20-F

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 20-F

(Mark One)

o REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934

or

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

For the fiscal year ended March 31, 2010

or

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

or

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

Date of event requiring this shell company report                     

For the transition period from                      to                     

COMMISSION FILE NUMBER: 1-7239

KABUSHIKI KAISHA KOMATSU SEISAKUSHO

(Exact name of Registrant as specified in its charter)

KOMATSU LTD.

(Translation of Registrant’s name into English)

JAPAN

(Jurisdiction of incorporation or organization)

2-3-6 Akasaka, Minato-ku, Tokyo 107-8414, Japan
(Address of principal executive offices)

Yasushi Sakano or Masaki Takeda
Telephone: +81-3-5561-2628
Facsimile: +81-3-3586-0374
Address: 2-3-6 Akasaka, Minato-ku, Tokyo 107-8414, Japan

(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)

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

	Name of each exchange
Title of each class	on which registered
None	N/A

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

None

(Title of Class)

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

Common Stock*

(Title of Class)

* 16,818,060 American Depositary Shares evidenced by American Depositary Receipts, each American Depositary Share representing 1 share of Common Stock of Komatsu Ltd.

Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report.

968,039,976 shares (excluding 30,704,084 shares of Treasury Stock)

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes þ No o

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.

Yes o No þ

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes þ No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes o No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer þ Accelerated filer o Non-accelerated filer o

Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:

U.S. GAAP þ International Financial Reporting Standards as issued by the International Accounting Standards Board o Other o

If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow.

Item 17 o Item 18 o

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes o No þ

In this document, KOMATSU LTD. is hereinafter referred to as the “Company,” and together with its consolidated subsidiaries as “Komatsu.”

Cautionary Statement with respect to forward-looking statements:

This annual report contains forward-looking statements that reflect management’s views and assumptions in the light of information currently available with respect to certain future events, including expected financial position, operating results and business strategies. These statements can be identified by the use of terms such as “will,” “believes,” “should,” “projects,” “plans,” “expects” and similar terms and expressions that identify future events or expectations. Actual results may differ materially from those projected, and the events and results of such forward-looking assumptions cannot be assured. Any forward-looking statements speak only as of the date of this annual report, and the Company assumes no duty to update such statements.

Factors that may cause actual results to differ materially from those predicted by such forward-looking statements include, but are not limited to, unanticipated changes in demand for Komatsu’s principal products, owing to changes in the economic conditions in Komatsu’s principal markets; changes in exchange rates or the impact of increased competition; unanticipated costs or delays encountered in achieving Komatsu’s objectives with respect to globalized product sourcing and new information technology tools; uncertainties as to the results of Komatsu’s research and development efforts and its ability to access and protect certain intellectual property rights; the impact of regulatory changes and accounting principles and practices; and the introduction, success and timing of business initiatives and strategies.

Important information regarding risks and uncertainties is also set forth elsewhere in this annual report, including in “D. Risk Factors” included in “Item 3. Key Information,” “Item 4. Information on the Company,” “Item 5. Operating and Financial Review and Prospects” and “Item 11. Quantitative and Qualitative Disclosures About Market Risk.”

Table of Contents

PART I
Item 1. Identity of Directors, Senior Management and Advisers	1
Item 2. Offer Statistics and Expected Timetable	1
Item 3. Key Information	1
A. Selected Financial Data	1
B. Capitalization and Indebtedness	4
C. Reasons for the Offer and Use of Proceeds	4
D. Risk Factors	4
Item 4. Information on the Company	8
A. History and Development of the Company	8
B. Business Overview	12
C. Organizational Structure	29
D. Property, Plants and Equipment	31
Item 4A. Unresolved Staff Comments	34
Item 5. Operating and Financial Review and Prospects	34
A. Operating Results	34
B. Liquidity and Capital Resources	76
C. Research and Development, Patents and Licenses, etc.	81
D. Trend Information	83
E. Off-Balance Sheet Arrangements	85
F. Tabular Disclosure of Contractual Obligations	87
G. Safe Harbor	88
Item 6. Directors, Senior Management and Employees	89
A. Directors and Senior Management	89
B. Compensation	99
C. Board Practices	102
D. Employees	103
E. Share ownership	105
Item 7. Major Shareholders and Related Party Transactions	107
A. Major Shareholders	107
B. Related Party Transactions	108
C. Interests of Experts and Counsel	108
Item 8. Financial Information	108
A. Consolidated Statements and Other Financial Information	108
B. Significant Changes	109
Item 9. The Offer and Listing	109
A. Offer and Listing Details	109

B. Plan of Distribution	111
C. Markets	111
D. Selling Shareholders	111
E. Dilution	111
F. Expenses of the Issue	111
Item 10. Additional Information	111
A. Share Capital	111
B. Memorandum and Articles of Association	111
C. Material Contracts	123
D. Exchange Controls	123
E. Taxation	125
F. Dividends and Paying Agents	132
G. Statement by Experts	132
H. Documents on Display	132
I. Subsidiary Information	132
Item 11. Quantitative and Qualitative Disclosures About Market Risk	132
Item 12. Description of Securities Other than Equity Securities	137
A. Debt Securities	137
B. Warrants and Rights	137
C. Other Securities	137
D. American Depositary Shares	137
PART II
Item 13. Defaults, Dividend Arrearages and Delinquencies	139
Item 14. Material Modifications to the Rights of Security Holders and Use of Proceeds	139
Item 15. Controls and Procedures	139
Item 16. [Reserved]	141
A. Audit Committee Financial Experts	141
B. Code of Ethics	141
C. Principal Accountant Fees and Services	141
D. Exemptions from the Listing Standards for Audit Committees	143
E. Purchases of Equity Securities by the Issuer and Affiliated Purchasers	143
F. Change in Registrant’s Certifying Accountant	143
G. Corporate Governance	143
PART III
Item 17. Financial Statements	144
Item 18. Financial Statements	144
Item 19. Exhibits	144
Exhibit 1.1
Exhibit 1.2
Exhibit 2
Exhibit 11
Exhibit 12 a
Exhibit 12 b
Exhibit 13 a
Exhibit 13 b

PART I

Item 1. Identity of Directors, Senior Management and Advisers

Not applicable.

Item 2. Offer Statistics and Expected Timetable

Not applicable.

Item 3. Key Information

A. Selected Financial Data

The following data for each of the fiscal years ended March 31, 2006 through March 31, 2010 have been derived from the Company’s audited consolidated financial statements prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”). It should be read in conjunction with the Company’s audited consolidated balance sheets as of March 31, 2009 and 2010, the related consolidated statements of income, shareholders’ equity and cash flows for the three fiscal years ended March 31, 2010 and the notes thereto that appear elsewhere in this annual report.

Selected Financial Data

	(Millions of yen, except per share amounts)
	2010		2009		2008		2007		2006
Income Statement Data:
Net sales 1)		1,431,564		2,021,743		2,243,023		1,893,343		1,612,140
Operating income 1)		67,035		151,948		332,850		244,741		163,428
Income from continuing operations before income taxes and equity in earnings of affiliated companies 1)		64,979		128,782		322,210		236,491		155,779
Income taxes 1)		25,364		42,293		115,794		79,745		43,970
Income from continuing operations attributable to Komatsu Ltd. less applicable income taxes1)		33,559		78,797		203,826		153,264		109,141
Income from discontinued operations attributable to Komatsu Ltd. less applicable income taxes 1)		—		—		4,967		11,374		5,149
Net income attributable to Komatsu Ltd.		33,559		78,797		208,793		164,638		114,290

1

	(Millions of yen, except per share amounts)
	2010		2009		2008		2007		2006
Per Share Data:
Income from continuing operations attributable to Komatsu Ltd. less applicable income taxes
- Basic		34.67		79.95		204.88		154.25		109.94
- Diluted		34.65		79.89		204.61		153.97		109.75
Net income attributable to Komatsu Ltd.
- Basic		34.67		79.95		209.87		165.70		115.13
- Diluted		34.65		79.89		209.59		165.40		114.93
Cash dividends
Yen		26.00		44.00		38.00		23.00		14.00
U.S. cents 2)		27.96		44.44		38.00
Depreciation and amortization		91,319		98,354		75,664		72,709		72,640
Capital Investment 1) 3)		96,191		162,512		145,730		129,680		113,934
Research and development expenses 1)		46,449		53,736		49,673		46,306		44,560
	(Millions of yen)
Balance Sheet Data:
Total assets		1,959,055		1,969,059		2,105,146		1,843,982		1,652,125
Komatsu Ltd. shareholders’ equity		833,975		814,941		887,126		776,717		622,997
Capital stock		67,870		67,870		67,870		67,870		67,870
Number of shares issued at year-end		998,744,060		998,744,060		998,744,060		998,744,060		998,744,060
Number of shares outstanding at year-end		968,039,976		967,822,292		995,103,847		993,786,759		993,645,492

Notes:

1) In the fiscal year ended March 31, 2007, Komatsu disposed of its majority interest in Komatsu Electronic Metals Co., Ltd. (“KEM”). In the fiscal year ended March 31, 2008, Komatsu sold the outdoor power equipment (“OPE”) business of Komatsu Zenoah Co. and its subsidiaries. As a result, operating results and the gain recognized on the sale of KEM and its subsidiaries as well as the OPE business of Komatsu Zenoah Co. and its subsidiaries are presented as “Income from discontinued operations attributable to Komatsu Ltd. less applicable income taxes.”

2

2)

The conversion rate between the Japanese yen to the U.S. dollar for the fiscal year ended March 31, 2010 is ¥93 to U.S.$1.00, the approximate buying rate of Japanese yen as of noon on March 31, 2010 in The City of New York as reported by the Federal Reserve Board.

3)

The term “Capital Investment” as used in the above Selected Financial Data should be distinguished from the term “Capital Expenditures” as used in the consolidated statements of cash flows. The term “Capital Investment” as used in the above Selected Financial Data is defined to refer to costs relating to the purchase of property, plant and equipment including properties under capital leases on an accrual basis which reflects the effect of timing differences between acquisition dates and payment dates. Komatsu’s management uses this financial indicator to manage its capital investment and believes that this indicator is useful to investors in that this indicator presents accrual based capital investment in addition to the cash based capital expenditures provided in the consolidated statements of cash flows.

The following table provides the noon buying rates for Japanese yen in The City of New York as reported by the Federal Reserve Bank of New York and the Federal Reserve Board expressed in Japanese yen per U.S. dollar for the periods indicated. The average Japanese yen exchange rates represent average noon buying rates on the last business day of each month for the respective period. On June 18, 2010, the noon buying rate in The City of New York as reported by the Federal Reserve Board for Japanese yen was ¥90.79 = U.S.$1.00.

Yen Exchange Rates per U.S. dollar:

(Yen)

	Average		High		Low		Period-End
Year ended March 31
2006		113.67		104.64		119.66		117.48
2007		116.55		112.26		121.02		117.56
2008		113.61		96.88		124.09		99.85
2009		100.85		87.80		110.48		99.15
2010		92.49		86.12		100.71		93.40

	High		Low		Period-End
2009
December		86.62		93.08		93.08
2010
January		89.41		93.31		90.38
February		88.84		91.94		88.84
March		88.43		93.40		93.40
April		92.03		94.51		94.24
May		89.89		94.68		90.81

3

B. Capitalization and Indebtedness

Not applicable.

C. Reasons for the Offer and Use of Proceeds

Not applicable.

D. Risk Factors

Given the business environment in which Komatsu operates, Komatsu is exposed to a variety of risks. Komatsu has identified the following risks as its primary risks based on information currently available to it. The statements set forth in this section should be considered carefully in conjunction with Item 5. “Operating and Financial Review and Prospects” and the “Consolidated Financial Statements” that appear elsewhere in this annual report on Form 20-F. The risks discussed below are risks that may, individually or in the aggregate, make Komatsu’s actual results differ materially from its expected or past results. It should be noted, however, that it is impossible to predict or identify all risks that may be applicable to Komatsu. The below list of risks should not be considered to be a complete list of risks that could materially affect Komatsu’s results of operations and/or financial condition. Komatsu’s results of operations and/or financial condition may also be affected in the future by other risks that are currently unknown or that are not currently considered significant or material.

(1) Economic and market conditions

As Komatsu is engaged in business on a global scale, the economic and market conditions and competitive environment in which Komatsu operates differ from region to region. In addition, demand for Komatsu’s products, as well as the business environment in which Komatsu operates, may change substantially as a result of changes in the economic and market conditions of each such region.

In economically-advanced regions in which Komatsu operates, Komatsu’s business is generally affected by cyclical changes in the economies of such regions. Therefore, factors which are beyond Komatsu’s control, such as levels of housing starts, industrial production, public investments in infrastructure development and private-sector capital outlays, may affect demand for Komatsu’s products.

4

In recent years, Komatsu has derived a greater percentage of its business from newly-developing markets, such as China, India, Russia, the Middle East and Africa. In line with such increase in business, Komatsu has been making capital investments in such markets. Particularly in China, Komatsu has been making aggressive investments to expand the production capacity of its subsidiaries and reinforce its sales and service operations. If a temporary confusion or stagnation were to occur in the Chinese economy, Komatsu’s business results would be adversely affected. In addition, in the other newly-developing markets, Komatsu constantly pays careful attention to the changes in demand for its products. However, their economies depend upon a number of unstable factors, such as commodity prices and considerable reliance on exports to economically-advanced countries, and thus, changes in these factors could adversely affect Komatsu’s business results.

Furthermore, when economic and/or market conditions change more drastically than forecasted by Komatsu, Komatsu may also experience, among others, fewer orders of its products, an increase in cancellation of orders by customers and a delay in the collection of receivables.

These changes in the economic and market conditions and the business environment in which Komatsu operates may lead to a decline in sales, and inefficient inventory levels and/or production capacities, thereby causing Komatsu to record lower profitability and incur additional expenses and losses. As a result, Komatsu’s results of operations may be adversely affected.

(2) Foreign currency exchange rate fluctuations

Komatsu conducts its business operations on a global scale, and a substantial portion of its overseas sales is affected by foreign currency exchange rate fluctuations. In general, an appreciation of the Japanese yen against another currency would adversely affect Komatsu’s results of operations, while a depreciation of the Japanese yen against another currency would have a favorable impact thereon. In addition, foreign currency exchange rate fluctuations may also affect the comparative prices between products sold by Komatsu and products sold by its foreign competitors in the same market, as well as the cost of materials used in the production of such products. Komatsu strives to alleviate the effect of such foreign currency exchange rate fluctuations by, for example, locating its production bases globally and positioning such bases closer to the respective markets in which the products manufactured by such bases are sold. Komatsu also engages in hedging activities to minimize the effects of short-term foreign currency exchange rate fluctuations. Despite Komatsu’s efforts, if the foreign currency exchange rates fluctuate beyond Komatsu’s projected fluctuation range, Komatsu’s results of operations may be adversely affected.

5

(3) Fluctuations in financial markets

While Komatsu is currently working on improving the efficiency of its assets to reduce its interest-bearing debt, its aggregate short- and long-term interest-bearing debt was approximately ¥590 billion as of March 31, 2010. Although Komatsu has strived to reduce the effect of interest rate fluctuations by promoting the procurement of funds at fixed interest rates, an increase in interest rates may increase Komatsu’s interest expenses with respect to its interest-bearing debt subject to floating interest rates, thereby adversely affecting Komatsu’s results of operations. In addition, fluctuations in the financial markets, such as fluctuations in the fair value of marketable securities and interest rates, may also increase the unfunded obligation portion of Komatsu’s pension plans or pension liabilities, which may result in an increase in pension expenses. Such an increase in interest expenses and pension expenses may adversely affect Komatsu’s results of operations and financial condition.

(4) Laws and regulations of different countries

Komatsu is subject to various governmental regulations and approval procedures in the countries in which it operates. If the government of a given country were to enact new laws and regulations, such as laws and regulations relating to import/export duties, quotas, currency restrictions and taxation, Komatsu may be required to bear increased expenses in order to comply with such regulations. With respect to transfer pricing between Komatsu and its affiliated companies, Komatsu is careful to comply with applicable taxation laws of Japan and the concerned foreign governments. Nevertheless, it is possible that Komatsu may be viewed by the concerned tax authorities as having used inappropriate pricing. If intergovernmental negotiations were to fail, Komatsu may be charged with double or additional taxation. Such developments could have an unfavorable impact on Komatsu’s business results.

(5) Environmental laws and regulations

Komatsu’s products and business operations are required to comply with increasingly stringent environmental laws and regulations in the numerous countries in which Komatsu operates. Komatsu expends a significant share of its management resources, such as research and development expenses, to comply with regulations concerning air and wastewater emission levels of its manufacturing facilities and products. If the existing standards were amended, Komatsu may be required to bear increased costs and to make further capital investments to comply with such new standards. Incurrence of such additional environmental compliance costs may adversely affect Komatsu’s results of operations.

6

(6) Product and quality liability

While Komatsu endeavors to sustain and improve the quality and reliability of its operations and products based on stringent standards established internally, Komatsu may face product and quality liability claims or become exposed to other liabilities if unexpected defects in its products result in recalls or accidents. If the costs for addressing such claims or other liabilities are not covered by Komatsu’s existing insurance policies or other protective means, such claims may adversely affect its financial condition.

(7) Alliances and collaborative relationships

Komatsu has entered into various alliances and collaborative relationships with distributors, suppliers and other companies in its industry to reinforce its international competitiveness. Through such arrangements, Komatsu is working to improve its product development, production, sales and service capabilities. While Komatsu expects its alliances and collaborative relationships to be successful, Komatsu’s failure to attain expected results or the termination of such alliances or collaborative relationships may adversely affect Komatsu’s results of operations.

(8) Procurement, production and other matters

Komatsu’s procurement of parts and materials for its products is exposed to fluctuations in commodity prices, mainly in the price of steel materials. Price increases in commodities may increase the cost of materials and therefore the production cost of Komatsu’s products. In addition, a shortage of product parts and materials, bankruptcies of suppliers or production discontinuation by suppliers of products used by Komatsu may make it difficult for Komatsu to engage in the timely procurement of parts and materials and manufacture of its products, thereby lowering Komatsu’s production efficiency. In an effort to reduce any adverse effect to its business as a result of an increase in the cost of materials, Komatsu strives to reduce other costs and pass on any increase in the cost of materials to its customers through price adjustments of its products. Komatsu strives to minimize the effects of possible procurement or manufacturing issues by securing new suppliers or promoting closer collaboration among its related business divisions. However, if the increase in commodity prices were to exceed Komatsu’s expectations or a prolonged shortage of materials and parts were to occur, Komatsu’s results of operations may be adversely affected.

(9) Information security, intellectual property and other matters

Komatsu may obtain confidential information concerning its customers and individuals in the normal course of its business. Komatsu also holds confidential business and technological information. Komatsu safeguards such confidential information with the utmost care. To safeguard such confidential information from unauthorized access, tampering, destruction, leakage, losses and other damages, Komatsu employs appropriate safety measures, including implementing technological safety measures and strengthening its information management capabilities. If a leak of confidential information concerning customers and individuals were to occur, Komatsu may become liable for damages, or its reputation or its customers’ confidence in Komatsu may be adversely affected. In addition, if Komatsu’s confidential business and technological information were leaked or misused by a third party, or Komatsu’s intellectual properties were infringed upon by a third party, or Komatsu were held liable for infringing on a third party’s intellectual property rights, Komatsu’s business results may be adversely affected.

7

(10) Natural calamities, wars, terrorism, accidents and other matters

Komatsu conducts its business operations on a global scale and operates and maintains development, production, sales and other business facilities in many countries. If natural disasters, such as earthquakes and floods, epidemics, wars, terrorist acts, accidents, such as fires and explosions, unforeseeable criticism or interference by third parties or computer virus infections in regions in which Komatsu operates were to occur and cause extensive damage to one or more of its facilities that then could not become fully operational within a short period of time, delays or disruption in the procurement of materials and parts or the production and sales of Komatsu’s products and services may result. Such delays or disruptions may adversely affect Komatsu’s results of operations.

Item 4. Information on the Company

A. History and Development of the Company

The Company was incorporated in May 1921 as a joint stock corporation (kabushiki kaisha) in accordance with Japanese law under the name Kabushiki Kaisha Komatsu Seisakusho (“Komatsu Ltd.” in English). Its registered office is located at 2-3-6 Akasaka, Minato-ku, Tokyo 107-8414, Japan, and its telephone number is +81-3-5561-2628 (Finance & Treasury Department).

Shortly after its formation in 1921, the Company commenced the production and marketing of sheet-forming presses. In 1931, the Company produced Japan’s first crawler-type farm tractor and in the 1940s the Company began its production of bulldozers in Japan. The Company broadened its product line-up by beginning production of motor graders and dump trucks in the 1950s and wheel loaders and hydraulic excavators in the 1960s.

The history and development of Komatsu’s global operations can be divided into three phases: (1) exports from Japan, (2) offshore production and (3) management of its global production and distribution network.

8

Since its first export to Argentina in 1955, Komatsu has gradually increased exports of its products. Komatsu established its first liaison office in India in 1964 and established sales companies in Europe, the United States and Asia between 1967 and 1971.

During the 1970s and 1980s, Komatsu started establishing its production facilities offshore and enhanced its offshore production by locating manufacturing plants close to their respective markets. In 1975, Komatsu commenced offshore production with the production of bulldozers in Brazil by Komatsu do Brasil Ltda., its first manufacturing plant outside Japan. Subsequently, Komatsu increased its global presence by establishing manufacturing plants in Indonesia, the United Kingdom and the United States during the 1980s. For example, during the 1980s, Komatsu established a joint venture company in the United States with Dresser Industries Inc. named Komatsu Dresser Company (now known as Komatsu America Corp., “KAC”).

During the 1990s, Komatsu strengthened its overseas manufacturing capabilities and made efforts to optimize its production and distribution network on a global basis through various methods, including forming alliances and entering into joint ventures. For instance, Komatsu established Komatsu Cummins Engine Co., Ltd. and Industrial Power Alliance Ltd. in Japan and Cummins Komatsu Engine Company in the United States, with Cummins Engine Company (now known as Cummins Inc.). In addition, Komatsu entered into three joint ventures in China, and a joint venture with Mannesmann Demag of Germany to establish Demag Komatsu GmbH (now known as Komatsu Mining Germany GmbH).

The following are some of the significant transactions in the development of Komatsu’s business in recent years.

In September 2006, the Company entered into an agreement with SUMCO CORPORATION (“SUMCO”) pursuant to which the Company agreed to accept SUMCO’s tender offer for KEM. In October 2006, the Company sold 51.0% of its equity ownership in its consolidated subsidiary, KEM, to SUMCO. Prior to this disposition, the Company held a 61.9% equity interest in KEM.

In October 2006 and December 2006, the Company completed two transactions to acquire an aggregate 29.3% equity interest in NIPPEI TOYAMA CORPORATION (“NIPPEI TOYAMA”), one of the leading manufacturers in the field of transfer machines used in the processing of automobile engines, various grinding machines, wire saws used in the semiconductor and solar application industries, and laser cutting machines.

In January 2007, the Company signed a definitive agreement to sell the OPE business of Komatsu Zenoah Co. to a Japanese subsidiary of Husqvarna AB of Sweden. After Komatsu Zenoah Co. split its OPE business and established Zenoah Co., Komatsu Zenoah Co. was merged into Komatsu Utility Co., Ltd. in April 2007, as a result of which Komatsu Utility Co., Ltd. became Zenoah Co.’s parent company. In the same month, Komatsu Utility Co., Ltd. sold all of its shares of Zenoah Co. to HUSQVARNA JAPAN LTD. (now known as Husqvarna Zenoah Co., Ltd.), thereby completing the sale of the OPE business.

9

In January 2008, to generate more synergy, the Company launched a takeover bid to obtain all issued shares of NIPPEI TOYAMA, which resulted in the Company owning 93.7% of the equity interest.

In August 2008, the Company and NIPPEI TOYAMA implemented a share exchange and NIPPEI TOYAMA became a wholly owned subsidiary of the Company. In October 2008, NIPPEI TOYAMA changed its name and is now known as Komatsu NTC Ltd.

In April 2009, Komatsu Tokyo Ltd. (“Komatsu Tokyo”), a wholly owned subsidiary of the Company, merged with 11 other consolidated subsidiaries of the Company, consisting of 10 sales subsidiaries and Komatsu All Parts Support Ltd., through an absorption-type merger. In the same month, the Company transferred its sales and service business for construction equipment (excluding underground construction equipment) in Japan to Komatsu Tokyo through an absorption-type company split. Upon the completion of these transactions, Komatsu Tokyo changed its name and is now known as Komatsu Construction Equipment Sales and Service Japan Ltd.

In April 2010, Komatsu Industries Corporation (“Komatsu Industries”), a wholly owned subsidiary of the Company, took over the product development and sales and service operations of the large-sized press business, previously conducted by the Company’s Industrial Machinery Division, by way of an absorption-type corporate split.

PRINCIPAL CAPITAL INVESTMENT

Komatsu invests capital each year in the development and production of new products and the improvement of the operating efficiency of its production infrastructure, primarily focusing on the Construction, Mining and Utility Equipment operating segment. Komatsu’s capital investment for the fiscal years ended March 31, 2010, 2009 and 2008 were ¥96,191 million, ¥162,512 million and ¥145,730 million, respectively. Capital investment for the fiscal year ended March 31, 2010 by operating segment was as follows.

10

Capital Investment by Operating Segment

			Percentage Change as
	Millions of Yen		compared to the
	Fiscal Year ended		Fiscal Year ended
	March 31, 2010		March 31, 2009
Construction, Mining and Utility Equipment	¥	92,979		-39.2	%
Industrial Machinery and Others		3,212		-66.9	%
Total	¥	96,191		-40.8	%

Notes:

1)

Amounts include certain leased machinery and equipment accounted for as capital leases in accordance with Financial Accounting Standards Board Accounting Standards Codification 840.

2)

The term “Capital Investment” as used in the above table should be distinguished from the term “Capital Expenditures” as used in the consolidated statements of cash flows. The term “Capital Investment” as used in the above table is defined to refer to costs relating to the purchase of property, plant and equipment including properties under capital leases on an accrual basis which reflects the effect of timing differences between acquisition dates and payment dates. Komatsu’s management uses this financial indicator to manage its capital investment and believes that this indicator is useful to investors in that this indicator presents accrual based capital investment in addition to the cash based capital expenditures provided in the consolidated statements of cash flows.

Demand for Komatsu products decreased in the fiscal year ended March 31, 2010 due primarily to the global financial crisis. Although Komatsu decreased its capital investments in the construction, mining and utility equipment business for the fiscal year ended March 31, 2010, Komatsu continued to make capital investments, including investments to reorganize its production operations in Japan and the United States so as to put in place a more flexible production infrastructure that enables Komatsu to adjust quickly to market demands. Komatsu also made capital investments in the industrial machinery and others business for the fiscal year ended March 31, 2010 to improve its productivity and efficiency by making improvements to its production infrastructure, such as closing down the Komatsu Plant (where some of the facility and equipment had become obsolete) and transferring the production of products manufactured at such plant to the Kanazawa Plant (where the facility and equipment are more up-to-date).

While Komatsu did not complete any new main facilities during the fiscal year ended March 31, 2010, the following table sets forth in further detail new constructions, expansions and overhauls of Komatsu’s main facilities that were in progress during the fiscal year ended March 31, 2010:

Operating segment	Main facilities
Construction, Mining and Utility Equipment	Construction of Komatsu Manufacturing Rus, LLC’s new plant •    Products: Medium-sized hydraulic excavators and forklift trucks •    Location: Yaroslavl, Russia
	Relocation and expansion of Komatsu (Changzhou) Construction Machinery Corp.’s plant
	•    Products: Hydraulic excavators, wheel loaders, dump trucks, etc.
	•    Location: Changzhou, Jiangsu, China
	Expansion of Komatsu Castex Ltd.’s manufacturing facilities for key components (i.e., iron castings)
	•    Products: Cylinder blocks, etc.
	•    Location: Himi City, Toyama, Japan

11

Komatsu’s capital investments for the fiscal year ended March 31, 2010 were primarily financed by funds on hand and bank borrowings.

For information on Komatsu’s expected principal capital investments for the fiscal year ended March 31, 2011, see Item 4.D. Property, Plants and Equipment.

B. Business Overview

GENERAL

Komatsu is a global company that engages in the manufacturing, development, marketing and sale of a diversified range of industrial-use products and services. With “Quality and Reliability” as the cornerstone of its management policy, Komatsu is committed to providing safe and innovative products and services that satisfy its customers’ needs and expectations.

The manufacturing operations of Komatsu are conducted primarily at plants located in Japan, the United States, Brazil, the United Kingdom, Germany, Sweden, Italy, Indonesia, China, Thailand and India. Komatsu’s products are primarily sold under the “Komatsu” brand name and almost all of its sales and service activities are conducted through its sales subsidiaries and independent distributors who primarily sell products to retail dealers in their respective geographic area.

PRODUCTS AND SERVICES

The following table sets forth Komatsu’s net sales by operating segments for the fiscal years ended March 31, 2010, 2009 and 2008, which is reproduced from the Company’s audited consolidated financial statements.

Net Sales by Operating Segments

	(Millions of Yen)
	Fiscal Year				Fiscal Year				Fiscal Year
	Ended March 31,				Ended March 31,				Ended March 31,
	2010				2009				2008
Construction, Mining and Utility Equipment	¥	1,268,575	88.6	%	¥	1,744,733	86.3	%	¥	2,048,711	91.3	%
Industrial Machinery and Others		162,989	11.4	%		277,010	13.7	%		194,312	8.7	%
Total	¥	1,431,564	100.0	%	¥	2,021,743	100.0	%	¥	2,243,023	100.0	%

Note: Starting with the fiscal year ended March 31, 2009, Komatsu reclassified the forklift truck business of Komatsu Utility Co., Ltd. and the businesses of Komatsu Logistics Corp. (both of which were formerly in the Industrial Machinery, Vehicles and Others operating segment) so that such businesses are part of Komatsu’s construction and mining equipment business, and accordingly, changed its operating segments by renaming the Construction and Mining Equipment operating segment as the Construction, Mining and Utility Equipment operating segment and the Industrial Machinery, Vehicles and Others operating segment as the Industrial Machinery and Others operating segment. As a result of this reclassification, the financial data for the fiscal year ended March 31, 2008 in the above table have been retrospectively reclassified using the new operating segments.

12

(1) Construction, Mining and Utility Equipment

The Construction, Mining and Utility Equipment operating segment has been Komatsu’s mainstay operating segment during the last several decades. Net sales from this operating segment accounted for 88.6% of Komatsu’s total net sales for the fiscal year ended March 31, 2010.

Komatsu offers various types of construction, mining and utility equipment, ranging from super-large machines capable of mining applications to general construction equipment and mini construction equipment for urban use. Komatsu’s range of products in this operating segment also includes a wide variety of attachments to be used with its products. Komatsu’s principal products in this operating segment fall into the following categories:

Category	Principal Products
Excavating Equipment	Hydraulic excavators, mini excavators and backhoe loaders
Loading Equipment	Wheel loaders, mini wheel loaders and skid steer loaders
Grading and Roadbed Preparation Equipment	Bulldozers, motor graders and vibratory rollers
Hauling Equipment	Off-highway dump trucks, articulated dump trucks and crawler carriers
Forestry Equipment	Harvesters, forwarders and feller-bunchers
Tunneling Machines	Shield machines, tunnel-boring machines and small-diameter pipe jacking machines
Recycling Equipment	Mobile debris crushers, mobile soil recyclers and mobile tub grinders
Industrial Vehicles	Forklift trucks
Other Equipment	Railroad maintenance equipment
Engines and Components	Diesel engines, diesel generator sets and hydraulic equipment
Casting Products	Steel castings and iron castings
Logistics	Packing and transport

To remain competitive in this operating segment, Komatsu introduced the “DANTOTSU Strategy” in 2003 and has been working to increase the number of DANTOTSU products. DANTOTSU means “unique and unrivaled” in Japanese. Komatsu only designates a product as DANTOTSU if such product is considered unique and unrivaled as compared to those produced by Komatsu’s competitors, due to the fact that such product is equipped with one or more features that its competitors cannot match for some time. Since the introduction of DANTOTSU products, Komatsu has been working to replace many of its product models with DANTOTSU products. The current line-up of DANTOTSU products include WA500 and WA600 wheel loaders and the D51-22 bulldozer to name a few. Komatsu plans to continue making model changes to replace some of its existing construction, mining and utility equipment product models with DANTOTSU products.

13

In addition to manufacturing and developing new products, Komatsu has been focused on downstream businesses, such as the used equipment business and the rental equipment business. Komatsu Used Equipment Corp. has been facilitating the sale of used equipment by holding annual auctions in several locations in Japan since the mid-1990s.

The principal products developed and introduced to the market in the Construction, Mining and Utility Equipment operating segment during the fiscal year ended March 31, 2010 are listed below:

Company	Product	Model
Komatsu Ltd.	Hydraulic Excavators	PC78UU-8, PC130F-7, PC200LC-8E0Hybrid, PC600-8E0, PC600LC-8E0, PC600-8R, PC600LC-8R, PC650-8E0, PC650LC-8E0, PC700LC-8E0, PC700LC-8R, PC8000-6
	Bulldozers	D375A-6R
	Motor Graders	GD555-5, GD655-5, GD675-5
Komatsu Utility Co., Ltd.	Hydraulic Excavators,	PC05-1A, PC58UUT-5
	Forklifts Trucks	FD20-17, FD25-17, FD30-17, FD35A-17, FB15-12, FD18-12, FD20A-12, FB15MU-12, FB18MU-12, FB20MU-12

(2) Industrial Machinery and Others

Net sales from the Industrial Machinery and Others operating segment accounted for 11.4% of Komatsu’s total net sales for the fiscal year ended March 31, 2010. The products available in this operating segment are used by a wide range of businesses and include industrial machinery, such as forging and sheet metal machinery and other services. Komatsu’s principal products in this operating segment fall into the following categories:

Category	Principal Products
Metal Forging and Stamping Presses	Large-sized presses, servo presses, small- and medium-sized presses and forging presses
Sheet Metal Machines	Laser cutting machines, fine-plasma cutting machines, press brakes and shears
Machine Tools	Transfer machines, machining centers, crankshaft millers, grinding machines and wire saws
Defense Systems	Ammunition and armored personnel carriers
Temperature-control equipment	Thermoelectric modules and temperature-control equipment for semiconductor manufacturing
Others	Commercial-use prefabricated structures

14

The principal products developed and introduced to the market in the Industrial Machinery and Others operating segment during the fiscal year ended March 31, 2010 include the high speed palletizing system for large-size presses, plasma cutting machines, the crankshaft milling machine, new milling machines for a vehicle engine’s crankshaft (GPM190F-5 and 200F-5), the large size wire-sawing machine (PV800) that can be used to saw materials used in solar batteries and chip ID markers.

PRINCIPAL MARKETS

Komatsu operates and competes in the following six principal markets: (1) Japan, (2) the Americas, (3) Europe and Commonwealth of Independent States (“CIS”), (4) China, (5) Asia (excluding Japan and China) and Oceania and (6) the Middle East and Africa.

In this annual report, information regarding net sales by geographic segment is presented in the following two ways: (1) by sales destination (based on the country where the purchaser is located) and (2) by sales origin (based on the country where the seller is located). The following table sets forth Komatsu’s net sales recognized by sales destination for the fiscal years ended March 31, 2010, 2009 and 2008. Net sales data by sales origin are set forth in Item 5.A. Operating and Financial Review and Prospectus as well as Note 23 to the Company’s audited consolidated financial statements, included elsewhere in this report.

	(Millions of Yen)
	Fiscal Year				Fiscal Year				Fiscal Year
	Ended March 31,				Ended March 31,				Ended March 31,
	2010				2009				2008
Japan	¥	323,813	22.6	%	¥	452,172	22.4	%	¥	505,185	22.5	%
Americas		323,984	22.7	%		503,450	24.9	%		541,160	24.1	%
Europe and CIS		127,377	8.9	%		284,029	14.0	%		427,679	19.1	%
China		270,870	18.9	%		236,226	11.7	%		189,902	8.5	%
Asia (excluding Japan and China) and Oceania		299,864	20.9	%		335,574	16.6	%		348,462	15.5	%
Middle East and Africa		85,656	6.0	%		210,292	10.4	%		230,635	10.3	%
Total	¥	1,431,564	100.0	%	¥	2,021,743	100.0	%	¥	2,243,023	100.0	%

15

SALES AND DISTRIBUTION

Komatsu’s international and domestic sales and distribution for its Construction, Mining and Utility Equipment operating segment are conducted primarily through a network of subsidiaries, affiliates and independent distributors, and to a lesser extent by its partners of jointly-owned companies.

Komatsu’s construction, mining and utility equipment sales and distribution operations in Japan focus principally on retail sales to customers, partly on an installment basis. In addition, Komatsu has enhanced its equipment rental services business in Japan by using rental companies to act as its agents, especially for its construction and utility equipment, in response to strong demand from customers. Distributors and dealers form the core of Komatsu’s service network in Japan, providing total customer-support services.

Komatsu’s overseas construction, mining and utility equipment sales and service network consists of approximately 420 distributors. Komatsu supplies its products to distributors around the world through unaffiliated trading companies and the Company’s subsidiaries and affiliated companies. Komatsu’s liaison offices provide both sales support and technical support to independent distributors. The Company’s major sales subsidiaries and affiliates are located in the United States, Brazil, Chile, Belgium, Germany, France, Italy, Sweden, Russia, China, Singapore, Indonesia, India, Australia, the United Arab Emirates and South Africa. These subsidiaries and affiliates provide technical assistance to Komatsu’s distributors and carry spare parts so that such parts can be delivered on a timely basis to its customers and distributors. These subsidiaries and affiliates as well as Komatsu’s distributors provide the services that customers may require with respect to their construction, mining and utility equipment outside of Japan.

Komatsu’s sales of products in the Industrial Machinery and Others operating segment include direct sales to customers and sales through distributors, dealers and trading companies. For example, large presses are mainly sold directly to customers while small- and medium-sized presses are primarily sold through distributors and dealers.

SOURCES OF SUPPLY

As it is neither economical nor efficient for Komatsu to manufacture all of its necessary components and parts, Komatsu produces some of its major equipment components internally and purchases other components and parts, such as electrical components, tires, hoses and batteries, from specialized suppliers. Specialized suppliers are Komatsu’s business partners that supply components and parts that are particularly important to maintaining the quality of Komatsu’s products or business partners who specialize in supplying particular components and parts. Komatsu also procures some of its parts, such as metal forgings, machine components, sheet metal parts and various accessories, from other business partners. Therefore, the fluctuations in prices of materials for such components, such as steel materials, may affect Komatsu’s results of operations. In addition, a shortage of product parts and materials, bankruptcies of suppliers or production discontinuation by suppliers of products used by Komatsu may make it difficult for Komatsu to engage in the timely procurement of parts and materials and manufacture of its products. Komatsu believes, however, that it has adequate and reliable sources of supply for its material components, parts and raw materials, and that it has appropriate alternative sources available for such supplies consistent with its prudent business practices.

16

SEASONALITY

In general, Komatsu’s businesses have historically experienced some seasonal fluctuations in sales. While there are variations by market and product, Komatsu’s consolidated sales volume is customarily the highest during the fourth quarter. However, this seasonality has generally not been material to Komatsu’s results of operations.

PATENTS AND LICENSES

Komatsu holds numerous Japanese and foreign patents, design patents and utility model registrations relating to its products. It also has a number of applications pending for Japanese and foreign patents. Under Japanese law, a utility model registration is a right granted with respect to inventions of less originality than those which qualify for patents. Komatsu also manufactures a variety of products under licensing agreements with various other companies.

While Komatsu considers all of its patents and licenses to be important for the operation of its business, it does not consider any of its patents or licenses or any related group of them to be so important that its expiration or termination would materially affect Komatsu’s business as a whole, nor does it believe that any category of its activities is materially dependent upon patents or licenses, or patent or license protection. Komatsu also owns and maintains a substantial number of trademarks and trade names that are registered or otherwise protected under the laws of various jurisdictions.

COMPETITIVE ENVIRONMENT

Construction, Mining and Utility Equipment

As a manufacturer of a full line-up of construction and mining equipment, Komatsu provides a broad range of products from super-large equipment for mining use to general construction equipment and mini construction equipment for urban use.

17

While there is intense competition in all of the product categories in this operating segment, Komatsu continues to be one of the market leaders in respect of construction and mining equipment in every geographic region in which it operates. In many countries in the Asian market, Komatsu is the market leader in respect of construction and mining equipment.

Komatsu’s competitors in the construction and mining equipment business consist of global competitors, regional competitors and locally specialized competitors. Major global competitors include Caterpillar Inc. (“Caterpillar”), Hitachi Construction Machinery Co., Ltd. (“Hitachi Construction”), Volvo Construction Equipment NV (“Volvo”) and CNH Global N.V. The competitive environment differs according to regions and product models.

Although demand for construction equipment in North America continues to experience a sharp downturn, it is still the largest market for construction equipment in the world and Caterpillar is the market leader in North America based on sales. Deere & Company, which has formed an alliance with Hitachi Construction, also holds a strong market position in construction equipment in North America based on sales. With respect to mining equipment, Komatsu’s main competitor in North America is Caterpillar, a mining equipment manufacturer with a full line-up of products.

In Europe, in addition to global manufacturers with a full line-up of construction equipment, such as Caterpillar and Volvo, there are many regional or locally specialized competitors who have firm footings in the local construction equipment markets. Komatsu competes with different competitors in each country or region in Europe and it is expected that the construction equipment markets in Europe will continue to be very competitive.

In Asia, Komatsu’s competitors in the construction equipment market include Caterpillar, Hitachi Construction and Korean manufacturers, such as Hyundai Heavy Industries Co., Ltd. and Doosan Infracore Co., Ltd. In China, where demand has turned around in the first half of the fiscal year ended March 31, 2010 and started to record growth. Komatsu competes with a number of locally specialized construction equipment manufacturers in addition to the above-mentioned competitors. With respect to mining equipment, Komatsu’s main competitor in Asia and China is Caterpillar, a mining equipment manufacturer with a full line-up of products.

As for industrial vehicles, Komatsu competes with global competitors that offer a full line-up of forklift trucks, such as Toyota Motor Corporation, as well as locally specialized manufacturers. The major markets for forklift trucks have traditionally been Europe, the United States and Japan. Recently, China has overtaken Europe and has developed into the largest market for forklift trucks. While European and U.S. manufacturers of forklift trucks sell not only forklift trucks but also warehousing equipment, Komatsu and other Japanese manufacturers (excluding Toyota Motor Corporation) of forklift trucks primarily focus on forklift trucks. In China, Komatsu competes with a number of locally specialized manufacturers in addition to European and U.S. manufacturers.

18

Komatsu believes that the following strengths provide Komatsu with a competitive advantage in the global construction, mining and utility equipment market:

DANTOTSU products

DANTOTSU products are products that have truly outstanding features or qualities in terms of, among others, fuel efficiency, information and communication technology (“ICT”) and environmental features, such as lower carbon dioxide (CO₂) emissions and fuel consumption, which Komatsu believes its competitors will not be able to match for some time.

KOMTRAX (Komatsu Machine Tracking System)

KOMTRAX is a system that Komatsu pioneered the development of and introduced to the market in 2001. Using KOMTRAX, customers can manage the operation of their construction equipment by utilizing information technology applications, such as global positioning system (“GPS”) and mobile telecommunication technologies. Using the information collected through KOMTRAX, such as location and operation time, customers who operate equipment equipped with KOMTRAX are able to operate the equipment more efficiently and cost effectively because they are able to decrease fuel use and maintenance expenses. In addition, more recently, this system has enabled distributors and dealers to improve their parts and service operations.

AHS (Autonomous Haulage System)

AHS is a system that controls the operation of super-large autonomous dump trucks that are used in large-scale mines. Komatsu first introduced AHS in copper mines in northern Chile, where it is currently in full use. Komatsu started to provide AHS for use in iron ore mines in western Australia at the end of 2008 as its second installation. Komatsu is the only company that can provide this type of system in the mining equipment industry.

Hybrid

In June 2008, Komatsu launched the world’s first hybrid hydraulic excavator that consumes less fuel and emits less CO₂ . Komatsu believes that it has a competitive advantage in the market with respect to this type of equipment not only because it was one of the first to develop and market this type of equipment but also because it is equipped with advanced technologies that reduce CO₂ emissions and fuel consumption, which is a feature that customers have been focused on in recent years.

19

Industrial Machinery and Others

In the Industrial Machinery and Others operating segment, Komatsu’s principal products include (1) metal forging and stamping presses, (2) sheet metal machines and (3) machine tools. As discussed below, the market for these products is highly competitive.

(1) Metal Forging and Stamping Presses

Komatsu manufactures and sells stamping presses that are used to press doors and roofs of automobiles and various other parts into shapes. Komatsu’s stamping presses can be divided into large-sized presses, and medium- and small-sized presses.

With respect to large-sized presses, which are mainly sold to automobile manufacturers, Komatsu considers Ishikawajima-Harima Heavy Industries Co., Ltd., Hitachi Zosen Fukui Corporation and AIDA Engineering, Ltd. (“AIDA”) of Japan and Schuler AG of Germany to be its major competitors. In Japan, Japanese manufacturers, including Komatsu, have an advantage over non-Japanese manufacturers. Likewise, in Germany, German manufacturers enjoy dominant positions and have a competitive advantage over non-German manufacturers. In other markets, regional and locally specialized competitors in addition to the above-mentioned major manufacturers compete with each other, making the market highly competitive. For the fiscal year ended March 31, 2010, demand for large-sized presses decreased due primarily to the continuous restraint in capital investments exercised by automobile manufacturers on a global basis, in line with the drastic deterioration of the global economy. Nevertheless, Komatsu strengthened its marketing activities of large-sized presses in the emerging markets. For example, Komatsu focused on sales promotion activities in China and India as it expanded the product line-up of its AC Servo motor-driven large-sized presses, enhanced its technological edge, reinforced its global service operations and strengthened its collaboration with mold builders.

With respect to small- and medium-sized presses, Asia (including Japan) and North America are Komatsu’s largest markets. Major competitors of Komatsu for these products include AIDA and Amada Co., Ltd. (“Amada”) of Japan, The Minster Machine Company of the United States and Chin Fong Machine Industrial Co., Ltd. of Taiwan. During the fiscal year ended March 31, 2010, Komatsu continued to increase the product line-up of its AC Servo motor-driven presses, which contributed to the increase in sales of small- and medium-sized presses. Despite the downturn in the global economy and the difficult market conditions, which continued to exist partly because companies in the automobile industry and the electronics industry continued to exercise restraint in their capital investments, Komatsu started the production of small- and medium-sized presses in China in the fiscal year ended March 31, 2010 with the goal of increasing sales of such presses in China.

20

(2) Sheet Metal Machines

Komatsu’s sheet metal machines business is primarily focused on machines that cut and bend steel sheets, and Japan is the major market for such machines. Komatsu’s competitors consist of other Japanese manufacturers, such as Amada, Mitsubishi Electric Corporation, Yamazaki Mazak Corporation and Koike Sanso Kogyo Co., Ltd. Amada enjoys a large market share in this business due to its large product line-up.

One of the principal product of Komatsu’s sheet metal machine business is its plasma cutting machines. With technology that is original to Komatsu, Komatsu’s plasma cutting machines boast high productivity and outstanding cost performance in terms of both operating and initial costs while maintaining a cutting quality that is equivalent to that of laser cutting machines. Such features are highly valued in this market and has enabled Komatsu to improve its profitability in this business.

In addition, Komatsu’s 3D laser cutting machines that can be used to cut three dimensional objects are highly valued in the sheet metal machine market.

(3) Machine Tools

The principal products of Komatsu’s machine tool business are machine tools that are used to cut and fabricate engine parts (transfer machines, crankshaft millers and grinding machines), general- purpose machining centers and wire saws. Major competitors in the market for machine tools used to cut and fabricate engine parts include JTEKT Corporation and ENSHU Limited of Japan and Gebrüder Heller Maschinenfabrik GmbH of Germany. Major competitors in the machining center include Japanese manufacturers such as Mori Seiki Co., Ltd. and Okuma Corporation.

Komatsu believes that it continues to maintain a competitive edge in the global market for machine tools used to cut and fabricate engine parts based on its technological edge and broad product line-up.

Although capital investments by automobile manufacturers decreased sharply during the fiscal year ended March 31, 2010 as compared to the fiscal year ended March 31, 2009, Komatsu was able to maintain its high position in the global market for machine tools used to cut and fabricate engine parts due to the steps it took to reinforce its sales in China, North America and Europe, expand its product line-up and establish a sales arrangement whereby customers can purchase through Komatsu all of the machinery (including some machinery not manufactured by Komatsu) necessary to manufacture an engine.

21

In addition, the market for wire saws that are used to slice silicon ingots, which are used to manufacture solar cells, has expanded rapidly in recent years due to the increase in demand for solar power generator devices. Major competitors in the wire saw market include Swiss manufacturers HCT Shaping Systems SA and Meyer Burger Technology AG. Komatsu’s wire saws have been highly valued in the wire saw market because it uses advanced technologies, such as technologies that regulate the wire appropriately to enable it to cut silicon ingots.

REGULATIONS

Komatsu is subject to a wide range of laws and regulations in the countries and regions where it operates, including safety regulations, restrictions on emissions, noise and vibration from its products, various environmental controls regulating the manufacturing processes, such as the management of toxic chemicals and hazardous wastes, green procurement and recycling. Komatsu’s operations and products are designed to comply with all applicable laws and regulations currently in effect in the relevant jurisdictions. Komatsu expects to remain in substantial compliance with existing applicable laws and regulations and does not expect that the costs of compliance with foreseeable laws and regulations will have a material effect upon its financial position and results of operations. Some of the important laws and regulations that affect Komatsu’s businesses are summarized below.

Regulations regarding engine emissions

The Ministry of Land, Infrastructure and Transport of Japan (“MLIT”) introduced the approval system for low-emission type construction equipment used in construction in 1997, setting the maximum emission levels by model and power range. Under this system, manufacturers are required to file an application with MLIT for the approval of their low-emission type construction equipment which meets the standards set forth by MLIT. While the maximum emission levels set by MLIT are not legally binding, they must be complied with in Japan in practice since only construction equipment that has obtained the required approvals is allowed to be used in construction projects under the direct control of MLIT. In 2003, MLIT lowered such maximum emission levels established in 1997 and the revised limits are known in Japan as the Tier II standards. In 2006, a new law took effect in Japan to control exhaust emissions from off-road specific vehicles in the power range over 19kW, including those used at construction sites. In connection with the implementation of this new law, maximum emission levels were lowered further. Such new limits are known as the Tier III standards, compliance with which has been mandatory in Japan since 2006. MLIT and related ministries are expected to introduce new maximum emission levels, which are expected to become effective in two stages in Japan, first in 2011 and second in 2014. These new limits that are currently being considered by MLIT and related ministries are similar to the maximum emission level limits that are scheduled to be phased-in in the U.S. (Tier IV standards) and Europe (Stage 3B) starting in 2011.

22

In the United States, the U.S. Environmental Protection Agency (“EPA”) establishes emission standards for construction equipment and introduced the Tier I standards for equipment of 130kW or greater in 1996. Since then, the EPA has lowered emission standards and the Tier III standards, which are currently in effect, have been phased-in since 2006. The even more stringent Tier IV standards are scheduled to be phased-in starting 2011.

In Europe, the Engine Emissions Directive 97/68/EC regarding measures against emission of gaseous and particulate pollutants from internal combustion engines to be installed in off-road mobile machinery went into effect in 1999 and the second stage of the directive was implemented from 2002 to 2004. The first part of the third stage of this directive (Stage 3A) was implemented in 2006 to 2008. The next stage (Stage 3B) is scheduled to be phased-in starting 2011, similar to Japan and the United States.

Komatsu and its products are in compliance with all regulatory standards that have already taken effect and Komatsu continues to make progress in its preparations to comply with the Tier IV (Stage 3B) standards that are to be phased-in in Japan, the United States and Europe starting in 2011.

Regulations regarding noise and vibration

In Japan, MLIT established the approval system for low-noise emission and low-vibration type construction equipment in 1983. Under this system, manufacturers are required to file an application with MLIT for the approval of their low-noise and low-vibration type construction equipment which meets the standards set forth by MLIT. Initially, this approval system for noise emission and vibration was only used for noise emission. The current measurement method and limits on noise emission levels for the type approval system have been in effect since October 1997. While the maximum standards for noise emission established by MLIT are not legally binding, these maximum standards must be complied with in Japan in practice since only construction equipment that has obtained the required approvals is allowed to be used in construction projects under the direct control of MLIT. The type approval system has been in use for low-vibration type construction equipment since October 1996. Similar to the type approval system for noise emission, the maximum standards for vibration set by MLIT are not legally binding. However, unlike the type approval system for noise emission, construction equipment, such as vibratory hammers and hydraulic excavators, that have not obtained such approvals are allowed to be used in construction projects under the direct control of MLIT.

23

In Europe, Directive 95/27/EC of the European Parliament and of the Council of June 1995 amending Council Directive 86/662/EEC on the limitation of noise emitted by hydraulic excavators, rope-operated excavators, dozers, loaders and excavator-loaders has been in effect since January 1997. This directive defined the maximum sound-power levels of airborne noise emitted by these earth-moving machines under dynamic operating conditions and required manufacturers to obtain an EC type-examination certificate. The second stage of this directive, which requires further noise reduction, has been in effect since January 2006. Separately, in January 2002, Directive 2000/14/EC of the European Parliament and of the Council relating to the noise emission in the environment by equipment for use outdoors went into effect. This regulation applies to a wide range of product types from gardening equipment to construction and waste-management equipment and requires such products to bear a CE-mark and indicate their guaranteed sound-power level before they could be sold in the European market. Under such directive, manufacturers are required to confirm that the noise emitted from their products would not exceed the guaranteed sound-power level. The second stage of this directive, which requires further noise reduction, has been in effect since January 2006.

Komatsu and its products are in compliance with all regulatory standards that have already taken effect and Komatsu continues to make progress in its preparations to comply with the latest noise and vibration standards that are to become effective in the future.

Regulations regarding hazardous substances

Responding to the increase in environmental conservation awareness around the world, Komatsu has been making efforts for several decades to reduce the use of asbestos, lead and other substances of environmental concern.

In response to the enactment of the European regulation addressing Registration, Evaluation, Authorisation and Restriction of Chemicals (“REACH”) in June 2007, Komatsu reviewed the list of substances approved for limited use and revised the designation of certain substances within its manufacturing plants to “reduced” or “banned” as appropriate. Through cooperation with suppliers, Komatsu has initiated a system to strengthen its control over substances of environmental concern used in its products, as manufacturers like Komatsu are required by REACH to provide information to consumers (i.e., customers that purchased the equipment new or used) about the name(s) and the amount(s) of substance(s) used in each machine/part.

Komatsu and its products are in compliance with all regulatory standards that have already taken effect and Komatsu continues to make progress in its preparations to comply with the latest regulations regarding hazardous substances that are to become effective in the future.

24

Regulations regarding Health and Safety requirement

Komatsu believes that it is essential that manufacturers of construction equipment consider the machine operator’s health and safety when developing and manufacturing construction equipment. Komatsu has been making efforts to improve the health and safety features of its construction equipment for quite some time.

In Europe, the Machinery Directive 89/392/EEC, which sets forth the essential requirements on machine safety, was published in 1989 and became effective in 1995. These requirements relate to the design and construction of machinery and are intended to promote the health and safety of the operator when machinery is used. Since then Komatsu has been in compliance with this Directive. The Directive was amended by several Directives and codified into Directive 98/37/EC in 1998. Based on Directive 98/37/EC, the new Machinery Directive 2006/42/EC was published in 2006 and became effective on December 29, 2009.

The new Machinery Directive updated Directive 98/37/EC in several respects. Such updates include requiring manufacturers to provide clearer instructions as to the operation of the equipment and to improve the visibility of the operator of the equipment. More specifically, the new Machinery Directive requires the operation and maintenance manuals of the equipment to be written in the 24 official languages of the member states of the European Union at the time the equipment is sold in the European market. The new Machinery Directive also requires the manufacturer to take appropriate steps so that an operator of an equipment in each of the member states of the European Union understands any information regarding the equipment that is written on the equipment. To avoid any misunderstandings as to the operation or handling of the equipment due to language differences, a manufacturer can either (1) use decals solely consisting of pictograms or (2) translate the text of any decals into every official language of the member states of the European Union. In addition, as the new Machinery Directive requires operators of large-size machines to have rear visibility, Komatsu has made rear view cameras or mirror systems a standard feature of large-size machines it sells in Europe. The new Machinery Directive also requires the manufacturer to disclose in each operation and maintenance manual issued in Europe the declared level of noise or vibration level and the uncertainty figures (which is the mean value and deviation of noise or vibration data collected on several machines of the same model).

Komatsu and its products are in compliance with all regulatory standards that have already taken effect and Komatsu continues to make progress in its preparations to comply with the latest regulations regarding health and safety standards that are to become effective in the future.

25

MANAGEMENT POLICY AND STRATEGIES

Below describes Komatsu’s basic management policy and its mid- to long-range management plans.

Basic Management Policy

The cornerstone of Komatsu’s management is commitment to Quality and Reliability for maximization of its corporate value. This commitment is not limited to delivering safe and innovative products and services which incorporate the viewpoints of customers. Komatsu is continuing its efforts to enhance the Quality and Reliability of all organizations, businesses, employees and management of the entire Komatsu Group. It is the top management task of Komatsu to continue improving the Quality and Reliability of all these, year after year.

New Mid- to Long-Range Management Plan and Issues Ahead

To improve its profitability, strengthen its financial position, enhance its market position in Greater Asia and so forth, Komatsu worked on the “Global Teamwork for 15” mid-range management plan for three years, from April 2007 to the end of March 2010. For the fiscal year ended March 31, 2008, Komatsu attained an operating margin of 14.8%, virtually achieving the goal of 15%, against the backdrop of good tailwind on the market in addition to its own efforts, such as the development of DANTOTSU products. Komatsu sustained a high ratio up through the first half of the following fiscal year.

In the wake of the financial crisis triggered in the United States in September 2008, world economies went into recession, reducing the volume of global demand for construction equipment to half the size of the peak period recorded in April through June, 2008. Komatsu also weathered a similarly drastic drop in demand in its other businesses. In response to this change in the business environment, Komatsu quickly promoted structural reforms, such as the reorganization of production on a global scale and consolidation of sales operation, and cut down its inventories and fixed costs. As a result, Komatsu has sculpted its corporate structure into a leaner and stronger entity.

Today, market demand for construction and mining equipment has upturned for recovery in China and other emerging countries in Asia and Latin America. Komatsu anticipates that economic growth in these emerging countries will drive global demand upward. Komatsu is going to turn its rudder sharply for growth again as it capitalizes on market recovery by taking advantage of its solid corporate strength built through previous structural reforms. To generate further growth through teamwork among all employees and with distributors and suppliers around the world, Komatsu looked ahead and started the new three-year management plan “Global Teamwork for Tomorrow” in April this year.

26

In the new management plan, Komatsu has positioned China, Asia, Oceania, Latin America, Africa and some other emerging economies as “Strategic Markets.” Together with this move, Komatsu is going to work on the following activities of importance in order to further refine its accumulated strengths of ICT applications: development of key components, manufacturing technologies, global sales and service networks, and flexible procurement and production. Komatsu will generate positive outcomes. Komatsu is also continuing its efforts to anchor The KOMATSU Way* by encouraging all employees of the Komatsu Group to acquire it through their Kaizen (improvement) activities, while emphasizing the importance of Brand Management designed to build on relationships with customers and promote mutual business growth with them. Komatsu is going to materialize these two efforts in the form of human resource development needed for global business expansion.

