Consolidated Balance Sheets
Kawasaki Heavy Industries, Ltd. and consolidated subsidiaries
As of March 31, 1999 and 1998

Thousands of
U.S. dollars (Note 1)

Millions of yen

30

AssetsCurrent assets:
Cash on hand and in banks (Note 5)
Marketable securities (Notes 3 and 5)
Receivables (Notes 5 and 9):
Trade
Other
Allowance for doubtful receivables

Inventories (Notes 4 and 5)
Deferred tax assets (Note 8)
Other current assets
Total current assets
Investments and long-term loans:
Investments in securities (Notes 3 and 9)
Long-term loans
Other
Allowance for doubtful receivables
Total investments and long-term loans

Property, plant and equipment (Note 5):Land
Buildings
Machinery and equipment
Construction in progress
Accumulated depreciation
Net property, plant and equipment
Intangible and other assets
Deferred tax assets (Note 8)
Intangible and other assets

Foreign currency translation adjustments
Total assets
The accompanying notes to the consolidated financial statements are an integral part of these statements.

1999¥

55,30647,785

1998¥

76,26548,834

1999$

458,781396,392

403,423
13,173(3,041)
413,555

410,644
9,918(2,959)417,6033,346,520
109,274(25,226)3,430,568

347,765
5,507
14,481
884,399351,236
14,493
908,4312,884,820
45,682
120,124
7,336,367

38,967
1,784
13,264(3,009)51,006

38,604
3,940
14,293(2,289)54,548323,243
14,799110,030(24,961)
423,11150,070238,406
429,758
5,115
723,349(478,483)
244,866

46,524229,287
420,536
7,837
704,184(461,749)
242,435

415,346
1,977,652
3,564,977
42,4316,000,406(3,969,166)
2,031,240

2,956
6,989
9,945

5,699
5,699

24,521
57,97682,497

14,641¥ 1,204,857

11,793¥1,222,906

121,451$9,994,666

Thousands of
U.S. dollars (Note 1)

Millions of yen

Liabilities and shareholders’ equity
Current liabilities:
Short-term borrowings and current portionof long-term debt (Note 5)
Trade payables
Advances from customers
Accrued income taxes (Note 8)
Accrued expenses
Deferred tax liabilities (Note 8)

1999

1998

1999

¥ 238,265
321,830
81,4093,424
22,761
5,162¥ 239,252
327,176
97,703
19,904
41,721-$1,976,482
2,669,681
675,31328,403
188,81042,82049,836722,687

20,591
746,347

413,406
5,994,915

208,763
54,024
2,573

198,135
52,182-

1,731,755
448,146
21,344

10,894276,254

11,466
261,783

90,3692,291,614

Minority interests

6,279

5,736

52,086

Shareholders’ equity (Note 6):
Common stock of ¥50 par value :Authorized—3,360,000,000 shares
Issued—1,390,595,964 shares
Capital surplus

81,427
24,68281,427
24,682

675,462204,745

93,528
199,637¥1,204,857

102,931
209,040¥1,222,906

775,844
1,656,051$9,994,666

Other current liabilities
Total current liabilities

Long-term liabilities:
Long-term debt, less current portion (Note 5)
Retirement and severance benefits
Deferred tax liabilities (Note 8)
Other
Total long-term liabilities

Contingent liabilities (Note 10)

Retained earnings
Total shareholders’ equity
Total liabilities and shareholders’ equity

31Consolidated Statements of Operations
Kawasaki Heavy Industries, Ltd. and consolidated subsidiaries
For the three years ended March 31, 1999, 1998 and 1997

Thousands of
U.S. dollars (Note 1)

Millions of yen

32

Net sales
Cost of sales
Gross profit
Selling, general and administrative expenses
Operating income
Other income (expenses):
Interest and dividend income
Interest expense
Other, net (Note 7)
Income (loss) before income taxes and minority
interests and other1999¥1,202,189
1,045,143
157,046
135,380
21,666

