Translation

The share exchange described in this press release involves securities of foreign companies. This share exchange is subject to disclosure
requirements of Japan that are different from those of the United States. Financial information included in this press release has been
prepared in accordance with generally accepted Japanese accounting standards and may not be comparable to the financial statements ofcompanies in the United States.

It may be difficult for you to enforce your rights and any claim you may have arising under the U.S. federal securities laws, since thecompanies are located in a foreign country, and some or all of their officers are residents of a foreign country. You may not be able to sue aforeign company or its officers in a foreign court for violations of the U.S. securities laws. It may be difficult to compel a foreign company
and its affiliates to subject themselves to a U.S. court’s judgment.
You should be aware that the companies may purchase securities otherwise than under the share exchange, such as in open market or
privately negotiated purchases.

May 23, 2014
Company Name:

Namura Shipbuilding Co., Ltd.

Name of Representative:
Kensuke Namura, President & Representative Director(Code: 7014,
the first section of the Tokyo Stock Exchange)
Contact: Yoshihiro Ikebe, Deputy General Manager of Management
Affairs Headquarters(TEL:+81-3-6324-4971 (from overseas))
Company Name:

Sasebo Heavy Industries Co., Ltd.

Name of Representative:
Yoshifumi Yushita, President & Representative Director(Code:7007,
the first section of the Tokyo Stock Exchange and the Fukuoka
Stock Exchange)
Contact: Teruyuki Shibuya, Deputy General Manager, General
Administration Headquarters(TEL:+81-3-6861-7312 (from overseas))
Announcement Concerning the Execution of Agreements regarding Share Exchange
between Namura Shipbuilding Co., Ltd. and Sasebo Heavy Industries Co., Ltd.

Namura Shipbuilding Co., Ltd. (“Namura Shipbuilding”) and Sasebo Heavy Industries Co., Ltd. (“Sasebo Heavy
Industries”) hereby announce that, at their respective board of directors meetings held on May 23, 2014, Namura
Shipbuilding and Sasebo Heavy Industries have determined to enter into a share exchange transaction (the “Share
Exchange”) to make Sasebo Heavy Industries a wholly owned subsidiary of Namura Shipbuilding, and that the companies
have executed a share exchange agreement (the “Share Exchange Agreement”) and a statement of mutual agreement on the
Share Exchange, as described below.
The implementation of the Share Exchange is subject to obtaining all necessary approvals, including those of the relevant
authorities and of the shareholders at the respective shareholders’ meetings of the companies.
1Translation

Furthermore, the shares of Sasebo Heavy Industries are scheduled to be delisted from the Tokyo Stock Exchange (the“TSE”) and the Fukuoka Stock Exchange (“FSE”) on September 26, 2014 (the last trading date being September 25, 2014),
prior to the effective date of the Share Exchange.
1.

Purpose of the Share Exchange(1)

Background and Purpose of Making Sasebo Heavy Industries a Wholly Owned Subsidiary through the Share

