulting CO2 absorption volume via a smartphone application. European Komatsu Group companies are soliciting donations on various occasions via the efforts of employees as well as collaboration with partners to contribute to the restoration of forests.

Carbon Offset Initiatives

The forests to be restored through the on-schedule advancement of forest restoration projects in North America and Australia should absorb an estimated value of approximately 2,000 tons of CO2 each year. Komatsu anticipates that the spread of its forest restoration projects will have the positive benefit of mitigating climate change.

38

39

Resolution of ESG Issues

Developing People

Founder MeitaroTakeuchi established Komatsu Ltd. in Komatsu City, Ishikawa Prefecture roughly a century ago. Having witnessed Europe's cutting-edge technologies at that time,Takeuchi put forth the four management principles of global expansion, quality first, technological innovation, and human resource develop- ment.The commitment to the development of human resources, an invaluable asset to Komatsu, lives on in the Company today.

Komatsu's Business Model		Komatsu's Growth Strategies		Resolution of ESG Issues		Corporate Profile
		through Growth Strategies

The KOMATSU Way

The KOMATSU Way is the very DNA of Komatsu, an expression of the strengths of Komatsu, the beliefs supporting these strengths, the basic attitudes, and patterns of behaviors established based on the experiences of our predecessors as they proceeded to tackle the challenges facing them.

Komatsu seeks to develop its operations on a global scale and to become a stronger company and grow. To

Employees Supporting

Komatsu as a Global

Company

Japan Overseas

32% 68%

Komatsu Technical Institute lesson

Japan Overseas

6% (13) 94% (206)

accomplish these objectives, it will be crucial for us to transmit the KOMATSU Way to employees with different cultures and customs around the world and to implement these principles in a manner that aligns employees along the same vector. To spread understanding of the KOMATSU Way among all employees worldwide, we published the third edition of the K-Way booklet in 2019. This booklet is being utilized in human resource development through training programs, improvement activities, and daily communication.

Komatsu develops its operations around the world, and approximately 70% of its employees are not Japanese. Accordingly, developing human resources that are rooted in the communities they serve while promoting mutual acceptance of the values and cultures of various countries and regions is becoming increasingly important. Operations around the world must be instilled with Komatsu's manufacturing competitive- ness, which includes the values that support Komatsu and the workplace improvement, driven by employees.

Number of

Employees

62,823

(consolidated)

(as of March 31, 2020)

Number of

Consolidated

Subsidiaries

219

(as of March 31, 2020)

1 Leadership/ Top Management

Leaders must be directly involved in the workplaces and manage businesses with an emphasis on contributing to the entire Group, including distributors and suppliers. We have also defined guidelines for leaders related to actively engaging in regular board meetings, communicating with stakeholders, complying with rules of the business community, managing risks, and grooming successors for management positions.

2 "Monozukuri" for All Employees

Komatsu aims to pass on the manufacturing competitiveness, perspectives, and values that, based on total quality management, have continued to drive Komatsu's competitiveness and support its growth. We look to transmit these principles through a joint effort encompassing all internal divisions as well as our suppliers, distributors, and other partners and to continue promoting involvement by all of these parties.

3 Brand Management

(Customer Value Creation Activities)

Komatsu defines "Brand Management" as all the activities that "make Komatsu indispensable to our customers." This objective is accomplished by visiting customer workplaces to understand the ideal state of these customers and to build relationships that enable us to work together with them to help achieve their goals through concerted efforts by the Group and its distributors.

VOICE Message from the General Manager of the Human Resources Department

	The ongoing growth of a company is driven by its people, or its employees,	Group, including at overseas
	and these people are thus its most important resource.	Group companies.
	A basic policy of human resource development at Komatsu is that	The global COVID-19 pan-
	senior managers and other leaders are expected to foster their successors	demic is spreading uncertainty of
	and other human resources capable of competing on the global stage	an unprecedented degree. We are
	through their own actions.	therefore pressed to make deci-
	At the same time, we are constantly working to improve group-wide	sions and act swiftly and flexibly in
	GEMBA capability (employee-driven, continuous improvement capability)	response to an ever-changing
	and support the career development efforts of individual employees. These	environment.
	efforts are carried out through a diverse range of human resource develop-	Currently, a large number of
	ment and personnel rotation programs advanced on a global scale.	our employees are being forced to
	Koichi Honda
	In recent years, employees of non-Japanese nationality have come to	telecommute. Regardless, we are
		Senior Executive Officer
	represent around 70% of our total employee base. In reflection of this fact,	maintaining close coordination		General Manager of the Human
	creating an environment where globally diversified employees can work	with our colleagues around the		Resources Department
		Supervising Education
	together as one solid team and make contributions to business growth has	world to remain up-to-date on the
	been positioned as a central tenet of our human resource strategies under	latest information. The health and safety of all of our employees and their
	the current mid-term management plan, and various initiatives are being	families remains our top priority throughout this process.
	implemented accordingly.	Meanwhile, on the front lines of business, our strength in enacting poli-
	Specifically, we are focused on the following four areas:	cies is being utilized to its fullest as middle managers play a central role in
	1. Enhancing global measures for recruiting and cultivating talented person-	amassing the capabilities of the relative divisions to resolve the issues and
	nel and managing staff (visualization of human resources)	problems faced at customer workplaces.
	2. Increasing diversity and empowering female employees (increasing ratio	Over the roughly one century since its founding, Komatsu has contin-
	of female employees and ratio of female managers)	ued to surmount countless trials, growing rapidly in the process. The global
	3. Improving employee health, engagement, and productivity through work-	COVID-19 pandemic presents a need for constant vigilance going forward.
	style reforms	Still, I am confident that, with the	KOMATSU Way sculpted by our forebear-
	4. Addressing birthrate decline and population aging in Japan	ers and the principles of SLQDC (Safety, Law, Quality, Delivery, and Cost)
40	In these areas, we are looking to heighten our capabilities across the	as our guide, we can come together to overcome this challenge as well.

Diversity & Inclusion Development Seminar for Cultivating Female Leaders on a Global Basis

In March 2019, a Diversity & Inclusion Development Seminar was held for female managers at Komatsu and at local overseas subsidiaries, and 15 individuals from 12 countries took part. Through this seminar, we hope that participants will deepen their understanding of the history of Komatsu, the KOMATSU Way, and management strategies, and become leaders promoting diversity initiatives at their companies.

Komatsu Technical Institute for Fostering Production Engineers

The Komatsu Technical Institute is an internal boarding school system that offers a program for fostering the distinctive production engineers that underpin our manufacturing competitiveness. At the Komatsu Technical Institute, junior engineers selected from the production sites of Group companies and affiliates take part in a structured, two-year education program while stimulating mutual growth through communal living. A new training facility was completed in February 2020, and it was also at this time that we began accepting employees from overseas subsidiaries into this program. As a result, the Komatsu Technical Institute now offers an even more diverse environment for cultivating future global production leaders.

AI Education for Developing Key Personnel for AI Field Coordination

Looking ahead, it can be anticipated that there will be growth in opportunities for business coordination with external partners in the field of artificial intelligence (AI). Based on this recognition, Komatsu launched dedicated programs for cultivating key personnel in the AI field in 2019.

Through the basic and advance programs, we are working to heighten the AI technological capabilities of our staff, foster key personnel in the field, identify pertinent themes from customer -oriented and business perspectives, and develop human resources capable of playing a central leadership role in internal and external coordination.

Discussion between participants and senior management

New Komatsu Technical Institute training facility at the Awazu Plant

Requirements of Key AI

Coordination Personnel

Technical Skill	Communication
Skills

Customer- Business

Oriented Perspective

Perspective

41

Resolution of ESG Issues

Growing with Society -Social Contribution Activities

Komatsu recognizes that social contributions to the communities in which it conducts its business activities are an important corporate responsibility. Komatsu defines the social contribution activities as activities related to its three CSR themes that are not directly aimed at generating earnings. Based on this definition, we seek to contribute to society in a manner that leverages the strengths of our core business.

Social Contribution Activities in FY2019

The following chart shows expenditures for social contribution activities by Komatsu Group aggregated based on six general categories.

Komatsu's Business Model		Komatsu's Growth Strategies		Resolution of ESG Issues		Corporate Profile
		through Growth Strategies

Social Support Activities in Response to the

COVID-19 Pandemic

Producing and Donating Medical Supplies in Collaboration with Business

Partners,The Komatsu Midori-kai

The COVID-19 pandemic has directly damaged our lives and health, but has also significantly impacted the economy, finance, medical infrastructure, and other aspects of society.