1998¥1,297,212
1,114,693
182,519
131,440
51,0791997¥1,224,259
1,041,697
182,562
120,351
62,211

1999$9,972,534
8,669,788
1,302,746
1,123,020
179,726

5,495(12,646)(15,723)

5,122(11,907)(3,815)

5,424(12,578)(5,148)45,583(104,903)(130,427)(1,208)40,47949,909(10,021)(9,358)
2,943(22,618)-(27,128)-(77,627)
24,413

808

(541)

(529)

6,702

Income taxes (Note 8)
Current
Deferred
Minority interests in net (income) loss of
consolidated subsidiaries
Equity in income of unconsolidated
subsidiaries and affiliates
Net income (loss)¥

683(6,132)¥

1,236
18,556¥

320
22,572Yen

Per share amounts (Note 2 (u)):
Net income (loss)
Net income—diluted
Cash dividends¥(4.4)
6.0

The accompanying notes to the consolidated financial statements are an integral part of these statements.

¥13.3
12.0
6.0

$

5,666
(50,867)

U.S. dollars (Note 1)

¥16.4
14.8
7.0

$(0.04)0.05

Consolidated Statements of Shareholders’ Equity
Kawasaki Heavy Industries, Ltd. and consolidated subsidiaries
For the three years ended March 31, 1999, 1998 and 1997

Balance at March 31, 1996
Net income for the year
Adjustment for changes of interests in consolidated subsidiaries
and in affiliates accounted for by the equity method
Increase in retained earnings arising froma newly consolidated subsidiary
Cash dividends
Bonuses to directors and statutory auditors
Issue of new shares
Conversion of convertible bonds
Balance at March 31, 1997
Net income for the year
Adjustment for changes of interests inconsolidated subsidiaries
Increase in retained earnings arising fromnewly consolidated subsidiaries
Decrease in retained earnings arising fromaffiliates newly accounted for by the equity method
Cash dividends
Bonuses to directors and statutory auditors
Conversion of convertible bonds
Balance at March 31, 1998
Net loss for the year
Cumulative effect of adopting tax effect accounting
Increase in retained earnings arising from affiliates
newly accounted for by the equity method
Merger of unconsolidated subsidiaries with consolidated subsidiary
Adjustment for changes of interests in affiliates accounted forby the equity method
Cash dividends
Bonuses to directors and statutory auditors
Balance at March 31, 1999

Thousands
Number ofshares ofcommon stock

Millions of yen
Commonstock

CapitalsurplusRetainedearnings

1,350,038-¥ 71,108-¥14,375-¥ 77,502
22,572

-

-

-

22

30,0009,085
1,389,123
-

7,890
2,090
81,088
-

7,890
2,080
24,345-57(8,211)(214)
91,72818,556

-

-

-

23

-

-

-

2,727

1,473
1,390,596-

339
81,427-337
24,682-(83)(9,728)(292)
102,931(6,132)
5,652

-

-

-

65
24

1,390,596¥ 81,427¥24,682(406)(8,344)(262)¥ 93,528

Thousands of U.S. dollars (Note 1)

Balance at March 31, 1998
Net loss for the year
Cumulative effect of adopting tax effect accounting
Increase in retained earnings arising from affiliates
newly accounted for by the equity method
Merger of unconsolidated subsidiaries with consolidated subsidiary
Adjustment for changes of interests in affiliates accounted forby the equity method
Cash dividends
Bonuses to directors and statutory auditors
Balance at March 31, 1999
The accompanying notes to the consolidated financial statements are an integral part of these statements.

