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 10, 2020
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 197th ORDINARY GENERAL MEETING OF SHAREHOLDERS
We would like to inform you that we will hold the 197th Ordinary General Meeting of
Shareholders of Kawasaki Heavy Industries, Ltd. (the “Company” or “KHI”) as described
below.
Recently, a certain level of results has been produced in controlling infection due to thedevelopment of various initiatives, such as refraining from going out, in order to prevent the
spread of the novel coronavirus disease (COVID-19). However, even at the stage where thedeclaration of the state of emergency has been lifted, we expect the current situation to lasta long time until we reach the stage where health, safety and security can be guaranteed
through a decrease in the risk of infection, the establishment of a treatment method ordevelopment of vaccines, etc.
After careful consideration, we have decided to hold this General Meeting of Shareholders
by implementing appropriate infection prevention measures, taking into account thenecessity of expeditiously making resolutions on matters including the transition to acompany with audit and supervisory committee and the election of officers associated withsuch transition.
We believe that the General Meeting of Shareholders is a valuable occasion to communicate
directly with the shareholders. However, we also believe that we must prioritize the lives,
health and safety of our shareholders. In holding this General Meeting of Shareholders, wewill be taking various measures to prevent infection. However, we are concerned that if alarge number of shareholders come to the venue at a time, the “Three Cs (confined spaces,
crowded places, and close contact with people)” will overlap as a result. Accordingly, we
kindly ask you to consider exercising your voting rights for the meeting in advancevia the Internet, smartphones or in writing, as much as possible, and refraining
from visiting the meeting on the day of the General Meeting of Shareholders,regardless of your health condition.
Regarding the exercise of voting rights mentioned above, we kindly ask you to review
the “Reference Documents for the General Meeting of Shareholders” describedhereinafter, and exercise your voting rights by 5:00 p.m. on Wednesday, June 24, 2020
(JST).

–1–

1. Date and Time:

2. Place:

Thursday, June 25, 2020 at 10:00 a.m. (JST) (Door opens
at 9:00 a.m.)
Depending on the condition of the spread of COVID-19
infections, the venue or start time of the meeting may have to
be changed. In this case, we will post the information on the
Company’s Website (https://www.khi.co.jp/ir/). Please makesure to check the Company’s Website in advance, even if you
visit the meeting on the day of the General Meeting of
Shareholders.
Kokusai Hall at The Kobe International House
1-6 Gokoudori 8-chome, Chuo-ku, Kobe
To prevent the spread of COVID-19 infections, the number ofseats available this year will be significantly reduced compared
to previous years due to widening spaces between seats(capacity of approximately 2,000 seats in previous years, but
maximum of approximately 250 seats this year). Therefore,
even if you come on the day of the General Meeting of
Shareholders, your admission may be refused. We would
appreciate your advance understanding.

3. Meeting Agenda:
Matters to be reported:
1. The Business Report, Consolidated Financial Statements for the Company’s 197th
Fiscal Year (from April 1, 2019 to March 31, 2020) and results of audits of theConsolidated Financial Statements by the Accounting Auditor and the Audit &Supervisory Board
2. Non-Consolidated Financial Statements for the Company’s 197th Fiscal Year(from April 1, 2019 to March 31, 2020)
Matters to be resolved:
Proposal No. 1: Partial Amendments to the Articles of Incorporation
Proposal No. 2: Election of Eight Directors (except Directors Serving as Audit andSupervisory Committee Members)
Proposal No. 3: Election of Five Directors Serving as Audit and Supervisory
Committee Members
Proposal No. 4: Election of One Director Serving as Substitute Audit andSupervisory Committee Member
Proposal No. 5: Determination of Remuneration Amount for Directors (except
Directors Serving as Audit and Supervisory Committee
Members)
Proposal No. 6: Determination of Remuneration Amount for Directors Serving as
Audit and Supervisory Committee Members(Please refer to the “Reference Documents for the General Meeting of Shareholders”
hereinafter for information on each of the proposals.)–2–

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 ensurethat Directors’ execution of duties complies with laws and regulations and the Articles
of Incorporation, other systems to ensure proper execution of business and overview
of operation status of such systems” in the Business Report, “Consolidated Statementof 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
Statement of Changes in Net Assets” “Notes to the Consolidated Financial Statements”“Non-consolidated Statement of Changes in Net Assets” and “Notes to the Nonconsolidated Financial Statements” have been combined with the Consolidated Financial
Statements and the Non-Consolidated Financial Statements for the auditing process
when preparing the results of audits by the Audit & Supervisory Board Members andthe Accounting Auditor.
(2) Concerning amendments on the web
Any amendments to the Business Report, the Consolidated Financial Statements, theNon-Consolidated Financial Statements and the Reference Documents for the General
Meeting of 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.

–3–

Guidance on Exercise of Voting Rights, Etc.
To prevent the spread of COVID-19 infections, we kindly ask you to consider
refraining from visiting the meeting on the day of the General Meeting of
Shareholders, taking much thought to the effects on health of the shareholders attending
the meeting, including yourself, and exercising your voting rights for the meeting in advancevia the Internet, smartphones or by the enclosed voting form, as much as possible.
The exercise of voting rights by the voting form involves the risk of infections, stemmingfrom the process of returning the form and the task of collating the votes. Accordingly, we
kindly ask you that, if you intend to exercise your voting rights in advance, you do so via
the Internet or smartphones, as much as possible.

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.

–4–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.
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 dayof the General Meeting of Shareholders.

–5–Reference Documents for the General Meeting of Shareholders
Proposals and References
Proposal No. 1: Partial Amendments to the Articles of Incorporation
1. Reasons for amendments(1) Amendments in connection with the transition to a company with audit andsupervisory committee
The Company makes a continuous effort to strengthen its corporate governancesystem, aiming to achieve sustainable growth and increase its medium- to longterm enterprise value. Accordingly, we hereby propose to transition to a company
with audit and supervisory committee to enable it to delegate a considerable
portion of the Board of Directors’ business execution authority to Executive
Directors with a view to enhancing discussion of management strategy and so forthin the Board of Directors, and responding swiftly to rapid changes in the
management environment while further strengthening its supervisory function.
 To this end, the Company will establish new provisions for Audit and Supervisory
Committee Members and the Audit and the Supervisory Committee, and delete
the provisions for Audit & Supervisory Board Members and the Audit &Supervisory Board, which are necessary for the transition to a company withaudit and supervisory committee.
 The Company will also establish new provisions for delegation of authority to
Executive Directors to increase management efficiency and enable them to makeflexible decisions.
 In order to ensure that Directors who do not execute business, such as Directors
who are Audit and Supervisory Committee Members, can adequately fulfill theroles expected of them by signing limited liability agreements with the Company,
the Company will amend the related provisions regarding the scope of officers,etc. who can enter into limited liability agreements with the Company. Consent
has been obtained from each Audit and Supervisory Board Member in regard tothese amendments.
(2) Review in accordance with the clarification of duties, etc. of Directors andExecutive Officers
On April 1, 2018, the Company reviewed Managing Director and Executive Officer
system in order to promote the separation of the supervisory and monitoring
functions and the execution functions of the Board of Directors to further
strengthen corporate governance. Since this has recently advanced even further,
the Company will review related provisions in order to clarify the duties and rolesof Directors, Representative Directors, Managing Directors and Executive Officers.
–6–(3) Addition of business purpose
The Company is working toward the full-scale construction of hydrogen supply
chains and development of medical robots, so in order to expand business activities
and prepare for future business development, the Company will make an addition
to business purpose in Article 3 (Purpose) of the current Articles of Incorporation.
(4) Other overall amendments
The Company will make any other necessary amendments, such as renumbering ofarticles accompanying the addition and deletion of articles.

[Reference] System after the transition to a company with audit and supervisorycommittee
Upon approval of the proposals pertaining to the transition to a company with audit
and supervisory committee, the Company will establish the following system.
(Unit: person)
System after the transition to a company withaudit and supervisory committee

Current system
Direc tors
(11)

Internal

8

Outside3

Audit & Supervisory
Board Members(5)Internal

2

Outside3

Direc tors
(13)

Directors not serving as
Audit and Supervisory
Committee Members
Directors serving as Audit
and Supervisory Committee
Members

Internal

5

Outside3

Internal

2

Outside3

2. Contents of proposed amendments
The contents of the proposed amendments are as follows.
The amendments to the Articles of Incorporation pertaining to this proposal will beeffective at the conclusion of this Ordinary General Meeting of Shareholders.
(Underline indicates amendments.)
Current Articles of Incorporation

Proposed provisions after amendments

Chapter I
General Provisions

Chapter I
General Provisions(Purpose)(Purpose)

Art. 3: The purposes for which the Corporation Art. 3: (Unchanged)
is organized are as follows:
1. Business concerning the design,
construction, manufacture, installation,
repair, disassembly, and sale and leaseof the following and their components(1) to (10) (Provisions omitted)(1) to (10) (Unchanged)(Newly established)
2 to 3

1. (Unchanged)(11) Various medical devices(Provisions omitted)

2. to 3.

4. Business relating to supply ofelectricity and heat
5. to 12. (Provisions omitted)(Unchanged)

4. Business relating to supply ofelectricity, heat and gas
5. to 12. (Unchanged)–7–

Current Articles of Incorporation

Proposed provisions after amendments(Organization)(Organization)

Art. 4: The Corporation shall install thefollowing in addition to the Ordinary
Meeting of Shareholders and Directors:

Art. 4: The Corporation shall install thefollowing in addition to the Ordinary
Meeting of Shareholders and Directors:

1.
2.
3.
4.

The Board of Directors
Audit & Supervisory Board Members
The Audit & Supervisory Board
Accounting Auditors
Chapter III
Meeting of Shareholders

1. The Board of Directors
2. The Audit and Supervisory Committee(Deleted)
3. Accounting Auditors
Chapter III
Meeting of Shareholders(Convening Person)(Convening Person)

Art. 15: Unless otherwise provided for by law
or ordinance, the Meeting of
Shareholders shall be convened by
the President in accordance with aresolution of the Board of Directors.

Art. 15: Unless otherwise provided for by law
or ordinance, the Meeting of
Shareholders shall be convened by
the President serving as Director inaccordance with a resolution of theBoard of Directors.

(ii) If the President is unable to convene
the Meeting of Shareholders, one ofthe other Representative Directors, inthe order established in advance by
the Board of Directors, shall act for
the President.

(ii) If there is no Director set forth
above, or if such Director is unable toconvene the Meeting of
Shareholders, one of the other
Representative Directors, in theorder established in advance by the
Board of Directors, shall act for such
Director.

(Chairman)(Chairman)

Art. 17: Either the President or Chairman of Art. 17: (Unchanged)
the Board shall be the Chairman of the
Meeting of Shareholders pursuant to
the determination by the Board of
Directors.
(ii) If the Chairman determined by the
Board of Directors is unable to presideover the Meeting of Shareholders, oneof the other Representative Directors,
in the order established in advance by
the Board of Directors, shall act for
the Chairman.