Exchange
The global shipbuilding market has suffered from weak demand and low ship prices for a long time due to the global
economic stagnation and the credit squeeze in the global financial markets caused by the collapse of the Lehman
Brothers in September 2008. Since 2013 the market has shown some positive signs; the volume of new global
shipbuilding orders grew year over year for the first time since the “Lehman Shock” and ship prices have recently
shown a slight improvement. However, there remains an excess of existing ships due to the bulk orders before the“Lehman Shock”, and the structural issues in the shipbuilding industry, including the worldwide excess of shipbuilding
capacity, are far from being resolved. As a result it is expected that shipyards in Japan, South Korea, China and othercountries will face fierce competition and the competition among the strong will be further intensified throughrealignment and natural selection of shipyards. Furthermore, as ship fuel prices soar and customers become more
conscious of environmental issues, there is a marked tendency for customers to focus on fuel-efficient technology inselecting shipyards. In order to survive the competition, shipyards now must enhance cost competitiveness and alsoenhance their design and technology development capabilities to enable the shipyards to serve customers’ needs forfuel-efficiency at a high level, and to appropriately and promptly respond to amendments of international rules,
especially environmental rules.
Since its incorporation in 1911, Namura Shipbuilding has run a shipbuilding business as its core business, as well as aship repair business and steel structure business. In recent years, in accordance with its basic policy of offering a“product mix”, Namura Shipbuilding has offered at Imari Shipyard & Works, various ships to its customers ranging
from capesize bulkers such as the 250,000 deadweight tonnage-type iron ore carriers (WOZMAX), to small andmedium sized bulkers such as Panamax and handysize bulkers, and the Aframax Tanker. In 2007, Namura
Shipbuilding made The Hakodate Dock Co., Ltd. (“Hakodate Dock”), with which Namura Shipbuilding had enteredinto a capital and business alliance, its consolidated subsidiary, and since then has enhanced customer satisfaction byrealizing a synergy effect through joint development for shipbuilding and more efficient procurement. Furthermore,
Namura Shipbuilding has been actively working on jointly developing new technology with customers seeking
differentiation through the use of fuel efficient technology and other environment-related technology. However, inorder to win the battle for survival, Namura Shipbuilding believes that it must: (i) further enhance its design anddevelopment capabilities to respond to customers’ needs for high fuel-efficiency, amendments to international rules,
and energy structure changes such as increasing demand for gas transportation; (ii) improve and enhance its flexibility
to respond to rapid changes in the market through its product mix policy of receiving orders for, and building, several
types of ships; and (iii) expand its scale to make it more competitive by cutting the costs of development and building
per ship.
Since its incorporation in 1946, Sasebo Heavy Industries’ core business has comprised of shipbuilding, ship repair andmachinery by making use of equipment and technologies inherited from the former Sasebo Naval Base, and in recent
years its leading products in the shipbuilding business have included the Panamax Bulker and the Aframax Tanker.
Thus, Sasebo Heavy Industries has accommodated its customers’ requests with its high technological capabilities inthe shipbuilding business as well as the ship repair and machinery businesses. Although Sasebo Heavy Industries’
financial results deteriorated due to the rapid change in the business environment after the “Lehman Shock”, Sasebo
Heavy Industries established on May 17, 2013 its mid-term management plan aiming to establish a profitable structure
resistant to environmental changes, and since then has made managerial efforts to change its sales structure and review
2Translationand strengthen its business operation system. Due to these efforts as well as the recent correction of the yen’s
appreciation and the recent increase in ship prices, the business results of Sasebo Heavy Industries are currently
improving. However, in order to win the future battle for survival and ensure the continuance of manufacturing in the
Sasebo region, there is an urgent need for Sasebo Heavy Industries to enhance its design capability and costcompetitiveness, and enhance and restructure its business platform based on the mid- and long-term growth strategy. In
this regard, Sasebo Heavy Industries has been considering the possibility of cooperating further with competitors.
After consultation on the industry environment and the situation of the companies as set forth above, the companies
concluded that Namura Shipbuilding would make Sasebo Heavy Industries its wholly owned subsidiary. The
companies will focus on realizing two main objectives which they consider to be essential conditions for survival;enhancing design and development capabilities, and enhancing procurement capabilities, each of which are discussed
further in the next section. In addition, the companies aim to enhance their respective competitiveness and businessdevelopment capabilities, as well as those of the group as a whole, by working together in ensuring their respective
flexibility on the sales and production side, cooperating in the ship repair business field, and streamlining
administrative departments. The companies also aim to continuously enhance corporate value through the expansionof scale and quality improvement. According to the Shipbuilders’ Association of Japan, the total combined new
shipbuilding completion volume of Namura Shipbuilding, Sasebo Heavy Industries and Hakodate Dock for 2013 was
151 million gross tons, and taken together the three companies constitute the third largest shipbuilder in Japan on agross tonnage basis.
(2)

Outline of Business Strategy after Making Sasebo Heavy Industries a Wholly Owned Subsidiary through the Share
Exchange

The companies aim to maximize a synergy effect by integrating the management of the Imari office of Namura
Shipbuilding and the Sasebo shipyard, which are geographically close, and utilizing the economies of scale whencombined with Hakodate Dock.
(i) Enhancing design and development capabilities
By integrating the design capabilities that the companies have built over time and improving the quality andquantity of their design and development, the companies plan to establish a system to respond to changes incustomers’ technical needs relating mainly to environmental performance and energy structure changes, and to thestrengthened international rules and amendments thereto. In addition, the companies will strive to improve
efficiency through integrated management and to reduce design and development costs per ship.
(ii) Realizing efficient procurement
The companies aim to realize the efficient procurement of cost-competitive equipment through quantitative
expansion and collaboration.
(iii) Enhancing sales ability
The companies plan to build a flexible and strategic order-receiving system by utilizing three bases - Namura
Shipbuilding, Hakodate Dock and Sasebo Heavy Industries - as well as enhancing sales capabilities throughintegration and revision of the companies’ sales systems.
(iv) Streamlining production strategy
The companies plan to take advantage of the benefits of having relatively close offices, and build an efficient
production system that includes an allocation of management resources allowing optimal role-sharing and personnel
exchanges.
(v) Cooperating on ship repair business
Similar to Sasebo Heavy Industries, Hakodate Dock, a member of the Namura Shipbuilding Group, conducts a ship
repair business as one of its core businesses, and as such aims to enhance its business base through cooperation
between the companies.
3