1) Promotion of ICT Applications

Komatsu has refined its ICT applications mainly in the domain of construction and mining equipment as represented by KOMRAX (Komatsu Machine Tracking System) for construction equipment and Autonomous Haulage System for use in large-scale mines. Komatsu is continuing its applications of leading-edge ICT to machine management, machine control and construction management to enhance its product competitiveness. Komatsu is also going to proactively promote ICT applications to industrial machinery and forklift trucks. Furthermore, Komatsu is going to advance its utilization of KOMTRAX-originated information to improve customers’ productivity and its sales and production planning.

2) Development of Environment-Friendly Products

To help Komatsu’s customers reduce CO₂ emissions from their equipment, Komatsu is going to advance its hybrid and HST (hydrostatic transmission) technologies for construction equipment and forklift trucks and its AC Servo technology for presses in the industrial machinery business. With respect to hybrid hydraulic excavators, in particular, Komatsu is going to lead other companies in worldwide marketing. In the domain of mining equipment, Komatsu is going to generate steady results in the Biodiesel Fuel Project Komatsu has recently started.

Starting in and after 2011, the new emission control regulations which require further reduction of NO_X (nitrogen oxides) and PM (particulate matters) will be effective in Japan, the United States and Europe. Komatsu is going to continue its efforts to develop new regulations-compliant products by integrating leading-edge technologies into its strategic advantage of in-house development and manufacturing capabilities for engines, hydraulic units and control systems and to ensure their smooth market introduction.

27

3) Expansion of Sales and Service Operations in Strategic Markets

In Strategic Markets with high growth potential and in the domain of mining equipment, Komatsu is going to make a difference from competitors by not only supplying products featuring excellent QCDS (quality, costs, delivery and safety) but also enhancing operating rates of customers’ equipment through quick and responsive delivery of parts and service. To this end, Komatsu is going to upgrade its sales and service capabilities by developing and strengthening distributors, expanding service support bases, reinforcing parts and Reman businesses and supporting customers through ICT applications. Also, in the domains of industrial machinery and forklift trucks, Komatsu is going to promote more synergy effects with the construction equipment operation and improve sales and service networks in response to an expanding weight on Strategic Markets centering on China.

4) Promotion of Continuous Kaizen (Improvement) by Strengthening Workplace Capability

While growth of emerging economies offers Komatsu a great chance to expand its business, Komatsu needs to expect new competition with companies of emerging economies in addition to conventional competition. To win this global mega competition, it is important for Komatsu to continuously refine its capability and cost competitiveness to meet the changes, as Komatsu advances its engagement in activities for growth which are defined in the new mid-range management plan. To this end, it is absolutely necessary for Komatsu to demonstrate workplace capability, i.e., the power to continue its Kaizen (improvement) activities. With this workplace capability and effective ICT utilization, Komatsu is going to further heighten its operational flexibility of global production, optimize logistics, and reduce its production costs substantially. Komatsu is also going to continue efforts to reform and streamline its administrative work. Through these Kaizen (improvement) activities, Komatsu is going to further enhance its workplace capability and promote human resource development.

Based on the belief that “Komatsu’s corporate value is the total sum given to it by society and all of its stakeholders,” Komatsu is further strengthening its corporate governance to ensure sound and transparent management, while improving management efficiency. Being committed to promoting thorough compliance, Komatsu will also ensure that all employees share The KOMATSU Way. In addition to improving its business performance, Komatsu will facilitate the development of both corporate strength and social responsibility in a well balanced manner.

* The KOMATSU Way:

When the founder of Komatsu established the Company in 1921, he defined the guiding principles of the Company to be “overseas expansion,” “quality first,” “technology innovation” and “human resource development.” Komatsu’s management believes that Komatsu’s strengths were forged by earlier generations of employees based on these principles and these principles are still ingrained in the minds of Komatsu employees today. Komatsu’s management defines “The KOMATSU Way” to consist of Komatsu’s strengths, the beliefs that support the strengths, and the basic attitudes and patterns of behavior. Komatsu’s management believes that Komatsu can further enhance its reliability and achieve growth if its employees continue to believe in and pursue The KOMATSU Way.

28

Below are the financial targets that management has established for the “Global Teamwork for Tomorrow” mid-range management plan.

Numerical Targets of the “Global Teamwork for Tomorrow”

Items	Targets for Fiscal Year Ending March 31, 2013
Operating margin	15% or above
ROE: Return on equity 1)	20%
Net debt-to-equity ratio 2)	0.4 or below
Excluding debt of retail finance companies	0.2 or below
Consolidated payout ratio	20 - 40% (stably)

Notes:

1)	ROE = Net income attributable to Komatsu Ltd. for the fiscal year/[(shareholders’ equity at the beginning of the fiscal year + shareholders’ equity at the end of the fiscal year)/2]
2)	Net debt-to-equity ratio = (Interest-bearing debt - cash and cash equivalents - time deposits)/shareholders’ equity

Guidelines for the Numeric Targets of the “Global Teamwork for Tomorrow”

Items	Fiscal Year Ending March 31, 2013
Guideline on sales	JPY2,000 billion ± JPY100 billion
Guidelines on exchange rate		USD1	EUR1		RMB1
		JPY90	JPY125	JPY13.5

C. Organizational Structure

As of March 31, 2010, the Komatsu group includes the Company, 143 consolidated subsidiaries and 40 affiliates accounted for by the equity method. The Company is the parent of the Komatsu group. The following is a list of the principal consolidated subsidiaries as of March 31, 2010.

29

		Ownership Interest (proportion of voting
	Country of	power held)
Name	Incorporation	(%)
Komatsu Utility Co., Ltd.	Japan		100.0
Komatsu Castex Ltd.	Japan		100.0
Komatsu Construction Equipment Sales and Service Japan Ltd.	Japan		100.0
Komatsu Used Equipment Corp.	Japan		100.0
Komatsu Rental Japan Ltd.	Japan		79.0
Komatsu Forklift Japan Ltd.	Japan		100.0
Komatsu Logistics Corp.	Japan		100.0
Komatsu Industries Corporation	Japan		100.0
Komatsu Machinery Corporation	Japan		100.0
Komatsu NTC Ltd.	Japan		100.0
Komatsu Business Support Ltd.	Japan		100.0
Komatsu America Corp.	U.S.A.		100.0
Komatsu do Brasil Ltda.	Brazil		100.0
Komatsu Brasil International Ltda.	Brazil		100.0
Komatsu Holding South America Ltda.	Chile		100.0
Komatsu Cummins Chile Ltda.	Chile		81.8
Komatsu Financial Limited Partnership	U.S.A.		100.0
Komatsu Europe International N.V.	Belgium		100.0
Komatsu UK Ltd.	U.K.		100.0
Komatsu Hanomag GmbH	Germany		100.0
Komatsu Mining Germany GmbH	Germany		100.0
Komatsu Deutschland GmbH	Germany		100.0
Komatsu France S.A.S.	France		100.0
Komatsu Utility Europe S.p.A.	Italy		100.0
Komatsu Italia S.p.A.	Italy		100.0
Komatsu Forest AB	Sweden		100.0
Komatsu CIS LLC	Russia		100.0
Komatsu Financial Europe N.V.	Belgium		100.0
Komatsu Southern Africa (Pty) Ltd.	South Africa		80.0
Komatsu Asia & Pacific Pte Ltd.	Singapore		100.0
PT Komatsu Indonesia	Indonesia		94.9
Bangkok Komatsu Co., Ltd.	Thailand		74.8
Komatsu Australia Pty. Ltd.	Australia		60.0
Komatsu Australia Corporate Finance Pty. Ltd.	Australia		60.0
Komatsu (China) Ltd.	China		100.0
Komatsu (Changzhou) Construction Machinery Corp.	China		85.0
Komatsu Shantui Construction Machinery Co., Ltd.	China		60.0
Komatsu Financial Leasing China Ltd.	China		100.0

Notes:
1)	Percentage of ownership interest includes indirect ownership.
2)	The Company’s significant subsidiaries (as such term is defined in Rule 1-02(w) of Regulation S-X) are Komatsu America Corp. and Komatsu (China) Ltd.

30

D. Property, Plants and Equipment

Komatsu’s manufacturing operations for the Construction, Mining and Utility Equipment operating segment are conducted in 45 plants, 12 of which are located in Japan. As of March 31, 2010, 24 principal plants (out of 45 plants) had an aggregate manufacturing floor space of 1,665 thousand square meters (17,923 thousand square feet). Komatsu uses additional floor space at such plants and elsewhere as laboratories, office space and employee housing and welfare facilities. Komatsu is capable of increasing production output at its manufacturing facilities by adjusting their manufacturing schedules.

Komatsu owns most of the manufacturing facilities and the land on which such facilities are located. A portion of the properties owned by Komatsu is subject to mortgages or other types of liens. As of March 31, 2010, the net book value of the property owned by Komatsu was ¥525,100 million, of which ¥4,660 million was subject to encumbrances.

The name and location of Komatsu’s principal plants, their approximate aggregate floor space, and the principal products manufactured therein as of March 31, 2010 are as follows:

	Floor Space
	Thousand		Thousand
Name and Location	sq. meter		sq. ft		Principal products
Japan:
Awazu Plant Komatsu, Ishikawa		247		2,659	Small- and medium-sized hydraulic excavators, small- and medium-sized wheel loaders, small- and medium-sized bulldozers, motor graders
Kanazawa Plant Kanazawa, Ishikawa		25		269	Super-large hydraulic excavators, presses
Osaka Plant Hirakata, Osaka		169		1,819	Medium- and large-sized hydraulic excavators, large-sized bulldozers, recycling equipment
Oyama Plant 1) Oyama, Tochigi		225		2,422	Diesel engines, hydraulic equipment, axle
Ibaraki Plant Hitachinaka, Ibaraki		51		549	Large-sized wheel loaders, dump trucks
Koriyama Plant Koriyama, Fukushima		30		323	Hydraulic equipment
Komatsu Utility Co., Ltd. Oyama, Tochigi		75		807	Forklift trucks, mini excavators, mini wheel loaders
Komatsu Castex Ltd. Himi, Toyama		91		980	Steel castings, iron castings, pattern for casting
Komatsu NTC Ltd. Nanto, Toyama		68		732	Transfer machines, machining centers, laser cutting machines, grinding machines

31

	Floor Space
	Thousand		Thousand
Name and Location	sq. meter		sq. ft		Principal products
The Americas
Komatsu America Corp. Tennessee, U.S.A.		31		334	Medium-sized hydraulic excavators, articulated dump trucks
South Carolina, U.S.A.		18		194	Wheel loaders, forklift trucks
Illinois, U.S.A.		62		667	Large-sized dump trucks
Hensley Industries, Inc. Texas, U.S.A.		29		312	Buckets, teeth, edges, adapters
Komatsu do Brasil Ltda. São Paulo, Brazil		68		732	Medium-sized hydraulic excavators, small- and medium-sized wheel loaders, medium-sized bulldozers, motor graders
Europe
Komatsu UK Ltd. Birtley, UK		60		646	Medium- and large-sized hydraulic excavators
Komatsu Hanomag GmbH Hannover, Germany		77		829	Wheeled hydraulic excavators, small- and medium-sized wheel loaders, mini wheel loaders
Komatsu Forest AB Umea, Sweden		14		151	Forestry equipment (wheel type)
Komatsu Mining Germany GmbH Düsseldorf, Germany		23		248	Super-large hydraulic excavators
Komatsu Utility Europe S.p.A. Este, Italy		48		517	Mini excavators, backhoe loaders, skid steer loaders
Asia (excluding Japan) and Oceania
PT Komatsu Indonesia Jakarta, Indonesia		139		1,496	Medium-sized hydraulic excavators, small- and medium-sized bulldozers, motor graders, dump trucks and hydraulic equipment
PT Komatsu Undercarriage Indonesia Bekasi, Indonesia		12		129	Undercarriage components and spare parts
Komatsu (Changzhou) Construction Machinery Corporation Jiangsu, China		16		172	Medium-sized hydraulic excavators, medium-sized wheel loaders, dump trucks
Komatsu Shantui Construction Machinery Co., Ltd. Shandong, China		63		678	Small- and medium-sized hydraulic excavators
Bangkok Komatsu Co., Ltd. Chonburi, Thailand		24		258	Medium-sized hydraulic excavators, wheel loaders and backhoe loaders

32

Note:

1)     Komatsu Cummins Engine Co., Ltd. and a portion of Komatsu Castex Ltd. are located at the Oyama Plant.

The head office of the Company is located in an office building in Tokyo, Japan which Komatsu owns. Komatsu considers that its manufacturing plants and other facilities are well maintained and believes that its plant capacity is adequate for its current operating requirements. To the best of management’s knowledge, management does not believe that there are any significant environmental issues that may materially affect Komatsu’s utilization of its assets.

Plans for Capital Investments

As of the filing date of this annual report, Komatsu plans to make capital investments of ¥86,977 million in the fiscal year ending March 31, 2011. The amount of capital investment expected to be made in the fiscal year ending March 31, 2011, the principal investment objectives and the sources of funding by operating segment are set forth in the below table.

	Approximate expected
	capital investment amount
	in the fiscal year ending
	March 31, 2011		Principal investment
Operating Segment	(Millions of Yen)		objectives	Sources of funding
Construction, Mining and Utility Equipment		84,784	To reorganize production and to develop and manufacture new products, etc.	Funds on hand, bank borrowings, etc.
Industrial Machinery and Others		2,193	To renew obsolete equipment and to streamline production, etc.	Funds on hand, bank borrowings, etc.
Total		86,977

Note: Capital investment amounts exclude consumption tax.

With respect to the Construction, Mining and Utility Equipment operating segment, Komatsu plans to continue making investments to reorganize its production operations so as to put in place a more flexible production infrastructure that enables Komatsu to adjust quickly to market demands, and make investments in China and Asia where Komatsu anticipates further market growth. In addition, Komatsu plans to make investments to develop hybrid construction equipment and products that comply with the latest engine emission standards. With respect to the Industrial Machinery and Others operating segment, Komatsu plans to make investments to renew obsolete equipment and streamline its production operations.

33

Item 4A. Unresolved Staff Comments

None.

Item 5. Operating and Financial Review and Prospects

A. Operating Results

Overview

The following discussion and analysis provides information that Komatsu’s management believes to be relevant in understanding Komatsu’s consolidated financial condition and results of operations. For the convenience of the reader, Japanese yen amounts have been converted to U.S. dollar amounts at the rate of ¥93 to U.S.$1.00, the approximate buying rate of Japanese yen as of noon on March 31, 2010 in New York City as reported by the Federal Reserve Board.

Komatsu’s Business

Komatsu is a global organization engaged primarily in the manufacturing, development, marketing and sale of industrial-use equipment and products. Komatsu classifies its business segments into the following two operating segments: (1) Construction, Mining and Utility Equipment and (2) Industrial Machinery and Others.

For the fiscal year ended March 31, 2010, the Construction, Mining and Utility Equipment operating segment and the Industrial Machinery and Others operating segment accounted for approximately 88.6% and 11.4% of consolidated net sales, respectively. Of the consolidated net sales for the fiscal year ended March 31, 2010, 22.6% of net sales were derived from sales to customers located in Japan and 77.4% of net sales were derived from sales to customers located outside of Japan. For additional information regarding Komatsu’s products, competitive position, organizational structure, and property, plant and equipment, see Item 4. Information on the Company.

The average exchange rate between the Japanese yen and the U.S. dollar was ¥92.49 for the fiscal year ended March 31, 2010 and ¥100.85 for the fiscal year ended March 31, 2009. For additional discussion on the effect of foreign currency exchange rate fluctuations on Komatsu’s business, see “Risk Factors” in Item 3.D. Key Information and “Comparison of Fiscal Years ended March 31, 2010 and 2009” in Item 5.A. Operating Results.

34

General Overview

During the fiscal year ended March 31, 2010, some of the world’s economies showed signs of recovery, reflecting positive effects of the economic stimulus packages of their respective governments. In particular, the Chinese economy, with the support of its government’s massive economic stimulus measures, lead the other economies by turning around its economy in the first half of the fiscal year and recording growth. The positive effects of China’s economic growth have reached the surrounding Asian countries and countries that produce natural resources, helping such countries’ economic recovery. On the other hand, the pace of economic recovery of developed countries and regions, such as Japan, North America and Europe, was dull, which resulted in a challenging overall business environment.

In light of such economic environment, Komatsu continued to adjust its production levels around the world and was able to achieve an appropriate level of inventories in the first half of the fiscal year. Komatsu also reorganized its production infrastructure in both the Construction, Mining and Utility Equipment operating segment and the Industrial Machinery and Others operating segment. More specifically, with respect to the Construction, Mining and Utility Equipment operating segment, Komatsu (1) closed down the Mooka Plant and transferred the production of products manufactured at such plant to the Ibaraki Plant and other plants in Japan, (2) expanded the production capacity for electric motors and other key components for hybrid hydraulic excavators at its Shonan Plant and (3) closed down some of its manufacturing facilities in North America. With respect to the Industrial Machinery and Others operating segment, Komatsu (1) closed down the Komatsu Plant and transferred the production of products manufactured at such plant to the Kanazawa Plant and (2) integrated its product development and sales and service operations of the large-size press business previously conducted by the Company into Komatsu Industries to further streamline its press business, develop new markets and expand its business in China and other emerging economies. In addition, Komatsu also reorganized its distributor network to realign its sales infrastructure for construction equipment and forklift trucks in Japan.

At the same time, Komatsu worked to substantially decrease fixed costs, such as (1) R&D expenses, and (2) personnel expenses and facility related expenses (that is, depreciation expenses relating to fixed assets), which it was able to reduce through structural reforms such as the ones described above.

On the other hand, to improve sales and profits, Komatsu (1) reinforced its businesses that utilize ICT, such as the KOMTRAX, (2) strengthened its sales operations in China by implementing an ICT system that enables Komatsu and its distributors to exchange real-time information in order to minimize excess inventory, (3) strengthened its sales operations in the mining equipment business and (4) worked to strengthen its parts and service businesses.

35

Summary of Operating Results

Due primarily to the decrease in global demand for its products, which did not return to the levels reached prior to the financial meltdown, and the appreciation of the Japanese yen against other major currencies, Komatsu’s consolidated business results for the fiscal year ended March 31, 2010 decreased as compared to the fiscal year ended March 31, 2009.

Consolidated net sales for the fiscal year ended March 31, 2010 decreased by 29.2% from the fiscal year ended March 31, 2009 to ¥1,431,564 million (U.S.$15,393 million) due primarily to decreased sales in the Construction, Mining and Utility Equipment operating segment as well as the Industrial Machinery and Others operating segment. While the demand for construction, mining and utility equipment started to recover in some emerging economies that are rich in natural resources, such as Indonesia, India and Brazil, in addition to China, such recovery was not sufficient to fully offset the decrease in demand for construction, mining and utility equipment in developed countries and regions, such as Japan, North America and Europe. Demand for industrial machinery and other equipment decreased as customers to which Komatsu supplies such products continued to limit their capital investments in light of the global economic downturn. In addition, unfavorable changes in foreign exchange rates, such as the appreciation of the Japanese yen against the U.S. dollar, the Euro and other currencies, also contributed to the decrease in net sales.

Operating income for the fiscal year ended March 31, 2010 was ¥67,035 million (U.S.$721 million), which decreased by 55.9% as compared to the fiscal year ended March 31, 2009. This decrease in operating income was due primarily to negative factors such as (1) the decrease in demand for Komatsu products and (2) unfavorable changes in foreign exchange rates, which outweighed positive factors such as (1) the decrease in fixed costs, such as R&D expenses, and personnel expenses and facility related expenses (that is, depreciation expenses relating to fixed assets), which Komatsu was able to reduce through structural reforms, (2) the realization of product sales at higher prices and (3) the decrease in expenses relating to structural reforms of its production and sales operations.

Income from continuing operations before income taxes and equity in earnings of affiliated companies for the fiscal year ended March 31, 2010 decreased by 49.5% from the fiscal year ended March 31, 2009 to ¥64,979 million (U.S.$699 million).

Net income attributable to Komatsu Ltd. for the fiscal year ended March 31, 2010 decreased by 57.4% to ¥33,559 million (U.S.$361 million) from the fiscal year ended March 31, 2009.

36

Key Management Indices

Komatsu’s management uses the following six financial indicators to assess its financial condition and results of operations: (1) net sales, (2) segment profit, (3) operating income, (4) operating margin, (5) return on equity ratio (“ROE”) and (6) net debt-to-equity ratio (“Net DER”). Set forth below is the summary of operating results for the fiscal years ended March 31, 2010 and 2009.

Management considers segment profit, which is determined in a manner that is consistent with Japanese accounting principles, to be one of its key management indices because it enables management to evaluate financial data without taking into account the effect of nonrecurring events and other factors unrelated to business activities, such as impairment loss or interest income/expense. Based on such evaluation of financial data, management assesses performance and determines how to allocate resources.

	Results for Fiscal Year Ended March 31,						Percentage Change
Management Indices	2010			2009			2010 vs. 2009
Net Sales	¥	1,431,564 million		¥	2,021,743 million			-29.2	%
Segment Profit 1)	¥	80,719 million		¥	188,658 million			-57.2	%
Operating Income	¥	67,035 million		¥	151,948 million			-55.9	%
Operating Margin 2)		4.7	%		7.5	%	-2.8 points
ROE 3)		4.1	%		9.3	%	-5.2 points
Net DER 4)		0.60			0.62			-0.02

Notes:
1)	Segment Profit = Net Sales - {(Cost of Sales) + (Selling, General and Administrative Expenses)}
	For additional information, see Note 23 to the Consolidated Financial Statements.
2)	Operating Margin = Operating Income/Net Sales
3)	ROE = Net Income attributable to Komatsu Ltd. for the fiscal year/{(Komatsu Ltd. Shareholders’ Equity at the beginning of the fiscal year) + (Komatsu Ltd. Shareholders’ Equity at the end of the fiscal year)/2}
4)	Net Debt-to-Equity Ratio = (Interest-bearing Debt - Cash and Cash Equivalents - Time Deposits)/Komatsu Ltd. Shareholders’ Equity

Net Sales

Consolidated net sales for the fiscal year ended March 31, 2010 decreased by 29.2%, or ¥590,179 million, to ¥1,431,564 million (U.S.$15,393 million) from ¥2,021,743 million for the fiscal year ended March 31, 2009. This decrease was due primarily to decreased sales in the Construction, Mining and Utility Equipment operating segment as well as the Industrial Machinery and Others operating segment. While demand for construction, mining and utility equipment started to recover in some emerging economies that are rich in natural resources, such as Indonesia, India and Brazil, in addition to China, such recovery was not sufficient to fully offset the decrease in demand for construction, mining and utility equipment in developed countries and regions, such as Japan, North America and Europe. Demand for industrial machinery and other equipment decreased as customers to which Komatsu supplies such products continued to limit their capital investments in light of the global economic downturn. In addition, unfavorable changes in foreign exchange rates, such as the appreciation of the Japanese yen against the U.S. dollar, the Euro and other currencies, also contributed to the decrease in net sales.

37

Segment Profit

Consolidated segment profit for the fiscal year ended March 31, 2010 decreased by 57.2% to ¥80,719 million (U.S.$868 million) as compared to the fiscal year ended March 31, 2009. This decrease in segment profit was due primarily to negative factors such as (1) the decrease in demand for Komatsu products and (2) unfavorable changes in foreign exchange rates, which outweighed positive factors such as (1) the decrease in fixed costs, such as R&D expenses, and personnel expenses and facility related expenses (that is, depreciation expenses relating to fixed assets), which Komatsu was able to reduce through structural reforms, (2) the realization of product sales at higher prices and (3) the decrease in the prices of materials used in the production of Komatsu products.

Operating Income, Operating Margin

Operating income for the fiscal year ended March 31, 2010 was ¥67,035 million (U.S.$721 million), down by 55.9% or ¥84,913 million from ¥151,948 million for the fiscal year ended March 31, 2009. This decrease in operating income was due primarily to negative factors such as (1) the decrease in demand for Komatsu products and (2) unfavorable changes in foreign exchange rates, which outweighed positive factors such as (1) the decrease in fixed costs, such as R&D expenses, and personnel expenses and facility related expenses (that is, depreciation expenses relating to fixed assets), which Komatsu was able to reduce through structural reforms, (2) the realization of product sales at higher prices and (3) the decrease in expenses relating to structural reforms of its production and sales operations.

Operating margin for the fiscal year ended March 31, 2010 decreased by 2.8 percentage points to 4.7% from 7.5% for the fiscal year ended March 31, 2009.

38

ROE

Net income attributable to Komatsu Ltd. in the fiscal year ended March 31, 2010 decreased by 57.4% to ¥33,559 million (U.S.$361 million) compared with the fiscal year ended March 31, 2009 due primarily to the decrease in operating income. As a result, ROE for the fiscal year ended March 31, 2010 decreased by 5.2 percentage points to 4.1% from 9.3% in the fiscal year ended March 31, 2009.

Net DER

Komatsu’s aggregate interest-bearing debt as of March 31, 2010 was ¥586,379 million (U.S.$6,305 million), which decreased by ¥13,476 million as compared to March 31, 2009. This decrease was due primarily to Komatsu’s efforts to reduce inventory to appropriate levels.

Net interest-bearing debt after deducting cash and deposits also decreased by ¥6,430 million to ¥502,818 million (U.S.$5,407 million) in the fiscal year ended March 31, 2010. As a result, Net DER for the fiscal year ended March 31, 2010 decreased to 0.60 from 0.62 for the fiscal year ended March 31, 2009.

Critical Accounting Policies

Komatsu prepares its consolidated financial statements in conformity with U.S. GAAP. Komatsu’s management regularly makes certain estimates and judgments that Komatsu believes are reasonable based upon available information. These estimates and judgments affect the reported amounts of assets and liabilities as of the date of the financial statements, the reported amounts of income and expenses during the periods presented, and the disclosed information regarding contingent liabilities and debts. These estimates and judgments are based on Komatsu’s historical experience, terms of existing contracts, Komatsu’s observance of trends in the industry, information provided by its customers and information available from other outside sources, as appropriate.

By their nature, these estimates and judgments are subject to an inherent degree of uncertainty, and may differ from actual results. For a summary of Komatsu’s significant accounting policies, including the critical accounting policies discussed below, see Note 1 to the Consolidated Financial Statements. Komatsu’s management believes that the following accounting policies are critical in fully understanding and evaluating Komatsu’s reported financial results.

(1) Allowance for Doubtful Receivables

Komatsu estimates the collectability of its trade receivables taking into consideration numerous factors including the current financial position by each customer. Komatsu establishes an allowance for expected losses based on individual credit information, historical experience and assessment of overdue receivables. Komatsu continually analyzes data obtained from internal and external sources in order to become familiar with customers’ credit situations. Since Komatsu’s historical loss experiences have fallen within their original estimates and established provisions, Komatsu’s management believes its allowance for doubtful receivables to be adequate. If the composition of Komatsu’s trade receivable were to change or the financial position of each customer were to change due to an unexpected significant shift in the economic environment, it is possible that the accuracy of its estimates could be affected and thus its financial position and results of operations could be materially affected. For additional information, see Note 5 to the Consolidated Financial Statements.

39

(2) Deferred Income Tax Assets and Uncertain Tax Positions

Komatsu estimates income taxes and income tax payable in accordance with applicable tax laws in each of the jurisdictions in which it operates. Net operating loss carry forwards and temporary differences resulting from differing treatment of items for taxation and financial accounting and reporting purposes are recognized on Komatsu’s consolidated balance sheet by adjusting the effect for deferred income tax assets and liabilities. Komatsu is required to assess the likelihood that each of its group company’s deferred tax assets will be recovered from future taxable income estimated for each group company and the available tax planning strategies. Komatsu’s management estimates its future taxable income and considers the likelihood of recovery of deferred tax assets based on the management plan authorized by the board of directors, periodic operational reports of each group company, future market conditions and tax planning strategies, and, to the extent Komatsu’s management believes that any such recovery is not likely, each group company establishes a valuation allowance to reduce the amount of deferred tax assets reflected in the consolidated balance sheet. Changes to the amount and timing of future taxable income determined by Komatsu’s management could result in increases to the valuation allowance.

Benefits derived from uncertain tax positions are recognized when a particular tax position meets the more-likely-than-not recognition threshold based on the technical merits of such position. A benefit is measured as the largest amount of benefit that is greater than 50 percent likely of being realized upon a final settlement with the appropriate taxing authority. Komatsu assesses the likelihood of sustaining such tax positions at each reporting date, with any changes in estimate reflected in the financial statements for the period during which such changes occur, until such time as the positions are effectively settled.

While Komatsu’s management believes that all deferred tax assets after adjustments for valuation allowance will be realized and all material uncertain tax positions that are recognized will be successfully sustained, Komatsu may be required to adjust its deferred tax assets or valuation allowance or reserve for unrecognized tax benefits if its estimates differ from actual results due to poor operating results, lower future taxable income as compared to estimated taxable income or different interpretations of tax laws by the relevant tax authorities. These adjustments to the valuation allowance or recognized tax benefits could materially affect Komatsu’s financial position and results of operations. For additional information, see Note 16 to the Consolidated Financial Statements.

40

(3) Valuation of Long-Lived Assets and Goodwill

Komatsu’s long-lived assets are reviewed for potential impairment whenever events or changes in circumstance indicate that the carrying amount of an asset may not be recoverable, such as a decrease in future cash flows caused by a change in business environment. The recoverability of assets to be held and used is measured by comparing the carrying amount of a particular asset to the estimated future undiscounted cash flow expected to be generated by such asset. Such future undiscounted cash flow is estimated in accordance with Komatsu’s management plan. The management plan is established by taking into consideration, to the extent possible, management’s best estimates on the fluctuation of sales prices, changes in manufacturing costs and sales, general and administrative expenses based on expected sales volumes derived from market forecasts available through outside research institutions and through customers.

If the carrying amount of an asset exceeds its future undiscounted cash flow and such asset is considered unrecoverable and identified as an impaired asset, Komatsu recognizes an impairment loss based on the amount by which the carrying amount of the asset exceeds its fair value. Fair value is customarily measured based on the asset’s future discounted cash flow, and the rate used to discount such cash flow is the weighted average capital cost reflecting the fluctuation risk of future cash flow in the capital markets. As an alternative to such customary method, fair value may also be measured based on an independent appraisal. Long-lived assets to be disposed of are reported at the lower of the carrying amount or fair value less costs of sales.

Komatsu reviews its goodwill annually for impairment as of March 31. An impairment of goodwill is deemed to occur when the carrying amount of the reporting unit, including goodwill, exceeds its estimated fair value. Impairment losses on goodwill are recognized by conducting a two step test. The first of the two step test, which is used to identify potential impairment, compares the fair value of a reporting unit with its carrying amount, including goodwill. If the carrying amount of a reporting unit exceeds its fair value, the second step of the test is performed. The second step of the test, which is used to measure the amount of impairment loss, compares the implied fair value of the goodwill of the reporting unit with the carrying amount of that goodwill. Determination of the implied fair value of the goodwill requires management to estimate the fair value of other identifiable assets and liabilities of the reporting unit based on discounted cash flows, appraisals or other valuation methods. If the carrying amount of the goodwill of the reporting unit exceeds the implied fair value of that goodwill, an impairment loss is recognized in an amount equal to that excess.

In the event that Komatsu’s strategy or market conditions in which it operates changes, estimates of future cash flows to be generated by an asset and evaluations of fair value would be affected, and the assessment of the ability to recover the carrying amount of long-lived assets and goodwill may change. Accordingly, such changes in assessment could materially affect Komatsu’s financial position and results of operations.

41

(4) Fair Value of Financial Instruments

The fair values of derivative financial instruments, consisting principally of foreign currency contracts and interest swap agreements, are estimated by obtaining quotes from brokers based on observable market inputs.

While fair value estimates are made at a specific point in time based on relevant market information and information about the financial instruments, these estimates are subjective in nature. The estimated fair values may change due to uncertainties of the financial markets, and may therefore differ from actual results. The fair values of marketable investment securities are stated at market price.

In the case of a decrease in market price, in periodically assessing other-than-temporary impairment of marketable investment securities and investments in affiliates, Komatsu considers the period and amount of its decline, and the financial conditions and prospects of each subject company. While Komatsu believes that there are no major impairments of its investment securities or investments in affiliates at present, if the performance and business conditions of a subject company deteriorate due to a change in business circumstances, Komatsu may recognize an impairment of its investments.

(5) Pension Liabilities and Expenses

The amount of Komatsu’s pension obligations and net period pension costs are dependent on certain assumptions used to calculate such amounts. These assumptions are described in Note 13 to the Consolidated Financial Statements and include the discount rate, expected rate of return on plan assets and rates of increase in compensation. In accordance with U.S. GAAP, actual results that differ from these assumptions are accumulated and amortized over future service years of employees and therefore generally affect Komatsu’s recognized expenses and recorded obligations during such future periods.

The discount rate is determined based on the rates of return of high-quality fixed income investments currently available and expected to be available until the maturity of the pension benefits. The expected long-term rate of return on plan assets is determined by taking into consideration the current expectations for future returns and actual historical returns of each plan asset category.

42

While Komatsu believes that its assumptions are appropriate, in the event that actual results differ significantly from these assumptions or significant changes are made to these assumptions, Komatsu’s pension obligations and future expenses may be affected.

The following table illustrates the sensitivity of pension obligations and net periodic pension costs to changes in discount rates and expected long-term rate of return on pension plan assets, while holding all other assumptions constant, for Komatsu’s pension plans as of March 31, 2010.

	Pension obligations	Net periodic pension costs
Change in assumption	(Billions of Yen)	(Billions of Yen)
0.5% increase/ decrease in discount rate	-11.2 /+12.1	-1.1 /+1.1
0.5% increase/ decrease in expected long-term rate of return	—	-0.5 /+0.5

Recent Accounting Standards Not Yet Adopted

In December 2009, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2009-16, “Accounting for Transfers of Financial Assets.” ASU 2009-16 eliminates the concept of a qualifying special-purpose entity (“QSPE”), establishes more stringent conditions for reporting a transfer of a portion of a financial asset as a sale, clarifies the financial-asset derecognition criteria and revises the initial measurement of a transferor’s interest in transferred financial assets. ASU 2009-16 is effective for the fiscal periods beginning on or after November 15, 2009 and is required to be adopted by Komatsu in the fiscal year beginning April 1, 2010. Komatsu is currently evaluating the effect that the adoption of ASU 2009-16 will have on its consolidated results of operations and financial condition but expects it will not have a material impact.

In December 2009, the FASB issued ASU 2009-17, “Improvements to Financial Reporting by Enterprises Involved with Variable Interest Entities.” ASU 2009-17 prescribes a change in the approach to determine the primary beneficiary of a variable interest entity and also requires ongoing reassessments of whether an enterprise is the primary beneficiary of a variable interest entity. ASU 2009-17 is effective for the fiscal periods beginning on or after November 15, 2009 and is required to be adopted by Komatsu in the fiscal year beginning April 1, 2010. Komatsu is currently evaluating the effect that the adoption of ASU 2009-17 will have on its consolidated results of operations and financial condition but expects it will not have a material impact.

43

In October 2009, the FASB issued ASU 2009-13, “Multiple-Deliverable Revenue Arrangements.” ASU 2009-13 eliminates the residual method of revenue recognition and requires the use of management’s best estimate of selling price for individual elements of an arrangement if vendor specific objective evidence or third-party evidence is unavailable. ASU 2009-13 is effective for the fiscal periods beginning on or after June 15, 2010 and is required to be adopted by Komatsu in the fiscal year beginning April 1, 2011. Komatsu is currently evaluating the effect that the adoption of ASU 2009-13 will have on its consolidated results of operations and financial condition but expects it will not have a material impact.

In October 2009, the FASB issued ASU 2009-14, “Certain Revenue Arrangements That Include Software Elements.” ASU 2009-14 amends the scope of pre-existing software revenue guidance by removing tangible products containing software components and non-software components that function together to deliver the tangible product’s essential functionality. ASU 2009-14 is effective for the fiscal periods beginning on or after June 15, 2010 and is required to be adopted by Komatsu in the fiscal year beginning April 1, 2011. Komatsu is currently evaluating the effect that the adoption of ASU 2009-14 will have on its consolidated results of operations and financial condition but expects it will not have a material impact.

Comparison of the Fiscal Years ended March 31, 2010 and 2009

The following tables set forth selected consolidated financial and operating data, including numerical data expressed as a percentage of total consolidated net sales for the periods indicated, and the changes in each consolidated financial line item between the indicated fiscal years.

Consolidated Statements of Income

	Millions of Yen								Percentage			Millions of
	Fiscal Years Ended March 31,								change			U.S. dollars
	2010				2009				2010 vs. 2009			2010
Net sales	¥	1,431,564	100.0	%	¥	2,021,743	100.0	%		-29.2	%	$	15,393
Cost of sales		1,101,559	76.9	%		1,510,408	74.7	%		-27.1	%		11,845
Selling, general and administrative expenses		249,286	17.4	%		322,677	16.0	%		-22.7	%		2,680
Impairment loss on long-lived assets		3,332	0.2	%		16,414	0.8	%		-79.7	%		36
Impairment loss on goodwill		—	—			2,003	0.1	%		-100.0	%		—

44

	Millions of Yen										Percentage			Millions of
	Fiscal Years Ended March 31,										change			U.S. dollars
	2010					2009					2010 vs. 2009			2010
Other operating expenses, net		(10,352	)	-0.7	%		(18,293	)	-0.9	%		-43.4	%		(111	)
Operating income		67,035		4.7	%		151,948		7.5	%		-55.9	%		721
Other income (expenses), net		(2,056	)				(23,166	)				-91.1	%		(22	)
Interest and dividend income		6,158					8,621					-28.6	%		66
Interest expense		(8,502	)				(14,576	)				-41.7	%		(91	)
Other, net		288					(17,211	)				-101.7	%		3
Income from continuing operations before income taxes and equity in earnings of affiliated companies		64,979		4.5	%		128,782		6.4	%		-49.5	%		699
Income taxes
Current		32,722					60,511								352
Deferred		(7,358	)				(18,218	)							(79	)
Total		25,364		1.8	%		42,293		2.1	%		-40.0	%		273
Income from continuing operations before equity in earnings of affiliated companies		39,615		2.8	%		86,489		4.3	%		-54.2	%		426
Equity in earnings of affiliated companies		1,588		0.1	%		396		0.0	%		301.0	%		17
Net income		41,203		2.9	%		86,885		4.3	%		-52.6	%		443
Less net income attributable to noncontrolling interests		(7,644	)	-0.5	%		(8,088	)	-0.4	%		-5.5	%		(82	)
Net income attributable to Komatsu Ltd.	¥	33,559		2.3	%	¥	78,797		3.9	%		-57.4	%	$	361
	Yen										U.S. cents
Per share data
Net income attributable to Komatsu Ltd.:
Basic		34.67					79.95								37.28
Diluted		34.65					79.89								37.26
Cash dividends per share	¥	26.00				¥	44.00							¢	27.96

45

	Millions of Yen								Percentage			Millions of
	Fiscal Years Ended March 31,								change			U.S. dollars
	2010				2009				2010 vs. 2009			2010
Segment profit		80,719	5.6	%		188,658	9.3	%		-57.2	%	$	868

Note:
	Segment profit is obtained by subtracting cost of sales and selling, general and administrative expenses from net sales. For additional information, see Note 23 to the Consolidated Financial Statements.

Net Sales

Consolidated net sales for the fiscal year ended March 31, 2010 decreased by 29.2%, or ¥590,179 million, to ¥1,431,564 million (U.S.$15,393 million) from ¥2,021,743 million for the fiscal year ended March 31, 2009. This decrease was due primarily to decreased sales in the Construction, Mining and Utility Equipment operating segment as well as decreased sales in the Industrial Machinery and Others operating segment. Unfavorable changes in foreign exchange rates, such as the appreciation of the Japanese yen against the U.S. dollar, the Euro and other currencies, also contributed to the decrease in net sales.

For the fiscal year ended March 31, 2010, net sales to customers for the Construction, Mining and Utility Equipment operating segment decreased by 27.3%, or ¥476,158, to ¥1,268,575 million (U.S.$13,641 million) as compared to the fiscal year ended March 31, 2009. While demand for construction, mining and utility equipment recovered in China and showed signs of recovery in certain emerging economies that are rich in natural resources, such as Indonesia, India and Brazil, such trend was not generally observed in developed countries and regions, such as Japan, North America and Europe. Despite various governments’ efforts to stimulate their respective economies through stimulus packages, demand for construction, mining and utility equipment continued to decrease in developed countries as a result of the economic downturn. In light of such circumstances, Komatsu continued to suspend equipment sales to its dealers and distributors in developed countries to support their efforts to quickly adjust inventory levels, which further decreased Komatsu’s net sales. In addition, unfavorable changes in foreign exchange rates, such as the appreciation of the Japanese yen against the U.S. dollar, the Euro and other currencies, decreased net sales in the Construction, Mining and Utility Equipment operating segment by approximately ¥69.8 billion. While Komatsu was successful in realizing product sales at higher prices, this success did not offset the decrease in sales discussed above.

46

As the automobile and other industries to which Komatsu supplied industrial machinery and other products continued to limit their capital investments in light of the global economic downturn, as evidenced by the reduction in the number of new orders, net sales to customers in the Industrial Machinery and Others operating segment decreased by 41.2%, or ¥114,021 million, to ¥162,989 million (U.S.$1,753 million) as compared to the fiscal year ended March 31, 2009.

Cost of Sales

Cost of sales on a consolidated basis decreased by 27.1%, or ¥408,849 million, to ¥1,101,559 million (U.S.$11,845 million) for the fiscal year ended March 31, 2010 from ¥1,510,408 million for the fiscal year ended March 31, 2009, due primarily to decreased sales. Despite various efforts undertaken by Komatsu, such as the realization of sales of products at higher prices and the reduction of production costs (as a result of the decrease in the prices of materials used in the production of Komatsu products), cost of sales to sales ratio increased by 2.2 percentage points to 76.9% for the fiscal year ended March 31, 2010 from 74.7% for the fiscal year ended March 31, 2009. This increase was mainly due to (1) unfavorable changes in foreign exchange rates, such as the appreciation of the Japanese yen against the U.S. dollar, the Euro and other currencies and (2) certain costs not being fully absorbed due to reduced production volumes.

Selling, General and Administrative Expenses

Selling, general and administrative expenses decreased by 22.7% for the fiscal year ended March 31, 2010 to ¥249,286 million (U.S.$2,680 million) from ¥322,677 million for the fiscal year ended March 31, 2009, due primarily to (1) the decrease in selling expenses, such as expenses to transport products, as a result of decreased sales volume for the Construction, Mining and Utility Equipment operating segment, (2) the decrease in R&D expenses as Komatsu prioritized its R&D expenditures and postponed certain R&D activities and (3) the decrease in expenses associated with other activities aimed at reducing other fixed costs, such as personnel expenses and facility related expenses (that is, depreciation expenses relating to fixed assets), which Komatsu was able to reduce through structural reforms.

Impairment Loss on Long-Lived Assets

Consolidated impairment loss on long-lived assets for the fiscal year ended March 31, 2010 decreased by 79.7%, or ¥13,082 million, to ¥3,332 million (U.S.$36 million) as compared to ¥16,414 million for the fiscal year ended March 31, 2009. This decrease was due primarily to the fact that Komatsu did not record any impairment loss similar to the loss recorded in the fiscal year ended March 31, 2009 in connection with the closing of the Mooka plant and the Komatsu plant. For information about impairment loss on long-lived assets by segment, see Note 23 to the Consolidated Financial Statements.

47

Other Operating Expenses, net

For the fiscal year ended March 31, 2010, consolidated other operating expenses, net decreased by ¥7,941 million to ¥10,352 million as compared to ¥18,293 million for the fiscal year ended March 31, 2009. While Komatsu would have recorded income for the fiscal year ended March 31, 2010 as a result of gains recorded on the sale of some of its properties, such gains were fully offset by expenses incurred in connection with losses resulting from the disposal or sale of fixed assets. In addition, Komatsu recorded a decrease of its expenses associated with structural reforms of its production and sales operations, such as reorganization and relocation costs, during the fiscal year ended March 31, 2010, which also contributed to the decrease in other operating expenses.

Operating Income

Consolidated operating income for the fiscal year ended March 31, 2010 decreased by 55.9%, or ¥84,913 million, to ¥67,035 million (U.S.$721 million) as compared to ¥151,948 million for the fiscal year ended March 31, 2009. This decrease in operating income was due primarily to negative factors such as (1) the decrease in demand for Komatsu products and (2) unfavorable changes in foreign exchange rates, which outweighed positive factors such as (1) the decrease in fixed costs, such as R&D expenses, and personnel expenses and facility related expenses (that is, depreciation expenses relating to fixed assets), which Komatsu was able to reduce through structural reforms, (2) the realization of product sales at higher prices and (3) the decrease in expenses relating to structural reforms of its production and sales operations.

As a result, operating margin for the fiscal year ended March 31, 2010 decreased by 2.8 percentage points to 4.7% from 7.5% for the fiscal year ended March 31, 2009.

Other Income (Expenses), net

Consolidated other expenses, net for the fiscal year ended March 31, 2010 decreased by 91.1%, or ¥21,110 million, to ¥2,056 million (U.S.$22 million) as compared to ¥23,166 million for the fiscal year ended March 31, 2009. This decrease was due primarily to the decrease in foreign exchange rate losses and losses recorded as a result of impairments in Komatsu’s securities investments. Foreign exchange rate losses decreased by ¥12,868 million for the fiscal year ended March 31, 2010 to a gain of ¥1,066 million as compared to a loss of ¥11,802 million for the fiscal year ended March 31, 2009 mainly due to the favorable changes in foreign exchange rates, such as the depreciation of the U.S. dollar against the Canadian Dollar and Russian Ruble. In addition, Komatsu recorded losses on its securities investments of ¥204 million for the fiscal year ended March 31, 2010, a decrease of ¥9,237 million as compared to ¥9,441 million for the fiscal year ended March 31, 2009. This decrease in losses on its securities investments was due primarily to the overall recovery in the stock markets. Interest expense for the fiscal year ended March 31, 2010 decreased by 41.7%, or ¥6,074 million, to ¥8,502 million as compared to ¥14,576 million for the fiscal year ended March 31, 2009, due primarily to lower interest rates and the decrease in borrowings from external sources, and contributed to the decrease in other expenses. Interest and dividend income decreased by 28.6%, or ¥2,463 million, to ¥6,158 million for the fiscal year ended March 31, 2010 as compared to ¥8,621 million for the fiscal year ended March 31, 2009, due primarily to a decrease in interest rates.

48

Income from Continuing Operations Before Income Taxes and Equity in Earnings of Affiliated Companies

As a result of the above factors, consolidated income from continuing operations before income taxes and equity in earnings of affiliated companies for the fiscal year ended March 31, 2010 decreased by 49.5%, or ¥63,803 million, to ¥64,979 million (U.S.$699 million) as compared to ¥128,782 million for the fiscal year ended March 31, 2009.

Income Taxes

Consolidated income tax expense for the fiscal year ended March 31, 2010 decreased by ¥16,929 million to ¥25,364 million (U.S.$273 million) from ¥42,293 million for the fiscal year ended March 31, 2009. The actual effective tax rate for the fiscal year ended March 31, 2010 increased to 39.0% from 32.8% for the fiscal year ended March 31, 2009. This increase was due primarily to an increase in non-deductible expenses and valuation allowance of consolidated subsidiaries. The increase in the valuation allowance was mainly the result of additional valuation allowances recorded on deferred tax assets for net operating loss carryforwards at certain subsidiaries.

The difference between the Japanese statutory tax rate of 40.8% and the actual effective tax rate of 39.0% was caused by income of certain foreign subsidiaries being taxed at a rate lower than the Japanese statutory tax rate, which was offset in part by an increase in non-deductible expenses and valuation allowance. For additional information, see Note 16 to the Consolidated Financial Statements.

Income from Continuing Operations Before Equity in Earnings of Affiliated Companies

As a result of the above factors, consolidated income from continuing operations before equity in earnings of affiliated companies for the fiscal year ended March 31, 2010 decreased by ¥46,874 million to ¥39,615 million (U.S.$426 million) as compared to ¥86,489 million for the fiscal year ended March 31, 2009.

49

Equity in Earnings of Affiliated Companies

Consolidated equity in earnings of affiliated companies for the fiscal year ended March 31, 2010 increased by ¥1,192 million to ¥1,588 million (U.S.$17 million) as compared to ¥396 million for the fiscal year ended March 31, 2009, due primarily to increased earnings recorded by affiliated companies held under the equity accounting method, such as L&T-Komatsu Limited whose products were in greater demand in the Indian market.

Net income

As a result of the above factors, consolidated net income for the fiscal year ended March 31, 2010 decreased by ¥45,682 million to ¥41,203 million (U.S.$443 million) as compared to ¥86,885 million for the fiscal year ended March 31, 2009.

Net Income Attributable to Noncontrolling Interests

Net income attributable to noncontrolling interests for the fiscal year ended March 31, 2010 decreased by ¥444 million to ¥7,644 million (U.S.$82 million) as compared to ¥8,088 million for the fiscal year ended March 31, 2009. Noncontrolling interests in income of consolidated subsidiaries decreased mainly as a result of declined earnings recorded primarily by subsidiaries in the Construction, Mining and Utility Equipment operating segment, such as Komatsu Australia Pty. Ltd.

Net Income Attributable to Komatsu Ltd.

As a result of the above, consolidated net income attributable to Komatsu Ltd. for the fiscal year ended March 31, 2010 decreased by 57.4%, or ¥45,238 million, to ¥33,559 million (U.S.$361 million) as compared to ¥78,797 million for the fiscal year ended March 31, 2009. Accordingly, basic net income attributable to Komatsu Ltd. per share fell to ¥34.67 for the fiscal year ended March 31, 2010 from ¥79.95 for the fiscal year ended March 31, 2009. Diluted net income attributable to Komatsu Ltd. per share fell to ¥34.65 for the fiscal year ended March 31, 2010 from ¥79.89 for the fiscal year ended March 31, 2009.

50

Segment Profit

Segment profit, which is one of Komatsu’s key management indices, is determined in a manner that is consistent with Japanese accounting principles by subtracting cost of sales and selling, general and administrative expenses from net sales. Komatsu considers segment profit to be one of its key management indices because it enables management to evaluate financial data without taking into account the effect of nonrecurring events and other factors unrelated to business activities, such as impairment loss or interest income/expense. For information about impairment loss by segment, see Note 23 to the Consolidated Financial Statements. Based on such evaluation of financial data, management assesses performance and determines how to allocate resources.

Segment profit on a consolidated basis decreased by 57.2%, or ¥107,939 million, to ¥80,719 million (U.S.$868 million) for the fiscal year ended March 31, 2010 from ¥188,658 million for the fiscal year ended March 31, 2009. This decrease in segment profit was due primarily to negative factors such as (1) the decrease in demand for Komatsu products and (2) unfavorable changes in foreign exchange rates, which outweighed positive factors such as (1) the decrease in fixed costs, such as R&D expenses, and personnel expenses and facility related expenses (that is, depreciation expenses relating to fixed assets), which Komatsu was able to reduce through structural reforms, (2) the realization of product sales at higher prices and (3) the decrease in the prices of materials used in the production of Komatsu products.

For information regarding segment profit by operating segments and geographic segments, see “Performance by Operating Segments” and “Performance by Geographic Segments (based on the geographic origin of the seller)” below.

Performance by Operating Segments

The following table presents net sales and segment profit broken down by operating segments for the fiscal years ended March 31, 2010 and 2009. In evaluating the financial data for each operating segment, Komatsu’s management considers sales by the location of its customers to be particularly helpful for the Construction, Mining and Utility Equipment operating segment, its primary operating segment. Accordingly, in addition to providing performance information by operating segments, the below table and related discussion provide information regarding sales in the Construction, Mining and Utility Equipment operating segment broken down by geographic locations of Komatsu’s customer. Performance information by geographic segments (which are separately identified by management), which provides performance information based on the geographic location of the seller (as opposed to the customer), is provided under “Performance by Geographic Segments (based on the geographic origin of the seller).”

51

Performance by Operating Segments

	Millions of Yen
	Fiscal Years Ended						Percentage			Millions of
	March 31,						Change			U.S. dollars
	2010			2009			2010 vs. 2009			2010
Net sales:
Construction, Mining and Utility Equipment
Customers	¥	1,268,575		¥	1,744,733			-27.3	%	$	13,641
Japan		228,505			309,895			-26.3	%		2,457
Americas		306,135			462,405			-33.8	%		3,292
Europe and CIS		122,018			273,259			-55.3	%		1,312
China		244,509			179,221			36.4	%		2,629
Asia (excluding Japan, China) and Oceania		281,878			309,721			-9.0	%		3,031
Middle East and Africa		85,530			210,232			-59.3	%		920
Intersegment		2,690			4,653			-42.2	%		29
Total		1,271,265			1,749,386			-27.3	%		13,670
Industrial Machinery and Others
Customers		162,989			277,010			-41.2	%		1,753
Intersegment		15,619			26,389			-40.8	%		168
Total		178,608			303,399			-41.1	%		1,921
Elimination		(18,309	)		(31,042	)		-41.0	%		(197	)
Consolidated Net Sales	¥	1,431,564		¥	2,021,743			-29.2	%	$	15,393
Segment Profit:
Construction, Mining and Utility Equipment	¥	83,061		¥	180,455			-54.0	%	$	893
Industrial Machinery and Others		2,998			12,891			-76.7	%		32
Total		86,059			193,346			-55.5	%		925
Corporate expenses and elimination		(5,340	)		(4,688	)		13.9	%		(57	)
Consolidated Segment Profit	¥	80,719		¥	188,658			-57.2	%	$	868

Notes:
1)	Transfers between segments are made at estimated arm’s-length prices.
2)	Segment profit is obtained by subtracting cost of sales and selling, general and administrative expenses from net sales. For additional information, see Note 23 to the Consolidated Financial Statements.

52

Construction, Mining and Utility Equipment

Net sales

Consolidated net sales to customers in the Construction, Mining and Utility Equipment operating segment for the fiscal year ended March 31, 2010 decreased by 27.3%, or ¥476,158 million, to ¥1,268,575 million (U.S.$13,641 million) as compared to ¥1,744,733 million for the fiscal year ended March 31, 2009. This decrease in sales was due primarily to negative factors such as (1) the decrease in demand for Komatsu products during the fiscal year (which decreased net sales of this operating segment by approximately ¥433.9 billion) and (2) unfavorable changes in foreign exchange rates, such as the appreciation of the Japanese yen against the U.S. dollar, the Euro and other currencies (which decreased net sales in this operating segment by approximately ¥69.8 billion), which outweighed positive factors, such as the realization of product sales at higher prices (which increased net sales in this operating segment by approximately ¥27.5 billion).

Net sales to customers in Japan (based on sales destination) for the fiscal year ended March 31, 2010 decreased by 26.3%, or ¥81,390 million, to ¥228,505 million (U.S.$2,457 million) as compared to ¥309,895 million for the fiscal year ended March 31, 2009. While public-sector investment remained firm in the fiscal year ended March 31, 2010, due primarily to the economic stimulus package provided by the Japanese government, private-sector capital investment and residential investment continued to remain slack. As a result, overall demand for construction, mining and utility equipment in Japan decreased from the previous fiscal year. Accordingly, Komatsu’s sales of construction, mining and utility equipment in Japan decreased compared to the previous fiscal year.

Net sales to customers in the Americas (based on sales destination) for the fiscal year ended March 31, 2010 decreased by 33.8%, or ¥156,270 million, to ¥306,135 million (U.S.$3,292 million) as compared to ¥462,405 million for the fiscal year ended March 31, 2009. While the operating rate of construction equipment in North America showed signs that the market had bottomed out during the fiscal year ended March 31, 2010, demand for such equipment fell short of increasing as a result of the continuing economic uncertainty. As a result, the business environment in North America remained challenging. In light of such market conditions, Komatsu (1) reorganized its production and sales operations in North America by, among other things, closing certain manufacturing facilities and merging certain sales companies, and (2) continued to make efforts to reduce distributors’ inventory to appropriate levels. In Latin America, market demand that decreased after the financial crisis showed signs of recovery in Brazil and some other countries. To capture such recovery in demand in Latin America, Komatsu reinforced its sales and service operations by establishing a new subsidiary in Chile and opening a service support center in Mexico. The positive signs in Latin America, however, were not sufficient to fully offset the decrease in demand in North America. As a result, overall sales in the Americas for the fiscal year ended March 31, 2010 decreased as compared to the fiscal year ended March 31, 2009.

53

Net sales to customers in Europe and CIS (based on sales destination) for the fiscal year ended March 31, 2010 decreased by 55.3%, or ¥151,241 million to ¥122,018 million (U.S.$1,312 million) as compared to ¥273,259 million for the fiscal year ended March 31, 2009. A sharp drop in demand for construction, mining and utility equipment in Europe and CIS continued during the fiscal year ended March 31, 2010, against the backdrop of sluggish economies. Under such circumstances, Komatsu doubled sales promotion and other efforts in collaboration with its distributors in Europe, while reinforcing its product support capability for mines in CIS. However, net sales to customers in Europe and CIS (based on sales destination) for the fiscal year ended March 31, 2010 decreased due primarily to Komatsu’s continuing efforts to (1) reduce distributors’ inventory to an appropriate level and (2) decrease the number of construction, mining and utility equipment models that are manufactured in Europe, which action was undertaken to improve manufacturing efficiency and profitability by eliminating models that were no longer in demand.

Net sales to customers in China (based on sales destination) for the fiscal year ended March 31, 2010 increased by 36.4%, or ¥65,288 million to ¥244,509 million (U.S.$2,629 million) as compared to ¥179,221 million for the fiscal year ended March 31, 2009. Demand for construction, mining and utility equipment increased in China in light of the Chinese government’s economic stimulus measures, which advanced large-scale infrastructure developments, such as railways and highways projects, and resulted in an increase in year-on-year monthly demand since June 2009. The increase in year-on-year monthly demand was particularly significant after the Chinese New Year in February 2010. By increasing its production capacity at its existing plants, teaming up with its distributors to aggressively market its products and implementing an ICT system that enables Komatsu and its distributors to exchange real-time information in order to minimize excess inventory, Komatsu recorded an increase in net sales to customers in China for the fiscal year ended March 31, 2010. As a result, sales in China increased to account for 19.3% of total sales of the Construction, Mining and Utility Equipment operating segment.

Net sales to customers in Asia and Oceania (based on sales destination) for the fiscal year ended March 31, 2010 decreased by 9.0%, or ¥27,843 million to ¥281,878 million (U.S.$3,031 million) as compared to ¥309,721 million for the fiscal year ended March 31, 2009. In Indonesia, India and Thailand, year-on-year monthly demand showed signs of recovery in the second half of the fiscal year ended March 31, 2010. Demand remained firm for mining-related equipment in Australia throughout the entire fiscal year. Against this backdrop, Komatsu strived to strengthen its operations by (1) enhancing its global Reman (Re-manufacturing) capability by establishing and reorganizing its Reman entities in Indonesia and (2) reinforcing its market and product support capabilities by entering into a joint-venture arrangement with its distributors in Thailand. Notwithstanding such efforts, while sales picked up quickly in Asia in and after the third quarter, such increase in sales was not sufficient to fully offset the decrease in demand from customers in Asia and Oceania in the first half of the fiscal year ended March 31, 2010. As a result, Komatsu recorded a decrease in net sales in Asia and Oceania for the fiscal year ended March 31, 2010.