Members of donation recipient National Hospital

Academic and Industry-Academia Collaborations

Culture & Sports 26%

Disaster Relief 7%

22%

FY2019

Social Contribution

Expenditures (Consolidated)

¥2,136

million

Human

Resource Development 25%

Local

Community Support 17%

Environment 3%

In Japan, as the number of people infected by COVID-19 increased, the shortages of medical devices became a critical issue. Though we do not have the equipment or skills to produce medical devices, Komatsu has some assets, like long-time collaborative relationships with our business partners and our production and sales networks. By utilizing these assets, we have procured and donated isolation gowns and face shields, which are personal protective equipment (PPE) for medical workers for which there is particularly urgent need.

To procure them, we asked a Midori-kai member company to begin PPE produc- tion. At Komatsu, the staff of our production technology also participated in the activ-

Organization Osaka National Hospital

Type of Social Contribution Expenditure

Cash contributions	Employee dispatchment	Expense related to	Expense related to events	Total
	and time contributions	providing own facilities	for the community
		for public use
¥707 million	¥316 million	¥314 million	¥797 million	¥2,136 million

Commencement of Agricultural Support Project

Following Demining Project

ity to improve the strength of the parts, productivity, and the comfort of the PPE during the prototyping phase of the face shield.

After medical experts inspected the protective ability and comfort of the proto- types, 10,100 gowns and 8,000 face shields were produced. We distributed them to medical institutions around the nation for free through the NPO Peace Winds Japan and the government, of which part was funded by donations from our employees. In addition to the isolation gowns and face shields, Komatsu and our employees are carrying out the following support activities:

Through the personal network of our supplier, we also received support from a garment making vocational school in Nagano Prefecture. The teachers and students made 100 pieces of PPE from materials donated by a filter maker, one of Midori-kai member companies and donated them to the medical institutions in the region.

Since 2008, Komatsu has been engaging in collaborative efforts with the Japan Mine Action Service (JMAS) to support the demining of anti-personnel landmines in Cambodia and other areas threatened by these weapons. In addition to removing mines, we also provide reconstruction work, building roads and schools in demined areas, as part of a community development project. In January 2020, we embarked on a new project with JMAS. Through this project, Komatsu ICT-intensive bulldozers, wheel loaders, and hydraulic excavators will be deployed to Cambodia to provide agricultural support. This project represents a new step in our community development

efforts, which are shaped by local needs, in which we will use construction equipment to contribute to agriculture. For example, it is possible to increase rice yield by flattening out rough areas to make a smooth and level surface prior to planting. We therefore see the potential for ICT-intensive agricultural bulldozers equipped with automatic blade control functions to be used to increase rice production volumes by flattening direct-planting rice paddies to the greatest degree possible. We also anticipate that agricultural wheel loaders can be utilized in the production and harvesting of crops such as cas- sava, which has been the target of growing demand in recent years.

Country/Region		Major Activities
	• Donations equivalent to 350,000 dollars in total
USA	Breakdown:	• A 250,000-dollar joint donation with our employees to the hunger relief organization, Feeding
	America
		• 100,000 dollars donated to local communities
Chile	• Support for sanitation of streets using cistern trucks (in collaboration with the government)
India	• Donations equivalent to 10 million rupees (national or state welfare funds and technical training support for con-
struction equipment operators)
Europe	• Donations equivalent to 100,000 euros from our group companies in Europe (for medical and food-related purposes
depending on local needs, and support for multiple organizations)
Japan	• Donation of 100,000 N95 medical masks from our stock to the Red Cross, the government, medical institutions,
etc.

Business Partners-They are Invaluable to Komatsu

For manufacturers, business partners (the suppliers of materials, parts, and components) are important partners that support product

42

quality and reliability. Komatsu especially places great value on relationships with business partners and has grown together with	TOPICS
them throughout our long history. We have been thinking together with them and supporting each other, not only in terms of the pro-
curement of goods but also from the perspective of management and human resource development.
The Komatsu Midori-kai comprises 156 member companies that are the main suppliers in Japan. They supply approximately 80% of
the items we procure in Japan. Representatives of Midori-kai member companies and top Komatsu management participate in general con-
ferences and roundable discussions for managers, etc. to share policies and issues with each other. We also established regional Midori-kai
member comprises for China, North America and Europe. With the addition of the member companies of the Joint Associations of Business
Partners in Asia, the total number of overseas member companies exceeds 140.	43

Resolution of ESG Issues

Corporate Governance

Komatsu's Business Model		Komatsu's Growth Strategies		Resolution of ESG Issues		Corporate Profile
		through Growth Strategies

Basic Stance on Corporate Governance

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.

Activities of the Board of Directors

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 Komatsu, 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.

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.

Corporate Governance Framework

At the Company, the Board of Directors is positioned as the core of corporate governance, and to improve the effectiveness of discussions at meetings of the Board of Directors, the Company has worked to put in place a system to ensure thorough discussions of important management matters and prompt decision making, and reform their operational aspect. Having introduced the Executive

Officer (Shikko Yakuin) System in 1999, the Company has separated management decision making and supervisory functions from executive functions to the extent permitted by laws and regulations, and while appointing both Outside Directors and Outside Audit & Supervisory Board Members, limits the Board of Directors to a small number of members.

Characteristics of Komatsu's Board of Directors

• Monthly reports from the CEO (recent important items and other topics)
• Monthly reports from the CFO (performance, order trends, borrowings, etc.)
• Annual proposal plans and follow-up

• Multiple discussions on important items (deliberation → resolution)

• Business reports to Board of Directors covering nearly 100% of sales-generating activities
• Proactive expression of opinions by Audit & Supervisory Board Members in addition to Directors
• Opportunities for free discussion at Board of Directors meetings

Board of Directors Meeting Attendance and Agenda Item Numbers in FY2019 (April 1, 2019-March 31, 2020)

	Outside Directors	100%
Attendance	Outside Audit &	100%
	Supervisory members
Agenda item	Reports	45
Deliberations,
numbers	28
	Resolutions
Free discussion		2 times

Corporate Governance of the Company (As of June 30, 2020)	Figures in represent the number of meetings in FY2019.

				General Meeting of Shareholders
	Elect / Discharge			Elect / Discharge		Elect / Discharge
		15	Audit		15
	Audit &	times		times	Audit reports
			Accounting Auditors
Supervisory Board	Office of				(Audit corporation)
(Standing 2 / Outside 3)
Corporate	Board of Directors	Recommend
			Human Resource	3
			Auditors' Staff	(Standing 5 / Outside 3)
Collaboration			Advisory Committee	times
Audit			Advise / Suggest		Recommend	Compensation Advisory	1
	International
					Committee	time
		Advisory Board
		Elect / Discharge /
				Report / Submission
				Supervise

					Executive Functions
					President and CEO					Major Committees
Internal
Auditing										Product Safety Committee
Dept.			Strategy Review Committee				Compliance Committee
											Risk Management Committee
											Export Control Committee
			Komatsu Group's Global Operations
		Internal audit		Earth Environment Committee
		Executive Officers and Global Officers 60		CSR Committee
			• Japan 32		Disclosure Committee
			• Global 28 (including 19 foreign nationals)

Evaluation of the Effectiveness of the Board of Directors

The Company is working to improve the effectiveness of the Board of Directors and performs annual evaluations and analyses of the effectiveness of the Board of Directors for this reason.

Evaluation Process

Survey

Collection of survey

Discussion among

Report of discussion

After discussion by the Board of

results from all Directors

Outside Directors and

results, evaluation and

Directors on the method to be used

and Audit & Supervisory

Outside Audit &

analysis of effectiveness,

for FY2019 evaluation, based on the

Board Members

Supervisory Board

and discussion of the

method applied in the previous year

and the results thereof, the Company

Members based on

matters for improvement

conducted a survey out of consider-

survey responses

at meeting of the Board

ation for the nature of an effective

of Directors

Board of Directors.

• Composition of the Board of Directors

• Structure through which important matters are reported,

Survey Topics:

• Contents of agendas

proposed, and followed up

• Straightforward and meaningful

• Succession plans for CEO

discussions

• Other items

• Provision of information and presentation of

agendas by executives

Collaboration

Decide on the details of the items including election and discharge / Confirm suitability or independency of the Accounting Auditors

Recommend

Audit reports

Outline of the 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.

44

45

Resolution of ESG Issues

Corporate Governance

Komatsu's Business Model		Komatsu's Growth Strategies		Resolution of ESG Issues		Corporate Profile
		through Growth Strategies

Major Activities of Outside Directors and

Outside Audit & Supervisory Board Members in FY2019

Corporate Governance Reforms

The Company has proceeded to implement reforms to its corporate governance system in order 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 deci-

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. Going for-

Outside Directors

Masayuki Oku			Mitoji Yabunaka			Makoto Kigawa
	Major Career				Major Career				Major Career
Representative Director of Sumitomo			Vice-Minister for Foreign Affairs			Representative Director at bothYamato
Mitsui Banking Corporation							Holdings Co., Ltd. andYamatoTransport
									Co., Ltd.

sion 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. As a means to

ward, the Company will pursue increases to the effectiveness of the Board of Directors while appointing Outside Directors to ensure transparency and soundness and promoting openness and accountability in management.