Translation(vi) Streamlining of administrative departments.
The companies plan to allocate personnel appropriately through reviewing duplicate functions in their respective
administrative departments, and enhancing management ability.
(vii) Enhancing development capabilities
The companies aim to enhance capabilities for development toward further domestic business development andoverseas expansion through synthesizing the technique, manufacturing, and management capabilities of bothcompanies and improving the respective internal systems.
2. Summary of the Share Exchange(1)

Schedule for the Share Exchange
Date of resolution of the meeting of the board of directors in
respect of the execution of the Share Exchange Agreement

May 23, 2014

(both companies)
Date of execution of the Share Exchange Agreement (bothcompanies)
Record date for the general meeting of shareholders (bothcompanies)

May 23, 2014
March 31, 2014

Date on which the general meeting of shareholders toapprove the Share Exchange will be held (Namura

June 24, 2014 (scheduled)

Shipbuilding)
Date on which the general meeting of shareholders toapprove the Share Exchange will be held (Sasebo Heavy

June 25, 2014 (scheduled)

Industries)
Last day of trading (Sasebo Heavy Industries)

September 25, 2014 (scheduled)

Date of delisting (Sasebo Heavy Industries)

September 26, 2014 (scheduled)

Scheduled date of Share Exchange (Effective Date)

October 1, 2014 (scheduled)(Note) The above schedule may be subject to change according to need in the course of the Share Exchange or any
other event, and upon consultation and agreement between Namura Shipbuilding and Sasebo Heavy
Industries.
(2)

Method of the Share Exchange
In the Share Exchange, Namura Shipbuilding will be a wholly-owning parent company, and Sasebo Heavy
Industries will be a wholly-owned subsidiary. The Share Exchange is scheduled to be effective on October 1,
2014, subject to approvals at the respective ordinary general meetings scheduled to be held on June 24, 2014 at
Namura Shipbuilding and on June 25, 2014 at Sasebo Heavy Industries.

(3) Content of Share Allotment in the Share Exchange
Namura Shipbuilding

Sasebo Heavy Industries(Wholly-owning Parent Company(Wholly-owned Subsidiary in Sharein Share Exchange)

Exchange)

1

0.128

Share Exchange Ratio(i) Share allotment ratio

0.128 common stock of Namura Shipbuilding will be allotted and delivered for each common stock of Sasebo
Heavy Industries.
(ii) Number of shares to be delivered in the Share Exchange
In the Share Exchange, Namura Shipbuilding will newly issue 20,539,297 common stock, and allot and deliver4

Translationsuch shares to the shareholders of Sasebo Heavy Industries immediately preceding the time at which Namura
Shipbuilding acquires all of the issued shares of Sasebo Heavy Industries (the “Base Time”) through the Share
Exchange.
In addition, in accordance with a resolution of the meeting of the board of directors of Sasebo Heavy Industries tobe held no later than the day immediately preceding the effective date of the Share Exchange, Sasebo Heavy
Industries will cancel, at the Base Time, all of its shares then held by it as treasury stock (including the shares to bepurchased by it in response to a share purchase demand made by dissenting shareholders upon the Share Exchange
under Article 785, Paragraph 1 of the Companies Act).
Furthermore, the number of shares to be allotted and delivered through the Share Exchange may be subject tochange in the future due to reasons such as the acquisition and the cancellation of treasury stock by Sasebo Heavy
Industries.
(iii) Treatment of shares in a number less than one Share Unit
The Shareholders who hold less than one full trading unit (fewer than 100 shares) of Namura Shipbuilding sharesthrough the Share Exchange are unable to sell shares in a number less than one Share Unit on the exchange market.
Additionally, each shareholder who will hold shares of Namura Shipbuilding constituting less than one unit may
use the following systems concerning shares of Namura Shipbuilding.
(a) Purchase of shares constituting less than one unit (sale by shareholder of shares constituting less than one unit)
In accordance with the provisions of Article 192, Paragraph 1 of the Companies Act, shareholders holding lessthan a full trading unit of Namura Shipbuilding shares may request Namura Shipbuilding to purchase theshares constituting less than one unit.
(b) Further purchase of shares constituting less than one unit (purchase to reach a total of 100 shares)
In accordance with the provisions of Article 194, Paragraph 1 of the Companies Act and the Articles ofIncorporation of Namura Shipbuilding, shareholders holding less than a full trading unit of Namura
Shipbuilding shares may request to purchase from Namura Shipbuilding the number of shares that will, whentaken together with the number of shares constituting less than one unit already held by such shareholder,
result in the shareholder holding a total of one unit.
(vi) Treatment of any fractions of less than one share
Namura Shipbuilding will pay to shareholders of Sasebo Heavy Industries who are entitled to receive the allotmentof fractions of less than one share of common stock of Namura Shipbuilding upon the Share Exchange, an amountin cash in proportion to such fraction in accordance with Article 234 of the Companies Act and other relevant laws
and regulations.
(4)