(ii) If the Chairman determined by the
Board of Directors is unable to presideover the Meeting of Shareholders, oneof the other Directors, in the order
established in advance by the Board of
Directors, shall act for the Chairman.

(iii) The Chairman may adjourn orcontinue the Meeting of Shareholders
in accordance with a resolution of the
Meeting of Shareholders, for which nofurther step shall be required toreconvene the Meeting.

(iii) (Unchanged)(Minutes)
Art. 20: The substance of proceedings at the
Meeting of Shareholders, the results
thereof and other matters stipulated
by law and ordinance shall be enteredin the Minutes of the Meeting of
Shareholders.
Chapter IV
Directors and Board of Directors(Deleted)

Chapter IV
Directors and Board of Directors–8–Current Articles of Incorporation

Proposed provisions after amendments(Number of Directors)(Number of Directors)

Art. 21: The authorized number of Directors of Art. 20: The authorized number of Directors
the Corporation shall not exceed 18.
(except Directors serving as Audit andSupervisory Committee Members) of
the Corporation shall not exceed 12.
(Newly established)(ii) The authorized number of Directors
serving as Audit and Supervisory
Committee
Membersofthe
Corporation shall not exceed 5.

(Method of Election)(Method of Election)

Art. 22: The Directors shall be elected at the Art. 21: The Directors shall be elected at the
Meeting of Shareholders.
Meetingof
Shareholders
byseparating Directors serving as Audit
and Supervisory Committee Members
from Directors other than the above.
(ii) A resolution as to election of
Directors must be adopted by amajority of votes of thoseshareholders present at a Meeting
where those shareholders have morethan one-third of the aggregate
number of voting rights ofshareholders who can exercise voting
rights.

(ii) (Unchanged)(iii) Cumulative voting shall not be
adopted in the election of Directors.

(iii) (Unchanged)(Term of Office)(Term of Office)Art. 23: The term of office of Directors shall be Art. 22: The term of office of Directors (except
until the closing of the Ordinary
Directors serving as Audit andMeeting of Shareholders convened forSupervisory Committee Members)
the first time after their election.
shall be until the closing of theOrdinary Meeting of Shareholders
convened for the first time after theirelection.
(Newly established)(ii) The term of office of Directors serving
as Audit and Supervisory Committee
Members shall be until the closing of
the Ordinary Meeting of Shareholders
for the latest fiscal year that ends
within two years after their election.

(Newly established)(iii) The term of office of Directors serving
as Audit and Supervisory Committee
Members who are elected as
substitutes for Directors serving as
Audit and Supervisory Committee
Members resigned prior to thetermination of their term of officeshall be until the term of office of such
resigned Directors expires.

(Newly established)(iv) A resolution for election of substitute
Directors serving as Audit andSupervisory Committee Members
elected pursuant to Article 329,
Paragraph 3, of the Companies Act
shall be effective until the beginningoftheOrdinary
Meetingof
Shareholders for the latest fiscal year

–9–

Current Articles of Incorporation

Proposed provisions after amendmentsthat ends within two years after theirelection.

(Representative
Directors)

Directors

andManaging (Representative
Directors)

Directors

andManaging

Art. 24: Representative Directors shall be Art. 23: (Unchanged)
elected by resolution of the Board of
Directors.
(ii) A Chairman of the Board, a certain
number of Vice Chairman of theBoard, a President, a certain numberof Senior Executive Vice Presidents,
Executive Vice Presidents and SeniorVice Presidents may be appointed byresolution of the Board of Directors.

(ii) A Chairman of the Board andManaging Directors may be appointed
by resolution of the Board of
Directors.

(Executive Officers and Managing Executive
Officers)(Newly established)

Art. 24: The Board of Directors shall, by its
resolution, appoint Executive Officers
and have them share the execution ofbusiness of the Corporation.
(ii) A President and Chief Executive
Officer and Managing Executive
Officers may be appointed byresolution of the Board of Directors.

(Powers and Duties of President)
Art. 25: The President shall have generalcharge and control of all business andaffairs of the Corporation.
(ii) If the President is unable to perform
his duties, one of the other
Representative Directors, in theorder established in advance by the
Board of Directors, shall act for the
President.

(Deleted)(Convening Person and Chairman of the Board (Convening Person and Chairman of the Boardof Directors)of Directors)
Art. 26: Meeting of the Board of Directors shall Art. 25: Meeting of the Board of Directors shallbe convened by the President andbe convened by the President serving
presided over by the Chairman of the
as Director and presided over by a
Board.
Director predetermined by the Board(ii) If there is no Chairman of the Boardof Directors.
or if the Chairman of the Board is(ii) If there are no Directors set forth
unable to preside at the Meeting ofabove or if such Directors are unable
the Board of Directors, one of theto convene or preside at the Meetingother directors shall act for theof the Board of Directors, one or two
Chairman of the Board in accordanceof the other directors shall act forwith the order established in advancesuch Directors in accordance with theby the Board of Directors.
order established in advance by the
Board of Directors.

– 10 –

Current Articles of Incorporation

Proposed provisions after amendments(Notice of Meeting of the Board of Directors)(Notice of Meeting of the Board of Directors)

Art. 27: Notice of a Meeting of the Board of Art. 26: Notice of a Meeting of the Board of
Directors shall be given to each
Directors shall be given to each
Director and Audit & Supervisory
Director 3 days before the meetingdate. In the event of an emergency,
Board Member 3 days before thehowever, such period may bemeeting date. In the event of an
shortened.
emergency, however, such period may
be shortened.
(ii) If all Directors and Audit &Supervisory Board Members consent
to the holding of a Meeting of theBoard of Directors, the meeting may
be held without such notice.
(Newly established)(ii) If all Directors consent to the holdingof a Meeting of the Board of Directors,
the meeting may be held without such
notice.

(Delegation of Decision
Important Operations)on

ExecutionofArt. 27: The Corporation may delegate all orpart of decisions on the execution ofimportant operations to Directors by
the resolution of the Board of
Directors pursuant to Art. 399-13,
Paragraph 6, of the Companies Act(other than the items stated in each
Item of Paragraph 5 of the said
Article).
(Minutes of the Meeting of the Board of
Directors)
Art. 29: The substance of the proceedings ofthe Meeting of the Board of Directors
and the results thereof as well asother matters stipulated by law andordinance shall be recorded in the
Minutes of the Meeting, and the
Directors and Audit & Supervisory
Board Members present shall inscribe
their names and affix their seals
thereon.

(Deleted)(Operation of the Board of Directors)(Operation of the Board of Directors)

Art. 30: (Provisions omitted)

Art. 29: (Unchanged)(Compensation, etc.)(Compensation, etc.)

Art. 31: The amount of compensation to Art. 30: The amount of compensation to
Directors and financial benefit such as
Directors and financial benefit such as
bonuses that they receive from thebonuses that they receive from the
Corporation in compensation for
Corporation in compensation for
execution of duties (hereinafter
execution of duties (hereinafterreferred to as “compensation, etc.”)referred to as “compensation, etc.”)
shall be fixed by resolution of theshall be fixed by resolution of the
Meeting of Shareholders.
Meetingof
Shareholders
byseparating compensation, etc. for
Directors serving as Audit andSupervisory Committee Members
from those for Directors other than
the above.

– 11 –

Current Articles of Incorporation

Proposed provisions after amendments(Exemption of Liabilities of Directors)(Exemption of Liabilities of Directors)

Art. 32: Pursuant to Art. 427, Paragraph 1, of Art. 31: Pursuant to Art. 427, Paragraph 1, of
the Companies Act, the Corporation
the Companies Act, the Corporation
may enter into an agreement withmay enter into an agreement withoutside Directors to limit such outside
Directors (except those concurrently
Directors’
liabilities
fordamageserving as Executive Directors, etc.)
attributable to such outside Directors’
to limit such Directors’ liabilities fordamageattributabletosuchnegligence of duties. However, theDirectors’ negligence of duties.
upper limit of liabilities based on the
However, the upper limit of liabilities
agreement shall be the higher of either
based on the agreement shall be the¥10 million or the amount provided byhigher of either ¥10 million or thelaw.
amount provided by law.
Chapter V
Audit & Supervisory Board Members and the
Audit & Supervisory Board(Deleted)(Number of Audit & Supervisory Board
Members)Art. 33: The authorized number of Audit &Supervisory Board Members of the
Corporation shall not exceed 5.

(Deleted)(Method of Election)
Art. 34: The Audit & Supervisory Board
Members shall be elected at the
Meeting of Shareholders.

(Deleted)(ii) A resolution as to election of Audit &Supervisory Board Members must be
adopted by a majority of votes of
those shareholders present at a
Meeting where those shareholders
have more than one-third of theaggregate number of voting rights
held by shareholders who can
exercise voting rights.
(Term of Office)Art. 35: The term of office of Audit &Supervisory Board Members shall be
until the Ordinary Meeting of
Shareholders is concluded for thelatest fiscal year that ends within four
years after their election.

(Deleted)(Substitute Audit & Supervisory Board
Members)Art. 36: For the purpose of preparing for thecase when the number of statutory
Audit & Supervisory Board Members
might become insufficient, Substitute
Audit & Supervisory Board Members
may be elected in the Meeting of
Shareholders.
(ii) A resolution as to election of
Substitute Audit & Supervisory Board
Members must be adopted by amajority
of
votes
of
those
shareholders present at a Meeting– 12 –(Deleted)

Current Articles of Incorporation

Proposed provisions after amendments

where those shareholders have morethan one-third of the aggregate
number of voting rights held byshareholders who can exercise voting
rights.
(iii) The validity of the election of
Substitute Audit & Supervisory Board
Members shall be until the Ordinary
Meeting of Shareholders is concluded
for the latest fiscal year that ends
within four years after their election.
(iv) Substitute Audit & Supervisory Board
Members shall assume the post of
Audit & Supervisory Board Member tofill vacancies if the number ofstatutory Audit & Supervisory Board
Members is insufficient.
(v) In case Substitute Audit &Supervisory Board Members assume
the post of Audit & Supervisory Board
Member as per the preceding section,
the term of office shall be until theOrdinary Meeting of Shareholders is
concluded for the latest fiscal yearthat ends within four years after theirelection as Substitute Audit &Supervisory Board Member.
(Notice of Meetings of the Audit & Supervisory
Board)
Art. 37 Notice of a Meeting of the Audit &Supervisory Board shall be given toeach Audit & Supervisory Board
Member 3 days before the meetingdate. In the event of an emergency,
however, such period may be
shortened.

(Deleted)(ii) If all Audit & Supervisory Board
Members consent to holding of a
Meeting of the Audit & Supervisory
Board, the meeting may be held
without such notice.
(Resolution of the Audit & Supervisory Board)
Art. 38: Unless otherwise provided for by law
or ordinance, resolutions of the Audit& Supervisory Board shall be adopted
by a majority of votes of all Audit &Supervisory Board Members.

