These documents have been translated from Japanese originals for reference purposes only.
In the event of any discrepancy between these translated documents and the Japanese originals, theoriginals shall prevail. The Company assumes no responsibility for this translation or for direct,
indirect or any other forms of damages arising from the translations.

(Securities Code: 7012)
June 5, 2019
Dear Shareholders:
Yoshinori Kanehana
President
Kawasaki Heavy Industries, Ltd.
1-1 Higashikawasaki-cho 3-chome,
Chuo-ku, Kobe
(Registered Office)
1-3 Higashikawasaki-cho 1-chome,
Chuo-ku, Kobe

NOTICE OF
THE 196th ORDINARY GENERAL MEETING OF SHAREHOLDERS
You are cordially invited to attend the 196th Ordinary General Meeting of Shareholders of
Kawasaki Heavy Industries, Ltd. (the “Company” or “KHI”). The meeting will be held as
described below.
If you are unable to attend on the day of the meeting, we kindly ask you toreview the “Reference Documents for the General Meeting of Shareholders”(described hereinafter), and exercise your voting right in writing or via theInternet, etc., by 5:00 p.m. on Tuesday, June 25, 2019 (JST).
1. Date and Time:
2. Place:

Wednesday, June 26, 2019 at 10:00 a.m. (JST) (Dooropens at 9 a.m.)
Kokusai Hall at The Kobe International House
1-6 Gokoudori 8-chome, Chuo-ku, Kobe

3. Meeting Agenda:
Matters to be reported:
1. The Business Report, Consolidated Financial Statements for the Company’s 196th
Fiscal Year (from April 1, 2018 to March 31, 2019) and results of audits of theConsolidated Financial Statements by the Accounting Auditor and the Audit &Supervisory Board Members
2. Non-Consolidated Financial Statements for the Company’s 196th Fiscal Year (from
April 1, 2018 to March 31, 2019)
Matters to be resolved:
Proposal No. 1: Appropriation of Surplus
Proposal No. 2: Election of Eleven Directors
Proposal No. 3: Election of One Audit & Supervisory Board Member(Please refer to the “Reference Documents for the General Meeting of Shareholders”
hereinafter for information on each of the proposals.)–1–

4. Other matters regarding procedures of the General Meeting of Shareholders:(1) Concerning web disclosure
Among the documents to be submitted when sending the Notice, “System to ensure that
Directors’ execution of duties complies with laws and regulations and the Articles ofIncorporation, other systems to ensure proper execution of business and overview ofoperation status of such systems” in the Business Report, “Consolidated Statement of
Changes in Net Assets” “Notes to the Consolidated Financial Statements” and “Nonconsolidated Statement of Changes in Net Assets” “Notes to the Non-consolidated
Financial Statements” are posted on the Company’s Website pursuant to laws andregulations as well as Article 16 of the Company’s Articles of Incorporation, and they are
not included in the Appendix regarding matters to be reported. “Consolidated Statementof Changes in Net Assets” “Notes to the Consolidated Financial Statements” “Nonconsolidated Statement of Changes in Net Assets” and “Notes to the Non-consolidated
Financial Statements” have been combined with the Consolidated Financial Statements andthe Non-Consolidated Financial Statements for the auditing process when preparing theresults of audits by the Accounting Auditor and the Audit & Supervisory Board Members.
(2) Concerning amendments on the web
Any amendments to the Business Report, the Consolidated Financial Statements, the NonConsolidated Financial Statements and the Reference Documents for the General Meetingof Shareholders, will be posted on the Company’s Website.
The Company’s Website
https://www.khi.co.jp/ir/(3) Concerning entrance of persons other than shareholders
Please note that persons other than shareholders who are able to exercise voting rights,
including representatives and their companions who are not shareholders, are notpermitted to enter the venue.
(4) Concerning photography, video and audio recording inside the General Meeting of
Shareholders
Photography, video and audio recording inside the General Meeting of Shareholders is
prohibited. We appreciate your cooperation.
(5) Concerning proceedings on the day of the General Meeting of Shareholders
Please note that the proceedings on the day of the General Meeting of Shareholders will
be conducted in the Japanese language. Please kindly accept that we will not be
preparing any interpreters.

–2–

Exercise of Voting Rights in Writing
Please indicate your vote for or against the proposals on the enclosed Voting Rights
Exercise Form, and return it so that it is delivered by the above-mentioned exercise date.
Exercise of Voting Rights via the Internet, etc.
Please exercise your voting right by logging on to the Internet website(https://www.web54.net) and entering the voting right exercise code and password
stated on the enclosed Voting Rights Exercise Form, and follow the online instructions tosubmit your vote.
Notes:
1. If you duplicate your vote, i.e., if you exercise your voting rights both in writing and via theInternet, etc., we will consider only the vote cast via the Internet, etc. to be valid. Also, if you
vote a number of times, we will consider the final vote to be the valid one.
2. Shareholders who intend to diversely exercise voting rights are requested to give written
notification to that effect, and the reason(s) thereof, no later than three days prior to the day of
the General Meeting of Shareholders.

–3–Scanning QR code®
“Smart Vote”

Entering login ID andpassword

You can simply login to the website
for exercising voting rights without
entering your login ID and password.

Voting website:
https://www.web54.net

1 Please scan the QR code® locatedon the right side of the Voting Rights
Exercise Form.

1 Please access the voting website.
2 Enter your “voting right exercisecode” on the Voting Rights Exercise
Form.

* “QR code” is a registeredtrademark
of
DENSO
WAVE
INCORPORATED.

3 Enter your “password” on the
Voting Rights Exercise Form.

2 Indicate your approval ordisapprovalbyfollowingtheinstructions on the screen.
Note that you can exercise yourvote via “Smart Vote” only once.
If you need to change your vote after

4 Indicate your approval ordisapprovalbyfollowingtheinstructions on the screen.

having exercised your right, please
access the voting website, enter your“votingright

exercise

code”

and

“password” stated on the Voting Rights
Exercise Form to log in, and exercise
your voting right again.
*Please scan the QR code again toaccess the voting website.

–4–Reference Documents for the General Meeting of Shareholders
Proposals and References
Proposal No. 1: Appropriation of Surplus
The Company considers the improvement of enterprise value, i.e., creating stable profit
that exceeds capital costs over the future, as being a fundamental policy, and return ofprofits to shareholders by enhancing shareholder value over the long term throughcontinuous, advanced research and development and innovative capital investment,
which is necessary for future growth, as being an important management issue.
In addition, in order to keep a balance between shareholder value and returning profits
to shareholders through dividends, the Company takes its overall financial position into
consideration, including free cash flow and debt-equity ratio (D/E ratio) etc., in addition
to future earnings trends, and, with stable dividends in mind, has established 30% as
the basis for the medium- to long-term dividend payout ratio with respect to net income
attributable to owners of parent.
The Company’s basic policy is to distribute dividend surplus twice a year as an interim
dividend and a year-end dividend. The Board of Directors determines the amount of theinterim dividend and the shareholders determine the year-end dividend at a General
Meeting of Shareholders.
Based on the policy above, the year-end dividend for the 196th term will amount to ¥35
per ordinary share of the Company for a total distribution of ¥5,846,586,760. As a result,annual dividend will be ¥70 per ordinary share of the Company, including interim
dividend (¥35 per ordinary share of the Company).
In addition, the effective date for the dividends from surplus shall be June 27, 2019.
Type of dividend property
Dividend per share
Total amount of dividend
Effective date of dividends of surplus

Cash
¥35
¥5,846,586,760
June 27, 2019–5–

Proposal No. 2:

Election of Eleven Directors

The terms of office of all twelve Directors will expire at the conclusion of this Ordinary
General Meeting of Shareholders. We propose to elect eleven Directors due to thechange in management structure (reduction in number of Directors by one) this fiscal
year. Candidates for Directors were nominated by the Board of Directors in accordancewith “Qualifications Expected of Directors,” which is described on page 17 The Company
has obtained a report to the effect that this nomination is appropriate from theNomination Advisory Committee, which consists mainly of independent outside officers.
The candidates for Directors are as follows:
Attendance toNo.

Duties, Significant concurrent

Name

positions etc.

meetings of theBoard ofDirectors

1

Reappointed

Shigeru Murayama

2

Reappointed

Yoshinori Kanehana

3

Reappointed

Kenji Tomida

4

Reappointed

Tatsuya Watanabe

5

Reappointed

6

Reappointed

Katsuya Yamamoto

7

Reappointed

Sukeyuki Namiki

8

Reappointed

Yasuhiko Hashimoto

9

Reappointed

10

Reappointed

11

New

(Note)

OutsideIndependent

OutsideIndependent
OutsideIndependent

Michio Yoneda

17/17 (100%)
Chief Executive Officer
Assistant to the President, withoverall responsibility for finance andaccounting, and human resources
President, Energy System & Plant
Engineering Company
Outside Audit & Supervisory Board
Member, Sumitomo Chemical
Company, Limited
Outside Director, Audit andSupervisory Committee Member,
Asahi Broadcasting Group Holdings
Corporation
In charge of Corporate Planning,
Investor Relations, Corporate
Communication and Ship &Offshore Structure Company,
General Manager, Corporate
Planning Division
Assistant to the President, withoverall responsibility for technology,
production and procurement, and in
charge of Quality Control and Rolling
Stock Company
President, Precision Machinery &Robot Company, in charge ofpromoting automation

17/17 (100%)
17/17 (100%)
15/17 (88%)

17/17 (100%)

17/17 (100%)

14/14 (100%)

14/14 (100%)

Yoshiaki Tamura

Outside Director, DIC Corporation

14/14 (100%)

Jenifer Rogers

Outside Director, Mitsui & Co., Ltd.

14/14 (100%)

Hiroyoshi Shimokawa

President, Aerospace Systems
Company-/- (-%)The number shown under “Attendance to meetings of the Board of Directors” for Sukeyuki
Namiki, Yasuhiko Hashimoto, Yoshiaki Tamura and Jenifer Rogers indicates theirattendance to the meetings after their assumption on June 27, 2018.

–6–

Name
(Date of Birth)No.

Attendance tomeetings of theBoard of Directors(Reappointed)

1

Shigeru
Murayama(February 27,
1950)
17/17 (100%)(Reappointed)

2Career Summary, Positions and Duties[Significant concurrent positions]

Yoshinori
Kanehana(February 19,
1954)
17/17 (100%)

Apr. 1974

Joined Kawasaki Heavy Industries, Ltd.

Jun. 2010

Senior Vice President
President, Aerospace Company

Jun. 2013

President

Jun. 2016

Chairman of the Board

Reasons for nomination as candidate for Director
Mr. Murayama has been mainly engaged in business related
to technology and development of the aerospace segmentof the Company for many years. He assumed the office of
its Senior Vice President in 2010 and its President in 2013.
He has served as Chairman of the Board since 2016.
Presently, as Chairman of the Board, he has been
demonstrating outstanding leadership, thereby making asignificant contribution to the Company’s business growthand enhancing its enterprise value. Considering thesepoints, we have determined that he is suitable for a Director
and nominated him again as a candidate for Director.
Apr. 1976

Joined Kawasaki Heavy Industries, Ltd.