$675,462-$204,745-$853,845(50,867)
46,885

-

-

539
199

$675,462$204,745(3,368)(69,216)(2,173)$775,844

33

Consolidated Statements of Cash Flows
Kawasaki Heavy Industries, Ltd. and consolidated subsidiaries
For the three years ended March 31, 1999, 1998 and 1997

Thousands of
U.S. dollars (Note 1)

Millions of yen

34

Cash flows from operating activities:
Net income (loss)
Adjustments to reconcile net income (loss) to net cash provided byoperating activities:
Depreciation and amortization
Provision for retirement and severance benefits(Gain) loss on disposal of property, plant and equipment
Provision for allowance for doubtful receivables
Minority interests in net income (loss) of consolidated subsidiaries
Equity in undistributed earnings of unconsolidated subsidiaries and affiliates
Provision for estimated loss on uncompleted contract(Gain) loss on sale of marketable securities and investments in securities
Deferred income taxes
Changes in assets and liabilities:
Decrease (increase) in
Receivables
Inventories
Other current assets
Increase (decrease) inPayablesAdvances received
Accrued income taxes
Other liabilities
Other, net
Net cash provided by operating activities
Cash flows from investing activities:
Acquisition of property, plant and equipment
Proceeds from sale of property, plant and equipment
Decrease (increase) in marketable securities
Increase in intangible and other investments
Proceeds from sales and redemption of investments in securities
Additions to investments in securities
Payments received on long-term loans receivable
Additions to long-term loans receivable
Other
Net cash used for investing activities

1999

1998

1997

1999

¥ (6,132)¥ 18,556¥ 22,572$ (50,867)

34,607
1,842
1,382
876
(808)
(370)
5,784
1,077
(2,943)32,416
1,667
993
352
541
(838)
2,694
(799)
-

31,245
1,866(1,064)
507
529
(390)
(442)
-

287,076
15,28011,464
7,267(6,702)(3,069)47,980
8,934(24,413)

5,127
3,471
2,537

(18,951)
88,306
3,342(48,209)
1,805(2,438)42,53028,79321,045(5,346)(16,294)(8,534)
3,164
772(37,464)(48,065)(4,379)
3,908
1,378

19,999(21,745)
6,049
3,608
2,335

44,347135,164(70,792)
26,246
6,404

20,21243,657

16,227

167,665(40,428)1,333(50)(2,453)73(1,544)
1,215
(406)
(292)

(42,928)
325
835
(406)
1,088
(3,266)
930
(404)
23

(35,130)
3,644(3,125)(230)
485(5,734)
861
(673)
65

(335,363)
11,058(415)(20,349)606(12,808)
10,079(3,368)(2,422)(42,552)(43,803)(39,837)(352,982)

Cash flows from financing activities:
Proceeds from long-term debt
Proceeds from issuance of common stock
Repayment of long-term debt
Cash dividends paid
Cash dividends paid to minority interests
Decrease in short-term borrowings
Net cash provided by (used for) financing activities
Effect of exchange rate changes
Net decrease in cash on hand and in banks
Cash on hand and in banks at beginning of year
Cash on hand and in banks at end of year

54,894(37,681)(8,310)(62)(6,514)
2,327(946)(20,959)
76,265¥55,306

37,796(36,287)(9,694)(522)(10,528)(19,235)(971)(20,352)
96,617¥ 76,265

43,902
15,780(28,182)(8,207)(138)(5,821)
17,3342,759(3,517)100,134¥ 96,617

455,363(312,576)(68,934)(514)(54,036)
19,303(7,847)(173,861)
632,642$458,781

Supplemental information on cash flows:
Cash paid during the year forInterest
Income taxes
Convertible bonds converted into common stock¥12,380
17,181-¥12,617
27,048676¥ 12,224
21,1294,170$102,696
142,522-

The accompanying notes to the consolidated financial statements are an integral part of these statements.