(Deleted)(Minutes of the Meeting of the Audit &Supervisory Board)
Art. 39: The substance of the proceedings ofthe Meeting of the Audit & Supervisory
Board and the results thereof as wellas matters stipulated by law andordinance shall be entered in the
Minutes of the Meeting and the Audit& Supervisory Board Members present
shall inscribe their names and affix– 13 –(Deleted)

Current Articles of Incorporation

Proposed provisions after amendments

their seals thereon.
(Provision for the Audit & Supervisory Board)
Art. 40: Unless otherwise provided for by law
or ordinance or by these Articles ofIncorporation, matters concerning theoperation of the Audit & Supervisory
Board which are not provided hereinshall be controlled by regulations of
the Audit & Supervisory Board aspromulgated
by
the
Audit
&
Supervisory Board.

(Deleted)(Compensation, etc.)
Art. 41: The amount of compensation, etc., to
Audit & Supervisory Board Members
shall be fixed by resolution of the
Meeting of Shareholders.

(Deleted)(Exemption of Liabilities of Audit & Supervisory
Board Members)Art. 42: Pursuant to Art. 427, Paragraph 1, of
the Companies Act, the Corporation
may enter into an agreement withoutside Audit & Supervisory Board
Members to limit such outside Audit &Supervisory Board Members’ liabilities
for damage attributable to suchoutside Audit & Supervisory Board
Members’
negligenceof
duties.
However, the upper limit of liabilities
based on the agreement shall be thehigher of either ¥10 million or theamount provided by law.
(Newly established)(Deleted)

Chapter V
Audit and Supervisory Committee(Notice of Meetings ofSupervisory Committee)(Newly established)

the

Audit

and

Art. 32: Notice of a Meeting of the Audit andSupervisory Committee shall be given
to each Member 3 days before themeeting date. In the event of an
emergency, however, such period may
be shortened.
(ii) If
all
Audit
and
Supervisory
Committee Members consent toholding of a Meeting of the Audit andSupervisory Committee, the meeting
may be held without such notice.

(Newly established)(Full-time Audit and Supervisory Committee
Members)Art. 33: The Audit and Supervisory Committee
may, by its resolution, elect full-time
Audit and Supervisory Committee
Members from among the Audit andSupervisory Committee Members.

– 14 –

Current Articles of Incorporation

Proposed provisions after amendments(Newly established)(Operation of theCommittee)

Audit

and

Supervisory

Art. 34: Unless otherwise provided for by law
or ordinance or by the Articles ofIncorporation, any other mattersconcerning the operation of the Audit
and Supervisory Committee of the
Corporation shall be controlled by theregulations
of
the
Audit
and
Supervisory
Committee
aspromulgated by the said Committee.
Chapter VI
Accounting Auditors

Chapter VI
Accounting Auditors

Art. 43 to 45: (Provisions omitted)

Art. 35 to 37: (Unchanged)(Compensation, etc.)(Compensation, etc.)

Art. 46: Compensation, etc., to the Accounting Art. 38: Compensation, etc., to the Accounting
Auditor shall be determined by the
Auditor shall be determined by the
Representative
Directors
withRepresentative
Directors
withapproval of the Audit & Supervisory
approval of the Audit and Supervisory
Board.
Committee.
Chapter VII
Accounting

Chapter VII
Accounting

Art. 47 to 51: (Provisions omitted)

Art. 39 to 43: (Unchanged)– 15 –

Proposal No. 2:

Election of Eight Directors (except Directors Serving as

Audit and Supervisory Committee Members)
If Proposal No. 1 “Partial Amendments to the Articles of Incorporation” is approved andadopted in its original form, the Company will transition to a company with audit andsupervisory committee, and the terms of office for all eleven Directors will expire at theeffective date of the amendments to the Articles of Incorporation.
Therefore, we propose to elect eight Directors (except Directors serving as Audit andSupervisory Committee Members; the same shall apply hereinafter in this proposal).
This proposal will be effective provided that the amendment to the Articles ofIncorporation in Proposal No. 1 “Partial Amendments to the Articles of Incorporation”
takes effect.
Candidates for Directors were nominated by the Board of Directors in accordance with
“Qualifications Expected of Directors,” which is described on page 35. The Company has
obtained a report to the effect that this nomination is appropriate from the Nomination
Advisory Committee, which consists mainly of independent outside officers.
The candidates for Directors are as follows:No.

Duties, Significant concurrent

Name

positions etc.

Attendance tomeetings of theBoard of Directors

Yoshinori Kanehana

President and Chief Executive Officer

17/17 (100%)

2

Sukeyuki Namiki

Assistant to the President, withoverall responsibility for technology,
production and procurement, and in
charge of TQM, General
Administration and Rolling Stock
Company

17/17 (100%)

3

Yasuhiko Hashimoto

Assistant to the President

17/17 (100%)

1

4

5

Katsuya Yamamoto

Hiroshi Nakatani

New

Outside6

Independent

7

Independent

8

OutsideNew

OutsideIndependent

Assistant to the President, withoverall responsibility for finance andaccounting, and human resources,
and in charge of Sustainable
Development, Investor Relations andCorporate Communication
In charge of Corporate Planning,
Digital Transformation and Ship &Offshore Structure Company, andGeneral Manager, Corporate
Technology Division

17/17 (100%)-/- (-%)

Yoshiaki Tamura

Outside Director, DIC Corporation

17/17 (100%)

Jenifer Rogers

Outside Director, Mitsui & Co., Ltd.
Outside Director, Nissan Motor Co.,Ltd.

16/17 (94%)-/- (-%)

Hideo Tsujimura– 16 –

Name(Date of Birth)No.

1Career Summary, Positions and Duties[Significant concurrent positions]

Attendance tomeetings of theBoard of Directors

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

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(present)

Reasons for nomination as candidate
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
has served 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 as a candidate for Director.

– 17 –

Number oftheCompany’s
shares held

21,500sharesName(Date of Birth)No.

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

Attendance tomeetings of theBoard of Directors

Sukeyuki Namiki(June 6, 1955)
17/17 (100%)

Apr. 1980

Joined Kawasaki Heavy Industries, Ltd.

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

Apr. 2020

Director, Vice President and Senior
Executive Officer
Assistant to the President, with overall
responsibility for technology, production andprocurement, and in charge of TQM, General
Administration, and Rolling Stock Company(present)

Reasons for nomination as candidate
Mr. Namiki has been mainly engaged in businesses related
to technology and development of the aerospace segmentof the Company for many years. He was appointed
Director, Managing Executive Officer of the Company in2018. Presently, as Director, Vice President and Senior
Executive Officer, he has an overall responsibility fortechnology, production and procurement, while also being
in charge of TQM, General Administration, and Rolling
Stock Company, thereby making a significant contribution
to the Company’s business growth and enhancing its
enterprise value. Considering these points, we havedetermined that he is suitable for a Director andnominated him as a candidate for Director.

– 18 –

Number oftheCompany’s
shares held

8,600
sharesName(Date of Birth)
No.

3Career Summary, Positions and Duties[Significant concurrent positions]

Attendance tomeetings of theBoard of Directors

Yasuhiko
Hashimoto(May 15, 1957)
17/17 (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

Apr. 2020

Director, Vice President and Senior
Executive Officer
Assistant to the President (present)

Reasons for nomination as candidate
Mr. Hashimoto has been mainly engaged in businesses
related to technology and development of the industrial
robots business unit of the Company for many years. He
was appointed Director, Managing Executive Officer in 2018and Director, Vice President and Senior Executive Officer of
the Company in 2020. Presently, as Director, Vice President
and Senior Executive Officer, he assists the President andChief Executive Officer in the overall business execution,
thereby making a significant contribution to the Company’sbusiness growth and enhancing its enterprise value.
Considering these points, we have determined that he issuitable for a Director and nominated him as a candidate
for Director.

– 19 –

Number oftheCompany’s
shares held

7,300
sharesName(Date of Birth)No.

4Career Summary, Positions and Duties[Significant concurrent positions]

Attendance tomeetings of theBoard of Directors

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

Apr. 1981

Joined Kawasaki Heavy Industries, Ltd.

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

Apr. 2020

Director, Vice President and Senior
Executive Officer
Assistant to the President, with overall
responsibility for finance and accounting,and human resources, and in charge of
Sustainable Development, Investor Relations
and Corporate Communication (present)

Reasons for nomination as candidate
Mr. Yamamoto has been mainly engaged in businesses
related to corporate planning and finance & accounting of
the plant & infrastructure segment and the precision
machinery segment of the Company for many years. He
was appointed Senior Vice President in 2017 and Director,
Vice President and Senior Executive Officer of the Company
in 2020. Presently, as Director, Vice President and Senior
Executive Officer, he has an overall responsibility for
finance and accounting, and human resources, while also
being in charge of Sustainable Development, Investor
Relations and Corporate Communication, 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 as a candidate for Director.

– 20 –

Number oftheCompany’s
shares held

7,600
sharesName(Date of Birth)No.

Attendance tomeetings of theBoard of Directors(Newlyappointed)
5Career Summary, Positions and Duties[Significant concurrent positions]Apr. 1984

Joined Kawasaki Heavy Industries, Ltd.

Apr. 2016

Executive Officer
Deputy General Manager, Corporate
Technology Division, and General Manager,
Technical InstituteApr. 2019

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

Apr. 2020

Managing Executive Officer
In charge of Corporate Planning, Digital
Transformation, and Ship & Offshore
Structure Company, and General Manager,
Corporate Technology Division (present)

Hiroshi Nakatani(August 9, 1960) Reasons for nomination as candidate
Mr. Nakatani has been mainly engaged in businesses-/- (-%)
related to technical development and planning for many
years. He was appointed Executive Officer in 2016 andManaging Executive Officer of the Company in 2019.
Presently, as Managing Executive Officer and General
Manager of Corporate Technology Division, he has been
demonstrating outstanding leadership, while also being inchargeofoverallCorporate
Planning,
DigitalTransformation and Ship & Offshore Structure Company,
thereby making a significant contribution to the Company’sbusiness growth and enhancing its enterprise value.
Considering these points, we have determined that he issuitable for a Director and newly nominated him as a
candidate for Director.

– 21 –

Number oftheCompany’s
shares held

2,900
sharesName(Date of Birth)No.

6Career Summary, Positions and Duties[Significant concurrent positions]

Attendance tomeetings of theBoard of Directors
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 GlassCo., Ltd.

Mar. 2014

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

Jan. 2017

Assistant to CEO, Asahi Glass Co., Ltd.

(Outside Director Mar. 2017
Candidate)Mar. 2018(Independent
Officer)Jun. 2018

Executive Fellow, Asahi Glass Co., Ltd.
(retired in March 2019)
Outside Director, DIC Corporation (present)
Outside Director, Kawasaki Heavy
Industries, Ltd. (present)

Yoshiaki Tamura [Significant concurrent positions](October 3, 1954) Outside Director, DIC Corporation
17/17 (100%)

Number oftheCompany’s
shares held

Reasons for nomination as candidate
Mr. Tamura served as Representative Director and Executive
Vice President, 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 positionsof Asahi Glass Co., Ltd. (At present: AGC Inc.). Since 2018,as Outside Director of the Company, 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,
we have determined that he is suitable for an Outside
Director and nominated him as a candidate for Director.