Jun. 2012

Senior Vice President
General Manager, Marketing DivisionJun. 2013

Senior Vice President
President, Rolling Stock Company

Apr. 2016

Senior Executive Vice President
Assistant to the President

Jun. 2016

President

Apr. 2018

President and Chief Executive Officer

Reasons for nomination as candidate for Director
Mr. Kanehana has been mainly engaged in business related
to technology and development of the rolling stock segmentof the Company and its overseas business for many years.
He assumed the office of its Senior Vice President in 2012
and its Senior Executive Vice President in April 2016. He hasserved as its President since June 2016. Presently, as
President and Chief Executive Officer, he has been
demonstrating outstanding leadership, thereby making asignificant contribution to the Company’s business growthand enhancing its enterprise value. Considering thesepoints, we have determined that he is suitable for a Director
and nominated him again as a candidate for Director.

–7–

Number oftheCompany’s
shares held

23,300shares

16,500sharesName(Date of Birth)No.

Attendance tomeetings of theBoard of Directors(Reappointed)
3Career Summary, Positions and Duties[Significant concurrent positions]Apr. 1978

Joined Kawasaki Heavy Industries, Ltd.

Jun. 2014

Senior Vice President
General Manager, Corporate Planning
Division

Apr. 2015

Senior Vice President
President of Motorcycle & Engine Company

Dec. 2016

Senior Vice President
General Manager, Corporate Planning
Division, in charge of Finance & Accounting
and Personnel & Labor Administration
Department

Apr. 2017

Senior Executive Vice President
Assistant to the President, in charge of Head
Office Administration Department

Apr. 2018

Director, Vice President and Senior Executive
Officer
Assistant to the President, with overall
responsibility for finance and accounting, incharge of Head Office Administration
Department

May 2018

Director, Vice President and Senior Executive
Officer
Assistant to the President, with overall
responsibility for finance and accounting, incharge of Head Office Administration
Department and Ship & Offshore Structure
Company

Kenji Tomida(August 7, 1955)
17/17 (100%)

Apr. 2019

Director, Vice President and Senior Executive
Officer
Assistant to the President, with overall
responsibility for finance and accounting, andhuman resources

Reasons for nomination as candidate for Director
Mr. Tomida has been mainly engaged in business related tofinance & accounting and corporate planning of theCompany and its overseas business for many years. He wasappointed as its Senior Vice President in 2014 and has
served as its Senior Executive Vice President since 2017.
Presently, as Director, Vice President and Senior Executive
Officer, he has an overall responsibility for corporate financeand accounting, and human resources, thereby making asignificant contribution to the Company’s business growthand enhancing its enterprise value. Considering thesepoints, we have determined that he is suitable for a Director
and nominated him again as a candidate for Director.

–8–

Number oftheCompany’s
shares held

9,600
sharesName(Date of Birth)No.

Attendance tomeetings of theBoard of Directors(Reappointed)
4Career Summary, Positions and Duties[Significant concurrent positions]Apr. 1981

Joined Kawasaki Heavy Industries, Ltd.

Apr. 2013

Executive Officer
Senior Manager, Energy Plant Engineering
Division of Plant & Infrastructure Company

Apr. 2015

Executive Officer
Vice President, Plant & Infrastructure
Company

Apr. 2016

Managing Executive Officer
President, Plant & Infrastructure Company

Jun. 2016

Senior Vice President
President, Plant & Infrastructure Company

Tatsuya Watanabe Apr. 2018
(September 30,
1957)
15/17 (88%)

Director, Managing Executive Officer
President, Energy System & Plant
Engineering Company

Reasons for nomination as candidate for Director
Mr. Watanabe has been mainly engaged in business related
to technology and development of the plant & infrastructure
segment of the Company for many years. He has served as
Senior Vice President since 2016. Presently, as Director,
Managing Executive Officer and President of Energy System& Plant Engineering Company, he has been demonstrating
outstanding leadership, thereby making a significant
contribution to the Company’s business growth andenhancing its enterprise value. Considering these points, wehave determined that he is suitable for a Director andnominated him again as a candidate for Director.

–9–

Number oftheCompany’s
shares held

5,900
sharesName(Date of Birth)
No.

Career Summary, Positions and Duties[Significant concurrent positions]

Attendance tomeetings of theBoard of Directors
Apr. 1973

5(Reappointed)(Outside Director
Candidate)(Independent
Officer)
Michio Yoneda(June 14, 1949)
17/17 (100%)

Number oftheCompany’s
shares held

Joined Bank of Japan

Apr. 2000

Resigned Bank of Japan

Apr. 2000

Executive Director, Osaka Securities
Exchange

Apr. 2001

Executive Director (Member of the Board),
Osaka Securities Exchange Co., Ltd.

Dec. 2003

President & CEO (Member of the Board),
Osaka Securities Exchange Co., Ltd.

Jan. 2013

Director & Representative Executive Officer,
Group COO, Japan Exchange Group, Inc.
Director, Tokyo Stock Exchange, Inc.

Jun. 2015

Resigned Director & Representative
Executive Officer, Group COO of Japan
Exchange Group, Inc.
Resigned Director of Tokyo Stock Exchange,
Inc.

Jun. 2015

Outside Audit & Supervisory Board Member,
The Resolution and Collection Corporation

Jun. 2016

Outside Director, Kawasaki Heavy Industries,Ltd.
(current position)

Jun. 2018

Resigned Outside Audit & Supervisory Board
Member, The Resolution and Collection
Corporation
Outside Audit & Supervisory Board Member,
Sumitomo Chemical Company, Limited
Outside Director, Audit and Supervisory
Committee Member, Asahi BroadcastingGroup Holdings Corporation[Significant concurrent positions]
Outside Audit & Supervisory Board Member, Sumitomo
Chemical Company, Limited
Outside Director, Audit and Supervisory Committee
Member, Asahi Broadcasting Group Holdings Corporation
Reasons for nomination as candidate for Director
Mr. Yoneda previously served as President & CEO (Memberof the Board) of Osaka Securities Exchange Co., Ltd., andDirector & Representative Executive Officer and Group COO
of Japan Exchange Group, Inc., and other important
positions. We have received helpful opinions and advice on
important management decisions based on his deep insightfor corporate governance and abundant management
experience cultivated in those positions from a standpoint
independent from the Company’s execution of duties.
Considering these points, we have nominated him again asa candidate for Director as we have judged that he will beable to fully perform his roles as an Outside Director
supervising the execution of duties and enhancing its
enterprise value.

– 10 –

400
sharesName(Date of Birth)
No.

Career Summary, Positions and Duties[Significant concurrent positions]

Attendance tomeetings of theBoard of Directors
Apr. 1981

Joined Kawasaki Heavy Industries, Ltd.

Jul. 2013

General Manager, Planning & Control
Division, Precision Machinery Company

Apr. 2015

Executive Officer
General Manager, Planning & Control Division,
Precision Machinery Company

Apr. 2017Managing Executive Officer
General Manager, Corporate Planning
Division

Jun. 2017

Senior Vice President
General Manager, Corporate Planning Division

Apr. 2018

Director, Managing Executive Officer
General Manager, Corporate Planning Division,in charge of Risk Management

Apr. 2019

Director, Managing Executive Officer, incharge of Corporate Planning, Investor
Relations, Corporate Communication andShip & Offshore Structure Company, General
Manager, Corporate Planning Division(Reappointed)

6

Katsuya
Yamamoto(November 21,
1957)
17/17 (100%)

Reasons for nomination as candidate for Director
Mr. Yamamoto has been mainly engaged in business related
to corporate planning and finance & accounting of the plant& infrastructure segment and the precision machinery
segment of the Company for many years. He has served as
Senior Vice President since 2017. Presently, as Director,
Managing Executive Officer and General Manager ofCorporate Planning Division, he exercises control over
operations including overall corporate planning and investor
relations, while also being in charge of Corporate
Communication and Ship & Offshore Structure Company,
making a significant contribution to the Company’s businessgrowth and enhancing its enterprise value. Considering
these points, we have determined that he is suitable for a
Director and nominated him again as a candidate for
Director.

– 11 –

Number oftheCompany’s
shares held

5,200
sharesName(Date of Birth)No.

Attendance tomeetings of theBoard of Directors(Reappointed)
7Career Summary, Positions and Duties[Significant concurrent positions]

Sukeyuki Namiki(June 6, 1955)
14/14 (100%)

Apr. 1980

Joined Kawasaki Heavy Industries, Ltd.

Apr. 2014

Staff officer to Aerospace Company (Incharge of Next-Generation Wide-Body
Project Promotion Department)

Apr. 2015

Executive Officer
Vice President, Aerospace Company

Apr. 2016

Managing Executive Officer
President, Aerospace Company

Apr. 2018

Managing Executive Officer
President, Aerospace Systems Company,
with overall responsibility for production

Jun. 2018

Director, Managing Executive Officer
President, Aerospace Systems Company

Apr. 2019

Director, Vice President and Senior Executive
Officer
Assistant to the President, with overall
responsibility for technology, production andprocurement, and in charge of Quality
Control and Rolling Stock Company

Reasons for nomination as candidate for Director
Mr. Namiki has been mainly engaged in businesses related
to technology and developing the aerospace segment of theCompany for many years. He was appointed Director,
Managing Executive Officer of the Company in 2018.
Presently, as Director, Vice President and Senior Executive
Officer, he has demonstrated outstanding leadership, he has
an overall responsibility for technology, production andprocurement, while also being in charge of Quality Control
and Rolling Stock Company, making a significant
contribution to the Company’s business growth andenhancing its enterprise value. Considering these points, wehave determined that he is suitable for a Director andnominated him again as a candidate for Director.

– 12 –

Number oftheCompany’s
shares held

5,600
sharesName(Date of Birth)No.

Attendance tomeetings of theBoard of Directors(Reappointed)
8Career Summary, Positions and Duties[Significant concurrent positions]

Yasuhiko
Hashimoto(May 15, 1957)
14/14 (100%)

Apr. 1981

Joined Kawasaki Heavy Industries, Ltd.

Apr. 2013

Executive Officer
General Manager, Robot Business Division,
Precision Machinery Company

Apr. 2016

Managing Executive Officer
In charge of promoting automation, General
Manager, Robot Business Division, Precision
Machinery Company

Apr. 2018

Managing Executive Officer
President, Precision Machinery & Robot
Company, in charge of promoting automation

Jun. 2018

Director, Managing Executive Officer
President, Precision Machinery & Robot
Company, in charge of promoting automation

Reasons for nomination as candidate for Director
Mr. Hashimoto has been mainly engaged in businesses
related to technology and developing of the industrial robots
business unit of the Company for many years. He wasappointed Director, Managing Executive Officer of theCompany in 2018. Presently, as Director, Managing
Executive Officer and President of Precision Machinery &Robot Company, he has demonstrated outstanding
leadership, while also having overall responsibility forpromoting companywide automation, thereby making asignificant contribution to the Company’s business growthand enhancing its enterprise value. Considering thesepoints, we have determined that he is suitable for a Director
and nominated him again as a candidate for Director.

– 13 –

Number oftheCompany’s
shares held

4,600
sharesName(Date of Birth)No.