Attendance to the Meetings

Meeting of the Board of Directors 100%

(15 meetings out of the 15 meetings held)

Mr. Masayuki Oku previously served as Representative Director of Sumitomo Mitsui Banking Corporation. During the fiscal year ended March 31, 2020, based on his rich experience in the business world, he provided comments at the meetings of the Board of Directors concerning such issues as product and service demand trends, busi-

Attendance to the Meetings

Meeting of the Board of Directors 100%

(15 meetings out of the 15 meetings held)

Mr. Mitoji Yabunaka previously served as Vice- Minister for Foreign Affairs. During the fiscal year ended March 31, 2020, based on his standpoint as a specialist in international affairs, he provided comments at the meetings of the Board of Directors concerning such issues as market conditions in the Asian region, development of emerging markets and

Attendance to the Meetings

Meeting of the Board of Directors 100%

(15 meetings out of the 15 meetings held)

Mr. Makoto Kigawa previously served as Representative Director at both Yamato Holdings Co., Ltd. and Yamato Transport Co., Ltd. During the fiscal year ended March 31, 2020, based on his rich experience in the business world, he provided comments at the meetings of Board of Directors concerning such issues as the utilization of new

Board of Directors

	1999:	2003:	2005:	2017:
28 members	8 members	8 members	10 members	8 members

ness strategy and utilization of AI. In addition, he was a member of the Company's Human Resource Advisory Committee and the Compensation Advisory Committee.

environmental measures. In addition, he was a member of the Company's Human Resource Advisory Committee.

technologies, information disclosure policies and ICT strategies using platforms. In addition, he was a member of the Company's Human Resource Advisory Committee.

(0 Outside Directors)	(1 Outside Director)	(2 Outside Directors)	(3 Outside Directors)	(3 Outside Directors)
Audit & Supervisory Board
	Audit & Supervisory Board (1994)
1999:
3 members	1994: 4 members			2006: 5 members
(1 Outside Audit &
(2 Outside Audit & Supervisory Board Members)	(3 Outside Audit & Supervisory Board Members)

Outside Audit & Supervisory Board Members

Hirohide Yamaguchi			Eiko Shinotsuka
	Major Career				Major Career
Deputy Governor of the Bank of Japan			Professor Emeritus, Ochanomizu
					University, Commissioner, National
					Personnel Authority, Member of the Bank
					of Japan's Policy Board

Kotaro Ohno

Major Career

Prosecutor-General, Special Counsel, Mori Hamada & Matsumoto

Supervisory
Board Member)
Other organizations and systems	Executive Officer System (1999)

Global officers (2016)

Compensation Advisory Committee (1999) 4 outside members, 1 standing member

Human Resource Advisory Committee (2015)

3 outside members, 2 standing members

International Advisory Board (1995) 3-4domestic and overseas experts

Hitech & Innovation International

Advisory Board (2015) 4-6overseas experts

Compliance Committee (2001)

Members of senior management and labor representatives

Attendance to the Meetings

Meeting of the Board of Directors 100%

(15 meetings out of the 15 meetings held)

Meeting of the Audit & Supervisory Board 100%

(15 meetings out of the 15 meetings held)

Mr. Hirohide Yamaguchi previously served as Deputy Governor of the Bank of Japan. During the fiscal year ended March 31, 2020, based on his professional standpoint, he provided comments at the meetings of the Audit & Supervisory Board and the meetings of the Board of Directors concerning such issues as M&A risks, inventory management and audit systems. In addition, he was a member of the Company's Compensation Advisory Committee.

Attendance to the Meetings

Meeting of the Board of Directors 100%

(15 meetings out of the 15 meetings held)

Meeting of the Audit & Supervisory Board 100%

(15 meetings out of the 15 meetings held)

Ms. Eiko Shinotsuka possesses wide-ranging knowledge and experience in fields such as economics, labor relations and law. During the fiscal year ended March 31, 2020, based on her professional stand- point, she provided comments at the meetings of the Audit & Supervisory Board and the meetings of the Board of Directors concerning such issues as the compliance system, securing and utilizing human resources, and mental care for employees. In addition, she was a member of the Company's Compensation Advisory Committee.

Attendance to the Meetings

Meeting of the Board of Directors 100%

(15 meetings out of the 15 meetings held)

Meeting of the Audit & Supervisory Board 100%

(15 meetings out of the 15 meetings held)

Mr. Kotaro Ohno possesses rich experience in the legal profession. During the fiscal year ended March 31, 2020, based on his professional standpoint, he provided comments at the meetings of the Audit & Supervisory Board and the meetings of the Board of Directors concerning such issues as legal compli- ance, internal reporting system and risk manage- ment. In addition, he was an observer of the Company's Compliance Committee.

Internal

Composition of Directors and Audit & Supervisory Board Members (As of June 30, 2020)

Introduction of New Outside Directors

In conjunction with the resignation of Masayuki Oku and Mitoji Yabunaka, the following two new directors were appointed at the General Meeting of Shareholders held in June 2020.

Outside		Internal	Outside		Internal
3		5	3	Audit &	2
	Directors			Supervisory
Of whom,	Of whom,	Of whom,	Board
non-Japanese		women	women	Members
1		1	1

New

Takeshi Kunibe

New

Arthur M. Mitchell

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. 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 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.

46

47

Resolution of ESG Issues

Corporate Governance

Activities of Advisory Committees

Komatsu's Business Model		Komatsu's Growth Strategies		Resolution of ESG Issues		Corporate Profile
		through Growth Strategies

Remuneration Systems

Committee Name	Human Resource Advisory Committee	Compensation Advisory Committee
Chairperson	Outside Director (Masayuki Oku)	External expert (Advisor: Tsuguoki Fujinuma, The Japanese
Institute of Certified Public Accountants)
		1 external expert (Advisor: Tsuguoki Fujinuma, The
	3 Outside Directors	Japanese Institute of Certified Public Accountants)
Members	(Masayuki Oku, Mitoji Yabunaka, Makoto Kigawa)	1 Outside Director (Masayuki Oku)
Chairperson of the Board	2 Outside Audit & Supervisory Board Members
	President	(Hirohide Yamaguchi, Eiko Shinotsuka)
		Chairperson of the Board
	Selection of next President and deliberation, resolution, and	Deliberation, resolution, and reporting to the Board of Directors
Purpose	reporting to the Board of Directors on human resource	and Audit & Supervisory Board on remuneration systems for
development methods, succession plans, and appointment	Directors, Audit & Supervisory Board Members, and Executive
	and dismissal of Directors	Officers to ensure objectivity and transparency
Meetings in FY2019	3	1
	• Selection and cultivation of candidates for next President
	• Proposal of Directors and Audit & Supervisory Board	• Monthly compensation levels for Directors and Audit &
Agenda items in	Members for FY2020	Supervisory Board Members in FY2020
•Terms of Directors and Audit & Supervisory Board Members	• Performance-based remuneration for Directors for FY2019
FY2019
• Composition of Outside Directors	(projections)
	• Concurrent positions held by Chairman of the Board and	• Evaluation methods for the mid-term management plan

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. Taking its reports and recommen- dations into consideration, the remuneration for Directors is deter- mined 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 exclud- ing 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 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.

Outside Directors, etc.

Composition of Remuneration of Directors and Audit & Supervisory Board Members

Succession Plans

One of the items contained in the Code of Conduct for Leadership/ Top Management that has been described in the KOMATSU Way since its establishment in 2006 is "continue to think about your succession plan."

In order to ensure that Komatsu's management values are transmitted to the next generation, the basic requirements for candidates for the position of President are discussed and clearly defined by the Human Resource Advisory Committee. In addition, successors for

important domestic and overseas positions up to and including that of the President are decided through the annual implementation of succession plans (see chart below).

Selected successors are assigned to challenging tasks and granted even larger roles in the organization to systematically develop them in an environment that encourages the pursuit of mutual growth.

		Basic Remuneration		Performance-Based Remuneration for a SingleYear	Performance-Based Remuneration
			Linked to Performance of Mid-Term
Internal		(Fixed Remuneration)			(Monthly Remuneration x 0-24 months)	Management Plan
						(Monthly Remuneration x 0-3 months)
Directors
	Monthly remuneration x 12 months			Bonus in Cash	Stock-Based Remuneration A	Stock-Based
				(1/3, in principle)	Remuneration B
			(2/3, in principle)*
				Restricted Stocks	Restricted Stocks
Outside		Basic Remuneration
	(Fixed Remuneration)
Directors					Not influenced by Company performance
and Audits		Monthly remuneration x 12 months

* The upper limit for Bonus in Cash is set at 12 months' worth of monthly remuneration; the remainder of bonuses is to be paid as Stock-Based Remuneration A.