Treatment of stock acquisition rights and bonds with stock acquisition rights upon the Share Exchange
Sasebo Heavy Industries, which is to become a wholly-owned subsidiary by the Share Exchange, has issued neither
stock acquisition rights nor bonds with acquisition rights.

3. Basis for Calculation of the Content of Allotment Concerning the Share Exchange(1)

Basis and reason for Calculation of the Content of Allotment
As described in 1.(1) “Background and Purpose of Making Sasebo Heavy Industries a Wholly Owned Subsidiary
Through the Share Exchange” above, as a result of discussions on the basis of the severe industry environment andsituations of the companies, Namura Shipbuilding and Sasebo Heavy Industries concluded that it would be the best
choice for the companies to enhance the competitiveness and capability for development of each company and thewhole group through collaboration in various aspects and to aim for constant increases in corporate values through5

Translation

an expansion in scale and a reform of quality, and the Companies reached an agreement on the Share Exchange.
With respect to the share exchange ratio set out in 2.(3) “Details of the Content of Share Allotment in the Share
Exchange” above, Namura Shipbuilding appointed Mitsubishi UFJ Morgan Stanley Securities Co., Ltd.
(“Mitsubishi UFJ Morgan Stanley Securities”) as the third-party valuation institution, and Sasebo Heavy Industries
appointed KPMG FAS Co., Ltd. (“KPMG FAS”) as the third-party valuation institution as described further in (4)“Measures to Ensure Fairness” below. Namura Shipbuilding and Sasebo Heavy Industries repeatedly negotiated andconsulted with each other while each company used the calculation results of the share exchange ratio submitted bytheir respective third-party valuation institutions as a reference, and considered the financial condition, performancetrend, share price trend and other factors. As a result, the companies concluded that the share exchange ratio set out
in 2.(3) above was appropriate. If, however, any material changes occur to the basic terms and conditions for the
calculation of the share exchange ratio, such share exchange ratio may be changed through consultation between thecompanies.
(2)

Matters Concerning Calculation(i) Names of valuation institutions and relationships with the parties
Both Mitsubishi UFJ Morgan Stanley Securities and KPMG FAS are third-party valuation institutions independentof Namura Shipbuilding and Sasebo Heavy Industries, they are not the parties related to Namura Shipbuilding or
Sasebo Heavy Industries, and they do not have a material interest to be noted in connection with the Share
Exchange.
(ii) Summary of valuation
As market share prices are available for both companies, Mitsubishi UFJ Morgan Stanley Securities adopted themarket price analysis for the valuation of common stock of the companies (with May 21, 2014 being the record date
for calculation, Mitsubishi UFJ Morgan Stanley Securities made such calculation based on the closing prices of theshares of the respective companies on the record date as shown in the first section of the TSE, the simple average ofthe closing prices of the shares of the respective companies on each trading day for the period from May 12, 2014
(the business day immediately following the date when the companies announced the respective financial results forthe fiscal year ended March 2014) to the record date, and the simple average of the closing prices of the shares forthe one-month period, the three-month period, and the six-month period immediately preceding the record date).
In addition, Mitsubishi UFJ Morgan Stanley Securities adopted the discounted cash flow analysis (the “DCF
Analysis”) in order to reflect future business operations in the valuation.