9Career Summary, Positions and Duties[Significant concurrent positions]

Attendance tomeetings of theBoard of Directors(Reappointed)(Outside Director
Candidate)(Independent
Officer)

Apr. 1979

Joined Asahi Glass Co., Ltd. (At present: AGC
Inc.)

Mar. 2013

Representative Director and Executive Vice
President, Asahi Glass Co., Ltd.
Overall Business Management, GM of
Technology General Division, Deputy Leaderof AGC Group Improvement Activities

Jan. 2014

President of Glass Company, Asahi Glass Co.,
Ltd.

Mar. 2014

Executive Vice President, President of Glass
Company, Asahi Glass Co., Ltd.

Jan. 2017

Assistant to CEO, Asahi Glass Co., Ltd.

Mar. 2017

Executive Fellow, Asahi Glass Co., Ltd.

Mar. 2018

Outside Director, DIC Corporation

Jun. 2018

Outside Director, Kawasaki Heavy Industries,
Ltd.

Mar. 2019

Retired from Executive Fellow, AGC Inc.

Yoshiaki Tamura [Significant concurrent positions](October 3, 1954) Outside Director, DIC Corporation
Reasons for nomination as candidate for Director
14/14 (100%)
Mr. Tamura served as Representative Director and Executive
Vice President, Asahi Glass Co., Ltd. (At present: AGC Inc.),
Overall Business Management, GM of Technology General
Division, Deputy Leader of AGC Group Improvement
Activities and Executive Vice President, President of Glass
Company and other important positions. We have received
helpful opinions and advice on important management
decisions based on his deep insight for manufacturing andabundant management experience cultivated in thosepositions from a standpoint independent from theCompany’s execution of duties. Considering these points, wehave judged that he will be able to fulfill his role as an
Outside Director supervising the execution of duties of theCompany and enhancing its enterprise value, and nominatedhim again as a candidate for Director.

– 14 –

Number oftheCompany’s
shares held

300
sharesName(Date of Birth)No.

10Career Summary, Positions and Duties[Significant concurrent positions]

Attendance tomeetings of theBoard of Directors(Reappointed)(Outside Director
Candidate)(Independent
Officer)
Jenifer Rogers(June 22, 1963)
14/14 (100%)

Sep. 1989

Joined Haight Gardner Poor & Havens (Atpresent: Holland & Knight LLP)

Dec. 1990

Registered as Attorney at Law admitted in
New York

Feb. 1991

Joined Industrial Bank of Japan Limited (Atpresent: Mizuho Bank, Ltd.)

Nov. 1994

Retired from Industrial Bank of Japan Limited(At present: Mizuho Bank, Ltd.)

Dec. 1994

Joined Merrill Lynch Japan Securities Co.,
Ltd.

Nov. 2000

Merrill Lynch Europe Plc

Jul. 2006

Bank of America Merrill Lynch (Hong Kong)

Nov. 2012

General Counsel Asia, Asurion Japan
Holdings G.K. (concurrently serving as Vice
President)

Jun. 2015

Outside Director, Mitsui & Co., Ltd.

Jun. 2018

Outside Director, Kawasaki Heavy Industries,
Ltd.

[Significant concurrent positions]
Outside Director, Mitsui & Co., Ltd.
Reasons for nomination as candidate for Director
Ms. Rogers has extensive international experience and deep
insights into legal affairs, compliance, and risk management,
having served as an in-house lawyer and counsel at financial
institutions in Japan and overseas for many years. We havereceived helpful opinions and advice on importantmanagement decisions based on her deep insight for legal
affairs, compliance, risk management and abundantinternational experience cultivated in those positions from astandpoint independent from the Company’s execution ofduties. Considering these points, we have judged that she
will be able to fulfill her role as an Outside Director
supervising the execution of duties of the Company andenhancing its enterprise value, and nominated her again asa candidate for Director.

– 15 –

Number oftheCompany’s
shares held

300
sharesName(Date of Birth)
No.

Career Summary, Positions and Duties[Significant concurrent positions]

Attendance tomeetings of theBoard of Directors
Apr. 1983

Joined Kawasaki Heavy Industries, Ltd.

Jul. 2014

Deputy General Manager (in charge of
Manufacturing), Manufacturing Division, andSenior Manager, Production Control
Department

Apr. 2015

General Manager, QM Promoting Division,
Aerospace Company

Apr. 2017

Executive Officer
Vice President, Aerospace Company, andGeneral Manager, Manufacturing Division(Newly-appointed) Apr. 201811

Hiroyoshi
Shimokawa(March 8, 1960)-/- (-%)

Apr. 2019

Executive Officer
Vice President (in charge of the Aerospacebusiness), Aerospace Systems Company
Managing Executive Officer
President, Aerospace Systems Company

Number oftheCompany’s
shares held

800
sharesReasons for nomination as candidate for Director
Mr. Shimokawa has been mainly engaged in businesses
related to manufacturing and quality assurance of theaerospace business unit of the Company for many years. He
was appointed Executive Officer of the Company in 2017 andhas served as Managing Executive Officer of the Company
since 2019. Presently, as Managing Executive Officer andPresident of Aerospace Systems Company, he has
demonstrated outstanding leadership, thereby making asignificant contribution to the Company’s business growthand enhancing its enterprise value. Considering thesepoints, we have determined that he is suitable for a Director
and newly nominated him as a candidate for Director.

(Notes) 1. There is no special interest relationship between each candidate and the Company.
2. Mr. Michio Yoneda, Mr. Yoshiaki Tamura and Ms. Jenifer Rogers are candidates for Outside
Director.
3. Mr. Michio Yoneda’s tenure as Outside Director of the Company will have been three years
at the conclusion of this Ordinary General Meeting of Shareholders.
4. Tenure of Mr. Yoshiaki Tamura and Ms. Jenifer Rogers as Outside Director of the Company
will have been one year at the conclusion of this Ordinary General Meeting of Shareholders.
5. Mr. Michio Yoneda, Mr. Yoshiaki Tamura and Ms. Jenifer Rogers have entered into a limited
liability agreement pursuant to the provisions of Article 427, Paragraph 1 of the Companies
Act, and the liability under said agreement shall be limited to either an amount of ¥10
million, or an amount specified by laws and regulations, whichever is higher. Should thereappointment of Mr. Michio Yoneda, Mr. Yoshiaki Tamura and Ms. Jenifer Rogers beapproved, the Company will extend the above agreement with them.
6. The Company has submitted notification to Tokyo Stock Exchange, Inc. that Mr. Michio
Yoneda, Mr. Yoshiaki Tamura and Ms. Jenifer Rogers have been appointed as Independent
Officer as provided for by the aforementioned exchange.
7. The Company has no special transactional relationship, with the exception of transactions
based on the listing agreement between Tokyo Stock Exchanges, Inc., where Mr. Michio
Yoneda served as managing officer in the past, and the Company. Because a conflict ofinterest is not likely to be caused with general shareholders, we have judged that he will
be able to fulfill his role as an Independent Officer.
8. Although Asahi Glass Co., Ltd. (At present: AGC Inc.), where Mr. Yoshiaki Tamura served
as a managing officer in the past, is a business partner of the Company, the annual averagetransactions between the Group of Asahi Glass Co., Ltd and the KHI Group for the mostrecent five fiscal years account for less than 1% of the annual average net sales each forthe said Group and the KHI Group over the corresponding period. Consequently, we have– 16 –

determined that there is no issue as to the independence of Mr. Tamura and he will be able
to fulfill his role as an Independent Officer.

– 17 –

Proposal No. 3: Election of One Audit & Supervisory Board Member
The term of office of Outside Audit & Supervisory Board Member Mr. Takashi Torizumi
will expire at the conclusion of this Ordinary General Meeting of Shareholders.
Accordingly, we propose to elect one Audit & Supervisory Board Member.
We have obtained the prior consent of the Audit & Supervisory Board Members on this
proposal.
Candidate for Audit & Supervisory Board Member was nominated by the Board of
Directors in accordance with “Qualifications Expected of Audit & Supervisory Board
Members,” which is described on page 17 The Company has obtained a report to theeffect that this nomination is appropriate from the Nomination Advisory Committee,
which consists mainly of independent outside officers.
The candidate for Audit & Supervisory Board Member is as follows:

Name(Date of Birth)(Newly-appointed)(Outside Audit & Supervisory
Board Member Candidate)(Independent Officer)
Ryoichi Saito(February 3, 1950)

Carrier Summary and Positions[Significant concurrent positions]Apr. 1974

Joined NSK Ltd.

Jun. 2006

Senior Vice President, Head of Corporate
Planning Division HQ

Jun. 2011

Director, Representative, Executive Vice
President, Head of Corporate Strategy
Division HQ, Crisis Management
Committee Chairperson

Jun. 2013

Senior Advisor

Jun. 2016

Administrative Officer

Jun. 2017RetiredReasons for nomination as candidate for Audit &Supervisory Board Member
Mr. Saito has not only extensive management
experience but also deep insights into businessplanning,
financeandaccounting,andrisk
management, having joined NSK Ltd., where heassumed key posts, including Senior Vice President,
Head of Corporate Planning Division HQ, Director,
Representative, Executive Vice President, Head ofCorporate Strategy Division HQ and Crisis Management
Committee Chairperson. Considering these points, wehave judged that he will be able to fulfil his role as an
Outside Audit & Supervisory Board Member auditing
the Company from an independent position, and newly
nominated him as a candidate for Audit & Supervisory
Board Member.

Number oftheCompany’s
sharesheld

0shares(Notes) 1. There is no special conflict of interest between the Company and the candidate for
Audit & Supervisory Board Member.
2. Mr. Ryoichi Saito is a candidate for Outside Audit & Supervisory Board Member.
3. Mr. Ryoichi Saito will enter into a limited liability agreement after his election pursuant to
the provisions of Article 427, Paragraph 1 of the Companies Act with the Company on
condition that Proposal No. 3 is adopted in its original form. Liability under the said
agreement shall be limited to either ¥10 million or an amount specified by laws andregulations, whichever is higher.

– 18 –

4. The Company will submit notification to Tokyo Stock Exchange, Inc. that Mr. Ryoichi Saito
is appointed as Independent Officer as provided for by the aforementioned exchange.
5. Although NSK Ltd., where Mr. Ryoichi Saito previously served as business executive, is abusiness partner of the Company, the annual average transactions between the Group of
NSK Ltd. and the KHI Group for the most recent five fiscal years account for less than 1%of the annual average net sales each for the said Group and the KHI Group over thecorresponding period. Consequently, we have determined that there is no issue as to the
independence of Mr. Saito and he will be able to fulfill his role as an Independent Officer.