54

Net sales to customers in Middle East and Africa (based on sales destination) for the full fiscal year ended March 31, 2010 decreased by 59.3%, or ¥124,702 million to ¥85,530 million (U.S.$920 million) as compared to ¥210,232 million for the fiscal year ended March 31, 2009. Although commodity prices showed signs of an increase from the drastic plunge in 2008, market demand failed to recover in the Middle East and Africa as affected by the recessionary economies. In light of such market conditions and Komatsu’s continuing efforts to reduce distributors’ inventories, net sales to customers in the Middle East and Africa for the fiscal year ended March 31, 2010 decreased.

Segment Profit

Segment profit for the Construction, Mining and Utility Equipment operating segment for the fiscal year ended March 31, 2010 decreased by 54.0%, or ¥97,394 million, to ¥83,061 million (U.S.$893 million) from ¥180,455 million for the fiscal year ended March 31, 2009.

This decrease in segment profit was due primarily to negative factors such as (1) the decrease in demand for Komatsu products (which decreased segment profit by approximately ¥139.9 billion) and (2) unfavorable changes in foreign exchange rates, such as the appreciation of the Japanese yen against the U.S. dollar, the Euro and other currencies (which decreased segment profit by approximately ¥34.9 billion), which outweighed positive factors such as (1) the decrease in fixed costs, such as R&D expenses, and personnel expenses and facility related expenses (that is, depreciation expenses relating to fixed assets), which Komatsu was able to reduce through structural reforms (which increased segment profit by approximately ¥43.3 billion), (2) the realization of product sales at higher prices (which increased segment profit by approximately ¥27.5 billion) and (3) the decrease in the prices of materials used in the production of Komatsu products (which increased segment profit by approximately ¥6.6 billion).

55

Industrial Machinery and Others

Net Sales

Consolidated net sales to customers in the Industrial Machinery and Others operating segment for the fiscal year ended March 31, 2010 decreased by 41.2%, or ¥114,021 million, to ¥162,989 million (U.S.$1,753 million) as compared to ¥277,010 million for the fiscal year ended March 31, 2009. During the fiscal year ended March 31, 2010, the automobile and other industries to which Komatsu supplied industrial machinery and other products continued to limit their capital investments in light of the global economic downturn. As a result, new orders for Komatsu products decreased sharply and resulted in a decrease in net sales in the Industrial Machinery and Others operating segment.

Segment Profit

Segment profit for the Industrial Machinery and Others operating segment for the fiscal year ended March 31, 2010 decreased by 76.7%, or ¥9,893 million, to ¥2,998 million (U.S.$32 million) from ¥12,891 million for the fiscal year ended March 31, 2009. This decrease was due primarily to the decrease in demand for Komatsu products (which decreased segment profit by approximately ¥15.7 billion), which fully offset the decrease in costs, such as fixed costs (which increased segment profit by approximately ¥5.8 billion).

56

Performance by Geographic Segments (based on the geographic origin of the seller)

The following table presents net sales and segment profit broken down by the geographic origin of the seller for the fiscal years ended March 31, 2010 and 2009.

Performance by Geographic Segments

	Millions of Yen
	Fiscal Years Ended						Percentage			Millions of
	March 31,						Change			U.S. dollars
	2010			2009			2010 vs. 2009			2010
Net sales:
Japan	¥	716,719		¥	1,212,449			-40.9	%	$	7,707
Americas		347,717			511,821			-32.1	%		3,739
Europe and CIS		162,610			294,398			-44.8	%		1,748
Others		490,256			481,250			1.9	%		5,272
Elimination		(285,738	)		(478,175	)		-40.2	%		(3,073	)
Consolidated	¥	1,431,564		¥	2,021,743			-29.2	%	$	15,393
Segment Profit (Loss):
Japan	¥	(19,783	)	¥	37,876			-152.2	%	$	(213	)
Americas		33,982			52,133			-34.8	%		365
Europe and CIS		10,460			22,279			-53.0	%		112
Others		60,151			61,008			-1.4	%		647
Corporate and elimination		(4,091	)		15,362			-126.6	%		(43	)
Consolidated	¥	80,719		¥	188,658			-57.2	%	$	868

Note: Segment profit (loss) is obtained by subtracting cost of sales and selling, general and administrative expenses from net sales. For additional information, see Note 23 to the Consolidated Financial Statements.

Japan

Net Sales

Net sales in the Japan geographic segment (based on the geographic origin of the seller) for the fiscal year ended March 31, 2010 decreased by 40.9%, or ¥495,730 million, to ¥716,719 million (U.S.$7,707 million) as compared to ¥1,212,449 million for the fiscal year ended March 31, 2009. This decrease was due primarily to the decrease in sales of construction, mining and utility equipment as both domestic sales and export of such equipment decreased due mainly to the weak Japanese economy and the significant drop in global demand for such equipment.

57

In addition, decreased sales mainly of small- and medium- sized presses and sheet metal machines due primarily to the decrease in capital investments by customers in the automobile and other industries also contributed to the decrease in net sales in this geographic segment.

Segment Profit (Loss)

Segment profit (loss) for the Japan geographic segment (based on the geographic origin of the seller) for the fiscal year ended March 31, 2010 decreased by 152.2%, or ¥57,659 million, from ¥37,876 million to ¥(19,783) million (U.S.$(213) million) as compared to the fiscal year ended March 31, 2009. This decrease in segment profit was due primarily to the decrease in sales of construction, mining and utility equipment and unfavorable changes in foreign exchange rates.

Americas

Net Sales

Net sales in the Americas geographic segment (based on the geographic origin of the seller) for the fiscal year ended March 31, 2010 decreased by 32.1%, or ¥164,104 million, from ¥511,821 million to ¥347,717 million (U.S. $3,739 million) as compared to the fiscal year ended March 31, 2009. This decrease was due primarily to an overall decline in demand for construction, mining and utility equipment and Komatsu’s continuing efforts to reduce the inventory of its distributors to appropriate levels.

Segment Profit

Segment profit for the Americas geographic segment (based on the geographic origin of the seller) for the fiscal year ended March 31, 2010 decreased by 34.8%, or ¥18,151 million, from ¥52,133 million to ¥33,982 million (U.S.$365 million) as compared to the fiscal year ended March 31, 2009 due primarily to the decrease in net sales as discussed above.

58

Europe and CIS

Net Sales

Net sales in the Europe and CIS geographic segment (based on the geographic origin of the seller) for the fiscal year ended March 31, 2010 decreased by 44.8%, or ¥131,788 million, to ¥162,610 million (U.S.$1,748 million) as compared to ¥294,398 million for the fiscal year ended March 31, 2009. This decrease was due primarily to a sharp drop in demand in Europe and CIS of construction, mining and utility equipment. In addition, Komatsu efforts to suspend equipment sales to its dealers and distributors to reduce their inventory to appropriate levels also contributed to the decrease in net sales in this geographic segment.

Segment Profit

Segment profit for the Europe and CIS geographic segment (based on the geographic origin of the seller) for the fiscal year ended March 31, 2010 decreased by 53.0%, or ¥ 11,819 million, to ¥10,460 million (U.S.$112 million) as compared to ¥22,279 million for the fiscal year ended March 31, 2009 due primarily to the decrease in net sales as discussed above.

Others

Net Sales

Net sales in the Others geographic segment (based on the geographic origin of the seller) for the fiscal year ended March 31, 2010 increased by 1.9%, or ¥9,006 million, to ¥490,256 million (U.S.$5,272 million) as compared to ¥481,250 million for the fiscal year ended March 31, 2009. This increase was due primarily to the significant increase in demand in China, which fully offset the decrease in demand in other regions.

Segment Profit

Segment profit for the Others geographic segment (based on the geographic origin of the seller) for the fiscal year ended March 31, 2010 decreased by 1.4%, or ¥857 million, to ¥60,151 million (U.S.$647 million) as compared to ¥61,008 million for the fiscal year ended March 31, 2009 due primarily to the mixed sales conditions as discussed above.

59

Comparison of the Fiscal Years ended March 31, 2009 and 2008

The following tables set forth selected consolidated financial and operating data, including numerical data expressed as a percentage of total consolidated net sales for the periods indicated, and the changes in each consolidated financial line item between the indicated fiscal years.

Consolidated Statements of Income

	Millions of Yen										Percentage
	Fiscal Years Ended March 31,										change
	2009					2008					2009 vs. 2008
Net sales	¥	2,021,743		100.0	%	¥	2,243,023		100.0	%		-9.9	%
Cost of sales		1,510,408		74.7	%		1,590,963		70.9	%		-5.1	%
Selling, general and administrative expenses		322,677		16.0	%		317,474		14.2	%		1.6	%
Impairment loss on long-lived assets		16,414		0.8	%		2,447		0.1	%		570.8	%
Impairment loss on goodwill		2,003		0.1	%		2,870		0.1	%		-30.2	%
Other operating income (expenses), net		(18,293	)	-0.9	%		3,581		0.1	%		-610.8	%
Operating income		151,948		7.5	%		332,850		14.8	%		-54.3	%
Other income (expenses), net		(23,166	)				(10,640	)				117.7	%
Interest and dividend income		8,621					10,265					-16.0	%
Interest expense		(14,576	)				(16,699	)				-12.7	%
Other, net		(17,211	)				(4,206	)
Income from continuing operations before income taxes and equity in earnings of affiliated companies		128,782		6.4	%		322,210		14.4	%		-60.0	%
Income taxes
Current		60,511					104,142
Deferred		(18,218	)				11,652
Total		42,293		2.1	%		115,794		5.2	%		-63.5	%

60

	Millions of Yen										Percentage
	Fiscal Years Ended March 31,										change
	2009					2008					2009 vs. 2008
Income from continuing operations before equity in earnings of affiliated companies		86,489		4.3	%		206,416		9.2	%		-58.1	%
Equity in earnings of affiliated companies		396		0.0	%		6,845		0.3	%		-94.2	%
Income from continuing operations		86,885		4.3	%		213,261		9.5	%		-59.3	%
Income from discontinued operations less applicable income taxes		—		—			4,967		0.2	%		-100.0	%
Net income	¥	86,885		4.3	%	¥	218,228		9.7	%		-60.2	%
Less net income attributable to noncontrolling interests		(8,088	)	-0.4	%		(9,435	)	-0.4	%		-14.3	%
Net income attributable to Komatsu Ltd.	¥	78,797		3.9	%	¥	208,793		9.3	%		-62.3	%
	Yen
Per share data
Income from continuing operations attributable to Komatsu Ltd.:
Basic	¥	79.95				¥	204.88
Diluted		79.89					204.61
Income from discontinued operations attributable to Komatsu Ltd.:
Basic		—					4.99
Diluted		—					4.98
Net income attributable to Komatsu Ltd.:
Basic		79.95					209.87
Diluted		79.89					209.59
Cash dividends per share	¥	44.00				¥	38.00

61

	Millions of Yen								Percentage
	Fiscal Years Ended March 31,								change
	2009				2008				2009 vs. 2008
Segment profit		188,658	9.3	%		334,586	14.9	%		-43.6	%

Notes:

1)	In the fiscal year ended March 31, 2008, Komatsu sold the OPE business of Komatsu Zenoah Co. and its subsidiaries. As a result, operating results and the gain recognized on the sale of the OPE business of Komatsu Zenoah Co. and its subsidiaries are presented as “Income from discontinued operations less applicable income taxes” for the fiscal year ended March 31, 2008.
2)	Segment profit is obtained by subtracting cost of sales and selling, general and administrative expenses from net sales. For additional information, see Note 23 to the Consolidated Financial Statements.

Net Sales

Consolidated net sales for the fiscal year ended March 31, 2009 decreased by 9.9%, or ¥221,280 million, to ¥2,021,743 million from ¥2,243,023 million for the fiscal year ended March 31, 2008. This decrease was due primarily to decreased sales in the Construction, Mining and Utility Equipment operating segment, which was partially offset by the increase in sales of the Industrial Machinery and Others operating segment due to the addition of Komatsu NTC Ltd. as a consolidated subsidiary in March 2008. Unfavorable changes in foreign exchange rates, such as the appreciation of the Japanese yen against the U.S. dollar, the Euro and other currencies, also contributed to the decrease in net sales.

For the fiscal year ended March 31, 2009, net sales to customers in the Construction, Mining and Utility Equipment operating segment decreased by 14.8%, or ¥303,978 million, to ¥1,744,733 million as compared to the fiscal year ended March 31, 2008. This decrease reflected the significant decrease in demand for construction, mining and utility equipment as a result of the global economic recession. Net sales of construction, mining and utility equipment became particularly challenging during the second half of the fiscal year with demand also decreasing in emerging economies and commodity-exporting countries. In light of such circumstances, Komatsu suspended equipment sales to its dealers and distributors to support their efforts to quickly adjust inventory levels, which decreased Komatsu’s net sales. In addition, unfavorable changes in foreign exchange rates, such as the appreciation of the Japanese yen against the U.S. dollar, the Euro and other currencies, decreased net sales in the Construction, Mining and Utility Equipment operating segment by approximately ¥152.7 billion.

62

The decrease in net sales to customers in the Construction, Mining and Utility Equipment operating segment was partially offset by the increase in net sales to customers in the Industrial Machinery and Others operating segment, which increased by 42.6%, or ¥82,698 million, to ¥277,010 million as compared to the fiscal year ended March 31, 2008 due primarily to the addition of Komatsu NTC Ltd. as a consolidated subsidiary in March 2008. A wide range of client industries, including the automobile manufacturing industry, rapidly restrained their capital investment and created a challenging environment for the Industrial Machinery and Others operating segment during the second half of the fiscal year. Excluding the net sales of Komatsu NTC Ltd., net sales to customers in the Industrial Machinery and Others operating segment would have decreased by 13.4% or ¥26,100 million in the fiscal year ended March 31, 2009. Foreign exchange rate fluctuations had only a limited effect on net sales in the Industrial Machinery and Others operating segment.

Cost of Sales

Cost of sales on a consolidated basis decreased by 5.1%, or ¥80,555 million, to ¥1,510,408 million for the fiscal year ended March 31, 2009 from ¥1,590,963 million for the fiscal year ended March 31, 2008, due primarily to decreased sales. Despite various efforts undertaken by Komatsu, such as realization of sales of products at higher prices and reduction of production cost, cost of sales to sales ratio increased by 3.8 percentage points to 74.7% for the fiscal year ended March 31, 2009 from 70.9% for the fiscal year ended March 31, 2008. This increase was mainly due to (1) the increase in prices of materials used in the production of Komatsu products, (2) the adverse impact of foreign exchange rate fluctuations upon sales in relation to cost of sales and (3) certain costs not being fully absorbed due to reduced production volumes.

Selling, General and Administrative Expenses

Selling, general and administrative expenses increased by 1.6% for the fiscal year ended March 31, 2009 to ¥322,677 million from ¥317,474 million for the fiscal year ended March 31, 2008, due primarily to research and development activities relating to the Construction, Mining and Utility Equipment operating segment, including expenses incurred in connection with the development of new DANTOTSU products and next generation engines that comply with the latest emissions regulations that will become effective in the near future. The addition of BIGRENTAL Co., Ltd. and Komatsu NTC Ltd. as consolidated subsidiaries also contributed to the increase in selling, general and administrative expenses.

Impairment Loss on Long-Lived Assets

Consolidated impairment loss on long-lived assets for the fiscal year ended March 31, 2009 increased by ¥13,967 million, to ¥16,414 million as compared to ¥2,447 million for the fiscal year ended March 31, 2008. This increase was due primarily to the impairment loss recorded in connection with the decision to close the Mooka plant and the Komatsu plant and transfer the production capacity of such plants to other Komatsu plants and facilities. For information about impairment loss on long-lived assets by segment, see Note 23 to the Consolidated Financial Statements.

63

Impairment loss on goodwill

Consolidated impairment loss on goodwill for the fiscal year ended March 31, 2009 decreased by ¥867 million, to ¥2,003 million as compared to ¥2,870 million for the fiscal year ended March 31, 2008. Komatsu recognized an impairment loss of ¥2,003 million on goodwill allocated to a reporting unit in Japan that is engaged in the rental business, which is included in the Construction, Mining and Utility Equipment operating segment, due to unfavorable business circumstances.

Other Operating Income (Expenses), net

For the fiscal year ended March 31, 2009, Komatsu recorded consolidated other operating expenses of ¥18,293 million as compared to consolidated other operating income of ¥3,581 million for the fiscal year ended March 31, 2008. While Komatsu would have recorded an income for the fiscal year ended March 31, 2009 as a result of gain recorded on the sale of some of its properties, such gain was fully offset by expenses incurred in connection with losses resulting from the disposal or sale of fixed assets. Komatsu also recorded expenses associated with structural reforms that it implemented during the fiscal year ended March 31, 2009 with respect to its production and sales operations, such as reorganization and relocation costs.

Operating Income

Consolidated operating income for the fiscal year ended March 31, 2009 decreased by 54.3%, or ¥180,902 million, to ¥151,948 million as compared to ¥332,850 million for the fiscal year ended March 31, 2008. This decrease in operating income was due primarily to negative factors such as (1) the increase in prices of materials used in the production of Komatsu products, (2) the decrease in demand for Komatsu products during the second half of the fiscal year, (3) unfavorable changes in foreign exchange rates, (4) expenses associated with structural reforms of production and sales operations, (5) the decrease in equipment sales to dealers and distributors to support their efforts to quickly adjust inventory levels, which resulted in certain costs not being fully absorbed due to reduced production volumes and (6) higher fixed costs, such as R&D expenses and depreciation, which outweighed positive factors, such as the realization of product sales at higher prices.

As a result, operating margin for the fiscal year ended March 31, 2009 decreased by 7.3 percentage points to 7.5% from 14.8% for the fiscal year ended March 31, 2008.

64

Other Income (Expenses), net

Consolidated other expenses for the fiscal year ended March 31, 2009 increased by 117.7%, or ¥12,526 million, to ¥23,166 million as compared to ¥10,640 million for the fiscal year ended March 31, 2008. This increase was due primarily to foreign exchange rate losses and losses recorded as a result of impairment in securities investments. Foreign exchange rate losses increased by ¥8,335 million for the fiscal year ended March 31, 2009 to ¥11,802 million as compared to ¥3,467 million for the fiscal year ended March 31, 2008 in light of the unfavorable changes in foreign exchange rates, such as the appreciation of the Japanese yen against the U.S. dollar, the Euro and other currencies. In addition, Komatsu recorded a loss on securities investments of ¥9,441 million for the fiscal year ended March 31, 2009, an increase of ¥9,152 million as compared to ¥289 million for the fiscal year ended March 31, 2008. This increase in loss on securities investments was due primarily to the overall decline in the stock markets. While interest expense for the fiscal year ended March 31, 2009 decreased by 12.7%, or ¥2,123 million, to ¥14,576 million as compared to ¥16,699 million for the fiscal year ended March 31, 2008, due primarily to lower interest rates, interest expenses also contributed to the increase in other expenses. The increase in other income resulting from the above factors was partially offset by interest and dividend income, which decreased by 16.0%, or ¥1,644 million, to ¥8,621 million for the fiscal year ended March 31, 2009 as compared to ¥10,265 million for the fiscal year ended March 31, 2008, due primarily to lower interest rates.

Income from Continuing Operations Before Income Taxes and Equity in Earnings of Affiliated Companies

As a result of the above factors, consolidated income from continuing operations before income taxes and equity in earnings of affiliated companies for the fiscal year ended March 31, 2009 decreased by 60.0%, or ¥193,428 million, to ¥128,782 million as compared to ¥322,210 million for the fiscal year ended March 31, 2008.

Income Taxes

Consolidated income tax expense for the fiscal year ended March 31, 2009 decreased by ¥73,501 million to ¥42,293 million from ¥115,794 million for the fiscal year ended March 31, 2008. The actual effective tax rate for the fiscal year ended March 31, 2009 decreased to 32.8% from 35.9% for the fiscal year ended March 31, 2008. This decrease was due to the fact that the proportion of income before income taxes and equity in earnings of affiliated companies derived from countries with lower tax rates increased in relation to the total income before income taxes and equity in earnings of affiliated companies for the fiscal year ended March 31, 2009.

65

The difference between the Japanese statutory tax rate of 40.8% and the actual effective tax rate of 32.8% was caused by income of certain foreign subsidiaries taxed at a rate lower than the Japanese statutory tax rate and a realization of previously reserved tax benefits on operating losses of subsidiaries, which were offset in part by an increase in valuation allowance and non-deductible expenses. For additional information, see Note 16 to the Consolidated Financial Statements.

Income from Continuing Operations Before Equity in Earnings of Affiliated Companies

As a result of the above factors, consolidated income from continuing operations before equity in earnings of affiliated companies for the fiscal year ended March 31, 2009 decreased by ¥119,927 million to ¥86,489 million as compared to ¥206,416 million for the fiscal year ended March 31, 2008.

Equity in Earnings of Affiliated Companies

Consolidated equity in earnings of affiliated companies for the fiscal year ended March 31, 2009 decreased by ¥6,449 million to ¥396 million as compared to ¥6,845 million for the fiscal year ended March 31, 2008, due primarily to decreased earnings recorded by affiliated companies held under the equity accounting method, such as L&T-Komatsu Limited and Gigaphoton Inc., as well as the absence of earnings of an affiliated company of Komatsu NTC Ltd. that was recorded during the fiscal year ended March 31, 2008 before Komatsu NTC Ltd. became a consolidated subsidiary in March 2008.

Income from Continuing Operations

As a result of the above, consolidated income from continuing operations for the fiscal year ended March 31, 2009 decreased by 59.3%, or ¥126,376 million, to ¥86,885 million as compared to ¥213,261 million for the fiscal year ended March 31, 2008.

Income from Discontinued Operations Less Applicable Income Taxes

There was no consolidated income from discontinued operations less applicable income taxes for the fiscal year ended March 31, 2009, which was ¥4,967 million for the fiscal year ended March 31, 2008.

Net Income

As a result of the above factors, consolidated net income for the fiscal year ended March 31, 2009 decreased by ¥131,343 million to ¥86,885 million as compared to ¥218,228 million for the fiscal year ended March 31, 2008.

66

Net Income Attributable to Noncontrolling Interests

Net income attributable to noncontrolling interests for the fiscal year ended March 31, 2009 decreased by ¥1,347 million to ¥8,088 million as compared to ¥9,435 million for the fiscal year ended March 31, 2008. Net income attributable to noncontrolling interests decreased mainly as a result of declined earnings recorded primarily by subsidiaries in the Construction, Mining and Utility Equipment operating segment, such as Komatsu Shantui Construction Machinery Co., Ltd. and Bangkok Komatsu Co., Ltd.

Net Income Attributable to Komatsu Ltd.

As a result of the above factors, Komatsu’s consolidated net income attributable to Komatsu Ltd. for the fiscal year ended March 31, 2009 decreased by 62.3%, or ¥129,996 million, to ¥78,797 million as compared to ¥208,793 million for the fiscal year ended March 31, 2008. Accordingly, basic net income attributable to Komatsu Ltd. per share fell to ¥79.95 for the fiscal year ended March 31, 2009 from ¥209.87 for the fiscal year ended March 31, 2008. Diluted net income attributable to Komatsu Ltd. per share fell to ¥79.89 for the fiscal year ended March 31, 2009 from ¥209.59 for the fiscal year ended March 31, 2008.

Segment Profit

Segment profit, which is one of Komatsu’s key management indices, is determined in a manner that is consistent with Japanese accounting principles by subtracting cost of sales and selling, general and administrative expenses from net sales. Komatsu considers segment profit to be one of its key management indices because it enables management to evaluate financial data for each operating and geographic segment separately, without the effect of nonrecurring events and other factors unrelated to business activities, such as impairment loss or interest income/expense. For information about impairment loss by segment, see Note 23 to the Consolidated Financial Statements. Based on such evaluation of financial data for each operating and geographic segment, management assesses the performance of each such operating and geographic segment and determines how to allocate resources to each such segment.

Segment profit on a consolidated basis decreased by 43.6%, or ¥145,928 million, to ¥188,658 million for the fiscal year ended March 31, 2009 from ¥334,586 million for the fiscal year ended March 31, 2008.

This decrease in segment profit was due primarily to negative factors such as (1) the increase in prices of materials used in the production of Komatsu products, (2) the decrease in demand for Komatsu products during the second half of the fiscal year, (3) unfavorable changes in foreign exchange rates, (4) the decrease in equipment sales to dealers and distributors to support their efforts to quickly adjust inventory levels, which resulted in certain costs not being fully absorbed due to reduced production volumes and (5) higher fixed costs, such as R&D expenses and depreciation, which outweighed positive factors, such as the realization of product sales at higher prices.

67

For information regarding segment profit by operating segments and geographic segments, see “Performance by Operating Segments” and “Performance by Geographic Segments (based on the geographic origin of the seller)” below.

Performance by Operating Segments

The following table presents net sales and segment profit broken down by operating segments for the fiscal years ended March 31, 2009 and 2008. In evaluating the financial data for each operating segment, Komatsu’s management considers sales by the location of its customers to be particularly helpful for the Construction, Mining and Utility Equipment operating segment, its primary operating segment. Accordingly, in addition to providing performance information by operating segments, the below table and related discussion provide information regarding sales in the Construction, Mining and Utility Equipment operating segment broken down by geographic locations of Komatsu’s customer. Performance information by geographic segments (which are separately identified by management), which provides performance information based on the geographic location of the seller (as opposed to the customer), is provided under “Performance by Geographic Segments (based on the geographic origin of the seller).”

	Millions of Yen
	Fiscal Years Ended				Percentage
	March 31,				Change
	2009		2008		2009 vs. 2008
Net sales:
Construction, Mining and Utility Equipment
Customers	¥	1,744,733	¥	2,048,711		-14.8	%
Japan		309,895		370,744		-16.4	%
Americas		462,405		510,552		-9.4	%
Europe and CIS		273,259		427,029		-36.0	%
China		179,221		181,468		-1.2	%
Asia (excluding Japan, China) and Oceania		309,721		328,725		-5.8	%
Middle East and Africa		210,232		230,193		-8.7	%
Intersegment		4,653		6,127		-24.1	%
Total		1,749,386		2,054,838		-14.9	%

68

	Millions of Yen
	Fiscal Years Ended						Percentage
	March 31,						Change
	2009			2008			2009 vs. 2008
Industrial Machinery and Others
Customers		277,010			194,312			42.6	%
Intersegment		26,389			23,376			12.9	%
Total		303,399			217,688			39.4	%
Elimination		(31,042	)		(29,503	)		5.2	%
Consolidated Net Sales	¥	2,021,743		¥	2,243,023			-9.9	%
Segment Profit:
Construction, Mining and Utility Equipment	¥	180,455		¥	317,895			-43.2	%
Industrial Machinery and Others		12,891			19,947			-35.4	%
Total		193,346			337,842			-42.8	%
Corporate expenses and elimination		(4,688	)		(3,256	)		44.0	%
Consolidated Segment Profit	¥	188,658		¥	334,586			-43.6	%

Notes:

1)	Transfers between segments are made at estimated arm’s-length prices.
2)	Starting with the fiscal year ended March 31, 2009, Komatsu reclassified the forklift truck business of Komatsu Utility Co., Ltd. and the businesses of Komatsu Logistics Corp. (both of which were formerly in the Industrial Machinery, Vehicles and Others operating segment) so that such businesses are part of Komatsu’s construction and mining equipment business, and accordingly, changed its operating segments by renaming the Construction and Mining Equipment operating segment as the Construction, Mining and Utility Equipment operating segment and the Industrial Machinery, Vehicles and Others operating segment as the Industrial Machinery and Others operating segment. As a result of this reclassification, the financial data for the fiscal year ended March 31, 2008 in the above table have been retrospectively reclassified using the new operating segments.
3)	Segment profit is obtained by subtracting cost of sales and selling, general and administrative expenses from net sales. For additional information, see Note 23 to the Consolidated Financial Statements.

Construction, Mining and Utility Equipment

Net sales

Consolidated net sales to customers in the Construction, Mining and Utility Equipment operating segment for the fiscal year ended March 31, 2009 decreased by 14.8%, or ¥303,978 million, to ¥1,744,733 million as compared to ¥2,048,711 million for the fiscal year ended March 31, 2008.

This decrease in sales was due primarily to negative factors, such as (1) the significant drop in demand on a global basis of Komatsu’s construction, mining and utility equipment (which decreased net sales of this operating segment by approximately ¥193.3 billion), (2) unfavorable changes in foreign exchange rates, such as the appreciation of the Japanese yen against the U.S. dollar and the Euro (which decreased net sales in this operating segment by approximately ¥152.7 billion) and (3) Komatsu’s decision to suspend equipment sales to dealers and distributors to support their efforts to quickly adjust inventory levels to the new business environment (which decreased net sales in this operating segment by approximately ¥30.0 billion), which outweighed positive factors, such as the realization of product sales at higher prices (which increased net sales in this operating segment by approximately ¥70.6 billion).

69

Net sales to customers in Japan (based on sales destination) for the fiscal year ended March 31, 2009 decreased by 16.4%, or ¥60,849 million, to ¥309,895 million as compared to ¥370,744 million for the fiscal year ended March 31, 2008. In the fiscal year ended March 31, 2009, demand fell sharply in Japan as a result of slack public-sector investments and reduced private-sector investments against the backdrop of the worsened economy in the second half of the fiscal year and sluggish housing starts. In addition, the decrease in the number of exports of used equipment from Japan due to lower demand for used equipment outside of Japan adversely affected demand for new equipment in Japan, because customers in Japan tend to trade in their old equipment for new equipment. Despite such market conditions, Komatsu strived to realize higher prices and expand its rental equipment business. In light of the significant decrease in demand, however, sales in Japan declined from the fiscal year ended March 31, 2008.

Net sales to customers in the Americas (based on sales destination) for the fiscal year ended March 31, 2009 decreased by 9.4%, or ¥48,147 million, to ¥462,405 million as compared to ¥510,552 million for the fiscal year ended March 31, 2008. Although demand for mining equipment remained strong in North America, demand for construction equipment decreased due primarily to reduced U.S. housing starts and the slack economy resulting from the financial crisis. In addition, Komatsu’s decision to suspend sales to dealers and distributors in North America to support their efforts to bring down their inventory to an appropriate level in light of the new business environment also contributed to the decrease in net sales in North America. While Komatsu continued its efforts to realize higher prices, such efforts were not sufficient to offset the significant decrease in demand. As a result, Komatsu recorded a decrease in net sales to customers in North America for the fiscal year ended March 31, 2009. As a percentage of total sales to customers in the Americas, sales to customers in North America for the fiscal year ended March 31, 2009 was 53.6% as compared to 63.2% for the fiscal year ended March 31, 2008. Despite decreased sales to customers in North America, demand expanded in Latin America. In response to such increased demand, Komatsu made adjustment to its local operations in Latin America to strengthen its marketing capability. While sales to customers in Latin America for the fiscal year ended March 31, 2009 increased to 46.4% of the total net sales to customers in the Americas as compared to 36.8% for the fiscal year ended March 31, 2008, it fell short of fully offsetting the sales decrease in North America. Accordingly, sales in the Americas decreased from the fiscal year ended March 31, 2008.

70

Net sales to customers in Europe and CIS (based on sales destination) for the fiscal year ended March 31, 2009 decreased by 36.0%, or ¥153,770 million, to ¥273,259 million as compared to ¥427,029 million for the fiscal year ended March 31, 2008. European economies which showed signs of contraction in the first half of the fiscal year deteriorated further in the second half of the fiscal year in light of the global financial crisis. As a result, demand for construction equipment decreased significantly in Europe. In CIS, decreased demand for construction equipment became more articulated in light of the global financial crisis and the decrease in commodity prices in the second half of the fiscal year. In addition to lower demand in both regions, the decrease in net sales to customers in Europe and CIS was partly due to Komatsu’s proactive efforts to support dealers and distributors in this region adjust their inventory to an appropriate level by suspending sales to them. The depreciation of the Euro and the Russian ruble against the Japanese yen also contributed to the decrease in sales to customers in Europe and CIS.

Net sales to customers in China (based on sales destination) for the fiscal year ended March 31, 2009 decreased by 1.2%, or ¥2,247 million, to ¥179,221 million as compared to ¥181,468 million for the fiscal year ended March 31, 2008. While demand decreased in China in the second half of the fiscal year due primarily to the global financial crisis, such decrease was not as drastic as the other regions as demand for Komatsu products has begun to show signs of recovery since February 2009, as public work projects, such as the post-earthquake reconstruction project in Sichuan Province, became active in light of the support provided by the Chinese government’s economic stimulus package. As a result, sales in China only decreased slightly from the fiscal year ended March 31, 2008.

Net sales to customers in Asia and Oceania (based on sales destination) for the fiscal year ended March 31, 2009 decreased by 5.8%, or ¥19,004 million, to ¥309,721 million as compared to ¥328,725 million for the fiscal year ended March 31, 2008. The decrease in demand became more evident in both Asia and Oceania in the second half of the fiscal year, reflecting recessionary economies and a significant decline in commodity prices. While working to realize higher prices of its products, Komatsu also strived to reduce inventory and delivery lead-times by encouraging (1) information sharing between local plants and distributors in Southeast Asia and (2) pre-delivery installation of optional features in plants, which Komatsu Australia Pty. Ltd. used to do at its facility. Despite such efforts, sales in Asia and Oceania declined from the fiscal year ended March 31, 2008, reflecting the significant fall in demand and sharp depreciation of the Australian dollar to the Japanese yen in the second half of the fiscal year.

Net sales to customers in the Middle East and Africa (based on sales destination) for the fiscal year ended March 31, 2009 decreased by 8.7%, or ¥19,961 million, to ¥210,232 million as compared to ¥230,193 million for the fiscal year ended March 31, 2008. Similar to the other regions, demand rapidly fell in the Middle East and Africa as a result of the financial crisis and the significant decrease in the price of crude oil and other commodities. In light of such circumstances, Komatsu made concerted efforts to reinforce its sales and product support capabilities in the Middle East and Africa by expanding its training programs for distributors. Due largely to the significant decrease in demand and the sharp depreciation of the rand (the currency of South Africa, which is one of the major markets in Africa) relative to the Japanese yen, however, sales in the Middle East and Africa decreased from the fiscal year ended March 31, 2008.

71

Segment Profit

Segment profit for the Construction, Mining and Utility Equipment operating segment for the fiscal year ended March 31, 2009 decreased by 43.2%, or ¥137,440 million, to ¥180,455 million from ¥317,895 million for the fiscal year ended March 31, 2008.

This decrease in segment profit was due primarily to negative factors such as (1) the increase in prices of materials used in the production of Komatsu products (which decreased segment profit by approximately ¥66.5 billion), (2) the decrease in demand for Komatsu products during the second half of the fiscal year (which decreased segment profit by approximately ¥54.1 billion), (3) unfavorable changes in foreign exchange rates, such as the appreciation of the Japanese yen against the U.S. dollar, the Euro and other currencies (which decreased segment profit by approximately ¥53.5 billion), (4) the decrease in equipment sales to dealers and distributors to support their efforts to quickly adjust inventory levels, which resulted in certain costs not being fully absorbed due to reduced production volumes (which decreased segment profit by approximately ¥17.0 billion) and (5) higher fixed costs, such as R&D expenses and depreciation (which decreased segment profit by approximately ¥16.9 billion), which outweighed positive factors, such as the realization of product sales at higher prices (which increased segment profit by approximately ¥70.6 billion).

Industrial Machinery and Others

Net Sales

Consolidated net sales to customers in the Industrial Machinery and Others operating segment for the fiscal year ended March 31, 2009 increased by 42.6%, or ¥82,698 million, to ¥277,010 million as compared to ¥194,312 million for the fiscal year ended March 31, 2008. This increase was due primarily to the addition of Komatsu NTC Ltd. as a consolidated subsidiary in March 2008, which increased net sales by approximately ¥108.7 billion. While sales of large presses, such as AC Servo presses and high-speed transfer lines, remained strong, sales of sheet metal machines and small- and medium-sized presses decreased significantly as the automobile manufacturing and other client industries restrained capital investments in the second half of the fiscal year. Meanwhile, sales of wire saws made by Komatsu NTC Ltd. steadily expanded against the backdrop of accelerating growth of the solar cell market. Excluding the net sales of Komatsu NTC Ltd., net sales to customers in the Industrial Machinery and Others operating segment would have decreased by 13.4% or ¥26,100 million in the fiscal year ended March 31, 2009.

72

Segment Profit

Segment profit for the Industrial Machinery and Others operating segment for the fiscal year ended March 31, 2009 decreased by 35.4%, or ¥7,056 million, to ¥12,891 million from ¥19,947 million for the fiscal year ended March 31, 2008. This decrease was due primarily to negative factors, such as the decrease in segment profit of subsidiaries other than Komatsu NTC Ltd., which was mainly due to decreased sales by such subsidiaries (which decreased segment profit by approximately ¥10.0 billion), and the adjustments made in connection with the addition of Komatsu NTC Ltd. as a consolidated subsidiary in March 2008 (which decreased segment profit by approximately ¥1.5 billion), which outweighed the increase in segment profit derived from the ordinary business of Komatsu NTC Ltd.(which increased segment profit by approximately ¥4.5 billion).

Performance by Geographic Segments (based on the geographic origin of the seller)

The following table presents net sales and segment profit broken down by the geographic origin of the seller for the fiscal years ended March 31, 2009 and 2008.

Performance by Geographic Segments

	Millions of Yen
	Fiscal Years Ended						Percentage
	March 31,						Change
	2009			2008			2009 vs. 2008
Net sales:
Japan	¥	1,212,449		¥	1,292,314			-6.2	%
Americas		511,821			567,243			-9.8	%
Europe and CIS		294,398			452,222			-34.9	%
Others		481,250			517,887			-7.1	%
Elimination		(478,175	)		(586,643	)		-18.5	%
Consolidated	¥	2,021,743		¥	2,243,023			-9.9	%
Segment Profit:
Japan	¥	37,876		¥	173,063			-78.1	%
Americas		52,133			56,667			-8.0	%
Europe and CIS		22,279			44,088			-49.5	%
Others		61,008			68,204			-10.6	%
Corporate and elimination		15,362			(7,436	)		-306.6	%
Consolidated	¥	188,658		¥	334,586			-43.6	%

Note: Segment profit is obtained by subtracting cost of sales and selling, general and administrative expenses from net sales. For additional information, see Note 23 to the Consolidated Financial Statements.

73

Japan

Net Sales

Net sales in the Japan geographic segment (based on the geographic origin of the seller) for the fiscal year ended March 31, 2009 decreased by 6.2%, or ¥79,865 million, to ¥1,212,449 million as compared to ¥1,292,314 million for the fiscal year ended March 31, 2008. This decrease was due primarily to the decrease in sales of construction, mining and utility equipment as both domestic sales and export of such equipment decreased due mainly to the slack Japanese economy and the significant drop in global demand in the second half of the fiscal year as a result of the financial crisis. Komatsu’s decision to suspend sales of equipment to dealers and distributors to support their efforts to quickly adjust their inventory levels also contributed to the decrease.

In addition, decreased sales mainly of small- and medium- sized presses and sheet metal machines due primarily to the decrease in capital investments by a wide range of client industries, including the automobile manufacturing industry, also contributed to the decrease in net sales in this geographic segment. While the addition of Komatsu NTC Ltd. as a consolidated subsidiary in March 2008 increased net sales, such increase was not sufficient to fully offset the decrease in net sales as a result of the various factors discussed above.

Segment Profit

Segment profit for the Japan geographic segment (based on the geographic origin of the seller) for the fiscal year ended March 31, 2009 decreased by 78.1%, or ¥135,187 million, from ¥173,063 million to ¥37,876 million as compared to the fiscal year ended March 31, 2008. This decrease in segment profit was due primarily to (1) the increase in prices of materials, (2) the decrease in demand, (3) unfavorable changes in foreign exchange rates, (4) the decrease in equipment sales to dealers and distributors to support their efforts to quickly adjust inventory levels, which resulted in certain costs not being fully absorbed due to reduced production volumes, and (5) higher fixed costs.

74

Americas

Net Sales

Net sales in the Americas geographic segment (based on the geographic origin of the seller) for the fiscal year ended March 31, 2009 decreased by 9.8%, or ¥55,422 million, from ¥567,243 million to ¥511,821 million as compared to the fiscal year ended March 31, 2008. This decrease was due primarily to reduced U.S. housing starts and the slowdown in the North American economy. While exports of super-large dump trucks to commodity-exporting countries remained strong and sales in Latin America increased, such increase in sales was not sufficient to fully offset the overall decrease in net sales of other equipment.

Segment Profit

Segment profit for the Americas geographic segment (based on the geographic origin of the seller) for the fiscal year ended March 31, 2009 decreased by 8.0%, or ¥4,534 million, from ¥56,667 million to ¥52,133 million as compared to the fiscal year ended March 31, 2008 due primarily to the decrease in net sales as discussed above.

Europe and CIS

Net Sales

Net sales in the Europe and CIS geographic segment (based on the geographic origin of the seller) for the fiscal year ended March 31, 2009 decreased by 34.9%, or ¥157,824 million, to ¥294,398 million as compared to ¥452,222 million for the fiscal year ended March 31, 2008. This decrease was due primarily to further decrease in demand in Europe as the economic slowdown spread from Western Europe to Central and Eastern Europe. In addition, Komatsu’s decision to suspend equipment sales to dealers and distributors to support their efforts to quickly adjust their inventory levels also contributed to the decrease. While exports of super-large hydraulic excavators to commodity-exporting countries remained strong, the increase in sales of such excavators was not sufficient to fully offset the overall decrease in net sales.

Segment Profit

Segment profit for the Europe and CIS geographic segment (based on the geographic origin of the seller) for the fiscal year ended March 31, 2009 decreased by 49.5%, or ¥ 21,809 million, to ¥22,279 million as compared to ¥44,088 million for the fiscal year ended March 31, 2008 due primarily to the decrease in net sales as discussed above.

75

Others

Net Sales

Net sales in the Others geographic segment (based on the geographic origin of the seller) for the fiscal year ended March 31, 2009 decreased by 7.1%, or ¥36,637 million, to ¥481,250 million as compared to ¥517,887 million for the fiscal year ended March 31, 2008. This decrease was due primarily to the significant decrease in demand in the second half of the fiscal year.

Segment Profit

Segment profit for the Others geographic segment (based on the geographic origin of the seller) for the fiscal year ended March 31, 2009 decreased by 10.6%, or ¥7,196 million, to ¥61,008 million as compared to ¥68,204 million for the fiscal year ended March 31, 2008 due primarily to the decrease in net sales as discussed above.

B. Liquidity and Capital Resources

Cash Flow

Set forth below is the condensed consolidated statements of cash flows for the fiscal years ended March 31, 2010, 2009 and 2008.

Condensed Consolidated Statements of Cash Flows

	Millions of yen									Millions of
	Fiscal Years Ended March 31,									U.S. dollars
	2010			2009			2008			2010
Net cash provided by operating activities	¥	182,161		¥	78,775		¥	160,985		$	1,959
Net cash used in investing activities		(72,967	)		(145,368	)		(128,182	)		(785	)
Net cash provided by (used in) financing activities		(116,363	)		57,219			(17,422	)		(1,251	)
Effect of exchange rate change on cash and cash equivalents		( 965	)		(2,073	)		(5,570	)		(10	)
Net increase (decrease) in cash and cash equivalents		(8,134	)		(11,447	)		9,811			(87	)
Cash and cash equivalents, beginning of year		90,563			102,010			92,199			973
Cash and cash equivalents, end of year	¥	82,429		¥	90,563		¥	102,010		$	886

Fiscal Year ended March 31, 2010

Net cash provided by operating activities increased by ¥103,386 million from the previous fiscal year, to ¥182,161 million (U.S.$1,959 million), mainly due to a decrease in inventories.

Net cash used in investing activities declined by ¥72,401 million from the previous fiscal year, to ¥72,967 million (U.S.$785 million), mainly due to restrained capital investments in both Japan and overseas.

76

Net cash used in financing activities totaled ¥116,363 million (U.S.$1,251 million), an increase of ¥173,582 million from the previous fiscal year, mainly due to repayments on short-term debt.

As a result, cash and cash equivalents, as of March 31, 2010, totaled ¥82,429 million (U.S.$886 million), a decrease of ¥8,134 million from the previous fiscal year.

Fiscal Year ended March 31, 2009

Net cash provided by operating activities for the fiscal year ended March 31, 2009 decreased by ¥82,210 million to ¥78,775 million as compared to the fiscal year ended March 31, 2008, due mainly to decreased net income.

Net cash used in investing activities for the fiscal year ended March 31, 2009 increased by ¥17,186 million to ¥145,368 million as compared to the fiscal year ended March 31, 2008, due mainly to investments made to improve productivity of plants in Japan and overseas.

Net cash provided by financing activities for the fiscal year ended March 31, 2009 increased by ¥74,641 million to ¥57,219 million as compared to the fiscal year ended March 31, 2008, reflecting proceeds received from the issuance of long-term debt and an increase in short-term debt.

As a result of the above, cash and cash equivalents as of March 31, 2009 totaled ¥90,563 million, a decrease of ¥11,447 million compared to the balance as of March 31, 2008.

Capital Investment

Komatsu’s management defines “Capital Investment” as costs relating to the purchase of property, plant and equipment including properties under capital leases on an accrual basis, which reflects the effect of timing differences between acquisition dates and payment dates. Komatsu’s management uses this financial indicator to manage its capital investment and believes that this indicator is useful to investors in that this indicator presents accrual based capital investment in addition to the cash based capital expenditures provided in the consolidated statements of cash flows.

Demand for Komatsu products decreased in the fiscal year ended March 31, 2010 due primarily to the global financial crisis. Although Komatsu decreased its capital investments in the construction, mining and utility equipment business for the fiscal year ended March 31, 2010, Komatsu continued to make capital investments, including investments to reorganized its production operations in Japan and the United States so as to put in place a more flexible production infrastructure that enables Komatsu to quickly adjust to market demands. Komatsu also made capital investments in the industrial machinery and others business for the fiscal year ended March 31, 2010 to improve its productivity and efficiency by making improvements to its production infrastructure, such as closing down the Komatsu Plant (where some of the facility and equipment had become obsolete) and transferring the production of products manufactured at such plant to the Kanazawa Plant (where the facility and equipment are more up-to-date).

77

As a result, Komatsu’s capital investment on a consolidated basis for the fiscal year ended March 31, 2010 was ¥96,191 million (U.S.$1,034 million), a decrease of ¥66,321 million from the fiscal year ended March 31, 2009. Komatsu plans to make investments totaling ¥86,977 million for the fiscal year ended March 31, 2011.

Source of Funds and Liquidity Management

Komatsu’s principal capital resources policy is to maintain sufficient capital resources to be able to respond promptly to future capital needs in connection with its operations and to maintain an appropriate level of liquidity. Consistent with this policy, Komatsu has secured various sources of funding, such as loans, corporate bonds, notes, securitized receivables and lines of credit. Komatsu expects to use cash generated from its operations, and funds procured through such external sources to satisfy future capital expenditures and working capital needs. In addition, Komatsu manages funds held by it and its subsidiaries through a group-wide cash management system in order to improve the efficiency and effectiveness of its cash management. Transfers of funds from subsidiaries in the form of cash dividend, loans or advances are restricted under regulatory requirements of countries in which some of Komatsu’s subsidiaries are located. Nonetheless, Komatsu does not expect these restrictions to have a significant impact on its ability to meet its cash obligations.

Komatsu’s short-term funding needs have been met mainly by cash flows from its operating activities, as well as by bank loans and the issuance of commercial paper. As of March 31, 2010, certain consolidated subsidiaries of the Company maintained committed credit line agreements totaling ¥50,082 million (U.S.$539 million) with financial institutions to secure liquidity. As of March 31, 2010, ¥23,741 million (U.S.$255 million) was available to be used under such credit line agreements, which contain customary covenants. Komatsu is not subject to any covenants limiting its ability to incur additional indebtedness. In addition, the Company has a ¥160,000 million (U.S.$1,720 million) commercial paper program, ¥129,000 million (U.S.$1,387 million) of which was unused as of March 31, 2010. The amount of capital raised through its commercial paper program has depended upon Komatsu’s financing needs, investor demand and market conditions, as well as the ratings outlook for Komatsu.

78

To fulfill Komatsu’s medium- to long-term funding needs, the Company has established a bond program under which it can issue up to ¥100,000 million (U.S.$1,075 million) of variable-term bonds. In addition, the Company, Komatsu Finance America Inc., Komatsu Europe Coordination Center N.V. and Komatsu Capital Europe S.A. have established a U.S.$1.2 billion Euro Medium Term Note (“EMTN”) program. As of March 31, 2010, the principal amount of bonds outstanding under the bond program was ¥60,000 million (U.S.$ 645 million) and the principal amount of notes outstanding under the EMTN program was ¥68,142 million (U.S.$733 million). The amount of capital raised through such programs has depended upon Komatsu’s financing needs, investor demand and market conditions, as well as the ratings outlook for Komatsu.

Komatsu has also established programs to securitize trade notes and accounts receivables for the purpose of accelerating the receipt of cash related to its finance receivables and diversifying its sources of funding. As of March 31, 2010, the balance of such off-balance sheet securitized receivables was ¥22,004 million (U.S.$237 million).

For additional information about the interest rate structure and maturity dates for these borrowings, see Note 12 to the Consolidated Financial Statements.

Fiscal 2010 Financial Position

Komatsu’s short-term debt as of March 31, 2010, which primarily consisted of short-term bank loans and commercial paper, decreased by ¥96,649 million from March 31, 2009 to ¥123,438 million (U.S.$1,327 million). Such short-term debt was used for working capital purposes.

Komatsu’s long-term debt as of March 31, 2010, including debt that is scheduled to mature as of March 31, 2011, increased by ¥83,173 million from March 31, 2009 to ¥462,941 million (U.S.$4,978 million). As of March 31, 2010, Komatsu’s long-term debt, excluding market value adjustment, consisted of (1) ¥231,848 million in loans from banks, insurance companies and other financial institutions, and so on, (2) ¥90,000 million in unsecured bonds, (3) ¥72,951 million in capital lease obligations and (4) ¥68,142 million in EMTN. Such long-term debt was used primarily for capital expenditures and long-term working capital needs. For information about the interest rate structure and maturity dates for these borrowings, see Note 12 to the Consolidated Financial Statements.

As a result, Komatsu’s interest-bearing debt as of March 31, 2010, including its capital lease obligations, decreased by ¥13,476 million from March 31, 2009 to ¥586,379 million (U.S.$6,305 million). Net interest-bearing debt after deducting cash and deposits as of March 31, 2010 also decreased by ¥6,430 million from March 31, 2009 to ¥502,818 million (U.S.$5,407 million). As a result, Komatsu’s net debt-to-equity ratio as of March 31, 2010 improved and was 0.60, compared to 0.62 as of March 31, 2009.

79

As of March 31, 2010, total current assets decreased by ¥63,118 million to ¥1,040,121 million (U.S. $11,184 million), while total current liability decreased by ¥90,541 million to ¥641,746 million (U.S. $6,900 million). As a result, the current ratio, which is calculated by dividing current assets by current liabilities, as of March 31, 2010, was 162.1%, which reflected an increase of 11.4 percentage points from the fiscal year ended March 31, 2009.

Based on expected cash flow from its operating activities, the available sources of funds and current cash and cash equivalent balances, Komatsu believes that it has sufficient means to satisfy its liquidity needs and future obligations.

Komatsu committed to make capital investments totaling approximately ¥4.7 billion (U.S.$51 million) as of March 31, 2010. With respect to the Construction, Mining and Utility Equipment operating segment, Komatsu plans to continue making investments to reorganize its production operations to put in place a more flexible production infrastructure that enables Komatsu to quickly adjust to market demands, and make investments in China and Asia where Komatsu anticipates further market growth. In addition, Komatsu plans to make investments to develop hybrid construction equipment and products that comply with the latest engine emission standards. With respect to the Industrial Machinery and Others operating segment, Komatsu plans to make investments to renew obsolete equipment and streamline its production operations.

Credit Ratings

The Company obtains credit ratings from three rating agencies: Standard and Poor’s Ratings Services (“S&P”), Moody’s Investors Service, Inc. (“Moody’s”) and Rating and Investment Information, Inc. (“R&I”). As of March 31, 2010, the Company’s issuer ratings were as follows:

S&P: A (long-term)
Moody’s: A2 (long-term)
R&I: AA- (long-term), a-1+ (short-term)

80

C. Research and Development, Patents and Licenses, etc.

Komatsu is actively engaged in research and development activities for new technologies, new products and new services consistent with its commitment to provide “Quality and Reliability.” Komatsu’s research and development activities are conducted by various groups within Komatsu. With respect to the Construction, Mining and Utility Equipment operating segment, the Research Division and the Development Division as well as development centers that focus on construction, mining and utility equipment are involved in research and development activities. The Industrial Machinery Division and the technology departments of Komatsu’s subsidiaries and affiliates are responsible for research and development activities relating to the Industrial Machinery and Others operating segment.

The following table presents Komatsu’s research and development expenses for the fiscal years ended March 31, 2010, 2009 and 2008. Research and development expenses are recognized when incurred.

	Millions of yen						Millions of
	Fiscal Years Ended March 31,						U.S. dollars
R&D expenses	2010		2009		2008		2010
Construction, Mining and Utility Equipment	¥	40,359	¥	47,036	¥	44,036	$	434
Industrial Machinery and Others		6,090		6,700		5,637		65
Total	¥	46,449	¥	53,736	¥	49,673	$	499

Note: From the fiscal year ended March 31, 2009, Komatsu reclassified its operating segments. Accordingly, the financial data for the fiscal years ended March 31, 2008 in the above table have been retrospectively adjusted to reflect the reclassification using the new operating segments.

The objectives of the research and development activities by operating segment for the fiscal years ended March 31, 2010, 2009 and 2008 are described below.

(1) Construction, Mining and Utility Equipment

In order to develop construction, mining and utility equipment that can be used in various parts of the world, Komatsu has established research and development centers in Japan and overseas and has encouraged joint research and development programs as well as personnel exchanges. With the goal of assisting its customers improve their productivity, Komatsu’s medium- and long-term research and development objectives are as follows: (1) to make advancements in the use of information and communication technology and (2) to increase the environmental friendliness of its products.

Komatsu has been engaged in the research and development of ICT, including remote management technology (which enables remote management of equipment by obtaining information regarding machine locations, operating conditions and vehicle health, using state-of-the-art remote sensing and telecommunication technologies), control technology and artificial intelligence. Equipment with control systems and management systems using these technologies has been rapidly penetrating the construction and mining equipment market. Komatsu is striving to achieve the complete automation of its equipment and is making advances to in the active use of ICT in its construction and mining equipment taking into consideration customer needs and preferences.

81

Komatsu has made advances in research and development relating to energy conservation, component recycling and reuse, and the evaluation of environmental loads through lifecycle assessment techniques based on the belief that it is possible to reduce environmental burdens while achieving economic efficiency. In particular, in recent years, Komatsu’s first priority in research and development has been to develop technology to reduce fuel consumption by its machines, which leads to both CO₂ emission reduction and economic benefits to customers. For example, Komatsu introduced the world’s first hybrid hydraulic excavator (PC200-8 Hybrid) to the Japanese and Chinese markets. The hybrid excavator typically consumes about 25% less fuel at maximum levels as compared to conventional excavators and also emits lower levels of NO_X and CO₂. Komatsu is also developing new engines for its diesel-engine machines to meet the stringent clean-air standards that are to be phased in by Japan, the US and the EU starting in 2011. Komatsu is continuously seeking to develop new technology to meet stricter exhaust gas emission standards that are to become effective in the future. In addition, Komatsu is working to improve the working conditions for machine operators by improving safety measures and reducing noise and vibration levels of its machines.

(2) Industrial Machinery and Others

Research and development in the Industrial Machinery and Others operating segment is principally conducted in the fields of large presses (which was conducted by Komatsu Ltd. through the fiscal year ended March 31, 2010 and is now being conducted by Komatsu Industries Corporation), sheet-metal forging machines (which is conducted by Komatsu Industries Corporation), machine tools (which is conducted by Komatsu Machinery Corporation and Komatsu NTC Ltd.) and other industrial machinery (which is conducted by Komatsu Engineering Co., Ltd. and KELK Ltd.).

In the field of large size presses, Komatsu has been focused on developing functional enhancements to its AC servo presses to respond to the customers’ growing need to reduce production costs. With respect to sheet-metal machines, Komatsu Industrial Corporation in cooperation with the Komatsu Research Division has developed a 100Kw plasma power source having the world’s best output level. In addition, Komatsu Industrial Corporation has released the large size TWISTER type TFPL-Blade through which high-speed high precision cutting of mild steel up to 50mm thickness has become possible. Komatsu has also installed its KOMTRAX system as a standard feature on new small size AC servo presses, sheet-metal machines and Komatsu NTC’s LASER cutting machines.

82

With respect to machine tools, Komatsu Machinery Corporation has developed the largest crankshaft milling machine (GPM1600E) and a new milling machine for vehicle engine’s crankshaft (GPM250B-2).

In terms of other products, Komatsu Engineering Co. has made improvements to the precision of its Chip ID Marker. Komatsu believes that it is one of the leaders in the development and application of the LASER irradiation technology, which enables customers to physically write manufacturing history on the top surface of individual IC chips on the wafer. In addition, KELK Ltd. has promoted the research and development of high-performance temperature control equipment, high-performance thermoelectric module heat exchange units and micro thermo-modules for use in optical communications.

D. Trend Information

Construction, Mining and Utility Equipment Operating Segment

In the wake of the financial crisis triggered in the United States in September 2008, world economies went into recession, reducing the volume of global demand for construction equipment to half the size of its peak period recorded in April through June of 2008. While some world economies, such as China, Latin America and other developing countries in Asia that produce natural resources, showed signs of recovery during the fiscal year ended March 31, 2010 reflecting positive effects of the economic stimulus packages of their respective governments, the pace of economic recovery has been dull, bringing about a challenging overall business environment. However, Komatsu anticipates that growth in such economies will drive global demand for construction, mining and utility equipment upward.

In response to the recent drastic change in the business environment, Komatsu has implemented various structural reforms, such as reorganizing its production facilities on a global basis and consolidating its sales operations, decreased its inventories and reduced its fixed costs. Through these reforms, Komatsu has streamlined its corporate structure so that it is leaner yet stronger. As a result, Komatsu believes that it is well positioned to take advantage of the market recovery when global demand for construction, mining and utility equipment increases.

In the new mid-range management plan “Global Teamwork for Tomorrow,” Komatsu has positioned China, Asia, Oceania, Latin America, Africa and some other emerging countries as “Strategic Markets” and Japan, North America and Europe as “Conventional Markets.” In the next three-year period, Komatsu anticipates that annual demand for construction equipment will grow on average 16% for Strategic Markets and 10% for Conventional Markets. On a worldwide basis, Komatsu anticipates the demand for construction equipment will grow 14% in the next three-year period.