Notes to the Consolidated Financial Statements

1. Basis of presenting consolidated financial statements
Kawasaki Heavy Industries, Ltd. (the “Company”) and its consolidated
domestic subsidiaries maintain their accounts and records inaccordance with the provisions set forth in the Japanese Commercial
Code and the Securities and Exchange Law and in conformity withaccounting principles and practices generally accepted in Japan, which
are different from the accounting and disclosure requirements ofInternational Accounting Standards. The accounts of overseas
consolidated subsidiaries are based on their accounting records
maintained in conformity with generally accepted accounting principles
and practices prevailing in the respective countries of domicile.
The accompanying consolidated financial statements are atranslation of the audited consolidated financial statements of theCompany which were prepared in accordance with accounting
principles and practices generally accepted in Japan from the accounts
and records maintained by the Company and its consolidated
subsidiaries and were filed with the Minister of Finance (“MOF”) as

2. Significant accounting policies(a) Consolidation
The consolidated financial statements include the accounts of theCompany and 6 5 (6 2 in 1 9 9 8 and 5 1 in 1 9 9 7) majority-owned
subsidiaries.
For the years ended March 31, 1999, 1998 and 1997, respectively,
58, 59 and 72 subsidiaries are excluded from the consolidation. The
amounts of total assets, net sales, net income and retained earningsof these excluded subsidiaries, in the aggregate, would not have had
a material effect on the consolidated financial statements.
(b) Application of the equity method of accounting
For the years ended March 31, 1999 and 1998, 12 (3 unconsolidated
subsidiaries and 15 affiliates in 1997) affiliates (20 percent to 50
percent owned) are accounted for by the equity method.
For the years ended March 31, 1999, 1998 and 1997, investments
in 58, 59 and 6 9 unconsolidated subsidiaries and 22, 23 and 2 2affiliates, respectively, are stated at cost without applying the equity
method of accounting. If the equity method had been applied forthese investments, the amounts of net income and retained earningsof these excluded subsidiaries and affiliates would not have had amaterial effect on the consolidated financial statements.
(c) Consolidated subsidiaries’ fiscal year-ends
Fiscal year-ends of 2 0 (1 7 in 1 9 9 8 and 1 9 in 1 9 9 7) consolidated
subsidiaries end on December 31. The Company consolidates such
subsidiaries’ financial statements as of each subsidiary’s latest year-end.
Unusual significant transactions for the period between each subsidiary’s
year-end and the Company’s year-end are adjusted on consolidation.

required by the Securities and Exchange Law.
In preparing the accompanying consolidated financial statements,
certain reclassifications have been made in the consolidated financial
statements issued domestically in order to present them in a form
which is more familiar to readers outside Japan. The consolidated
statements of cash flows have been prepared for the purpose ofinclusion in the consolidated financial statements, although suchstatements are not customarily prepared in Japan and are not required
to be filed with MOF.
The translation of the Japanese yen amounts into U.S. dollars areincluded solely for the convenience of the reader, using the prevailingexchange rate at March 31, 1999, which was ¥120.55 to U.S. $1.00.
Th e convenience t ra nslations s ho uld no t be construed as
representations that the Japanese yen amounts have been, could havebeen, or could in the future be, converted into U.S. dollars at this or
any other rate of exchange.

(d) Elimination of inter-company transactions and accounts
All significant inter-co mp any transacti ons a nd a ccounts andunrealized inter-company profits are eliminated on consolidation, andthe portion thereof attributable to minority interests is credited tominority interests.
When the excess of equity in net assets over the cost of aninvestment is considered significant, it is amortized to income by thestraight-line method over five years. Otherwise, it is credited directly
to retained earnings in the year of acquisition or the year newly
included in consolidation.
(e) Translation of foreign currency statements
The financial statements of the overseas consolidated subsidiaries aretranslated into yen as stated below, in accordance with a regulation
issued by the Financial Accounting Deliberation Council.
(1) Assets and liabilities are translated at the fiscal year-end
exchange rates.
(2) Share capital accounts and retained earnings are translated athistorical rates.
(3) Revenue and expense accounts are translated at average rates
prevailing during the fiscal year.
Differences arising from the application of the process stated above
are shown as foreign currency translation adjustments in theaccompanying consolidated balance sheet.

35

36

(f) Appropriations of retained earnings
Appropriations of retained earnings are recorded in the fiscal year
when the proposed appropriations are approved.