– 19 –

Reference[Qualifications Expected of Directors]
1. Deeply understand and agree to the management philosophy and vision of the KHI
Group
2. Be able to contribute to sustainable growth and enhancement of enterprise value inthe medium- to long-term
3. Hold companywide standpoints and have abundant and broad experience, deep
insight and expertise to do so
4. Be able to supervise the management and execution of business operations from an
independent and objective standpoint as a member of the Board of Directors[Qualifications Expected of Audit & Supervisory Board Members]
1. Be able to contribute to ensuring the soundness of the KHI Group’s management
2. Have the ability to make fair and appropriate judgment from an independent andobjective standpoint
3. Be able to exercise one’s authority in an active and positive manner, and properly
express one’s opinions to the Board of Directors or the management
4. Be familiar with the Company’s business and corporate management or haveabundant and broad experience, deep insight and expertise
5. At least one Audit & Supervisory Board Member must have substantial knowledge
about finance and accounting[Independence Standards for Officers]
When the outside officer does not fall under all the following items, Outside
Officer is deemed to satisfy the independence requirements:
1. The Outside Officer presently serves or previously served in the last ten years as amanaging director, executive officer, operating officer or other important employee ofa company (including major subsidiaries designated by the Company) (hereinafter,
the “Home Company”) that has a business relationship with the KHI Group, where
the average amount of transaction from the said business for the last five fiscal years
exceeds 2% of average net sales of the KHI Group and the Home Company.
2. The Outside Officer serves as a specialist or consultant (corporation if it has judicial
personality) of legal, accounting or tax affairs and the average remuneration directly
received from the KHI Group (excluding remuneration for the Company’s officer) forthe last five fiscal years exceeds ¥10 million.
3. The Outside Officer serves as executive officer of a non-profit organization and theaverage donations from the KHI Group to the organization for the last five fiscal years
exceeds ¥10 million and exceeds 2% of the total revenue or the current balance ofthe organization.
4. Home Company of the Outside Officer is a major shareholder of the Company as it
holds 10% or more of total number of shares issued in KHI.
5. A relative of the Outside Officer within the second degree falls under the preceding
four items or serves as managing director, executive officer, operating officer or otherimportant employee of the KHI Group.

– 20 –

Attachment:

Business Report(April 1, 2018 - March 31, 2019)
1. Overview concerning the Current Situation of Company Group(1) Business Progress and Results(i) General conditions
While the global economy, centered on the U.S. with a strong real economy,
has continued to grow moderately, it lacks momentum as a whole mainly due
to an economic slowdown in some emerging economies and resource-richcountries. In addition, deterioration in corporate earnings is becoming
manifest, resulting from U.S.-China trade friction, and there remains thepossibility of a no-deal Brexit, even though the departure of the UK from theEU was postponed. Under these circumstances, uncertainty over the prospectsof the real economy has persisted, requiring continued attention on the risk ofa global economic downturn.
The Japanese economy is recovering moderately mainly due to a slightincrease in capital investment and improvements in corporate earnings. Goingforward, although moderate growth is expected in general, it is also possiblethat the yen will appreciate primarily due to the economic policies of the U.S.
and other countries, so continued attention must be paid to the foreignexchange markets.
Amid such an operating environment, the KHI Group achieved growth inorders received mainly in the Ship & Offshore Structure segment. However,sales in the Rolling Stock and Aerospace Systems segments contracted,
decreasing the Group’s overall net sales by 1% year-on-year down to ¥1,585.9
billion in the fiscal year ended March 31, 2019. Net sales, as a whole, were¥1,594.7 billion, 1% higher than the previous fiscal year, due to increased
sales primarily in the Motorcycle & Engine segment and the Precision
Machinery & Robot segment, while sales of the Rolling Stock segment
decreased.
In terms of profit, operating income was ¥64.0 billion, 14% higher than theprevious fiscal year, due to an improvement in the Ship & Offshore Structure
segment and increased profit in the Energy System & Plant Engineering
segment and others. Recurring profit was ¥37.8 billion, 12% lower than theprevious fiscal year mainly due to payments for the in-service issues ofcommercial aircraft jet engines, while operating income increased. Net income
attributable to owners of parent was ¥27.4 billion, 5% lower than the previous
fiscal year, mainly due to a decrease in recurring profit.
(ii) Operating conditions by business segment
The Company has reviewed the method of business segment classificationfrom the fiscal year ended March 31, 2019 and has changed its reportablesegments from the previous Ship & Offshore Structure, Rolling Stock,
Aerospace, Gas Turbine & Machinery, Plant & Infrastructure, Motorcycle &Engine, Precision Machinery, and Others to Aerospace Systems, Energy– 21 –

System & Plant Engineering, Precision Machinery & Robot, Ship & Offshore
Structure, Rolling Stock, Motorcycle & Engine, and Others.
Information by business segment for the previous fiscal year has been
prepared using the revised segment classification method.
Aerospace Systems segment
In the Aerospace Systems segment, orders received were ¥431.6 billion, adecrease of ¥67.2 billion from the previous fiscal year, due to decreased orders
received from the Ministry of Defense (MOD) in Japan and component partsfor commercial aircraft, while component parts for commercial aircraft jetengines increased.
Net sales decreased ¥5.5 billion from the previous fiscal year to ¥463.9 billion,
due to decreased sales to MOD and of component parts for commercial aircraft,while sales of component parts for commercial aircraft jet engines increased.
Operating income increased ¥1.7 billion from the previous fiscal year to ¥32.6
billion, which was mainly attributable to the increased profitability ofcomponent parts for commercial aircraft.
Energy System & Plant Engineering segment
In the Energy System & Plant Engineering segment, orders received were¥263.5 billion, an increase of ¥39.8 billion from the previous fiscal year, which
was mainly due to orders received for Combined Cycle Power Plant (CCPP) and
LNG tanks in the domestic market and other factors.
Net sales increased ¥1.4 billion from the previous fiscal year to ¥253.0 billion,
which was mainly due to an increase in the volume of construction works ofenergy business, despite decreased sales of construction works of municipal
waste treatments facilities in the domestic market and construction works ofchemical plants for overseas market.
Operating income increased ¥3.9 billion from the previous fiscal year to ¥11.6
billion mainly due to an increase in profitability of energy business.
Precision Machinery & Robot segment
In the Precision Machinery & Robot segment, orders received were ¥222.4
billion, an increase of ¥15.3 billion from the previous fiscal year, due to anincrease of hydraulic components for the construction machinery market
despite a decrease of robots for semiconductor manufacturing equipment.
Net sales increased ¥23.0 billion from the previous fiscal year to ¥222.0 billion
due to an increase in sales of hydraulic components for the construction
machinery market despite a decrease in sales of robots for semiconductor
manufacturing equipment.
Operating income was ¥21.3 billion, around the same level as the previous
fiscal year, mainly due to an increase in selling, general and administrative– 22 –

expenses, such as costs for increasing production capacity and research anddevelopment expenses, despite increased sales.
Ship & Offshore Structure segment
The Ship & Offshore Structure segment received orders amounting to ¥81.1
billion, an increase of ¥76.4 billion from the previous fiscal year, when thecancellation of an agreement for the construction of ships related to offshore
service vessels, mainly due to orders received for a submarine for MOD.
Net sales were ¥78.9 billion, a decrease of ¥16.6 billion from the previous
fiscal year, mainly due to a change in sales mix between LNG carriers and LPG
carriers.
Operating income improved ¥4.9 billion from the previous fiscal year, with anoperating income of ¥1.0 billion mainly due to construction cost reduction,
despite decreased sales.
Rolling Stock segment
In the Rolling Stock segment, orders received were ¥136.0 billion, a decreaseof ¥121.0 billion from the previous fiscal year, when orders for new subway
cars for New York City Transit were received, despite orders received forpassenger cars from the Port Authority Trans-Hudson Corporation.
Net sales decreased ¥17.0 billion from the previous fiscal year to ¥124.6 billion,
mainly due to a decrease in sales for overseas markets including the US andAsia.
Operating income decreased ¥1.3 billion from the previous fiscal year,
resulting in an operating loss of ¥13.7 billion, mainly due to deterioration of
profitability of the US projects continuing from the previous fiscal year.
Motorcycle & Engine segment
Net sales of the Motorcycle & Engine segment increased ¥25.1 billion from theprevious fiscal year to ¥356.8 billion. This was attributable to increased salesof motorcycles and utility vehicles in developed countries.
Operating income decreased ¥0.8 billion from the previous fiscal year to ¥14.3
billion mainly due to rising prices of steel stock and other materials cost, andweakness of emerging market currency, despite increased sales.
(Note)The net sales figure for the Motorcycle & Engine segment is also used as thefigure for orders received.

Others segment
In the Others segment, net sales increased ¥10.0 billion from the previous
fiscal year to ¥95.1 billion.
Operating income decreased ¥0.4 billion from the previous fiscal year to ¥2.5
billion.
– 23 –

Referencei) Orders Received, Net Sales and Operating Income/Loss by
Segment(Billions of yen)Orders Received
Segment

Net Sales

Operating Income/Loss

AmountYear-onYear Change

AmountYear-onYear Change

AmountYear-onYear Change

Aerospace Systems

431.6(67.2)

463.9

(5.5)

32.6

1.7

Energy System & Plant
Engineering

263.5

39.8

253.0

1.4

11.6

3.9

Precision Machinery &
Robot

222.4

15.3

222.0

23.0

21.3

(0.2)

Ship & Offshore
Structure

81.1

76.4

78.9

(16.6)

1.0

4.9

Rolling Stock

136.0(121.0)124.6(17.0)(13.7)(1.3)

Motorcycle & Engine

356.8

25.1

356.8

25.1

14.3

(0.8)

94.2

9.4

95.1

10.0

2.5

(0.4)

–

–

–

–

(5.7)

0.4

20.5

64.0

8.0

OthersAdjustment
Total

1,585.9(22.0)

1,594.7(Notes) 1. Net sales recorded are for sales to external customers.
2. The net sales figure for Motorcycle & Engine segment is also used as the figure for orders
received.

ii) ROIC and ROE
FY2017 (195th fiscal year)

FY2018 (196th fiscal year)

ROIC

3.9%

4.5%

ROE

6.4%

5.8%

(Notes) 1. ROIC (return on invested capital) = EBIT (income before income taxes + interest expense)÷ Invested capital at the end of the period (debt obligation + shareholders’ equity)
2. ROE (return on equity) = Net income attributable to owners of the parent ÷ {(shareholders’equity at the end of the previous period + shareholders’ equity at the end of the current
period) ÷ 2}iii) Cash flows(Billions of yen)
FY2017 (195th fiscal year)

FY2018 (196th fiscal year)

Cash flows from operating activities

56.0

109.7

Cash flows from investing activities(80.5)(85.3)Cash flows from financing activities

37.7(19.7)– 24 –

(2) Capital Investments, etc.
In the KHI Group, capital investments were made predominantly for thedevelopment of facilities to increase the production capacity in the Aerospace
Systems segment and Precision Machinery & Robot segment, and for thedevelopment of facilities to handle new models in the Motorcycle & Engine segment.
As a result, the KHI Group spent a total of ¥66.9 billion (including spending on
intangible assets) on capital investments in the fiscal year under review. The
investments were covered by internally generated funds and borrowed money.
Details of major investments in the respective segments are as follows:(Billions of yen)Segment

Major investments

Investment
amounts in the
consolidated
fiscal year
under review

Aerospace Systems

Facilities for increasing aircraft, jet engine and otherproductions and facilities for handling new models andproducts, etc.

24.0

Energy System & Plant
Engineering

Facilities for streamlining
machinery, etc.