83

Industrial Machinery and Others Operating Segment

With more than half of the sales of this operating segment being dependent on the automobile manufacturing industry, this operating segment is substantially affected by capital investments made by automobile manufacturers. At present, major automobile manufacturers are continuing to cut back their capital investments. As a result, new orders are continuing to decrease in all businesses which belong to this operating segment, such as large presses, small- and medium-sized sheet metal and press machines, and machine tools. Since Komatsu expects the industrial machinery and other business environment to remain challenging, Komatsu has been working to reorganize its production facilities, such as closing its Komatsu Plant and transferring production to its Kanazawa Plant, in addition to continuing to decrease fixed costs. In order to further streamline the press business, develop new markets and expand business in China and other emerging economies, Komatsu has embarked on the process of integrating the development and service operations of its large press business into Komatsu Industries Corp. Because Komatsu anticipates growth in the solar cell market in light of the environmental friendliness of such products, Komatsu also has been working to enhance the product competitiveness of wire saws made by Komatsu NTC Ltd. as wire saws are used to manufacture solar cells. In addition, because Komatsu believes that its KOMTRAX system enables customers to operate equipment more efficiently and effectively by decreasing fuel use and maintenance expenses, Komatsu has commenced sales of industrial machinery, such as small and medium-sized presses, that are equipped with its KOMTRAX system as a standard feature.

Forward looking statements

This annual report contains forward-looking statements which reflect management’s current views with respect to certain future events, including expected financial position, operating results, and business strategies. These statements can be identified by the use of terms such as “will,” “believes,” “should,” “projects” and similar terms and expressions that identify future events or expectations. Actual results may differ materially from those projected, and the events and results of such forward-looking assumptions cannot be assured.

Factors that may cause actual results to differ materially from those predicted by such forward-looking statements include, but are not limited to, unanticipated changes in demand for Komatsu’s principal products, owing to changes in the economic conditions in Komatsu’s principal markets; changes in exchange rates or the impact of increased competition; unanticipated cost or delays encountered in achieving Komatsu’s objectives with respect to globalized product sourcing and new Information Technology tools; uncertainties as to the results of Komatsu’s research and development efforts and its ability to access and protect certain intellectual property rights; and, the impact of regulatory changes and accounting principles and practices.

84

E. Off-Balance Sheet Arrangements

Komatsu has several accounts receivable securitization programs, which are sources of capital for Komatsu. As of March 31, 2010, Komatsu had securitized accounts receivable of ¥22,004 million (U.S.$237 million) or approximately 3.5% of its total receivables as of that date.

The securitized receivables, net of retained interests, are removed from the consolidated balance sheet when they are sold. Komatsu has entered into contractual arrangements with special purpose entities solely for the purpose of securitizing its receivables. A downgrading or worsening of the quality of Komatsu’s receivables portfolio could restrict it from using its receivables securitization programs.

Cash flows received for all securitization activities from the sale of trade notes and accounts receivable for the fiscal years ended March 31, 2010 and 2009 were ¥13,072 million (U.S.$141 million) and ¥243,495 million, respectively.

Certain consolidated subsidiaries retain responsibility to service sold trade receivables and accounts receivable that are sold pursuant to a securitization transaction. However, contractual servicing fees are not received from the third parties separately. The investors and the trusts that hold the receivables have no or limited recourse rights to certain subsidiaries’ assets in case of debtor’s default. Appropriate reserves have been established for potential losses relating to the limited recourse of the sold receivables. Also certain subsidiaries, except for a certain U.S. subsidiary, as transferor do not retain any interest in the receivables sold.

The components of securitized trade receivables and other assets managed together as of March 31, 2010 and 2009 were as follows:

	Millions of yen
	Fiscal Years Ended						Millions of
	March 31,						U.S. dollars
	2010			2009			2010
Total amount of trade receivables that are managed and securitized	¥	635,610		¥	595,968		$	6,835
Assets transferred		(22,004	)		(103,768	)		(237	)
Total amount of trade receivables on balance sheet	¥	613,606		¥	492,200		$	6,598

85

A certain U.S. subsidiary’s retained interests, which are included in the recourse provisions, are subordinate to investors’ interests. The value of such U.S. subsidiary’s retained interests are estimated based on the present value of future expected cash flows, using certain key assumptions such as a weighted average life, prepayment speed over the life and expected credit losses over the life.

Commitments and Contingent Liabilities

As of March 31, 2010, Komatsu had ¥9,850 million (U.S.$106 million) of contingent liabilities with financial institutions for discounted and transferred receivables on a recourse basis.

Komatsu provides guarantees to third parties in connection with loans borrowed by its employees and affiliated companies and other companies. These guarantees relate mainly to housing loans extended to Komatsu’s employees. The guarantees that support loans borrowed by Komatsu’s affiliated companies and other companies are issued to enhance the creditworthiness of these affiliated companies and other companies.

For each guarantee issued, Komatsu is required to perform under such guarantee if the borrower defaults on a payment required to be made by the applicable contract’s terms. The contract terms range from 10 years to 30 years in the case of employees’ housing loans, and from 1 to 10 years in the case of loans borrowed by Komatsu’s affiliated companies and other companies. The maximum aggregate amount of undiscounted payments Komatsu would have had to make in the event that a payment default were to occur for these loans was ¥88,379 million (U.S.$950 million) as of March 31, 2010. The fair value of the liabilities recognized for Komatsu’s obligations as guarantor under these guarantees as of March 31, 2010 were believed to be insignificant by Komatsu’s management. Some of these guarantees were secured by collateral or insurance issued to the Company.

Komatsu’s management believes that losses from these contingent liabilities, if any, would not have a material effect on the consolidated financial statements of Komatsu.

Komatsu is involved in certain legal actions and claims arising in the ordinary course of its business. It is the opinion of Komatsu’s management and legal counsel that such litigation and claims will be resolved without any material effect on Komatsu’s financial position.

Komatsu has business activities with customers, dealers and associates around the world and their trade receivables from such parties are well diversified to minimize credit risk concentrations. Komatsu’s management does not expect to incur losses on their trade receivables in excess of established allowances.

86

Komatsu also issues contractual product warranties under which they generally guarantee the performance of products delivered and services rendered for a certain period or term. Changes in accrued product warranty costs for the fiscal years ended March 31, 2010 and 2009 are summarized below:

	Millions of yen						Millions of
	Fiscal Years Ended March 31,						U.S. dollars
	2010			2009			2010
Balance at beginning of year	¥	28,256		¥	31,890		$	304
Addition		21,149			25,288			227
Utilization		(25,477	)		(26,369	)		(274	)
Other		(170	)		(2,553	)		(2	)
Balance at end of year	¥	23,758		¥	28,256		$	255

F. Tabular Disclosure of Contractual Obligations

The following tables set forth Komatsu’s contractual obligations as of March 31, 2010.

	Millions of yen
	Cash payments due by period
			Less than						More than
	Total		1 year		1-3 years		3-5 years		5 years
Short-term debt obligations	¥	123,438	¥	123,438	¥	—	¥	—	¥	—
Long-term debt obligations (excluding Capital lease obligations)		382,819		82,521		198,158		101,065		1,075
Capital (Finance) lease obligations		72,951		21,590		41,255		8,860		1,246
Operating lease obligations		13,426		4,783		4,847		1,719		2,077
Interest on interest-bearing debt (including Capital lease obligations)		14,836		8,664		5,033		1,113		26
Pension and other postretirement obligations		4,384		4,384		—		—		—
Total	¥	611,854	¥	245,380	¥	249,293	¥	112,757	¥	4,424

87

	Millions of U.S. dollars
	Cash payments due by period
			Less than						More than
	Total		1 year		1-3 years		3-5 years		5 years
Short-term debt obligations	$	1,327	$	1,327	$	—	$	—	$	—
Long-term debt obligations (excluding Capital lease obligations)		4,116		886		2,131		1,087		12
Capital (finance) lease obligations		784		232		444		95		13
Operating lease obligations		144		52		52		18		22
Interest on interest-bearing debt (including Capital lease obligations)		160		94		54		12		0
Pension and other postretirement obligations		47		47		—		—		—
Total	$	6,578	$	2,638	$	2,681	$	1,212	$	47

Long-term debt obligations exclude market value adjustments of ¥7,171 million (U.S.$77 million).

Interest on interest-bearing debt is based on rates in effect as of March 31, 2010.

Pension and other postretirement obligations reflect contributions expected to be made during the year ending March 31, 2011 only, as the amounts of funding obligations beyond the next year are not yet determinable.

Obligations related to derivative activities are summarized in Foreign Exchange Risk and Interest Rate Risk under Item 11. Quantitative and Qualitative Disclosures about Market Risk.

G. Safe Harbor

Any information disclosed under Item 5.F. Tabular Disclosure of Contractual Obligations, that is not historical in nature is deemed to be a forward-looking statement. See “Cautionary Statement with respect to forward-looking statements” for more information.

88

Item 6. Directors, Senior Management and Employees

A. Directors and Senior Management

Set forth below are the Directors and Corporate Auditors of the Company, their date of birth, current position with the Company, prior positions, the dates when they assumed such positions and other principal business activities performed outside the Company as of June 24, 2010. The Company’s senior management is comprised of all of the directors (excluding outside directors) listed below.

Board of Directors

Masahiro Sakane

Date of Birth:	Jan. 7, 1941
Director Since:	Jun. 1989
Current Positions:	Chairman of the Board and Director (since Jun. 2010)
Prior Positions:
Jun. 2007	Chairman of the Board and Representative Director
Jun. 2003	President, Representative Director and Chief Executive Officer
Jun. 2001	President and Representative Director
Jun. 1999	Executive Vice President and Representative Director
Jun. 1997	Executive Managing Director
Jun. 1994	Managing Director
Jun. 1989	Director
Jun. 1989	General Manager, Business Development Division
Apr. 1963	Joined the Company
Principal Business Activities outside the Company:
	Outside Director of Nomura Holdings, Inc. Outside Director of Tokyo Electron Limited

Kunio Noji*

Date of Birth:	Nov. 17, 1946
Director Since:	Jun. 2001
Current Positions:	President, Representative Director and Chief Executive Officer (since Jun. 2007)
Prior Positions:
Apr. 2003	Director and Senior Executive Officer (Senmu)
Jun. 2001	Managing Director
Jun. 2000	Senior Executive Officer (Joumu)
Jun. 1999	Executive Officer
Jun. 1997	Director
Mar. 1997	General Manager, Information Systems Division
Apr. 1969	Joined the Company
Principal Business Activities outside the Company:
	None

89

Yoshinori Komamura*

Date of Birth:	Feb. 20, 1948
Director Since:	Jun. 2005
Current Positions:	Executive Vice President and Representative Director (since Jun. 2010) President of Construction and Mining Equipment Marketing Division (since Apr. 2005)
Prior Positions:
Apr. 2007	Senior Executive Officer (Senmu)
Jun. 2005	Director
Apr. 2005	Senior Executive Officer (Joumu)
Jun. 1999	President and Representative Director of Komatsu Europe International N.V.
Apr. 1970	Joined the Company
Principal Business Activities outside the Company:
	None

Yasuo Suzuki*

Date of Birth:	Jan. 28, 1948
Director Since:	Jun. 2004
Current Positions:	Director (since Jun. 2004)
	Senior Executive Officer (Senmu) (since Apr. 2007)
	President of Industrial Machinery Division (since Apr. 2009)
	In charge of the Ishikawa Prefecture Area (since Apr. 2004)
Prior Positions:
Apr. 2008	President, Industrial Machinery General Headquarters
Apr. 2004	Senior Executive Officer (Joumu)
Jun. 2002	Executive Officer
Apr. 2002	President, Industry Machinery Division
Apr. 1970	Joined the Company
Principal Business Activities outside the Company:
	Outside Director of Fuji Technica Inc.

90

Kenji Kinoshita*

Date of Birth:	Oct. 7, 1947
Director Since:	Jun. 2007
Current Positions:	Director (since Jun. 2007)
	Chief Financial Officer (“CFO”) (since Jun. 2001)
	Senior Executive Officer (Senmu) (since Apr. 2008)
	Supervising Investor Relations (since Apr. 2010)
Prior Positions:
Apr. 2004	Senior Executive Officer (Joumu)
Jun. 2000	Executive Officer
Jan. 1996	General Manager, Finance and Treasury Dept., Accounting Division
Jul. 1971	Joined the Company
Principal Business Activities outside the Company:
	None

Masao Fuchigami*

Date of Birth:	May 19, 1949
Director Since:	Jun. 2009
Current Positions:	Director (since Jun. 2009)
	Senior Executive Officer (Senmu) (since Apr. 2009)
	Supervising Environment, Research, Design & Development and Quality Assurance (since Apr. 2009)
Prior Positions:
Apr. 2007	Senior Executive Officer (Joumu)
Jun. 2002	President of Research Division
Jun. 2001	Executive Officer
Sep. 1995	General Manager of the 4th Research Dept., Central Research Center, Research Division
Apr. 1972	Joined the Company
Principal Business Activities outside the Company:
	None

Tetsuji Ohashi*

Date of Birth:	Mar. 23, 1954
Director Since:	Jun. 2009
Current Positions:	Director (since Jun. 2009)
	Senior Executive Officer (Joumu) (since Apr. 2008)
	President of Production Division (since Apr. 2007)
	Supervising Production and e-KOMATSU (since Apr. 2007)
Prior Positions:
Apr. 2007	Executive Officer
Oct. 1998	General Manager of Planning & Coordination Dept. of Awazu Plant, Production Division
Apr. 1977	Joined the Company
Principal Business Activities outside the Company:
	None

91

Kensuke Hotta

Date of Birth:	Oct. 12, 1938
Director Since:	Jun. 2008
Current Position:	Outside Director (since Jun. 2008)
Prior Positions (outside the Company):
Dec. 2008	Chairman and Representative Director of Greenhill & Co. Japan Ltd. (current position)
Dec. 2007	Senior Advisor of Morgan Stanley Japan Securities Co., Ltd. (now known as Morgan Stanley MUFG Securities Co., Ltd.)
Oct. 2007	Chairman and Representative Director of Hotta Partners Inc. (current position)
Apr. 2006	Chairman and Representative Director of Morgan Stanley Japan Securities Co., Ltd. (now known as Morgan Stanley MUFG Securities Co., Ltd.)
Jan. 2001	Chairman of Morgan Stanley Japan Limited
Jun. 1997	Deputy President and Representative Director of the Sumitomo Bank, Ltd. (now known as Sumitomo Mitsui Banking Corporation, hereinafter the “Bank”)
Oct. 1992	Senior Managing Director and Representative Director of the Bank
Oct. 1990	Managing Director of the Bank
Jun. 1987	Director of the Bank
Apr. 1962	Joined the Bank
Principal Business Activities outside the Company:
	Chairman and Representative Director of Greenhill & Co. Japan Ltd.
	Chairman and Representative Director of Hotta Partners Inc.
	Outside Corporate Auditor of Mitsui O.S.K. Lines, Ltd.
	Outside Corporate Auditor of SEIREN CO., LTD.

Noriaki Kano

Date of Birth:	Apr. 29, 1940
Director Since:	Jun. 2008
Current Position:	Outside Director (since Jun. 2008)
Prior Positions (outside the Company):
Jun. 2006	Professor Emeritus at Tokyo University of Science (current position)
Oct. 1982	Professor at Faculty of Engineering, Tokyo University of Science
Principal Business Activities outside the Company:
	Professor Emeritus at Tokyo University of Science

92

Kouichi Ikeda

Date of Birth:	Apr. 21, 1940
Director Since:	Jun. 2010
Current Position:	Outside Director (since Jun. 2010)
Prior Positions (outside the Company):
Mar. 2010	Corporate Advisor of Asahi Breweries, Ltd. (current position)
Mar. 2006	Chairman of the Board and Chief Executive Officer of Asahi Brewers, Ltd.
Jan. 2002	President and Chief Operating Officer of Asahi Brewers, Ltd.
Mar. 2001	Senior Managing Director and Senior Managing Executive Officer of Asahi Brewers, Ltd.
Mar. 2000	Senior Managing Executive Officer of Asahi Brewers, Ltd.
Mar. 1999	Senior Managing Director of Asahi Brewers, Ltd.
Mar. 1997	Managing Director of Asahi Brewers, Ltd.
Mar. 1996	Director of Asahi Brewers, Ltd.
Apr. 1963	Joined Asahi Brewers, Ltd.
Principal Business Activities outside the Company:
	None

Corporate Auditors

Masaji Kitamura

Date of Birth:	Aug. 19, 1947
Corporate Auditor Since:	Jun. 2008
Current Positions:	Corporate Auditor (Full Time) (since Jun. 2008)
Prior Positions:
Apr. 2007	Senior Executive Officer (Joumu)
Apr. 2005	President of Construction and Mining Equipment Strategy Division
Apr. 2003	Executive Officer
Jun. 1994	President of Procurement Division of Osaka Plant, Construction Equipment Division
Apr. 1971	Joined the Company
Principal Business Activities outside the Company:
	None

93

Kyoji Torii

Date of Birth:	Sep. 5, 1951
Corporate Auditor Since:	Jun. 2009
Current Positions:	Corporate Auditor (Full Time) (since Jun. 2009)
Prior Positions:
Jun. 2009	Assistant to Corporate Auditor
Jun. 2007	General Manager of Planning & Administration Dept., Defense Systems Division
Jun. 1999	General Manager of Affiliated Companies Dept.
Apr. 1974	Joined the Company
Principal Business Activities outside the Company:
	None

Makoto Okitsu

Date of Birth:	Dec. 2, 1939
Corporate Auditor Since:	Jun. 2006
Current Position:	Outside Corporate Auditor (since Jun. 2006)
Prior Positions (outside the Company):
Jun. 2008	Advisor of Teijin Limited (current position)
Jun. 2006	Chairman and Director of Teijin Limited
Jun. 2005	Chairman and Director of Nabtesco Corporation
	(previously known as Teijin Seiki Co., Ltd.)
Jun. 2005	Chairman and Representative Director of Teijin Limited
Jun. 2004	Director of Teijin Limited
Sep. 2003	President and Representative Director of Nabtesco Corporation
Jun. 1999	Director of Teijin Limited
Jun. 1998	President and Representative Director of Teijin Seiki Co., Ltd.
Jun. 1996	Managing Director of Teijin Seiki Co., Ltd.
Jun. 1994	Director of Teijin Seiki Co., Ltd.
Apr. 1963	Joined Teijin Limited
Principal Business Activities outside the Company:
	Advisor to Teijin Limited

94

Hiroyuki Kamano

Date of Birth:	Jul. 21, 1945
Corporate Auditor Since:	Jun. 2007
Current Position:	Outside Corporate Auditor (since Jun. 2007)
Prior Positions (outside the Company):
Oct. 1988	Partner of the Kamano Sogo Law Offices
Apr. 1981	Registered as attorney-at-law (bengoshi)
Dec. 1978	Retired from the Ministry of Foreign Affairs
Apr. 1971	Entered the Ministry of Foreign Affairs
Principal Business Activities outside the Company:
	Partner (attorney-at-law) of Kamano Sogo Law Offices Outside Director of Sumitomo Life Insurance Company

Kunihiro Matsuo

Date of Birth:	Sep. 13, 1942
Corporate Auditor Since:	Jun. 2009
Current Position:	Outside Corporate Auditor (since Jun. 2009)
Prior Positions (outside the Company):
Sep. 2006	Registered as attorney-at-law (bengoshi)
Jun. 2006	Retired from the position of Prosecutor-General of Supreme Public Prosecutors Office
Jun. 2004	Prosecutor- General of Supreme Public Prosecutors Office
Sep. 2003	Superintending Prosecutor of Tokyo High Public Prosecutors Office
May 1998	Prosecutor of Supreme Public Prosecutors Office
Apr. 1988	Counsellor of Minister’s Secretariat, Ministry of Justice
Apr. 1968	Appointed as Prosecutor of Tokyo District Public Prosecutors Office
Principal Business Activities outside the Company:
	Attorney-at-Law
	Outside Director of Asahi Glass Co., Ltd.
	Outside Director of Tokyo Stock Exchange Group, Inc.
	Outside Corporate Auditor of Toyota Motor Corporation
	Outside Corporate Auditor of Mitsui & Co., Ltd.
	Outside Corporate Auditor of Sompo Japan Insurance Inc.

95

Notes:

1)	Directors Kensuke Hotta, Noriaki Kano and Kouichi Ikeda satisfy the requirements for outside director set forth in Article 2, Item 15 of the Corporation Act of Japan.
2)	Corporate auditors Makoto Okitsu, Hiroyuki Kamano and Kunihiro Matsuo satisfy the requirements for outside corporate auditors set forth in Article 2, Item 16 of the Corporation Act of Japan.
3)	The Company determined that Directors Kensuke Hotta, Noriaki Kano and Kouichi Ikeda satisfy the definition of Independent Director and Corporate Auditors Makoto Okitsu, Hiroyuki Kamano and Kunihiro Matsuo satisfy the definition of Independent Corporate Auditor as set forth by the Tokyo Stock Exchange and the Osaka Stock Exchange, and have notified each such Exchanges of such designation.
4)	The Company introduced an executive officer system in June 1999. As of June 24, 2010, the Company has 31 officers including 6 persons simultaneously holding the position of director. Such persons have been marked with an asterisk in the above table.
5)	There are no family relationships between any of the directors or corporate auditors of the Company.
6)	There are no arrangements or understandings with major shareholders, customers, suppliers or others, pursuant to which any of the directors or corporate auditors of the Company were selected as a director or member of senior management.

Corporate Governance

Basic Stance on Corporate Governance

To become a company which enjoys an ever larger trust of all stakeholders by maximizing its corporate value, Komatsu is working to strengthen corporate governance, improve management efficiency, advocate corporate ethics and ensure sound management on a group-wide basis. To further improve transparency of the management to shareholders and investors, Komatsu discloses information in a fair and timely manner and actively engages in investor relations activities by holding meetings in Japan and abroad to explain business results.

Current State of Progress Concerning Corporate Governance

Current Conditions Concerning Management Organizations Relating to Decision-Making, Execution and Supervisory and Other Corporate Governance Functions

a. Organizational Framework

In 1999, Komatsu introduced the executive officer system and has since worked to separate management decision-making and supervisory functions within the confines of the law. At the same time, in addition to having reduced the number of members of the Board of Directors of the Company and appointed outside directors and corporate auditors, the Company has been implementing operational reforms of its Board of Directors through which Board members can discuss important management issues thoroughly and make decisions promptly in order to enhance the effectiveness of the Board of Directors.

96

The Company’s Board of Directors meets every month, discusses and adopts resolutions concerning important matters and determines management policies of Komatsu. The Company’s Board of Directors also closely supervises and monitors the performance of management duties by representative and other directors. Three outside directors, each of whom satisfy the requirements for independence as set forth under the listed company rules of the Tokyo Stock Exchange and the Osaka Securities Exchange, have been appointed to the Company’s Board of Directors (which consisted of ten persons as of March 31, 2010) to enhance management transparency and objectivity.

With respect to corporate auditors (which consisted of five persons as of March 31, 2010), Komatsu has consistently made sure that at least half of them are outside corporate auditors. Currently, all three outside corporate auditors also satisfy the requirements for independence as set forth under the listed company rules of the Tokyo Stock Exchange and the Osaka Securities Exchange. Each corporate auditor attends the Company’s Board of Directors meetings and other important meetings and audits the performance of duties by directors. The Board of Corporate Auditors of the Company performs such audit functions by meeting every month, determines audit policies, establishes scope of responsibilities and accountability and receives periodic status update reports from the directors as to the performance of his or her management duties. The Company has established the Office of Auditors’ Staff and assigned 5 employees who work as full-time and part-time assistants to the corporate auditors.

b. Support for Outside Directors (and Outside Corporate Auditors)

As a general rule, the Company provides the outside directors (and the outside corporate auditors) with the materials for Board meetings beforehand to ensure sufficient time for review. Concerning particularly important resolution matters, the Board of Directors discusses them in the Board meeting prior to the Board meeting where the concerned matters are scheduled for resolution. In this manner, the Company ensures that the directors will have sufficient time to review the matters before they resolve them and that they will be able to utilize the matters, which were pointed out during the earlier discussion, as proposals for review when resolving the concerned matters.

c. Collaboration between Corporate Auditors and Independent Public Accounting Firm

When making audit plans, corporate auditors exchange opinions with the contracted independent public accounting firm concerning audit policies, audit items focused upon and audit approaches in order to accomplish effective and efficient auditing. Corporate auditors also observe the independent public accounting firm when the firm audits Komatsu’s business bases, affiliated companies and other related entities. Corporate Auditors and the independent public accounting firm also hold meetings to exchange audit information as needed during a given fiscal year, thus improving mutual collaboration and engaging in expeditious auditing. In addition, Corporate Auditors receive review reports from the independent public accounting firm at the end of the first, second and third quarter and check important matters at the end of the second quarter and fiscal year-end. Furthermore, corporate auditors evaluate the methods and results of the independent public accounting firm by hearing their audit summary and receiving their audit report.

97

When the Board of Corporate Auditors approves of audit and non-audit work by the accounting firm, the Board defines the policies, procedures and other related matters and conducts preliminary reviews of individual procedures in order to maintain the independence of the accounting firm from Komatsu.

d. Collaboration between Corporate Auditors and the Internal Audit Department

The Internal Audit Department, in cooperation with other related departments, regularly audits business bases and affiliated companies both in Japan and overseas, evaluates the effectiveness of their internal control, reinforces their risk management and work to prevent frauds and errors. Corporate auditors observe audits by the Internal Audit Department, form their own audit opinions, and give advice and recommendations to the Internal Audit Department.

In addition to reporting the audit results above to the Board of Corporate Auditors, the Internal Audit Department maintains close and substantive collaborations with corporate auditors, for example, by providing information on a routine basis. There are 23 employees in the Internal Audit Department.

e. Collaboration between the Internal Audit Department and Independent Public Accounting Firm

In assessing the effectiveness of internal control, Internal Audit Department and independent public accounting firm collaborate as needed by exchanging opinions and sharing information.

In order to ensure that each Outside Director and Outside Corporate Auditor can fully play the expected role and that the Company can invite best qualified people in the future, the Company has entered into limited liability agreements that limit the liability of the Outside Corporate Auditors in the event of dereliction of duty in accordance with Article 427, Paragraph 1 of the Corporation Act. The limit on liability provided in said agreement shall be as prescribed by laws and regulations.

Komatsu has entered into an audit contract with KPMG AZSA & Co. and receives audit services for its accounts in connection with both non-consolidated and consolidated financial statements. Komatsu has also entered into consultation contracts with a number of law firms, receiving advice on important legal issues as needed, in an effort to reduce its legal risk.

98

In 1995, Komatsu established the International Advisory Board (“IAB”) to obtain objective advice and suggestions concerning Komatsu as a global company from internationally leading figures. IAB meets twice a year to exchange opinions on various matters.

B. Compensation

In an effort to maintain an objective and transparent remuneration system, the policy and levels of remuneration for Directors and Corporate Auditors of the Company are deliberated by the Compensation Advisory Committee, which consists of four external members (two Outside Corporate Auditors, one Outside Director and one outside expert) and one internal member. Taking its recommendations into consideration, the remuneration for Directors is determined by the Board of Directors and the remuneration for Corporate Auditors is determined by discussions amongst the Corporate Auditors. Such remuneration for Directors and Corporate Auditors must be within the aggregate remuneration limits approved at a meeting of the shareholders. After such remuneration for Directors and Corporate Auditors are determined by the Board of Directors and Corporate Auditors, respectively, the determined remuneration is subject to approval at the general meeting of shareholders in accordance with the Corporation Act of Japan.

With regards to remuneration levels, comparison of other key, globally active manufacturers in Japan is made by the Compensation Advisory Committee and is reflected in its recommendations.

The remuneration for Directors is composed of a fixed, monthly remuneration and a variable remuneration linked to Komatsu’s consolidated performance and stock price fluctuations. The variable remuneration consists of the annual bonus, reflecting business results, and stock options, granted to give Directors the same perspective on earnings as shareholders, both of which have the purpose of motivating the Directors to manage the Company with the goal of enhancing corporate value.

Taking the recommendations of the Compensation Advisory Committee into consideration, at a meeting of the Board of Directors held on April 27, 2010, the Board of Directors approved the following revisions and parameters to the Company’s variable remuneration system for Directors. The variable remuneration for Directors is linked to Komatsu’s consolidated performance as measured by Komatsu’s consolidated return-on-equity and return-on-asset performance indicators, subject to certain adjustment indicators for growth and segment profit margins as set forth in further detail in the below table. The variable remuneration can range from 0% up to a maximum of 60% of the total annual remuneration paid to Directors. Two-thirds of the total amount of the variable remuneration is expected to be paid out in the form of cash bonuses, and the remaining one-third in the form of stock-based remuneration. In the event that the variable remuneration is 0%, only the fixed, monthly remuneration will be paid out to Directors.

99

	Indicator	Ratio
Basic Indicators	Consolidated ROE (Net income attributable to Komatsu Ltd. divided by Komatsu Ltd. shareholders’ equity)		70	%
	Consolidated ROA (Income before income taxes and equity in earnings of affiliated companies divided by total assets)		30	%
Adjustment Indicators	Adjustment according to growth rate of consolidated sales and profit margin of segment		—

The remuneration for Corporate Auditors only consists of a fixed, monthly remuneration. This remuneration arrangement is designed to support their independent position, with authority to audit the execution of duties by the Directors and without being influenced by changes in the corporate performance of the Company.

The aggregate compensation, including bonuses and stock options, paid by the Company for the fiscal year ended March 31, 2010 to all directors and corporate auditors for services in all capacities, was ¥723 million. The breakdown of the compensation is set forth below.

				Amount of
	Number of			Remuneration paid
Remuneration	Persons Paid			(Millions of Yen)			Reference
Directors		12			613		Including bonuses and stock options
(Outside Directors included above)		(3	)		(67	)
Corporate Auditors		7			110		—
(Outside Corporate Auditors included above)		(4	)		(40	)
Total		19		¥	723		—
(Outside Directors and Outside Corporate Auditors included above)		(7	)	¥	(107	)

Below are the names, titles and amounts of remuneration paid to persons by the Company whose remuneration (including bonuses and stock options) equaled or exceeded ¥100 million for the fiscal year ended March 31, 2010.

(Millions of Yen)

							Non-Monetary
	Monetary Remuneration						Remuneration, Etc.		Total Amount of
Name and Title	Salary		Bonus		Total		Stock Options		Remuneration Paid
Masahiro Sakane, Chairman of the Board and Director		79		13		92		28		120
Kunio Noji, President Representative Director and Chief Executive Officer		86		14		101		28		129

100

Notes:

1)	The remuneration value for Stock Options included in the “Total Amount of Remuneration Paid” is the amount that has been recorded by the Company from an accounting perspective as “Non-Monetary Compensation, etc.” for the fiscal year ended March 31, 2010. More specifically, each of the above persons have been granted the right to subscribe for or purchase 44,000 shares of common stock of the Company (at an exercise price per share of ¥1,729). In accordance with the Accounting Standards Board of Japan Statement No. 8 Accounting Standard for Share-based Payment, the remuneration value for Stock Options that has been recorded by the Company from an accounting perspective for the fiscal year ended March 31, 2010 has been calculated by multiplying the fair value per share (¥643 per share) as of the grant date (September 1, 2009) by the number of shares granted.
2)	The retirement allowance system for directors and corporate auditors has been abolished as of June 2007.
3)	The figures in the above table have been rounded to the nearest Yen one million. Accordingly, the amounts do not necessarily add up to figures provided under “Monetary Remuneration — Total” or “Total Amount of Remuneration Paid.”

Bonuses

Bonuses to be received by the directors are determined by a resolution adopted at the ordinary general meeting of shareholders of the Company held in June of each year. Bonuses so paid are not deductible by the Company for tax purposes, and are reported for financial reporting purposes under selling, general and administrative expenses as a charge against income for the fiscal year in which they are paid. The Company does not grant bonuses to corporate auditors.

Retirement Allowance

At the ordinary general meeting of shareholders held on June 22, 2007, a resolution was passed to abolish the retirement benefit system for directors and corporate auditors and to pay each director and corporate auditor the amount of retirement benefits for the period of service up to June 22, 2007 at the time of their respective retirement. Accordingly, Komatsu did not make any provision for retirement allowance for the fiscal year ended March 31, 2010 and will not make any provision for retirement allowance in the future.

Stock Options

Komatsu has stock option plans for (1) directors of the Company and (2) certain employees of the Company and directors of major subsidiaries of the Company. Under these plans, the Company may grant rights to subscribe for or purchase shares of common stock of the Company (“Stock Acquisition Rights”) upon approval by shareholders at the ordinary general meeting of shareholders. The Company does not grant Stock Acquisition Rights to corporate auditors.

101

At the 138th ordinary general meeting of shareholders held on June 22, 2007, the shareholders approved the establishment of the maximum limit of ¥360 million for the yearly remuneration for directors of the Company in the form of stock options (of which no more than ¥50 million is allocated for outside directors). Within this maximum limit, the Company may issue Stock Acquisition Rights as stock options upon resolution of the Board of Directors. The maximum number of Stock Acquisition Rights to be issued on a date within one year from the day of the ordinary general meeting of shareholders of the respective fiscal year is 239 units (of which a total number of 33 units is allocated for outside directors). The maximum number of shares of common stock of the Company subject to Stock Acquisition Rights is 239,000 shares (of which 33,000 shares are allocated for outside directors).

During the fiscal year ended March 31, 2010, the Company granted to its Directors 239 Stock Acquisition Rights conferring the right to purchase a total number of 239,000 shares of common stock of the Company. The exercise price for these Stock Acquisition Rights granted as of September 1, 2009 was ¥1,729 per share. These Stock Acquisition Rights are exercisable from September 1, 2010 to August 31, 2017.

At the 141st ordinary general meeting of shareholders held on June 23, 2010, the shareholders approved the establishment of the maximum limit of ¥360 million for the yearly remuneration for directors of the Company in the form of stock options (of which no more than ¥50 million is allocated for outside directors). Within this maximum limit, the Company may issue Stock Acquisition Rights as stock options upon resolution of the Board of Directors. The maximum number of Stock Acquisition Rights to be issued on a date within one year from the day of the ordinary general meeting of shareholders of the respective fiscal year is 2,390 units (of which a total number of 330 units is allocated for outside directors). The maximum number of shares of common stock of the Company subject to Stock Acquisition Rights is 239,000 shares (of which 33,000 shares are allocated for outside directors).

For additional information regarding the stock acquisition rights granted to Directors and certain employees of the Company and Directors of its subsidiaries during the fiscal year ended March 31, 2010, see Item 6.E. “Share Ownership.”

C. Board Practices

All directors and corporate auditors are elected at a general meeting of shareholders. Directors serve a one year term and corporate auditors serve a four year term pursuant to the Company’s Articles of Incorporation. However, a director or a corporate auditor may serve any number of consecutive terms.

102

The Board of Directors elects from its members a certain number of Representative Directors who have the power severally to represent the Company in all matters, and elects a President from the Representative Directors. At its discretion, the Board of Directors may also elect a Chairman from among its members and may grant special titles to one or more directors as it deems necessary. At the present time, the Chairman and the President are Representative Directors.

The corporate auditors of the Company are not required to be, and are not, certified public accountants. Each corporate auditor audits the performance of the directors, and may at any time request the directors to report on the business activities of the Company or investigate the business as well as the financial situation of the Company. Certain powers are provided under the Corporation Act of Japan to enable the corporate auditors to carry out these functions. Further, each corporate auditor continues to perform the function of examining the annual financial documents and the rendering of an opinion thereon for the general meeting of shareholders. The corporate auditors may not at the same time be directors, managers or employees of the Company or of any of its subsidiaries. The Company does not have an audit committee.

For information relating to the period during which each of the Company’s directors and corporate auditors have served in their respective offices, see Item 6.A.

The Company does not have a remuneration committee but does have a Compensation Council that is composed of a majority of external experts as noted in Item 6.A. “Corporate Governance.”

None of the directors have entered into service contracts with the Company or any of its subsidiaries providing for benefits upon termination of employment.

For additional information regarding director compensation, see Item 6.B. “Compensation.”

D. Employees

The following table shows the number of employees of the Company by operating segment as of March 31, 2010, 2009 and 2008.

Number of employees by operating segment

	As of March 31,
	2010			2009			2008
Construction, Mining and Utility Equipment		33,766			34,986			34,549
		(3,926	)		(7,354	)		(7,408	)
Industrial Machinery and Others		4,180			4,340			4,251
		(901	)		(1,395	)		(1,108	)
Corporate		572			529			467
		(113	)		(92	)		(72	)
Total		38,518			39,855			39,267
		(4,940	)		(8,841	)		(8,588	)

103

Notes:

1)	The numbers in parentheses refer to the average number of temporary employees during the relevant fiscal year ended March 31, which are not included in the number of employees.
2)	The number of employees under “Corporate” refers to employees working for administrative departments who cannot be classified into the two operating segments.
3)	The number of employees as of March 31, 2010 decreased by 1,337 as compared to the number as of March 31, 2009. This decrease was due primarily to the reduction of production volume and structural reforms of Komatsu’s production and sales operations.
4)	Starting with the fiscal year ended March 31, 2009, Komatsu reclassified the forklift truck business of Komatsu Utility Co., Ltd. and the businesses of Komatsu Logistics Corp. (both of which were formerly in the Industrial Machinery, Vehicles and Others operating segment) so that such businesses are part of Komatsu’s construction and mining equipment business, and accordingly, changed its operating segments by renaming the Construction and Mining Equipment operating segment as the Construction, Mining and Utility Equipment operating segment and the Industrial Machinery, Vehicles and Others operating segment as the Industrial Machinery and Others operating segment. As a result of this reclassification, the numbers for the fiscal years ended March 31, 2008 in the above table have been retrospectively reclassified using the new operating segments.

The Company has a labor contract with the Komatsu Labor Union covering conditions of employment. This contract, which provides that all employees except management and certain other enumerated personnel must become union members, has been renegotiated every two years and its present term runs until September 2010. The employees of the Company’s principal Japanese subsidiaries are covered by separate labor contracts between such subsidiaries and the unions representing their employees. These contracts contain provisions generally similar to those contained in the Company’s contract with the Komatsu Labor Union. Certain overseas employees of the Company and subsidiaries are also covered by labor contracts between their employer and unions in the relevant locale representing the employees.

Management and the Komatsu Labor Union have negotiations and meetings on a regular basis in order to discuss various issues and share concerns relating to the financial condition of Komatsu. The Company believes that management has a good relationship with the Komatsu Labor Union.

104

E. Share Ownership

The following table sets forth the number of shares owned by the directors and corporate auditors of the Company as of May 31, 2010.

		Number of
		shares held
Name	Position	(in thousands)
Masahiro Sakane	Chairman of the Board, Director		102
Kunio Noji	President, Representative Director		73
Yoshinori Komamura	Executive Vice President, Representative Director		28
Yasuo Suzuki	Director		24
Kenji Kinoshita	Director		36
Masao Fuchigami	Director		15
Tetsuji Ohashi	Director		20
Kensuke Hotta	Director		1
Noriaki Kano	Director		6
Kouichi Ikeda	Director		—
Masaji Kitamura	Corporate Auditor (Full time)		10
Kyoji Torii	Corporate Auditor (Full time)		17
Makoto Okitsu	Corporate Auditor		—
Hiroyuki Kamano	Corporate Auditor		3
Kunihiro Matsuo	Corporate Auditor		—
Total			338

Note: The number of shares for each director and corporate auditor are rounded down. Accordingly, the sum of the amounts indicated in the “Number of shares held (in thousands)” column may not add up to the figure provided as the “Total.”

The following table sets forth the number of Stock Acquisition Rights granted by the Company to Masahiro Sakane and Kunio Noji for the execution of their respective duties as of March 31, 2010.

		Number of Stock	Exercise Price
Name	Grant Date	Acquisition Rights	(Yen per Share)		Expiration Date
Masahiro Sakane	08/01/2006	64		2,325	07/31/2014
	09/03/2007	44		3,661	08/31/2015
	09/01/2008	34		2,499	08/31/2016
	09/01/2009	44		1,729	08/31/2017
Kunio Noji	08/01/2006	37		2,325	07/31/2014
	09/03/2007	44		3,661	08/31/2015
	09/01/2008	34		2,499	08/31/2016
	09/01/2009	44		1,729	08/31/2017

Note: Stock Acquisition Rights grant the right to subscribe for or purchase shares of common stock of the Company. The number of shares of common stock that can be subscribed for or purchased with one Stock Acquisition Right is 1,000 shares.

105

Each of the directors and corporate auditors owns less than one percent of the issued and outstanding shares of common stock of the Company. The number of shares listed above does not include options that are exercisable for shares of the Company’s common stock. Directors and corporate auditors are entitled to voting rights that do not differ in any respect from voting rights granted to other shareholders of the common stock of the Company.

As noted in Item 6.B. “Compensation,” during the fiscal year ended March 31, 2010, directors of the Company were granted 239 Stock Acquisition Rights (conferring the right to purchase a total number of 239,000 shares of common stock of the Company), and the exercise price for these Stock Acquisition Rights granted as of September 1, 2009 was ¥1,729 per share. These Stock Acquisition Rights are exercisable from September 1, 2010 to August 31, 2017.

Pursuant to approval by the shareholders at the ordinary general meeting of shareholders, certain employees of the Company and directors of major subsidiaries of the Company were granted in the aggregate 403 Stock Acquisition Rights (conferring the right to purchase a total number of 403,000 shares of common stock of the Company) during the fiscal year ended March 31, 2010. The exercise price for these Stock Acquisition Rights granted as of September 1, 2009 was ¥1,729 per share. These Stock Acquisition Rights are exercisable from September 1, 2010 to August 31, 2017.

At the 141st ordinary general meeting of shareholders held on June 23, 2010, it was approved that the Company grant no more than 558 Stock Acquisition Rights (conferring the right to purchase a total number of 55,800 shares of common stock of the Company) as stock options to employees of the Company and directors of major subsidiaries of the Company. At such ordinary general meeting of shareholders, the Company’s Board of Directors was given the authority to issue such Stock Acquisition Rights as stock options to employees of the Company and directors of major subsidiaries of the Company as it deems appropriate.

106

Item 7. Major Shareholders and Related Party Transactions

A. Major Shareholders

The following table shows the number of the Company’s shares held by the 10 major shareholders of the Company and their ownership percentage as of March 31, 2010.

Major Shareholders as of March 31, 2010

	Number of Shares Held		Percentage
Name of Major Shareholders	(in thousands)		(%)
Japan Trustee Services Bank, Ltd. (Trust Account)		51,931		5.19
Taiyo Life Insurance Company		42,000		4.20
The Master Trust Bank of Japan, Ltd. (Trust Account)		39,468		3.95
Nippon Life Insurance Co.		33,283		3.33
JPMorgan Chase Bank 380055		23,344		2.33
State Street Bank and Trust Company		22,950		2.29
CBNY-IVY Funds Inc Asset Strategy Fund		20,661		2.06
Sumitomo Mitsui Banking Corporation		17,835		1.78
The Bank of New York Mellon as Depositary Bank for Depositary Receipt Holders		16,818		1.68
NIPPONKOA Insurance Co., Ltd.		13,962		1.39
Total of Top 10 Shareholders		282,255		28.26

Notes:

1)	The figures for each shareholder are rounded. Accordingly, the sum of the amounts indicated in each column does not necessarily add up to the figures provided as “Total of Top 10 Shareholders.”
2)	30,157 thousand shares of treasury stock held by the Company are excluded from the Major Shareholders list above.
3)	Shares held by the Japan Trustee Services Bank, Ltd. and The Master Trust Bank of Japan, Ltd. are held through trusts.

To the best knowledge of the Company, no significant change has occurred in the ownership percentage of the major shareholders listed above during the past three years except for the following changes in ownership as of March 31, 2010 as compared to March 31, 2009: (1) the increase of State Street Bank and Trust Company’s ownership percentage to 2.29% from 0.87%, CBNY-IVY Funds Inc Asset Strategy Fund’s ownership percentage to 2.06% from 0.0%, and (2) the decrease of Japan Trustee Services Bank, Ltd. (Trust Account 4G)’s ownership percentage to 0.0% from 4.91%, Japan Trustee Services Bank, Ltd. (Trust Account) ’s ownership percentage to 5.19% from 6.29%, The Master Trust Bank of Japan, Ltd. (Trust Account) ’s ownership percentage to 3.95% from 5.17%.

The Company’s major shareholders are not entitled to any voting rights that are not provided to the other shareholders.

As of March 31, 2010, 19.4% of the shares of common stock issued (998,744,060 shares) were held of record by 212 residents of the United States.

To the best knowledge of the Company, the Company is not, directly or indirectly, controlled by another corporation or another entity, by the Government of Japan or by any foreign government, nor does any person own more than 10% of the Company’s common stock.

There are no arrangements that are known to the Company the operation of which may at a subsequent date result in a change in control of the Company.

107

B. Related Party Transactions

In the ordinary course of business, Komatsu purchases and sells materials, supplies and services from and to its affiliates accounted for by the equity method. Komatsu regularly has trade accounts and other receivables payable by, and accounts payable to, its affiliates accounted for by the equity method. Furthermore, Komatsu has made loans to or received borrowings from its affiliates accounted for by the equity method for the fiscal year ended March 31, 2010. Komatsu believes all of these transactions with, and loans to and borrowings from, its affiliates accounted for by the equity method to be arms-length transactions. In addition, Komatsu does not consider the amounts of these transactions with, or loans to or borrowings from, its affiliates accounted for by the equity method to be material to its business.

For additional information, see Note 8 to the Consolidated Financial Statements included elsewhere in this report.

C. Interests of Experts and Counsel

Not applicable.

Item 8. Financial Information

A. Consolidated Statements and Other Financial Information

See the Consolidated Financial Statements and Notes to the Consolidated Financial Statements included in the Company’s Financial Report to Shareholders for the fiscal year ended March 31, 2010 attached hereto.

Legal Proceedings

Komatsu is involved in certain legal actions and claims arising out of the ordinary course of its business. It is the opinion of Komatsu’s management and its legal counsel that such litigation and claims will be resolved without any material effect on Komatsu’s financial position or profitability.

Dividend Policy

The Company makes effort to provide steady dividend payments, taking into consideration the consolidated business results in determining the amount of profit to redistribute. The Company’s goal is to provide a consolidated dividend payout ratio of 20% or higher and the Company maintains a policy of not decreasing dividends as long as the consolidated payout ratio does not surpass 40%. The Company distributes dividends twice a year (i.e., year-end dividends and interim dividends). The resolutions for the distributions of year-end dividends and of interim dividends are adopted at the ordinary general meeting of shareholders and at the meeting of the Board of Directors. For the fiscal year ended March 31, 2010, the Company set interim dividends of ¥8.0 per share, and year-end dividends of ¥8.0 per share, for a total annual per share dividend of ¥16.0.

108

Any retained earnings will be used to expand Komatsu’s business and to strengthen its business bases by making effective investments to further globalize its operations and to develop and introduce new products using the technologies in which Komatsu enjoys technological advantages.

The Company may distribute interim dividends pursuant to Article 454, Paragraph 5 of the Corporation Act of Japan. Under the Articles of Incorporation of the Company, the Company may distribute interim dividends upon adoption of resolutions by the Board of Directors. The record date for interim dividends is September 30 of each year.

B. Significant Changes

No significant change has occurred since the date of the Company’s annual financial statements.

Item 9. The Offer and Listing

A. Offer and Listing Details

The shares of common stock of the Company have been listed on the Tokyo Stock Exchange (“TSE”) and the Osaka Stock Exchange in Japan since May 1949.

In the United States, the Company’s American Depositary Shares (“ADSs”) are traded over-the-counter in the form of ADRs and are issued and exchanged by The Bank of New York Mellon in New York as the depositary. The Bank of New York Mellon replaced Citibank, N.A. as depositary on September 29, 2008. During the fiscal year ended March 31, 2010, the Company changed the ratio of its ADSs. Prior to February 16, 2010, each ADS represented four shares of the Company’s common stock. On and after February 16, 2010, each ADS represents one share of the Company’s common stock.

As of March 31, 2010, 968,039,976 shares were outstanding out of a total of 998,744,060 shares of common stock issued. This incorporates 16,818,060 ADSs (equivalent to 16,818,060 shares of common stock when using the current ratio of one ADS representing one common stock, or approximately 1.7% of the total number of shares of common stock outstanding) held by 18 registered ADR holders.

109

The following table sets forth the reported high and low sales prices of the Company’s stock on the TSE and the reported high and low sales prices of ADSs for the periods indicated.

	TSE				ADS
	(Japanese Yen)				(U.S. dollars)
Period	High		Low		High		Low
Annual highs and lows
The fiscal year ended March 31, 2006		2,255		715		19.06		6.72
The fiscal year ended March 31, 2007		2,870		1,857		23.80		16.60
The fiscal year ended March 31, 2008		4,090		2,175		34.68		20.68
The fiscal year ended March 31, 2009		3,440		702		32.62		8.18
The fiscal year ended March 31, 2010		2,099		1,090		22.93		11.25
Quarterly highs and lows
The fiscal year ended March 31, 2009
1st quarter		3,440		2,600		32.62		26.06
2nd quarter		3,050		1,603		28.31		15.00
3rd quarter		1,730		702		15.87		8.18
4th quarter		1,323		897		13.89		9.60
The fiscal year ended March 31, 2010
1st quarter		1,621		1,090		16.57		11.25
2nd quarter		1,808		1,286		20.00		14.01
3rd quarter		1,962		1,565		21.45		17.43
4th quarter		2,099		1,683		22.93		19.13
Monthly highs and lows
December 2009		1,962		1,691		21.45		20.01
January 2010		2,099		1,778		22.93		19.93
February 2010		1,862		1,683		21.00		19.13
March 2010		1,989		1,765		21.75		19.85
April 2010		2,023		1,801		21.53		19.25
May 2010		1,851		1,588		20.60		17.50

Note: During the fiscal year ended March 31, 2010, the Company changed the ratio of common stock represented by ADSs. Prior to February 16, 2010, each ADS represented four shares of the Company’s common stock. On and after February 16, 2010, each ADS represents one share of the Company’s common stock. The high and low sales prices set forth in the above table prior to March 2010 have been revised by dividing the actual sales price that were reported using the ratio of one ADS to four common stock (the ratio that was in effect prior to March 2010) by four.

110

B. Plan of Distribution

Not applicable.

C. Markets

See Item 9.A. “Offer and listing details.”

D. Selling Shareholders

Not applicable.

E. Dilution

Not applicable.

F. Expenses of the Issue

Not applicable.

Item 10. Additional Information

A. Share Capital

Not applicable.

B. Memorandum and Articles of Association

I. Organization and Registration

The Company is a joint stock corporation (kabushiki kaisha) incorporated in Japan under the Corporation Act of Japan. It is registered in the Commercial Register (Shogyo Tokibo) maintained by the Minato Branch Office of Tokyo Legal Affairs Bureau, which has the jurisdiction over the district in which the Company’s head office is currently located.

111

II. Objectives and Purposes

The objectives and purposes of the Company, provided in Article 2 of the Company’s Articles of Incorporation, is to engage in the following businesses:

1.	Manufacture, repair, sale and purchase of construction machinery, agricultural machinery, industrial machinery, automobiles, internal combustion engines and various types of other machinery and equipment and parts thereof.
2.	Manufacture, sale and purchase of various iron and steel goods.
3.	Smelting, processing, sale and purchase of various types of iron and steel, pig-iron, ferroalloys and other special metals.
4.	Manufacture, sale and purchase of various types of electric materials and equipment.
5.	Manufacture, sale and purchase of various synthetic resin products.
6.	Manufacture, repair, sale and purchase of various armaments and parts thereof.
7.	Mining industry, and sale and purchase of minerals.
8.	Designing, executing, supervising and contracting various types of civil engineering and construction work for plants, dwelling house, and other structures.
9.	Sale and purchase of lumber, processed lumber products and various types of civil engineering and construction materials, machinery and equipment.
10.	Sale, purchase and lease of real property.
11.	Manufacture, sale and repair of industrial waste and general waste treatment devices.
12.	Collection, transportation, treatment and recycling of industrial waste and general waste, sale of such recycled products, and consulting on these matters.
13.	Development, creation, sales and consulting on computer software and computer systems.
14.	Electronic commerce using networks such as the internet.
15.	Information processing and information providing service.
16.	Financing services.
17.	All business incidental to each and every one of the preceding items.
18.	Investing in other companies or promoting the organization of other companies.

The objectives and purposes of other companies in which the Company may invest may not necessarily be restricted by the objectives and purposes of the Company.

112

III. Directors

The Corporation Act of Japan provides that the Directors must refrain from engaging in any business competing with the Company (Art. 356, Paragraph 1, Item 1) or effecting a transaction involving a conflict of interest (Art. 356, Paragraph 1, Items 2 and 3) unless approved by the Board of Directors (Art. 365, Paragraph 1, Art. 356, Paragraph 1). It also provides that any Director who has a material interest in the subject matter of a resolution to be taken by the Board of Directors cannot vote in such resolution (Art. 369, Paragraph 2). Neither the Articles of Incorporation nor the Regulations of the Board of Directors of the Company have any additional provisions regarding a Director’s power to vote on a proposal, arrangement or contract in which the Director is materially interested. The Corporation Act of Japan does not have an explicit provision concerning a director’s obligation not to use the corporation’s opportunity for his or her personal benefit or for the benefit of a third party, although such a conduct may be restricted by the duty of faithfulness (Art. 355).

With respect to directors’ compensation, the Corporation Act of Japan requires that, unless otherwise specified in the Articles of Incorporation (which specification does not exist in the case of the Company), the amount (if a fixed amount is payable), the calculation method (if the amount is unfixed) or the substance (in the case of non-cash benefits) of directors’ compensation shall be determined at a general meeting of shareholders (Art. 361, Paragraph 1). The Board of Directors of the Company may determine the other details of their compensation in accordance with what are determined by a general meeting of shareholders as above.

The Corporation Act of Japan provides that the incurrence by a company of a significant amount of borrowings from a third party needs approval of the company’s board of directors (Art. 362, Paragraph 4, Item 2). The Company’s Regulations of the Board of Directors contain corresponding provisions. (The Articles of Incorporation of the Company have no specific provisions as to a borrowing power exercisable by the directors.) There is no mandatory retirement age for Directors under the Corporation Act of Japan, the Articles of Incorporation or the Regulations of the Board of Directors of the Company. There is no requirement concerning the number of shares an individual must hold in order to qualify as a Director of the Company under the Corporation Act of Japan, the Articles of Incorporation nor the Regulations of the Board of Directors of the Company.

IV. Common Stock

Set forth below is information relating to the Company’s shares of common stock, including brief summaries of the relevant provisions of its Articles of Incorporation and Share Handling Regulations, as currently in effect, and of the Corporation Act of Japan and related legislation.

113

General

The Company’s authorized share capital is 3,955,000,000 shares, of which 998,744,060 shares were issued as of May 31, 2010. Under the Corporation Act of Japan and the Law Concerning Book-Entry Transfer of Corporate Bonds, Stocks and Other Securities (including regulations promulgated thereunder; the “Book-Entry Law”), the listed companies issue no share certificates and any share certificates of such companies are invalid after January 5, 2009, though the holder of the share certificates may have applied for registration through certain procedure until January 5, 2010. Shares of such companies must be registered, and are transferable by an agreement between the transferor and the transferee but such transfer may not be asserted against a third party without its registration. In order to assert shareholders’ rights against the Company, a shareholder must have its name and address registered on the shareholder register under the Corporation Act of Japan and the Book-Entry Law, in accordance with the Company’s Share Handling Regulations.

A holder of shares must register its shares in the transfer account of the Japan Securities Depository Center, Inc. (hereinafter referred to as “JASDEC”) or the account management institutions of the securities companies, etc. at which shareholders have established transfer accounts (hereinafter referred to as the “Securities Companies”). Modification of entries in the shareholders’ register shall be generally made through notifications from JASDEC, including notifications and the like for all shareholder information (excluding such notices as set forth in Art. 154, Paragraph 3 of the Book-Entry Law). A shareholder shall place his/her name and address etc. on file through Securities Companies and JASDEC, as prescribed by JASDEC. If a shareholder resides in a foreign country, he/she or his/her statutory agent shall appoint a standing proxy in Japan or specify a place in Japan to receive notices, and shall place the name or title and address of the standing proxy and the place to receive notice on file through Securities Companies and JASDEC, as prescribed by JASDEC.

When a shareholder makes any request or exercises any other shareholders’ right, he/she shall attach or provide items attesting that he/she made the request by himself/herself. Provided, however, that this shall not apply when it can be verified by the Company that the request was made by the shareholder himself/herself.

The registered holder of deposited shares underlying the ADSs is the depositary for the ADSs. Accordingly, holders of ADSs will not be able to directly assert shareholders’ rights.

114

Rights of Shareholders

•Dividends from Surplus

Under the Corporation Act of Japan, a joint stock corporation can make distribution of dividends from surplus to its shareholders (or pledgees) by the resolution of its shareholders’ meeting anytime. Under the Company’s Articles of Incorporation, it is only stipulated that the record date of year-end dividends shall be March 31 of each year, but it does not prevent the Company from making distribution of dividends from surplus based on other record dates. In addition, under the Corporation Act of Japan, a joint stock corporation can stipulate in its Articles of Incorporation, that it may distribute interim dividends to its shareholders (or pledgees) once per business year by resolution of its Board of Directors. Under the Company’s Articles of Incorporation, the Company may, by resolution of the Board of Directors, distribute interim dividends, on the record date of which is September 30 in each year. Furthermore, under the Corporation Act of Japan, the Company can stipulate that if the length of term of office of its directors is not longer than one (1) year, it can stipulate that it can basically (i.e., other than the cases where its non-consolidated annual financial statements and certain documents relating to the latest fiscal year do not present fairly its assets and profit or loss, as required by ordinances of the Ministry of Justice) make distribution of dividends from surplus to its shareholders (or pledgees) by the resolution of its Board of Directors in its Articles of Incorporation. The Company has not stipulated such clauses in its Articles of Incorporation.

Dividends from surplus will usually be distributed in cash, but it can be distributed in kind under the Corporation Act of Japan. If a distribution of dividend from surplus is to be made in kind, the Company may, pursuant to a resolution of a general meeting of shareholders or the Board of Directors which determines to make the distribution, grant rights to its shareholders to require the Company to make such distribution in cash instead of in kind to shareholders. If no such rights are granted to shareholders, the relevant dividends from surplus must be approved by a special resolution of a general meeting of shareholders.

The Corporation Act of Japan requires that, until the aggregate amount of the Company’s legal reserve and additional paid-in capital is at least one-quarter of its stated capital, it set aside in its legal reserve and/or additional paid-in capital an amount equal to at least one-tenth of the amount of the dividends of surplus distributed.

The distributable amount of surplus is calculated by making some adjustments to the amount of surplus.

Under the Corporation Act of Japan, the amount of surplus is calculated by the following formula:

(1) base amount + (2) additional amount - (3) subtractive amount, where

(1) the total amount of other capital surplus and other retained earnings as of the end of the last business year.

(2) (a) the amount of the consideration for treasury stock disposed of after the end of the last business year less the book value thereof;

115

(b)	the amount of reduction of stated capital made after the end of the last business year less the portion thereof that has been transferred to additional paid-in capital or legal reserve (if any);
(c)	the amount of reduction of additional paid-in capital or legal reserve made after the end of the last business year less the portion thereof that has been transferred to stated capital (if any).

(3) (a) the book value of treasury stock cancelled after the end of the last business year;

(b)	the total book value of surplus reduced by the distribution of dividends from surplus made after the end of the last business year;
(c)	other amounts set forth in ordinances of the Ministry of Justice.