– 22 –

800
sharesName(Date of Birth)No.

7Career Summary, Positions and Duties[Significant concurrent positions]

Attendance tomeetings of theBoard of Directors
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.) (retired in
November 1994)

Dec. 1994

Joined Merrill Lynch Japan Securities Co.,
Ltd.

Nov. 2000

Merrill Lynch Europe Plc

Jul. 2006

Bank of America Merrill Lynch (Hong Kong)

Jan. 2012

Bank of America Merrill Lynch (NY) (retiredin October 2012)(Outside Director Nov. 2012
Candidate)(Independent
Jun. 2015
Officer)

General Counsel Asia, Asurion Japan
Holdings G.K. (concurrently serving as Vice
President from November 2014) (present)

Jenifer Rogers(June 22, 1963)
16/17 (94%)

Outside Director, Mitsui & Co., Ltd. (present)

Jun. 2018

Outside Director, Kawasaki Heavy
Industries, Ltd. (present)

Jun. 2019

Outside Director, Nissan Motor Co., Ltd.
(present)[Significant concurrent positions]
Outside Director, Mitsui & Co., Ltd.
Outside Director, Nissan Motor Co., Ltd.
Reasons for nomination as candidate
Ms. Rogers served as an in-house lawyer and counsel atfinancial institutions in Japan and overseas for many years.
Since 2018, as Outside Director of the Company, we havereceived helpful opinions and advice on importantmanagement
decisions
based
on
her
extensiveinternational experience and deep insights into legal affairs,
compliance, and risk management cultivated in thosepositions from a standpoint independent from theCompany’s execution of duties. Considering these points,
we have determined that she is suitable for an Outside
Director and nominated her as a candidate for Director.

– 23 –

Number oftheCompany’s
shares held

1,000
sharesName(Date of Birth)No.

8Career Summary, Positions and Duties[Significant concurrent positions]

Attendance tomeetings of theBoard of Directors
Apr. 1980

Joined Suntory Limited

Mar. 2004

Director, Suntory Limited

Apr. 2009Managing Executive Officer, Suntory
Holdings Limited
General Manager, R&D Planning Division, incharge of Intellectual Property Department

Mar. 2015

Senior Managing Director, Suntory Holdings
LimitedRepresentative Director, President & Chief
Executive Officer, Suntory Business Expert
Limited (At present: Suntory MONOZUKURI
Expert Limited)

Apr. 2015

Senior Managing Director, in charge ofIntellectual Property Department and R&D
Division, Suntory Holdings Limited

Mar. 2017(Newlyappointed)(Outside Director Apr. 2017
Candidate)(Independent
Officer)

Director, Executive Vice President, Suntory
Beverage & Food Limited

Hideo Tsujimura(June 6, 1954)

Full-time Advisor, Suntory Beverage & Food
Limited (present)
Chairman, Suntory Foundation for Life
Sciences (present)-/- (-%)

Apr. 2020

Director, Executive Vice President,
Chief Operating Officer, MONOZUKURIDivision and Senior General Manager,
Research & Development Department,
Suntory Beverage & Food Limited

Number oftheCompany’s
shares held0
sharesReasons for nomination as candidate
Mr. Tsujimura has not only extensive management
experience but also deep insights into product development
and intellectual property, having served as Senior Managing
Director, in charge of Intellectual Property Department andR&D Division of Suntory Holdings Limited, Representative
Director, President & Chief Executive Officer of Suntory
Business Expert Limited, as well as Director, Executive Vice
President, Chief Operating Officer, MONOZUKURI Division
and Senior General Manager, Research & Development
Department of Suntory Beverage & Food Limited and otherimportant positions. Considering these points, we havejudged that he will be able to fully fulfil his role as an
Outside Director supervising the execution of duties andenhancing its enterprise value, 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. Yoshiaki Tamura, Ms. Jenifer Rogers and Mr. Hideo Tsujimura are candidates for Outside
Director.
3. Tenure of Mr. Yoshiaki Tamura and Ms. Jenifer Rogers as Outside Director of the Company
will have been two years at the conclusion of this Ordinary General Meeting of Shareholders.
4. Mr. Yoshiaki Tamura and Ms. Jennifer Rogers have entered into a limited liability agreement
pursuant to the provisions of Article 427, Paragraph 1 of the Companies Act with theCompany, 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. The
Company will extend the above agreement with them after their election on condition that
Proposals No. 1 and No. 2 are adopted in their original form.
5. Mr. Hideo Tsujimura 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– 24 –

condition that Proposals No. 1 and No. 2 are adopted in their original form. Liability under
the said agreement shall be limited to either ¥10 million or an amount specified by laws
and regulations, whichever is higher.
6. The Company has submitted notification to Tokyo Stock Exchange, Inc. that Mr. Yoshiaki
Tamura and Ms. Jenifer Rogers have been appointed as Independent Officers as provided
for by the aforementioned exchange.
7. The Company will submit notification to Tokyo Stock Exchange, Inc. that Mr. Hideo
Tsujimura is appointed as Independent Officer as provided for by the aforementioned
exchange.
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 havedetermined that there is no issue as to the independence of Mr. Tamura and he will be able
to fulfil his role as an Independent Officer.
9. Although Suntory Beverage & Food Limited, where Mr. Hideo Tsujimura served as amanaging officer in the past, is not a business partner of the Company, the KHI Group has
a track record of transactions with the Group of Suntory Beverage & Food Limited and the
KHI Group. However, the annual average transactions between the Group of Suntory
Beverage & Food Limited and the KHI Group for the most recent five fiscal years accountfor less than 1% of the annual average net sales each for the said Group and the KHI Groupover the corresponding period. Consequently, we have determined that there is no issue
as to the independence of Mr. Tsujimura and he will be able to fulfil his role as an
Independent Officer.
[Reference]
1. “TQM”: Total Quality Management
2. “Sustainability”: This is the sustainability of society and the environment. The Company
promotes sustainable management, which it supports from the aspects of CSR, risk, legal
affairs, etc., to contribute to the future of society and the environment.
3. “Digital Transformation”: The reformation of products, services and business models basedon the needs of customers and society, which utilizes data and digital technologies to
respond to drastic changes in the business environment, as well as the reformation ofbusiness, organization, processes and corporate culture.

– 25 –

Proposal No. 3: Election of Five Directors Serving as Audit and Supervisory
Committee Members
If Proposal No. 1 “Partial Amendments to the Articles of Incorporation” is approved andadopted in its original form, the Company will transition to a company with audit andsupervisory committee.
Accordingly, we propose to elect five Directors serving as Audit and Supervisory
Committee Members. This proposal will be effective provided that the amendment to
the Articles of Incorporation in Proposal No. 1 “Partial Amendments to the Articles ofIncorporation” takes effect.
We have obtained the consent of the Audit & Supervisory Board on this proposal.
Additionally, candidates for Directors serving as Audit and Supervisory Committee
Members were nominated by the Board of Directors in accordance with “Qualifications
Expected of Directors,” which is described on page 35. The Company has obtained areport to the effect that this nomination is appropriate from the Nomination Advisory
Committee, which consists mainly of independent outside officers.
The candidates for Directors serving as Audit and Supervisory Committee Members are
as follows:
No.

Name

1

2

3

4

5

OutsideIndependent

OutsideIndependent

OutsideIndependent

Present position

Duties, Significant concurrent

at the Company

positions etc.

Full-Time Audit
Katsuyoshi Fukuma & Supervisory
Board Member
Full-Time Audit& Supervisory
Akio Nekoshima
Board Member
Audit &
Supervisory
Satoru Kohdera
Board Member(Outside)

Atsuko Ishii

Audit &
Supervisory
Board Member(Outside)

Ryoichi Saito

Audit &
Supervisory
Board Member(Outside)

Attendance tomeetings of theBoard of Directors
17/17 (100%)

17/17 (100%)

Managing Partner, Higashimachi
LPC

17/17 (100%)

Outside Audit & Supervisory
Board Member, Mitsui
Sumitomo Insurance Company,
LimitedOutside Director, NS Solutions
Corporation

17/17 (100%)

14/14 (100%)(Note) The “Attendance to meetings of the Board of Directors” of Mr. Ryoichi Saito represents his
attendance to the meetings held after assuming the office of Audit & Supervisory Board
Member on June 26, 2019.

– 26 –

Name(Date of Birth)No.

1

Carrier Summary, Positions and Duties[Significant concurrent positions]

Attendance tomeetings of theBoard of Directors

Katsuyoshi
Fukuma(December 5,
1957)
17/17 (100%)

Apr. 1981

Joined Kawasaki Heavy Industries, Ltd.

Oct. 2010

Senior Manager, Subsidiaries & Affiliates
Control Department, Planning Division

Apr. 2014

Deputy General Manager and Senior
Manager, Business Planning Department,
Planning DivisionJun. 2016

Audit & Supervisory Board Member(present)

Reasons for nomination as candidate
Mr. Fukuma has been mainly engaged in businesses related
to corporate planning and finance & accounting of theCompany for many years. He was appointed Audit &Supervisory Board Member of the Company in 2016.
Presently, as Full-Time Audit & Supervisory Board Member
and the Chairman of the Audit & Supervisory Board, he has
made a significant contribution to ensuring the soundnessof the Company’s management and enhancing its
enterprise value. Considering these points, we havedetermined that he is suitable for a Director serving as Audit
and Supervisory Committee Member and nominated him asa candidate for Director serving as Audit and Supervisory
Committee Member.

– 27 –

Number oftheCompany’s
shares held

1,000
sharesName(Date of Birth)No.

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

Attendance tomeetings of theBoard of Directors

Akio Nekoshima(September 30,
1958)
17/17 (100%)

Apr. 1982

Joined The Dai-Ichi Kangyo Bank, Limited(At present: Mizuho Bank, Ltd.) (Retired in
April 2012)

May 2012

Joined Kawasaki Heavy Industries, Ltd.

Apr. 2013

Senior Manager, Europe, the Middle East
and Africa, and Group Manager,
Overseas, Marketing Division

Jul. 2013

General Manager, Finance & Accounting
Division

Apr. 2014

Executive Officer
General Manager, Finance & Accounting
Division

Apr. 2016

Executive Officer
General Manager, Marketing Division

Apr. 2018

Executive Officer
Staff officer to Audit & Supervisory Board
MemberJun. 2018

Audit & Supervisory Board Member(present)

Reasons for nomination as candidate
Mr. Nekoshima has been engaged in businesses related tofinance and accounting and sales promotion, and overseas
business of the Company. He was appointed Executive
Officer in 2014 and Audit & Supervisory Board Member of
the Company in 2018. Presently, as Full-time Audit &Supervisory Board Member of the Company, he has madea significant contribution to ensuring the soundness of theCompany’s management and enhancing its enterprisevalue. Considering these points, we have determined that
he is suitable for a Director serving as Audit andSupervisory Committee Member and nominated him as a
candidate for Director serving as Audit and Supervisory
Committee Member.