2.2

Precision Machinery &Robot

Facilities for increasing hydraulic components andindustrial robot production, etc.

11.6

Ship & Offshore
Structure

Facilities for streamlining ship construction, etc.

2.3

Rolling Stock

Facilities for increasing rolling stock production, etc.

3.3

Motorcycle & Engine
Othersproduction of industrial

Facilities for handling new models and products ofmotorcycles, etc.
Research and development facilities and information
facilities, etc.

Total

18.5
4.7
66.9

(3) Assignment of businesses, absorption-type company split andincorporation-type company split
Not applicable.
(4) Transfer of business from other companies
Not applicable.
(5) Succession of rights and obligations pertaining to the business ofanother juridical person, etc., due to absorption-type merger orabsorption-type company split
Not applicable.
(6) Acquisition or disposal of other company’s shares or other holdings, orshare options, etc.
Not applicable.
(7) Corporate Management Strategies in the Medium- to Long-Term andIssues to be Addressed
The Group has been progressing steadily toward realizing its image of business
operations ten years down the road through development and investment activities
in the energy systems business field, particularly regarding the hydrogen supply
chain demonstration project, and also in the medical business field. However, overthe period covered by MTBP2016 targeting FY2016 through FY2018, while suffering
losses in various large projects and being impeded by the slow recovery of sluggish
markets, the Group has proactively made growth investments targeting the future.
– 25 –

Consequently, the quantitative targets set in MTBP2016 were not achieved. In
addition, we would like to sincerely apologize to our shareholders and otherstakeholders for causing significant inconvenience and concern over “Defects during
Manufacturing Process of Series N700 Shinkansen Train Bogie Frames.”
Reflecting on the above, the Group has formulated a new medium-term businessplan “MTBP2019” targeting FY2019 through FY2021. In MTBP2019, our priority
challenge is to strengthen the financial base in readiness for future growth. While
more stringently selecting where to invest our business resources from theviewpoint of overall optimization, we will implement the following measures.
For details of MTBP, please refer to the URL below.
https://www.khi.co.jp/ir/library/management_plan.html(i)Boost profitability and improve free cash flow
As seen by our recognition of a large-scale loss in the Rolling Stock segment
in FY2018, the primary reason for not achieving the quantitative targets in
MTBP 2016 was the losses incurred in large-scale projects. Also, because
investments for future growth and investments for the renewal of aging
facilities have also inflated, free cash flow has slumped as a result. Under
MTBP 2019, with the exception of businesses earmarked for investment, ourfirst priority will be to boost profitability and generate free cash flow.
Furthermore, in recognition of a growing concern over yen appreciation, we
aim to construct a business operational system that is resilient against foreignexchange fluctuation risk by not only using foreign currency forward contracts
to hedge against short term risk, but also strengthening the global supply
chain, applying price adjustment in contracts following fluctuations incommodity prices and foreign exchange rates (escalation clauses) andpursuing countermeasures best suited to the business characteristics, such as
passing costs on to prices.

(ii) Thorough attention to project risk management
We will proceed with various efforts, including thorough elimination of risks
by strengthening the function of risk checking carried out prior to committing
to an order, and strengthening the Project Risk Management Committee’s
monitoring of projects underway. As part of our efforts to thoroughly manage
risk going forward, we have started to share among the Group the lessons
learned from past failures and other experiences, enhance the examinations
carried out by experts before committing to orders, and formulate various
rules and protocols for projects involving numerous first-off products, or largescale projects.
(iii) Strengthen quality management systems
Targeting all inspections carried out under quality management systems acrossthe entire Group, our newly established the TQM Department is leading efforts
to establish a TQM (Total Quality Management) system that coordinates thedemanded characteristics of products and operational processes. This system
is being implemented to all companies and all divisions, including senior
management levels, and it includes comprehensive quality management
education.
In regards to the “Defects during Manufacturing Process of Series N700
Shinkansen Train Bogie Frames” matter, based on the above efforts and inorder to avoid similar issues from occurring in the future, we are implementing
corrective measures to prevent recurrence as announced by the Company on
September 28, 2018.

– 26 –

(iv) Clarify the ideal composition of the business portfolio and selectively
invest in growth fields
In anticipation of the future, we are stringently selecting the growth fields inwhich we will prioritize investment during the MTBP2019 period while
continuously revising the business portfolio (structure of business scale,profitability, growth, etc.) so that our business operations collectively provide
a good balance of areas to grow, stabilize, and challenge. To further enhance
our provision of added value, we are striving to transition our business model
to one that focuses on not simply products but also the value chain such as
development, procurement, design, manufacturing, sales, services. In
addition, we are pushing forward various measures aimed at restructuring theShip & Offshore Structure segment and the Rolling Stock segment.
(v) Organizational and Corporate Culture Reform
Through our implementation of “Kawasaki Workstyle Innovation Activities (KWin Activities)” we are striving to change attitudes among employees tofacilitate bold action in response to change and realize various personnel
systems that encourage forward-thinking employees, who are conscious of theimportance of speed, to take bold action. We also promote diversity, and in
addition to considering the child rearing and caregiving commitments of
employees, we also are creating work-friendly environments in the workplaceso that employees with diverse values and ways of thinking can express theirindividuality and demonstrate their abilities to the fullest.

– 27 –

(8) Trends in Assets and Income(i)Company Group Assets and Income(Billions of yen)Item

The 193rd
fiscal year

The 194th fiscal The 195th fiscal
year
year

The 196th fiscal
year (underreview)

Orders received

1,693.6

1,348.7

1,608.0

1,585.9

Net sales

1,541.0

1,518.8

1,574.2

1,594.7

Operating income

95.9

45.9

55.9

64.0

Recurring profit

93.2

36.6

43.2

37.8

Net income attributableto owners of parent

46.0

26.2

28.9

27.4

Net income per share(yen)¥275.61¥156.85¥173.09¥164.34

Total assets

1,620.4

1,687.3

1,785.0

1,838.8

Net assets

445.6

451.3

481.3

492.2

(Note) The Company consolidated 10 ordinary shares into 1 ordinary share as of October 1, 2017, basedon a resolution passed at the 194th Ordinary General Meeting of Shareholders held on June 28,
2017. Net income per share was calculated on the assumption that the share consolidation took
place at the beginning of the 193rd term.

(ii) Company Assets and Income(Billions of yen)Item

The 193rd
fiscal year

The 194th fiscal The 195th fiscal
year
year

The 196th fiscal
year (underreview)

Orders received

1,309.0

1,005.0

1,184.6

1,171.8

Net sales

1,161.0

1,172.4

1,213.6

1,195.1

Operating income

56.8

4.7

13.6

15.2

Recurring profit

68.5

12.5

23.0

9.5

Net income attributableto owners of parent

30.7

17.4

24.6

15.0

Net income per share(yen)¥184.34¥104.71¥147.70¥90.37

Total assets

1,300.7

1,388.0

1,469.9

1,499.6

Net assets

306.8

304.7

322.7

325.5

(Note) The Company consolidated 10 ordinary shares into 1 ordinary share as of October 1, 2017, basedon a resolution passed at the 194th Ordinary General Meeting of Shareholders held on June 28,
2017. Net income per share was calculated on the assumption that the share consolidation took
place at the beginning of the 193rd term.

– 28 –

(9) Major Parent Companies and Subsidiaries(i)

Parent Companies
Not applicable.

(ii) Major Subsidiariesi) JapanCompany name
(Location)

Kawasaki Trading Co., Ltd.
(Kobe, Hyogo)
Kawasaki Machine Systems,
Ltd.

CapitalThe
Company’s
percentageof equity
participation

Main business¥600 million

70%

Sale of various types of industrial
machinery, petroleum, steel stock,
and air conditioning equipment, etc.

100%

Sale, repair and after-sales service ofgeneral-purpose gas turbine
generators and other industrial
machinery

100%

Manufacture of aircraft components,
targeting systems, rocket
components, aerospace equipment
and marine equipment; repair andmaintenance of aircraft

100%

Sole distributor of motorcycles,
personal watercraft (“JET SKI®”),
general-purpose gasoline engines
and engine components in Japan

83%

Manufacture, sale, installation andafter-sales service for boilers, airconditioning equipment andabsorption-style heat pumps, etc.

¥1,200 million

100%

Design, manufacture, and sale ofcrushers, grinders, castings, andother equipment; design, execution
and supervision of engineering,
construction, installation ofmachinery and appliances¥120 million

75%

Design, manufacture, and sale ofsnow removal machinery, material
handling machinery, etc.

¥350 million(Osaka, Osaka)

NIPPI Corporation(Yokohama, Kanagawa)Kawasaki Motors
Corporation Japan

¥6,048 million¥100 million(Akashi, Hyogo)
Kawasaki ThermalEngineering Co., Ltd.

¥1,460 million(Kusatsu, Shiga)

EarthTechnica Co., Ltd.
(Chiyoda-ku, Tokyo)

NICHIJO CORPORATION(Sapporo, Hokkaido)(Note)“JET SKI®” is a registered trademark of Kawasaki Heavy Industries, Ltd.

– 29 –

ii) Overseas
The
Company’s
percentageof equity
participation

Main business

100%

Sale of motorcycles, ATVs (all-terrain
vehicles), utility vehicles, personal
watercraft “JET SKI®” and generalpurpose gasoline engines in the U.S.
and South and Central America

100%

Manufacture of ATVs (all-terrain
vehicles), utility vehicles, personal
watercraft “JET SKI®” and generalpurpose gasoline engines;
manufacture, servicing andengineering of rolling stock;
manufacture of aircraft components

EUR 64
million100%

Sale of motorcycles, ATVs (all-terrain
vehicles), utility vehicles, personal
watercraft “JET SKI®” and generalpurpose gasoline engines in Europe

THB 1,900
million100%

Manufacture and sale of motorcycles
in Thailand

US$ 60 million

Note 1

Manufacture, sale, servicing andengineering of rolling stock

PHP 101
million50%

Manufacture and sale of motorcycles
in the Philippines

JPY 3,000
million100%

Manufacture of hydraulic pumps andhydraulic motors for construction
machinery, marine hydraulicproducts and industrial robots

JPY 400
million100%

Sale and servicing of precision
machinery in China

PT. Kawasaki Motor Indonesia
US$ 80 million(Indonesia)

90%

Manufacture and sale of motorcycles
in Indonesia

US$ 1 million

Note 2

Sale and servicing of industrial robots
in Americas

JPY 1,680
million100%

Procurement of parts andcomponents of robots and related
equipment

KRW 1,310
million50%

Manufacture, sale and servicing of
hydraulic equipment products forconstruction machinery and marine
hydraulic products in South Korea

JPY 200
million100%

Sale and servicing of industrial
robots in China

Company name
(Location)

Kawasaki Motors Corp.,
U.S.A.
(United States)

Kawasaki Motors
Manufacturing Corp., U.S.A.
(United States)

Kawasaki Motors Europe N.V.
(Netherlands)
Kawasaki Motors Enterprise(Thailand) Co., Ltd.
(Thailand)
Kawasaki Rail Car, Inc.
(United States)
Kawasaki Motors (Phils.)
Corporation(Philippines)
Kawasaki Precision Machinery(Suzhou) Ltd.
(China)Kawasaki Precision Machinery
Trading (Shanghai) Co., Ltd.
(China)Kawasaki Robotics (U.S.A.),
Inc.