(n) Intangible assets
Amortization of intangible assets is computed by the straight-line
method.

(g) Revenue recognition
Sales are principally recognized at the time of completion of thecontracts. However, the percentage-of-completion method is applied
to long-term contracts exceeding ¥5,000 million.
Effective April 1, 1997, the method of accounting for revenue fromlong term construction contracts was changed from the completedcontract method to the percentage-of-completion method for longterm contracts exceeding ¥5,000 million.
Und er the pre vi ous completed-co ntract method, sales o fmaterials and equipment for plant construction projects, contract
prices of which exceeded ¥10,000 million, were recognized at thetime of shipment.
The application of the percentage-of-completion method to thesecontracts improves the quality of financial disclosures and more fairly
presents the results of operations. As a result of this change, net
sales, operating income and income before income taxes, minority
interests and other for the year ended March 31, 1998 increased¥79,590 million, ¥15,203 million and ¥15,203 million respectively,
compared with the amounts which would have been recognized if theformer method had been applied consistently.

(o) Research and development expenses
Research and development expenses are charged to income as
incurred.

(h) Cash on hand and in banks
Cash on hand and in banks includes time deposits maturing within
one year.
(i) Allowance for doubtful receivables
Possible losses from notes and accounts receivable, loans and otherreceivables are provided for based on relevant income tax laws andthe Companies’ estimates of losses on collection.
(j) Inventories
Inventories are stated at cost, as determined principally by the
specific identification cost method, the first-in, first-out method or themoving-average method.
(k) Marketable securities
Marketable securities are stated principally at cost, as determined by
the moving-average method. When significant impairment of value
has been deemed permanent, cost has been appropriately reduced.
(l) Investments in securities
Investments in securities are stated at cost, as determined by themoving-average method, except for those accounted for by the equity
method as explained in Note 2 (b). When significant impairment ofvalue has been deemed permanent, cost has been appropriately
reduced.
(m) Property, plant and equipment
Property, plant and equipment are stated at cost. Depreciation is computed
principally by the declining-balance method over estimated useful lives.

(p) Bond issue expenses
Bond issue expenses are charged to income as incurred.
(q) Foreign currency translation
Foreig n currency accounts of the C ompany a nd it s domestic
subsidiaries are translated into yen as stated below, in accordance witha regulation issued by the Financial Accounting Deliberation Council.
(1) Foreign currencies and short-term monetary accounts aretranslated at the rates of exchange prevailing at the balance sheet
date. The resulting translation gain or loss is included in thedetermination of net income for the year.
(2) Long-term monetary accounts and non-monetary accounts aretranslated at historical exchange rates prevailing at the time oftransactions.
(3) Monetary accounts which are hedged by forward exchange
contracts are translated into yen at the contracted rates of
exchange.
Notes denominated in foreign currencies and hedged by longterm forward exchange contracts are translated at the contracted
exchange rates. The exchange gain on the transaction is deferred andamortized to income over the period from the date of the contract tothe date of settlement.
If long-term monetary items were translated at exchange rates in
effect at March 31, 1999, net translation losses of ¥4 5 8 m i l l i o n($3,799 thousand) would have been recorded.
(r) Income taxes
Income taxes were principally provided for based on taxable income
for the period, determined in accordance with applicable tax laws, forthe years ended March 31, 1998 and 1997. Effective April 1, 1998, theCompany adopted the new accounting standard, which recognizes tax
effects of temporary differences between the carrying amounts ofassets and liabilities for tax and financial reporting.
Under the new accounting standard, the asset and liability
approach is used to recognize deferred tax assets and liabilities forthe expected future tax consequences of temporary differences
between the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for income tax purposes.
The amount of deferred income taxes attributable to the net tax
effects of the temporary differences at April 1, 1998 is reflected as an
adjustment to the retained earnings brought forward from the previous
year. Prior year’s financial statements have not been restated. The
cumulative effect of adopting the new accounting standard is ¥5,652
million and the effect for the year ended March 31, 1999 was todecrease net loss by ¥2,741 million.