The earnings plan of Namura

Shipbuilding, on which Mitsubishi UFJ Morgan Stanley Securities relied for the purpose of DCF Analysis, assumes
that after Namura Shipbuilding achieved its record-high consolidated operating income of 22,291 million yen for
the fiscal year 2013, its profit level will decline substantially in the fiscal year 2014, for which the earnings forecast
has been published, and the fiscal year 2015 due to the building of ships ordered during the market slump following
the “Lehman Shock” and other factors, but that its earnings will grow substantially in the fiscal year 2017 due to therecent trend of ship prices recovering, the change in the type of ships which Namura Shipbuilding receives orders tobuild, its cost-cutting efforts, and other factors. The earnings plan of Sasebo Heavy Industries assumes that it willcontinue to post a net loss until and in the fiscal year 2014 due to the building of ships ordered during the market
slump after the “Lehman Shock” and other factors, but its operating income will turn a profit from the fiscal year
2015 and its earnings will grow substantially in the fiscal year 2016 due to the recent increase in ship prices, thechange in the type of ships which Sasebo Heavy Industries receives orders to build, its cost-cutting efforts, and otherfactors.
The following shows the relevant calculation result for each analysis method when the share value per share of
Namura Shipbuilding is set at 1.

6

Translation

Analysis Method Adopted

Calculation Result of Share Exchange Ratio

Market Price Analysis

0.117-0.149

DCF Analysis

0.090-0.153

In performing its analysis with respect to the share exchange ratio, Mitsubishi UFJ Morgan Stanley Securities has
assumed and relied upon, without independent verification, the accuracy and completeness of the information thatwas publicly available or supplied or otherwise made available to it by the companies, as the appropriate basis for its
analysis. With respect to the financial projections, Mitsubishi UFJ Morgan Stanley Securities has assumed thatthey have been reasonably prepared to reflect the best currently available estimates and judgments of the
management of each company of their future financial performance. Mitsubishi UFJ Morgan Stanley Securities
has not made, nor has it obtained from any third party, any independent valuation or appraisal of the assets or
liabilities (including any off-balance sheet assets and liabilities and contingent liabilities) of either Company or theiraffiliates. The analysis by Mitsubishi UFJ Morgan Stanley Securities is based on the aforementioned information
made available to it as of May 21, 2014.
Similarly, as market share prices are available for both companies, KPMG FAS made the calculation of the value ofthe common stock of the companies using the market price analysis (with May 22, 2014 being the record date forcalculation, KPMG FAS made such calculation based on the closing prices of the shares of the respective
companies on the record date as shown in the first section of the TSE, the simple average of the closing prices of theshares of the respective companies on each trading day for the period from May 12, 2014 (the business day
immediately following May 9, 2014, when the companies announced the respective financial results for the fiscal
year ended March 2014) to the record date, and the simple average of the closing prices of the shares for the onemonth period and the three-month period immediately preceding the record date). In addition, KPMG FAS madethe calculation of the value of the common stock of the companies using the DCF Analysis in order to reflect futurebusiness operations of the companies in the valuation. The earnings plan of Namura Shipbuilding, on which
KPMG FAS relied for the purpose of DCF Analysis, assumes that after Namura Shipbuilding achieved its recordhigh consolidated operating income of 22,291 million yen for the fiscal year 2013, its profit level will decline
substantially in the fiscal year 2014, for which the earnings forecast has been published, and the fiscal year 2015 dueto the building of ships ordered during the market slump following the “Lehman Shock” and other factors, but its
earnings will grow substantially in the fiscal year 2017 due to the recent recovery trend in ship prices, the change inthe type of ships which Namura Shipbuilding receives orders to build, its cost-cutting efforts, and other factors.
The earnings plan of Sasebo Heavy Industries assumes that it will continue to post a net loss until and in the fiscal
year 2014 due to the building of ships ordered during the market slump following the “Lehman Shock” and otherfactors, but its operating income will turn a profit from the fiscal year 2015 and its earnings will grow substantiallyin the fiscal year 2016 due to the recent recovery trend in ship prices, the change in the type of ships which Sasebo
Heavy Industries receives orders to build, its cost-cutting efforts, and other factors.
The following shows the relevant calculation result of KPMG FAS for each analysis method when the share value
per share of Namura Shipbuilding is set at 1.
Analysis Method Adopted