– 28 –

Number oftheCompany’s
shares held

4,900
sharesName(Date of Birth)
No.

Carrier Summary, Positions and Duties[Significant concurrent positions]

Attendance tomeetings of theBoard of Directors
Apr. 1991

Admitted to Bar in Japan
Joined Ohshiro Law Office (At present:
Higashimachi LPC)

Apr. 1993

Partner, Higashimachi Law OfficeJun. 2010

Partner, Higashimachi LPC

Jun. 2013

Substitute Audit & Supervisory Board
Member, Kawasaki Heavy Industries, Ltd.

Apr. 2015

President, Hyogo-ken Bar Association(resigned in March 2016)

Dec. 2015

Managing Partner, Higashimachi LPC(present)(Outside Director
Apr. 2016
Candidate)(Independent
Officer)Jun. 2017
3

Satoru Kohdera(December 30,
1958)
17/17 (100%)

Number oftheCompany’s
shares held

Vice President, Japan Federation of Bar
Associations (resigned in March 2017)
Outside Audit & Supervisory Board Member,
Kawasaki Heavy Industries, Ltd. (present)

Reasons for nomination as candidate
Mr. Kohdera has never involved in the management of acompany, except as an outside officer. However, heserved as President of the Hyogo-ken Bar Association,
Vice President of the Japan Federation of Bar Associations,and other important positions. Since 2017, as Outside
Audit & Supervisory Board Member of the Company, he
has made a significant contribution to ensuring thesoundness of the Company’s management and enhancing
its enterprise value based on his abundant experience anddeep insight into legal affairs as an attorney. Considering
these points, we have determined that he is suitable for
an Outside Director serving as Audit and Supervisory
Committee Member and nominated him as a candidate for
Outside Director serving as Audit and Supervisory
Committee Member.

– 29 –

1,100
sharesName(Date of Birth)
No.

Carrier Summary, Positions and Duties[Significant concurrent positions]

Attendance tomeetings of theBoard of Directors
Apr. 1980

Joined Ministry of Labour (At present:
Ministry of Health, Labour and Welfare)Jul. 2009

Director-General, Osaka Labour Bureau,
Ministry of Health, Labour and Welfare

Jul. 2010

Deputy Director-General (in charge of equal
employment, child and family policy, andmeasures for declining birthrate), Ministry of
Health, Labour and Welfare

Sep. 2012

Director-General, Equal Employment, Childand Family Policy Bureau, Ministry of Health,Labour and Welfare

Jul. 2014

Director-General for General Policy and
Evaluation (in charge of labor), Ministry of
Health, Labour and Welfare

Oct. 2015

Director-General, Social Welfare and War
Victims’ Relief Bureau, Ministry of Health,Labour and Welfare (resigned in June 2016)

Jun. 2017

Outside Audit & Supervisory Board Member,
Kawasaki Heavy Industries, Ltd. (present)(Outside Director
Jun. 2017
Candidate)(Independent
Officer)4

Atsuko Ishii(November 17,
1957)
17/17 (100%)

Jun. 2019

Number oftheCompany’s
shares held

Outside Audit & Supervisory Board Member,
Mitsui Sumitomo Insurance Company,
Limited (present)
Outside Director, NS Solutions Corporation(present)[Significant concurrent positions]
Outside Audit & Supervisory Board Member, Mitsui
Sumitomo Insurance Company, Limited
Outside Director, NS Solutions Corporation
Reasons for nomination as candidate
Ms. Ishii has never involved in the management of acompany, except as an outside officer. However, she servedin the Ministry of Health, Labour and Welfare as DirectorGeneral of Osaka Labour Bureau, Deputy Director-General,
Director-General of Equal Employment, Child and Family
Policy Bureau, Director-General for General Policy and
Evaluation, and Director-General of Social Welfare and War
Victims’ Relief Bureau, and other important positions. Since
2017, as Outside Audit & Supervisory Board Member of theCompany, Ms. Ishii has made a significant contribution toensuring the soundness of the Company’s management andenhancing its enterprise value based on her abundant
experience and deep insight on labor administration.
Considering these points, we have determined that she issuitable for an Outside Director serving as Audit andSupervisory Committee Member and nominated her as a
candidate for Outside Director serving as Audit andSupervisory Committee Member.

– 30 –

300
sharesName(Date of Birth)No.

5Carrier Summary, Positions and Duties[Significant concurrent positions]

Attendance tomeetings of theBoard of Directors
Apr. 1974

Joined NSK Ltd.

Jun. 2006

Senior Vice President, Head of Corporate
Planning Division HQ, NSK Ltd.

Jun. 2011

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

Jun. 2013

Senior Advisor, NSK Ltd.

Jun. 2016

Administrative Officer, NSK Ltd. (Retired inJune 2017)(Outside Director
Jun. 2019
Outside Audit & Supervisory Board Member,
Candidate)
Kawasaki Heavy Industries, Ltd. (present)(Independent
Reasons for nomination as candidate
Officer)Mr. Saito served as Senior Vice President, Head ofCorporate Planning Division HQ, Director, Representative,
Ryoichi Saito
Executive Vice President, Head of Corporate Strategy(February 3,
Division HQ and Crisis Management Committee Chairperson
1950)
of NSK Ltd. and other important positions. Since 2019, asOutside Audit & Supervisory Board Member of the
14/14 (100%)Company, he has made asignificant contribution to ensuring the soundness of theCompany’s management and enhancing its enterprisevalue based on his extensive management experience anddeep insights into business planning, finance andaccounting, and risk management. Considering thesepoints, we have determined that he is suitable for an
Outside Director serving as Audit and Supervisory
Committee Member and nominated him as a candidate for
Outside Director serving as Audit and Supervisory
Committee Member.

Number oftheCompany’s
shares held

100
shares(Notes) 1. There is no special interest relationship between each candidate and the Company.
2. Mr. Satoru Kohdera, Ms. Atsuko Ishii and Mr. Ryoichi Saito are candidates for Outside
Directors.
3. Mr. Satoru Kohdera and Ms. Atsuko Ishii are currently the Outside Audit & Supervisory
Board Members of the Company, and their tenure as Audit & Supervisory Board Member
will have been three years at the conclusion of this Ordinary General Meeting of
Shareholders.
4. Mr. Ryoichi Saito is currently the Outside Audit & Supervisory Board Member of theCompany, and his tenure as Audit & Supervisory Board Member will have been one year
at the conclusion of this Ordinary General Meeting of Shareholders.
5. Mr. Katsuyoshi Fukuma and Mr. Akio Nekoshima will enter into a limited liability agreement
after their election pursuant to the provisions of Article 427, Paragraph 1 of the Companies
Act with the Company on condition that Proposals No. 1 and No. 3 are adopted in their
original form. Liability under the said agreement shall be limited to either ¥10 million or an
amount specified by laws and regulations, whichever is higher.
6. Mr. Satoru Kohdera, Ms. Atsuko Ishii and Mr. Ryoichi Saito has entered into a limited liability
agreement pursuant to the provisions of Article 427, Paragraph 1 of the Companies Act
with the Company. Liability under the said agreement is limited to either ¥10 million or an
amount specified by laws and regulations, whichever is higher. They will enter into a same
limited liability agreement aforementioned after their election with the Company on
condition that Proposals No. 1 and No. 3 are adopted in their original form.
7. The Company has submitted notification to Tokyo Stock Exchange, Inc. that Mr. Satoru
Kohdera, Ms. Atsuko Ishii and Mr. Ryoichi Saito are appointed as Independent Officers asprovided for by the aforementioned exchange.

– 31 –

8. 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.

– 32 –

Proposal No. 4: Election of One Director serving as Substitute Audit andSupervisory Committee Member
If Proposal No. 1 “Partial Amendments to the Articles of Incorporation” is approved andadopted in its original form, the Company will transition to a company with audit andsupervisory committee.
Accordingly, we propose to elect one Outside Director serving as substitute Audit andSupervisory Committee Member to prepare for a contingency in which the Company
does not have the number of Directors serving as Audit and Supervisory Committee
Members required by laws and regulations. This proposal will be effective provided thatthe amendment to the Articles of Incorporation in Proposal No. 1 “Partial Amendments
to the Articles of Incorporation” takes effect.
We have obtained the consent of the Audit & Supervisory Board on this proposal.
Additionally, a candidate for Director serving as substitute Audit and Supervisory
Committee Member was nominated by the Board of Directors in accordance with
“Qualifications Expected of Directors,” which is described on page 35. The Company has
obtained a report to the effect that this nomination is appropriate from the Nomination
Advisory Committee, which consists mainly of independent outside officers.
The candidate for Outside Director serving as substitute Audit and Supervisory
Committee Member is as follows:
Carrier Summary and Positions[Significant concurrent positions]

Name(Date of Birth)(Newlyappointed)(Outside Director
Candidate)(Independent
Officer)
Susumu Tsukui(May 3, 1969)

Apr. 1995

Admitted to Bar in Japan
Joined Kobe-Kaito Law Office

Apr. 1999

Joined Law Office ASHIYA

Apr. 2002

Established Ashiya Nishinomiya Citizen Law
OfficeManaging Partner, Ashiya Nishinomiya Citizen
Law Office (present)

Apr. 2006

Vice President, Hyogo-ken Bar Association(retired in March 2007)

Reasons for nomination as candidate
Mr. Tsukui has never directly involved in the managementof a company. However, he has extensive experience anddeep insights into legal affairs an attorney, having served
as Vice President of Hyogo-ken Bar Association and otherimportant positions. Considering these points, we havejudged that he will be able to fully fulfil his role as an
Outside Director serving as Audit and Supervisory
Committee Member auditing the Company from an
independent position in the case of a contingency in which
the Company does not have the number of Directors
serving as Audit and Supervisory Committee Members
required by laws and regulations, and nominated him as a
candidate for Outside Director serving as substitute Audit
and Supervisory Committee Member.

Number oftheCompany’s
shares held0
shares(Notes) 1. There is no special interest relationship between the candidate and the Company.

– 33 –

2. Mr. Susumu Tsukui is a candidate for Outside Director serving as substitute Audit
and Supervisory Committee Member
3. Should Mr. Susumu Tsukui be appointed Outside Director serving as Audit andSupervisory Committee Member on condition that Proposals No. 1 and No. 4 are
adopted in their original form, he will enter into a limited liability agreement to limit
his liabilities to compensate for damages with the Company pursuant to theprovisions of Article 427, Paragraph 1 of the Companies Act. Liability under the said
agreement shall be limited to either ¥10 million, or an amount specified by laws andregulations, whichever is higher.
4. Mr. Susumu Tsukui satisfies the requirements of the independence standards foroutside officers stipulated by the Company. Should Mr. Susumu Tsukui be appointed
Outside Director serving as Audit and Supervisory Committee Member, the Company
will submit notification to Tokyo Stock Exchange, Inc. that he is appointed as
Independent Officer as provided for by the aforementioned exchange.