The distributable amount of surplus is calculated by the following formula:

the amount of surplus + (B) additional amounts - (C) subtractive amounts, where

(A) the amount of surplus

(B) (a) the amount of profit in the extraordinary financial statements

(b) the amount of consideration for any of its treasury stock disposed of recorded in the extraordinary financial statements

(C) (a)  the book value of its treasury stock

(b) the amount of consideration for any of its treasury stock disposed of after the end of the last business year

(c) the amount of loss in the extraordinary financial statements

(d) other amounts set forth in ordinances of the Ministry of Justice

Under the Corporation Act of Japan, a joint stock corporation can make extraordinary financial statements anytime during business years. If such extraordinary financial statements have been prepared and have been approved by the Board of Directors or (if so required by the Corporation Act of Japan) by a general meeting of shareholders, then the distributable amount of surplus must be adjusted as stated above.

116

•Stock Splits

The Corporation Act of Japan permits the Company, by resolution of its Board of Directors, to make stock splits, regardless of the value of net assets (as appearing in its latest non-consolidated balance sheet) per share.

Under the Corporation Act of Japan, by resolution of the Company’s Board of Directors, the Company may increase the authorized shares up to the number reflecting the rate of stock splits and amend its Articles of Incorporation by resolution of its Board of Directors to this effect without the approval of a shareholders’ meeting. Before a stock split, the Company must give public notice of the stock split specifying the record date not less than two weeks prior to such record date.

•Japanese Unit Share System

On June 14, 2006, the Board of Directors of the Company adopted a resolution to decrease the number of shares constituting one “unit” of the Company to 100 shares effective as of August 1, 2006. Accordingly, since August 1, 2006, 100 shares of common stock constitute one trading “unit”. Prior to this change, the Company’s Articles of Incorporation provided that 1,000 shares of common stock constitute one “unit”. The Corporation Act of Japan permits the Company, by resolution of its Board of Directors, to reduce the number of shares which constitutes one unit or abolish the unit share system, and amend its Articles of Incorporation to this effect without the approval of a shareholders’ meeting.

•Transferability of Shares Representing Less than One Unit.

After January 5, 2009, shares representing less than one unit are automatically registered in the transfer account, and upon such registration shares representing less than one unit may be transferable through the book entry system, although such shares may not be sold in the market under the rules of the relevant stock exchange. A holder of shares representing less than one unit also continues to collect such shares so that they constitute one unit and then sell them as one unit of shares in the market.

As the transfers of ADRs do not require a change in the ownership of the underlying shares, holders of ADRs evidencing ADSs, that constitute less than one unit of shares are not affected by these restrictions in their ability to transfer the ADRs. However, because transfers of less than one unit of the underlying shares are not normally permitted in the market in Japan, the deposit agreement provides that the right of ADR holders to surrender their ADRs and withdraw the underlying shares for sale in Japan may only be exercised as to whole units.

117

•Right of a Holder of Shares Representing Less than One Unit to Require the Company to Purchase Its Shares.

A holder of shares representing less than one unit may, at any time, require the Company to purchase their shares through Securities Companies and JASDEC. These shares will be purchased at (a) the closing price of the shares of the Company reported by the Tokyo Stock Exchange on the day on which the application for the purchase request reached the handling office of the transfer agent, multiplied by the number of shares or (b) in case that no trading is effected at the Tokyo Stock Exchange on that day, the price of the first trade effected thereafter, multiplied by the number of shares. As a practical matter, however, because holders of ADRs representing less than one unit are not able to withdraw the underlying shares from deposit, these holders will not be able to exercise this right.

•Right of a Holder of Shares Representing Less than One Unit to Purchase from the Company its Shares up to a Whole Unit.

The Articles of Incorporation of the Company provide that in the case that a shareholder holding Less-Than-One-Unit Shares requests that the Company sell a certain number of Less-Than-One-Unit Shares so that the shares owned by such shareholder combined with such additional shares may constitute one unit through Securities Companies and JASDEC. These shares will be sold at (a) the closing price of the share of the Company reported at a market operated by the Tokyo Stock Exchange on the day on which the application for additional purchase become effective, multiplied by the number of shares applied for additional purchase or (b) in the case that no trading is effected on such day or if the Tokyo Stock Exchange is closed on such day, the price at which the share of the Company is first traded thereafter, multiplied by the number of shares applied for additional purchase.

•Voting Rights of a Holder of Shares Representing Less than One Unit.

A holder of shares representing less than one unit cannot exercise any voting rights of those shares. In calculating the quorum for various voting purposes, the aggregate number of shares representing less than one unit will be excluded from the number of outstanding shares. A holder of shares representing one or more whole units will have one vote for each whole unit represented.

A holder of shares representing less than one unit does not have any rights relating to voting, such as the right to participate in a demand for the resignation of a director, the right to participate in a demand for the convocation of a general meeting of shareholders and the right to join with other shareholders to propose an agenda item to be addressed at a general meeting of shareholders.

118

In addition, under the Corporation Act of Japan, a joint stock corporation can further restrict the rights of a holder of shares constituting less than one unit. Under the Company’s Articles of Incorporation, a holder of shares constituting less than one unit does not have rights, other than the following:

• to receive annual and interim dividends,

• to receive shares and/or cash by way of consolidation, subdivision, gratis issue of shares to shareholders, exchange or transfer of shares, corporate split or merger,

• to receive shares, cash and/or other assets in which a shareholder of the Company has the option to acquire or which the Company has the option to acquire,

• to participate in any distribution of surplus assets upon liquidation,

• to request the Company to purchase shares constituting less than one unit, and

• any other rights which are prohibited from being restricted by Art. 189, Paragraph 2 of the Corporation Act of Japan and ordinances of the Ministry of Justice.

•Ordinary and Extraordinary General Meeting of Shareholders

The Company usually holds its ordinary general meeting of shareholders in June of each year in Minato-ku, Tokyo or in a neighboring district. In addition, the Company may hold an extraordinary general meeting of shareholders whenever necessary by giving at least two weeks’ advance notice. Under the Corporation Act of Japan and the Company’s Articles of Incorporation, notice of any shareholders’ meeting must be given to each shareholder having voting rights or, in the case of a non-resident shareholder, to his or her resident proxy or mailing address in Japan, at least two weeks prior to the date of the meeting.

•Voting Rights

A shareholder is generally entitled to one vote per one unit of shares as described in this paragraph and under “Japanese Unit Share System” above. In general, under the Corporation Act of Japan, a resolution can be adopted at a general meeting of shareholders by a majority of the shares having voting rights represented at the meeting. The Corporation Act of Japan and the Company’s Articles of Incorporation require a quorum for the election of directors and corporate auditors of not less than one-third of the total number of outstanding shares having voting rights. The Company’s shareholders are not entitled to cumulative voting in the election of directors under the Company’s Articles of Incorporation. A corporate shareholder whose operation can be substantially controlled by the Company based on the reasons such as that the Company directly or indirectly owns not less than one-quarter of the total voting rights of such shareholder does not have voting rights. Shareholders may exercise their voting rights through proxies in accordance with the Company’s Articles of Incorporation, provided that those proxies are also shareholders who have voting rights.

119

Pursuant to the Corporation Act of Japan and the Company’s Articles of Incorporation, a quorum of, not less than one-third of the outstanding shares with voting rights must be present at a shareholders’ meeting to approve any material corporate actions such as:

• a reduction of stated capital;

• amendment of the articles of incorporation (except amendments which the board of directors are authorized to make under the Corporation Act of Japan as described in “Stock Splits” and “Japanese Unit Share System” above);

• establishment of a 100% parent-subsidiary relationship by way of share exchange or share transfer;

• a dissolution, merger or consolidation;

• a corporate split;

• the transfer of the whole or an important part of the Company’s business;

• taking over of the whole of the business of any other corporation; or,

• any issuance of new shares at a “specially favorable” price, bonds or debentures with share acquisition rights to subscribe for new shares with “specially favorable” conditions or share acquisition rights with “specially favorable” conditions to persons other than shareholders, and the like.

At least two-thirds of the outstanding shares having voting rights present at the meeting must approve these actions.

The voting rights of holders of ADSs are exercised by the depositary based on instructions from those holders.

•Share Acquisition Rights

A Share Acquisition Right shall mean the right under which, upon the exercise thereof against the Company by a person who has such right (hereinafter referred to as a “Share Acquisition Rights Holder”), the Company shall be obliged to issue new shares, or in lieu of such issuance, to transfer the shares that it owns, to such Share Acquisition Rights Holder.

The Company may basically issue Share Acquisition Rights as Share Acquisition Rights on their own or attached to bonds or debentures to any persons by the resolution of its board of directors. Holders of shares do not have the right to receive, upon the exercise thereof against the Company, an allotment of Share Acquisition Rights to be issued by the Company (hereinafter referred to as a “Right to Subscribe for Share Acquisition Rights”) under the Company’s Articles of Incorporation when it issues Share Acquisition Rights. Under the Corporation Act of Japan, the board of directors may, however, determine that shareholders be given Right to Subscribe for Share Acquisition Rights in connection with a particular issue of Share Acquisition Rights. In the case of an issue of Share Acquisition Rights, public or individual notice (public notice is basically made via internet on the Company’s website) must be given to each of the shareholders at least two weeks prior to the allotment date unless the terms of such issuance are already disclosed in a securities registration statement or other disclosure document.

120

Share Acquisition Rights may be made transferable or nontransferable by the resolution of the board of directors under the Corporation Act of Japan.

•Liquidation Rights

In the event of liquidation, the assets remaining after payment of all debts, liquidation expenses and taxes will be distributed among the shareholders in proportion to the number of shares they own.

•Liability to Further Calls or Assessments

All of the Company’s currently outstanding shares, including shares represented by the ADSs, are fully paid and nonassessable.

•Transfer Agent

Mitsubishi UFJ Trust and Banking Corporation (“Mitsubishi UFJ Trust”) is the transfer agent for the Company’s shares. Mitsubishi UFJ Trust’s office is located at 4-5, Marunouchi 1-chome, Chiyoda-ku, Tokyo, Japan. Mitsubishi UFJ Trust maintains the Company’s register of shareholders and records transfers of record ownership.

•Record Date

The close of business on March 31 is the record date for the Company’s year-end dividends, if payable. September 30 is the record date for interim dividends, if payable. A holder of shares constituting one or more whole units who is registered as a holder on the Company’s register of shareholders at the close of business as of March 31 is also entitled to exercise shareholders’ voting rights at the ordinary general meeting of shareholders with respect to the fiscal year ending on March 31. In addition, the Company may set a record date for determining the shareholders entitled to the rights by giving at least two weeks’ public notice which is basically made via internet on the Company’s website.

121

The shares generally trade ex-dividend or ex-rights in the Japanese stock exchanges on the second business day before a record date (or if the record date is not a business day, the third business day prior thereto), for the purpose of dividends or rights offerings.

•Acquisition of Own Shares

Under the Corporation Act of Japan, the Company may acquire its shares for any purposes subject to the authorization of shareholders at a general shareholders’ meeting. In addition, the Company is authorized to purchase its shares pursuant to a resolution of the board of directors pursuant to its Articles of Incorporation. The acquisition is generally subject to the condition that the aggregate amount of the purchase price must not exceed the distributable amount of surplus mentioned in “Dividends from Surplus.”

In the case of shares listed on a Japanese stock exchange or traded in the over-the-counter market, acquisition shall be made through the market or by way of tender offer by the close of the following ordinary general meeting, subject to certain exceptions such as where acquisition of the shares from a specified person is authorized by the approval of two-thirds of outstanding shares having voting rights present at the shareholders’ meeting at which a quorum of at least one-third of the outstanding shares having voting rights must be present.

In addition, the Company may acquire its shares by means of repurchase of any number of shares constituting less than one unit upon the request of the holder of those shares, as described under “Japanese Unit Share System” above.

•Holding of Shares by Foreign Investors

Other than the Japanese unit share system that is described in “Rights of Shareholders — Japanese Unit Share System” below, there are no limitations on the rights of non-residents or foreign shareholders to hold or exercise voting rights on the Company’s shares imposed by the laws of Japan or the Company’s Articles of Incorporation or other constituent documents.

122

C. Material Contracts

All contracts entered into by Komatsu or any member of Komatsu during the two years immediately preceding this report were entered into in the ordinary course of business.

D. Exchange Controls

THE FOREIGN EXCHANGE AND FOREIGN TRADE LAW OF JAPAN

The Foreign Exchange and Foreign Trade Law of Japan, as amended, and the cabinet orders and ministerial ordinances thereunder (collectively, the “Foreign Exchange Law”), regulate certain transactions involving a “non-resident of Japan” (as defined below) or a “foreign investor” (as defined below), including issuance of securities by a resident of Japan outside of Japan, transfer of securities between a resident of Japan and a non-resident of Japan, “inward direct investment” by a foreign investor, and a payment from Japan to a foreign country or by a resident of Japan to a non-resident of Japan.

“Non-residents of Japan” include individuals who are not resident in Japan and corporations whose principal offices are located outside of Japan. Generally, branches and other offices of Japanese corporations located outside of Japan are regarded as non-residents of Japan, but branches and other offices of non-resident corporations located within Japan are regarded as residents of Japan. “Foreign investors” are defined to be: (1) individuals not resident in Japan, (2) corporations which are organized under the laws of foreign countries or whose principal offices are located outside of Japan, (3) corporations of which not less than 50% of the voting rights are held directly or indirectly by (1) or (2) above, and (4) corporations in which: (a) a majority of the officers are non-resident individuals or (b) a majority of the officers having the power to represent the corporation are non-resident individuals.

The following is a summary of the pertinent provisions under the Foreign Exchange Law insofar as they affect debt securities of the Company, shares of the Company’s common stock or depositary receipts representing such shares.

Debt Securities

The Foreign Exchange Law requires that a resident of Japan whose debt securities are being issued or offered outside of Japan file a post facto report of “capital transaction” with the Minister of Finance. Under the Foreign Exchange Law, payment of the principal of and interest on these debt securities (including any additional amounts payable pursuant to the terms of the securities) may in general be made by the issuer without any restrictions. The Foreign Exchange Law gives the Minister of Finance the power in certain limited and exceptional circumstances to require prior approval for any such capital transaction (or for such payment).

123

Acquisition of Shares

The Foreign Exchange Law requires that a resident of Japan whose shares are being issued or offered outside of Japan file a post facto report of “capital transaction” with the Minister of Finance.

In general, the acquisition of shares in a Japanese corporation listed on any stock exchange in Japan or traded on the over-the-counter market in Japan (the “listed shares”) from a resident of Japan by a non-resident of Japan requires the resident of Japan to file a post facto report with the Minister of Finance of the transaction. The Foreign Exchange Law gives the Minister of Finance the power in certain limited and exceptional circumstances to require prior approval for any such acquisition.

If a foreign investor intends to acquire the listed shares and as a result of such acquisition the aggregate of the shares in the relevant corporation already held by that foreign investor and certain related parties (as specified under the Foreign Exchange Law) and the number of such shares proposed to be acquired by that foreign investor would be 10% or more of the total issued shares, such foreign investor will generally be subject to a requirement to provide a post facto report to the Minister of Finance and any other competent Minister having jurisdiction over the business of the issuer by the 15th day of the month following the month in which it acquired such shares. In certain exceptional cases, prior notification may be required. In case the prior notification requirement is applicable, the Minister of Finance and the competent Minister will ultimately have the power to order the alternation or suspension of the acquisition in certain special circumstances.

While prior approval, as described above, is not required, in the case where a resident of Japan transfers shares of a Japanese company for consideration exceeding 100 million yen to a non-resident, the resident of Japan who transfers the shares is required to report the transfer to the Minister of Finance within 20 days from the date of the transfer, unless the transfer was made through a bank, securities company or financial futures trader licensed under Japanese law.

Dividends and Proceeds of Sale

Under the Foreign Exchange Law, dividends paid on the shares of a Japanese corporation (including those in the form of depositary receipts) held by non-residents of Japan and the proceeds of any sale of such shares within Japan may in general be converted into any foreign currency and repatriated abroad. The acquisition of shares by non-resident shareholders by way of stock splits is not subject to any of the prior notification and/or post facto reporting requirements.

124

Exercise or Transfer of Share Acquisition Rights

The acquisition by a foreign investor of shares in a Japanese corporation upon the exercise of acquisition rights in respect of share acquisition rights or bonds with share acquisition rights issued inside or outside of Japan is subject to the formalities and restrictions described in the second paragraph under “Acquisitions of Shares” above. However, if a foreign investor wishes to dispose of, rather than exercise, any acquisition rights, such foreign investor may sell the rights inside or outside of Japan without material foreign exchange restriction; provided that the resident of Japan who acquired such rights is in general subject to post facto reporting requirements.

Depositary Receipts

When shares are deposited with a depositary located outside of Japan and depositary receipts are issued in exchange therefor, the depositary is treated like any other foreign investor acquiring shares.

THE FINANCIAL INSTRUMENTS AND EXCHANGE LAW

The Financial Instruments and Exchange Law of Japan requires any person who has become, beneficially and solely or jointly, a holder of more than 5% of the total outstanding voting shares of capital stock of a company listed on any Japanese stock exchange to file with the relevant Local Finance Bureau of the Minister of Finance within five business days a report concerning such share ownership. A similar report must also be made in respect of any subsequent change of 1% or more in any such holding. Copies of any such report must also be furnished to the issuer of such shares and all Japanese stock exchanges on which the shares are listed. For this purpose, shares issuable exercise of rights for subscription of shares held by such holder are taken into account in determining both the size of a holding and a company’s total outstanding share capital.

E. Taxation

JAPANESE TAXATION

The discussion of Japanese taxation set forth below is intended only as a summary and does not purport to be a complete analysis or discussion of all the potential Japanese tax consequences that may be relevant to the ownership of the Company’s shares or ADSs by a person who is not a resident of Japan.

A non-resident of Japan or a non-Japanese corporation is generally subject to a Japanese withholding tax on cash dividends. Stock splits and allotment of shares without consideration, in general, are not subject to Japanese withholding tax since they are characterized merely as an increase in the number of shares (as opposed to an increase in the value of the shares) from a Japanese tax perspective. Due to the 2001 Japanese tax legislation effective April 1, 2001, a conversion of retained earnings or legal earned reserve into stated capital is not deemed a dividend payment to shareholders for Japanese tax purposes and therefore such a conversion does not trigger Japanese withholding taxation.

125

In the absence of any applicable treaty or agreement reducing the maximum rate of withholding tax, the standard rate of Japanese withholding tax applicable to dividends paid by Japanese corporations to non-residents of Japan or non-Japanese corporations is generally 20%. However, with respect to dividends paid on listed shares issued by a Japanese corporation (such as the shares of common stock of the Company) to any corporate or individual shareholders (including those shareholders who are non-Japanese corporations or Japanese non-resident individuals), except for any individual shareholder who holds 5% or more of the total shares issued by the relevant Japanese corporation, the aforementioned standard 20% withholding tax rate is reduced to (i) 7% for dividends due and payable on or before December 31, 2011 and (ii) 15% for dividends due and payable on or after January 1, 2012.

Pursuant to the Convention Between the Government of the United States of America and the Government of Japan for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income (the “Treaty”), (i) the withholding tax rate on dividends is generally 10% for portfolio investors who are qualified U.S. residents eligible to enjoy treaty benefits and (ii) the dividends are exempt from Japanese taxation by way of withholding or otherwise for pension funds which are qualified U.S. residents eligible to enjoy treaty benefits, unless the dividends are derived from the carrying on of a business, directly or indirectly, by such pension funds. For Japanese tax purposes, a treaty rate generally supersedes the tax rate under Japanese tax law. However, due to the so-called “preservation doctrine” under the Treaty, and/or due to the Special Measurement Law for the Income Tax Law, Corporation Tax Law and Local Taxes Law with respect to the Implementation of Tax Treaties, if the tax rate under Japanese tax law is lower than the treaty rate (which is currently the case with respect to the treaty), the Japanese tax rate applies (which, as discussed above, is currently 7% with respect to dividends paid on the Company’s shares).

The amount of withholding tax imposed on dividends payable to the holders of the Company’s shares or ADSs who reside in a country other than the United States is dependent upon the provisions of such treaties or agreements as may exist between such country and Japan.

Gains derived from the sale outside Japan of shares of common stock or ADSs by a non-resident of Japan or a non-Japanese corporation, or from the sale of the shares within Japan by a non-resident of Japan as an occasional transaction or by a non-Japanese corporation not having a permanent establishment in Japan, are in general not subject to Japanese income or corporation taxes. Japanese inheritance and gift taxes at progressive rates may be payable by an individual who has acquired shares of common stock or ADSs as a distributee, legatee or donee.

126

CERTAIN U.S. FEDERAL INCOME TAX CONSIDERATIONS

General

The following is a summary of certain U.S. federal income tax consequences of the acquisition, ownership, and disposition of shares of common stock and ADSs of the Company to U.S. holders (as defined below). This summary does not purport to be a comprehensive description of all of the tax consequences of the acquisition, ownership and disposition of shares of common stock or ADSs. This summary applies only to shares of common stock and ADSs acquired by U.S. holders and held as capital assets, within the meaning of section 1221(a) of the Internal Revenue Code of 1986, as amended (the “Code”), and does not apply to persons in special tax situations, including, but not limited to, a person with a functional currency other than the U.S. dollar, a person that actually or constructively owns 10% or more of the Company’s voting stock, a tax-exempt organization, a bank, a financial institution, a real estate investment trust, a regulated investment company, a partnership or other flow-through entity, a dealer in securities or currencies, an insurance company, a securities trader electing to account for its investment in shares of common stock or ADSs on a mark-to-market basis, a person that owns shares of common stock or ADSs through a partnership or other entity treated as a partnership for U.S. federal income tax purposes or through a flow-through entity, a person who acquired shares of common stock or ADSs pursuant to the exercise of any employee stock option or otherwise as compensation, or a person holding shares of common stock or ADSs in a hedging transaction or as part of a straddle or conversion transaction or other integrated financial transaction. In addition, this summary does not address the application, or the potential application, of the alternative minimum tax.

This discussion is based on current provisions of the Code, final, temporary and proposed U.S. Treasury regulations, judicial opinions, published positions of the Internal Revenue Service (the “IRS”) and other applicable authorities, all as in effect on the date hereof and all of which are subject to differing interpretations or change, possibly with retroactive effect. The Company has not sought, and will not seek, any ruling from the IRS or any opinion of counsel with respect to the tax consequences discussed herein, and there can be no assurance that the IRS will not take a contrary position or that any position taken by the IRS would not be sustained.

As used in this summary, the term “U.S. holder” means a beneficial owner of shares of common stock or ADSs of the Company that is for U.S. federal income tax purposes (i) a citizen or resident of the United States, (ii) a corporation (including an entity treated as a corporation for U.S. federal income tax purposes) that is created or organized in or under the laws of the United States, any State thereof or the District of Columbia, (iii) an estate the income of which is subject to U.S. federal income tax regardless of its source, or (iv) a trust if a court within the United States is able to exercise primary supervision over the administration of the trust and one or more United States persons have the authority to control all substantial decisions of the trust. Certain trusts not described in clause (iv) above in existence on August 20, 1996, that elect to be treated as United States persons will also be U.S. holders for purposes of the following discussion.

127

If a partnership is a beneficial owner of shares of common stock or ADSs, the treatment of a partner in the partnership generally will depend upon the status of the partner and the activities of the partnership. A beneficial owner of shares of common stock or ADSs that is a partnership and partners in such a partnership should consult their tax advisors regarding the U.S. federal income tax consequences of acquiring, owning, and disposing of shares of common stock or ADSs.

This discussion is only a summary of certain U.S. federal income tax consequences of the acquisition, ownership and disposition of shares of common stock or ADSs. Investors should consult their own tax advisors with respect to the particular tax consequences of the acquisition, ownership and disposition of shares of common stock or ADSs, including the effect of any state, local, foreign or other tax laws. In addition, this summary assumes that the Company has not been, is not currently, and will not be treated as a passive foreign investment company (a “PFIC”) for U.S. federal income tax purposes. See the discussion below under “Passive Foreign Investment Company Rules.”

Treatment of ADSs

In general, a U.S. holder of ADSs evidencing shares of common stock will be treated as the beneficial owner of the underlying shares of common stock represented and evidenced by those ADSs for U.S. federal income tax purposes. Deposits or withdrawals of shares of common stock by U.S. holders in exchange for ADSs generally will not result in the recognition of gain or loss for U.S. federal income tax purposes.

The United States Department of the Treasury (the “U.S. Treasury”) has expressed concerns that U.S. holders of foreign securities may be claiming foreign tax credits in situations where an intermediary in the chain of ownership between the holder of a foreign security or an ADS and the issuer of the security has taken actions inconsistent with the ownership of the underlying security by the person claiming the credit, such as a disposition of such security. Such actions could also be inconsistent with the claiming of the reduced rate of tax applicable to dividends received by certain non-corporate U.S. holders. Accordingly, the analysis of the creditability of Japanese taxes and the availability of the reduced tax rate for dividends received by certain non-corporate U.S. holders, each as described below, could be affected by actions taken by the depositary or others or by future actions taken by the U.S. Treasury.

128

Taxation of Distributions on Shares of Common Stock or ADSs

Subject to the discussion below under “Passive Foreign Investment Company Rules,” the gross amount of distributions paid on shares of common stock or ADSs, other than certain pro rata distributions of shares of common stock, will generally be taxable as dividends to the extent paid out of the Company’s current or accumulated earnings and profits (as determined under U.S. federal income tax principles). Because the Company does not maintain calculations of its earnings and profits under U.S. federal income tax principles, it is expected that distributions generally will be reported (where required) to U.S. holders as dividends. Such dividends will include any amounts withheld in respect of Japanese taxes and will not be eligible for the dividends-received deduction generally allowed to U.S. corporations.

Subject to applicable limitations that may vary depending upon a U.S. holder’s individual circumstances (including with respect to certain short-term and hedged positions) and the discussion below under “Passive Foreign Investment Company Rules,” dividends received by certain non-corporate U.S. holders in taxable years beginning before January 1, 2011 that constitute qualified dividend income will be taxable at a maximum rate of 15% provided that certain conditions are met. Non-corporate U.S. holders should consult their own tax advisors regarding the availability of the reduced rate and to determine whether they are subject to any special rules that limit their ability to be taxed at this reduced rate.

Dividends paid in a foreign currency, such as Japanese yen, will be included in a U.S. holder’s income in a U.S. dollar amount calculated by reference to the exchange rate in effect on the date the dividend is actually or constructively received by the U.S. holder, in the case of shares of common stock, or by the depositary, in the case of ADSs, regardless of whether the payment is in fact converted into U.S. dollars on such date. A U.S. holder will have a tax basis in such foreign currency equal to the U.S. dollar value of the foreign currency calculated by reference to the exchange rate in effect on the date of such receipt. Gain or loss, if any, realized by a U.S. holder on a subsequent sale or other disposition of the foreign currency will be ordinary income or loss, and will be income or loss from sources within the United States for U.S. foreign tax credit purposes. Prospective investors should consult their own tax advisors concerning the calculation and U.S. federal income tax treatment of foreign currency gain or loss.

For foreign tax credit purposes, dividends included in gross income by a U.S. holder in respect of shares of common stock or ADSs will generally constitute income from sources outside the United States. Japanese income taxes withheld from dividends on shares of common stock or ADSs may be claimed by a U.S. holder as a credit against U.S. federal income tax liability or, in the alternative, as a deduction in the computation of such U.S. holder’s taxable income, subject, in each case, to certain conditions and limitations. For U.S. foreign tax credit limitation purposes, dividends will generally be treated as “passive category income” or, in certain cases, “general category income.” The U.S. federal income tax rules relating to foreign tax credits are extremely complex. U.S. holders should consult their own tax advisors concerning the availability of foreign tax credits based upon their particular situations.

129

Sales and Other Dispositions of Shares of Common Stock or ADSs

Subject to the discussion below under “Passive Foreign Investment Company Rules,” for U.S. federal income tax purposes, upon a sale or other taxable disposition of a share of common stock or an ADS, a U.S. holder will recognize gain or loss in an amount equal to the difference between the amount realized (determined in U.S. dollars) on the disposition and such U.S. holder’s adjusted tax basis (determined in U.S. dollars) in the share of common stock or ADS (as the case may be). Any such gain or loss generally will constitute capital gain or loss, and will be long-term capital gain or loss if such U.S. holder held the share of common stock or the ADS (as the case may be) for more than one year as of the date of the disposition. The deduction of capital losses is subject to limitations under the Code. In addition, such gain or loss generally will be gain or loss from sources within the United States for foreign tax credit purposes.

Passive Foreign Investment Company Rules

The Company believes that it should not be a PFIC for U.S. federal income tax purposes for its taxable year ended March 31, 2009. In general, the Company will be a PFIC for any taxable year in which (i) at least 75% of its gross income is passive income, or (ii) the average percentage of its assets, as determined under applicable provisions of U.S. federal income tax laws, during the taxable year which produce passive income or which are held for the production of passive income is at least 50%. Passive income for this purpose generally includes dividends, interest, royalties, rents, annuities, gains from commodities and securities transactions and certain other types of income. The PFIC determination is made annually and generally will depend upon the composition of the Company’s income and assets. There can be no assurance that the Company has not been, is not or will not be considered a PFIC for any taxable year. If the Company were treated as a PFIC for any taxable year during which a U.S. holder held shares of common stock or ADSs, certain adverse tax consequences could apply to such U.S. holder.

If the Company were treated as a PFIC for any taxable year during which a U.S. holder held shares of common stock or ADSs, any gain recognized by the U.S. holder on the disposition of such shares of common stock or ADSs as well as any “excess distribution” received by the U.S. holder (i.e., generally, any distribution in respect of shares of common stock or ADSs in excess of 125% of the average of the annual distributions on such securities received by a U.S. holder during the preceding three taxable years or such U.S. holder’s holding period, whichever is shorter) would be allocated ratably to each day in the U.S. holder’s holding period for such securities. The amount of any such gain or excess distribution allocable to the year of the disposition or distribution or to any year before the Company became a PFIC will be taxed as ordinary income. The amount of any such gain or distribution allocable to taxable years in which the Company was a PFIC and thereafter, other than the year of the disposition or distribution, would be subject to tax at the highest rate in effect in each such taxable year for individuals or corporations, as appropriate, and an interest charge would be imposed on the tax liability attributable to such allocated amounts.

130

Certain elections (including a mark-to-market election) may be available to a U.S. holder that may mitigate the adverse tax consequences resulting from PFIC status. However, if the Company were to be treated as a PFIC, U.S. holders may not be able to mitigate the adverse tax consequences resulting from PFIC status by electing to treat the Company as a “qualified electing fund” because the Company may not provide the information that a U.S. holder requires to make such an election.

In addition, if the Company were treated as a PFIC in a taxable year in which it pays a dividend or the prior taxable year, the 15% tax rate with respect to qualified dividend income, discussed above under “Taxation of Distributions on Shares of Common Stock or ADSs,” would not apply.

U.S. holders should consult their own tax advisors regarding the potential application of the PFIC rules to shares of common stock or ADSs.

Information Reporting and Backup Withholding

In general, information reporting requirements will apply to distributions on shares of common stock and ADSs, and to the proceeds received on the disposition of shares of common stock and ADSs paid within the United States (and in certain cases, outside the United States), unless an exemption is established. A backup withholding tax at the applicable statutory rate may apply to such amounts if a U.S. holder (i) fails to establish properly that such U.S. holder is entitled to an exemption, (ii) fails to furnish or certify a correct taxpayer identification number to the payor in the manner required, (iii) is notified by the IRS that such U.S. holder has failed to report payments of interest or dividends properly, or (iv) under certain circumstances, fails to certify that such U.S. holder has not been notified by the IRS that backup withholding applies due to the failure to report interest or dividend payments. The amount of any backup withholding will be allowed as a credit against or refund of the U.S. holder’s U.S. federal income tax liability provided that the required information is furnished to the IRS in a timely manner.

Recently enacted legislation will require certain types of U.S. holders to report information with respect to their investments in the shares of common stock or ADSs not held through an account with a U.S. financial institution to the IRS. If a U.S. holder fails to report information required under this legislation, such U.S. holder could become subject to substantial penalties. U.S. holders are encouraged to consult with their own tax advisors regarding the possible implications of this legislation on their investment in the shares of common stock or ADSs.

131

The preceding summary of certain U.S. federal income tax considerations is for general information only and is not intended to be construed as tax advice. Accordingly, prospective investors should consult their own tax advisors as to the particular tax consequences to them of the acquisition, ownership and disposition of shares of common stock and ADSs, including the applicability and effect of any U.S. federal, state, local or foreign tax laws, and of any proposed changes in applicable law.

F. Dividends and Paying Agents

Not applicable.

G. Statements by Experts

Not applicable.

H. Documents on Display

The Company is subject to the informational requirements of the Securities Exchange Act of 1934, as amended. In accordance with these requirements, the Company files annual reports on Form 20-F and other reports on Form 6-K with the U.S. Securities and Exchange Commission (the “SEC”). These materials, including this annual report and exhibits thereto, may be inspected and copied at the SEC’s Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC in the U.S. at 1-800-SEC-0330. The materials filed via the Electronic Data Gathering, Analysis, and Retrieval system are also available for inspection on the SEC’s website (http://www.sec.gov).

I. Subsidiary Information

Not applicable.

Item 11. Quantitative and Qualitative Disclosures About Market Risk

Market Risk Exposure

Komatsu is exposed to market risk primarily from changes in foreign currency exchange rates and interest rates with respect to its international operations and foreign currency denominated receivables and debts. In order to manage these risks that arise in the normal course of its business, Komatsu has entered into various derivative financial transactions pursuant to its policies and procedures. Komatsu does not enter into derivative financial transactions for trading or speculative purposes. Komatsu is exposed to credit-related losses in the event of nonperformance by counterparties to the derivative financial instruments. However, because of the counterparties’ credit ratings, Komatsu does not expect any of its existing counterparties to default on their obligations.

132

Foreign Exchange Risk

To reduce foreign exchange risks against foreign currency denominated assets, liabilities and certain forecasted transactions, Komatsu executes forward exchange contracts and option contracts in a range of 50% to 100% based on its projected cash flow in foreign currencies. The following table provides information concerning derivative financial instruments of Komatsu in relation to foreign currency exchange transactions that existed as of March 31, 2010, which are translated into Japanese yen at the rate used on that date, together with the related weighted average contractual exchange rates as of March 31, 2010. The notional amount of option contracts was ¥949 million (U.S.$10 million).

Forward Exchange Contracts

Forwards to sell foreign	Millions of yen (except average contractual rates)
currencies:	US$/Yen			EUR/Yen		US$/EUR			Others		Total
Contract amounts	¥	32,530		¥	3,227	¥	1,813		¥	2,639	¥	40,209
Average contractual rates	90.50Yen/US$			127.51Yen/EUR		0.72EUR/US$				—		—
Fair value		(851	)		70		(40	)		19		(802	)

Forwards to buy foreign	Millions of yen (except average contractual rates)
currencies:	Yen/Yuan			GBP/EUR		US$/CLP			US$/Yuan		US$/ZAR			Others			Total
Contract amounts	¥	17,668		¥	6,069	¥	4,407		¥	3,019	¥	2,593		¥	15,053		¥	48,809
Average contractual rates	13.26Yen/Yuan			0.89GBP/EUR		0.0019US$/CLP			0.14US$/Yuan		0.13US$/ZAR				—			—
Fair value		(478	)		7		(42	)		4		(95	)		(509	)		(1,113	)

Almost all of the above forward exchange contracts are expected to mature during the fiscal year ending March 31, 2011.

133

Currency Option

	Millions of yen (except average contractual rates)
Purchase to sell foreign currencies:	US$/EUR		Others		Total
Contract amounts	¥	233		—	¥	233
Average contractual rates	1.335US$/EUR			—		—
Fair value		5		—		5

	Millions of yen (except average contractual rates)
Purchase to buy foreign currencies:	GBP/EUR		Others		Total
Contract amounts	¥	716		—	¥	716
Average contractual rates	0.897EUR/GBP			—		—
Fair value		12		—		12

All of the above currency options are expected to mature during the fiscal year ending March 31, 2011.

For the convenience of the reader, the below tables provide the U.S. dollar equivalent of the Japanese yen contract amounts for each transaction set forth in the above tables, calculated at the rate of U.S.$1.00 to ¥93.

Forward Exchange Contracts

Forwards to sell foreign	Thousands of U.S. dollars
currencies:	US$/Yen			EUR/Yen		US$/EUR			Others		Total
Contract amounts	$	349,785		$	34,699	$	19,495		$	28,376	$	432,355
Fair value		(9,151	)		753		(430	)		204		(8,624	)

Forwards to buy foreign	Thousands of U.S. dollars
currencies:	Yen/Yuan		GBP/EUR		US$/CLP			US$/Yuan		US$/ZAR			Others		Total
Contract amounts	$	189,978	$	65,258	$	47,387		$	32,462	$	27,882		$	161,861	$	524,828
Fair value		(5,140)		75		(452	)		43		(1,022	)		(5,472)		(11,968	)

134

Currency Option

	Thousands of U.S. dollars
Purchase to sell foreign currencies:	US$/EUR		Others		Total
Contract amounts	$	2,505		—	$	2,505
Fair value		54		—		54

	Thousands of U.S. dollars
Purchase to buy foreign currencies:	GBP/EUR		Others		Total
Contract amounts	$	7,699		—	$	7,699
Fair value		129		—		129

Interest Rate Risk

To reduce interest rate risk, Komatsu has engaged in certain interest rate swaps, cross-currency swaps and interest cap option transactions for interest payments and interest receipts. Certain interest rate swap contracts are not qualified as hedges for financial reporting purposes and are recorded at the fair value with the gains and losses thereof recognized as income and expense.

The following tables provide information concerning long-term debt excluding capital lease obligations (including those obligations that are due within one year), interest rate swaps, cross-currency swaps and interest caps. For debt obligations, the tables present the weighted average interest rate, fair value and principal cash flows by expected maturity dates. For interest rate swaps and cross-currency swaps, the following tables present the weighted average receive and pay interest rates, fair value and notional amounts. For interest caps, the following tables present average strike rates, fair value and notional amounts.

Long-term debt excluding capital lease obligations (including due within one year)

								Millions of yen
	Average							Expected maturity date
	interest rate			Fair value		Total		2011		2012		2013		2014		2015		Thereafter
Japanese yen bonds		1.45	%	¥	88,974	¥	90,000	¥	—	¥	—	¥	30,000	¥	30,000	¥	30,000	¥	—
Euro medium-term notes (relating to variable interest rate)		0.72	%		68,142		60,971		25,073		23,489		10,630		1,779		—		—
Loans, principally from banks (relating to variable interest rate)		2.81	%		65,950		65,950		15,425		22,028		24,513		3,098		28		858
Loans, principally from banks (relating to fixed interest rate)		2.05	%		164,899		165,898		42,023		48,101		39,397		15,362		20,798		217
Total				¥	387,965	¥	382,819	¥	82,521	¥	93,618	¥	104,540	¥	50,239	¥	50,826	¥	1,075

135

Interest rate swaps, cross-currency swaps and interest caps

	Average											Millions of yen
	interest rate											Expected maturity date
	Receive			Pay			Fair value			Total		2011		2012		2013		2014		2015		Thereafter
U.S. dollar interest rate swap		0.30	%		3.01	%	¥	(1,176	)	¥	61,821	¥	34,050	¥	18,443	¥	8,629	¥	227	¥	75	¥	397
Yen/US$ cross-currency swap		1.00	%		0.58	%		6,926			49,251		18,500		22,686		8,065		—		—		—
EUR interest rate swap		0.98	%		3.93	%		(774	)		22,772		10,006		7,078		4,144		1,223		321		—
Yen/EUR cross-currency swap		0.84	%		1.04	%		2,050			12,922		—		10,922		—		2,000		—		—
EUR interest cap		—			5.00	%		0			6,246		6,246		—		—		—		—		—
AUD interest rate swap		4.13	%		6.08	%		(358	)		30,471		7,366		7,436		7,221		4,714		1,904		1,830
Others		—			—			(46	)		1,004		664		137		66		18		119		—
Total							¥	6,622		¥	184,487	¥	76,832	¥	66,702	¥	28,125	¥	8,182	¥	2,419	¥	2,227

For the convenience of the reader, the below tables provide the U.S. dollar equivalent of the Japanese yen contract amounts for each transaction set forth in the above tables, calculated at the rate of U.S.$1.00 to ¥93.

Long-term debt excluding capital lease obligations (including due within one year)

								Thousands of U.S. dollars
	Average							Expected maturity date
	interest rate			Fair value		Total		2011		2012		2013		2014		2015		Thereafter
Japanese yen bonds		1.45	%	$	956,710	$	967,743	$	—	$	—	$	322,581	$	322,581	$	322,581	$	—
Euro medium-term notes (relating to variable interest rate)		0.72	%		732,710		655,602		269,602		252,570		114,301		19,129		—		—
Loans, principally from banks (relating to variable interest rate)		2.81	%		709,140		709,140		165,860		236,860		263,581		33,312		301		9,226
Loans, principally from banks (relating to fixed interest rate)		2.05	%		1,773,108		1,783,849		451,860		517,215		423,624		165,183		223,634		2,333
Total				$	4,171,668	$	4,116,334	$	887,322	$	1,006,645	$	1,124,087	$	540,205	$	546,516	$	11,559

136

Interest rate swaps, cross-currency swaps and interest caps

	Average											Thousands of U.S. dollars
	interest rate											Expected maturity date
	Receive			Pay			Fair value			Total		2011		2012		2013		2014		2015		Thereafter
U.S. dollar interest rate swap		0.30	%		3.01	%	$	(12,645	)	$	664,742	$	366,129	$	198,312	$	92,785	$	2,441	$	806	$	4,269
Yen/US$ cross-currency swap		1.00	%		0.58	%		74,473			529,581		198,926		243,935		86,720		—		—		—
EUR interest rate swap		0.98	%		3.93	%		(8,323	)		244,860		107,590		76,108		44,559		13,151		3,452		—
Yen/EUR cross-currency swap		0.84	%		1.04	%		22,043			138,946		—		117,441		—		21,505		—		—
EUR interest cap		—			5.00	%		0			67,161		67,161		—		—		—		—		—
AUD interest rate swap		4.13	%		6.08	%		(3,849	)		327,645		79,205		79,957		77,645		50,688		20,473		19,677
Others		—			—			(495	)		10,796		7,139		1,473		710		194		1,280		—
Total							$	71,204		$	1,983,731	$	826,150	$	717,226	$	302,419	$	87,979	$	26,011	$	23,946

For additional information about derivative financial instruments, see Note 20 to the Consolidated Financial Statements included elsewhere in this report.

Item 12. Description of Securities Other than Equity Securities

A. Debt Securities

Not applicable.

B. Warrants and Rights

Not applicable.

C. Other Securities

Not applicable.

D. American Depositary Shares

Fees and Charges for Holders of American Depositary Receipts

137

The Bank of New York Mellon, as depositary for the Company’s ADSs (the “Depositary”), collects its fees for delivery and surrender of ADSs directly from investors depositing shares or surrendering ADSs for the purpose of withdrawal, or from intermediaries acting for them. The Depositary collects fees for making distributions to investors by deducting those fees from the amounts distributed or by selling a portion of distributable property to pay the fees. The Depositary may collect its annual fee for depositary services by deducting such fee from cash distributions, by directly billing investors or by charging the book-entry system accounts of participants acting for them. The Depositary may generally refuse to provide services until its fees for those services are paid.

The below table sets forth the fees that an investor depositing or withdrawing shares must pay to the Depositary for certain services:

Investor depositing or withdrawing shares must pay:	For:
$5.00 (or less) per 100 ADSs (or portion of 100 ADSs)	Issuance of ADSs, including issuances resulting from a distribution, sale or exercise of shares or rights or other property Cancellation of ADSs for the purpose of withdrawal including if the depositary agreement is terminated
$0.02 (or less) per ADS	Any cash distribution to ADS registered holders
A fee equivalent to the fee that would be payable if securities distributed had been shares and the shares had been deposited for issuance of ADSs	Distribution of securities distributed to holders of deposited securities which are distributed by the Depositary to ADS registered holders
Registration fees	Registration of transfer of shares on Komatsu’s share register to the name of the depositary or its nominee or the custodian or its nominee when shares are deposited or withdrawn
Expenses of the Depositary	Cable, telex, and facsimile transmissions (when expressly provided in the depositary agreement) Converting foreign currency to US dollars
Taxes and other governmental charges the Depositary or custodian must pay on any ADSs or shares underlying ADSs	As necessary

For the fiscal year ended March 31, 2010, the Company received from the Depositary $30,000 for the expenses (including legal fees) incurred in 2008 relating to the establishment of the ADR program with the Depositary, $30,000 for the expenses incurred in 2008 relating to the maintenance of the program, and $30,000 for the expenses incurred relating to the 2009 Annual General Meeting of Shareholders.

Fees to be Paid in the Future

The Depositary has agreed to reimburse the Company for expenses incurred by the Company that relate to the establishment and maintenance of the ADR program. The Depositary has also agreed to pay the standard out-of-pocket maintenance costs for the ADRs, which consist of the expenses for postage and envelopes for mailing annual and interim financial reports, printing and distributing dividend checks, electronic filing of U.S. Federal tax information, mailing required tax forms, stationery, postage, facsimile and telephone calls. The Depositary has also agreed to reimburse the Company annually for certain investor relations programs or special investor relations promotional activities. While there are limits on the amount of expenses for which the Depositary will reimburse the Company for these investor relations activities, the amount of reimbursement available to the Company is not necessarily tied to the amount of fees the Depositary collects from investors.

138

PART II

Item 13. Defaults, Dividend Arrearages and Delinquencies

None.

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

None.

Item 15. Controls and Procedures

Evaluation of disclosure controls and procedures

Komatsu’s management performed an evaluation of the effectiveness of the design and operation of its disclosure controls and procedures under the supervision and with the participation of its Chief Executive Officer and Chief Financial Officer. Based on Komatsu’s evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that as of March 31, 2010, the end of the period covered by this report, the disclosure controls and procedures were adequate and effective.

Management’s report on internal control over financial reporting

The management of Komatsu is responsible for establishing and maintaining adequate internal control over financial reporting. Komatsu’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of its financial reporting and the preparation of financial statements for external purposes in accordance with U.S. GAAP. Komatsu’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of Komatsu, (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S. GAAP, and that receipts and expenditures of Komatsu are being made only in accordance with authorizations of management and directors of Komatsu and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of Komatsu’s assets that could have a material effect on its financial statements.

139

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Management assessed the effectiveness of Komatsu’s internal control over financial reporting as of March 31, 2010. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control — Integrated Framework.

Based on its assessment, management concluded that, as of March 31, 2010, Komatsu’s internal control over financial reporting was effective.

Komatsu’s management excluded from its assessment of the effectiveness of Komatsu’s internal control over financial reporting as of March 31, 2010 an assessment of internal control over financial reporting of Komatsu Australia Corporate Finance Pty. Ltd. (“KACF”), which Komatsu acquired during the fiscal year ended March 31, 2010. KACF had total assets of ¥55,059 million and total revenues of ¥7,693 million that were reflected in the consolidated financial statements of the Company as of and for the fiscal year ended March 31, 2010.

Komatsu’s independent registered public accounting firm, KPMG AZSA & Co., has issued an audit report on the effectiveness of Komatsu’s internal control over financial reporting as of March 31, 2010.

Changes in internal control over financial reporting

There has been no change in Komatsu’s internal control over financial reporting that occurred during the period covered by this annual report that has materially affected, or is reasonably likely to materially affect, its internal control over financial reporting.

140

Item 16. [Reserved]

Item 16A. Audit Committee Financial Expert

The Board of Corporate Auditors of the Company has determined that Mr. Kyoji Torii qualifies as an “audit committee financial expert” as such term is defined under the rules of the SEC. Mr. Torii meets the independence requirements imposed on corporate auditors under the Corporation Act of Japan. Mr. Torii has long engaged in accounting-related duties at the Company, and has extensive experience and expertise regarding financial affairs and accounting matters. Since joining the Company in 1974, Mr. Torii has worked in the fields of accounting and finance. Mr. Torii served as the chief project manager of the Tax & Corporate Controlling Dept. from 1998 to 1999, the general manager of the Affiliated Companies Dept. from 1999 to 2002 and the general manager of the Planning & Administration Dept., Defense Systems Division from 2007 to 2009.

Mr. Torii was elected as one of the corporate auditors of the Company at the ordinary general meeting of shareholders held in June 2009. See Item 6.A. for additional information regarding Mr. Torii.

Item 16B. Code of Ethics

In order to ensure that Komatsu’s business is conducted honestly, ethically and in compliance with applicable laws, rules and regulations by its senior officers (including directors, executive officers, presidents of divisions, general managers of administrative departments at the Company as well as managers of the Finance & Treasury and Corporate Accounting departments at the Company), Komatsu has adopted the “Code of Ethics for Senior Officers” that stipulates the ethical duties and rules of conduct that its senior officers are required to comply with. This “Code of Ethics for Senior Officers” has been filed as Exhibit 11 hereto.

In addition, beginning in 1998, Komatsu has published a booklet entitled “Komatsu’s Code of Worldwide Business Conduct.” Komatsu distributes this booklet to all of its worldwide employees and management officers in order to ensure that they understand how important it is to observe the rules of the business community. The content of the latest edition of this booklet published in January 2007 is available on the Company’s website at http://www.komatsu.com/CompanyInfo/profile/conduct/.

No amendments have been made to the “Code of Ethics for Senior Officers” or “Komatsu’s Code of Worldwide Business Conduct” during the fiscal year ended March 31, 2010.

Item 16C. Principal Accountant Fees and Services

Audit and Non-Audit Fees

KPMG AZSA & Co. and the various member firms of KPMG International served as Komatsu’s principal independent registered public accounting firm for the fiscal years ended March 31, 2010 and 2009. Set forth below are the fees for services rendered by KPMG AZSA & Co. and the various member firms of KPMG International for the fiscal years ended March 31, 2010 and 2009.

141

	(Millions of Yen)
	Fiscal Year ended March 31,
	2010		2009
Audit fees	¥	1,687	¥	1,812
Audit-related fees		23		27
Tax fees		32		48
All other fees		3		4
Total	¥	1,745	¥	1,891

Audit fees include fees billed for services rendered in connection with the audit of Komatsu’s annual and semiannual consolidated financial statements, the review of consolidated quarterly financial statements and the review of associated documents filed with regulatory organizations.

Audit-related fees include fees billed for due diligence services related to mergers and acquisitions, agreed-upon or expanded audit procedures and the review of Komatsu’s internal control procedures.

Tax fees include fees billed for tax compliance, the review of tax return documents, documentation relating to transfer pricing, international and domestic indirect tax.

All other fees consist of fees for all other services not included in any of the above categories.

Pre-Approval Policies and Procedures of the Board of Corporate Auditors

In accordance with the SEC rules regarding auditor independence, the Board of Corporate Auditors of the Company has established pre-approval policies and procedures for audit and non-audit services that are provided by its principal independent registered public accounting firm. These policies and procedures apply when the Company and/or its consolidated subsidiaries wish to engage an accounting firm for audit services and when the Company and/or its consolidated subsidiaries wish to engage the principal independent registered public accounting firm for permissible non-audit services.

When engaging an accounting firm for audit services, pre-approval is required prior to the commencement of such services. Similarly, when engaging the principal independent registered public accounting firm for permissible non-audit services (i.e., audit-related services, tax services and all other services), pre-approval must be obtained prior to the commencement of the services.

For the fiscal year ended March 31, 2010, no services were provided for which pre-approval was waived pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X.

142

Item 16D. Exemptions from the Listing Standards for Audit Committees

Not applicable.

Item 16E. Purchases of Equity Securities by the Issuer and Affiliated Purchasers

Not applicable.

Item 16F. Change in Registrant’s Certifying Accountant

Not applicable.

Item 16G. Corporate Governance

Not applicable.

143

PART III

Item 17. Financial Statements

Not applicable.

Item 18. Financial Statements

See Consolidated Financial Statements attached hereto.

Item 19. Exhibits

1.1	Articles of Incorporation of Komatsu Ltd., as amended (Translation)
1.2	Regulations of The Board of Directors (Translation)
2	Share Handling Regulations, as amended (Translation)
8	Significant subsidiaries of Komatsu Ltd., including additional subsidiaries that management has deemed to be significant, as of March 31, 2010 (See “Item 4. Information on the Company — Organizational Structure”)
11	Code of Ethics for Senior Officers (Translation)
12 a.	Certification of the CEO of the Company required pursuant to Rule 15d-14(a).
12 b.	Certification of the CFO of the Company required pursuant to Rule 15d-14(a).
13 a.	Certification of the CEO of the Company required pursuant to Rule 15d-14(b) and Section 1350 of Chapter 63 of Title 18 of the United States Code.
13 b.	Certification of the CFO of the Company required pursuant to Rule 15d-14(b) and Section 1350 of Chapter 63 of Title 18 of the United States Code.

144

SIGNATURES

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

	KOMATSU LTD.
Date: June 29, 2010	By:	/s/ Kenji Kinoshita
		Name:	KENJI KINOSHITA
		Position:	Director and Senior Executive Officer, Chief Financial Officer

145

KOMATSU LTD. AND CONSOLIDATED SUBSIDIARIES

INDEX TO
CONSOLIDATED FINANCIAL STATEMENTS

Reports of Independent Registered Public Accounting Firm	F-2 and F-3
Consolidated Balance Sheets as of March 31, 2010 and 2009	F-4 and F-5
Consolidated Statements of Income for the Years Ended March 31, 2010, 2009 and 2008		F-6
Consolidated Statements of Equity for the Years Ended March 31, 2010, 2009 and 2008		F-7 and F-8
Consolidated Statements of Cash Flows for the Years Ended March 31, 2010, 2009 and 2008		F-9
Notes to Consolidated Financial Statements	F-10 to F-53

F-1

Report of Independent Registered Public Accounting Firm

The Board of Directors and Shareholders
Komatsu Ltd.:

We have audited the accompanying consolidated balance sheets of Komatsu Ltd. and subsidiaries as of March 31, 2010 and 2009, and the related consolidated statements of income, equity and cash flows for each of the years in the three-year period ended March 31, 2010. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

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

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Komatsu Ltd. and subsidiaries as of March 31, 2010 and 2009, and the results of their operations and their cash flows for each of the years in the three-year period ended March 31, 2010, in conformity with U.S. generally accepted accounting principles.

As described in Note 1 to the consolidated financial statements, the Company adopted retrospectively the presentation and disclosure provisions of FASB Accounting Standards Codification Topic 810, “Consolidation” in the fiscal year ended March 31, 2010.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Komatsu Ltd’s internal control over financial reporting as of March 31, 2010, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), and our report dated June 29, 2010 expressed an unqualified opinion on the effectiveness of Komatsu Ltd’s internal control over financial reporting.

The accompanying consolidated financial statements as of and for the year ended March 31, 2010 have been translated into United States dollars solely for convenience of the reader. We have audited the translation and, in our opinion, the consolidated financial statements expressed in yen have been translated into dollars on the basis set forth in Note 1 to the consolidated financial statements.

/s/ KPMG AZSA & Co.

Tokyo, Japan
June 29, 2010

F-2

Report of Independent Registered Public Accounting Firm

The Board of Directors and Shareholders
Komatsu Ltd.:

We have audited the internal control over financial reporting of Komatsu Ltd. as of March 31, 2010, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting, which appears in Item 15. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S. generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, Komatsu Ltd. maintained, in all material respects, effective internal control over financial reporting as of March 31, 2010, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).The Company acquired Komatsu Australia Corporate Finance Pty. Ltd. (KACF) during the year ended March 31,2010, and the Company’s management excluded from its assessment of the effectiveness of the internal control over financial reporting of Komatsu Ltd. as of March 31, 2010, the internal control over financial reporting of KACF associated with total assets of 55,059 million yen and total revenues of 7,693 million yen included in the consolidated financial statements of Komatsu Ltd. and subsidiaries as of and for the year ended March 31, 2010. Our audit of internal control over financial reporting of Komatsu Ltd. also excluded an evaluation of the internal control over financial reporting of KACF.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Komatsu Ltd. and subsidiaries as of March 31, 2010 and 2009, and the related consolidated statements of income, equity and cash flows for each of the years in the three-year period ended March 31, 2010, expressed in Japanese yen, and our report dated June 29, 2010 expressed an unqualified opinion on those consolidated financial statements.

/s/ KPMG AZSA & Co.

Tokyo, Japan
June 29, 2010

F-3

Consolidated Balance Sheets

Komatsu Ltd. and Consolidated Subsidiaries
March 31, 2010 and 2009

					Thousands of
					U.S. dollars
	Millions of yen				(Note 1)
Assets	2010		2009		2010
Current assets
Cash and cash equivalents (Note 10)	¥	82,429	¥	90,563	$	886,333
Time deposits		1,132		44		12,172
Trade notes and accounts receivable, less allowance for doubtful receivables of ¥14,941 million ($160,656 thousand) in 2010 and ¥15,330 million in 2009 (Notes 1, 5 and 26)		447,693		373,901		4,813,903
Inventories (Notes 1 and 6)		396,416		507,357		4,262,538
Deferred income taxes and other current assets (Notes 1, 7, 10, 16, 20, 21, 22, 24 and 26)		112,451		131,374		1,209,151
Total current assets		1,040,121		1,103,239		11,184,097
Long-term trade receivables (Note 5)		150,972		102,969		1,623,355
Investments
Investments in and advances to affiliated companies (Notes 1 and 8)		24,002		19,249		258,086
Investment securities (Notes 1, 7, 21 and 22)		60,467		53,854		650,183
Other		2,399		12,017		25,795
Total investments		86,868		85,120		934,064
Property, plant and equipment—less accumulated depreciation (Notes 1, 9, 10 and 17)		525,100		525,462		5,646,237
Goodwill (Notes 1 and 11)		29,570		28,661		317,957
Other intangible assets (Notes 1 and 11)		61,729		60,346		663,753
Deferred income taxes and other assets (Notes 1, 16, 20, 21, 22 and 26)		64,695		63,262		695,645
	¥	1,959,055	¥	1,969,059	$	21,065,108

The accompanying Notes to Consolidated Financial Statements are an integral part of these balance sheets.