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

Overview of Succession Plans

Results Feedback

Succession Plans	Evaluation and Selection of	Human Resource Relocations
Successors	and Cultivation

Oversight of

Implementation Process

Board of Directors

Human Resource Advisory Committee

Key Points for Cultivating Leadership/Top Management Successors

1. Foster willpower necessary to overcome challenges by having candidates experience extremely difficult situations
2. Nurture organizational operation capabilities needed to unite parties with differing interests
3. Cultivate compliance awareness to prevent misconduct

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.

Management Indicators and Management Targets in Mid-Term Management Plan (FY2019-FY2021)

	Management Indicator	ManagementTarget
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
	• Reduction of environmental impact	• CO2 emissions: Decrease by 50% in 2030 from 2010
ESG	Renewable energy use: Increase to 50% of total energy use in 2030
• Evaluation by external organizations
	• Selected for DJSI*3 (World & Asia Pacific) and for CDP*4 A-list (Climate Changes and Water Risk), etc.
		• Keep a fair balance between investment for growth and shareholder return
Shareholder return	• Consolidated payout ratio	(including stock buybacks), while placing main priority on investment
		• Set the goal of a consolidated payout ratio of 40% or higher

*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.

48

49

Resolution of ESG Issues

Corporate Governance

Major Executive Committees

Committee Name (Committees indicated		Purpose	Meeting Frequency
with an asterisk [*] are chaired by the President.)
Product Safety Committee	Effective promotion of Companywide product safety activities based on basic	2 times a year and
product safety policies defined in product safety regulations	when necessary
Compliance Committee*	Discussion on and decision and execution of policies and important measures pertaining to	2 times a year and
group-wide compliance	when necessary
Risk Management
Primarily discussion and approval of group-wide risk management tasks and risk	1 time a year and when
Committee	countermeasures	necessary
Export Control Committee	Discussion on and decision and execution of policies and important measures regarding group-	1 time a year and when
wide export control (trade security management)	necessary
Earth Environment
Formulation of group-wide environmental measures and discussion of progress to	1 time a year
Committee*	facilitate promotion of environmental preservation throughout the Group
CSR Committee*	Discussion on and decision and execution of group-wide CSR policies and important	1 time a year
measures and activities
	Discussion and assessment to facilitate accurate information disclosure as required by the	4 times a year and
Disclosure Committee	Financial Instruments and Exchange Act and submission of recommendations to internal
when necessary
	information­	control representatives regarding judgments on material developments
KOMATSU Way	Discussion on and decision and execution of policies and important measures regarding human
resources, labor affairs, education and human resource development, the KOMATSU Way, total	2 times a year
Committee*	quality management, employee benefits, and occupational health and safety management for
	the Company and the Group

		Appointments of Advisors of the International Advisory Board
TOPICS		Komatsu established the IAB back in 1995 for the Board of Directors to incorporate, from external experts,
		objective advice and suggestions concerning management and operations of Komatsu as a global company.
		The IAB has met a total of 35 times in the conventional and new organizations combined. In April 2020,
		Komatsu is going to start the 8th the session of the IAB for Management of the IAB with the following new

advisors. The term of service for each advisor is set at three years as a general rule.

Komatsu will continue to incorporate advice and suggestions from IAB members with expertise in global business, further improve management and strengthen its corporate governance in order to enhance its corporate value.

Name		Current Position and Brief Background
	2018-Present	Chairman of the Board, Elanco Animal Health
	2015-Present	Board of Directors, Edgewell Personal Care Company
R. David Hoover	2009-2018	Board of Directors, Eli Lilly and Company
	2000-2015	Board of Directors, Energizer Holdings, Inc.
	1996-2013	Board of Directors, Ball Corporation (Chairman, 2002-2013)
	2015-Present	Vice President Commissioner of PT Adaro Power
Kusmayanto Kadiman	2010-Present	President Commissioner of BFI Finance
2004-2009	The State Minister for Research and Technology of the Republic of Indonesia
	2001-2004	President of Bandung Institute of Technology (ITB)
	2006-Present	Chairman of the Board of Directors, F-Secure Corporation
Risto Siilasmaa		(He is the founder of F-Secure Corporation.)
	2012-May, 2020	Chairman of the Board of Directors, Nokia Corporation
	2010-Present	Visiting Professor, Ritsumeikan University
Mitoji Yabunaka	2014-June, 2020	Outside Director, Komatsu Ltd.
	2008-2010	Vice Minister, Ministry of Foreign Affairs

Komatsu's Business Model		Komatsu's Growth Strategies		Resolution of ESG Issues		Corporate Profile
		through Growth Strategies

Stakeholder Engagement

In order to gain more trust from all stakeholders, the Company is strengthening corporate governance and top management is practicing direct engagement with stakeholders.

Corporate Value = Total Sum of Trust Given to Us by Society and All Stakeholders

Share information on the Komatsu Group's vision and

Provide as many opportunities for engagement as

the issues it faces (employees, suppliers, distributors)

Society

possible and practice proper information disclosure

to facilitate understanding of Komatsu

Distributors

Suppliers

Employees

Customers

Shareholders

Investors and

Mass media

Communities

Analysts

Distributor

Midori-kai

Meetings with

Visits from top

General Meeting of

Visits to investors

Interviews

Meetings with

meetings

General

the president

management

Shareholders

worldwide

mayors,

meetings with

Shareholder meetings

Analysts meetings

governors, etc.

management

Financial results

briefings

Direct Communication by Top Management

Major Investor Relations Activities in FY2019

To further improve the transparency of management for our shareholders and investors, we disclose information in a fair and timely manner and actively engage in investor relations activities by holding meetings with shareholders and investors.

For Institutional Investors	For Shareholders and	Homepage
	Individual Investors

Financial results briefings (4 times)	Shareholder meetings (2 times)	Financial information
Small meetings (7 times)	Factory tours for shareholders (10 times)	• Financial results briefings
Business briefings (2 times)	Individual investor meetings (7 times)	• Sales and profits gains reports
Business site tours (1 time)	Gifts of appreciation for long-term	• Quarterly reports, etc.
Overseas investor relations activities	shareholders	Web interviews with the president (4 times)
(5 times; approx. 70 companies)	* Certain tours and briefings have been cancelled	KOMATSU REPORT, etc.
Individual meetings (over 240)	as a result of the global COVID-19 pandemic.

Engagement Topics

Komatsu holds meetings with institutional investors and securities analysts to deepen their understanding of the Company.

Date	Meeting Name	Attendants		Contents
September 18, 2019	Investors	39	(1)	Komatsu business development in Africa and (2) Komatsu's digital transformation strategy
Meeting
December 11, 2019			(1)	Solving ESG issues in the new mid-term management plan, (2) KOMATSU REPORT 2019 /
ESG Meeting	40		corporate governance, and (3) KOMATSU REPORT 2019 / Komatsu's social contribution
				activities

WEB

For materials from meetings held in FY2019, please refer to Komatsu's corporate website:

https://home.komatsu/en/ir/library/results/1203311_1764.html

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51

ESGResolutionの課題解決 of ESG Issues

Corporate Governance

Risk Management

Komatsu's Business Model		Komatsu's Growth Strategies		Resolution of ESG Issues		Corporate Profile
		through Growth Strategies

Establishing a business continuity plan (BCP) and providing training

Basic Principles and Structure for Risk Management

Komatsu has established business continuity plans (BCPs) for individ-

swift decisions by senior management should a disaster strike.

In addition to the basic policy for risk management to ensure business continuity and stable development, Komatsu has established Risk Management Rules to correctly recognize and manage risks.

Komatsu has established a Risk Management Committee to devise relevant policies for the entire Group, review the risk management system, and evaluate and improve upon response measures in place for each risk, as well as to take control of risks when they arise. The committee regularly reports on its deliberations and

We are developing risk reporting lines, preparing related manuals and making other efforts to further improve the risk management system of the entire Group, including overseas subsidiaries.

We have reflected climate change risks in this system for management.

ual bases and conducts initial response training drills to prepare primarily for earthquakes. At production bases, we implement measures to reinforce the seismic resistance of structures and production equipment while implementing countermeasures to safeguard against water and wind damage from concentrated heavy rains and other weather events in order to minimize the impacts of increasingly more severe natural disasters. Moreover, the disaster response reporting chains and standards for frontline sites have been clarified to facilitate

We are focused on not only strengthening the BCPs of Komatsu Group but also on strengthening the supply chain system through support of our business partners. Recent initiatives to this effect have included holding nationwide seminars on initial disaster responses and hazard map use led by experts on these subjects. Several partners were invited to take part in these seminars.