Capital

US$ 165
million

US$ 170
million(United States)
Kawasaki Robotics (Kunshan)Co., Ltd.
(China)Flutek, Ltd.
(South Korea)
Kawasaki Robotics (Tianjin)
Co., Ltd.
(China)(Notes) 1. Kawasaki Rail Car, Inc. is a wholly-owned subsidiary of Kawasaki Motors Manufacturing
Corp., U.S.A.

– 30 –

2. Kawasaki Robotics (U.S.A.), Inc. is a wholly-owned subsidiary of Kawasaki Motors Corp.,
U.S.A.
3. There are 94 consolidated subsidiaries, including 20 companies (7 in Japan and 13
overseas) as major subsidiaries, and there are 17 companies which are accounted for using
the equity method.

(iii) Status of Business Combinations
Not applicable.

(10) Company Group’s Main Business and Number of Employees
Segment

Main Business

Number of
Employees

Aerospace Systems

Manufacture and sale of aircraft, aircraft
engines, etc.

7,983

Energy System & Plant
Engineering

Manufacture and sale of energy-related
equipment and systems, marine propulsion
machinery and systems, industrial machinery,
environmental equipment, cryogenic storage
equipment, hydrogen-related facilities,
crushing machines, etc.

5,878

Precision Machinery & Robot

Manufacture and sale of hydrauliccomponents, industrial robots, etc.

3,862

Ship & Offshore Structure

Manufacture and sale of ships, etc.

2,416

Rolling Stock

Manufacture and sale of rolling stock, snow
removal machinery, etc.

3,355

Motorcycle & Engine

Manufacture and sale of motorcycles, AllTerrain Vehicles (ATVs), utility vehicles,
personal watercraft (“JET SKI®”), general
purpose gasoline engines, etc.

9,070

OthersCommerce, brokerage and mediation for saleand order reception and administration of
welfare facilities, etc.

1,949

Companywide common areas(Head Office Administration Department,
Research & Development Department, etc.)

1,178

-

35,691

Total(Notes) 1. Employees total 26,171 people in Japan and 9,520 people overseas.
2. The Company has 16,899 employees (average age: 38.7 years old; average years ofservice: 13.6 years).

– 31 –

(11) Company Group’s Principal Offices and Plants
Name and location

Principal
officesHead office

Kobe Head Office (Kobe), Tokyo Head Office (Minato-ku, Tokyo): 2 Head
Offices

Branches

Sapporo Office (Sapporo), Sendai Office (Sendai), Nagoya Office(Nagoya), Osaka Office (Osaka), Hiroshima Office (Hiroshima), Fukuoka
Office (Fukuoka), Okinawa Office (Naha, Okinawa): 7 Offices
Gifu Works (Kakamigahara, Gifu), Nagoya Works 1 (Yatomi, Aichi),
Nagoya Works 2 (Ama-gun, Aichi), Kobe Works, Hyogo Works, Seishin
Works, Nishi-Kobe Works (Kobe), Akashi Works (Akashi, Hyogo),
Kakogawa Works (Kakogawa, Hyogo), Harima Works (Kako-gun,
Hyogo), Sakaide Works (Sakaide, Kagawa), Technical Institute (Akashi,
Hyogo): 12 Works (including a Technical Institute)

Plants, etc.

Location of principal offices of major subsidiaries are provided in “(9) Major Parent
Companies and Subsidiaries.”(12) Financing
Funds of ¥34.5 billion from long-term debt, ¥20.0 billion from domestic unsecured
straight bonds and short-term debts and other funds from various sources wereraised in the current fiscal year. The funds were allocated to such items as thescheduled payment for long-term debt, capital investments and working capital.
(13) Principal lenders(Billions of yen)
Lenders

Balance of borrowings
Long term

Short term

Total

Mizuho Bank, Ltd.

7.3

20.1

27.5

Development Bank of Japan Inc.

13.4

5.3

18.7

Sumitomo Mitsui Trust Bank, Ltd.

9.0

7.7

16.7

Sumitomo Mitsui Banking Corporation

10.0

5.9

15.9

MUFG Bank, Ltd.

0.0

9.3

9.3

(14) Other important issues concerning the current situation of company
groupsNot applicable.

– 32 –

2. Status of Shares (as of March 31, 2019)(1) Aggregate number of issuable shares

336,000,000 shares(2) Total number of shares issued

167,080,532 shares(including 35,196 shares of treasury stock)(3) Number of shareholders

113,819 persons(4) Major shareholders (top 10)
Shareholder name

Number of shares
held

Shareholding ratio

thousand shares%

The Master Trust Bank of Japan, Ltd. (Trust Account)

10,911

6.5

Japan Trustee Services Bank, Ltd. (Trust Account)

8,256

4.9

Nippon Life Insurance Company

5,751

3.4

Mizuho Bank, Ltd.

4,176

2.5

Kawasaki Heavy Industries, Ltd. Kyoueikai

3,768

2.2

JFE Steel Corporation

3,539

2.1

Kawasaki Heavy Industries, Ltd. Employees Shareholder
Association

3,286

1.9

Sompo Japan Nipponkoa Insurance Inc.

3,057

1.8

Japan Trustee Services Bank, Ltd. (Trust Account 5)

3,051

1.8

Japan Trustee Services Bank, Ltd. (Trust Account 9)

3,012

1.8

(Note)The shareholding ratio is calculated after subtracting treasury stock (35,196 shares).

3. Company Share Options(1) Share options held by company officers at the end of the fiscal year
under review
Not applicable.
(2) Share options delivered to employees, etc. during the fiscal year underreview
Not applicable.
(3) Other important issues concerning share options, etc.
Not applicable.

– 33 –

4. Company Officers(1) Directors and Audit & Supervisory Board Members (as of March 31, 2019)
Position

Name

Chairman of the
Board

Shigeru Murayama

Representative
Director andPresident

Yoshinori Kanehana

Areas of Responsibility within the Company andOther Significant Concurrent Positions

Chief Executive Officer
Assistant to the President, with overall
responsibility for technology, production andprocurement, and, in charge of Quality Control andRolling Stock Company
Assistant to the President, with overall
responsibility for finance and accounting, and, incharge of Head Office Administration Department
and Ship & Offshore Structure Company

Representative
Director

Munenori Ishikawa

Representative
Director

Kenji Tomida

Director

Kazuo Ota

President, Motorcycle & Engine Company

Director

Tatsuya Watanabe

President, Energy System & Plant Engineering
Company

Director

Katsuya Yamamoto

General Manager, Corporate Planning Division, incharge of Risk Management

Director

Sukeyuki Namiki

President, Aerospace Systems Company

Director

Yasuhiko Hashimoto

Director (Outside)

Michio Yoneda

Director (Outside)

Yoshiaki Tamura

Outside Director, DIC Corporation

Director (Outside)

Jenifer Rogers

Outside Director, Mitsui & Co., Ltd.

Full-Time Audit &Supervisory Board
MemberKatsuyoshi Fukuma

Full-Time Audit &Supervisory Board
MemberAkio Nekoshima

Audit & Supervisory
Board Member(Outside)

Takashi Torizumi

Audit & Supervisory
Board Member(Outside)

Satoru Kohdera

Managing Partner, Higashimachi LPC

Audit & Supervisory
Board Member(Outside)

Atsuko Ishii

Outside Audit & Supervisory Board Member, Mitsui
Sumitomo Insurance Company, Limited(Notes)President, Precision Machinery & Robot Company,in charge of promoting automation
Outside Audit & Supervisory Board Member,
Sumitomo Chemical Company, Limited
Outside Director, Audit and Supervisory Committee
Member, Asahi Broadcasting Group Holdings
Corporation

1. The Company has registered all Outside Directors and Outside Audit & Supervisory
Board Members as Independent Officers with Tokyo Stock Exchange, Inc. pursuant to
the rules of that stock exchange.
2. Mr. Hayashi, formerly Senior Vice President of the Company, has been appointed as
Outside Audit & Supervisory Board Member of Kawasaki Kisen Kaisha, Ltd. (“Kawasaki
Kisen”), to which Mr. Torizumi belonged. Kawasaki Kisen owns 1.03% of total numberof shares issued in the Company. Meanwhile, the Company owns voting rights of
3.61% of total number of shares issued in Kawasaki Kisen, which are held by Trust &Custody Services Bank, Ltd. (Kawasaki Heavy Industries, Ltd. retirement benefit trust– 34 –

account re-entrusted by Mizuho Trust and Banking Co., Ltd.). However, Kawasaki
Kisen is not a company of the KHI Group. In addition, although Kawasaki Kisen is abusiness partner of the Company mainly in ship-related transactions, the annual
average transactions between the Kawasaki Kisen Group and KHI Group for the mostrecent five fiscal years account for less than 1% of the total annual average net sales
each for the Kawasaki Kisen Group and KHI Group over the corresponding period.
Consequently, we have determined that there is no issue as regards to the
independence of Mr. Torizumi and he is therefore suitable for an Independent Officer.
3. Directors Yoshihiko Morita, Kazuo Hida, Toshiyuki Kuyama and Makoto Ogawara, andAudit & Supervisory Board Member Takafumi Shibahara resigned during the fiscal year
under review at the conclusion of the 195th Ordinary General Meeting of Shareholders.
4. With revisions made to the positions of directors effective April 1, 2019,
Representative Director, Vice President and Senior Executive Officer Munenori
Ishikawa became a Director, and Director, Managing Executive Officer Sukeyuki
Namiki became Representative Director, Vice President and Senior Executive Officer.
5. Audit & Supervisory Board Member Katsuyoshi Fukuma, who has many years ofexperience with administration and accounting operations at the Company, has
substantial knowledge about finance and accounting.
Audit & Supervisory Board Member Akio Nekoshima, who has many years ofexperience with finance and accounting at the Company and Mizuho Bank, Ltd.
(including The Dai-Ichi Kangyo Bank, Limited, a precursor of the bank), has
substantial knowledge about finance and accounting.

(2) Outside Officers(i) Concurrent Managing Officer positions at other companies and therelationship between the Company and said companies
Not applicable.
(ii) Concurrent Outside Officer positions at other companies and therelationship between the Company and said companies
Position

Name

MichioYonedaDirector
YoshiakiTamuraJenifer
RogersAudit &
Superviso
ry Board
MemberAtsukoIshii

Significant concurrent positions

Relationships
with the Company

Outside Audit & Supervisory
Board Member,
Sumitomo Chemical
Company, Limited
Outside Director, Audit andSupervisory Committee
Member,Asahi Broadcasting Group
Holdings Corporation
Outside Director,
DIC Corporation
Outside Director,
Mitsui & Co., Ltd.
Outside Audit & Supervisory
Board Member,
Mitsui Sumitomo Insurance
Company, Limited

The Company does not have
any important dealing orother special relationship withthe said companies.

(iii) Family relationships with managing officers or officers, of theCompany or of specific related business operators of the Company
Not applicable.