F-4

							Thousands of
							U.S. dollars
	Millions of yen						(Note 1)
Liabilities and Equity	2010			2009			2010
Current liabilities
Short-term debt (Note 12)	¥	123,438		¥	220,087		$	1,327,290
Current maturities of long-term debt (Notes 10, 12, 17 and 21)		105,956			87,662			1,139,312
Trade notes, bills and accounts payable		207,024			214,375			2,226,065
Income taxes payable (Note 16)		22,004			10,818			236,602
Deferred income taxes and other current liabilities (Notes 1, 16, 20, 21, 22 and 24)		183,324			199,345			1,971,226
Total current liabilities		641,746			732,287			6,900,495
Long-term liabilities
Long-term debt (Notes 10, 12, 17 and 21)		356,985			292,106			3,838,548
Liability for pension and retirement benefits (Notes 1 and 13)		46,354			53,822			498,430
Deferred income taxes and other liabilities (Notes 1, 16, 20, 21 and 22)		37,171			42,510			399,689
Total long-term liabilities		440,510			388,438			4,736,667
Total liabilities		1,082,256			1,120,725			11,637,162
Commitments and contingent liabilities (Note 19)		—			—			—
Equity
Komatsu Ltd. shareholders’ equity (Notes 1 and 14)
Common stock:
Authorized 3,955,000,000 shares in 2010 and 2009 Issued 998,744,060 shares in 2010 and 2009 Outstanding 968,039,976 shares in 2010 and 967,822,292 shares in 2009		67,870			67,870			729,785
Capital surplus		140,421			140,092			1,509,903
Retained earnings:
Appropriated for legal reserve		31,983			28,472			343,903
Unappropriated		724,090			719,222			7,785,914
Accumulated other comprehensive income (loss) (Notes 1, 7, 13 and 15)		(95,634	)		(105,744	)		(1,028,323	)
Treasury stock at cost, 30,704,084 shares in 2010 and 30,921,768 shares in 2009 (Notes 14)		(34,755	)		(34,971	)		(373,709	)
Total Komatsu Ltd. shareholders’ equity		833,975			814,941			8,967,473
Noncontrolling interests		42,824			33,393			460,473
Total equity		876,799			848,334			9,427,946
	¥	1,959,055		¥	1,969,059		$	21,065,108

F-5

Consolidated Statements of Income

Komatsu Ltd. and Consolidated Subsidiaries
Years ended March 31, 2010, 2009 and 2008

										Thousands of
										U.S. dollars
	Millions of yen									(Note 1)
	2010			2009			2008			2010
Net sales (Notes 1 and 8)	¥	1,431,564		¥	2,021,743		¥	2,243,023		$	15,393,161
Cost of sales (Notes 17 and 25)		1,101,559			1,510,408			1,590,963			11,844,720
Selling, general and administrative expenses (Notes 17 and 25)		249,286			322,677			317,474			2,680,495
Impairment loss on long-lived assets (Note 1, 9 and 25)		3,332			16,414			2,447			35,828
Impairment loss on goodwill (Note 1 and 11)		—			2,003			2,870			—
Other operating income (expenses), net (Note 25)		(10,352	)		(18,293	)		3,581			(111,312	)
Operating income		67,035			151,948			332,850			720,806
Other income (expenses), net (Note 25)		(2,056	)		(23,166	)		(10,640	)		(22,107	)
Interest and dividend income		6,158			8,621			10,265			66,215
Interest expense		(8,502	)		(14,576	)		(16,699	)		(91,419	)
Other, net		288			(17,211	)		(4,206	)		3,097
Income from continuing operations before income taxes and equity in earnings of affiliated companies		64,979			128,782			322,210			698,699
Income taxes (Notes 1 and 16)
Current		32,722			60,511			104,142			351,849
Deferred		(7,358	)		(18,218	)		11,652			(79,118	)
Total		25,364			42,293			115,794			272,731
Income from continuing operations before equity in earnings of affiliated companies		39,615			86,489			206,416			425,968
Equity in earnings of affiliated companies		1,588			396			6,845			17,075
Income from continuing operations		41,203			86,885			213,261			443,043
Income from discontinued operations less applicable income taxes (Note 4)		—			—			4,967			—
Net income		41,203			86,885			218,228			443,043
Less net income attributable to noncontrolling interests		(7,644	)		(8,088	)		(9,435	)		(82,194	)
Net income attributable to Komatsu Ltd.	¥	33,559		¥	78,797		¥	208,793		$	360,849
	Yen									U.S. cents
Per share data (Notes 1 and 18):
Income from continuing operations attributable to Komatsu Ltd.:
Basic	¥	34.67		¥	79.95		¥	204.88		¢	37.28
Diluted		34.65			79.89			204.61			37.26
Income from discontinued operations attributable to Komatsu Ltd.:
Basic		—			—			4.99			—
Diluted		—			—			4.98			—
Net income attributable to Komatsu Ltd.:
Basic		34.67			79.95			209.87			37.28
Diluted		34.65			79.89			209.59			37.26
Cash dividends per share (Note 1)		26.00			44.00			38.00			27.96

The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.

F-6

Consolidated Statements of Equity

Komatsu Ltd. and Consolidated Subsidiaries
Years ended March 31, 2010, 2009 and 2008

	Millions of yen
						Retained earnings					Accumulated						Total
						Appropriated					other						Komatsu Ltd.			Non-
	Common		Capital			for legal		Unappro-			comprehensive			Treasury			shareholders’			controlling
	stock		surplus			reserve		priated			income (loss)			stock			equity			interests			Total equity
Balance at March 31, 2007	¥	67,870	¥	137,155		¥	24,267	¥	517,450		¥	33,501		¥	(3,526	)	¥	776,717		¥	19,774		¥	796,491
Cash dividends									(37,810	)								(37,810	)		(4,156	)		(41,966	)
Transfer to retained earnings appropriated for legal reserve							2,447		(2,447	)								—						—
Other changes																		—			7,416			7,416
Comprehensive income (loss)
Net income									208,793									208,793			9,435			218,228
Other comprehensive income (loss), for the period, net of tax (Note 15)
Foreign currency translation adjustments												(43,661	)					(43,661	)		(2,225	)		(45,886	)
Net unrealized holding gains (losses) on securities available for sale												(15,071	)					(15,071	)		(7	)		(15,078	)
Pension liability adjustments												(3,908	)					(3,908	)		2			(3,906	)
Net unrealized holding gains on derivative instruments												360						360			—			360
Comprehensive income																		146,513			7,205			153,718
Issuance and exercise of stock acquisition rights (Notes 1 and 14)				598														598						598
Purchase of treasury stock															(340	)		(340	)					(340	)
Sales of treasury stock				417											1,031			1,448						1,448
Balance at March 31, 2008	¥	67,870	¥	138,170		¥	26,714	¥	685,986		¥	(28,779	)	¥	(2,835	)	¥	887,126		¥	30,239		¥	917,365
Cash dividends									(43,803	)								(43,803	)		(3,939	)		(47,742	)
Transfer to retained earnings appropriated for legal reserve							1,758		(1,758	)								—						—
Other changes																		—			3,335			3,335
Comprehensive income (loss)
Net income									78,797									78,797			8,088			86,885
Other comprehensive income (loss), for the period, net of tax (Note15)
Foreign currency translation adjustments												(49,695	)					(49,695	)		(4,333	)		(54,028	)
Net unrealized holding gains (losses) on securities available for sale												(16,090	)					(16,090	)		4			(16,086	)
Pension liability adjustments												(10,027	)					(10,027	)		(1	)		(10,028	)
Net unrealized holding gains (losses) on derivative instruments												(1,153	)					(1,153	)		—			(1,153	)
Comprehensive income																		1,832			3,758			5,590
Issuance and exercise of stock acquisition rights (Notes 1 and 14)				352														352						352
Purchase of treasury stock															(33,090	)		(33,090	)					(33,090	)
Sales of treasury stock				1,570											954			2,524						2,524
Balance at March 31, 2009	¥	67,870	¥	140,092		¥	28,472	¥	719,222		¥	(105,744	)	¥	(34,971	)	¥	814,941		¥	33,393		¥	848,334
Cash dividends									(25,180	)								(25,180	)		(3,368	)		(28,548	)
Transfer to retained earnings appropriated for legal reserve							3,511		(3,511	)								—						—
Other changes																		—			2,531			2,531
Comprehensive income (loss)
Net income									33,559									33,559			7,644			41,203
Other comprehensive income (loss), for the period, net of tax (Note15)
Foreign currency translation adjustments												(904	)					(904	)		1,897			993
Net unrealized holding gains on securities available for sale												5,480						5,480			—			5,480
Pension liability adjustments												4,920						4,920			2			4,922
Net unrealized holding gains on derivative instruments												614						614			725			1,339
Comprehensive income																		43,669			10,268			53,937
Issuance and exercise of stock acquisition rights (Notes 1 and 14)				413														413						413
Purchase of treasury stock															(40	)		(40	)					(40	)
Sales of treasury stock				(84	)										256			172						172
Balance at March 31, 2010	¥	67,870	¥	140,421		¥	31,983	¥	724,090		¥	(95,634	)	¥	(34,755	)	¥	833,975		¥	42,824		¥	876,799

F-7

	Thousands of U.S. dollars (Note 1)
						Retained earnings					Accumulated						Total
						Appropriated					other						Komatsu Ltd.			Non-
	Common		Capital			for legal		Unappro-			comprehensive			Treasury			shareholders’			controlling
	stock		surplus			reserve		priated			income (loss)			stock			equity			interests			Total equity
Balance at March 31, 2009	$	729,785	$	1,506,366		$	306,151	$	7,733,570		$	(1,137,033	)	$	(376,032	)	$	8,762,807		$	359,065		$	9,121,872
Cash dividends									(270,753	)								(270,753	)		(36,216	)		(306,969	)
Transfer to retained earnings appropriated for legal reserve							37,752		(37,752	)								—						—
Other changes																		—			27,214			27,214
Comprehensive income (loss)
Net income									360,849									360,849			82,194			443,043
Other comprehensive income (loss), for the period, net of tax (Note15)
Foreign currency translation adjustments												(9,720	)					(9,720	)		20,398			10,678
Net unrealized holding gains on securities available for sale												58,925						58,925			—			58,925
Pension liability adjustments												52,903						52,903			22			52,925
Net unrealized holding gains on derivative instruments												6,602						6,602			7,796			14,398
Comprehensive income																		469,559			110,410			579,969
Issuance and exercise of stock acquisition rights (Notes 1 and 14)				4,441														4,441						4,441
Purchase of treasury stock															(430	)		(430	)					(430	)
Sales of treasury stock				(904	)										2,753			1,849						1,849
Balance at March 31, 2010	$	729,785	$	1,509,903		$	343,903	$	7,785,914		$	(1,028,323	)	$	(373,709	)	$	8,967,473		$	460,473		$	9,427,946

F-8

Consolidated Statements of Cash Flows

Komatsu Ltd. and Consolidated Subsidiaries
Years ended March 31, 2010, 2009 and 2008

										Thousands of
										U.S. dollars
	Millions of yen									(Note 1)
	2010			2009			2008			2010
Operating activities
Net income	¥	41,203		¥	86,885		¥	218,228		$	443,043
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		91,319			98,354			75,664			981,925
Deferred income taxes		(7,358	)		(18,218	)		15,016			(79,118	)
Net loss (gain) from sale of investment securities and subsidiaries		(679	)		3,543			(8,045	)		(7,301	)
Net gain on sale of property		(373	)		(269	)		(3,169	)		(4,011	)
Loss on disposal of fixed assets		2,244			5,561			3,313			24,129
Impairment loss on long-lived assets		3,332			16,414			2,447			35,828
Impairment loss on goodwill		—			2,003			2,870			—
Pension and retirement benefits, net		(55	)		3,378			(10,782	)		(592	)
Changes in assets and liabilities:
Decrease (increase) in trade receivables		(71,459	)		103,355			(83,855	)		(768,376	)
Decrease (increase) in inventories		117,707			(22,307	)		(65,884	)		1,265,666
Increase (decrease) in trade payables		(8,354	)		(148,655	)		12,586			(89,828	)
Increase (decrease) in income taxes payable		11,311			(40,507	)		(2,913	)		121,624
Other, net		3,323			(10,762	)		5,509			35,731
Net cash provided by operating activities		182,161			78,775			160,985			1,958,720
Investing activities
Capital expenditures		(92,401	)		(145,670	)		(117,571	)		(993,559	)
Proceeds from sale of property		11,212			6,414			19,425			120,559
Proceeds from sale of available for sale investment securities		1,005			703			601			10,806
Purchases of available for sale investment securities		(4,826	)		(6,785	)		(4,663	)		(51,892	)
Proceeds from sale of subsidiaries, net of cash disposed		661			—			16,372			7,108
Acquisition of subsidiaries and equity investees, net of cash acquired		1,107			(223	)		(42,717	)		11,903
Collection of loan receivables		11,559			7,736			7,778			124,290
Disbursement of loan receivables		(667	)		(6,381	)		(6,315	)		(7,172	)
Decrease in time deposits, net		(617	)		(1,162	)		(1,092	)		(6,634	)
Net cash used in investing activities		(72,967	)		(145,368	)		(128,182	)		(784,591	)
Financing activities
Proceeds from long-term debt		155,641			129,327			82,791			1,673,559
Repayments on long-term debt		(73,052	)		(88,058	)		(48,868	)		(785,505	)
Increase (decrease) in short-term debt, net		(139,067	)		127,589			634			(1,495,344	)
Repayments of capital lease obligations		(31,240	)		(30,770	)		(15,168	)		(335,914	)
Sale (purchase) of treasury stock, net		132			(32,685	)		691			1,419
Dividends paid		(25,180	)		(43,803	)		(37,810	)		(270,753	)
Other, net		(3,597	)		(4,381	)		308			(38,677	)
Net cash provided by (used in) financing activities		(116,363	)		57,219			(17,422	)		(1,251,215	)
Effect of exchange rate change on cash and cash equivalents		(965	)		(2,073	)		(5,570	)		(10,376	)
Net increase (decrease) in cash and cash equivalents		(8,134	)		(11,447	)		9,811			(87,462	)
Cash and cash equivalents, beginning of year		90,563			102,010			92,199			973,795
Cash and cash equivalents, end of year	¥	82,429		¥	90,563		¥	102,010		$	886,333

The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.

F-9

Notes to Consolidated Financial Statements

Komatsu Ltd. and Consolidated Subsidiaries

1. Description of Business, Basis of Financial Statement Presentation and Summary of Significant Accounting Policies

Description of Business

Komatsu Ltd. (“Company”) and subsidiaries (together “Komatsu”) primarily manufacture and market various types of construction, mining and utility equipment throughout the world. Komatsu is also engaged in the manufacture and sale of industrial machinery and others.

The consolidated net sales of Komatsu for the year ended March 31, 2010, consisted of the following: Construction, Mining and Utility Equipment — 88.6%, Industrial Machinery and Others — 11.4%.

Sales are made principally under the Komatsu brand name, and are almost entirely through sales subsidiaries and sales distributors. These subsidiaries and distributors are responsible for marketing and distribution and primarily sell to retail dealers in their geographical area. Of consolidated net sales for the year ended March 31, 2010, 77.4% were generated outside Japan, with 22.7% in the Americas, 8.9% in Europe and CIS, 18.9% in China, 20.9% in Asia (excluding Japan and China) and Oceania, and 6.0% in the Middle East and Africa.

The manufacturing operations of Komatsu are conducted primarily at plants in Japan, United States, Germany, United Kingdom, Sweden, Indonesia, Brazil, Italy, and China.

Basis of Financial Statement Presentation

The accompanying consolidated financial statements are prepared and presented in accordance with generally accepted accounting principals in the United States of America.

The accompanying consolidated financial statements are stated in Japanese yen, the currency of the country in which the Company is incorporated and principally operates. The translation of Japanese yen amounts into United States dollar amounts as of and for the year ended March 31, 2010, is included solely for the convenience of readers and has been made at the rate of ¥93 to $1, the approximate rate of exchange prevailing at the Federal Reserve Bank of New York on March 31, 2010. Such translation should not be construed as a representation that Japanese yen amounts could be converted into United States dollars at the above or any other rate.

F-10

Summary of Significant Accounting Policies

(1) Consolidation and Investments in Affiliated Companies

The consolidated financial statements include the accounts of the Company and all of its majority-owned domestic and foreign subsidiaries, except for certain immaterial subsidiaries.

The accounts of any variable interest entities that must be consolidated under Financial Accounting Standards Board (“FASB”) Accounting Standard Codification^TM (“ASC”) 810, “Consolidation” because the Company has been determined to be the primary beneficiary, are included in the consolidated financial statements. The consolidated balance sheets as of March 31, 2010 and 2009, include assets of ¥29,601 million ($318,290 thousand) and ¥32,866 million, respectively, of consolidated variable interest entities, which engage in equipment leasing in Europe. The majority of these assets are trade notes and accounts receivable, and long-term trade receivables.

Investments in 20 to 50% owned affiliated companies whereby Komatsu has the ability to exercise significant influence over the operational and financial policies of a company are accounted for by the equity method.

(2) Foreign Currency Translation and Transactions

Assets and liabilities of foreign operations are translated at the exchange rates in effect at each fiscal year-end, and income and expenses of foreign operations are translated at the average rates of exchange prevailing during each fiscal year in consolidating the financial statements of overseas subsidiaries. The resulting translation adjustments are included as a separate component of accumulated other comprehensive income (loss) in the accompanying consolidated financial statements. All foreign currency transaction gains and losses are included in other income (expenses) in the period incurred.

(3) Allowance for Doubtful Trade Receivables

Komatsu records allowance for doubtful receivables as the best estimate of the amount of probable credit losses in Komatsu’s existing receivables. The amount is determined based on historical experience, credit information of individual customers, and assessment of overdue receivables. An additional allowance for individual receivable is recorded when Komatsu becomes aware of a customer’s inability to meet its financial obligations, such as in the case of bankruptcy filings or deterioration of the customer’s business performance. The amount of estimated credit losses is further adjusted to reflect changes in customer circumstances.

(4) Inventories

Inventories are stated at the lower of cost or market. Komatsu determines cost of work in process and finished products using the specific identification method based on actual costs accumulated under a job-order cost system. The cost of finished parts is determined principally using the first-in first-out method. Cost of materials and supplies is stated at average cost.

(5) Investment Securities

Komatsu’s investments in debt and marketable equity securities are categorized as available-for-sale securities which are stated at fair value. Changes in fair values are included as a separate component of accumulated other comprehensive income (loss) in the accompanying consolidated financial statements.

F-11

Unrealized losses on marketable securities are charged against net earnings when a decline in market value below initial cost is determined to be other than temporary based primarily on the financial condition and near term prospects of the issuer and the extent and length of the time of the decline.

In assessing other-than-temporary impairment of investment securities which are stated at cost, Komatsu considers the financial condition and prospects of each investee company and other relevant factors. Impairment to be recognized is measured based on the amount by which the carrying amount of the investment securities exceeds its estimated fair value which is determined using discounted cash flows or other valuation techniques considered appropriate.

(6) Property, Plant and Equipment, and Related Depreciation

Property, plant and equipment are stated at cost, less accumulated depreciation. Depreciation is computed principally using the declining-balance method at rates based on the estimated useful lives of the assets. The weighted average depreciation periods are 23 years for buildings and 9 years for machinery and equipment. Effective rates of depreciation for buildings, machinery and equipment for the years ended March 31, 2010, 2009 and 2008, were as follows:

	2010			2009			2008
Buildings		9	%		9	%		9	%
Machinery and equipment		23	%		25	%		26	%

Certain leased machinery and equipment are accounted for as capital leases. The aggregate cost included in property, plant and equipment and related accumulated amortization as of March 31, 2010 and 2009 were as follows:

					Thousands of
	Millions of yen				U.S. dollars
	2010		2009		2010
Aggregate cost	¥	136,171	¥	124,198	$	1,464,204
Accumulated amortization		49,512		37,417		532,387

Accumulated amortization related to capital leases are included in accumulated depreciation.

Ordinary maintenance and repairs are charged to expense as incurred. Major replacements and improvements are capitalized. When properties are retired or otherwise disposed of, the costs of those properties and the related accumulated depreciation are relieved from the consolidated balance sheets and the differences between the costs of those properties and the related accumulated depreciation are recognized in other operating income (expenses) of the consolidated statements of income.

(7) Goodwill and Other Intangible Assets

Komatsu uses the acquisition method of accounting for business combinations. Goodwill is tested for impairment at least annually. Intangible assets with useful life are amortized over their respective estimated useful lives and reviewed for impairment whenever there is an indicator of possible impairment. An impairment loss would be recognized when the carrying amount of an asset or an asset group exceeds the estimated undiscounted cash flows expected to be generated by the asset or an asset group. The amount of the impairment loss to be recorded is determined by the difference between the fair value of the asset or an asset group using a discounted cash flow valuation model and carrying value. Any recognized intangible assets determined to have an indefinite useful life are not to be amortized, but instead tested for impairment annually based on its fair value until its life is determined to no longer be indefinite.

(8) Revenue Recognition

Komatsu recognizes revenue when (1) persuasive evidence of an arrangement exists, (2) delivery has occurred or services have been rendered for customers or dealers, (3) sales price is fixed or determinable, and (4) collectability is reasonably assured.

Revenue from sales of products including construction, mining and utility equipment and industrial machinery is recognized when title and risk of ownership is transferred to independently owned and operated customers or dealers, which occurs upon the attainment of customer acceptance or when installation is completed. The conditions of acceptance are governed by the terms of the contract or arrangement. For arrangements with multiple elements, which may include any combination of products, installation and maintenance, Komatsu allocates revenue to each element based on its relative fair value if such elements meet the criteria for treatment as a separate unit of accounting. When Komatsu enters into a separate contract to render transportation or technical advice, principally related to a sale of large-sized industrial machinery such as large presses, these service revenues are accounted for separately from the product sale and recognized at the completion of the service delivery specified in the contract.

Service revenues from repair and maintenance and from transportation are recognized at the completion of service delivery. Revenues from long-term fixed price maintenance contracts are recognized ratably over the contract period.

Certain consolidated subsidiaries rent construction equipment to customers. Rent revenue is recognized on a straight-line basis over the rental period.

Revenues are recorded net of discounts. In addition, taxes collected from customers and remitted to governmental authorities on revenue-producing transactions are accounted for on a net basis and therefore are excluded from revenues in the consolidated statements of income.

F-12

(9) Income Taxes

Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences and carryforwards are expected to be realized or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

Komatsu uses a specific identification method to release the residual tax effects associated with components of accumulated other comprehensive income (loss) resulting from a change in tax law or rate.

If a tax position meets the more-likely-than-not recognition threshold based on the technical merits of the position, Komatsu recognizes the benefit of such position in the financial statements. The benefit of the tax position is measured at the largest amount of benefit that is greater than 50 percent likely of being realized upon settlement with appropriate taxing authority. For the years ended March 31, 2010, 2009 and 2008, Komatsu did not have material unrecognized tax benefits and thus, no significant interest and penalties related to unrecognized tax benefits were recognized.

(10) Product Warranties

Komatsu establishes a liability for estimated product warranty cost at the time of sale. Estimates for accrued product warranty cost are primarily based on historical experience and are classified as other current liabilities.

(11) Pension and Retirement Benefits

Komatsu recognizes the overfunded or underfunded status of the defined benefit plans as an asset or liability in the consolidated balance sheet, with a corresponding adjustment to accumulated other comprehensive income, net of tax.

Amortization of actuarial net gain or loss is included as a component of Komatsu’s net periodic pension cost for defined benefit plans for a year if, as of the beginning of the year, that unrecognized net gain or loss exceeds 10 percent of the greater of (1) the projected benefit obligation or (2) the fair value of that plan’s assets.

In such case, the amount of amortization recognized is the resulting excess divided by average remaining service period of active employees expected to receive benefits under the plan. The expected return on plan assets is determined based on the historical long-term rate of return on plan assets. The discount rate is determined based on the rates of return of high-quality fixed income investments currently available and expected to be available during the period to maturity of the pension benefits.

(12) Share-Based Compensation

Komatsu recognizes share-based compensation expense using the fair value method. Compensation expense is measured at grant-date fair value of the share-based award and charged to expense over the vesting period.

(13) Per Share Data

Basic net income attributable to Komatsu Ltd. per share has been computed by dividing net income attributable to Komatsu Ltd. by the weighted-average number of common shares outstanding during each fiscal year, after deducting treasury shares. Diluted net income attributable to Komatsu Ltd. per share reflects the potential dilution computed on the basis that all stock options were exercised (less the number of treasury shares assumed to be purchased from proceeds using the average market price of the Company’s common shares) to the extent that each is not antidilutive.

Dividends per share shown in the accompanying consolidated statements of income are based on dividends approved and paid in each fiscal year.

(14) Cash and Cash Equivalents

Cash and cash equivalents include highly liquid investments with an original maturity of three months or less at the date of purchase.

(15) Derivative Financial Instruments

Komatsu uses various derivative financial instruments to manage its interest rate and foreign exchange exposure.

All derivatives, including derivatives embedded in other financial instruments, are measured at fair value and recognized as either assets or liabilities on the consolidated balance sheet. Changes in the fair values of derivative instruments not designated or not qualifying as hedges and any ineffective portion of qualified hedges are recognized in earnings in the current period. Changes in the fair values of derivative instruments which qualify as fair value hedges are recognized in earnings, along with changes in the fair value of the hedged item. Changes in the fair value of the effective portions of cash flow hedges are reported in accumulated other comprehensive income (loss), and recognized in earnings when the hedged item is recognized in earnings.

(16) Impairment of Long-Lived Assets and Long-Lived Assets to be Disposed of

Long-lived assets and certain identifiable intangibles to be held and used by Komatsu are reviewed for impairment based on a cash flow analysis of the asset or an asset group whenever events or changes in circumstances indicate that the carrying amount of an asset or an asset group may not be recoverable. The assets to be held for use are considered to be impaired when estimated undiscounted cash flows expected to result from the use of the assets and their eventual disposition is less than their carrying amounts. The impairment losses are measured as the amount by which the carrying amount of the asset or an asset group exceeds the fair value. Long-lived assets and identifiable intangibles to be disposed of are reported at the lower of carrying amount or fair value less cost to sell.

F-13

(17) Use of Estimates

Komatsu has made a number of estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses presented in consolidated financial statements prepared in conformity with U.S. GAAP. Actual results could differ from the estimates and assumptions.

Komatsu has identified several areas where it believes estimates and assumptions are particularly critical to the financial statements. These are the determination of the useful lives of Property, Plant and Equipment, the allowance for doubtful receivables, impairment of long-lived assets and goodwill, pension liabilities and expenses, product warranty liabilities, fair value of financial instruments, realization of deferred tax assets, securitization of trade notes and accounts receivable, income tax uncertainties and other contingencies. The current economic environment has increased the degree of uncertainty inherent in those estimates.

(18) Recently Adopted Accounting Standards

In the fiscal year ended March 31, 2010, Komatsu adopted ASC 805, “Business Combinations”. ASC 805 establishes principles and requirements for how an acquirer recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, any noncontrolling interest in the acquiree and the goodwill acquired or gain from a bargain purchase. ASC 805 also establishes disclosure requirements to enable the evaluation of the nature and financial effects of the business combination. The adoption of ASC 805 did not have a material impact on our consolidated results of operations and financial condition.

In the fiscal year ended March 31, 2010, Komatsu adopted ASC 810, “Consolidation”. ASC 810 establishes accounting and reporting standards for the noncontrolling interests in a subsidiary and for the deconsolidation of a subsidiary. ASC 810 also establishes disclosure requirements that clearly identify and distinguish between the controlling and noncontrolling interests, and requires the separate disclosure of income attributable to controlling and noncontrolling interests. Komatsu has retrospectively applied the presentation and disclosure requirements of ASC 810.

2. Supplemental Cash Flow Information

Additional cash flow information and noncash investing and financing activities for the years ended March 31, 2010, 2009 and 2008, are as follows:

							Thousands of
	Millions of yen						U.S. dollars
	2010		2009		2008		2010
Additional cash flow information:
Interest paid	¥	8,533	¥	14,403	¥	16,639	$	91,753
Income taxes paid		9,797		111,508		110,674		105,344
Noncash investing and financing activities:
Capital lease obligations incurred	¥	14,285	¥	29,762	¥	28,159	$	153,602

F-14

3. Acquisition and Divestiture

(1) Komatsu NTC Ltd.

On January 16, 2008, the Company decided to purchase additional shares of NIPPEI TOYAMA CORPORATION (it was renamed Komatsu NTC Ltd., hereinafter “NTC”) through a tender offer at ¥1,250 per share with the purpose of making NTC a wholly owned subsidiary of the Company. The purchase price was determined by comprehensively taking into consideration the market price of NTC common stock, NTC’s financial condition and future earnings prospects. As a result, the Company purchased 32,594,444 shares for ¥40,743 million in cash tendered in the period from January 22, 2008 through March 17, 2008. Prior to the acquisition, the Company held a 29.3% equity interest in NTC and accounted for the investment by the equity method. As a result of the additional investment, the Company’s ownership increased to 93.7% and NTC became a consolidated subsidiary of the Company effective March 25, 2008.

NTC is a manufacturer of transfer machines and various kinds of grinding machines used for manufacturing automobile engines in the machine tools market as well as laser machines and wire-saws for semiconductor and solar cell industries in the industrial machinery market. The Company has concluded that the acquisition of NTC will promote business development on a global scale, collaboration in R&D, and joint development of new business domains that would lead to the reinforcement of its industrial machinery business.

Following is a summary of the assets acquired and liabilities assumed adjusted to reflect purchase price allocation as of the date of acquisition:

	Millions of yen
Current assets	¥	59,831
Property, plant and equipment		22,861
Intangible assets		29,219
Goodwill		12,815
Other assets		5,123
Total assets acquired		129,849
Current liabilities		(53,882	)
Long-term liabilities		(17,291	)
Noncontrolling interests		(2,479	)
Total liabilities assumed		(73,652	)
Net assets acquired	¥	56,197

Intangible assets of ¥29,219 million consist of intangible assets subject to amortization of ¥21,852 million and intangible assets not subject to amortization of ¥7,367 million. The intangible assets subject to amortization mainly include customer relationships of ¥14,000 million, technology assets of ¥4,475 million and software of ¥2,194 million. The amortization periods are 17, 17 and 5 years, respectively. The intangible assets not subject to amortization are trademarks of ¥7,367 million.

The goodwill of ¥12,815 million was assigned to the industrial machinery and others segment. The goodwill is not deductible for tax purpose.

The differences between net assets acquired of ¥56,197 million and purchase consideration including direct costs of ¥41,234 million represents the portion of the net assets previously held and accounted for under the equity method in period prior to the acquisition of a controlling interest.

The business results of NTC from the date of acquisition to March 31, 2008 are included as equity in earnings in the consolidated statements of income for the fiscal year ended March 31, 2008, and are consolidated for the fiscal year ended March 31, 2009.

The following table presents unaudited pro forma consolidated operating results for Komatsu as if the acquisition of NTC had occurred on April 1, 2007. The unaudited pro forma consolidated operating results are for information purposes only and are not intended to represent what Komatsu’s consolidated results of operation would have been if the acquisition had actually occurred on those dates.

	Millions of yen
	2008
Sales	¥	2,317,784
Net income attributable to Komatsu Ltd.	¥	211,975

	Yen
	2008
Net income attributable to Komatsu Ltd. per share
Basic	¥	213.07
Diluted	¥	212.79
	2008

The Company and NTC entered into a share exchange agreement with the purpose of making NTC a wholly owned subsidiary of the Company in April, 2008. The Company’s ownership of NTC became 100.0% at August 1, 2008, the effective date of the share exchange. The additional acquisition did not have material impact on purchase price allocation as of the date of acquisition or pro forma consolidated operating results for Komatsu as if the additional acquisition of NTC had occurred on April 1, 2007.

F-15

(2) BIGRENTAL Co., Ltd.

During February 2008 the Company acquired 57.9% of the shares in BIGRENTAL Co., Ltd (hereinafter “BR”). The acquisition cost of the shares was ¥8,564 million and was paid in cash.

BR is a construction equipment rental company with a business presence in Tohoku and northern Kanto regions of Japan. The Company acquired BR with the expectation to strengthen its rental business and to expand its rental and used equipment business on a global scale.

In addition, a synergy from integration was expected to arise from the effective use of resources, such as personnel, assets and offices.

Following is a summary of the assets acquired and liabilities assumed adjusted to reflect purchase price allocation as of the date of acquisition:

	Millions of yen
Current assets	¥	9,423
Property, plant and equipment		39,260
Intangible assets		3,133
Goodwill		1,533
Other assets		922
Total assets acquired		54,271
Current liabilities		(12,191	)
Long-term liabilities		(31,807	)
Noncontrolling interest		(1,709	)
Total liabilities assumed		(45,707	)
Net assets acquired	¥	8,564

Total intangible assets of ¥3,133 million consist primarily of customer relationships of ¥1,182 million, business model of ¥1,182 million and software of ¥667 million. The amortization periods are 7, 10 and 5 years, respectively.

The goodwill of ¥1,533 million was assigned to the construction, mining and utility equipment segment. The goodwill is not deductible for tax purposes.

The business results of BR are not included in the consolidated statements of income for the fiscal year ended March 31, 2008 and the business results of BR are included in the consolidated financial statements of income for the fiscal year ended March 31, 2009.

On an unaudited pro forma basis, net sales, net income attributable to Komatsu Ltd. and the per share information of Komatsu, with assumed acquisition dates for BR of April 1, 2007 would not differ materially from the amounts reported in the consolidated financial statements for the fiscal years ended March 31, 2008.

Komatsu Rental Japan Ltd. (hereinafter “KR”), a consolidated subsidiary of the Company, and BR entered into a share exchange agreement with the purpose of making BR a wholly owned subsidiary of KR in February 2008. The Company’s ownership in BR increased to 79.0% from 57.9% at April 1, 2008, the effective date of the share exchange. The additional acquisition did not have material impact on purchase price allocation as of the date of acquisition or pro forma consolidated operating results for Komatsu as if the additional acquisition of BR had occurred on April 1, 2007. BR was merged with KR in April 2009.

F-16

(3) Komatsu Australia Corporate Finance Pty. Ltd.

In May, 2009, Komatsu acquired the additional shares of Komatsu Australia Corporate Finance Pty. Ltd. (hereinafter “KACF”) according to a capital increase of KACF at ¥1,684 million ($18,107 thousand), 3,144,898 shares out of 3,489,796 shares.

Prior to the additional acquisition, Komatsu held a 50.0% equity interest in KACF and accounted for the investment by the equity method. As a result of the additional investment, Komatsu’s ownership increased to 60.0% and KACF became a consolidated subsidiary of Komatsu.

Komatsu expects the acquisition will expand its business in relation to construction and mining equipment in the entire value chain including retail finance in Oceania strengthening its control and governance to KACF.

Following is a summary of the consideration paid for KACF and the assets acquired and liabilities assumed adjusted to reflect purchase price allocation as of the date of acquisition as well as the fair value at the acquisition date of the noncontrolling interest:

				Thousands of
	Millions of yen			U.S. dollars
Consideration
Cash and cash equivalents	¥	1,684		$	18,107
Fair value of total consideration transferred		1,684			18,107
Fair value of Komatsu’s equity interest in KACF held before the business combination		696			7,484
	¥	2,380		$	25,591
Recognized amounts of identifiable assets and liabilities assumed Current assets	¥	34,478		$	370,731
Property, plant and equipment		15,692			168,731
Intangible assets		2			22
Other assets		232			2,495
Total assets acquired		50,404			541,979
Current liabilities		(33,174	)		(356,710	)
Long-term liabilities		(13,999	)		(150,527	)
Total liabilities assumed		(47,173	)		(507,237	)
Net assets acquired		3,231			34,742
Noncontrolling interest		(1,587	)		(17,065	)
Goodwill		736			7,914
	¥	2,380		$	25,591

The goodwill of ¥736 million ($7,914 thousand) was assigned to the construction, mining and utility equipment segment. The goodwill is not deductible for tax purposes.

Remeasurement to fair value its 50% equity interest in KACF held before the business combination did not have a material impact on consolidated income statement for the year ended March 31, 2010.

The amounts of KACF’s sales and net income attributable to Komatsu Ltd. included in Komatsu’s consolidated income statement for the year ended March 31, 2010 were immaterial. The sales and net income attributable to Komatsu Ltd. of the combined entity had the acquisition date been April 1, 2009 or April 1, 2008 would not also differ materially from the amounts reported in the consolidated financial statements for the fiscal years ended March 31, 2010 and 2009.

F-17

4. Discontinued Operations

On April 2, 2007, the outdoor power equipment (OPE) business of Komatsu Zenoah Co., which was allocated to a reporting unit in the industrial machinery and others segment was sold to a Japanese subsidiary of Husqvarna AB of Sweden. Accordingly, the OPE business of Komatsu Zenoah Co. and its subsidiaries engaging in the OPE business are no longer consolidated in Komatsu’s results. The gain on sale of the OPE business of Komatsu Zenoah Co. is included in “income from discontinued operations less applicable income taxes” in the consolidated statements of income. The cash flows attributable to the discontinued operations are not presented separately from the cash flows attributable to activities of the continuing operations in the consolidated statements of cash flows.

Selected financial information in connection with the discontinued operations for the year ended March 31, 2008 is as follows:

	Millions of yen
	2008
Net sales	¥	—
Income before income taxes, and equity in earnings of affiliated companies (only gain on sale of the OPE business of Komatsu Zenoah Co.)		8,331
Income taxes		3,364
Income from discontinued operations less applicable income taxes	¥	4,967

5. Trade Notes and Accounts Receivable

Receivables at March 31, 2010 and 2009 are summarized as follows:

							Thousands of
	Millions of yen						U.S. dollars
	2010			2009			2010
Trade notes	¥	82,954		¥	70,807		$	891,978
Accounts receivable		379,680			318,424			4,082,581
Total		462,634			389,231			4,974,559
Less: allowance		(14,941	)		(15,330	)		(160,656	)
Net trade receivables-current	¥	447,693		¥	373,901		$	4,813,903
Long-term trade receivables	¥	150,972		¥	102,969		$	1,623,355

Installment and lease receivables (less unearned interest) are included in trade notes and accounts receivable and long-term trade receivables.

The leases are accounted for as sales-type leases. Equipment sales revenue from sales-type leases are recognized at the inception of the lease.

At March 31, 2010 and 2009, lease receivables comprised the following:

							Thousands of
	Millions of yen						U.S. dollars
	2010			2009			2010
Minimum lease payments receivable	¥	166,983		¥	111,158		$	1,795,516
Unearned income		(16,078	)		(9,979	)		(172,882	)
Net lease receivables	¥	150,905		¥	101,179		$	1,622,634

The residual values of leased assets at March 31, 2010 and 2009 were not material.

Cash flows received from the sale of trade notes and accounts receivable for the years ended March 31, 2010, 2009 and 2008 were ¥13,072 million ($140,559 thousand), ¥243,495 million and ¥343,457 million.

Certain consolidated subsidiaries retain responsibility to service sold trade notes and accounts receivable that are sold pursuant to a securitization transaction, however contractual servicing fees are not received from the third parties separately. The investors and the trusts that hold the receivables have no or limited recourse rights to certain subsidiaries’ assets in case of debtors’ default. Appropriate provisions have been established for potential losses relating to the limited recourse of the sold receivables. Also certain subsidiaries, except for a certain U.S. subsidiary, as transferor do not retain any interest in the receivables sold.

The components of securitized trade receivables and other assets managed together at March 31, 2010 and 2009 were as follows:

							Thousands of
	Millions of yen						U.S. dollars
	2010			2009			2010
Total amount of trade receivables that are managed and securitized	¥	635,610		¥	595,968		$	6,834,516
Assets transferred		(22,004	)		(103,768	)		(236,602	)
Total amount of trade receivable on balance sheet	¥	613,606		¥	492,200		$	6,597,914

F-18

A certain U.S. subsidiary’s retained interests, which are included in the recourse provisions, are subordinate to investor’s interests. Their values are estimated based on the present value of future expected cash flows, using certain key assumptions such as a weighted average life, prepayment speed over the life and expected credit losses over the life.

Key assumptions used in measuring the fair value of retained interests related to securitization transactions completed during the year ended March 31, 2010 and 2009 were as follows:

	2010			2009
Weighted-average life	23 months			28 months
Prepayment speed over the life		0.6	%		0.6	%
Expected credit losses over the life		5.6	%		2.4	%

The carrying amount of retained interest was ¥1,378 million ($14,817 thousand) liability and ¥919 million asset as of March 31, 2010 and 2009, respectively. The impacts of 10% and 20% changes of the key assumptions on the fair value of retained interest as of March 31, 2010 are immaterial.

6. Inventories

At March 31, 2010 and 2009, inventories comprised the following:

					Thousands of
	Millions of yen				U.S. dollars
	2010		2009		2010
Finished products, including finished parts held for sale	¥	254,157	¥	328,643	$	2,732,871
Work in process		102,096		128,345		1,097,807
Materials and supplies		40,163		50,369		431,860
Total	¥	396,416	¥	507,357	$	4,262,538

7. Investment Securities

Investment securities at March 31, 2010 and 2009, primarily consisted of securities available for sale. Komatsu does not have intentions to sell these securities within a year as of the balance sheet date.

The cost, gross unrealized holding gains and losses, and fair value for such investment securities by major security types at March 31, 2010 and 2009, are as follows:

	Millions of yen
			Gross unrealized holding
	Cost		Gains		Losses		Fair value
At March 31, 2010
Investment securities:
Marketable equity securities available for sale	¥	24,988	¥	22,235	¥	45	¥	47,178
Other investment securities at cost		13,289
Other		—
	¥	38,277
At March 31, 2009
Investment securities:
Marketable equity securities available for sale	¥	24,112	¥	13,419	¥	465	¥	37,066
Other investment securities at cost		16,788
Other		101
	¥	41,001

	Thousands of U.S. dollars
			Gross unrealized holding
	Cost		Gains		Losses		Fair value
At March 31, 2010
Investment securities:
Marketable equity securities available for sale	$	268,688	$	239,086	$	484	$	507,290
Other investment securities at cost		142,893
Other		—
	$	411,581

F-19

Other investment securities primarily include non-marketable equity securities. The fair value of other investment securities was not estimated as it was not practicable to estimate the fair value of investments and no significant events or changes that might have effected the fair value of those investments were observed.

Unrealized holding gains and losses are included as a component of accumulated other comprehensive income (loss) until realized.

Proceeds from the sale of investment securities available for sale were ¥1,005 million ($10,806 thousand), ¥703 million and ¥601 million for the years ended March 31, 2010, 2009 and 2008, respectively.

Net realized gains or losses on impairment or sale of investment securities available for sale during the years ended March 31, 2010, 2009 and 2008, amounted to gains of ¥679 million ($7,301 thousand), losses of ¥9,188 million and losses of ¥289 million, respectively. Such gains and losses were included in “other income (expenses)” in the accompanying consolidated statements of income. The cost of the marketable securities and investment securities sold was computed based on the average cost method.

In connection with the share exchange of SUMCO CORPORATION and SUMCO TECHXIV CORPORATION effective May 30, 2008, the Company exchanged shares of SUMCO TECHXIV CORPORATION for those of SUMCO CORPORATION. In accordance with the ASC 325, “Investments — Other,” a non-cash gain of ¥6,148 million was recorded in “Other income (expenses)” in the accompanying consolidated statement of income for the year ended March 31, 2009. The Company recorded impairment losses of ¥5,645 million on its investment in SUMCO CORPORATION in connection with the decline of its fair value as “Other income (expenses)” in the accompanying consolidated statements of income for the year ended March 31, 2009. Gross unrealized holding gain of its investment in SUMCO CORPORATION was ¥3,478 million ($37,398 thousand) at March 31, 2010.

8. Investments in and Advances to Affiliated Companies

At March 31, 2010 and 2009, investments in and advances to affiliated companies comprised the following:

					Thousands of
	Millions of yen				U.S. dollars
	2010		2009		2010
Investments in capital stock	¥	21,688	¥	16,348	$	233,204
Advances		2,314		2,901		24,882
Total	¥	24,002	¥	19,249	$	258,086

The investments in and advances to affiliated companies relate to 20% to 50% owned companies whereby Komatsu has the ability to exercise significant influence over the operational and financial policies.

Dividends received from affiliated companies were ¥329 million ($3,538 thousand), ¥869 million and ¥286 million during the years ended March 31, 2010, 2009 and 2008, respectively.

Trade notes and accounts receivable from affiliated companies at March 31, 2010 and 2009, were ¥17,838 million ($ 191,806 thousand) and ¥14,954 million, respectively.

Short-term loans receivable from affiliated companies at March 31, 2010 and 2009, were ¥2,222 million ($23,892 thousand) and ¥2,994 million, respectively.

Trade notes and accounts payable to affiliated companies at March 31, 2010 and 2009, were ¥10,180 million ($109,462 thousand) and ¥5,242 million, respectively.

Net sales for the years ended March 31, 2010, 2009 and 2008, included net sales to affiliated companies in the amounts of ¥37,058 million ($398,473 thousand), ¥41,821 million and ¥61,128 million, respectively.

Intercompany profits (losses) have been eliminated in the consolidated financial statements.

As of March 31, 2010 and 2009, consolidated unappropriated retained earnings included Komatsu’s share of undistributed earnings of affiliated companies accounted for by the equity method in the amount of ¥9,379 million ($100,849 thousand) and ¥9,743 million, respectively.

The difference between the carrying value of the investments in affiliated companies and Komatsu’s equity in the underlying net assets of such affiliated companies is insignificant as of March 31, 2010 and 2009.

Investments in affiliated companies include certain equity securities which have been quoted on an established market. The carrying amount of such equity securities at March 31, 2009 was ¥401 million. The quoted market value of the equity securities at March 31, 2009 was ¥469 million. There were no such investments in affiliated companies at March 31, 2010.

F-20

Summarized financial information for affiliated companies at March 31, 2010 and 2009, and for the years ended March 31, 2010, 2009 and 2008, is as follows:

					Thousands of
	Millions of yen				U.S. dollars
	2010		2009		2010
Current assets	¥	107,097	¥	142,366	$	1,151,581
Net property, plant and equipment—less accumulated depreciation		42,207		40,403		453,839
Investments and other assets		22,246		21,991		239,204
Total assets	¥	171,550	¥	204,760	$	1,844,624
Current liabilities	¥	79,894	¥	104,734	$	859,075
Noncurrent liabilities		35,156		48,161		378,022
Equity		56,500		51,865		607,527
Total liabilities and equity	¥	171,550	¥	204,760	$	1,844,624

							Thousands of
	Millions of yen						U.S. dollars
	2010		2009		2008		2010
Net sales	¥	168,418	¥	205,798	¥	333,505	$	1,810,946
Net income	¥	3,229	¥	1,300	¥	16,731	$	34,720

9. Property, Plant and Equipment

The major classes of property, plant and equipment at March 31, 2010 and 2009, are as follows:

							Thousands of
	Millions of yen						U.S. dollars
	2010			2009			2010
Land	¥	92,355		¥	93,864		$	993,065
Buildings		329,554			315,518			3,543,591
Machinery and equipment		710,511			682,241			7,639,903
Construction in progress		24,653			23,468			265,086
Total		1,157,073			1,115,091			12,441,645
Less: accumulated depreciation		(631,973	)		(589,629	)		(6,795,408	)
Net property, plant and equipment	¥	525,100		¥	525,462		$	5,646,237

During March 2009, Komatsu decided to shut down Mooka plant in the construction, mining and utility equipment segment and Komatsu plant in the industrial machinery and others segment and transfer their production capacity to other plants. Impairment losses were recorded ¥4,728 million for Mooka plant, ¥1,808 million for Komatsu plant for the year ended March 31, 2009. Impairment losses were insignificant for the year ended March 31, 2010.

10. Pledged Assets

At March 31, 2010, assets pledged as collateral for long-term debt and guarantees for debt are as follows:

			Thousands of
	Millions of yen		U.S. dollars
Cash and cash equivalents	¥	2	$	21
Other current assets		1,887		20,290
Property, plant and equipment—less accumulated depreciation		4,660		50,108
Total	¥	6,549	$	70,419

The above assets were pledged against the following liabilities:

			Thousands of
	Millions of yen		U.S. dollars
Appearing in the consolidated balance sheets as:
Long-term debt	¥	4,660	$	50,107
Guarantees for debt		1,889		20,312
Total	¥	6,549	$	70,419

F-21

11. Goodwill and Other Intangible Assets

The information for intangible assets other than goodwill at March 31, 2010 and 2009 are as follows:

	Millions of yen														Thousands of U.S. dollars
	2010							2009							2010
	Gross					Net		Gross					Net		Gross					Net
	carrying		Accumulated			carrying		carrying		Accumulated			carrying		carrying		Accumulated			carrying
	amount		amortization			amount		amount		amortization			amount		amount		amortization			amount
Other intangible assets subject to amortization:
Software	¥	26,059	¥	(4,640	)	¥	21,419	¥	23,386	¥	(3,031	)	¥	20,355	$	280,204	$	(49,892	)	$	230,312
Other		39,242		(11,629	)		27,613		36,262		(9,179	)		27,083		421,957		(125,043	)		296,914
Total		65,301		(16,269	)		49,032		59,648		(12,210	)		47,438		702,161		(174,935	)		527,226
Other intangible assets not subject to amortization							12,697							12,908							136,527
Total other intangible assets						¥	61,729						¥	60,346						$	663,753

At March 31, 2010, the amounts of other in other intangible assets subject to amortization mainly consist of intangible assets resulted from the acquisition of additional shares of NTC for the fiscal year ended March 31, 2008.

For the fiscal year ended March 31, 2009, Komatsu recognized an impairment loss of ¥2,831 million related to an asset group engaged in the rental business in Japan within the construction, mining and utility equipment segment due to significant deterioration in the rental business. The entire impairment loss was allocated to certain definite lived intangible assets within the asset group. The fair value used to measure the impairment of the asset group was based on discounted cash flows using Komatsu’s weighted average cost of capital.

The aggregate amortization expense of other intangible assets subject to amortization for the year ended March 31, 2010, 2009 and 2008 were ¥8,633 million ($92,828 thousand), ¥12,611 million and ¥5,487 million, respectively. The future estimated amortization expenses for each of five years relating to intangible assets currently recorded in the consolidated balance sheet are as follows:

			Thousands of
Year ending March 31	Millions of yen		U.S. dollars
2011	¥	8,358	$	89,871
2012		7,883		84,763
2013		6,782		72,925
2014		4,538		48,796
2015		3,143		33,796

The changes in carrying amounts of goodwill for the year ended March 31, 2010 and 2009 were as follow:

	Millions of yen
	Construction, Mining			Industrial Machinery
	and Utility Equipment			and Others
	segment			segment			Total
Balance at March 31, 2008
Goodwill	¥	25,194		¥	13,355		¥	38,549
Accumulated impairment losses		(6,176	)		(540	)		(6,716	)
	¥	19,018		¥	12,815		¥	31,833
Goodwill acquired during the year		628			588			1,216
Impairment losses		(2,003	)		—			(2,003	)
Foreign exchange impact		(2,318	)		—			(2,318	)
Other		(67	)		—			(67	)
Balance at March 31, 2009
Goodwill		23,437			13,943			37,380
Accumulated impairment losses		(8,179	)		(540	)		(8,719	)
	¥	15,258		¥	13,403		¥	28,661
Goodwill acquired during the year		736			—			736
Foreign exchange impact		173			—			173
Balance at March 31, 2010
Goodwill		24,346			13,943			38,289
Accumulated impairment losses		(8,179	)		(540	)		(8,719	)
	¥	16,167		¥	13,403		¥	29,570

F-22

	Thousands of U.S. dollars
	Construction, Mining			Industrial Machinery
	and Utility Equipment			and Others
	segment			segment			Total
Balance at March 31, 2009
Goodwill	$	252,011		$	149,925		$	401,936
Accumulated impairment losses		(87,946	)		(5,807	)		(93,753	)
	$	164,065		$	144,118		$	308,183
Goodwill acquired during the year		7,914			—			7,914
Foreign exchange impact		1,860			—			1,860
Balance at March 31, 2010
Goodwill		261,785			149,925			411,710
Accumulated impairment losses		(87,946	)		(5,807	)		(93,753	)
	$	173,839		$	144,118		$	317,957

For the fiscal year ended March 31, 2009, Komatsu recognized an impairment loss of ¥2,003 million, on goodwill allocated to Japanese rental business reporting unit in the construction, mining and utility equipment segment, due to unfavorable business circumstance of the business. This impairment loss was recognized based on the difference by which the carrying value of the goodwill of the reporting unit exceeded its implied fair value as determined based on estimated future discounted cash flow.

Goodwill acquired during the fiscal year ended March 31, 2010 resulted from the acquisition of additional shares of KACF. Goodwill acquired during the fiscal year ended March 31, 2009 principally resulted from the acquisition of additional shares of NTC and acquisition of shares of BR.

12. Short-Term and Long-Term Debt

Short-term debt at March 31, 2010 and 2009, consisted of the following:

					Thousands of
	Millions of yen				U.S. dollars
	2010		2009		2010
Banks, insurance companies and other financial institutions	¥	92,438	¥	125,087	$	993,957
Commercial paper		31,000		95,000		333,333
Short-term debt	¥	123,438	¥	220,087	$	1,327,290

F-23

The weighted-average annual interest rates applicable to short-term debt outstanding at March 31, 2010 and 2009, were 1.9% and 3.2%, respectively. Certain consolidated subsidiaries have entered into contracts for committed credit lines totaling ¥50,082 million ($538,516 thousand) and have unused committed lines of credit amounting to ¥23,741 million ($255,280 thousand) with certain financial institutions at March 31, 2010, which are available for full and immediate borrowings. The Company is party to a committed ¥160,000 million ($1,720,430 thousand) commercial paper program and unused committed commercial paper program amounting to ¥129,000 million ($1,387,097 thousand) at March 31, 2010, is available upon the satisfaction of certain customary procedural requirements. Long-term debt at March 31, 2010 and 2009, consisted of the following:

							Thousands of
	Millions of yen						U.S. dollars
	2010			2009			2010
Long-term debt with collateral (Note 10):
Banks, insurance companies and other financial institutions, maturing in 2010, weighted-average rate 1.8%	¥	50		¥	1,400		$	538
Long-term debt without collateral:
Banks, insurance companies and other financial institutions, maturing serially through 2010-2025, weighted-average rate 2.3%		228,311			162,261			2,454,957
Euro Medium-Term Notes
maturing serially through 2010-2013, weighted-average rate 0.7%		68,142			63,332			732,710
1.45% Unsecured Bonds due 2009		—			10,000			—
0.98% Unsecured Bonds due 2010		—			200			—
1.66% Unsecured Bonds due 2012		20,000			20,000			215,054
0.85% Unsecured Bonds due 2012		10,000			—			107,527
1.53% Unsecured Bonds due 2013		30,000			30,000			322,580
1.19% Unsecured Bonds due 2014		30,000			—			322,580
Capital lease obligations (Note 17)		72,951			86,399			784,419
Other		3,487			6,176			37,495
Total		462,941			379,768			4,977,860
Less: current maturities		(105,956	)		(87,662	)		(1,139,312	)
Long-term debt	¥	356,985		¥	292,106		$	3,838,548

In 1996, the Company, Komatsu Finance America Inc. and Komatsu Finance (Netherlands) B.V. registered the US$1.0 billion Euro Medium-Term Note Program (“the Program”) on the London Stock Exchange. On April 1, 1999, the registered amount of the Program was increased to US$1.2 billion. On October 14, 2003, Komatsu Europe Coordination Center N.V. and on September 25, 2008, Komatsu Capital Europe S.V. were added as an issuer under the Program, respectively. At March 31, 2010, the issuers under the Program were the Company, Komatsu Finance America Inc. and Komatsu Capital Europe S.A. Under the Program, each of the issuers may from time to time issue notes denominated in any currency as may be agreed between the relevant issuers and dealers. The issuers under the Program issued ¥25,856 million ($278,022 thousand) during the fiscal year ended March 31,2010, and ¥10,000 million during the fiscal year ended March 31,2009 of Euro Medium-Term Notes with various interest rates and maturity dates.

The Company has established a program to issue up to ¥100,000 million ($1,075,269 thousand) of variable term bonds.

As is customary in Japan, substantially all bank loans are made under agreements which provide that the banks may require, under certain conditions, the borrower to provide collateral, additional collateral or guarantors for its loans.

Lending banks have a right to offset cash deposited with them against any debt or obligation that becomes due and, in the case of default and certain other specified events, against all other debt payable to the banks.

Under certain loan agreements, the lender may require the borrower to submit proposals for the payment of dividends and other appropriations of earnings for the lender’s review and approval before presentation to the shareholders. Komatsu has never received such a request.

Annual maturities of long-term debt subsequent to March 31, 2010, excluding market value adjustments of ¥7,171 million ($77,108 thousand) are as follows:

			Thousands of
Year ending March 31	Millions of yen		U.S. dollars
2011	¥	104,111	$	1,119,473
2012		120,638		1,297,183
2013		118,775		1,277,150
2014		57,678		620,194
2015		52,247		561,796
2016 and thereafter		2,321		24,957
Total	¥	455,770	$	4,900,753

F-24

13. Liability for Pension and Other Retirement Benefits

The Company’s employees, with certain minor exceptions, are covered by a severance payment and a defined benefit cash balance pension plan. The plan provides that approximately 60% of the employee benefits are payable as a pension payment, commencing upon retirement at age 60 (mandatory retirement age) and that the remaining benefits are payable as a lump-sum severance payment based on remuneration, years of service and certain other factors at the time of retirement. The plan also provides for lump-sum severance payments, payable upon earlier termination of employment.

Under the cash balance pension plan, each employee has an account which is credited yearly based on the current rate of pay and market-related interest rate.

Certain subsidiaries have various funded pension plans and/ or unfunded severance payment plans for their employees, which are based on years of service and certain other factors. The Company and certain subsidiaries’ funding policy is to contribute the amounts to provide not only for benefits attributed to service to date but also for those expected to be earned in the future.

The reconciliation of beginning and ending balances of the benefit obligations and the fair value of the plan assets of the defined benefit plans are as follows:

							Thousands of
	Millions of yen						U.S. dollars
	2010			2009			2010
Change in benefit obligation:
Benefit obligation, beginning of year	¥	139,569		¥	143,214		$	1,500,742
Service cost		7,224			8,460			77,677
Interest cost		3,745			3,885			40,269
Actuarial loss (gain)		4,048			462			43,527
Plan participants’ contributions		49			98			527
Acquisition		—			348			—
Plan amendment		208			—			2,236
Curtailment		—			330			—
Benefits paid		(17,446	)		(13,234	)		(187,591	)
Foreign currency exchange rate change		55			(3,994	)		591
Benefit obligation, end of year	¥	137,452		¥	139,569		$	1,477,978
Change in plan assets:
Fair value of plan assets, beginning of year	¥	88,252		¥	107,183		$	948,946
Actual return on plan assets		10,329			(12,044	)		111,065
Employer contributions		6,465			4,549			69,516
Plan participants’ contributions		49			98			527
Acquisition		—			66			—
Benefits paid		(10,788	)		(8,496	)		(116,000	)
Foreign currency exchange rate change		96			(3,104	)		1,032
Fair value of plan assets, end of year	¥	94,403		¥	88,252		$	1,015,086
Funded status, end of year	¥	(43,049	)	¥	(51,317	)	$	(462,892	)
Prepaid benefit cost	¥	22		¥	184		$	237
Other current liability		(89	)		(623	)		(957	)
Accrued benefit liability		(42,982	)		(50,878	)		(462,172	)
	¥	(43,049	)	¥	(51,317	)	$	(462,892	)
Amounts recognized in accumulated other comprehensive income (loss):
Actuarial loss	¥	34,979		¥	41,258		$	376,118
Prior service cost		1,370			1,341			14,731
	¥	36,349		¥	42,599		$	390,849

The accumulated benefit obligations for all defined benefit plans were ¥130,571 million ($1,403,989 thousand) and ¥131,620 million, respectively, at March 31, 2010 and 2009.