Calculation Result of Share Exchange Ratio

Market Price Analysis

0.114-0.155

DCF Analysis

0.115-0.143

In performing its analysis with respect to the share exchange ratio, KPMG FAS has assumed and relied upon,
without independent verification, the accuracy and completeness of the information that was publicly available orsupplied or otherwise made available to it by the companies, and that there is no fact that could have a material
impact on the calculation of the share exchange ratio and that was not disclosed to KPMG FAS, as the appropriate
7

Translationbasis for its analysis. In addition, KPMG FAS has not made, nor has it obtained from any third party, any
independent valuation or appraisal of the assets or liabilities (including any off-balance sheet assets and liabilities
and contingent liabilities) of either company, its subsidiaries or its related companies, including analysis andvaluation of individual assets and liability.
The analysis by KPMG FAS is based on the information and economic conditions made available to it as of May 22,
2014, and with respect to the financial projections and other future information, KPMG FAS has assumed that they
have been reasonably prepared to reflect the best currently available estimates and judgments of the management ofeach Company of their future financial performance.
(3)

Prospects for Delisting and Reasons therefor
Through the Share Exchange, Sasebo Heavy Industries will become a wholly-owned subsidiary of Namura
Shipbuilding on October 1, 2014, the effective date of the Share Exchange, and the common stock of Sasebo Heavy
Industries will be delisted in accordance with the delisting procedures prescribed by the Delisting Standards of the
TSE and the FSE. After delisting, it will be impossible to trade common stock of Sasebo Heavy Industries on the
TSE and the FSE; however, shares of Namura Shipbuilding will be allotted to the shareholders of Sasebo Heavy
Industries pursuant to the Share Exchange Agreement as described in 2. (3) “Details of the Content of Share
Allotment in the Share Exchange” above.
The purpose of the Share Exchange is as described in 1. “Purpose of the Share Exchange” above, and delisting ofSasebo Heavy Industries is not the purpose of the Share Exchange. After the delisting of common stock of Sasebo
Heavy Industries, common stock of Namura Shipbuilding that will be allotted to each shareholder of Sasebo Heavy
Industries through the Share Exchange will remain listed on the TSE, and will be tradable on the exchange market
after the Share Exchange. Namura Shipbuilding therefore believes that for shareholders who will receive, upon
the Share Exchange, an allotment of not less than 100 shares of Namura Shipbuilding, which is one Share Unit ofNamura Shipbuilding, such shareholders can continue to trade the shares, which will ensure the liquidity of theshares.
Although the shareholders of Sasebo Heavy Industries who will receive less than 100 shares of Namura
Shipbuilding cannot sell such shares in a number less than one Share Unit on either of the exchange markets
described above, such shareholders may, at their request, require Namura Shipbuilding to purchase such shares, orpurchase additional shares constituting less than one Share Unit. For details of such treatment, see 2. (3) (iii)
above. Furthermore, where the number of shares of Namura Shipbuilding to be allotted to the shareholders of
Sasebo Heavy Industries upon the Share Exchange includes any fractions of less than one share, an amount in cash
in proportion to such fraction will be paid. For details of such treatment, see 2. (3) (iv).

(4)

Measures to Ensure Fairness
Namura Shipbuilding, upon the implementation of the Share Exchange, requested Mitsubishi UFJ Morgan Stanley
Securities, the third-party valuation institution, to calculate the share exchange ratio in order to ensure the fairness ofthe share exchange ratio in the Share Exchange. Referring to the result of such calculation, Namura Shipbuilding
negotiated and consulted with Sasebo Heavy Industries, and resolved at the meeting of the board of directors which
was held today to implement the Share Exchange based on the share exchange ratio set out in 2. (3) above.
On the other hand, Sasebo Heavy Industries, upon the implementation of the Share Exchange, requested KPMG
FAS, the third-party valuation institution, to calculate the share exchange ratio in order to ensure the fairness of theshare exchange ratio in the Share Exchange. Referring to the result of such calculation, Sasebo Heavy Industries
negotiated and consulted with Namura Shipbuilding, and resolved at the meeting of the board of directors which
was held today to implement the Share Exchange based on the share exchange ratio set out in 2. (3) above.
Neither Namura Shipbuilding nor Sasebo Heavy Industries obtained a written opinion (so-called fairness opinion)by the said third-party valuation institutions stating that the agreed share exchange ratio was fair to shareholders ofeach company from the financial perspective.
8Translation

Furthermore, Namura Shipbuilding appointed Nagashima Ohno & Tsunematsu, and Sasebo Heavy Industries
appointed Mori Hamada & Matsumoto as their respective legal advisors, and received advice from their respective
legal advisors on the appropriate procedures and correspondence for the Share Exchange from the legal perspective.
Nagashima Ohno & Tsunematsu and Mori Hamada & Matsumoto are independent of Namura Shipbuilding and
Sasebo Heavy Industries, and do not have any material interest.
(5)

Measures to Avoid Conflicts of Interest
Namura Shipbuilding and Sasebo Heavy Industries have not taken any special measures, since there is no particularconflicts of interest between the companies in the Share Exchange.