Going forward, we will continue to promote and enhance our Groupwide BCP initiatives.

activities to the board of directors.

Komatsu will establish an emergency headquarters when

serious risks occur and implement appropriate measures to minimize damage.

Recent Natural Disasters and Response Measures

1995	2007		2011		2018	2019
	Great Hanshin Earthquake			Chuetsu Offshore Earthquake		Great East Japan Earthquake		Heavy Rain in West Japan		Typhoon Hagibis
	• Initial response manual devel-			• Business continuity manual		• Group-wide deployment of		• Reconfirmation of natural disaster risks and coun-
					termeasure development
	opment for ensuring safety			development		response measures
					• Improvement of BCP implementation procedures at
	• Preparation of disaster			• Preparation of BCPs for			• Installation of equipment and
	response manuals			specific bases			communications infrastructure			Komatsu Group and business partners
	• Formulation of risk-related			• Establishment of headquar-		• Establishment of base-specific		• Improvement of BCP implementation procedures at
					individual bases
	regulations			ters BCP drill regulations		BCP drill regulations
					• Establishment of BCPs for business partners regulations

Risks Surrounding the Company

Risk Management System

Board of Directors

Hazard Risk

Report as

Risks of natural disasters and other

Review

needed

regularly

President

Report

disasters caused by external

regularly

factors

ManagementRiskforManualBasic

RulesManagementRisk

Risk Management Committee​

Operational Risk

(When serious risks are exposed:

Emergency Headquarters)

Inherent risks associated with cor-

Risk Management Committee

porate activities such as the viola-

tion of laws and scandals

Executive Office

(Administration Department)

Strategy Risk

Primary division responsible for each risk​

• Identify and review risk recognitions

Risks related to the significant

• Perform activities to prevent risks and minimize

change of social situations and

their effects

business uncertainties

•Take action when a risk is exposed

Each division and each Group company​

Financial Risk

Expert committees

Risks related to finance including

• Product Safety Committee

• Compliance Committee

fluctuations in interest rates and

• Export Control Committee

• CSR Committee

stock prices

• Earth Environment Committee, etc.

Response to the COVID-19 Pandemic

With the safety and health of our customers, partner companies, people in local communities, and our employees and their families set as our priority, the Komatsu Group is striving to prevent the spread of the COVID-19 pandemic based on the government policies in each country.

To fulfill our responsibilities to customers involved in businesses that support social infrastructure (essential businesses), we have continued to supply products, parts, and services to our customers while thoroughly taking measures to prevent infection.

In the middle of March, we determined that we had entered the Infection and Pandemic phase, a management item in the Basic Manual for Risk Management, and set up an emergency

					Management of
Government					the physical		Avoid the			Hygiene
policy					condition of		three C's			measures
					employees

headquarters with our president as its Chairperson. Since the state of emergency was declared in Japan in April, we have carried out remote meetings almost every day that include the president, internal directors, and the heads of functions to share the latest information about the situation at the global level and determine the correct actions to take. In addition, the president has also regularly reported this information and these actions to the board of directors.

We have posted news releases on our website to keep all stakeholders updated on the status of our mask donation and other support activities, our global production activities, and other matters as needed. We will continue to exercise accountability toward stakeholders through timely and appropriate information disclosure going forward.

Measures appropriate to the phase and local situation

Safety and security of employees

Sustainable measures

Compliance

The Company shall establish the "Compliance Committee" as

establishment of the Compliance Department. Through all of these,

Response to Climate Change

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 all Directors and employees thorough compliance to business rules as well as laws 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

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.

Approximately 90% of the CO2 emissions associated with Komatsu Group's operations are attributable to product operation. Accordingly, we have the potential help mitigate climate change by providing low- carbon products and solutions. However, if efforts to deliver such offerings do not conform to the regulatory requirements of the relevant countries or with the demands of markets, we will risk suffering future impacts to our earnings. For this reason, Komatsu has set the goal of halving the CO2 emissions from product

operation by 2030, and R&D activities are being advanced toward the accomplishment of this goal (response to transition risks). Meanwhile, the rise in natural disasters associated with climate change is creating risks of damages to the Company and its supply chain. We are therefore taking steps to identify the water-related risks threatening the Company and its supply chain while instituting BCP drills and other measures to mitigate these risks (response to physical risks).

52

53

Komatsu's Business Model		Komatsu's Growth Strategies		Resolution of ESG Issues		Corporate Profile
		through Growth Strategies

Corporate Profile

Directors and Audit & Supervisory Board Members

Directors

Chairperson of the Board and

President and Representative Director, and CEO

Director and Senior Executive Officer

Director and Senior Executive Officer

Representative Director

Hiroyuki Ogawa

Masayuki Moriyama

Kiyoshi Mizuhara

Tetsuji Ohashi

President of Mining Business Division

President of Construction Equipment Marketing

Division

Number of Year (s) in Office

11 years

Number of Year (s) in Office

2 years

Number of Year (s) in Office

1 year

Number of Year (s) in Office

1 year

Attendance to the Meetings of the Board of Directors

Attendance to the Meetings of the Board of Directors

Attendance to the Meetings of the Board of Directors

Attendance to the Meetings of the Board of Directors

15/15 (100%)

15/15 (100%)

11/11 (100%)

11/11 (100%)

Number of Shares of the Company Held

Number of Shares of the Company Held

Number of Shares of the Company Held

Number of Shares of the Company Held

151 thousand shares

55 thousand shares

52 thousand shares

35 thousand shares

Important Concurrent Positions Held in Other Organizations:

Important Concurrent Positions Held in Other Organizations:

Important Concurrent Positions Held in Other Organizations:

Important Concurrent Positions Held in Other Organizations:

Outside Director of Yamaha Motor Co., Ltd.

None

None

None

Special Interests Between the Candidate and the Company:

Special Interests Between the Candidate and the Company:

Special Interests Between the Candidate and the Company:

Special Interests Between the Candidate and the Company:

None

None

None

None

4/1977 Joined the Company

4/1985

Joined the Company

4/1982 Joined the Company

4/1983 Joined the Company

4/2019 Took office as Chairperson of the

Board and

4/2019

Took office as President and

Representative Director

6/2019 Took office as Director and Senior Executive

Officer

6/2019 Took office as Director and Senior Executive

Officer

Representative Director (current)

(current) CEO (current)

(current)

(current)

Director and Senior Executive Officer

Outside Director

Outside Director

Outside Director

Kuniko Urano

Makoto Kigawa

Takeshi Kunibe

Arthur M. Mitchell

NEW

NEW

Supervising Safety & Health Care, Corporate

Communications, and CSR

Number of Year (s) in Office

2 years

Number of Year (s) in Office

4 years

Number of Shares of the Company Held

None

Number of Shares of the Company Held

None

Attendance to the Meetings of the Board of Directors

Attendance to the Meetings of the Board of Directors

Important Concurrent Positions Held in Other

Important Concurrent Positions Held in Other

15/15 (100%)

15/15 (100%)

Organizations:

Organizations:

Number of Shares of the Company Held

Number of Shares of the Company Held

None

Chairman of the Board of Sumitomo Mitsui Financial

Foreign lawyer of White & Case LLP

34 thousand shares

Important Concurrent Positions Held in Other

Group, Inc.

Outside Director of Sumitomo Mitsui Financial Group,

Important Concurrent Positions Held in Other Organizations:

Organizations:

Outside Member of the Board of TAISHO

Inc.

None

Special Advisor of Yamato Holdings Co., Ltd.

PHARMACEUTICAL HOLDINGS CO., LTD

Special Interests Between the Candidate and the Company:

Special Interests Between the Candidate and the Company:

Outside Director of Seven Bank, Ltd.

Outside Auditor of Nankai Electric Railway Co., Ltd.

None

None

Outside Director of Oki Electric Industry Co., Ltd.

Special Interests Between the Candidate and the Company:

Outside Audit & Supervisory Board Member of The Higo

None

7/1976

Registered as attorney at law in New York State,

4/1979

Joined the Company

Bank, Ltd.

USA (current)

6/2018

Took office as Director and

Senior Executive Officer

Special Interests Between the Candidate and the Company:

4/1976

Joined The Sumitomo Bank, Ltd. (currently

1/2003

Took office as General Counsel of

Asian

(current)

None

Sumitomo Mitsui Banking Corporation, hereinafter

Development Bank

the "SMBC")

9/2007

Joined White & Case LLP

4/1973

Joined The Fuji Bank, Limited (currently Mizuho

6/2003

Took office

as

Executive

Officer of

SMBC

1/2008

Registered as registered foreign lawyer in Japan

Bank, Ltd.)