F-25

Information for pension plans with accumulated benefit obligations in excess of plan assets and pension plans with projected benefit obligations in excess of plan assets is as follows:

					Thousands of
	Millions of yen				U.S. dollars
	2010		2009		2010
Plans with accumulated benefit obligations in excess of plan assets:
Accumulated benefit obligations	¥	119,363	¥	127,171	$	1,283,473
Plan assets		82,806		82,868		890,387
Plans with projected benefit obligations in excess of plan assets:
Projected benefit obligations	¥	134,348	¥	139,506	$	1,444,602
Plan assets		91,255		88,182		981,237

Components of net periodic pension cost

Net periodic cost of the companies’ defined benefit plans for the years ended March 31, 2010, 2009 and 2008, consisted of the following components:

										Thousands of
	Millions of yen									U.S. dollars
	2010			2009			2008			2010
Service cost - Benefits earned during the year	¥	7,224		¥	8,460		¥	6,390		$	77,677
Interest cost on projected benefit obligation		3,745			3,885			3,776			40,269
Expected return on plan assets		(2,452	)		(3,029	)		(3,210	)		(26,366	)
Amortization of actuarial loss		2,478			1,622			570			26,645
Amortization of prior service cost		179			535			825			1,925
Curtailment and settlement loss (gain)		(28	)		475			—			(301	)
Net periodic cost	¥	11,146		¥	11,948		¥	8,351		$	119,849

Other changes in plan assets and benefit obligations recognized in other comprehensive income (loss) for the years ended March 31, 2010 and 2009 are summarized as follows:

							Thousands of
	Millions of yen						U.S. dollars
	2010			2009			2010
Current year actuarial loss	¥	(3,829	)	¥	15,870		$	(41,172	)
Amortization of actuarial loss		(2,450	)		(2,031	)		(26,344	)
Current year prior service cost		208			(5	)		2,237
Amortization of prior service cost		(179	)		(601	)		(1,925	)
	¥	(6,250	)	¥	13,233		$	(67,204	)

The estimated actuarial loss and prior service cost for the defined benefit plans that will be amortized from accumulated other comprehensive income (loss) into net periodic cost over the next fiscal year are summarized as follows.

			Thousands of
	Millions of yen		U.S. dollars
Actuarial loss	¥	2,203	$	23,688
Prior service cost		182		1,957

Information with respect to the defined benefit plans is as follows:

Assumptions

Weighted-average assumptions used to determine benefit obligations at March 31:

	Domestic plans						Foreign plans
	2010			2009			2010			2009
Discount rate		2.0	%		2.0	%		6.0	%		6.9	%
Assumed rate of increase in future compensation levels (Point-based benefit system)		3.8	%		3.9	%		—			—
Assumed rate of increase in future compensation levels		2.6	%		2.4	%		4.4	%		4.1	%

F-26

Weighted-average assumptions used to determine net periodic benefit cost for the years ended March 31:

	Domestic plans									Foreign plans
	2010			2009			2008			2010			2009			2008
Discount rate		2.0	%		2.0	%		1.9	%		6.9	%		6.7	%		5.6	%
Assumed rate of increase in future compensation levels (Point-based benefit system)		3.9	%		3.9	%		3.7	%		—			—			—
Assumed rate of increase in future compensation levels		2.4	%		2.0	%		2.3	%		4.1	%		4.4	%		4.1	%
Expected long-term rate of return on plan assets		1.9	%		1.9	%		1.9	%		7.6	%		7.5	%		7.6	%

The Company and a certain domestic subsidiary have defined benefit cash balance pension plans. These companies adopt the assumed rate of increase in future compensation levels under the point-based benefit system.

The Company and certain subsidiaries determine the expected long-term rate of return on plan assets based on the consideration of the current expectations for future returns and actual historical returns of each plan asset category.

Plan assets

In order to secure long-term comprehensive earnings, the Company and certain subsidiaries’ investment policies are designed to ensure adequate plan assets to provide future payments of pension benefits to eligible participants. Taking into account the expected long-term rate of return on plan assets, the Company and certain subsidiaries formulate a basic portfolio comprised of the judged optimum combination of equity and debt securities. Plan assets are principally invested in equity securities, debt securities and life insurance company general accounts in accordance with the guidelines of the basic portfolio in order to produce a total return that will match the expected return on a mid-term to long-term basis. The Company and certain subsidiaries evaluate the gap between expected return and actual return of invested plan assets on an annual basis to determine if such differences necessitate a revision in the formulation of the basic portfolio. The Company and certain subsidiaries revise the basic portfolio when and to the extent considered necessary to achieve the expected long-term rate of return on plan assets.

The “Pension and Retirement Benefit Committee” is organized in the Company in order to periodically monitor the employment of such plan assets.

Komatsu’s basic portfolio for plan assets consists of three major components: approximately 35 % is invested in equity securities, approximately 30% is invested in debt securities, and approximately 35% is invested in other investment assets, primarily consisting of investments in life insurance company general accounts.

The equity securities are selected primarily from stocks that are listed on the securities exchanges. Prior to investing, Komatsu has investigated the business condition of the investee companies, and appropriately diversified investments by type of industry and other relevant factors. The debt securities are selected primarily from government bonds and municipal bonds, and corporate bonds. Prior investing, Komatsu has investigated the quality of the issue, including rating, interest rate and repayment dates, and has appropriately diversified the investments. Pooled funds are selected using strategies consistent with the equity described above. As for investments in life insurance company general accounts, the contracts with the insurance companies include a guaranteed interest rate and return of capital. With respect to investments in foreign investment assets, Komatsu has investigated the stability of the underlying governments and economies, the market characteristics such as settlement systems and the taxation systems. For each such investment, Komatsu has selected the appropriate investment country and currency. There is no significant concentration of risk within the portfolio of investments.

The three levels of input used to measure fair value are more full described in Note 22.

F-27

The fair values of benefit plan assets at March 31, 2010, by asset class are as follows:

	Millions of yen
	2010
	Level 1		Level 2		Level 3		Total
Plan assets
Cash	¥	4,486	¥	—	¥	—	¥	4,486
Equity securities
Japanese equities		13,730		—		—		13,730
Foreign equities		17,358		—		—		17,358
Pooled funds		2,650		—		—		2,650
Debt securities
Government bonds and municipal bonds		20,030		1,245		—		21,275
Corporate bonds		—		4,698		—		4,698
Other assets
Life insurance company general accounts		—		29,638		—		29,638
Other		145		—		423		568
Total	¥	58,399	¥	35,581	¥	423	¥	94,403

	Thousands of U.S. dollars
	2010
	Level 1		Level 2		Level 3		Total
Plan assets
Cash	$	48,237	$	—	$	—	$	48,237
Equity securities
Japanese equities		147,634		—		—		147,634
Foreign equities		186,645		—		—		186,645
Pooled funds		28,495		—		—		28,495
Debt securities
Government bonds and municipal bonds		215,376		13,387		—		228,763
Corporate bonds		—		50,516		—		50,516
Other assets
Life insurance company general accounts		—		318,688		—		318,688
Other		1,559		—		4,549		6,108
Total	$	627,946	$	382,591	$	4,549	$	1,015,086

(1)	The plan’s equity securities include common stock of the Company in the amount of ¥48 million ($516 thousand) (0.08% of the Company’s total plan assets) and ¥21 million (0.03% of the Company’s total plan assets) at March 31, 2010 and 2009, respectively.
(2)	The plan’s pooled funds which are primarily hold by the U.S. subsidiaries include listed foreign equity securities primarily consisting U.S. equity.
(3)	The plan’s government bonds and municipal bonds include approximately 50% Japanese bonds and 50% foreign bonds.

Each level into which assets are categorized is based on inputs used to measure the fair value of the assets, and does not indicate the risks of the assets.

Level 1 assets are comprised principally of equity and debt securities, which are valued using quoted prices in active markets. Level 2 assets are comprised of debt securities and investments in life insurance company general accounts. Debt securities are valued using inputs other than quoted prices included within Level 1 that are observable for the assets or liabilities, either directly or indirectly. Investments in life insurance company general accounts are valued at conversion value.

The fair value of level 3 assets, consisting of the investment trusts hold by foreign subsidiaries, was ¥423 million ($4,549 thousand) and ¥377 million ($4,054 thousand) at March 31, 2010 and 2009, respectively. Amounts of actual returns on, and purchases and sales of, these assets during the year ended March 31, 2010 are not material to Komatsu’s consolidated financial position or results of operations.

Cash flows

(1) Contributions

The Company and certain subsidiaries expect to contribute ¥4,346 million ($46,731 thousand) to their benefit plans in the year ending March 31, 2011.

F-28

(2) Estimated future benefit payments

The benefits expected to be paid in each of the next five years, and in the aggregate for the five years thereafter which reflect estimated future employee service are as follows:

			Thousands of
Year ending March 31	Millions of yen		U.S. dollars
2011	¥	13,379	$	143,860
2012		14,039		150,957
2013		11,998		129,011
2014		7,863		84,548
2015		8,805		94,677
Through 2016-2020	¥	44,270	$	476,022

Other postretirement benefit plan

Some U.S. subsidiaries provide certain postretirement health care and life insurance benefits for substantially all of their employees. The plans are contributory, with contributions indexed to salary levels. Employee contributions are adjusted to provide for any costs of the plans in excess of those paid for by the subsidiaries. The policy is to fund the cost of these benefits as claims and premiums are paid. In the fiscal year ended March 31, 2008 certain U.S. subsidiaries established a Voluntary Employees’ Beneficiary Association (“VEBA”) trust to hold assets and pay substantially all of these subsidiaries’ self-funded post employment benefit plan obligations. The VEBA trust arrangement provides for segregation and legal restriction of the plan assets to satisfy plan obligations, and tax deductibility for contributions to the trust, subject to certain tax code limitations.

The reconciliation of beginning and ending balances of the accumulated postretirement benefit obligations and the fair value of the plan assets of the U.S. subsidiaries’ plans are as follows:

							Thousands of
	Millions of yen						U.S. dollars
	2010			2009			2010
Change in accumulated postretirement benefit obligation:
Accumulated postretirement benefit obligation, beginning of year	¥	9,069		¥	9,555		$	97,516
Service cost		231			311			2,484
Interest cost		528			575			5,677
Actuarial loss (gain)		979			150			10,527
Plan amendment		—			(393	)		—
Curtailment		(456	)		—			(4,903	)
Plan participants’ contributions		2			—			22
Medicare Part D		68			74			731
Benefits paid		(659	)		(839	)		(7,086	)
Foreign currency exchange rate change		(346	)		(364	)		(3,721	)
Accumulated postretirement benefit obligation, end of year	¥	9,416		¥	9,069		$	101,247
Change in plan assets:
Fair value of plan assets, beginning of year	¥	6,579		¥	7,521		$	70,742
Actual return on plan assets		1,156			(821	)		12,430
Employer contributions		657			837			7,065
Plan participants’ contributions		2			—			22
Benefits paid		(1,894	)		(839	)		(20,366	)
Foreign currency exchange rate change		(348	)		(119	)		(3,742	)
Fair value of plan assets, end of year	¥	6,152		¥	6,579		$	66,151
Funded status, end of year	¥	(3,264	)	¥	(2,490	)	$	(35,096	)
Prepaid benefit cost	¥	700		¥	677		$	7,527
Other current liabilities		(38	)		(37	)		(408	)
Accrued benefit liability		(3,926	)		(3,130	)		(42,215	)
	¥	(3,264	)	¥	(2,490	)	$	(35,096	)
Amounts recognized in accumulated other comprehensive income (loss):
Actuarial loss	¥	3,502		¥	3,945		$	37,656
Prior service cost		616			686			6,624
	¥	4,118		¥	4,631		$	44,280

Accumulated postretirement benefit obligations exceed plan assets for each of the U.S. subsidiaries’ plans.

F-29

Components of net periodic postretirement benefit cost

Net periodic postretirement benefit cost of the U.S. subsidiaries’ plans for the years ended March 31, 2010, 2009 and 2008, included the following components:

										Thousands of
	Millions of yen									U.S. dollars
	2010			2009			2008			2010
Service cost	¥	231		¥	311		¥	340		$	2,484
Interest cost		528			575			597			5,677
Expected return on plan assets		(324	)		(400	)		(232	)		(3,484	)
Amortization of actuarial loss		250			201			160			2,688
Amortization of prior service cost		70			128			144			753
Curtailment and settlement loss (gain)		(116	)		—			—			(1,247	)
Net periodic postretirement benefit cost	¥	639		¥	815		¥	1,009		$	6,871

Other changes in plan assets and accumulated postretirement benefit obligations recognized in other comprehensive income (loss) for the years ended March 31, 2010 and 2009 are summarized as follows:

							Thousands of
	Millions of yen						U.S. dollars
	2010			2009			2010
Current year actuarial (gain) loss	¥	(309	)	¥	1,371		$	(3,322	)
Amortization of actuarial loss		(134	)		(201	)		(1,441	)
Current year prior service cost		—			(393	)		—
Amortization of prior service cost		(70	)		(128	)		(753	)
	¥	(513	)	¥	649		$	(5,516	)

The estimated actuarial loss and prior service cost for the postretirement benefit plans that will be amortized from accumulated other comprehensive income (loss) into net periodic postretirement benefit cost over the next fiscal year are summarized as follows.

			Thousands of
	Millions of yen		U.S. dollars
Actuarial loss	¥	234	$	2,516
Prior service cost		70		753

Information with respect to the plans is as follows:

Assumptions

Weighted-average assumptions used to determine accumulated postretirement benefit obligations at March 31:

	2010			2009
Discount rate		5.4	%		6.4	%
Assumed rate of increase in future compensation levels		4.0	%		4.0	%
Current healthcare cost trend rate		7.8	%		7.8	%
Ultimate healthcare cost trend rate		4.8	%		4.8	%
Number of years to ultimate healthcare cost trend rate		7			7

Weighted average assumptions used to determine net periodic postretirement benefit cost for the years ended March 31:

	2010			2009			2008
Discount rate		6.4	%		5.9	%		5.5	%
Assumed rate of increase in future compensation levels		4.0	%		4.0	%		4.0	%
Expected long-term rate of return on plan assets		5.5	%		5.5	%		5.5	%
Current healthcare cost trend rate		7.8	%		7.7	%		9.0	%
Ultimate healthcare cost trend rate		4.8	%		4.8	%		5.0	%
Number of years to ultimate healthcare cost trend rate		7			6			5

At March 31, 2010 and 2009, the impact of one percentage point change in the assumed health care cost trend rates was not material to Komatsu’s consolidated financial position or results of operations.

F-30

Plan assets

The U.S. subsidiaries’ investment policies are to provide returns that will maximize principal growth while accepting only moderate risk.

The U.S. subsidiaries’ asset portfolio will be invested in a manner that emphasizes safety of capital while achieving total returns consistent with prudent levels of risk. The basic portfolio for the plan assets are comprised approximately of 35% equity securities and 65% debt securities.

The equity securities are selected primarily from stocks that are listed on the securities exchanges. Prior to investing, Komatsu has investigated the business condition of the invested companies, and appropriately diversified investments by type of industry and other relevant factors. The debt securities are selected primarily from government bonds and municipal bonds, and corporate bonds. Prior investing, Komatsu has investigated the quality of the issue, including rating, interest rate and repayment dates, and has appropriately diversified the investments. Pooled funds are selected using strategies consistent with the equity described above. There is no significant concentration of risk within the portfolio of investments.

The three levels of input used to measure fair value are more full described in Note 22.

The fair values of postretirement benefit plan assets at March 31, 2010, by asset class are as follows:

	Millions of yen
	2010
	Level 1		Level 2		Level 3		Total
Plan assets
Cash	¥	155	¥	—	¥	—	¥	155
Equity securities
Foreign equities		959		—		—		959
Pooled funds		1,113		—		—		1,113
Debt securities
Government bonds		—		2,936		—		2,936
Corporate bonds		—		989		—		989
Total	¥	2,227	¥	3,925	¥	—	¥	6,152

	Thousands of U.S. dollars
	2010
	Level 1		Level 2		Level 3		Total
Plan assets
Cash	$	1,667	$	—	$	—	$	1,667
Equity securities
Foreign equities		10,312		—		—		10,312
Pooled funds		11,968		—		—		11,968
Debt securities
Government bonds		—		31,570		—		31,570
Corporate bonds		—		10,634		—		10,634
Total	$	23,947	$	42,204	$	—	$	66,151

(1)	The plan’s pooled funds include listed foreign equity securities primarily consisting U.S. equity.
(2)	The plan’s government bonds are U.S. government bonds.

Each level into which assets are categorized is based on inputs used to measure the fair value of the assets, and does not indicate the risks of the assets.

Level 1 assets are comprised principally of equity securities, which are valued using quoted prices in active markets. Level 2 assets are comprised of debt securities, which are valued using inputs other than quoted prices included within Level 1 that are observable for the assets or liabilities, either directly or indirectly.

F-31

Cash flows

(1) Contributions

The U.S. subsidiaries expect to contribute ¥38 million ($409 thousand) to their post retirement benefit plans in the year ending March 31, 2011.

(2) Estimated future benefit payments

The benefits expected to be paid in each of the next five years, and in the aggregate for the five years thereafter which reflect estimated future employee service are as follows:

			Thousands of
Year ending March 31	Millions of yen		U.S. dollars
2011	¥	738	$	7,935
2012		765		8,226
2013		786		8,452
2014		807		8,677
2015		825		8,871
Through 2016-2020	¥	4,481	$	48,183

Directors of the Company and domestic subsidiaries are primarily covered by unfunded retirement allowance plans. At March 31, 2010, 2009 and 2008, the amounts required if all directors covered by the plans had terminated their service have been fully accrued. Such amounts are not material to Komatsu’s consolidated financial position or results of operations for any of the periods presented.

Certain subsidiaries maintain various defined contribution plans covering certain employees. The amount of cost recognized for all periods presented is not material to Komatsu’s consolidated financial position or results of operations.

14. Komatsu Ltd. Shareholders’ Equity

(1) Common Stock and Capital Surplus

The Commercial Code of Japan (“the Code”) permitted, upon approval of the Board of Directors, transfer of amounts from capital surplus to common stock. Prior to October 2001, the Company from time to time made free share distributions that were accounted for by a transfer from capital surplus to common stock of the aggregate par value of shares issued. Effective on October 2001, the Code requires no accounting recognition for such free share distribution. Publicly owned corporations in the United States issuing shares in similar transactions would be required to account for them as stock dividends as of the shareholders’ record date by reducing retained earnings and increasing appropriate capital accounts by an amount equal to the fair value of the shares issued.

If such United States practice had been applied to the cumulative free distributions made by the Company, capital surplus at March 31, 2010, would have been increased by ¥103,189 million ($1,109,559 thousand) with a corresponding decrease in unappropriated retained earnings. At March 31, 2010 and 2009, affiliated companies owned 1,094,600 and 1,127,100 shares which represent 0.11% and 0.12% of the Company’s common stock outstanding, respectively.

The Corporate Act, which has been in force since May 1, 2006 (“the Act”), requires a company to obtain the approval of shareholders for transferring an amount between common stock and capital surplus. Common stock and capital surplus also are available for being transferred to other capital surplus or being used to reduce a deficit mainly upon an approval of shareholders.

(2) Retained Earnings Appropriated for Legal Reserve

The Act provides that an amount equal to 10% of retained earnings distributed each fiscal period shall be appropriated as a capital surplus or a legal reserve until the total amount of capital surplus and legal reserve becomes equal to 25% of the amount of common stock.

Legal reserve is available for being transferred to other retained earnings or being used to reduce a deficit mainly upon an approval of shareholders.

(3) Retained Earnings and Dividends

The amount of retained earnings available for dividends under the Act is based on the amount recorded in the Company’s general books of account maintained in accordance with accounting principles generally accepted in Japan. In addition to the Act provision requiring an appropriation for capital surplus or legal reserve as discussed above, the Act imposes certain limitations on the amount of retained earnings available for dividends. Accordingly, total shareholders’ equity of ¥271,404 million ($2,918,323 thousand), included in the Company’s general books of account as of March 31, 2010 is available for dividends under the Act.

F-32

The Board of Directors recommended to and approved by the shareholders, at the general meeting held on June 23, 2010, payment of a cash dividend totaling ¥7,748 million ($83,312 thousand) to shareholders of record on March 31, 2010. In accordance with the Act, the approved dividend has not been reflected in the consolidated financial statements as of March 31, 2010. Dividends are reported in the consolidated statements of equity when approved and paid.

The Act provides that a company can make dividends of earnings anytime with resolution of the shareholders. It also provides that a company can declare an interim dividend once a fiscal year according to its charter of corporation.

(4) Stock Option Plan

The Company intends to transfer treasury shares to directors and certain employees and certain directors of subsidiaries and affiliated companies under an agreement granting the right for them to request such transfers at a predetermined price. The purchase price is the amount calculated by taking the average of the closing prices applicable to ordinary transactions of shares of the Company on the Tokyo Stock Exchange on all days for a month immediately preceding the month in which the date of grant of the right falls and multiplying by 1.05, provided that the exercise price shall not be less than the closing price of the shares of the Company on the Tokyo Stock Exchange on the date of the grant. Based on the resolutions of the shareholders’ meeting on June 24, 2009, June 24, 2008 and June 22, 2007 and the Board of Directors on July 14, 2009, July 15, 2008 and July 10, 2007, the Company issued 642 rights, 463 rights and 562 rights of its share acquisition rights during the years ended March 31, 2010, 2009 and 2008, respectively (The number of shares subject to be issued to one stock acquisition right shall be 1,000 shares.). The options vest 100% on each of the grant dates and are exercisable from September 1, 2010, September 1, 2009 and September 1, 2008, September 3, 2008, respectively.

Komatsu recognizes compensation expense using the fair value method. Compensation expenses during the years ended March 31, 2010, 2009 and 2008 were ¥413 million ($4,441 thousand), ¥376 million and ¥711 million, respectively, and were recoded in selling, general and administrative expenses. Compensation expenses after tax during the years ended March 31, 2010, 2009 and 2008 were ¥246 million ($2,645 thousand), ¥224 million and ¥423 million, respectively.

F-33

The following table summarizes information about stock option activity for the years ended March 31, 2010, 2009 and 2008:

	2010							2009					2008
	Number of			Weighted average				Number of			Weighted average		Number of			Weighted average
	shares			exercise price				shares			exercise price		shares			exercise price
				Yen		U.S. dollars					Yen					Yen
Outstanding at beginning of year		2,891,000		¥	2,022	$	21.74		2,844,000		¥	1,784		3,648,000		¥	1,182
Granted		642,000			1,729		18.59		463,000			2,499		562,000			3,661
Exercised		(200,000	)		595		6.40		(416,000	)		926		(1,366,000	)		947
Outstanding at end of year		3,333,000			2,051		22.05		2,891,000			2,022		2,844,000			1,784
Exercisable at end of year		2,691,000			2,128		22.88		2,428,000			1,931		2,282,000			1,322

The intrinsic values of options exercised were ¥153 million ($1,645 thousand), ¥722 million and ¥3,023 million for the years ended March 31, 2010, 2009 and 2008.

The information for options outstanding and options exercisable at March 31, 2010 are as follows.

	Outstanding												Options Exercisable
											Weighted average												Weighted average
			Weighted average				Intrinsic value				remaining				Weighted average				Intrinsic value				remaining
	Number of		exercise price				Millions of		Thousands of		contractual life		Number of		exercise price				Millions of		Thousands of		contractual life
Exercise Prices	shares		Yen		U.S. dollars		yen		U.S. dollars		years		Shares		Yen		U.S. dollars		yen		U.S. dollars		years
¥651 - 900		330,000	¥	673	$	7.24	¥	425	$	4,570		2.3		330,000	¥	673	$	7.24	¥	425	$	4,570		2.3
¥901 - 1,350		680,000		1,126		12.11		567		6,097		3.3		680,000		1,126		12.11		567		6,097		3.3
¥1,351 - 2,325		1,298,000		2,030		21.83		148		1,591		5.9		656,000		2,325		25.00		—		—		2.2
¥2,326 - 3,700		1,025,000		3,136		33.72		—		—		5.9		1,025,000		3,136		33.72		—		—		5.9
¥651 - 3,700		3,333,000		2,051		22.05		1,140		12,258		5.0		2,691,000		2,128		22.88		992		10,667		4.4

The fair value of each share option award is estimated on the date of grant using a discrete-time model (a binomial model) based on the assumptions noted in the following table. Because a discrete-time model incorporates ranges of assumptions for inputs, those ranges are disclosed. Expected volatilities are based on implied volatilities from historical volatility of the Company’s shares.

F-34

The Company uses historical data to estimate share option exercise and employee departure behavior used in the discrete-time model. The expected term of share options granted represents the period of time that share options granted are expected to be outstanding. The risk-free rate for periods within the contractual term of the share option is based on the Japanese government bond yield curve in effect at the time of grant.

	2010			2009			2008
Grant-date fair value	¥	643 ($6.91	)	¥	813		¥	1,266
Expected term	7 years			7 years			7 years
Risk-free rate		0.17%–1.35	%*		0.60%–1.48	%*		0.76%–1.66	%*
Expected volatility		44.00	%		39.00	%		38.00	%
Expected dividend yield		2.07	%		1.32	%		1.36	%

* Interest rate corresponding to discount periods is applied to risk-free rate, that is as follows:

	1 year			2 years			3 years			4 years			5 years			6 years			7 years			8 years			9 years			10 years
2008		0.76	%		0.87	%		0.98	%		1.08	%		1.19	%		1.29	%		1.39	%		1.48	%		1.57	%		1.66	%
2009		0.60	%		0.71	%		0.82	%		0.94	%		1.02	%		1.07	%		1.07	%		1.16	%		1.33	%		1.48	%
2010		0.17	%		0.24	%		0.32	%		0.48	%		0.63	%		0.74	%		0.88	%		1.03	%		1.19	%		1.35	%

15. Other Comprehensive Income (Loss)

Other comprehensive income (loss) consists of changes in foreign currency translation adjustments, net unrealized holding gains (losses) on securities available for sale, pension liability adjustments and net unrealized holding gains (losses) on certain derivative instruments, and is included in equity of the consolidated balance sheets.

Each component of accumulated other comprehensive income (loss) at March 31, 2010, 2009 and 2008, is as follows:

										Thousands of
	Millions of yen									U.S. dollars
	2010			2009			2008			2010
Foreign currency translation adjustments:
Balance, beginning of year	¥	(84,152	)	¥	(34,457	)	¥	9,204		$	(904,861	)
Adjustment for the year		(904	)		(49,695	)		(43,661	)		(9,720	)
Balance, end of year	¥	(85,056	)	¥	(84,152	)	¥	(34,457	)	$	(914,581	)
Net unrealized holding gains (losses) on securities available for sale:
Balance, beginning of year	¥	8,646		¥	24,736		¥	39,807		$	92,967
Net increase (decrease)		5,480			(16,090	)		(15,071	)		58,925
Balance, end of year	¥	14,126		¥	8,646		¥	24,736		$	151,892
Pension liability adjustments:
Balance, beginning of year	¥	(29,235	)	¥	(19,208	)	¥	(15,300	)	$	(314,355	)
Adjustment for the year		4,920			(10,027	)		(3,908	)		52,903
Balance, end of year	¥	(24,315	)	¥	(29,235	)	¥	(19,208	)	$	(261,452	)
Net unrealized holding gains (losses) on derivative instruments:
Balance, beginning of year	¥	(1,003	)	¥	150		¥	(210	)	$	(10,785	)
Net increase (decrease)		614			(1,153	)		360			6,602
Balance, end of year	¥	(389	)	¥	(1,003	)	¥	150		$	(4,183	)
Total accumulated other comprehensive income (loss)
Balance, beginning of year	¥	(105,744	)	¥	(28,779	)	¥	33,501		$	(1,137,033	)
Other comprehensive income (loss) for the year, net of tax		10,110			(76,965	)		(62,280	)		108,710
Balance, end of year	¥	(95,634	)	¥	(105,744	)	¥	(28,779	)	$	(1,028,323	)

F-35

Tax effects allocated to each component of other comprehensive income (loss) and adjustments are as follows:

	Millions of yen
	Pretax			Tax (expense)			Net of tax
	amount			or benefit			amount
2010:
Foreign currency translation adjustments	¥	(1,196	)	¥	292		¥	(904	)
Net unrealized holding gains (losses) on securities available for sale:
Unrealized holding gains or (losses) arising during the year		9,124			(3,843	)		5,281
Less: reclassification adjustment for (gains) or losses included in net income attributable to Komatsu Ltd.		336			(137	)		199
Net unrealized gains (losses)		9,460			(3,980	)		5,480
Pension liability adjustments
Unrealized holding gains or (losses) arising during the year		3,930			(1,224	)		2,706
Less: reclassification adjustment for (gains) or losses included in net income attributable to Komatsu Ltd.		2,833			(619	)		2,214
Net unrealized gains (losses)		6,763			(1,843	)		4,920
Net unrealized holding gains (losses) on derivative instruments:
Changes in fair value of derivatives		2,121			(1,138	)		983
Net (gains) or losses reclassified into earnings		(621	)		252			(369	)
Net unrealized gains (losses)		1,500			(886	)		614
Other comprehensive income	¥	16,527		¥	(6,417	)	¥	10,110
2009:
Foreign currency translation adjustments	¥	(50,243	)	¥	548		¥	(49,695	)
Net unrealized holding gains (losses) on securities available for sale:
Unrealized holding gains or (losses) arising during the year		(29,333	)		11,432			(17,901	)
Less: reclassification adjustment for (gains) or losses included in net income attributable to Komatsu Ltd.		3,058			(1,247	)		1,811
Net unrealized gains (losses)		(26,275	)		10,185			(16,090	)
Pension liability adjustments
Unrealized holding gains or (losses) arising during the year		(16,843	)		4,420			(12,423	)
Less: reclassification adjustment for (gains) or losses included in net income attributable to Komatsu Ltd.		2,961			(565	)		2,396
Net unrealized gains (losses)		(13,882	)		3,855			(10,027	)
Net unrealized holding gains (losses) on derivative instruments:
Changes in fair value of derivatives		855			(306	)		549
Net (gains) or losses reclassified into earnings		(2,892	)		1,190			(1,702	)
Net unrealized gains (losses)		(2,037	)		884			(1,153	)
Other comprehensive loss	¥	(92,437	)	¥	15,472		¥	(76,965	)
2008:
Foreign currency translation adjustments	¥	(43,661	)	¥	—		¥	(43,661	)
Net unrealized holding gains (losses) on securities available for sale:
Unrealized holding gains or (losses) arising during the year		(30,182	)		15,098			(15,084	)
Less: reclassification adjustment for (gains) or losses included in net income attributable to Komatsu Ltd.		22			(9	)		13
Net unrealized gains (losses)		(30,160	)		15,089			(15,071	)
Pension liability adjustments
Unrealized holding gains or (losses) arising during the year		(8,254	)		3,337			(4,917	)
Less: reclassification adjustment for (gains) or losses included in net income attributable to Komatsu Ltd.		1,699			(690	)		1,009
Net unrealized gains (losses)		(6,555	)		2,647			(3,908	)
Net unrealized holding gains (losses) on derivative instruments:
Changes in fair value of derivatives		1,726			(704	)		1,022
Net (gains) or losses reclassified into earnings		(1,118	)		456			(662	)
Net unrealized gains (losses)		608			(248	)		360
Other comprehensive loss	¥	(79,768	)	¥	17,488		¥	(62,280	)

F-36

	Thousands of U.S. dollars
	Pretax			Tax (expense)			Net of tax
	amount			or benefit			amount
2010:
Foreign currency translation adjustments	$	(12,860	)	$	3,140		$	(9,720	)
Net unrealized holding gains (losses) on securities available for sale:
Unrealized holding gains or (losses) arising during the year		98,108			(41,323	)		56,785
Less: reclassification adjustment for (gains) or losses included in net income attributable to Komatsu Ltd.		3,613			(1,473	)		2,140
Net unrealized gains (losses)		101,721			(42,796	)		58,925
Pension liability adjustments
Unrealized holding gains or (losses) arising during the year		42,258			(13,161	)		29,097
Less: reclassification adjustment for (gains) or losses included in net income attributable to Komatsu Ltd.		30,462			(6,656	)		23,806
Net unrealized gains (losses)		72,720			(19,817	)		52,903
Net unrealized holding gains (losses) on derivative instruments:
Changes in fair value of derivatives		22,806			(12,236	)		10,570
Net (gains) or losses reclassified into earnings		(6,677	)		2,709			(3,968	)
Net unrealized gains (losses)		16,129			(9,527	)		6,602
Other comprehensive income	$	177,710		$	(69,000	)	$	108,710

16. Income Taxes

The sources of income (loss) from continuing operations before income taxes and equity in earnings of affiliated companies and the sources of income taxes for the years ended March 31, 2010, 2009 and 2008, were as follows:

									Thousands of
	Millions of yen								U.S. dollars
	2010			2009			2008		2010
Income (loss) from continuing operations before income taxes and equity in earnings of affiliated companies:
Domestic	¥	(35,965	)	¥	5,426		¥	151,878	$	(386,720	)
Foreign		100,944			123,356			170,332		1,085,419
	¥	64,979		¥	128,782		¥	322,210	$	698,699
Income taxes:
Current—
Domestic	¥	5,254		¥	22,854		¥	53,954	$	56,495
Foreign		27,468			37,657			50,188		295,354
		32,722			60,511			104,142		351,849
Deferred—
Domestic		(6,272	)		(17,008	)		7,779		(67,441	)
Foreign		(1,086	)		(1,210	)		3,873		(11,677	)
		(7,358	)		(18,218	)		11,652		(79,118	)
Total	¥	25,364		¥	42,293		¥	115,794	$	272,731

Total income taxes recognized for the years ended March 31, 2010, 2009 and 2008 were applicable to the following:

										Thousands of
	Millions of yen									U.S. dollars
	2010			2009			2008			2010
Income from continuing operations	¥	25,364		¥	42,293		¥	115,794		$	272,731
Income from discontinued operations		—			—			3,364			—
Other comprehensive income (loss):
Foreign currency translation adjustments		(292	)		(548	)		—			(3,140	)
Net unrealized holding gains (losses) on securities available for sale		3,980			(10,185	)		(15,089	)		42,796
Pension liability adjustments		1,843			(3,855	)		(2,647	)		19,817
Net unrealized holding gains (losses) on derivative instruments		886			(884	)		248			9,527
Total income taxes	¥	31,781		¥	26,821		¥	101,670		$	341,731

F-37

Temporary differences and tax loss carryforwards which gave rise to deferred tax assets and liabilities at March 31, 2010 and 2009, are as follows:

							Thousands of
	Millions of yen						U.S. dollars
	2010			2009			2010
Deferred tax assets:
Allowances provided, not yet recognized for tax	¥	3,332		¥	1,587		$	35,828
Accrued expenses		43,835			52,054			471,345
Property, plant and equipment		13,289			14,117			142,892
Inventories		8,551			8,902			91,946
Net operating loss carryforwards		51,543			26,618			554,226
Research and development expenses		690			461			7,419
Other		31,536			21,854			339,097
Total gross deferred tax assets		152,776			125,593			1,642,753
Less valuation allowance		(49,081	)		(31,420	)		(527,753	)
Total deferred tax assets	¥	103,695		¥	94,173		$	1,115,000
Deferred tax liabilities:
Unrealized holding gains on securities available for sale	¥	7,829		¥	4,213		$	84,183
Deferral of profit from installment sales		104			213			1,118
Property, plant and equipment		11,519			11,807			123,860
Intangible assets		17,503			17,544			188,204
Undistributed earnings of foreign subsidiaries and affiliated companies accounted for by the equity method		3,847			3,080			41,366
Total deferred tax liabilities	¥	40,802		¥	36,857		$	438,731
Net deferred tax assets	¥	62,893		¥	57,316		$	676,269

Net deferred tax assets and liabilities as of March 31, 2010 and 2009 are reflected on the consolidated balance sheets under the following captions:

							Thousands of
	Millions of yen						U.S. dollars
	2010			2009			2010
Deferred income taxes and other current assets	¥	43,390		¥	37,749		$	466,559
Deferred income taxes and other assets		36,467			36,397			392,118
Deferred income taxes and other current liabilities		(128	)		(228	)		(1,376	)
Deferred income taxes and other liabilities		(16,836	)		(16,602	)		(181,032	)
	¥	62,893		¥	57,316		$	676,269

The valuation allowances were ¥22,435 million and ¥30,879 million as of March 31, 2008 and 2007, respectively. The net changes in the total valuation allowance for the years ended March 31, 2010, 2009 and 2008 were an increase of ¥17,661 million ($189,903 thousand), an increase of ¥8,985 million and a decrease of ¥8,444 million, respectively. The increase for the year ended March 31, 2010 was mainly a result of additional valuation allowances recorded on deferred tax assets for net operating loss carryforwards at certain subsidiaries.

In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible and net operating losses available is to be utilized. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment. Based upon the level of historical taxable income and projections for future taxable income over the periods in which the deferred tax assets, net of the existing valuation allowances at March 31, 2010 and 2009, are deductible, management believes it is more likely than not that the companies will realize the benefits of these deductible differences and net operating loss carryforwards. The amount of the deferred tax asset considered realizable, however, could be reduced in the near term if estimates of future taxable income during the carryforward period are reduced.

The Company and its domestic subsidiaries are subject to a National Corporate tax rate of 30%, an inhabitant tax of approximately 6% and a deductible Enterprise tax of approximately 8%, which in the aggregate resulted in a Japanese statutory income tax rate of approximately 40.8%. The inhabitant tax rate and Enterprise tax rate vary by local jurisdiction.

F-38

The differences between the Japanese statutory tax rates and the effective tax rates for the years ended March 31, 2010, 2009 and 2008, are summarized as follows:

	2010			2009			2008
Japanese statutory tax rate		40.8	%		40.8	%		40.8	%
Increase (decrease) in tax rates resulting from:
Increase in valuation allowance		25.2			7.1			0.8
Expenses not deductible for tax purposes		6.8			2.9			2.0
Realization of tax benefits on operating losses of subsidiaries		(0.8	)		(1.4	)		(1.5	)
Income of foreign subsidiaries taxed at lower than Japanese normal rate		(22.6	)		(11.3	)		(5.1	)
Tax credit for research and development expenses		—			(0.7	)		(0.8	)
Realization of loss for investment in a subsidiary		(10.2	)		—			—
Other, net		(0.2	)		(4.6	)		(0.3	)
Effective tax rate		39.0	%		32.8	%		35.9	%

Foreign subsidiaries are subject to income taxes of the countries in which they operate. At March 31, 2010 and 2009, undistributed earnings of foreign subsidiaries aggregated ¥431,834 million ($4,643,376 thousand) and ¥392,766 million, respectively. Komatsu has a policy to distribute a certain portion of undistributed earnings of foreign subsidiaries. As of March 31, 2010 and 2009, Komatsu recognized deferred tax liabilities of ¥601 million ($6,462 thousand) and ¥386 million, respectively, associated with those earnings. As of March 31, 2010 and 2009, Komatsu has not recognized deferred tax liabilities of ¥14,077 million ($151,366 thousand) and ¥13,782 million, respectively, for such portion of undistributed earnings of foreign subsidiaries that the Company intends to reinvest indefinitely. At March 31, 2010, the Company and certain subsidiaries had net operating loss carryforwards aggregating approximately ¥133,798 million ($1,438,688 thousand), which may be used as a deduction in determining taxable income in future periods. The period available to offset future taxable income varies in each tax jurisdiction as follows:

			Thousands of
Year ending March 31, 2010	Millions of yen		U.S. dollars
Within 5 years	¥	9,476	$	101,893
6 to 20 years		121,267		1,303,946
Indefinite periods		3,055		32,849
Total	¥	133,798	$	1,438,688

Although Komatsu believes its estimates of unrecognized tax benefits are reasonable, uncertainties regarding the final determination of income tax audit settlements and any related litigation could affect the total amount of unrecognized tax benefits in the future periods. Based on the information available as of March 31, 2010, Komatsu does not expect significant changes to the unrecognized tax benefits within the next twelve months.

Komatsu files income tax returns in Japan and various foreign tax jurisdictions. In Japan, the Company is no longer subject to regular income tax examinations by the tax authority before and in the fiscal year ended March 31, 2007. In other foreign tax jurisdictions, major subsidiaries are no longer subject to income tax examinations by tax authorities before and in the fiscal year ended March 31, 2005 with few exceptions.

F-39

17. Rent Expenses

Komatsu leases office space and equipment and employee housing under cancelable and non-cancelable lease agreements. Rent expenses under cancelable and non-cancelable operating leases amounted to ¥13,823 million ($148,634 thousand), ¥14,625 million and ¥15,911 million, respectively, for the years ended March 31, 2010, 2009 and 2008. At March 31, 2010, the future minimum lease payments under non-cancelable operating leases and capital leases are as follows:

	Millions of yen							Thousands of U.S. dollars
	Capital			Operating lease				Capital			Operating lease
Year ending March 31	leases			commitments		Total		leases			commitments		Total
2011	¥	23,307		¥	4,783	¥	28,090	$	250,613		$	51,430	$	302,043
2012		28,149			2,994		31,143		302,677			32,194		334,871
2013		14,746			1,853		16,599		158,559			19,925		178,484
2014		7,627			1,022		8,649		82,011			10,989		93,000
2015		1,476			697		2,173		15,871			7,495		23,366
Thereafter		1,264			2,077		3,341		13,591			22,333		35,924
Total minimum lease payments	¥	76,569		¥	13,426	¥	89,995	$	823,322		$	144,366	$	967,688
Less: amounts representing interest		(3,618	)						(38,903	)
Present value of net minimum capital lease payments	¥	72,951						$	784,419

18. Net Income attributable to Komatsu Ltd. per Share

A reconciliation of the numerators and denominators of the basic and diluted net income attributable to Komatsu Ltd. per share computations is as follows:

							Thousands of
	Millions of yen						U.S. dollars
	2010		2009		2008		2010
Income from continuing operations attributable to Komatsu Ltd.	¥	33,559	¥	78,797	¥	203,826	$	360,849
Income from discontinued operations attributable to Komatsu Ltd.		—		—		4,967		—
Net income attributable to Komatsu Ltd.	¥	33,559	¥	78,797	¥	208,793	$	360,849

	Number of shares
	2010		2009		2008
Weighted average common shares outstanding, less treasury stock		968,013,328		985,585,385		994,844,955
Dilutive effect of:
Stock options		449,531		731,973		1,335,586
Weighted average diluted common shares outstanding		968,462,859		986,317,358		996,180,541

	Yen						U.S. cents
	2010		2009		2008		2010
Income from continuing operations attributable to Komatsu Ltd.:
Basic	¥	34.67	¥	79.95	¥	204.88	¢	37.28
Diluted		34.65		79.89		204.61		37.26
Income from discontinued operations attributable to Komatsu Ltd.:
Basic	¥	—	¥	—	¥	4.99	¢	—
Diluted		—		—		4.98		—
Net income attributable to Komatsu Ltd.:
Basic	¥	34.67	¥	79.95	¥	209.87	¢	37.28
Diluted		34.65		79.89		209.59		37.26

19. Commitments and Contingent Liabilities

At March 31, 2010, Komatsu was contingently liable for discounted and transferred receivables on a recourse basis with the financial institutions of ¥9,850 million ($105,914 thousand) (Note 5).

Komatsu provides guarantees to third parties of loans of the employees, affiliated companies and other companies. The guarantees relating to the employees are mainly made for their housing loans. The guarantees of loans relating to the affiliated companies and other companies are made to enhance the credit of those companies.

F-40

For each guarantee provided, Komatsu would have to perform under a guarantee, if the borrower defaults on a payment within the contract terms. The contract terms are from 10 years to 30 years in the case of employees with housing loans, and from 1 year to 10 years in the case of loans relating to the affiliated companies and other companies. The maximum amount of undiscounted payments Komatsu would have had to make in the event of default is ¥88,379 million ($950,312 thousand) at March 31, 2010. The fair value of the liabilities recognized for Komatsu’s obligations as guarantors under those guarantees at March 31, 2010 were insignificant. Certain of those guarantees were secured by collateral and insurance issued to the Company.

Management of Komatsu believes that losses from those contingent liabilities, if any, would not have a material effect on the consolidated financial statements.

Commitments for capital investment outstanding at March 31, 2010, aggregated approximately ¥4,700 million ($50,538 thousand).

Komatsu is involved in certain legal actions and claims arising in the ordinary course of its business. It is the opinion of management and legal counsel that such litigation and claims will be resolved without material effect on Komatsu’s financial statements.

Komatsu has business activities with customers, dealers and associates around the world and its trade receivables from such parties are well diversified to minimize concentrations of credit risks. Management does not anticipate incurring losses on its trade receivables in excess of established allowances.

Komatsu also issues contractual product warranties under which it generally guarantee the performance of products delivered and services rendered for a certain period or term. Change in accrued product warranty cost for the years ended March 31, 2010 and 2009 is summarized as follows:

							Thousands of
	Millions of yen						U.S. dollars
	2010			2009			2010
Balance at beginning of year	¥	28,256		¥	31,890		$	303,828
Addition		21,149			25,288			227,409
Utilization		(25,477	)		(26,369	)		(273,946	)
Other		(170	)		(2,553	)		(1,829	)
Balance at end of year	¥	23,758		¥	28,256		$	255,462

20. Derivative Financial Instruments

Risk Management Policy

Komatsu is exposed to market risk primarily from changes in foreign currency exchange and interest rates with respect to debt obligations, international operations and foreign currency denominated credits and debts. In order to manage these risks that arise in the normal course of business, Komatsu enters into various derivative transactions for hedging pursuant to its policies and procedures. Komatsu does not enter into derivative financial transactions for trading or speculative purposes.

Komatsu has entered into interest rate swap and cap agreements, partly concurrent with currency swap agreements for the purpose of managing the risk resulting from changes in cash flow or fair value that arise in their interest rate and foreign currency exposure with respect to certain short-term and long-term debts.

Komatsu operates internationally which expose Komatsu to the foreign exchange risk against existing assets and liabilities and transactions denominated in foreign currencies (principally the U.S. dollar and the Euro). In order to reduce these risks, Komatsu executes forward exchange contracts and option contracts based on its projected cash flow in foreign currencies.

Komatsu is exposed to credit-related losses in the event of nonperformance by counterparties to derivative financial instruments, but Komatsu does not expect any counterparties to fail to meet their obligations because of the high credit rating of the counterparties. Komatsu has not held any derivative instruments which consisted credit-risk-related contingent features.

Fair Value Hedges

Komatsu uses derivative financial instruments designated as fair value hedges to manage primarily interest rate and foreign exchange risks associated with debt obligations. Principally interest rate swaps and cross-currency swaps are used to hedge such risk for debt obligations. Changes in fair value of the hedged debt obligations and derivative instruments designated as fair value hedge are offset and recognized in other income (expenses). For the years ended March 31, 2010, 2009 and 2008, hedge ineffectiveness resulting from fair value hedging activities was not material to Komatsu’s result of operations. During the same period, no fair value hedges were discontinued.

Cash Flow Hedges

Komatsu uses derivative financial instruments designated as cash flow hedges to manage Komatsu’s foreign exchange risks associated with forecasted transactions and Komatsu’s interest risks associated with debt obligations. For transactions denominated in foreign currencies, Komatsu typically hedges forecasted and firm commitment exposures to the variability in cash flow basically up to one year. For the variable rate debt obligations, Komatsu enters into interest rate swap contracts to manage the changes in cash flows. Komatsu records the changes in fair value of derivative instruments designated as cash flow hedges in other comprehensive income (loss). These amounts are reclassified into earnings through other income (expenses) when the hedged items impact earnings. Approximately ¥186 million ($2,000 thousand) of existing income included in accumulated other comprehensive income (loss) at March 31, 2010 will be reclassified into earnings within twelve months from that date. No cash flow hedges were discontinued during the years ended March 31, 2010 as a result of anticipated transactions that are no longer probable of occurring.

F-41

Undesignated Derivative Instruments

Komatsu has entered into interest rate swap contracts not designated as hedging instruments under ASC 815, “Derivatives and Hedging” as a means of managing Komatsu’s interest rate exposures for short-term and long-term debts. Forward contracts and option contracts not designated as hedging instruments under ASC815 are also used to hedge certain foreign currency exposures. The changes in fair value of such instruments are recognized currently in earnings.

Notional Principal Amounts of Derivative Financial Instruments

Notional principal amounts of derivative financial instruments outstanding at March 31, 2010 and 2009 are as follows.

					Thousands of
	Millions of yen				U.S. dollars
	2010		2009		2010
Forwards and options:
Sale of foreign currencies	¥	40,209	¥	30,868	$	432,355
Purchase of foreign currencies		48,809		48,424		524,828
Option contracts (purchased)		949		1,011		10,204
Interest rate swap, cross- currency swap and interest rate cap agreements		184,487		226,754		1,983,731

Fair value of derivative instruments at March 31, 2010 and 2009 on the consolidated balance sheets are as follows:

	Millions of yen
	2010
	Derivative Assets			Derivative Liabilities
Derivative instruments designated	Location on the consolidated	Estimated		Location on the consolidated	Estimated
as hedging instruments	Balance Sheets	fair value		Balance Sheets	fair value
Forwards contracts	Deferred income taxes and other current assets	¥	73	Deferred income taxes and other current liabilities	¥	830
Interest rate swaps, cross-currency swap and interest rate cap agreements	Deferred income taxes and other current assets		354	Deferred income taxes and other current liabilities		734
	Deferred income taxes and other assets		99	Deferred income taxes and other liabilities		—
Total		¥	526		¥	1,564

	Derivative Assets			Derivative Liabilities
	Location on the consolidated	Estimated		Location on the consolidated	Estimated
Undesignated derivative instruments	Balance Sheets	fair value		Balance Sheets	fair value
Forwards contracts	Deferred income taxes and other current assets	¥	90	Deferred income taxes and other current liabilities	¥	1,248
Option contracts	Deferred income taxes and other current assets		18	Deferred income taxes and other current liabilities		—
Interest rate swaps, cross-currency swap and interest rate cap agreements	Deferred income taxes and other current assets		1,730	Deferred income taxes and other current liabilities		915
	Deferred income taxes and other assets		6,989	Deferred income taxes and other liabilities		901
Total		¥	8,827		¥	3,064
Total Derivative Instruments		¥	9,353		¥	4,628

F-42

	Millions of yen
	2009
	Derivative Assets			Derivative Liabilities
Derivative instruments designated	Location on the consolidated	Estimated		Location on the consolidated	Estimated
as hedging instruments	Balance Sheets	fair value		Balance Sheets	fair value
Forwards contracts	Deferred income taxes and other current assets	¥	278	Deferred income taxes and other current liabilities	¥	430
	Deferred income taxes and other assets		8	Deferred income taxes and other liabilities		—
Interest rate swaps, cross-currency swap and interest rate cap agreements	Deferred income taxes and other current assets		2,351	Deferred income taxes and other current liabilities		—
	Deferred income taxes and other assets		5,709	Deferred income taxes and other liabilities		—
Total		¥	8,346		¥	430
	Derivative Assets			Derivative Liabilities
	Location on the consolidated	Estimated		Location on the consolidated	Estimated
Undesignated derivative instruments	Balance Sheets	fair value		Balance Sheets	fair value
Forwards contracts	Deferred income taxes and other current assets	¥	1,016	Deferred income taxes and other current liabilities	¥	1,387
Option contracts	Deferred income taxes and other current assets		19	Deferred income taxes and other current liabilities		—
Interest rate swaps, cross-currency swap and interest rate cap agreements	Deferred income taxes and other current assets		766	Deferred income taxes and other current liabilities		980
	Deferred income taxes and other assets		1,704	Deferred income taxes and other liabilities		3,058
Total		¥	3,505		¥	5,425
Total Derivative Instruments		¥	11,851		¥	5,855
	Thousands of U.S. dollars
	2010
	Derivative Assets			Derivative Liabilities
Derivative instruments designated	Location on the consolidated	Estimated		Location on the consolidated	Estimated
as hedging instruments	Balance Sheets	fair value		Balance Sheets	fair value
Forwards contracts	Deferred income taxes and other current assets	$	785	Deferred income taxes and other current liabilities	$	8,925
Interest rate swaps, cross-currency swap and interest rate cap agreements	Deferred income taxes and other current assets		3,806	Deferred income taxes and other current liabilities		7,892
	Deferred income taxes and other assets		1,065	Deferred income taxes and other liabilities		—
Total		$	5,656		$	16,817
	Derivative Assets			Derivative Liabilities
	Location on the consolidated	Estimated		Location on the consolidated	Estimated
Undesignated derivative instruments	Balance Sheets	fair value		Balance Sheets	fair value
Forwards contracts	Deferred income taxes and other current assets	$	968	Deferred income taxes and other current liabilities	$	13,419
Option contracts	Deferred income taxes and other current assets		194	Deferred income taxes and other current liabilities		—
Interest rate swaps, cross-currency swap and interest rate cap agreements	Deferred income taxes and other current assets		18,602	Deferred income taxes and other current liabilities		9,839
	Deferred income taxes and other assets		75,150	Deferred income taxes and other liabilities		9,688
Total		$	94,914		$	32,946
Total Derivative Instruments		$	100,570		$	49,763

F-43

The effects of derivative instruments on the consolidated statements of income for the year ended March 31, 2010 and 2009 are as follows:

Derivative instruments designated as fair value hedging relationships

	Millions of yen
	2010
	Location of	Amount of			Location of	Amount of
	gains (losses)	gains (losses)			gains (losses)	gains (losses)
	recognized in income	recognized in income			recognized in income	recognized in income
	on derivatives	on derivatives			on hedged items	on hedged items
Interest rate swaps, cross-currency swap and interest rate cap agreements	Other income (expenses), net: Other, net	¥	(270	)	Other income (expenses), net: Other, net	¥	355
Total		¥	(270	)		¥	355
	Millions of yen
	2009
	Location of	Amount of			Location of	Amount of
	gains (losses)	gains (losses)			gains (losses)	gains (losses)
	recognized in income	recognized in income			recognized in income	recognized in income
	on derivatives	on derivatives			on hedged items	on hedged items
Interest rate swaps, cross-currency swap and interest rate cap agreements	Other income (expenses), net: Other, net	¥	7,910		Other income (expenses), net: Other, net	¥	(6,958	)
Total		¥	7,910			¥	(6,958	)
	Thousands of U.S. dollars
	2010
	Location of	Amount of			Location of	Amount of
	gains (losses)	gains (losses)			gains (losses)	gains (losses)
	recognized in income	recognized in income			recognized in income	recognized in income
	on derivatives	on derivatives			on hedged items	on hedged items
Interest rate swaps, cross-currency swap and interest rate cap agreements	Other income (expenses), net: Other, net	$	(2,903	)	Other income (expenses), net: Other, net	$	3,817
Total		$	(2,903	)		$	3,817

Derivative instruments designated as cash flow hedging relationships

	Millions of yen
	2010
						Ineffective portion and amount
	Effective portion					excluded from effectiveness testing
	Amount of		Location of	Amount of		Location of		Amount of
	gains (losses)		gains (losses) reclassified	gains (losses) reclassified		gains (losses)		gains (losses)
	recognized in		from accumulated	from accumulated		recognized in income		recognized in income
	OCI on derivatives		OCI into income	OCI into income		on derivatives		on derivatives
Forwards contracts	¥	363	Other income (expenses), net: Other, net	¥	532		—	¥	—
Interest rate swaps, cross-currency swap and interest rate cap agreements		1,758	Other income (expenses), net: Other, net		89		—		—
Total	¥	2,121		¥	621			¥	—

F-44

	Millions of yen
	2009
						Ineffective portion and amount
	Effective portion					excluded from effectiveness testing
	Amount of		Location of	Amount of		Location of		Amount of
	gains (losses)		gains (losses) reclassified	gains (losses) reclassified		gains (losses)		gains (losses)
	recognized in		from accumulated	from accumulated		recognized in income		recognized in income
	OCI on derivatives		OCI into income	OCI into income		on derivatives		on derivatives
Forwards contracts	¥	790	Other income (expenses), net: Other, net	¥	2,892		—	¥	—
Interest rate swaps, cross-currency swap and interest rate cap agreements		65	—		—		—		—
Total	¥	855		¥	2,892			¥	—
	Thousands of U.S. dollars
	2010
						Ineffective portion and amount
	Effective portion					excluded from effectiveness testing
	Amount of		Location of	Amount of		Location of		Amount of
	gains (losses)		gains (losses) reclassified	gains (losses) reclassified		gains (losses)		gains (losses)
	recognized in		from accumulated	from accumulated		recognized in income		recognized in income
	OCI on derivatives		OCI into income	OCI into income		on derivatives		on derivatives
Forwards contracts	$	3,903	Other income (expenses), net: Other, net	$	5,720		—	$	—
Interest rate swaps, cross-currency swap and interest rate cap agreements		18,903	Other income (expenses), net: Other, net		957		—		—
Total	$	22,806		$	6,677			$	—

* OCI stands for other comprehensive income (loss).

Derivative instruments not designated as hedging instruments relationships

	Millions of yen
	2010
	Location of gains (losses) recognized	Amount of gains (losses) recognized
	in income on derivatives	in income on derivatives
Forwards contracts	Other income (expenses), net: Other, net	¥	(972	)
Option contracts	Other income (expenses), net: Other, net		3
Interest rate swaps, cross-currency swap and interest rate cap agreements	Cost of sales		(580	)
	Other income (expenses), net: Other, net		1,900
Total		¥	351

	Millions of yen
	2009
	Location of gains (losses) recognized	Amount of gains (losses) recognized
	in income on derivatives	in income on derivatives
Forwards contracts	Other income (expenses), net: Other, net	¥	846
Option contracts	Other income (expenses), net: Other, net		(7	)
Interest rate swaps, cross-currency swap and interest rate cap agreements	Cost of sales		94
	Other income (expenses), net: Other, net		(2,771	)
Total		¥	(1,838	)

F-45

	Thousands of U.S. dollars
	2010
	Location of gains (losses) recognized	Amount of gains (losses) recognized
	in income on derivatives	in income on derivatives
Forwards contracts	Other income (expenses), net: Other, net	$	(10,452	)
Option contracts	Other income (expenses), net: Other, net		32
Interest rate swaps, cross-currency swap and interest rate cap agreements	Cost of sales		(6,236	)
	Other income (expenses), net: Other, net		20,430
Total		$	3,774

21. The Fair Value of Financial Instruments

(1) Cash and Cash Equivalents, Time Deposits, Trade Notes and Accounts Receivable, Other Current Assets, Short-Term Debt, Trade Notes, Bills and Accounts Payables, and Other Current Liabilities

The carrying amount approximates fair value because of the short maturity of these instruments.

(2) Investment Securities, Marketable Equity Securities

The fair values of investment securities available for sale for which it is practicable to estimate fair value are based on quoted market prices and are recognized on the accompanying consolidated balance sheets.

(3) Long-Term Trade Receivables, Including Current Portion

The fair values of long-term trade receivables are based on the present value of future cash flows through maturity, discounted using estimated current interest rates. The fair values computed on such a basis approximate the carrying amounts (Note 5).

(4) Long-Term Debt, Including Current Portion

The fair values of each of the long-term debts are based on the quoted price in the most active market or the present value of future cash flows associated with each instrument discounted using the current borrowing rate for similar debt of comparable maturity.

(5) Derivatives

The fair values of derivative financial instruments, consisting principally of foreign exchange contracts and interest swap agreements, are estimated by obtaining quotes from brokers and are recognized on the accompanying consolidated balance sheets.

