Revision of System of Remuneration for Director and Establishment of the Amount of Remuneration for Directors of the Company in the Form of Stock Acquisition Rights to be Granted as "Stock-Based Remuneration" and the Details

Komatsu Ltd. (hereinafter "Company") hereby announces that, taking the recommendations of the Compensation Advisory Committee into consideration, the Company resolved at a meeting of the Board of Directors held on April 27, 2010 to revise the remuneration system for Directors as described at 1. below, and that, according to the said revision, the Company resolved to propose an agendum to the 141st Ordinary General Meeting of Shareholders which will be held on June 23, 2010, to establish the amount of the Stock Acquisition Rights to be granted as "stock-based remuneration" to the Directors of the Company and its details, based on the concept of the new "variable remuneration" system, as described at 2. below. See below for details.

(1) Purpose
The Company revises the remuneration system for Directors as described below for the purpose of fostering the same perspective on earnings with the shareholders, and consequently clarifying their incentive to enhance the long-term corporate value of the Company, by linking the remuneration of Directors more closely to the Company's consolidated performance.
(2)Details
The "variable remuneration" for Directors, separate from the fixed remuneration (paid monthly), is determined using the Company's consolidated performance as an indicator, and is composed of 1) the cash remuneration (bonuses) and 2) the stock-based remuneration.
The total amount of the new "variable remuneration" will be calculated each year by evaluating, at the ratio described in the below table, the ROE (Net income attributable to Komatsu Ltd. on Komatsu Ltd. shareholders' equity) and the ROA (Income before income taxes and equity in earnings of affiliated companies on total assets) on a consolidated basis, as the basic indicators, and factoring in the growth (extension rate of consolidated sales) and the profits (profit margin of segment) as the adjustment indicators. Regarding the levels of "variable remuneration", the maximum will be roughly 60% of the total annual remuneration of Directors (which is made up of the fixed remuneration (paid monthly) and the variable remuneration) and the minimum will be zero (0) (in which case, only the fixed remuneration will be paid to the Directors).

(1) Reasons for Resolution
The Company resolved at a meeting of the Board of Directors held on April 27, 2010 to implement a new "variable remuneration" system for Directors for the purposes of fostering the same perspective on earnings with the shareholders, and consequently clarifying their incentive to enhance the long-term corporate value of the Company, by linking the remuneration of Directors more closely to the Company's consolidated performance. (Refer to "1. Revision of System of Remuneration for Directors" above.)
The Company requests that as part of the new "variable remuneration" system, the Stock Acquisition Rights to be granted as "stock-based remuneration" to the Directors of the Company shall have the details described at "(2) Details of Agenda Item" below.
The total amount of remuneration in the form of Stock Acquisition Rights to be granted to the Directors as the aforementioned "stock-based remuneration" for each fiscal year shall be no more than JPY 360 million (of which, up to JPY 50 million shall be allocated for Outside Directors), which is the same amount as that of the former remuneration in the form of stock options to be granted to the Directors that was approved at the 138th Ordinary General Meeting of Shareholders held on June 22, 2007.
The Stock Acquisition Rights to be granted as "stock-based remuneration" to the Directors of the Company (including Outside Directors), as proposed in this item for the shareholders' approval are considered reasonable and appropriate, because the Stock Acquisition Rights, in accordance with the purpose of the new remuneration system of the Directors, will be issued not only for the purposes of raising the morale and motivation of the Directors to contribute to the improvement of the consolidated performance, but also for the purpose of motivating them to enhance the long-term corporate value of the Company.
If this agenda item is approved, the Company plans to issue and allocate Stock Acquisition Rights as "stock-based remuneration" to the Directors of the Company every year upon resolution of the Board of Directors and within the range of the amount and according to the details that are to be approved at the 141st Ordinary General Meeting of Shareholders.
The Company currently has ten (10) Directors (including three (3) Outside Directors), and assuming that an agendum about the election of the Directors is approved at the 141st Ordinary General Meeting of Shareholders, the number of Directors and Outside Directors will be the same: ten (10) and three (3), respectively.