– 34 –

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
5. Be able to exercise one’s authority in an active and positive manner, or properly
express one’s opinions to the Board of Directors or the management* Directors serving as Audit and Supervisory Committee Members must be familiar with
the Company’s business or have deep insight and expertise in corporate management,
legal affairs, finance and accounting, administration and other fields from theperspective of ensuring the effectiveness of audits. At least one Director serving as
Audit and Supervisory Committee 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 an
executive 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 executive director, executive officer, operating officer or otherimportant employee of the KHI Group.

– 35 –

Proposal No. 5:

Determination of Remuneration Amount for Directors(except Directors Serving as Audit and Supervisory Committee Members)
If Proposal No. 1 “Partial Amendments to the Articles of Incorporation” is approved andadopted in its original form, the Company will transition to a company with audit andsupervisory committee.
The maximum remuneration for Directors was approved to be ¥1.2 billion per year by
the resolution of the 189th Ordinary General Meeting of Shareholders held on June 27,
2012. In line with the transition to a company with audit and supervisory committee, we
propose to abolish the said amount and newly set the remuneration amount for Directors(except Directors serving as Audit and Supervisory Committee Members) at ¥800 million
or less per year, taking into account the decrease in the number of Directors and thevarious circumstances including economic situation.
Remuneration for Directors (except Directors serving as Audit and Supervisory
Committee Members), excluding Outside Directors, consists of “basic remuneration,”
which is a fixed amount, “performance-based remuneration,” which is determined bylinking with business performance and “stock purchase fund,” where the entire amountis contributed to the officers’ stock ownership plan. Remuneration for Outside Directors(except Directors serving as Audit and Supervisory Committee Members) is “basic
remuneration” only so that it is not involved in the performance-linked portion from theperspective of independence of their duties.
The remuneration amount paid to Directors (except Directors serving as Audit andSupervisory Committee Members) does not include employee salaries for Directors
concurrently serving as employees.
The Company currently has eleven Directors (of which three are Outside Directors). If
Proposal No. 1 and Proposal No. 2 are approved and adopted in their original form, thenumber of Directors (except Directors serving as Audit and Supervisory Committee
Members) pertaining to this proposal will be eight Directors (of which three are Outside
Directors).
This proposal will be effective provided that the amendment to the Articles ofIncorporation in Proposal No. 1 “Partial Amendments to the Articles of Incorporation”
takes effect.

– 36 –

Proposal No. 6: Determination of Remuneration Amount for Directors Serving
as Audit and Supervisory Committee Members
If Proposal No. 1 “Partial Amendments to the Articles of Incorporation” is approved andadopted in its original form, the Company will transition to a company with audit andsupervisory committee.
Accordingly, taking into account the number of Directors serving as Audit andSupervisory Committee Members and the various circumstances including economic
situation, we propose to set the remuneration amount for Directors serving as Audit andSupervisory Committee Members at ¥120 million or less per year.
If Proposal No. 1 and Proposal No. 3 are approved and adopted in their original form, thenumber of Directors serving as Audit and Supervisory Committee Members pertaining tothis proposal will be five.
This proposal will be effective provided that the amendment to the Articles ofIncorporation in Proposal No. 1 “Partial Amendments to the Articles of Incorporation”
takes effect.

– 37 –

Attachment:

Business Report(April 1, 2019 - March 31, 2020)
1. Overview concerning the Current Situation of Company Group(1) Business Progress and Results(i) General conditions
The overall orders received of the KHI Group for the fiscal year under review
amounted to ¥1,513.5 billion, 5% lower than the previous fiscal year. Thiswas mainly because of decreases in orders in the Aerospace Systems andthe Ship & Offshore Structure segments. Net sales, as a whole, were
¥1,641.3 billion, 3% higher than the previous fiscal year, due to increased
sales primarily in the Aerospace Systems and the Rolling Stock segments,
while sales of segments such as the Motorcycle & Engine and the Energy
System & Plant Engineering decreased.
In terms of profit, operating profit was ¥62.0 billion, 3% lower than theprevious fiscal year, due to decreases in profit in segments such as theMotorcycle & Engine and the Precision Machinery & Robot, while profit
increased in the Aerospace Systems and improved in the Rolling Stocksegments. Ordinary profit was ¥40.4 billion, 7% higher than the previous fiscal
year, mainly due to decreased payments for the in-service issues ofcommercial aircraft jet engines, while operating profit decreased. Profit
attributable to owners of parent was ¥18.6 billion, 32% lower than theprevious fiscal year, mainly as a result of the partial reversal of deferred tax
assets due to the impact of the spread of COVID-19 infections, despite anincrease in ordinary profit.
To ensure an appropriate balance of increases in shareholder value and returnof profit to shareholders through distribution of dividends, the Company
comprehensively takes into account its financial position in terms of factors
including free cash flow and debt-to-equity ratio as well as the forecast of its
operating results. As a result, it established a benchmark of 30% for the
consolidated dividend payout ratio in the medium- to long-term.
Profit attributable to owners of parent of ¥25.0 billion, announced on February
6, 2020 as our consolidated financial forecast for the fiscal year ended March
31, 2020, decreased to ¥18.6 billion as a result of a partial reversal of deferred
tax assets, etc. at the fiscal year-end under review, in view of the impact of
the spread of COVID-19 infections.
Further, the Company is also likely to be affected enormously by the global
economic stagnation due to the spread of COVID-19 infections. Thus, it is withgreat regret that the Company has decided not to provide a year-end dividend
because securing liquidity on hand is the most pressing issue at the present
time.

– 38 –

(ii) Operating conditions by business segment
Aerospace Systems segment
In the Aerospace Systems segment, orders received were ¥414.9 billion, adecrease of ¥16.6 billion from the previous fiscal year, due to decreased orders
received from the Ministry of Defense (MOD) in Japan and for component partsfor commercial aircraft, while orders for component parts for commercial
aircraft jet engines increased.
Net sales increased ¥68.5 billion from the previous fiscal year to ¥532.5 billion,
mainly due to increased sales to MOD, for component parts for commercial
aircraft and for component parts for commercial aircraft jet engines.
Operating profit increased ¥10.1 billion from the previous fiscal year to ¥42.7
billion, due to an increase in sales and other factors.
Energy System & Plant Engineering segment
In the Energy System & Plant Engineering segment, orders received were¥252.3 billion, a decrease of ¥11.1 billion from the previous fiscal year whenlarge-scale orders were received for energy products including LNG tanks andCombined Cycle Power Plant (CCPP) in the domestic market, despite orders
received for municipal waste treatment facilities in the domestic market.
Net sales decreased ¥10.0 billion from the previous fiscal year to ¥242.9 billion,
which was due to a decrease in energy business and other factors despite anincrease in construction works of chemical plants for the overseas market.
Operating profit increased ¥5.9 billion from the previous fiscal year to ¥17.5
billion mainly due to an improvement in profitability of chemical plants for theoverseas market, despite a decrease in revenue.
Precision Machinery & Robot segment
In the Precision Machinery & Robot segment, orders received were ¥218.8
billion, a decrease of ¥6.3 billion from the previous fiscal year, due to adecrease in hydraulic components for the construction machinery market
despite an increase in each series of robots.
Net sales decreased ¥4.7 billion from the previous fiscal year to ¥217.3 billion
due to a decrease in sales of hydraulic components for the construction
machinery market.
Operating profit decreased ¥9.1 billion from the previous fiscal year to ¥12.2
billion, due to, in addition to decreased revenue, an increase in research anddevelopment expenses for hydraulic components, a decrease in robot
production in China and other factors.
(Note) With the change and refinement of the counting method of orders received for thePrecision Machinery & Robot segment, its orders received for the Fiscal 2018 (196th
fiscal year) was amended (¥222.4 billion previously).

– 39 –

Ship & Offshore Structure segment
In the Ship & Offshore Structure segment, orders received were ¥56.2 billion,a decrease of ¥24.9 billion from the previous fiscal year when orders werereceived for a submarine for MOD, despite orders received for LNG carriers.
Net sales were ¥71.6 billion, a decrease of ¥7.2 billion from the previous fiscal
year, mainly due to a decrease in construction works for LNG carriers and LPG
carriers.
Operating profit (loss) decreased ¥1.7 billion from the previous fiscal year,
resulting in an operating loss of ¥0.6 billion, mainly due to a decrease in salesof newly-built ships and operation losses.
Rolling Stock segment
In the Rolling Stock segment, orders received were ¥125.7 billion, a decreaseof ¥10.3 billion from the previous fiscal year when orders for subway cars for
the US were received, despite orders received for Shinkansen and subway carsin the domestic market.
Net sales increased ¥11.8 billion from the previous fiscal year to ¥136.5 billion,
mainly due to an increase in passenger cars for the domestic and US markets,
despite a decrease in component parts for the overseas market.
Operating profit (loss) improved ¥9.9 billion from the previous fiscal year,
resulting in an operating loss of ¥3.8 billion, mainly due to, in addition toincreased revenue, a decrease in temporary expenses for the US projects
incurred in the previous fiscal year, despite delays to the next fiscal year andcost fluctuations due to the impact of the spread of COVID-19 in some projects.
Motorcycle & Engine segment
Net sales of the Motorcycle & Engine segment decreased ¥19.0 billion fromthe previous fiscal year to ¥337.7 billion due to, in addition to impact of the
spread of COVID-19, the yen’s appreciation continued against the euro andother currencies compared to the previous fiscal year.
Operating profit (loss) decreased ¥16.3 billion from the previous fiscal year,
resulting in an operating loss of ¥1.9 billion, mainly due to, in addition to
decreased revenue, an increase in manufacturing costs due to the high Thai
Baht and an influence of off-road four wheeler recalls.
(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 ¥7.2 billion from the previous fiscal
year to ¥102.4 billion.
Operating profit decreased ¥1.2 billion from the previous fiscal year to ¥1.2
billion.