10/2006

Took office

as

Managing

Executive

Officer of SMBC

(current)

4/2004

Took office

as Managing Director, Chief Risk Officer /

4/2007

Took office

as

Managing

Executive

Officer of

Registered foreign lawyer of White & Case LLP

Head of Risk Management Group, and Chief

Sumitomo Mitsui Financial Group, Inc. (hereinafter

(current)

Human Resources Officer / Head of Human

"SMFG")

6/2020

Took office as Outside Director (current)

Resources Group of Mizuho Corporate Bank, Ltd.

6/2007

Took office

as

Director

of

SMFG

(currently Mizuho Bank, Ltd.)

4/2009

Took office

as

Director

and Senior

Managing

3/2005

Retired from Mizuho Corporate Bank, Ltd.

Executive Officer of SMBC

4/2005

Joined Yamato Transport Co., Ltd. (currently Yamato

4/2011

Took office

as

Representative

Director, President

Holdings Co., Ltd.)

and Chief Executive Officer of

SMBC

6/2005

Took office

as

Managing Director of Yamato

4/2017

Took office

as

Representative

Director and

Transport Co., Ltd. (currently Yamato Holdings Co.,

President of SMFG

Ltd.)

Retired from Director of SMBC

11/2005

Took office

as

Representative

Managing Director of

6/2017

Took office

as

Director

President

and

Yamato Holdings Co., Ltd.

Representative Executive Officer

of

SMFG

4/2006

Took office

as

Representative

Director

and

4/2019

Took office

as

Chairman

of the

Board of SMFG

Managing Executive Officer of

Yamato Holdings

(current)

Co., Ltd.

6/2020

Took office

as

Outside

Director (current)

6/2006

Took office

as Representative Director and Senior

Managing Executive Officer of

Yamato Holdings

Co., Ltd.

3/2007

Took office

as

Representative

Director

and

Executive Officer of Yamato Holdings Co., Ltd.

Took office

as

Representative

Director, President

and Executive Officer of Yamato Transport Co., Ltd.

4/2011

Took office

as

Representative

Director, President

and Executive Officer of Yamato Holdings Co., Ltd.

4/2015

Took office

as Chairman of the Board and

Representative Director of Yamato Holdings Co.,

Ltd.

6/2016

Took office

as

Director of the

Company (current)

4/2018

Took office

as Director and Chairman of Yamato

Holdings Co., Ltd.

(As of June 30, 2020)

6/2019

Special Advisor of Yamato Holdings Co., Ltd.

54	(current)

Audit & Supervisory Board Members

Standing Audit & Supervisory Board	Standing Audit & Supervisory Board
Member	Member
	Hironobu Matsuo		Terumi Sasaki
		NEW
Number of Shares of the Company Held	Number of Shares of the Company Held
	22 thousand shares		21 thousand shares
Important Concurrent Positions Held in Other Organizations:	Important Concurrent Positions Held in Other Organizations:
	None			None
Special Interests Between the Candidate and the Company:	Special Interests Between the Candidate and the Company:
	None			None
4/1982 Joined the Company	4/1983 Joined the Company
6/2017 Took office as Standing Audit & Supervisory Board	6/2020 Took office as Standing Audit & Supervisory	Board
	Member (current)		Member (current)

Outside Audit & Supervisory Board Member

Outside Audit & Supervisory Board Member

Outside Audit & Supervisory Board Member

Hirohide Yamaguchi

Eiko Shinotsuka

Kotaro Ohno

Number of Shares of the Company Held

0 shares

Number of Shares of the Company Held

0 shares

Number of Shares of the Company Held

0 shares

Important Concurrent Positions Held in Other Organizations:

Important Concurrent Positions Held in Other Organizations:

Important Concurrent Positions Held in Other Organizations:

Chairman of the Advisory Board of Nikko Financial

Professor emeritus at Ochanomizu University

Attorney at law, Special Counsel of Mori Hamada &

Intelligence, Inc. (currently Nikko Research Center, Inc.)

Special Interests Between the Candidate and the

Matsumoto

Outside Audit & Supervisory Board Member of Mitsui

Company:

None

Outside Director of AEON Co., Ltd.

Fudosan Residential Co., Ltd.

Outside Audit & Supervisory Board Menber of ITOCHU

Special Interests Between the Candidate and the

4/1993

Took office as Professor at Ochanomizu University

Corporation

Company:

None

4/2008

Took office as Professor emeritus at

Ochanomizu

Special Interests Between the Candidate and the

University (current)

Company:

None

4/1974 Joined the Bank of Japan

6/2015

Took office as Audit & Supervisory

Board Member

4/1976 Appointed as Prosecutor

10/2008

Took office as Deputy Governor

of Bank

of

Japan

of the Company (current)

3/2013 Retired from Bank of Japan

7/2009

Took office

as

Vice-Minister of Justice

7/2013

Took office as Chairman of the

Advisory

Board of

7/2012

Took office

as

Superintending Prosecutor

of Tokyo

Nikko Financial Intelligence, Inc. (currently Nikko

High Public Prosecutors Office

Research Center, Inc.) (current)

7/2014

Took office

as

Prosecutor-General of Supreme

6/2014

Took office as Audit & Supervisory Board

Member

Public Prosecutors Office

of the Company (current)

9/2016 Retired from the position of Prosecutor-General of

Supreme Public Prosecutors Office

11/2016 Attorney at law, Special Counsel of Mori Hamada

& Matsumoto (current)

6/2017

Took office

as

Audit & Supervisory Board

Member

of the Company (current)

Komatsu's Independence Standards for Outside Directors and Outside Audit & Supervisory Board Members can be found via the link below.

WEB	https://home.komatsu/en/ir/prole/corporate-governance/independence-criterion.html
	(As of June 30, 2020)

55

Corporate Profile

Executive Officers and Global Officers (As of June 30, 2020)

Executive Officers

			Norikatsu Nishiyama
Senior Executive Officer (Senmu)		Executive Officers
	Himi Plant Manager, Production Division

Komatsu's Business Model		Komatsu's Growth Strategies		Resolution of ESG Issues		Corporate Profile
		through Growth Strategies

Executive Officers (Global)Note: Executive officers overseas concurrently serve as global officers.

North America

South America

Asia/Oceania

Yuichi Iwamoto

Chief Technology Officer (CTO)

Supervising Research & Development and

Environment

Senior Executive Officers (Jomu)

Susumu Ueno

President, Japanese Domestic Marketing, Construction Equipment Marketing Division

Masaki Nobuhara

President, Production Division

Taiichiro Kitatani

Vice President, Construction Equipment

Marketing Division

GM, ICT Project Department GM, Project

Promotion Department

Naoki Fujita

Supervising Industrial Machinery Business Chairman of the Board, Komatsu NTC Ltd. (Part time)

Seiichi Fuchita

President, Development Division

Yoshiharu Sato

President, Quality Assurance Division

Kazuya Kuriyama

President, Procurement,

Production Division

Kazuaki Miura

Vice President, Japanese Domestic

Marketing, Construction Equipment

Marketing Division

President, Komatsu Customer Support

Japan Ltd.

Takeshi Horikoshi

Chief Financial Officer (CFO)

Koichi Honda

GM, Human Resources Department Supervising Education

Keiko Fujiwara

GM, Department for Promotion of Distributor HR Development, Construction Equipment Marketing Division

GM, Business Reform Department, Construction Equipment Marketing Division

Chikashi Shike

President, Smart Construction

Promotion Division

Yasuo Suzuki

Vice President, Production Division (Responsible for Parts & Reman)