(2) Details of Agenda Item
1) Separately from the monthly remuneration for Directors of the Company, the yearly amount of remuneration in the form of Stock Acquisition Rights to be granted as "stock-based remuneration" to the Directors of the Company shall be no more than JPY 360 million for one (1) year; provided, however, that the salaries for Directors who also serve as employees of the Company are not included in this amount, and that up to JPY 50 million of the amount shall be allocated for Outside Directors.

2) The details of the Stock Acquisition Rights to be granted as "stock-based remuneration" to Directors of the Company (including Outside Directors) are as follows.
a) Type and number of shares to be issued upon the exercise of the Stock Acquisition Rights
The maximum number of Stock Acquisition Rights to be issued in the one-year period following the date of each Ordinary General Meeting of Shareholders shall be 2,390 units (of which a maximum of 330 units may be allocated to Outside Directors).
The maximum number of common stocks of the Company that Directors of the Company may receive through the exercise of the Stock Acquisition Rights to be issued in the one-year period following the date of each Ordinary General Meeting of Shareholders shall be 239,000 shares (of which a maximum of 33,000 shares may be allocated to Outside Directors). If the Number of Shares Granted (defined below) is adjusted, the maximum number of shares to be granted to Directors and Outside Directors will be obtained by multiplying the total number of the aforementioned Stock Acquisition Rights by the adjusted Number of Shares Granted.
The number of shares subject to one (1) Stock Acquisition Right ( "Number of Shares Granted") shall be 100 shares. If, however, the Company either effects a stock split of its common stock (including allotment of common stock of the Company to shareholders without consideration; the same applies hereinafter) or effects a stock consolidation after the date of resolution of this agenda item (hereinafter "Resolution Date"), the Number of Shares Granted in connection with the aforementioned Stock Acquisition Rights shall be adjusted proportionately, in accordance with the ratio of the stock split or the stock consolidation in question. Also, if it is necessary to adjust the Number of Shares Granted after the Resolution Date for other reasons, the Company may adjust the Number of Shares Granted in connection with the aforementioned Stock Acquisition Rights to the extent reasonable.
Fractions of less than one (1) share resulting from the foregoing adjustments shall be rounded down.

b) Amount of assets to be paid upon exercise of the Stock Acquisition Rights
The amount of assets to be paid upon exercise of the Stock Acquisition Rights shall be JPY 1 per each one (1) share to be transferred upon exercise of the Stock Acquisition Rights, multiplied by the number of shares to be transferred.

c) Exercise period for the Stock Acquisition Rights
The exercise period for the Stock Acquisition Rights shall begin (3) years after the date of allotment of the Stock Acquisition Rights and shall end five (5) years after the start of the exercise period.

d) Restrictions on the transfer and acquisition of Stock Acquisition Rights
Acquisition of the Stock Acquisition Rights by transfer shall be required to be approved by the Reorganized Company.

e) Conditions for exercising the Stock Acquisition Rights
If a holder of Stock Acquisition Rights who is a Director, Corporate Auditor or employee of the Company, or a Director, Corporate Auditor or employee of an affiliate of the Company, loses all their respective positions at the Company or affiliate, that person shall be able to exercise the Stock Acquisition Rights only within a period of three (3) years from the date they lost their position; provided, however, that the period shall not exceed the exercise period for the Stock Acquisition Rights described at 3) above. Other terms and conditions concerning the exercise of Stock Acquisition Rights shall be decided at a meeting of the Company�fs Board of Directors.


(For reference) Stock Acquisition Rights to be granted to the Directors of the Company as "stock-based remuneration" in fiscal year 2010

If an agendum about "Establishment of the Amount of Remuneration for Directors of the Company in the Form of Stock Acquisition Rights to be Granted as "Stock-Based Remuneration" and the Details" is approved at the 141st Ordinary General Meeting of Shareholders, the Stock Acquisition Rights to be granted to the Directors of the Company as "stock-based remuneration" in fiscal year 2010 will be issued according to the "stock-based remuneration" in the new remuneration system described in 1. above, and the maximum number of Stock Acquisition Rights will be 210 units (of which a maximum of 21 units may be allocated to Outside Directors) and the maximum number of common stock of the Company that Directors of the Company may receive through the exercise of the Stock Acquisition Rights will be 21,000 shares (of which a maximum of 2,100 shares may be allocated to Outside Directors), which will be equivalent to one third (1/3) of the total amount of "variable remuneration" calculated on the basis of the indicators described above.

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