The carrying amounts and the estimated fair values of the financial instruments, including financial instruments not qualifying as hedge, as of March 31, 2010 and 2009, are summarized as follows:

	Millions of yen								Thousands of U.S. dollars
	2010				2009				2010
	Carrying		Estimated		Carrying		Estimated		Carrying		Estimated
	amount		fair value		amount		fair value		amount		fair value
Investment securities, marketable equity securities	¥	47,178	¥	47,178	¥	37,066	¥	37,066	$	507,290	$	507,290
Long-term debt, including current portion		462,941		460,916		379,768		376,108		4,977,860		4,956,086
Derivatives:
Forwards and options
Assets		181		181		1,321		1,321		1,947		1,947
Liabilities		2,078		2,078		1,817		1,817		22,344		22,344
Interest rate swap, cross-currency swap and interest rate cap agreements
Assets		9,172		9,172		10,530		10,530		98,623		98,623
Liabilities		2,550		2,550		4,038		4,038		27,419		27,419

Limitations

Fair value estimates are made at a specific point in time, based on relevant market information and information about the financial instrument. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision. Changes in assumptions could affect the estimates.

F-46

22. Fair value measurements

ASC 820, “Fair Value Measurements and Disclosures” defines that fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. ASC 820 establishes a three-level fair value hierarchy that prioritizes the inputs used to measure fair value. The three levels of inputs used to measure fair value are as follows:

Level 1	—	Quoted prices in active markets for identical assets or liabilities
Level 2	—	Inputs other than quoted prices included within Level 1 that are observable for the assets or liabilities, either directly or indirectly
Level 3	—	Unobservable inputs for the assets or liabilities

Assets and liabilities that are measured at fair value on a recurring basis

The fair value hierarchy levels of assets and liabilities that are measured at fair value on a recurring basis at March 31, 2010 and 2009 are as follows:

	Millions of yen
At March 31, 2010	Level 1		Level 2		Level 3		Total
Assets
Investment securities available for sale
Manufacturing industry	¥	26,147	¥	—	¥	—	¥	26,147
Financial service industry		18,935		—		—		18,935
Other		2,096		—		—		2,096
Derivatives
Forward contracts		—		163		—		163
Option contracts		—		18		—		18
Interest rate swaps, cross currency swap and interest rate cap agreements		—		9,172		—		9,172
Other		—		—		—		—
Total Assets	¥	47,178	¥	9,353	¥	—	¥	56,531
Liabilities
Derivatives
Forward contracts	¥	—	¥	2,078	¥	—	¥	2,078
Interest rate swaps, cross currency swap and interest rate cap agreements		—		2,550		—		2,550
Other		—		22,839		2,280		25,119
Total Liabilities	¥	—	¥	27,467	¥	2,280	¥	29,747

	Millions of yen
At March 31, 2009	Level 1		Level 2		Level 3		Total
Assets
Investment securities available for sale	¥	37,066	¥	—	¥	—	¥	37,066
Derivatives		—		11,851		—		11,851
Other		—		—		919		919
Total Assets	¥	37,066	¥	11,851	¥	919	¥	49,836
Liabilities
Derivatives	¥	—	¥	5,855	¥	—	¥	5,855
Other		—		—		—		—
Total Liabilities	¥	—	¥	5,855	¥	—	¥	5,855

F-47

	Thousands of U.S. dollars
	Level 1		Level 2		Level 3		Total
Assets
Investment securities available for sale
Manufacturing industry	$	281,150	$	—	$	—	$	281,150
Financial service industry		203,602		—		—		203,602
Other		22,538		—		—		22,538
Derivatives
Forward contracts		—		1,753		—		1,753
Option contracts		—		194		—		194
Interest rate swaps, cross currency swap and interest rate cap agreements		—		98,623		—		98,623
Other		—		—		—		—
Total Assets	$	507,290	$	100,570	$	—	$	607,860
Liabilities
Derivatives
Forward contracts	$	—	$	22,344	$	—	$	22,344
Interest rate swaps, cross currency swap and interest rate cap agreements		—		27,419		—		27,419
Other		—		245,581		24,516		270,097
Total Liabilities	$	—	$	295,344	$	24,516	$	319,860

Investment securities available for sale

Marketable equity securities are classified Level 1 in the fair value hierarchy. Marketable equity securities are measured using a market approach based on the quoted market prices in active markets.

Derivatives

Derivatives primarily represent foreign exchange contracts and interest rate swap agreements. The fair value of foreign exchange contracts is based on a valuation model that discounts cash flows resulting from the differential between contract rate and the market-based forward rate and is classified in Level 2 in the fair value hierarchy. The fair value of interest rate swap agreements is based on a valuation model that discounts cash flows based on the terms of the contract and the swap curves and is classified in Level 2 in the fair value hierarchy.

Other

Other primarily represents the retained interests in securitizations of accounts receivables and loans which are measured at fair value. The fair value of retained interest in securitizations of accounts receivables is based on a valuation model using the present value of expected future cash flows using discount, prepayment and loss rates based on current market conditions and the historical performance of comparable receivables and is classified in Level 3 in the fair value hierarchy. The fair value of loans is based on a valuation model based on market yield curve data and credit spread data and is classified in Level 2 in the fair value hierarchy. The credit spread data was obtained through use of credit default swaps for each counterparty.

The following table summarizes information about changes of Level 3 for the year ended March 31, 2010 and 2009:

							Thousands of
	Millions of yen						U.S. dollars
	2010			2009			2010
Balance at beginning of year	¥	919		¥	3,015		$	9,882
Total gains or losses (realized/unrealized)		1,543			355			16,591
Included in earnings		1,605			349			17,258
Included in other comprehensive income (loss)		(62	)		6			(667	)
Purchases, issuances and settlements		(4,742	)		(2,451	)		(50,989	)
Balance at end of year	¥	(2,280	)	¥	919		$	(24,516	)

The amount of unrealized losses on classified in Level 3 assets recognized in earnings for the year ended March 31, 2010 and 2009 related to assets still held at March 31, 2010 and 2009 were gains of ¥1,605 million ($17,258 thousand) and losses of ¥678 million, respectively. These gains and losses were reported in other income (expense), net of the consolidated statement of income.

Assets and liabilities that are measured at fair value on a non-recurring basis

Komatsu measured certain long-lived assets at fair value, which is classified as Level 2 in the fair value hierarchy, as of March 31, 2010. As a result, Komatsu recognized impairment loss of ¥3,332 million ($35,828 thousand) for the year ended March 31, 2010, which is reported in impairment loss on long-lived assets of the consolidated statement of income.

F-48

23. Business Segment Information

Komatsu has two operating segments: 1) Construction, Mining and Utility Equipment 2) Industrial Machinery and Others.

Segment profit is determined by Management in a manner that is consistent with Japanese accounting principles by subtracting the cost of sales and selling, general and administrative expenses from net sales attributed to the operating segment. Segment profit excludes certain general corporate administration and finance expenses, such as costs of executive management, corporate development, corporate finance, human resources, internal audit, investor relations, legal and public relations. Segment profit also excludes certain non-recurring charges which may otherwise relate to operating segments, including impairments of long lived assets and goodwill.

The following tables present certain information regarding Komatsu’s operating segments and geographic information at March 31, 2010, 2009 and 2008, and for the years then ended:

										Thousands of
	Millions of yen									U.S. dollars
Operating segments:	2010			2009			2008			2010
Net sales:
Construction, Mining and Utility Equipment—
Customers	¥	1,268,575		¥	1,744,733		¥	2,048,711		$	13,640,591
Intersegment		2,690			4,653			6,127			28,925
Total		1,271,265			1,749,386			2,054,838			13,669,516
Industrial Machinery and Others—
Customers		162,989			277,010			194,312			1,752,570
Intersegment		15,619			26,389			23,376			167,946
Total		178,608			303,399			217,688			1,920,516
Elimination		(18,309	)		(31,042	)		(29,503	)		(196,871	)
Consolidated	¥	1,431,564		¥	2,021,743		¥	2,243,023		$	15,393,161
Segment profit:
Construction, Mining and Utility Equipment	¥	83,061		¥	180,455		¥	317,895		$	893,129
Industrial Machinery and Others		2,998			12,891			19,947			32,237
Total		86,059			193,346			337,842			925,366
Corporate expenses and elimination		(5,340	)		(4,688	)		(3,256	)		(57,420	)
Consolidated segment profit		80,719			188,658			334,586			867,946
Impairment loss on long-lived assets		3,332			16,414			2,447			35,828
Impairment loss on goodwill		—			2,003			2,870			—
Other operating income (expenses)		(10,352	)		(18,293	)		3,581			(111,312	)
Operating income		67,035			151,948			332,850			720,806
Interest and dividend income		6,158			8,621			10,265			66,215
Interest expense		(8,502	)		(14,576	)		(16,699	)		(91,419	)
Other, net		288			(17,211	)		(4,206	)		3,097
Consolidated income from continuing operations before income taxes and equity in earnings of affiliated companies	¥	64,979		¥	128,782		¥	322,210		$	698,699
Segment assets:
Construction, Mining and Utility Equipment	¥	1,682,542		¥	1,639,720		¥	1,738,481		$	18,091,850
Industrial Machinery and Others		207,551			254,200			283,427			2,231,731
Corporate assets and elimination		68,962			75,139			83,238			741,527
Consolidated	¥	1,959,055		¥	1,969,059		¥	2,105,146		$	21,065,108
Depreciation and amortization:
Construction, Mining and Utility Equipment	¥	82,508		¥	87,260		¥	69,738		$	887,183
Industrial Machinery and Others		7,707			9,981			4,890			82,871
Consolidated	¥	90,215		¥	97,241		¥	74,628		$	970,054
Capital investment:
Construction, Mining and Utility Equipment	¥	92,979		¥	152,803		¥	141,184		$	999,774
Industrial Machinery and Others		3,212			9,709			4,546			34,538
Consolidated	¥	96,191		¥	162,512		¥	145,730		$	1,034,312

F-49

Business categories and principal products and services included in each operating segment are as follows:

a) Construction, Mining and Utility Equipment Excavating equipment, loading equipment, grading and roadbed preparation equipment, hauling equipment, forestry equipment, tunneling machines, recycling equipment, industrial vehicles, other equipment, engines and components, casting products and logistics

b) Industrial Machinery and Others Metal forging and stamping presses, sheet-metal machines, machine tools, defense systems, temperature-control equipment and others

Transfers between segments are made at estimated arm’s length prices.

Segment assets are those assets used in the operations of each segment. Unallocated corporate assets consist primarily of cash and cash equivalents and marketable investment securities maintained for general corporate purposes.

Amortization for the years ended March 31, 2010, 2009 and 2008 does not include amortization of long-term prepaid expenses of ¥1,104 million ($11,871 thousand), ¥1,113 million and ¥1,036 million. The term “Capital investment” should be distinguished from the term “Capital expenditures” as used in the consolidated statements of cash flows. The term “Capital investment” is defined to refer to the acquisition of property, plant and equipment including properties under capital leases on an accrual basis which reflects the effects of timing differences between acquisition dates and payment dates.

Impairment loss on long-lived assets and goodwill included in each segment asset for the years ended March 31, 2010, 2009 and 2008 are as follows:

							Thousands of
	Millions of yen						U.S. dollars
	2010		2009		2008		2010
Impairment loss on long-lived assets
Construction, Mining and Utility Equipment	¥	3,063	¥	13,998	¥	1,282	$	32,936
Industrial Machinery and Others		269		2,416		1,165		2,892
Total	¥	3,332	¥	16,414	¥	2,447	$	35,828
Impairment loss on goodwill
Construction, Mining and Utility Equipment	¥	—	¥	2,003	¥	2,870	$	—
Industrial Machinery and Others		—		—		—		—
Total	¥	—	¥	2,003	¥	2,870	$	—

Geographic information:

Net sales to customers recognized by sales destination for the years ended March 31, 2010, 2009 and 2008 are as follows:

							Thousands of
	Millions of yen						U.S. dollars
	2010		2009		2008		2010
Net sales to customers:
Japan	¥	323,813	¥	452,172	¥	505,185	$	3,481,860
The Americas		323,984		503,450		541,160		3,483,699
Europe and CIS		127,377		284,029		427,679		1,369,645
China		270,870		236,226		189,902		2,912,581
Asia (excluding Japan, China) and Oceania		299,864		335,574		348,462		3,224,344
Middle East and Africa		85,656		210,292		230,635		921,032
Consolidated net sales	¥	1,431,564	¥	2,021,743	¥	2,243,023	$	15,393,161

Net sales recognized by geographic origin and property, plant and equipment at March 31, 2010, 2009 and 2008, and for the years then ended are as follows:

							Thousands of
	Millions of yen						U.S. dollars
	2010		2009		2008		2010
Net sales to customers:
Japan	¥	498,568	¥	831,569	¥	813,198	$	5,360,946
U.S.A.		311,170		469,047		526,821		3,345,914
Europe and CIS		141,510		269,139		420,778		1,521,613
Others		480,316		451,988		482,226		5,164,688
Total	¥	1,431,564	¥	2,021,743	¥	2,243,023	$	15,393,161
Property, plant and equipment:
Japan	¥	380,592	¥	400,554	¥	363,646	$	4,092,387
U.S.A.		62,637		68,170		65,225		673,516
Europe and CIS		35,811		28,207		36,664		385,065
Others		46,060		28,531		25,611		495,269
Total	¥	525,100	¥	525,462	¥	491,146	$	5,646,237

F-50

Other than in Japan, U.S.A. and China, no individual country had a material impact on net sales to customers. Net sales to customers in China for the years ended March 31, 2010, 2009 and 2008 are ¥238,102 million ($2,560,237 thousand), ¥174,466 million and ¥169,399 million, respectively, which are included in others area.

There were no sales to a single major external customer for the years ended March 31, 2010, 2009 and 2008.

The following information shows net sales and segment profit recognized by geographic origin for the years ended March 31, 2010, 2009 and 2008. The following supplemental information is provided to comply with disclosure requirements of the Japanese Financial Instruments and Exchange Law, which a Japanese public company is subject to:

										Thousands of
	Millions of yen									U.S. dollars
	2010			2009			2008			2010
Net sales:
Japan—
Customers	¥	498,568		¥	831,569		¥	813,198		$	5,360,946
Intersegment		218,151			380,880			479,116			2,345,710
Total		716,719			1,212,449			1,292,314			7,706,656
The Americas—
Customers		311,170			469,047			526,821			3,345,914
Intersegment		36,547			42,774			40,422			392,978
Total		347,717			511,821			567,243			3,738,892
Europe and CIS—
Customers		141,510			269,139			420,778			1,521,613
Intersegment		21,100			25,259			31,444			226,882
Total		162,610			294,398			452,222			1,748,495
Others—
Customers		480,316			451,988			482,226			5,164,688
Intersegment		9,940			29,262			35,661			106,882
Total		490,256			481,250			517,887			5,271,570
Elimination		(285,738	)		(478,175	)		(586,643	)		(3,072,452	)
Consolidated	¥	1,431,564		¥	2,021,743		¥	2,243,023		$	15,393,161
Segment profit (loss):
Japan	¥	(19,783	)	¥	37,876		¥	173,063		$	(212,721	)
The Americas		33,982			52,133			56,667			365,398
Europe and CIS		10,460			22,279			44,088			112,473
Others		60,151			61,008			68,204			646,785
Corporate and elimination		(4,091	)		15,362			(7,436	)		(43,989	)
Consolidated	¥	80,719		¥	188,658		¥	334,586		$	867,946
Segment assets:
Japan	¥	1,129,391		¥	1,194,694		¥	1,282,182		$	12,143,989
The Americas		417,423			426,772			441,499			4,488,420
Europe and CIS		196,469			206,955			290,008			2,112,570
Others		482,424			350,822			328,741			5,187,355
Corporate assets and elimination		(266,652	)		(210,184	)		(237,284	)		(2,867,226	)
Consolidated	¥	1,959,055		¥	1,969,059		¥	2,105,146		$	21,065,108
Overseas sales:
The Americas	¥	323,984		¥	503,450		¥	541,160		$	3,483,699
Europe and CIS		127,377			284,029			427,679			1,369,645
Others		656,390			782,092			768,999			7,057,957
Total	¥	1,107,751		¥	1,569,571		¥	1,737,838		$	11,911,301

Transfers between segments are made at estimated arm’s length prices. Segment assets are those assets used in the operations of each segment. Unallocated corporate assets consist primarily of cash and cash equivalents and marketable investment securities maintained for general corporate purposes.

F-51

24. Supplementary Information to Balance Sheets

At March 31, 2010 and 2009, deferred income taxes and other current assets were comprised of the following:

					Thousands of
	Millions of yen				U.S. dollars
	2010		2009		2010
Prepaid expenses	¥	3,804	¥	4,253	$	40,904
Short-term loans receivable:
Affiliated companies		2,222		2,994		23,892
Other		914		766		9,828
Total	¥	3,136	¥	3,760	$	33,720
Deferred income taxes		43,390		37,749		466,559
Other		62,121		85,612		667,968
Total	¥	112,451	¥	131,374	$	1,209,151

At March 31, 2010 and 2009, deferred income taxes and other current liabilities were comprised of the following:

					Thousands of
	Millions of yen				U.S. dollars
	2010		2009		2010
Accrued expenses	¥	82,449	¥	81,133	$	886,548
Deferred income taxes		128		228		1,376
Other		100,747		117,984		1,083,302
Total	¥	183,324	¥	199,345	$	1,971,226

25. Supplementary Information to Statements of Income

The following information shows research and development expenses and advertising costs, for the years ended March 31, 2010, 2009 and 2008. Research and development expenses and advertising costs are charged to expense as incurred and are included in cost of sales and selling, general and administrative expenses in consolidated statements of income.

							Thousands of
	Millions of yen						U.S. dollars
	2010		2009		2008		2010
Research and development expenses	¥	46,449	¥	53,736	¥	49,673	$	499,452
Advertising costs		2,417		4,678		4,410		25,989

Shipping and handling costs included in selling, general and administrative expenses for the years ended March 31, 2010, 2009 and 2008, were as follows:

							Thousands of
	Millions of yen						U.S. dollars
	2010		2009		2008		2010
Shipping and handling costs	¥	25,697	¥	46,264	¥	51,827	$	276,312

For the fiscal year ended March 31, 2010 and 2009, Komatsu recognized an impairment loss of ¥3,332 million ($35,828 thousand) and ¥16,414 million, related to property, plant and equipment and intangible assets subject to amortization at the Company and certain subsidiaries, as profitability of the assets of each subsidiary was expected to be low in the future and Komatsu estimated the carrying amounts would not be recovered by the future cash flows. For the fiscal year ended March 31, 2009, an impairment loss recognized is mainly ¥4,730 million for Mooka plant in the construction, mining and utility equipment segment and ¥1,808 million for Komatsu plant in the industrial machinery and others, due to reorganization and shut down of plants.

F-52

Other operating income (expenses), net for the years ended March 31, 2010, 2009 and 2008, were comprised of the following:

										Thousands of
	Millions of yen									U.S. dollars
	2010			2009			2008			2010
Gain on sale of property	¥	1,036		¥	630		¥	3,169		$	11,140
Loss on disposal or sale of fixed assets		(2,907	)		(5,922	)		(3,313	)		(31,258	)
Other*		(8,481	)		(13,001	)		3,725			(91,194	)
Total	¥	(10,352	)	¥	(18,293	)	¥	3,581		$	(111,312	)

* For the fiscal year ended March 31, 2010 and 2009, the Company and certain subsidiaries recognized expenses associated with structural reforms of production and sales operations. Out of the expenses, reorganization costs of ¥8,883 million ($95,516 thousand) and 13,926 million such as wind down and relocation costs related to the integration of facilities were included in other, except the expenses included in impairment loss on long-lived assets and impairment loss on goodwill of the consolidated statements of income.

Other income (expenses), net for the years ended March 31, 2010, 2009 and 2008, were comprised of the following:

										Thousands of
	Millions of yen									U.S. dollars
	2010			2009			2008			2010
Interest income-
Installment receivables	¥	1,206		¥	1,843		¥	2,107		$	12,968
Other		3,785			5,242			6,659			40,699
Dividends		1,167			1,536			1,499			12,548
Interest expense		(8,502	)		(14,576	)		(16,699	)		(91,419	)
Net gain (loss) from sale of investment securities		679			(3,543	)		(289	)		7,301
Exchange gain (loss), net		1,066			(11,802	)		(3,467	)		11,462
Other		(1,457	)		(1,866	)		(450	)		(15,666	)
Total	¥	(2,056	)	¥	(23,166	)	¥	(10,640	)	$	(22,107	)

26. Valuation and Qualifying Accounts

Valuation and qualifying accounts deducted from assets to which they apply:

							Thousands of
	Millions of yen						U.S. dollars
Allowance for doubtful receivables	2010		2009		2008		2010
Balance at beginning of fiscal period	¥	15,330	¥	11,470	¥	11,808	$	164,839
Additions
Charged to costs and expenses		7,457		7,091		3,003		80,183
Charged to other accounts		957		23		208		10,290
Deductions		8,803		3,254		3,549		94,656
Balance at end of fiscal period	¥	14,941	¥	15,330	¥	11,470	$	160,656

Deductions were principally collectible or uncollectible accounts and notes charged to the allowance.

							Thousands of
	Millions of yen						U.S. dollars
Valuation allowance for deferred tax assets	2010		2009		2008		2010
Balance at beginning of fiscal period	¥	31,420	¥	22,435	¥	30,879	$	337,849
Additions
Charged to costs and expenses		21,784		19,784		2,743		234,237
Charged to other accounts		8		587		945		86
Deductions		4,131		11,386		12,132		44,419
Balance at end of fiscal period	¥	49,081	¥	31,420	¥	22,435	$	527,753

Deductions were principally realization or expiration of net operating loss carryforwards.

F-53

EXHIBIT INDEX

		Subsequently
Exhibit number	Title	Numbered Page
Exhibit (1.1)	Articles of Incorporation of Komatsu Ltd., as amended (Translation)		1
Exhibit (1.2)	Regulations of The Board of Directors (Translation)		7
Exhibit (2)	Share Handling Regulations, as amended (Translation)		10
Exhibit (8)	Significant subsidiaries of Komatsu Ltd. including additional subsidiaries that management has deemed to be significant, as of March 31, 2010 (See “Organizational Structure” in “Item 4. Information on the Company”)
Exhibit (11)	Code of Ethics for Senior Officers (Translation)		16
Exhibit (12) a.	Certification of the CEO of the Company required pursuant to Rule 15d-14(a)		20
Exhibit (12) b.	Certification of the CFO of the Company required pursuant to Rule 15d-14(a)		21
Exhibit (13) a.	Certification of the CEO of the Company required pursuant to Rule 15d-14(b) and Section 1350 of Chapter 63 of Title 18 of the United States Code		22
Exhibit (13) b.	Certification of the CFO of the Company required pursuant to Rule 15d-14(b) and Section 1350 of Chapter 63 of Title 18 of the United States Code		23

EX-1.1

Exhibit (1.1)

(TRANSLATION)

ARTICLES OF INCORPORATION OF KOMATSU LTD.

(Amended as of June 24, 2009)

CHAPTER I. GENERAL PROVISIONS

Article 1. Corporate Name

The name of the Company shall be Kabushiki Kaisha Komatsu Seisakusho.

In English, the Company shall be called KOMATSU LTD.

Article 2. Objectives and Purposes

The objectives and purposes of the Company shall be to engage in the following businesses:

(1) Manufacture, repair, sale and purchase of construction machinery, agricultural machinery, industrial machinery, automobiles, internal combustion engines and various types of other machinery and equipment and parts thereof.

(2) Manufacture, sale and purchase of various iron and steel goods.

(3) Smelting, processing, sale and purchase of various types of iron and steel, pig-iron, ferroalloys and other special metals.

(4)	Manufacture, sale and purchase of various types of electric materials and equipment.
(5)	Manufacture, sale and purchase of various synthetic resin products.
(6)	Manufacture, repair, sale and purchase of various armaments and parts thereof.
(7)	Mining industry, and sale and purchase of minerals.

(8) Designing, executing, supervising and contracting various types of civil engineering and construction work for plants, dwelling house, and other structures.

(9) Sale and purchase of lumber, processed lumber products and various types of civil engineering and construction materials, machinery and equipment.

(10)	Sale, purchase and lease of real property.
(11)	Manufacture, sale and repair of industrial waste and general waste treatment devices.

(12) Collection, transportation, treatment and recycling of industrial waste and general waste, sale of such recycled products, and consulting on these matters.

(13)	Development, creation, sales and consulting on computer software and computer systems.
(14)	Electronic commerce using networks such as the internet.
(15)	Information processing and information providing service.
(16)	Financing services
(17)	All business incidental to each and every one of the preceding items.
(18)	Investing in other companies or promoting the organization of other companies.

Article 3. Location of Head Office

The Company shall have its head office in Minato-ku, Tokyo.

Article 4. Corporate Organizations

The Company shall have the following organizations other than the General Meeting of Shareholders and Directors:

(1)	Board of Directors;
(2)	Corporate Auditors;

(3) Board of Corporate Auditors: and

(4) Accounting Auditors.

1

Article 5. Method of Public Notice

The method of public notices by the Company shall be electronic public notice, provided, however, that if, the use of the electronic public notice becomes impossible, due to an accident or any other unavoidable reason, the public notices of the Company shall be made by publication in The Nihon Keizai Shimbun published in Tokyo.

CHAPTER II. SHARES

Article 6. Total Number of Shares Authorized to be Issued

The total number of shares authorized to be issued by the Company shall be three billion nine hundred fifty five million (3,955,000,000) shares.

Article 7. Acquisition by the Company of Its Own Shares

Pursuant to the provisions of Article 165, Paragraph 2 of the Corporation Act, the Company may acquire its own shares through transactions in the market, etc., by a resolution of the Board of Directors.

Article 8. Number of Shares Constituting One Unit (Tangen) of Shares

The number of shares constituting one (1) unit (Tangen) of shares of the Company shall be one hundred (100).

Article 9. Rights to Shares Constituting Less Than One Unit (Tangen) of Shares

Shareholders of the Company are not entitled to exercise their rights pertaining to shares constituting less than one (1) unit (Tangen) of shares held by them, except for the following rights:

(1) The rights provided for in each item of Article 189, Paragraph 2 of the Corporation Act;

(2) The right to make a request provided for in the provisions of Article 166, Paragraph 1 of the Corporation Act;

(3) The right to receive the allotment of offered shares and offered stock acquisition rights in proportion to the number of shares held by each shareholder; and

(4) The right to make a request provided for in the immediately following Article.

Article 10. Purchase of Shares to Increase the Number of Shares of Shareholders Holding Shares not Constituting One Unit (Tangen) of Shares

A shareholder of the Company may, in accordance with the Share Handling Regulations of the Company, request the Company to sell such number of shares as will, when aggregated with the shares constituting less than one (1) unit (Tangen) of shares held by him/her, constitute one (1) unit of shares.

Article 11. Transfer Agent

1. The Company shall have a Transfer Agent.

2. The Transfer Agent and the location of its business shall be designated by a resolution of the Board of Directors, and public notice thereof shall be given.

3. The administration of the Shareholders Register and the Register of Stock Acquisition Rights of the Company, and other matters relating to the Shareholders Register and the Register of Stock Acquisition Rights shall be entrusted with the Transfer Agent, and shall not be handled by the Company.

2

Article 12. Share Handling Regulations

The handling of shares of the Company and the fees thereof shall be governed by the “Share Handling Regulations” of the Company established by a resolution of the Board of Directors, as well as laws and regulations, and the Articles of Incorporation.

CHAPTER III. GENERAL MEETINGS OF SHAREHOLDERS

Article 13. Convocation of General Meeting of Shareholders

An Ordinary General Meeting of Shareholders of the Company shall be convened in June each year. An Extraordinary General Meeting of Shareholders may be convened whenever necessary.

Article 14. Record Date of Ordinary General Meeting of Shareholders

The record date of the voting rights at the Ordinary General Meeting of Shareholders of the Company shall be March 31 of each year.

Article 15. Person to Convene General Meeting of Shareholders and Person to Preside the Board as Chairman

1. A General Meeting of Shareholders shall be convened by the President, and the President shall act as the chairman thereof.

2. In the absence or disability of the President, one of the other Directors in the order previously determined by the Board of Directors may convene the General Meeting of Shareholders and act as the chairman thereof.

Article 16. Internet Disclosure and Deemed Provision of Reference Documents for General Meeting of Shareholders, etc.

The Company may, by disclosing the information related to the matters to be described or indicated in (1) the reference documents for the General Meeting of Shareholders, (2) the business report, (3) the financial statements and (4) the consolidated financial statements, through the Internet in accordance with the provisions of the Ministerial Ordinance of the Ministry of Justice, in connection with the convocation of the General Meeting of Shareholders, deem that it has provided the same to the shareholders.

Article 17. Exercise of Voting Rights by Proxy

1. A shareholder of the Company may exercise his/her voting rights at a General Meeting of Shareholders by one (1) proxy who shall be another shareholder of the Company eligible for exercising such voting rights of the Company.

2. In the case of the preceding paragraph, a shareholder or proxy shall submit to the Company a document certifying the proxy’s power of representation at each General Meeting of Shareholders.

Article 18. Method of Resolutions of General Meetings of Shareholders

1. Unless otherwise provided for in laws and regulations or these Articles of Incorporation, resolutions of a General Meeting of Shareholders shall be adopted by a majority of the voting rights of the shareholders who are eligible to exercise the voting rights and who are present at the meeting.

2. Resolutions made pursuant to Article 309, Paragraph 2 of the Corporation Act shall be adopted by two-thirds (2/3) or more of the voting rights of the shareholders who are eligible to exercise the voting rights and who are present at the meeting, at which meeting the shareholders holding one-third (1/3) or more of the voting rights of all shareholders eligible to exercise the voting rights must be present.

3

CHAPTER IV. DIRECTORS AND BOARD OF DIRECTORS

Article 19. Number of Directors

The Company shall have no more than fifteen (15) directors.

Article 20. Method of Election of Directors

1. Directors shall be elected at a General Meeting of Shareholders of the Company.

2. A resolution for the election of a Director shall be adopted by a majority of the voting rights of the shareholders who are eligible to exercise the voting rights and who are present at the meeting, at which meeting the shareholders holding one-third (1/3) or more of the voting rights of all shareholders eligible to exercise the voting rights must be present.

3. Cumulative voting shall not be used in a resolution for the election of a Director.

Article 21. Representative Directors, etc.

1. The Board of Directors shall, by its resolution, appoint the Representative Directors who shall represent the Company.

2. The Board of Directors may determine, by its resolution, one (1) Chairman and one (1) President from among its members, and may grant special titles to one or more Directors as deemed necessary.

Article 22. Term of Office of Directors

The term of office of a Director shall expire at the closing of the Ordinary General Meeting of Shareholders for the last business year ending within one (1) year after his/her election.

Article 23. Convocation of the Board of Directors and Person to Preside over the Board as Chairman

Meetings of the Board of Directors shall be convened and the chairman thereof shall be determined in accordance with the rules established by the Board of Directors.

Article 24. Notice of Convocation of Board of Directors

A notice of the convocation of a meeting of the Board of Directors shall be dispatched at least two (2) days prior to the date of such meeting; provided, however, that such period may be shortened in the case of emergency.

Article 25. Informal Resolution of the Board of Directors

With respect to the matters that are proposed by the Directors to be resolved at a meeting of the Board of Directors, the Company shall deem that such proposed matters are approved by a resolution of the Board of Directors when all the Directors who are eligible to participate in the resolution of such matters have given their consent thereto in writing or through electronic records, unless the Corporate Auditors raise an objection to such proposals.

4

Article 26. Counselors and Advisors

The Board of Directors may elect Advisor(s) (Komon) or Counselor(s) (Sodan-yaku).

Article 27. Exemption from Liability of Directors

1. In accordance with the provisions of Article 426, Paragraph 1 of the Corporation Act, the Company may, by a resolution of the Board of Directors, exempt a Director from his/her liability for damages caused by his/her dereliction of duty, within the limits stipulated by laws or regulations.

2. In accordance with the provisions of Article 427, Paragraph 1 of the Corporation Act, the Company may enter into agreements with an Outside Director to limit liability for damages caused by his/her dereliction of duty. Provided, however, that the maximum amount of liability of such Outside Directors prescribed in such agreements shall be equal to the minimum liability limit stipulated by laws and regulations.

CHAPTER V. CORPORATE AUDITORS AND BOARD OF CORPORATE AUDITORS

Article 28. Number of Corporate Auditors

The Company shall have no more than five (5) corporate auditors (Kansayaku).

Article 29. Method of Election of Corporate Auditors

1. The Corporate Auditors shall be elected at a General Meeting of Shareholders of the Company.

2. A resolution for the election of Corporate Auditor shall be adopted by a majority of the voting rights of the shareholders who are eligible to exercise the voting rights and who are present at the meeting, at which meeting the shareholders holding one-third (1/3) or more of the voting rights of all shareholders eligible to exercise the voting rights must be present.

Article 30. Full-time Corporate Auditor(s)

The Board of Corporate Auditors shall elect, by its resolution, (a) full-time Corporate Auditor(s).

Article 31. Term of Office of Corporate Auditors

1. The term of office of Corporate Auditors shall expire at the closing of the Ordinary General Meeting of Shareholders held for the last business year of the Company ending within four (4) years after their election.

2. The term of office of the Corporate Auditor elected to fill a vacancy of another Corporate Auditor who has resigned prior to the expiry of his/her term of office shall be until the expiry of the remaining term of his/her predecessor.

Article 32. Convocation of the Board of Corporate Auditors and Person to Preside over the Board as Chairman

Meetings of the Board of Corporate Auditors shall be convened and the chairman thereof shall be determined, in accordance with the rules established by the Board of Corporate Auditors.

5

Article 33. Notice of Convocation of Board of Corporate Auditors

Notice of convocation of meetings of the Board of Corporate Auditors shall be dispatched at least two (2) days prior to the date of such meetings; provided, however, that such period may be shortened in the case of emergency.

Article 34. Exemption from Liability of Corporate Auditors

1. In accordance with Article 426, Paragraph 1 of the Corporation Act, the Company may, by a resolution of the Board of Directors, exempt a Corporate Auditor from his/her liability for damages caused by his/her dereliction of duty, within the limits stipulated by laws and regulations.

2. In accordance with the provisions of Article 427, Paragraph 1 of the Corporation Act, the Company may enter into agreements with an Outside Corporate Auditor to limit liability for damages caused by his/her dereliction of duty. Provided, however, that the maximum amount of liability of such Outside Corporate Auditor prescribed in such agreements shall be equal to the minimum liability limit stipulated by laws and regulations.

CHAPTER VI. ACCOUNTING

Article 35. Business Year

The business year of the Company shall be the one (1) year period from April 1 of each year to March 31 of the following year.

Article 36. Record Date of Dividends

The record date of the year-end dividends of the Company shall be March 31 of each year.

Article 37. Interim Dividends

The Company may distribute interim dividends, by a resolution of the Board of Directors, by setting the record date as of September 30 of each year.

Article 38. Dispensation from Payment of Dividends

In the case where dividends are paid by cash, the Company shall not be obliged to pay such dividends if such dividends are not received within three (3) full years after the due date of each payment.

Supplemental Provisions

Article 1. The preparation and keeping of the Register of Lost Share Certificates of the Company and other operations relating to the Register of Lost Share Certificates shall be entrusted with the Transfer Agent and shall not be handled by the Company.

Article 2. The preceding article and this article shall remain in effect until January 5, 2010 and shall be deleted as of January 6, 2010.

6

EX-1.2

Exhibit (1.2)

(TRANSLATION)

REGULATIONS OF THE BOARD OF DIRECTORS

(Amended as of May 11, 2006)

Article 1. Scope of Application

Unless otherwise provided for in laws or regulations or the Articles of Incorporation, matters concerning the Board of Directors shall be provided for in these Regulations.

Article 2. Holding of Meetings

Meetings of the Board of Directors shall consist of ordinary and extraordinary meetings. An Ordinary Meeting of the Board of Directors shall, in principal, be held once every month, and an Extraordinary Meeting of the Board of Directors shall be held whenever necessary.

Article 3. Person to Convene

1. A meeting of the Board of Directors shall be convened either by the Chairman or by the President (unless otherwise provided for in laws or regulations).

2. In case the Chairman and the President are unable to so act or their positions are vacant, a meeting of the Board of Directors shall be convened by one (1) of the other Directors in the order previously determined by the Board of Directors.

Article 4. Convocation

1. A notice of the convocation of a meeting of the Board of Directors shall be dispatched at least two (2) days prior to the date of such meeting; provided, however, that such period may be shortened in the case of emergency.

2. Notwithstanding the provisions of the preceding paragraph, a meeting of the Board of Directors may be held without taking the convocation procedures with the unanimous consent of all the Directors and the Corporate Auditors.

Article 5. Chairman

1. The Chairman or the President shall preside over a meeting of the Board of Directors.

2. In case the Chairman and the President are unable to so act or their positions are vacant, one (1) of the other Directors shall preside over the meeting in the order previously determined by the Board of Directors.

7

Article 6. Method of Resolution

1. A resolution of a meeting of the Board of Directors shall be adopted by a majority of the voting rights of the Directors present at the meeting, a quorum for which shall be a majority of the Directors who are eligible to participate in a resolution at the meeting.

2. Notwithstanding the provisions of the preceding paragraph, in the event that a Director makes a proposal with respect to a matter that is subject to a resolution at a meeting of the Board of Directors, and all the Directors who are eligible to participate in the resolution of such matter have given their consent thereto in writing or through electronic records, the resolution to approve such proposal shall be deemed to be adopted at the meeting of the Board of Directors; provided, however, that this shall not apply if any of the Corporate Auditors raise an objection to such proposal.

Article 7. Matters to be Resolved

1. The matters that require a resolution of the Board of Directors shall be as follows:

(1) Matters that require a resolution of the Board of Directors pursuant to the provisions of laws or regulations;

(2) Matters delegated to the Board of Directors pursuant to a resolution made at a general meeting of shareholders;

(3) Matters that require a resolution of the Board of Directors pursuant to the provisions of the Articles of Incorporation;

(4) Other important matters concerning the performance of business.

2. The Board of Directors shall prescribe standards for (determining which) matters require a resolution at a meeting of the Board of Directors pursuant to the provisions of the preceding paragraph.

Article 8. Measures in Case of Emergency

If, because of an emergency or an unavoidable reason, a matter for resolution set forth in the preceding Article cannot be referred to a meeting of the Board of Directors, the President may perform business without a resolution of the Board of Directors (unless otherwise provided for in laws and regulations or the Articles of Incorporation). In this case, the President shall refer such matter to the next meeting of the Board of Directors, and shall request the approval thereof.

Article 9. Report to Meeting of Board of Directors

1. Unless otherwise provided for in laws or regulations or the Articles of Incorporation, the Directors shall report the matters that are deemed to be necessary by the Board of Directors, at meetings of the Board of Directors.

2. The Board of Directors shall provide standards for matters that require a report to a meeting of the Board of Directors pursuant to the provisions of the preceding paragraph.

Article 10. Minutes of Meetings

The substance of proceedings and results of a meeting of the Board of Directors and any matters provided for in the laws or regulations shall be recorded in the minutes, and the Directors and Corporate Auditors present thereat shall affix their names and seals thereto. The minutes shall be kept for ten (10) years by the Company.

8

Article 11. Amendment and Abolition of Regulations

Amendments or abolition of these Regulations shall be effected by a resolution of the Board of Directors.

Supplementary Provision

Article 1. The provision of Article 6, Paragraph 2 shall take effect when the amendment of the Articles of Incorporation, which is related to the matter provided for in such provision, is approved at the Meeting of Shareholders of the Company.

9

EX-2

Exhibit (2)

(TRANSLATION)

SHARE HANDLING REGULATIONS

(Amended as of January 5, 2009)

CHAPTER I. GENERAL PROVISIONS

Article 1. Purpose

Matters related to procedures for executing shareholders’ rights and other handling of shares in Komatsu Ltd. (hereinafter referred to as the “Company”) shall be governed by the provisions set forth by the Japan Securities Depository Center, Inc. (hereinafter referred to as “JASDEC”) and the account management institutions of the securities companies, etc. at which shareholders have established transfer accounts (hereinafter referred to as the “Securities Companies”), as well as by those set forth in these regulations, in accordance with provisions stipulated in the Articles of Incorporation of the Company.

Article 2. Transfer Agent

The transfer agent of the Company and its handling office shall be as follows:

Transfer agent:

Mitsubishi UFJ Trust and Banking Corporation
4-5, Marunouchi 1-chome
Chiyoda-ku, Tokyo

Handling office:

Mitsubishi UFJ Trust and Banking Corporation
Corporate Agency Department
4-5, Marunouchi 1-chome
Chiyoda-ku, Tokyo

CHAPTER II. ENTRIES OR RECORDS, ETC. IN SHAREHOLDERS’ REGISTER

Article 3. Entries or Records in Shareholders’ Register

1. Modification of entries in the shareholders’ register shall be made through notifications from JASDEC, including notifications and the like for all shareholder information (excluding such notices as set forth in Article 154 Paragraph 3 of the Law Concerning the Book-Entry Transfer of Corporate Bonds and Shares, etc. (hereinafter referred to as the “Book-Entry Transfer Law”) (hereinafter referred to as the “Notice of Individual Shareholder (kobetsu kabunushi tsuchi)”)).

2. In addition to the preceding paragraph, where stipulated in other laws or regulations for the issuance of new shares, modifications to the shareholders’ register may be made without receiving notice from JASDEC.

3. The shareholders’ register shall be recorded with letters and symbols designated by JASDEC.

10

Article 4. Notifications Related to Shareholders’ Register Entries

A shareholder shall place his/her name and address on file through Securities Companies and JASDEC, as prescribed by JASDEC. If changed, the same shall apply.

Article 5. Corporate Shareholder Representative

A corporate shareholder shall place the name of its single representative on file through Securities Companies and JASDEC, as prescribed by JASDEC. If changed, the same shall apply.

Article 6. Joint-Ownership Shareholder Representative

Shareholders who jointly own shares shall designate their single representative and place the name, title and address of their joint-ownership representative on file through Securities Companies and JASDEC, as prescribed by JASDEC. If changed, the same shall apply.

Article 7. Statutory Agent

The full name or title and address of the shareholder’s statutory agent, such as a person who has parental authority (shinken sha) or a guardian (kouken nin), shall be provided through Securities Companies and JASDEC, as prescribed by JASDEC. If changed and cancelled, the same shall apply.

Article 8. Notifications of Place of Contact for Shareholders Residing Overseas, etc.

A shareholder who resides in a foreign country or his/her statutory agent shall appoint a standing proxy in Japan or specify a place in Japan to receive notices, and shall place the name or title and address of the standing proxy and the place to receive notice on file through Securities Companies and JASDEC, as prescribed by JASDEC. If changed and cancelled, the same shall apply.

Article 9. Other Notifications

1. In addition to the notifications stipulated in Articles 4 to 8, notifications submitted to the Company shall be submitted through both Securities Companies and JASDEC, or through Securities Companies only, unless the Company has designated a particular method, provided, however, that this shall not apply to cases stipulated in Article 3 Paragraph 2.

2. Notifications that cannot be accepted or conveyed by Securities Companies shall be made to the transfer agent.

Article 10. Verification of Notifications through JASDEC

When a notification from a shareholder to the Company is submitted through Securities Companies and JASDEC, it shall be deemed to be a notification from the shareholder himself/herself.

Article 11. Registered Pledgee of Shares

The provisions of this chapter shall apply mutatis mutandis to registered pledgees of shares.

11

CHAPTER III. SHAREHOLDER VERIFICATION

Article 12. Shareholder Verification

1. When a shareholder (including a shareholder who has applied for an Individual Shareholder Notice) makes any request or exercises any other shareholders’ right (hereinafter referred to as the “Request”), he/she shall attach or provide items attesting that he/she made the Request (hereinafter referred to as “Certification Materials”) by himself/herself. Provided, however, that this shall not apply when it can be verified by the Company that the Request was made by the shareholder himself/herself.

2. When a Request from a shareholder to the Company is made through Securities Companies and JASDEC, it shall be deemed to have been made by the shareholder himself/herself and no Certification Materials are required.

3. When making a Request by proxy, in addition to the procedures noted in the preceding two paragraphs, the shareholder shall attach a letter of proxy that has been signed or sealed by the shareholder. The letter of proxy shall require a notation of the proxy’s name or title and address.

4. Paragraphs 1 and 2 shall apply mutatis mutandis to a proxy as well.

5. This Article 12 shall apply mutatis mutandis to registered pledgees of shares.

CHAPTER IV. PROCEDURES FOR EXERCISING OF SHAREHOLDERS’ RIGHTS

Article 13. Minority Shareholders’ Rights

When directly exercising the Minority Shareholders’ Rights provided for in Article 147, Paragraph 4 of the Book-Entry Transfer Law against the Company, the shareholder shall do so in writing, with signatures or seals affixed and by attaching the receipt for the Notice of Individual Shareholder.

Article 14. Shareholders’ Meeting Reference Materials for Shareholder Proposal

In the event that the shareholder right to propose is exercised according to the preceding Article, and when the proposal exceeds the character count listed below, a summary giving the following information, rather than the entire text, may be described in the shareholders’ meeting reference materials:

(1) Reason for proposal

400 characters for each proposal

(2) Matters regarding the appointment of directors, statutory auditors, and accounting auditors

400 characters for each candidate

CHAPTER V. PURCHASE OF SHARES LESS THAN ONE UNIT

Article 15. Method of Requesting Purchase of Shares less than One (1) Unit (tangen miman kabushiki)

When requesting a purchase of shares less than one (1) unit, such requests shall be made through Securities Companies and JASDEC, as prescribed by JASDEC.

12

Article 16. Determination of Purchase Price

1. The purchase price per share for the purchase request in the preceding Article shall be the closing price of the stock quoted on the market operated by the Tokyo Stock Exchange, on the day the purchase request arrives at the handling office of the transfer agent, as specified in Article 2. Provided, however, that if there are no sales transactions of shares on that day, or if the market is closed, then the price established with the first subsequent trade shall be used.

2. The purchase price shall be the amount calculated by multiplying the purchase price per share provided in the preceding paragraph by the number of shares applied for purchase.

Article 17. Payment of Purchase Price

The purchase price calculated according to the preceding Article shall serve as the purchase amount and, unless the Company stipulates otherwise, the Company shall make payment on the fourth business day from the day following the day on which the purchase price per share is determined, as prescribed by JASDEC. Provided, however, that if the purchase price includes a premium due to a distribution of a surplus or stock split, then payment shall be made by the record date.

Article 18. Transfer of Shares Purchased

The shares less than one unit for which a purchase request is received shall be transferred into the Company’s transfer account on the day the payment of the purchase amount is made, or upon completion of payment procedures, in accordance with the preceding Article.

CHAPTER VI. ADDITIONAL PURCHASES OF SHARES LESS THAN ONE UNIT

Article 19. Method of Requesting an Additional Purchase

When a shareholder who holds shares less than one (1) unit requests the sale of the number of shares which, in conjunction with the number of shares less than one unit, constitutes a unit share (hereinafter referred to as “Additional Purchase Request”), the transaction shall be carried out through Securities Companies and JASDEC, as prescribed by JASDEC.

Article 20. Additional Purchase Request that Exceeds the Balance of Treasury Stock

When the total number of shares for which an Additional Purchase Request is made on the same day exceeds the number of the Company’s transferable shares of treasury stock, none of the Additional Purchase Requests made on that day shall take effect.

Article 21. Effective Date of Additional Purchase Request

The effective date of an Additional Purchase Request shall be the date on which the purchase request arrives at the handling office of the transfer agent, as stipulated in Article 2.

Article 22. Determination of Price for Additional Purchase

1. The additional purchase unit price shall be the closing price quoted on the market operated by the Tokyo Stock Exchange on the day the purchase request takes effect. Provided, however, that if there are no sales transactions of shares on that day, or if the market is closed, the price established with the first subsequent trade shall be used.

2. The purchase price shall be the amount calculated by multiplying the purchase price per share provided in the preceding paragraph by the number of additional shares purchased.

13

Article 23. Transfer of Additionally Purchased Shares

When an Additional Purchase Request is received for shares less than one (1) unit, a request shall be made for transfer into the transfer account of the shareholder who made the Additional Purchase Request on the day the Company confirms that the value of the additional purchase is verified as having been deposited in the bank account designated by the Company.

Article 24. Suspension of Additional Purchase Request Acceptance

1. The Company will suspend the acceptance of Additional Purchase Requests every year during the period ten (10) business days prior to the dates shown below:

(1)	March 31;
(2)	September 30; and
(3)	Any other dates, such as a date for determination of shareholders specified by JASDEC.

2. Notwithstanding the preceding paragraph, the Company may, if it deems necessary, establish other periods during which additional purchase requests will be suspended.

CHAPTER VII. SPECIAL ACCOUNT EXCEPTIONS

Article 25. Exceptions for Special Accounts

The verification of the identity of a shareholder with respect to whom a special account has been opened and the handling of any other matters concerning a special account shall be based on the special account stipulations of the account management institutions, as well as the stipulations of JASDEC.

CHAPTER VIII. COMMISSIONS

Article 26. Commissions

1. No commissions shall be charged in connection with the handling of the shares in the Company.

2. The commission that a shareholder or a registered pledgee of shares pays to Securities Companies or JASDEC shall be borne by the shareholder or the registered pledgee of shares.

SUPPLEMENTARY PROVISIONS

Article 1. Amendment Procedure

Any amendments of these regulations shall require a resolution of the board of directors.

14

Article 2. Application for Cancellation of Registration of Share Certificates as a result of the Lost Share Certificates by the Share Certificate Registrar

When a person who registered the lost share certificate cancels the registration of a lost share certificate, he/she shall submit the designated application form.

Article 3. Application for Cancellation of Lost Share Certificates Registration by Share Certificate Holder

When a person who holds the lost share certificates (hereinafter referred to as the “Share Certificates”) applies for the cancellation of the registration of the lost Share Certificates, he/she shall submit the Share Certificates and the personal identification documents along with the designated application form.

Article 4. Corresponding Application of the Various Notices

The provisions of Articles 4 to 10 shall be applied mutatis mutandis to when a person who registered the lost share certificate changes a record or description for the lost share certificate, and a report is made to the handling office of the transfer agent.

Article 5. Transitional Measures

The provisions of Article 2 to this Article 5 of these Supplementary Provisions shall be deleted as of January 6, 2010.

15

EX-11

Exhibit (11)

(Adopted as of July 12, 2004)

Code of Ethics for Senior Officers

Article 1: Objective

To ensure that the business of Komatsu Ltd. and its consolidated subsidiaries are conducted honestly, ethically and in compliance with the law, this Code of Ethics is designed to stipulate the general rules of conduct that senior officers of Komatsu Ltd. and its consolidated subsidiaries must follow when performing their duties.

Article 2: Applicability

1. This Code of Ethics is applicable to those senior officers (collectively, the “Senior Officers”) of Komatsu Ltd. and its consolidated subsidiaries, as set forth in the following clauses:

a) Concerning Komatsu Ltd., this Code of Ethics is applicable to directors, executive officers, presidents of divisions, general managers of administrative departments at the Head Office as well as managers of the Finance & Treasury and Corporate Accounting of the Head Office and divisions.

b) Concerning the consolidated subsidiaries, this Code of Ethics is applicable to directors, executive officers, and persons responsible for finance and accounting at such consolidated subsidiary.

2. When this Code of Ethics is applicable to Senior Officers of consolidated subsidiaries of Komatsu Ltd., “Komatsu Ltd.” in the following articles shall be interchanged with “concerned consolidated subsidiaries.”

Article 3: General Rules

1. All Senior Officers must not only comply with all laws, rules or regulations applicable to Komatsu Ltd.’s business but must also follow this Code of Ethics, Komatsu’s Code of Worldwide Business Conduct (hereinafter, “Worldwide Business Conduct”) and other internal rules, and perform their duties properly.

2. Komatsu Ltd. may demand its Senior Officers to make a pledge in writing and sign their names on such pledge stating that each such Senior Officer will comply with the law, and read carefully, understand and comply with this Code of Ethics and the Worldwide Business Conduct.

Article 4: Prohibition against Insider Trading

1. All Senior Officers must work to prevent any insider trading by following the Securities and Exchange Law of Japan and other pertinent laws, as well as the Internal Information Control Rules and other internal rules stipulated by Komatsu Ltd.

2. All Senior Officers who have knowledge of insider information concerning Komatsu Ltd. are prohibited from trading stock or other securities (hereinafter, “Stock and Securities”) of Komatsu Ltd. under any name. When any Senior Officer has knowledge of insider information concerning another company, he or she is prohibited from trading Stock and Securities of such concerned company.

3. All Senior Officers who have knowledge of insider information concerning Komatsu Ltd. (or concerning another company if the insider information applies to another company) are prohibited from disclosing or giving “tips” on such insider information directly or indirectly to any person who might trade the Stock and Securities of Komatsu Ltd. (or the concerned company). However, the Senior Officers may disclose insider information in limited indispensable cases in the course of doing business and on the condition of imposing the confidentiality obligation to the recipient of such insider information.

16

Article 5: Conflicts of Interest

1. All Senior Officers must make business decisions in the best interest of Komatsu Ltd., and not motivated by personal interest or gain.

2. All Senior Officers are prohibited from engaging in any of the following conducts:

a) To deprive Komatsu Ltd. of opportunities that belong to the company or are discovered through the use of corporate property, information or position in order to attain personal profit.

b) To use corporate property, information or position for personal gain.

c) To compete with Komatsu Ltd.

3. When the Senior Officers determine that business decisions might infringe upon the law or any of the rules mentioned above, they must report such facts to the director in charge of compliance to obtain his or her judgement and follow his or her instructions in order to avoid actual or potential conflicts of interest with Komatsu Ltd.

Article 6: Secrecy

1. Each Senior Officer must acknowledge that he or she is responsible for keeping information about Komatsu Ltd., its customers or suppliers and other business partners or personal information, including that of other Senior Officers, confidential based on the law and/or agreements with concerned third parties, and that he or she must always work to prevent leakage of confidential information whether intentionally or otherwise.

2. When any Senior Officer determines that information to be disclosed outside of Komatsu Ltd. might infringe upon the preceding paragraph, he or she must decide whether to disclose the information after obtaining a judgement from the department in charge of controlling the concerned information.

Article 7: Fair Trade

1. All Senior Officers must comply strictly with the Antitrust Law and other fair trade laws.

2. All Senior Officers must work to engage in business with its customers, suppliers and other business partners in a fair and honest manner.

3. All Senior Officers must work to secure fair competition with competitors.

4. All Senior Officers are prohibited from gaining unfair profits, and from allowing Komatsu Ltd. to gain unfair profits through dishonest business transactions.

17

Article 8: Proper Relationship with Employees

1. All Senior Officers must take the initiative to respect the individuality and character of its employees and to develop and maintain a work environment without any discrimination.

2. All Senior Officers are prohibited from engaging in sexual harassment or other behavior which violate the preceding paragraph, and when they discover that such behavior has occurred, they must not leave it unattended.

Article 9: Protection and Proper Use of Company Assets

1. All Senior Officers must protect the assets (not only tangible but also intangible assets, including intellectual property) of Komatsu Ltd. and ensure their proper and efficient use.

2. When any Senior Officer discovers theft, carelessness, misuse, or infringement of the assets of Komatsu Ltd., they must report such fact to the director that is in charge of compliance.

Article 10: Timely Disclosure

1. Komatsu Ltd. shall comply with the law or applicable regulations of the securities exchange, the Securities and Exchange Surveillance Commission and other related organizations and shall disclose the necessary information in a fair and timely manner. To that end, all Senior Officers shall take every necessary and rational step.

2. When any Senior Officer obtains information which is applicable to any of the following matters, he or she must report such fact to the director in charge of corporate communications and follow his or her instructions.

a) Important information which may necessitate the determination of disclosure or non-disclosure of such information and the contents thereof by Komatsu Ltd.

b) Information concerning serious defects of internal control systems or system design and operation that may result in adverse effects on Komatsu Ltd.’s procedures for financial data recording, processing, summarizing, reporting and other processes.

c) Information concerning misconduct of Senior Officers or other employees who fulfill important duties relating to financial reporting, disclosure or internal controls, whether it is material or not.

3. In addition to each of the paragraphs above, detailed procedures for appropriate disclosure shall be stipulated separately.

Article 11: Reporting Illegal or Unethical Behavior

1. When any Senior Officer discovers illegal or other unethical behavior, he or she must report to or consult with his or her senior officer, the director in charge of compliance, the Compliance Department and other appropriate personnel.

2. When any Senior Officer receives a request for consultation, a report or other matters concerning compliance from an employee, he or she must respond honestly, promptly and accurately and also report to the Compliance Department.

3. Senior Officers or employees shall be ensured that they will not be subject to any penalty as a result of making a good-faith report based on each of the above clauses.

4. When the Compliance Department receives a report concerning illegal or other unethical conduct, such Department shall conduct an appropriate investigation, and when such Department determines that it is necessary to take corrective action, legal action, disciplinary action or action for prevention of recurrence of such illegal or unethical behavior in light of the Worldwide Business Conduct, such Department shall implement appropriate measures after discussions with the Compliance Committee and other concerned groups.

18

Article 12: Relationship to Worldwide Business Conduct

This Code of Ethics does not supersede, change, alter or replace the existing policies, standards and other contents already in place as stated in the Worldwide Business Conduct booklet.

Article 13: Punishment

Strict disciplinary action, including termination, shall be taken against any Senior Officer who has engaged in illegal or unethical conduct.

Article 14: Amendment and Abolishment

This Code of Ethics may be amended or abolished after the Compliance Department has discussed the proposed amendment or abolishment with the concerned departments and prepared drafts of such amendment or abolishment, and the Compliance Committee has reviewed and decided that such amendment or abolishment shall be made. Any amendment or abolishment shall be notified promptly to each department of Komatsu Ltd.

19

EX-12.A

Exhibit (12) a.

CERTIFICATIONS

I, Kunio Noji, certify that:

1. I have reviewed this annual report on Form 20-F of Komatsu Ltd.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the company as of, and for, the periods presented in this report;

4. The company’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the company and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the company’s internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the company’s internal control over financial reporting; and

5. The company’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the company’s auditors and the audit committee of the company’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the company’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the company’s internal control over financial reporting.

Date: June 29, 2010

By:	/s/ Kunio Noji
	Kunio Noji
	President, Chief Executive Officer

20

EX-12.B

Exhibit (12) b.

CERTIFICATIONS

I, Kenji Kinoshita, certify that:

1. I have reviewed this annual report on Form 20-F of Komatsu Ltd.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the company as of, and for, the periods presented in this report;

4. The company’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the company and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the company’s internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the company’s internal control over financial reporting; and

5. The company’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the company’s auditors and the audit committee of the company’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the company’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the company’s internal control over financial reporting.

Date: June 29, 2010

By:	/s/ Kenji Kinoshita
	Kenji Kinoshita
	Director and Senior Executive Officer Chief Financial Officer

21

EX-13.A

Exhibit (13) a.

CERTIFICATION

In connection with the annual report on Form 20-F of Komatsu Ltd. (the “Company”) for the period ended March 31, 2010 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned officer of the Company certifies, pursuant to 18 U.S.C. Section 1350, that:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: June 29, 2010

By:	/s/ Kunio Noji
	Kunio Noji
	President, Chief Executive Officer

22

EX-13.B

Exhibit (13) b.

CERTIFICATION

In connection with the annual report on Form 20-F of Komatsu Ltd. (the “Company”) for the period ended March 31, 2010 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned officer of the Company certifies, pursuant to 18 U.S.C. Section 1350, that:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: June 29, 2010

By:	/s/ Kenji Kinoshita
	Kenji Kinoshita
	Director and Senior Executive Officer Chief Financial Officer

23