– 40 –

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

Net Sales

Operating Profit/Loss

AmountYear-onYear Change

AmountYear-onYear Change

AmountYear-onYear Change

Aerospace Systems

414.9(16.6)

532.5

68.5

42.7

10.1

Energy System & Plant
Engineering

252.3(11.1)

242.9(10.0)

17.5

5.9

Precision Machinery &
Robot

218.8

(6.3)

217.3

(4.7)

12.2

(9.1)

Ship & Offshore
Structure

56.2(24.9)

71.6

(7.2)

(0.6)

(1.7)

Rolling Stock

125.7(10.3)

136.5

11.8

(3.8)

9.9

Motorcycle & Engine

337.7(19.0)

337.7(19.0)(1.9)(16.3)

Others

107.5

13.3

102.4

7.2

1.2

(1.2)

–

–

–

–

(5.3)

0.4

46.5

62.0

(1.9)

Adjustment
Total

1,513.5(75.2)

1,641.3(Notes) 1. Net sales recorded are for sales to external customers.
2. With the change and refinement of the counting method of orders received for the Precision
Machinery & Robot segment, its orders received for the Fiscal 2018 (196th fiscal year) was
amended from ¥222.4 billion to ¥225.2 billion.
3. The net sales figure for Motorcycle & Engine segment is also used as the figure for orders
received.

ii) ROIC and ROE
FY2018 (196th fiscal year)

FY2019 (197th fiscal year)

ROIC

4.5%

4.2%

ROE

5.8%

4.0%

(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) = Profit attributable to owners of 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)
FY2018 (196th fiscal year)

FY2019 (197th fiscal year)

Cash flows from operating activities

109.7(15.4)Cash flows from investing activities(85.3)(69.4)Cash flows from financing activities(19.7)

115.8– 41 –

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

The 194th
fiscal year

The 195th
fiscal year

The 196th
fiscal year

The 197th
fiscal year
(under review)

Orders received

1,348.7

1,608.0

1,588.7

1,513.5

Net sales

1,518.8

1,574.2

1,594.7

1,641.3

Operating profit

45.9

55.9

64.0

62.0

Ordinary profit

36.6

43.2

37.8

40.4

Profit attributable toowners of parent

26.2

28.9

27.4

18.6

Earnings per share (yen)¥156.85¥173.09¥164.34¥111.72

Total assets

1,687.3

1,785.0

1,838.8

1,957.8

Net assets

451.3

481.3

492.2

471.5

(Notes) 1. The Company consolidated 10 ordinary shares into 1 ordinary share as of October 1, 2017,
based on a resolution passed at the 194th Ordinary General Meeting of Shareholders heldon June 28, 2017. Earnings per share were calculated on the assumption that the shareconsolidation took place at the beginning of the 194th term.
2. With the change and refinement of the counting method of orders received for the Precision
Machinery & Robot segment, its orders received for the Fiscal 2018 (196th fiscal year) was
amended (¥1,585.9 billion previously).

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

The 194th
fiscal year

The 195th
fiscal year

The 196th
fiscal year

The 197th
fiscal year
(under review)

Orders received

1,005.0

1,184.6

1,171.8

1,124.7

Net sales

1,172.4

1,213.6

1,195.1

1,250.3

Operating profit

4.7

13.6

15.2

20.4

Ordinary profit

12.5

23.0

9.5

17.1

Profit attributable toowners of parent

17.4

24.6

15.0

10.8

Earnings per share (yen)¥104.71¥147.70¥90.37¥64.78

Total assets

1,388.0

1,469.9

1,499.6

1,609.2

Net assets

304.7

322.7

325.5

323.8

(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. Earnings per share were calculated on the assumption that the share consolidation took
place at the beginning of the 194th term.

(3) Management Policy, Management Environment, Issues to be
Addressed, Etc.
[Corporate Management Strategies in the Medium- to Long-Term andIssues to be Addressed]
Last year, the Group announced a new medium-term business plan “MTBP2019,”
which concludes in FY2021, aiming for sustainable growth and improvement ofcorporate value over the medium- to long-term. Effective from April 2020, we– 42 –

consolidated and reorganized existing business units (BUs) into divisions as well as
appointed a General Manager, a divisional head responsible for business execution,for each business division, aiming to achieve the basic policy of MTBP2019,“balancing autonomous business management and company-wide corporate
governance.” In addition, the Company will transition to a company with audit andsupervisory committee at the end of June this year, in order to strengthen thefunctions to supervise the Board of Directors.
However, due to the impact of the COVID-19 pandemic, the environment
surrounding our businesses has dramatically changed. Accordingly, we havedecided to withdraw the numerical management targets for FY2021, which is the
final year of MTBP2019, looking at the current business environment and market
conditions. On the other hand, medium- to long-term measures, such as the
improvement of profitability, improvement of free cash flow, conversion of businessmodels paying attention to the value chain, strengthening of quality assurance
systems and the reform of organization and culture, will steadily be implemented,
and in order to prepare for the chance for business recovery in the market recovery
phase, the Company will shift management resources to the development of
products, technologies and services that are necessary in a post-COVID society.
[Management Environment and Preferential Business and Financial
Issues to be Addressed]
As a result of the stagnation of global economic activity because of the impact of
the spread of COVID-19, the business activities of the Group have been affected invarious ways, such as a decrease in sales opportunities, the postponing of sales
negotiations, the temporary stoppage of operations at a portion of business offices
and supply chain disruptions. In particular, the Company expects that the
Aerospace Systems segment, where passenger demand is steeply declining, andthe Motorcycle & Engine segment, which is being affected by regulations on goingout and a decline in personal consumption, will be significantly affected, and it ispossible that the consolidated performance in the fiscal year ending March 31, 2021
will be in the red.
Considering such circumstances, regarding the allocation of businessresources, the Company is carefully selecting projects, and is immediately
advancing with measures for preventing surplus inventory, reducing fixed
costs, depreciating assets, etc. Furthermore, the Company is working tosecure liquidity on hand such as by quickly procuring appropriate funds toprepare for unexpected situations such as disruptions in the financial
market.
(4) Assignment of businesses, absorption-type company split andincorporation-type company split
Not applicable.
(5) Transfer of business from other companies
Not applicable.
(6) Succession of rights and obligations pertaining to the business ofanother juridical person, etc., due to absorption-type merger orabsorption-type company split
Not applicable.

– 43 –

(7) Acquisition or disposal of other company’s shares or other holdings, orshare options, etc.
Not applicable(8) Capital Investments, etc.
In the KHI Group, capital investments were made for the development of facilities
to increase the production capacity predominantly for the Aerospace Systems
segment and the Precision Machinery & Robot segment, and for the developmentof facilities to mainly handle new models in the Motorcycle & Engine segment. As aresult, the KHI Group spent a total of ¥70.4 billion (including spending on intangible
assets) on capital investments in the consolidated 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:– 44 –

(Billions of yen)Segment

Investment
amounts in the
consolidated
fiscal year
under review

Major investments

Aerospace Systems

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

25.1

Energy System & Plant
Engineering

Facilities for streamlining
machinery, etc.

3.0

Precision Machinery &Robot

Facilities for increasing hydraulic components andindustrial robot production, etc.

12.8

Ship & Offshore
Structure

Facilities for streamlining ship construction, etc.

1.3

Rolling Stock

Facilities for increasing rolling stock production, etc.

2.7Motorcycle & Engine
Othersproduction of industrial

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

21.3
4.0

Total

70.4

(9) Financing
Funds of ¥24.0 billion from long-term debt, ¥40.0 billion from domestic
unsecured straight bonds and short-term debts and other funds from various
sources were raised in the current consolidated fiscal year. The funds wereallocated to such items as the scheduled payment for long-term debt, capital
investments and working capital.
(10) Principal lenders(Billions of yen)
Lenders

Balance of borrowings
Long term

Short term

Total

Mizuho Bank, Ltd.

5.0

42.7

47.7

Sumitomo Mitsui Banking Corporation

7.5

21.6

29.1

Sumitomo Mitsui Trust Bank, Ltd.

13.5

6.6

20.1

MUFG Bank, Ltd.

4.5

11.6

16.1

The Norinchukin Bank

0.7

14.2

14.9

(11) Major Parent Companies and Subsidiaries(i) Parent Companies
Not applicable.

– 45 –

(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,maintenance and remodeling ofaircraft100%

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, industrial
vehicles, 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.

– 46 –

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 personal watercraft“JET SKI®”, utility vehicles, ATVs
(all-terrain vehicles), rims for ATVs
and utility vehicles, general-purpose
engines and rolling stock and aircraftdoors

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 400
million100%

Sale and servicing of precision
machinery in China

JPY 3,000
million100%

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

US$ 1 million

Note 2

Sale and servicing of industrial robots
in Americas

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

90%

Manufacture and sale of motorcycles
in Indonesia

KRW 1,310
million50%

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

JPY 1,680
million100%

Procurement of parts andcomponents of robots and related
equipment

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
Trading (Shanghai) Co., Ltd.
(China)Kawasaki Precision Machinery(Suzhou) Ltd.
(China)Kawasaki Robotics (U.S.A.),
Inc.

Capital

US$ 165
million

US$ 170
million(United States)

Flutek, Ltd.
(South Korea)
Kawasaki Robotics (Kunshan)Co., Ltd.
(China)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.

– 47 –

2. Kawasaki Robotics (U.S.A.), Inc. is a wholly-owned subsidiary of Kawasaki Motors Corp.,
U.S.A.
3. There are 96 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.

(12) 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.

8,101

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.

6,018

Precision Machinery & Robot

Manufacture and sale of hydrauliccomponents, industrial robots, etc.

3,895

Ship & Offshore Structure

Manufacture and sale of ships, etc.

2,364

Rolling Stock

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

3,511

Motorcycle & Engine

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

9,320

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

1,926Companywide common areas(Head Office Administration Department,
Research & Development Department, etc.)

1,197

-

36,332

Total(Notes) 1. Employees total 26,616 people in Japan and 9,716 people overseas.
2. The Company has 17,218 employees (average age: 39.0 years old; average years ofservice: 13.9 years)– 48 –

(13) 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

Plants, etc.

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)

Location of principal offices of major subsidiaries are provided in “(11) Major Parent
Companies and Subsidiaries.”(14) Other important issues concerning the current situation of company
groupsNot applicable.

– 49 –

2. Status of Shares (as of March 31, 2020)(1) Aggregate number of issuable shares

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

167,080,532 shares(including 36,587 treasury shares)(3) Number of shareholders

112,648 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)

11,525

6.8

Japan Trustee Services Bank, Ltd. (Trust Account)

7,569

4.5

Nippon Life Insurance Company

5,751

3.4

Mizuho Bank, Ltd.

4,176

2.5

Kawasaki Heavy Industries, Ltd. Kyoueikai

3,916

2.3

Kawasaki Heavy Industries, Ltd. Employees Shareholder
Association

3,790

2.2

BNYMSANV AS AGENT / CLIENTS LUX UCITS NON TREATY
1

3,576

2.1

JFE Steel Corporation

3,539

2.1

Japan Trustee Services Bank, Ltd. (Trust Account 7)

3,270

1.9

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

3,168

1.8

(Note)The shareholding ratio is calculated after subtracting treasury shares (36,587 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.

– 50 –

4. Company Officers(1) Directors and Audit & Supervisory Board Members (as of March 31, 2020)
Position

Name

Areas of Responsibility within the Company andOther Significant Concurrent Positions

Chairman of the
Board

Shigeru Murayama

Representative
Director andPresident

Yoshinori Kanehana

Chief Executive Officer

Representative
Director

Kenji Tomida

Assistant to the President, with overall responsibility
for finance and accounting, and human resources
Assistant to the President, with overall responsibility
for technology, production and procurement, and, incharge of Quality Control and Rolling Stock
Company
President, Energy System & Plant Engineering
Company
In charge of Corporate Planning, Investor Relations,
Corporate Communication and Ship & Offshore
Structure Company, and, General Manager,
Corporate Planning Division
President, Precision Machinery & Robot Company, incharge of promoting automation

Representative
Director

Sukeyuki Namiki

Director

Tatsuya Watanabe

Director

Katsuya Yamamoto

Director

Yasuhiko Hashimoto

Director

Hiroyoshi Shimokawa

President, Aerospace Systems Company

Director (Outside)

Michio Yoneda

Outside Audit & Supervisory Board Member,
Sumitomo Chemical Company, Limited
Outside Director, Audit and Supervisory Committee
Member, Asahi Broadcasting Group Holdings
Corporation
Outside Director, Toyo Tire Corporation

Director (Outside)

Yoshiaki Tamura

Outside Director, DIC Corporation

Director (Outside)

Jenifer Rogers

Outside Director, Mitsui & Co., Ltd.
Outside Director, Nissan Motor Co., Ltd.