– 35 –

(iv) Main activities during the fiscal year under review
Attendance and comments at Board of Directors meetings and Audit& Supervisory Board meetings
Position

Director

Audit &
Superviso
ry Board
Member(Note)

Name

Attendance
Audit &
Board ofSupervisory
Directors
Boardmeetings
meetings

MichioYoneda17/17
meetings–

YoshiakiTamura14/14
meetings–

Jenifer
Rogers

14/14
meetings–

TakashiTorizumi

17/17
meetings

17/17
meetings

SatoruKohdera17/17
meetings

17/17
meetings

AtsukoIshii

17/17
meetings

17/17
meetings

Main activities

He made comments mainly
based on his substantial
corporate management
experience acquired at Japan
Exchange Group, Inc. and his
professional knowledge.
He made comments mainly
based on his vast experience andexpertise in corporate
management.
She made comments mainly
based on her substantial
overseas experience andknowledge as a specialist
acquired at the financial
institutions in Japan andoverseas.
He made comments mainly
based on his vast experience andexpertise in corporate
management.
He made comments mainly
based on his vast experience andexpert perspective as an
attorney.
She made comments mainly
based on her vast governmental
experience and expertise in thefields of welfare and labor.

With respect to the Directors Yoshiaki Tamura and Jenifer Rogers, the description refers
to attendance at Board of Directors meetings, which were held after they assumed theirpositions of Directors on June 27, 2018.

(v) Overview of limited liability agreement
The Company has concluded limited liability agreement with Directors Michio
Yoneda, Yoshiaki Tamura and Jenifer Rogers and Audit & Supervisory Board
Members Takashi Torizumi, Satoru Kohdera and Atsuko Ishii, pursuant to theprovisions of Article 427, Paragraph 1 of the Companies Act. The liability undersaid agreement shall be limited to either an amount of ¥10 million, or an
amount specified by laws and regulations, whichever is higher.

– 36 –

(3) Remuneration to Directors and Audit & Supervisory Board Members(Millions of yen)

Total amount of remuneration, etc. by category

Total amountof
remuneration

Basic
remuneration

Performancebased
remuneration

Stock purchase
fund

Directors
16 persons

605

445

97

62

Audit &
Supervisory Board
Members
6 persons

108

108

–

–

Total 22 persons(including 7
persons fromoutside)

713
(73)

553
(73)

97
(–)

62
(–)

(Notes)1. The amount of remuneration for the Directors is ¥1,200 million per year (which was
resolved at the 189th Ordinary General Meeting of Shareholders held on June 27,2012).
2. The amount of remuneration for the Audit & Supervisory Board Members is ¥120
million per year (which was resolved at the 194th Ordinary General Meeting of
Shareholders held on June 28, 2017).

(4) Policy concerning the Amount of Remuneration and others to officers or
its Calculation Method
With respect to remuneration for Directors and Audit & Supervisory Board Membersof the Company, a remuneration scheme that corresponds to the duties of individual
officers has been adopted for the purpose of sustainably enhancing corporate
performance and enterprise value, and securing competent human resources.
Remuneration for Directors, excluding outside Directors, consists of basic
remuneration, performance-based remuneration, and stock purchase fund. Amongthese, performance-based remuneration is determined by linking profits and ROICof the Company overall and Business Companies with the aim of using remuneration
as an incentive for achieving business goals. The stock purchase fund is distributed
in fixed amounts each month for the purpose of sharing value with shareholders
and incentivizing Directors to enhance medium- to long-term corporate value, withthe entire amount contributed to the officers’ stock ownership plan in order topurchase shares of the Company on a continuous basis.
Remuneration for outside Directors is fixed compensation that is not linked toperformance from the perspective of the independence of their duties.
Remuneration for each Director is deliberated by the Remuneration Advisory
Committee, which consists mainly of independent outside officers, and is decided
by the President, who is delegated by the Board of Directors.
Remuneration for Audit & Supervisory Board Members is fixed compensation thatis not linked to performance from the perspective of the independence of theirduties, and is decided by the Board of Audit & Supervisory Board Members. The
above remuneration for Directors and Audit & Supervisory Board Members is set
and operated in such a way as to fall within the range of remuneration approved at
the General Meeting of Shareholders.

– 37 –

(Reference)

Executive Officers (as of April 1, 2019)

Position

Name

Areas of Responsibility within the Company

President and Chief
Executive Officer

Yoshinori
Kanehana

Chief Executive Officer

Vice President and Senior
Executive Officer

Kenji Tomida

Assistant to the President, with overall
responsibility for finance and accounting, andhuman resources

Vice President and Senior
Executive Officer

Sukeyuki Namiki

Assistant to the President, with overall
responsibility for technology, production andprocurement, and, in charge of Quality Control
and Rolling Stock Company

Managing Executive
Officer

Tatsuya Watanabe

President, Energy System & Plant Engineering
Company

Managing Executive
Officer

Katsuya Yamamoto

In charge of corporate planning, Investor
Relations, Corporate Communication and Ship &Offshore Structure Company, and General
Manager, Corporate Planning Division

Managing Executive
Officer

Ikuhiro Narimatsu

In charge of risk management, generaladministration, CSR and compliance, and Senior
Manager, Risk Management Office

Managing Executive
Officer

Yoshinori Mochida

President, Ship & Offshore Structure Company

Managing Executive
Officer

Yasuhiko
HashimotoPresident, Precision Machinery & Robot
Company, in charge of promoting automation

Managing Executive
OfficerTakeshi Ohata

Vice President, Energy System & Plant
Engineering Company

Managing Executive
Officer

Kazutoshi
Honkawa

President, Rolling Stock Company

Managing Executive
Officer

Hiroyoshi
Shimokawa

President, Aerospace Systems Company

Managing Executive
Officer

Hiroshi Nakatani

General Manager, Corporate Technology
Division, Technical Institute and Manufacturing
Improvement Center, in charge of IT Strategy

Managing Executive
Officer

Yuji Horiuchi

President, Motorcycle & Engine Company

Executive Officer

Eiichi Harada

Deputy General Manager, Corporate Technology
Division

Executive Officer

Yoshihiro Uetake

Vice President, Aerospace Systems Company (incharge of Engine Business), and, in charge of
Quality Control and KPS, staff officer to Rolling
Stock Company

Executive Officer

Ichiro Kono

Vice President, Ship & Offshore Structure
Company

Executive Officer

Akihisa Yamamoto

In charge of technology, Plant Department, staff
officer to Energy System & Plant Engineering
Company

Executive Officer

Akira MatsufujiVice President, Rolling Stock Company

Executive Officer

Mitsumasa Sato

Executive Officer

Makoto Shiota

General Manager, Marketing Division

Executive Officer

Keigo Imamura

General Manager, Planning & Control Division,
Ship & Offshore Structure Company

Vice President, Aerospace Systems Company (incharge of Aerospace segment)– 38 –

Position

Name

Areas of Responsibility within the Company

Executive Officer

Nobuhisa Kato

General Manager, Finance & Control Division

Executive Officer

Hidehiko
Shimamura

General Manager, Precision Machinery Business
Division, Precision Machinery & Robot Company

Executive Officer

Shinji Fujita

General Manager, Robot Business Division,
Precision Machinery & Robot Company

Executive Officer

Kouzou Tomiyama

General Manager, Human Resources Division

Executive Officer

Hiroshi Ito

General Manager, Planning Division, Motorcycle& Engine Company

Executive Officer

Yu Koshiyama

General Manager, Commercial Engine Project
Division, Aerospace Systems Company

Executive Officer

Hiroshi Murao

In charge of sales management, staff officer to
Rolling Stock Company

Executive Officer

Osamu Kobayashi

General Manager, Commercial Aircraft Project
Division, Aerospace Systems Company

Executive Officer

Akiyoshi Saiki

Deputy General Manager, Corporate Technology
Division, General Manager, System Technology
Development Center, Senior Manager, ICT
System Department, and seconded to Medicaroid
Corporation

Executive Officer

Naoki Murakami

Senior Manager, Energy System Division, andSenior Manager, CCPP Promotion Department,
Energy System & Plant Engineering Company

Executive Officer

Motohisa Amako

In charge of Plant Department and special
mission, staff officer to Energy System & Plant
Engineering Company

5. Accounting Auditor(1) Accounting Auditor’s Name
KPMG AZSA LLC(2) Accounting Auditors’ Remuneration, etc., for the fiscal year underreview(i) Remuneration, etc. as an Accounting Auditor for the fiscal year underreview¥190 million(ii) Cash and Other Profits Payable by the Company or its Subsidiaries to
the Accounting Auditors¥313 million(Notes) 1. The Audit & Supervisory Board verifies the reasonableness of audit plans, audit
performance and progress, and estimate and calculation of remuneration regarding its
Accounting Auditor in accordance with the “Practical Guidelines for Cooperation withAccounting Auditors” issued by Japan Audit & Supervisory Board Members Association.
Following such verification, the Audit & Supervisory Board determines whether it agrees tothe amount of remuneration and other related costs payable to the Accounting Auditor.
2. Under the audit agreement between the Company and its Accounting Auditor, remuneration,etc., for audits pursuant to the Companies Act and audits pursuant to the Financial
Instruments and Exchange Act are not separated, and they cannot be separated in apractical way. Consequently, the above amounts reflect total remuneration.
3. Of the Company’s major subsidiaries, some overseas subsidiaries have been audited bycertified public accountants or audit corporations (including those who possess equivalentqualifications in foreign countries) other than the Company’s Accounting Auditor.

– 39 –

(3) Details of Non-audit Services
Consulting services, etc. for accounting related advice with regards to addressing“Accounting Standard for Revenue Recognition”(4) Policy Regarding Determination of Dismissal or Non-reappointment of
Accounting Auditors
When it is recognized that the Accounting Auditor has engaged in an activity fallingunder any of causes for dismissal set forth in Article 340, Paragraph 1 of theCompanies Act, the Audit & Supervisory Board shall dismiss the Accounting Auditor
with the approval of all the Audit & Supervisory Board Members. In this case, an
Audit & Supervisory Board Member who is selected by the Audit & Supervisory
Board shall report the dismissal of the Accounting Auditor and the reason for
dismissal at the first General Meeting of Shareholders convened after dismissal.
Besides, when the Audit & Supervisory Board assesses independence in accordancewith laws and regulations etc., auditing system, status of executing duties, andothers in a comprehensive manner, and judges that there is a need for change, it
shall determine the contents of the proposal concerning dismissal and nonreappointment of the Accounting Auditor to submit to the General Meeting of
Shareholders.

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~(Note)

Amounts in this Business Report are rounded down to the nearest unit.