Nozomu Okamoto

Awazu Plant Manager, Production Division

Masami Naruse

Vice President, Development Division

GM, Vehicle Development Center 1,

Development Division

Takuya Imayoshi

GM, Business Coordination Department

GM, Komatsu Economic Strategy

Research Center

Kosei Okamoto

President, Product Marketing Division

Kenichi Tanaka

President, Defense Systems Division

Shinji Maeda

President, Information Strategy Division

Hiroshi Makabe

Supervising Legal, General Affairs & Compliance

Mitsuko Yokomoto

GM, General Affairs Department Responsible for Risk Management

Hidefumi Obikane

Oyama Plant Manager, Production Division

GM, Aftermarket Technology Development

Department

Toru Sunada

President, Service Division, Construction Equipment Marketing Division

Takayuki Furukoshi

Osaka Plant Manager, Production Division

Kenichi Sato

President, Aftermarket Business Division,

Construction Equipment Marketing Division

GM, Marketing Department, Aftermarket

Business Division, Construction Equipment

Marketing Division

Jun Taniguchi

Vice President, Development Division

GM, ICT System Development Center,

Development Division

Naoyuki Sakurai

Ibaraki Plant Manager, Production Division

Senior Executive Officers		Executive Officer			Executive Officer
Rodney Schrader	Yasuji Nishiura	Pratjojo Dewo S.
Chairman & CEO, Komatsu America Corp.	Representative of All Latin America*	President, PT Komatsu Indonesia
Jeffrey Dawes	Operations
President, Komatsu Cummins Chile Ltda.
President & CEO, Komatsu Mining Corp.
President, Komatsu Holding South America	China
Vice President, Mining Business Division
Ltda.
Korekiyo Yanagisawa	* "Latin America" does not include Brazil	Senior Executive Officer
EVP & COO, Komatsu Mining Corp.	Europe	Yasuhiro Inagaki
Ichiro Nakano	Representative of All China Operations
Vice President, Mining Business Division				Chairman, Komatsu (China) Ltd.
Senior Executive Officer
Technical Director, Modular Mining
Systems, Inc.	Masatoshi Morishita
Executive Officers
				President & CEO, Komatsu Europe
				Quanwang Zhang
				International N.V.
Executive Officers
				President & CEO, Komatsu(China) Ltd.
Taisuke Kusaba
			Takashi Yasukawa
Executive Officer
President & COO, Komatsu America Corp.
	President, Production & Procurement Division,
				Umeda Hiroyuki
Gary Kasbeer	Komatsu (China) Ltd.
Executive Vice President & CFO, Komatsu	President, Komatsu Forest AB
America Corp.				Africa
Yuushi Oshikawa
Executive Vice President & President, North
			Executive Officer
America R&D Division, Komatsu America Corp.
			Michael Blom
Technical Director, Komatsu Mining Corp.
							President & MD, Komatsu South Africa
							(Pty) Ltd.
Global Officers
North America	Europe	Asia/Oceania
Peter Salditt	Paul Blanchard	Charoen Ruengwilai
President, Underground and Hard Rock	President & MD, Komatsu UK Ltd.	President, Bangkok Komatsu Co., Ltd.
Mining, Komatsu Mining Corp.	Göksel Güner	Sean Taylor
John Koetz	Chief Operating Officer, Komatsu Europe	Managing Director, Komatsu Australia Pty. Ltd.
President, Surface Mining, Komatsu	International N.V.
Mining Corp.	Ralf Petzold
				China
Jorge Mascena	President & MD, Komatsu Germany GmbH
President & CEO, Modular Mining	Ingo Büscher	Fangchang Liu
Systems, Inc.
Executive Vice President & President,	President, Komatsu (Shandong) Construction
John Fiedler	Construction Division, Komatsu Germany	Machinery Corp.
President, Hensley Industries, Inc.	GmbH	Dechun Tian
				David Bazzi	President, Komatsu Shantui Construction
				President & MD, Komatsu Italia	Machinery Co., Ltd.
				Manufacturing S.p.A.

56

57

					Resolution of ESG Issues
	Komatsu's Business Model		Komatsu's Growth Strategies			Corporate Profile
			through Growth Strategies

Corporate Profile

11-Year Summary

											Millions of yen
	FY2009	FY2010	FY2011	FY2012	FY2013	FY2014	FY2015	FY2016	FY2017	FY2018	FY2019
Net sales	1,431,564	1,843,127	1,981,763	1,884,991	1,953,657	1,978,676	1,854,964	1,802,989	2,501,107	2,725,243	2,444,870
Operating income	67,035	222,929	256,343	211,602	240,495	242,062	208,577	174,097	268,503	397,806	250,707
Operating income ratio (%)	4.7	12.1	12.9	11.2	12.3	12.2	11.2	9.7	10.7	14.6	10.3
Income from continuing operations before income taxes and	64,979	219,809	249,609	204,603	242,056	236,074	204,881	166,469	291,807	377,471	223,114
equity in earnings of affiliated companies
Net income attributable to Komatsu Ltd.	33,559	150,752	167,041	126,321	159,518	154,009	137,426	113,381	196,410	256,491	153,844
Capital investment	96,191	97,738	122,038	136,962	179,070	192,724	160,051	142,006	145,668	179,210	166,552
Depreciation and amortization*1	90,215	88,442	89,015	88,005	85,837	100,666	111,174	103,219	132,442	129,860	129,525
Research and development expenses	46,449	49,005	54,843	60,788	64,479	70,715	70,736	70,507	73,625	73,447	74,761
Total assets	1,959,055	2,149,137	2,320,529	2,517,857	2,651,556	2,798,407	2,614,654	2,656,482	3,372,538	3,638,219	3,653,686
Shareholders' equity	833,975	923,843	1,009,696	1,193,194	1,376,391	1,528,966	1,517,414	1,576,674	1,664,540	1,815,582	1,771,606
Shareholders' equity ratio (%)	42.6	43.0	43.5	47.4	51.9	54.6	58.0	59.4	49.4	49.9	48.5
Net interest-bearing debt*2	502,818	459,110	563,814	585,926	513,918	481,817	349,081	286,512	663,740	779,890	762,705
Net debt-equity ratio (times)	0.60	0.50	0.56	0.49	0.37	0.32	0.23	0.18	0.40	0.43	0.43
Net cash provided by operating activities	182,161	150,402	105,608	214,045	319,424	343,654	319,634	256,126	148,394	202,548	295,181
Net cash used in investing activities	(72,967)	(88,509)	(124,539)	(131,397)	(167,439)	(181,793)	(148,642)	(133,299)	(377,745)	(187,204)	(190,930)
Net cash provided by (used in) financing activities	(116,363)	(56,365)	18,781	(71,814)	(155,349)	(143,983)	(173,079)	(107,718)	243,949	(3,660)	(3,457)
Cash and cash equivalents, end of year	82,429	84,224	83,079	93,620	90,872	105,905	106,259	119,901	144,397	148,479	247,616
Number of common share issued (thousands of shares)	998,744	998,744	983,130	983,130	983,130	971,967	971,967	971,967	971,967	972,252	972,581
Net income attributable to Komatsu Ltd. per share (yen)	34.67	155.77	173.47	132.64	167.36	162.07	145.80	120.26	208.25	271.81	162.93
Cash dividends per share (yen)	16.0	38.0	42.0	48.0	58.0	58.0	58.0	58.0	84.0	110.0	94.0
Consolidated payout ratio (%)*3	38.0	24.4	24.2	36.2	34.7	35.8	39.8	48.2	40.3	40.5	57.7
ROA (%)	3.3	10.7	11.2	8.5	9.4	8.7	7.6	6.3	9.7	10.8	6.1
ROE (%)	4.1	17.2	17.3	11.5	12.4	10.6	9.0	7.3	12.1	14.7	8.6
Exchange rate for the U.S. dollar (yen)*4	93	85	79	83	100	110	121	109	111	111	109
Exchange rate for the Euro (yen)*4	131	113	110	107	133	140	132	119	130	129	121
Exchange rate for the Chinese Renminbi (yen)*4	13.6	12.7	12.4	13.2	16.3	17.7	19.0	16.2	16.8	16.5	15.6
Number of employees (persons)	38,518	41,059	44,206	46,730	47,208	47,417	47,017	47,204	59,632	61,908	62,823
Overseas employee ratio (%)	51.9	55.5	57.5	64.3	61.8	61.0	60.7	62.7	66.7	68.4	68.4
CO2 emissions (thousand t)	359	554	583	468	458	412	342	384	459	519	404
Waste generated (thousand t)	69.5	111.1	119.5	112.1	101.4	83.2	62.4	83.5	113.1	117.8	95.1
Volume of water used (thousand m3)	7,022	7,400	6,784	5,737	5,114	4,265	3,627	3,351	4,016	3,941	3,557

*1 Depreciation is the total of depreciation on property, plant and equipment and on intangible assets. *2 Net interest-bearing debt = Interest-bearing debt - Cash and equivalents - Time deposits.

*3 Figures for FY2009 exclude structural reform expenses.

*4 Average exchange rates for the fiscal year.

58

59

Corporate Profile

Non-Financial Highlights

Komatsu's Business Model		Komatsu's Growth Strategies		Resolution of ESG Issues		Corporate Profile
		through Growth Strategies

Corporate Profie

External Evaluations and Index Inclusion

Reduction of CO2 Emissions from Product Operation

CO2 Emission Index for Product Operation

WEB

For more information on the above indexes, please refer to Komatsu's corporate website:

https://komatsu.disclosure.site/en/themes/133

In the mid-term management plan (FY2019-FY2021), Komatsu has set the target of reducing the CO2 emissions from the operation of products (construction, mining, and forest equipment) by 50% by 2030 (compared to 2010).