Full-Time Audit &Supervisory Board
MemberKatsuyoshi Fukuma

Full-Time Audit &Supervisory Board
MemberAkio Nekoshima

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
Outside Director, NS Solutions Corporation

Audit &
Supervisory Board
Member (Outside)

Ryoichi Saito(Notes)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. Directors Munenori Ishikawa and Kazuo Ota, and Audit & Supervisory Board Member
Takashi Torizumi resigned during the fiscal year under review at the conclusion of the196th Ordinary General Meeting of Shareholders.
3. With revisions made to the positions of directors effective April 1, 2020,
Representative Director Kenji Tomida became a Director, and Directors Yasuhiko
Hashimoto and Katsuya Yamamoto became Representative Directors.

– 51 –

4. 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

Significant concurrent positions
Outside Audit & Supervisory Board
Member,Sumitomo Chemical Company, Limited
Outside Director, Audit and Supervisory
Committee Member,
Asahi Broadcasting Group Holdings
Corporation
Outside Director, Toyo Tire Corporation

YoshiakiTamuraJenifer
RogersAudit &
Supervisory
Board
MemberAtsukoIshii

Outside Director, DIC Corporation
Outside Director, Mitsui & Co., Ltd.

Relationships
with the Company

The Company does
not have any
important dealingor other special
relationship withthe said companies.

Outside Director, Nissan Motor Co., Ltd.
Outside Audit & Supervisory Board
Member, Mitsui Sumitomo Insurance
Company, Limited
Outside Director, NS Solutions
Corporation(iii) Family relationships with managing officers or officers, of theCompany or of specific related business operators of the Company
Not applicable.

– 52 –

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

Name

Director

Audit &
Supervisory
Board
Member(Note)

Attendance
Audit &
Board ofSupervisory
Directors
Boardmeetings
meetings

MichioYoneda16/17
meetings–

YoshiakiTamura17/17
meetings–

Jenifer
Rogers

16/17
meetings–

SatoruKohdera17/17
meetings

17/17
meetings

AtsukoIshii

17/17
meetings

17/17
meetings

Ryoichi
Saito

14/14
meetings

13/13
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 experienceand expertise 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 experienceand expert perspective as an
attorney.
She made comments mainly
based on her vast
governmental experience andexpertise in the fields ofwelfare and labor.
He made comments mainly
based on his vast experienceand expertise in corporate
management.

With respect to Audit & Supervisory Board Member Ryoichi Saito, the description refers
to attendance at Board of Directors meetings and Audit & Supervisory Board meetings,
which were held after he assumed his position of Audit & Supervisory Board Member onJune 26, 2019.

(v) Overview of limited liability agreement
The Company has concluded a limited liability agreement with Directors Michio
Yoneda, Yoshiaki Tamura and Jenifer Rogers and Audit & Supervisory Board
Members Satoru Kohdera, Atsuko Ishii and Ryoichi Saito, 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.

– 53 –

(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
13 persons

570

425

85

58

Audit &
Supervisory Board
Members
6 persons

108

108

–

–

Total 19 persons(including 7
persons fromoutside)

678
(76)

533
(76)

85
(–)

58
(–)

(Notes)1. The amount of remuneration for the Directors is up to ¥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 up to¥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 decided by the President, who is delegated by
the Board of Directors in accordance with internal regulations, based on the resultsof deliberation by the Remuneration Advisory Committee, which consists mainly of
independent outside officers and is chaired by an Outside Director.
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 Audit & Supervisory Board.
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 approvedat the General Meeting of Shareholders.
– 54 –

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¥239 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.

(3) Details of Non-audit Services
Accounting related consulting services, etc., such as advice on addressing advisory
remuneration related to accounting peripheral operations and “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.

– 55 –

Consolidated Balance Sheet(As of March 31, 2020)(Unit: Millions of yen)

Description(Assets)
Current assets

Amount1,258,781

Description(Liabilities)
Current liabilities

Amount947,726

Cash and deposits

106,108

Notes and accounts payable trade261,159

Notes and accounts receivable trade473,204

Electronically recorded obligations- operating

110,526

Merchandise and finished goods

75,042

Short-term borrowings

166,188

Work in process

426,256

Current portion of bonds payable

20,000

Lease obligations

1,542

Raw materials and supplies

130,359

Income taxes payable

6,116

Other

51,176

Provision for sales promotion
expenses

12,174

Allowance for doubtful accounts(3,367)

Provision for bonuses

22,032

Provision for construction
warranties

14,454

Provision for loss on construction
contracts

11,464

Advances received

148,610

Other
Non-current assets

699,063

Non-current liabilities

173,456
538,556

Bonds payable

160,000

Long-term borrowings

188,859

Property, plant and equipment

482,570

Buildings and structures, net

193,931

Machinery, equipment andvehicles, net

151,196

Retirement benefit liability

129,846

Land

62,183

Leased assets, net

2,694

Provision for the in service issuesof commercial aircraft jet engines

15,689Other

42,491

Construction in progress

15,959Other, net

56,604

Intangible assets

21,358Investments and other assets

195,134

Investment securities
Retirement benefit asset

Deferred tax liabilities

12,035
135

Deferred tax assets

70,598

Other
Allowance for doubtful accounts

Lease obligations

Total liabilities(Net assets)
Shareholders’ equity
Share capital796

1,486,283
485,520
104,484

Capital surplus

54,542Retained earnings

326,626

Treasury shares
Accumulated othercomprehensive income(133)(29,892)

114,203

Valuation difference on availablefor-sale securities

1,636(1,838)Deferred gains or losses on hedges(272)

Foreign currency translation
adjustment(11,311)

Remeasurements of defined
benefit plans(19,946)

Non-controlling interests
Total assets

873

1,957,845

Total net assets
Total liabilities and net assets– 56 –

15,934
471,562
1,957,845

Consolidated Statement of Profit and Loss
(April 1, 2019 - March 31, 2020)(Unit: Millions of yen)

Description

AmountNet sales

1,641,335

Cost of sales

1,370,809

Gross profit

270,526

Selling, general and administrative expenses

208,463

Operating profit

62,063Non-operating income

9,686Interest income

695

Dividend income

288

Share of profit of entities accounted for using
equity method

1,255

Penalty income

2,784

Insurance claim income

1,191

Other

3,469

Non-operating expenses

31,319Interest expenses

3,615

Foreign exchange losses

8,479

Payments for the in service issues ofcommercial aircraft jet engines

11,500

Other

7,725

Ordinary profit

40,429Extraordinary income

1,277

Gain on sales of non-current assets

1,277

Extraordinary losses

2,383

Loss on withdrawal from business

2,383

Profit before income taxes

39,323

Income taxes - current

10,546

Income taxes - deferred

8,500

Profit19,046
20,276

Profit attributable to non-controllinginterests

1,614

Profit attributable to owners of parent

18,662– 57 –

Non-consolidated Balance Sheet(As of March 31, 2020)(Unit: Millions of yen)

Description

Amount(Assets)
Current assets
Cash and deposits
Notes receivable - trade
Accounts receivable - trade
Raw materials and supplies
Work in process
Advance payments - trade
Prepaid expenses
Other
Allowance for doubtful accounts

Non-current assets
Property, plant and equipment
Buildings
Structures
Docks and building berths
Machinery and equipment
Vessels
AircraftCurrent liabilities
Notes payable - trade
Electronically recorded obligations
10,048
Accounts payable - trade387,664
Short-term borrowings
89,121
Accounts payable - other362,713
Accrued expenses
17,328
Income taxes payable
2,306
Advances received
40,811
Provision for bonuses
Provision for construction(125)
warranties
Provision for loss on construction
contracts
Lease obligations
Other629,731 Non-current liabilities
Bonds payable
354,359
Long-term borrowings
121,278
Lease obligations
19,797
Provision for retirement benefits
2,455
Provision for the in service issues
112,947of commercial aircraft jet engines
125
Other
256
979,474

69,605

Vehicles

1,660

Tools, furniture and fixtures

47,856

Land

35,217

Leased assets

1,707

Construction in progress

11,057

Intangible assets
Software
Other
Investments and other assets
Investment securities
Shares of subsidiaries andassociates
Investments in capital ofsubsidiaries and associates
Long-term loans receivable fromsubsidiaries and associates
Distressed receivables
Deferred tax assets
Other
Allowance for doubtful accounts

Description

Total liabilities

Shareholders’ equity
Share capital
8,789
Capital surplus
7,508
Legal capital surplus
Other capital surplus
259,074Retainedearnings
9,948
Other retained earnings
Reserve for special depreciation
115,618
Reserve for tax purpose
reduction entry of non-current
42,477
assetsRetained earnings brought
9,500
forward1,318
Treasury shares
53,010 Valuation and translation
28,443 adjustments
Valuation difference on available(1,243)
for-sale securities
Deferred gains or losses on hedges
16,297

1,609,205

817,826
4,896
96,349216,555
173,804
29,86562,938837
114,927
14,681
11,724
10,913
1,281
79,053
467,542
160,000
188,856
296
67,862
15,68934,8381,285,369(Net assets)

Total net assets
Total assets

Amount(Liabilities)

Total liabilities and net assets– 58 –

323,068
104,484
52,21052,210166,506
166,506
1,742

9,967
154,796
(133)
768
1,059
(290)
323,836
1,609,205

Non-consolidated Statement of Profit and Loss
(April 1, 2019 - March 31, 2020)(Unit: Millions of yen)

Description

AmountNet sales

1,250,354

Cost of sales

1,113,924

Gross profit

136,430

Selling, general and administrative
expenses

115,966

Operating profit

20,463Non-operating income

24,956

Interest income

392

Dividend income

18,639Penalty income

2,784

Other

3,139

Non-operating expenses

28,279Interest expense

1,502

Foreign exchange losses

7,840

Loss on retirement of non-current assets

1,565

Payments for the in service issues ofcommercial aircraft jet engines

11,500

Other

5,871

Ordinary profit

17,141

Extraordinary income

1,277

Gain on sales of non-current assets

1,277

Extraordinary losses

1,514

Loss on withdrawal from business

1,514

Profit before income taxes

16,904

Income taxes-current(3,770)

Income taxes-deferred

9,853

Profit6,082
10,822– 59 –

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

Audit Report(English Translation)
Regarding the performance of duties by the Directors for the 197th fiscal year from
April 1, 2019 to March 31, 2020, 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– 60 –

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.
(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 20, 2020
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

Satoru Kohdera

Outside Audit & Supervisory Board Member

Atsuko Ishii

Outside Audit & Supervisory Board Member

Ryoichi Saito– 61 –