– 40 –

Consolidated Balance Sheet(As of March 31, 2019)(Unit: Millions of yen)

Description(Assets)
Current assets

Amount1,136,340

Cash on hand and in banks

74,311

Trade receivables

427,665

Merchandise and finishedproducts

68,176Work in process

405,087

Raw materials and supplies

119,558

Other current assets
Allowance for doubtfulreceivables

Description(Liabilities)
Current liabilities

247,191

Electronically recorded obligations

123,083

Short-term debt and current
portion of long-term debt

100,023

Current portion of bonds

10,000Current portion of lease obligations

319

Income taxes payable

10,390Accrued bonuses

21,16845,333

Provision for product warranties

13,096(3,792)

Provision for losses on construction
contracts

27,609Advances from customers

181,419

Other current liabilities

Net property, plant andequipment

864,280

Trade payables

Long-term liabilities
Fixed assets

Amount702,514
485,669

Bonds payable

140,000

Long-term debt, less current
portion187,568

Lease obligations

Buildings and structures, net

194,939

Machinery and equipment, net

148,620Land

62,705

Leased assets, net

2,148

Construction in progress

18,227

Other, net

59,028Intangible assets

16,797

Investments and other assets

200,048

Investments in securities

14,501

Net defined benefit assets

93

129,978
482,313

Deferred tax liabilities

1,513
593

Liabilities for retirement benefits

97,602

Provision for the in-service issuesof commercial aircraft jet engines

11,468

Other

43,566

Total liabilities(Net assets)
Shareholders’ equity
Common stock

1,346,593
483,502104,484

Capital surplus

54,542Retained earnings

324,606

Treasury stock
Accumulated othercomprehensive income(130)(7,115)

Deferred tax assets

70,179Net unrealized gains on securities,
net tax

2,682

Other investments and otherassets116,696

Deferred gains (losses) on hedges(227)

Allowance for doubtfulreceivables(1,422)Foreign currency translation
adjustments(4,556)

Accumulated adjustment for
retirement benefits(5,014)Non-controlling interests
Total assets

1,838,855

Total net assets
Total liabilities and net assets– 41 –

15,874492,261
1,838,855

Consolidated Statement of Income(April 1, 2018 - March 31, 2019)(Unit: Millions of yen)

Description

AmountNet sales

1,594,743

Cost of sales

1,326,668

Gross profit

268,075

Selling, general and administrative expenses

204,052

Operating income

64,023Non-operating income

6,696Interest income

909

Dividend income

294

Gain on sales of securities

862

Equity in income of non-consolidated
subsidiaries and affiliates

1,574

Other non-operating income

3,056

Non-operating expenses

32,858Interest expense

3,427

Foreign exchange losses, net

4,721

Payments for the in-service issues ofcommercial aircraft jet engines

14,851Other non-operating expenses

9,857

Recurring profit

37,861

Income before income taxes

37,861

Income taxes-current

16,704

Income taxes-deferred(8,681)

Net income

8,022
29,838Net income attributable to non-controllinginterests

2,385

Net income attributable to owners of parent

27,453– 42 –

Non-consolidated Balance Sheet(As of March 31, 2019)(Unit: Millions of yen)

Description

Amount(Assets)
Current assets
Cash on hand and in banks
Notes receivable-trade
Accounts receivable-trade
Raw materials and supplies
Work in process
Advance payments
Prepaid expenses
Other current assets
Allowance for doubtful receivables
Fixed assets
Net property, plant and equipment
Buildings
Structures
Docks and building berths
Machinery and equipment
Vessels
Aircraft
VehiclesTools, Furniture and fixtures
Land
Leased assets

Current liabilities
Notes payable-trade
Electronically recorded obligations
12,244
Accounts payable-trade314,528
Short-term debt
85,266
Accounts payable-other346,647
Accrued expenses
25,424
Income taxes payable
Advances from customers
1,144
Accrued bonuses
44,299Provision for product warranties(106)
Provision for losses on construction
625,959
contracts
353,541
Lease obligations
Other current liabilities
119,836
Noncurrent
liabilities
19,411
Bonds payable, less current
2,536
portion110,407
Long-term debt, less current
139
portionLease obligations
444
Employees’ retirement and
1,665
severance benefits
50,542
Provision for the in-service issues
35,379of commercial aircraft jet engines
1,827
Other long-term liabilities
873,718

44,268Construction in progress

11,350Intangible assets

12,684

Software

8,271

Other intangible assets
Investments and other assets
Investments in securities
Stock of affiliates
Investments in capital of affiliates
Long-term loans receivable fromsubsidiaries and associates
Claims provable in bankruptcy,
claims provable in rehabilitationand other
Deferred tax assets
Other investments and otherassetsAllowance for doubtful receivables

Description

4,413

Total liabilities

Shareholders’ equity
Common stock
12,155
Capital surplus
109,643
Legal capital surplus
Other capital surplus
41,918Retainedearnings
75
Other retained earnings
Reserve for special depreciation
1,252
Provision for advanced
depreciation of fixed assets
Retained earnings brought
62,567
forward33,446
Treasury stock
Valuation and translation(1,327) adjustments
Net unrealized gains on securities,
net tax
Deferred gains (losses) on hedges
259,733

1,499,677

735,2448,877
107,081
193,401
104,273
19,691
52,0305,404
148,551
13,983
10,561
27,209310
43,869438,885
140,000
186,950
1,489
60,225
11,46838,752

1,174,129(Net assets)

Total net assets
Total assets

Amount(Liabilities)

Total liabilities and net assets– 43 –

323,943
104,484
52,21052,210–167,378
167,378
2,180
9,475
155,722
(130)
1,604
1,891
(286)
325,548
1,499,677

Non-consolidated Statement of Income(April 1, 2018 - March 31, 2019)(Unit: Millions of yen)

Description

AmountNet sales

1,195,164

Cost of sales

1,067,890

Gross profit

127,273

Selling, general and administrative
expenses

112,072

Operating income

15,200Non-operating income

24,768Interest income

475

Dividend income

21,601Other non-operating income

2,692

Non-operating expenses

30,444

Interest expense

1,450

Foreign exchange losses

4,110

Loss on retirement of non-current assets

1,629

Payments for the in-service issues ofcommercial aircraft jet engines

14,851Other non-operating expenses

8,403

Recurring profit

9,524

Income before income taxes

9,524

Income taxes-current

3,255

Income taxes-deferred(8,827)

Net income(5,572)
15,097– 44 –

Audit & Supervisory Board’s audit report (duplicated copy)

Audit Report(English Translation)
Regarding the performance of duties by the Directors for the 196th fiscal year from
April 1, 2018 to March 31, 2019, the Audit & Supervisory Board hereby submits its audit
report, which has been prepared upon careful consideration based on the audit report
prepared by each Audit & Supervisory Board Member.
1. Summary of Auditing Methods by the Audit & Supervisory Board Members and Audit& Supervisory Board(1) The Board of Audit & Supervisory Board Members established auditing policies,
audit plans and other relevant matters, and received reports from each Audit &Supervisory Board Member regarding his/her audits and results thereof, as well
as received reports from the Directors, and the Accounting Auditor regarding
performance of their duties, and sought explanations as necessary.
(2) Each Audit & Supervisory Board Member complied with the auditing standards of
the Audit & Supervisory Board Members established by the Audit & Supervisory
Board, followed the auditing policies, audit plans and other relevant matters,
communicated with the Directors, internal control development division, Auditing
Department (Internal Audit Department) and other employees, and any otherrelevant personnel, as well as making efforts to prepare the environment for
information collection and audit, and conducted the audit by the following
methods.
(i) Participated in the Board of Directors meetings and other important meetings,
received reports from the Directors, Executive Officers, employees and otherrelevant personnel regarding performance of their duties, sought explanations
as necessary, examined important authorized documents and associatedinformation, and studied the operations and financial positions at the head
office and principal business offices.
As for subsidiaries, each Audit & Supervisory Board Member communicatedand exchanged information with Directors, Audit & Supervisory Board
Members and other relevant personnel of the subsidiaries, and received
business reports from subsidiaries as necessary.
(ii) Received reports from the Directors, employees and other relevant personnel
regarding the structure and operation status of the system for ensuring thatthe performance of duties by the Directors, described in the Business Report,
conforms to the related laws and regulations and the Articles of Incorporation,and the system prepared based on the contents of the resolutions of the Boardof Directors and such resolutions regarding preparation of the systemstipulated in Article 100, Paragraphs 1 and 3 of the Ordinance for Enforcementof the Companies Act (internal control systems), which system is necessaryfor ensuring that a joint stock corporation’s business is proper, and sought
explanations as necessary.
Furthermore, with respect to internal controls on financial reporting under the
Financial Instruments and Exchange Act, each Audit & Supervisory Board
Member received reports from the Directors and other relevant personnel aswell as KPMG AZSA LLC regarding the assessment of the internal controls
concerned and the status of auditing thereof, and sought explanations asnecessary.
(iii) Audited whether the Accounting Auditor maintained their independence andimplemented appropriate audits, as well as received reports from the
Accounting Auditor regarding the performance of their duties and sought– 45 –

explanations as necessary. Also, each Audit & Supervisory Board Member
received notice from the Accounting Auditor that “the system for ensuring that
duties are performed properly” (matters set forth in each item of Article 131of the Ordinance on Company Accounting) has been prepared in accordancewith the “Product Quality Management Standards Regarding Audits” (issued
by the Business Accounting Deliberation Council (BACD) on October 28, 2005)
and other relevant standards, and sought explanations as necessary.
Based on the above methods, we examined the Business Report and supplementaryschedules, the non-consolidated financial statements (non-consolidated balance sheet,non-consolidated statement of income, non-consolidated statement of changes in net
assets, and notes to the non-consolidated financial statements) and their supplementaryschedules, as well as consolidated financial statements (consolidated balance sheet,consolidated statement of income, consolidated statement of changes in net assets, andnotes to the consolidated financial statements) related to the relevant fiscal year.
2. Results of Audit(1) Results of Audit of Business Report and Other Relevant Documents(i) In our opinion, the business report and the supplementary schedules are inaccordance with the related laws and regulations and the Articles ofIncorporation, and fairly represent the Company’s condition.
(ii) We have found no evidence of wrongful action or material violation of related
laws and regulations, nor of any violation with respect to the Articles ofIncorporation, related to performance of duties by the Directors.
(iii) In our opinion, the contents of the resolutions of the Board of Directors
related to the internal controls system are fair and reasonable. We have foundno matters on which to remark regarding the information contained in thisBusiness Report and the performance of duties by the Directors related tosuch internal controls system, including internal controls on financial reporting.
Regarding the discovery of defects in Shinkansen train bogie frames in 2017,
the Companywide Quality Control Committee confirmed that the cause wasdetermined and that revisions were implemented based on those results.
Furthermore, the Board of Directors strengthened quality control not only of
the Train Division, but of the whole company and provided supervision, andwe will continue to monitor the continuation of these activities.
(2) Results of Audit of Non-consolidated Financial Statements and Supplementary
Schedules
In our opinion, the methods and results of audit employed and rendered by KPMG
AZSA LLC are fair and reasonable.
(3) Results of Audit of Consolidated Financial Statements
In our opinion, the methods and results of audit employed and rendered by KPMG
AZSA LLC are fair and reasonable.
May 21, 2019
Audit & Supervisory Board, Kawasaki Heavy Industries, Ltd.
Full-Time Audit & Supervisory Board Member

Katsuyoshi Fukuma

Full-Time Audit & Supervisory Board Member

Akio Nekoshima

Outside Audit & Supervisory Board Member

Takashi Torizumi

Outside Audit & Supervisory Board Member

Satoru Kohdera

Outside Audit & Supervisory Board Member

Atsuko Ishii– 46 –