To evaluate progress toward this goal, we compared the performance of the current year's products to the products of the reference year (2010) and estimated CO2 reduction rates through the improvement of fuel consumption and work efficiency. The products of 2019 achieved a CO2 ­reduction of 14%, compared to the reference year.

100	100
		88	86
80
60				Target
				50
40
20
0	2010	2018	2019	2030

CDP Climate A-List	Dow Jones Sustainability	MSCI Global
	Indices (DJSI)	Sustainability Indexes*1

Changes in Reman Sales (Base FY2004 = 100)

(%)
500
							451
						402	414
400
						349
300					304	313
				270
				239	250
200				200
	160	168
		156
		137
	100	112
100
0	2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019	(FY)

Incidence Rate of Occupational Accidents (Frequency Rate of Lost Work Time)

(Frequency rate)

2.0					1.83	1.80
	1.66	1.61	1.63	1.66
1.5					1.44
1.0	1.02					0.88
	0.81		0.79
	0.87	0.73
			0.56
	0.79		0.75	0.59
		0.72
0.5	0.42	0.32	0.45	0.46		0.29
				0.44
				0.36
	0.05	0.14	0.32
		0.20
0.0				0.16
2014	2015	2016	2017	2018	2019	(FY)

All industries (Japan)		Construction and mining equipment manufacturing industry (Japan)
Komatsu Group (Japan and Global)		Komatsu Group (Japan)
Komatsu (Non-consolidated)

Notes:1.The data for all industries (Japan) and construction and mining equipment manufacturing industry (Japan) are provided by the Ministry of Health, Labour and Welfare.

1. The scope of Komatsu Group (Japan) includes Komatsu Ltd. and Group companies in Japan.
2. The scope of Komatsu Group (global) includes "Komatsu Group (Japan)" and overseas production plants.

ISS-Oekom

EURONEXT VigeoEIRIS

FTSE Blossom Japan Index*2

MSCI Japan ESG Select	MSCI Japan Empowering	S&P/JPX Carbon
Leaders Index*1	Women Index*1	Efficient Index

Number of Global Officers

(People)
32	29
	27	26
24
	18	18
16	16
8
0

2017

2018

2019

(FY)

• Total ■ National top managers out of total executive officers

Numbers and Ratios of Female Employees and Female Managers

(People)			(%)
1,600		1,463	16
1,281	1,321
1,200	12.2	12.3	12
12.0
800		7.0	8
	6.2
5.5
400			4
94	109	129
0			0
2017	2018	2019	(FY)

• Number of female employees
• Number of women in management and executive positions Ratio of female employees (right scale)
  Ratio of women in management and executive positions (right scale)

Digital Transformation	SBT	Grand Prix of the Corporate Value
Stock Selection		Improvement Award,
Grand Prix 2020		Tokyo Stock Exchange

*1 THE INCLUSION OF KOMATSU LTD IN ANY MSCI INDEX, AND THE USE OF MSCI LOGOS, TRADEMARKS, SERVICE MARKS OR INDEX NAMES HERIN, DO NOT CONSTITUTE A SPONSORSHIP, ENDORSEMENT OR PROMOTION OF KOMATSU LTD BY MSCI OR ANY OF ITS AFFILIATES. THE MSCI INDEXES ARE THE EXCLUSIVE PROPERTY OF MSCI. MSCI AND THE MSCI INDEX NAMES AND LOGOS ARE TRADEMARKS OR SERVICE MARKS OF MSCI OR ITS AFFILIATES.

*2 FTSE Russell confirms that Komatsu has been independently assessed according to the index criteria, and has satisfied the requirements to become a constituent of the FTSE Blossom Japan Index. Created by the global index and data provider FTSE Russell, the FTSE Blossom Japan Index is designed to measure the performance of companies demonstrating strong Environmental, Social and Governance (ESG) practices. The FTSE Blossom Japan Index is used by a wide variety of market participants to create and assess responsible investment funds and other products.

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Corporate Profile

Corporate Information

(As of March 31, 2020)

Komatsu's Business Model		Komatsu's Growth Strategies		Resolution of ESG Issues		Corporate Profile
		through Growth Strategies

About KOMATSU REPORT

Name

Komatsu Ltd.

Head Office

2-3-6 Akasaka, Minato-ku, Tokyo 107-8414

Date of Establishment

May 13, 1921

Common Stock Outstanding

Consolidated: ¥68,689 million based on

U.S. GAAP

Non-consolidated: ¥70,973 million

Number of Employees

Consolidated: 62,823 Non-consolidated:11,692

Average age (non-consolidated) : 39.5 Average years of continuous

service (non-consolidated) : 15.1

Shares of Common Stock Issued and Outstanding

972,581,230 shares

(including shares of treasury stock)

Number of Shareholders

230,041

Number of Shares per Trading Unit

100

Securities Code

6301 (Japan)

Stock Listings

Tokyo

Transfer Agent for Common Stock/ Management Institution for Special Account

Mitsubishi UFJ Trust and Banking Corporation

4-5, Marunouchi 1-chome,Chiyoda-ku, Tokyo 100-8212, Japan

Depositaries (ADRs)

The Bank of New York Mellon

101 Barclay Street, New York, NY 10286, U.S.A.

Tel: [phone] for international calls and 888-269-2377(888-BNY-ADRS) for calls within U.S.A.

URL: https://www.adrbnymellon.com/

Ticker Symbol: KMTUY

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 are prepared and disclosed to provide detailed financial information and information on environmental and social initiatives.

Structure of Komatsu's Annual Reports

KOMATSU REPORT

(Integrated reporting)

Annual Securities Report		ESG Databook
(Financial conditions)		(Social activities and Environmental performance)

• KOMATSU REPORT, Annual Securities Report and ESG Databook, in both Japanese and English, are uploaded on Komatsu's website.
• Komatsu Ltd. issues the Komatsu Report only on the website.

Major Shareholders

	Number of shares held	Shareholding ratio
	(Thousands of shares)	(%)
The Master Trust Bank of Japan, Ltd. (Trust Account)	75,533	7.99
Japan Trustee Services Bank, Ltd. (Trust Account)	45,657	4.83
STATE STREET BANK AND TRUST COMPANY 505223	32,244	3.41
(Standing proxy: Mizuho Bank, Ltd., Settlement & Clearing Services Division)
Taiyo Life Insurance Company	27,200	2.87
Nippon Life Insurance Company (Standing proxy: The Master Trust Bank of Japan, Ltd.)	26,626	2.81
Japan Trustee Services Bank, Ltd. (Trust Account 7)	22,815	2.41
Japan Trustee Services Bank, Ltd. (Trust Account 5)	18,449	1.95
Sumitomo Mitsui Banking Corporation	17,835	1.88
JP MORGAN CHASE BANK 385151	15,951	1.68
(Standing proxy: Mizuho Bank, Ltd., Settlement & Clearing Services Division)
THE BANK OF NEW YORK MELLON AS DEPOSITARY BANK FOR DEPOSITARY RECEIPT	14,237	1.50
HOLDERS (Standing proxy: Sumitomo Mitsui Banking Corporation)

Notes: 1. Shareholding ratio is calculated by subtracting treasury stock.

2. Although the Company holds 27,479 thousand shares of treasury stock, it is excluded from the major shareholders listed above.

Stock Information (including shares of treasury stock)

Please refer to "Annual Securities Report" for more company and financial information.

• Overview of the Company and Its Consolidated Subsidiaries
• Business Overview
• Property, Plants and Equipment
• Information on the Company
• Financial Information

WEB https://home.komatsu/en/ir/library/annual-security-report/

Please refer to "ESG Databook" for more information concerning social and environmental efforts.

• Stance on CSR Efforts
• Theme 1: Enhancing Quality of Life

(Safety, environmental indexes, etc.)

• Theme 2: Developing People (Diversity, etc.)
• Theme 3: Growing with Society (Compliance, risk management, governance, etc.)

WEB https://komatsu.disclosure.site/en

	Financial	...........................	34.5%	335,868,341 shares	213 shareholders
Breakdown of	Foreign	.............................	39.1%	380,368,180 shares	1,068 shareholders
Individual and other..........
Shareholders	20.7%	201,375,918 shares	226,946 shareholders
(%)	Corporate	...........................	2.5%	24,395,112 shares	1,648 shareholders
	Securities	...........................	3.1%	30,573,679 shares	166 shareholders

• Komatsu has signed the United Nations Global
Compact (UNGC).
Click this link for more information about the Ten
Principles advocated by the UNGC and how they	Komatsu has joined the World Business Council for
pertain to Komatsu's initiatives.
Sustainable Development (WBCSD).
https://komatsu.disclosure.site/en/themes/129

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