9Translation

4. Outline of the Parties Involved in the Share Exchange (As of March 31, 2014) (In millions of yen, unless otherwise
specified)
Wholly-owning Parent Company

Wholly-owned Subsidiaryin Share Exchange

in Share Exchange

(1)

Name

Namura Shipbuilding Co., Ltd.

(2)

Location

1-9, Itachibori 2-chome, Nishi-ku, Osaka-city

Name and Title of

Kensuke Namura, President & Representative

Yoshifumi Yushita, President &Representative

Director

Representative Director

Description of

Manufacturing and sales of ships, machinery and

Manufacturing and sales of ships andBusinesssteel structures, and ship repair

machinery, and ship repair

Capital

8,083

8,414

April 13, 1931

October 1, 1946

48,386,417 shares

161,955,000 sharesFiscal Year End

March 31

March 31

Number of(non-consolidated) 1,003(non-consolidated) 749

Employees(consolidated) 2,235(consolidated) 1,184--

The Bank of Tokyo-Mitsubishi UFJ, Ltd.

The Bank of Fukuoka, Ltd.

Development Bank of Japan Inc.

Shinwa Bank, Ltd.

Aozora Bank, Ltd.

The Bank of Tokyo-Mitsubishi UFJ, Ltd.

The Bank of Saga, Ltd.

Eighteen Bank, Ltd.

Mitsubishi UFJ Trust and Banking Corporation

Nishi-Nippon City Bank, Ltd.

(3)
(4)
(5)
(6)
(7)
(8)
(9)
(10)

(11)

Date of
Establishment
Number of Issued
SharesMajor Business
Partners

Major Financing
Bank

Nippon Steel & Sumitomo Metal Corporation:
6.25%
The Bank of Tokyo-Mitsubishi UFJ, Ltd.: 4.40%
Mitsui O.S.K. Lines, Ltd.: 4.27%
Yamato Kogyo Co., Ltd.: 3.36%(12)

Major Shareholders

Air Water Inc.: 3.35%

and Ratio ofMetal One Corporation: 3.10%

Shareholding

Mitsubishi Heavy Industries, Ltd.: 2.92%
Tokio Marine & Nichido Fire Insurance Co., Ltd.:
2.79%
Nippon Yusen Kabushiki Kaisha: 2.48%
Japan Trustee Services Bank, Ltd. (Trustee
account): 2.47%(13)

between the Parties
Relationship
Personnel

31-1, Nihonbashi Hama-cho 2-chome, Chuoku, Tokyo

Nippon Steel & Sumitomo Metal
Corporation: 9.76％
Metal One Corporation: 7.55%
The Master Trust Bank of Japan, Ltd.: 3.87%
Yoshida Kaiun Co., Ltd.: 3.83%
MSCO CUSTOMER SECURITIES:
3.03％
Shinkoh Co., Ltd.: 2.59%
Sasebo Heavy Industries Saei-kai: 2.42%
Shinwa Bank, Ltd.: 1.61%
The Bank of Fukuoka, Ltd.: 1.61%
JPMC NA ITS LONDON CLIENT
ACCOUNT MORGAN STANLEY AND
COMPANY INTERNATIONAL: 1.27%

Relationship
CapitalSasebo Heavy Industries Co., Ltd.

Not applicable.
Not applicable.
10Translation

RelationshipTransaction
Relationship
Status as a Related
Party
(14)

Not applicable.
Not applicable.

Results of Operations and Financial Condition for Previous Three Fiscal Years

Fiscal Year Ended

Namura Shipbuilding (consolidated)

Sasebo Heavy Industries (consolidated)

March 2012

March 2013

March 2014

March 2012

March 2013

March 2014

47,64355,341

66,96428,51427,34525,098

162,304

147,012

152,891

84,46465,79556,087965.61

1,126.66

1,367.20

177.69170.41156.41

Consolidated Net Sales

122,633

118,414

124,559

66,08235,94630,968

Consolidated
Operating Income

11,677

13,554

22,291

9,862-1,291-1,676

11,04914,477

23,677

9,697

-819

-1,626

5,640

8,008

12,687734‐533-2,848116.86165.77262.46

4.58

‐3.32

‐17.75

14.00

18.00

30.00

5.00

-

-

Consolidated Net
AssetsConsolidated Gross
AssetsConsolidated Net
Assets per Share (yen)Consolidated Ordinary
IncomeConsolidated Net
IncomeConsolidated Net
Income per share (yen)Dividend per Share(yen)
5. Status after the Share Exchange

Wholly-owning Parent Company in Share Exchange
(1)

Name

Namura Shipbuilding Co., Ltd.

(2)

Location

1-9, Itachibori 2-chome, Nishi-ku, Osaka-city, Osaka(3)

Name and Title ofRepresentative

Kensuke Namura, President & Representative Director
Manufacturing and sales of ships, machinery and steel structures, and ship and(4)

Description of Business(5)

CapitalNot determined at present(6)

Fiscal Year End

March 31

(7)

Net Assets

Not determined at present(8)

Total Assets

Not determined at present

vessel repair

6. Outline of Accounting Treatment
With respect to the accounting treatment for the Share Exchange, the “Accounting Standard for Business Combinations”(Accounting Standards Board of Japan (“ASBJ”) Statement No. 21) and “Guidance on Accounting Standard for Business
Combinations and Accounting Standard for Business Divestitures” (ASBJ Guidance No. 10) will be applied and based on
the purchase method, with Namura Shipbuilding as the acquiring company.
The amount of goodwill (or negative goodwill) resulting from the Share Exchange has not yet been determined. It will beannounced when it is determined.
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Translation

7. Further Outlook
Through the Share Exchange, Sasebo Heavy Industries will be a wholly-owned subsidiary of Namura Shipbuilding. The
impact of the Share Exchange on the consolidated operating results of Namura Shipbuilding, etc., has not yet been
determined. In the event that any matter, which necessitates revision of the earnings estimates or that needs to beannounced, arises, such matter will be disclosed without delay.
(End of Document)

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Translation(Reference)
Consolidated earnings estimates for the current fiscal year (announced on May 9, 2014) and consolidated earnings results
for the prior year for Namura Shipbuilding (in millions)
Consolidated Net

Consolidated

Consolidated

Consolidated Net

Sales

Operating Income

Ordinary Income

IncomeEarnings Estimates for
the Current Fiscal Year

114,000

9,600

9,300

5,500

124,559

22,291

23,677

12,687(ending March 31, 2015)
Earnings Results
for the Prior Year(ended March 31, 2014)
Consolidated earnings estimates for the current fiscal year (announced on May 9, 2014) and consolidated earnings results
for the prior year for Sasebo Heavy Industries (in millions)
Consolidated Net

Consolidated

Consolidated

Consolidated Net

Sales

Operating Income

Ordinary Income

IncomeEarnings Estimates for
the Current Fiscal Year

30,000

‐ 300

-500

-600

30,968‐ 1,676-1,626-2,848(ending March 31, 2015)
Earnings Results
for the Prior Year(ended March 31, 2014)

Cautionary Statement Regarding Forward-Looking Statements
This press release contains forward-looking statements that reflect the Namura Shipbuilding’s and Sasebo Heavy Industry’splans and expectations. These forward-looking statements are not guarantees of future performance and involve known andunknown risks, uncertainties and other factors that may cause Namura Shipbuilding and Sasebo Heavy Industry’s actual
results, performance, achievements or financial position to be materially different from any future results, performance,
achievements or financial position expressed or implied by these forward-looking statements. These forward-looking
statements may be identified by words such as ‘believes’, ‘expects’, ‘anticipates’, ‘projects’, ‘intends’, ‘should’, ‘seeks’,‘estimates’, ‘future’ or similar expressions or by discussion of, among other things, strategy, goals, plans or intentions.
Actual results may differ materially in the future from those reflected in forward-looking statements contained in thisdocument, due to various factors including but not limited to: failure of the parties to agree on some or all of the terms ofthe transactions; failure to obtain a necessary shareholders’ approval; inability to obtain some or all necessary regulatory
approvals or to fulfill any other condition to the closing of the transaction; changes in laws or accounting standards, or otherchanges in the business environment relevant to the parties; challenges in executing our business strategies; the effects offinancial instability or other changes in general economic or industry conditions; and other risks to consummation of thetransaction.

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