(s) Retirement and severance benefits
Employees who terminate their services with the Company and its
domestic consolidated subsidiaries are generally entitled to lumpsum payments, the amounts of which are determined by reference totheir current basic rates of pay and length of service. The Company
and its domestic consolidated subsidiaries provide for 40 percent of
the amount which would be required to be paid if all eligible employees
voluntarily terminated their services at the balance sheet date.
Employees of the Company’s overseas consolidated subsidiaries are
generally covered by various pension plans, accounted for in accordancewith generally accepted accounting principles in the country ofincorporation.
In addition, the Company and some of its domestic consolidated
subsidiaries provide for retirement and severance benefits for directors andstatutory auditors principally at 50 percent of the amount required if they
retired at the balance sheet date.

(t) Finance leases
For the Company and its domestic consolidated subsidiaries, financeleases which do not transfer ownership and do not have bargain purchaseprovisions are accounted for in the same manner as operating leases inaccordance with generally accepted accounting principles in Japan.
(u) Per share amounts of net income (loss) and cash dividends
The computations of per share amounts of net income (loss) shown in the
consolidated statements of operations are based upon the weighted
average number of issued shares outstanding during each period. Diluted
income per share, is computed based on the assumption that all diluted
convertible bonds were converted at the beginning of year.
Per share amounts of cash dividends for each period represent dividends
declared as applicable to the respective year.
(v) Reclassifications
Certain prior year amounts have been reclassified to conform to 1999
presentation. These changes had no impact on previously reported results ofoperations or shareholders’ equity.

3. Market value information for securities - the Company only
Market values, book values and unrealized gains of quoted securities as of March 31, 1999 and 1998 are as follows:
Millions of yen

Market values:
Marketable securities
Investments in securities:
Subsidiaries and affiliates
Other
Book values (unconsolidated basis):Marketable securities
Investments in securities:
Subsidiaries and affiliates
Other
Unrealized gains (unconsolidated basis)Thousands of
U.S. dollars

1999

1998

1999

¥75,488¥81,360$626,197

17,870157
93,51514,802201
96,363

148,237
1,302
775,736

47,03847,511

390,195

6,517
104
53,659¥ 39,856

6,517
104
54,132¥42,23154,061
863
445,119$330,617

4. Inventories
Inventories as of March 31, 1999 and 1998 are comprised as follows:
Millions of yen

Finished products
Work in process
Raw materials and supplies
Total

1999
¥ 37,950
268,027
41,788¥347,765

1998¥ 34,788
275,272
41,176¥351,236

Thousands of
U.S. dollars

1999$ 314,807
2,223,368
346,645$2,884,820

37

5. Short-term borrowings and long-term debt
Short-term borrowings and long-term debt as of March 31, 1999 and 1998 are comprised as follows:
Millions of yen

38

Short-term borrowings:
Short-term debt, principally bank loans and commercial paper
Current portion of long-term debt
Total short-term debt
Long-term debt:
Loans from banks and other financial institutions, partly securedby mortgage or other collateral, due from 1999 to 2032, bearing interest
ranging from 0.694 percent to 7.5 percent and from 1.05 percent
to 8.125 percent as of March 31, 1999 and 1998, respectively
6.15 percent notes due 1999
2.10 percent notes due 1999
2.50 percent notes due 2000
2.55 percent notes due 2001
2.00 percent notes due 2003
2.775 percent notes due 2008
1.94 percent notes due 2004
2.51 percent notes due 2008
0.50 percent convertible bonds due 1998
0.80 percent convertible bonds due 2001
0.90 percent convertible bonds due 2003
1.10 percent convertible bonds due 2006
0.65 percent convertible bonds due 2003
0.75 percent convertible bonds due 2005
0.90 percent convertible bonds due 2008
1.00 percent convertible bonds due 2011
Less portion due within one year
Total long-term debt

Thousands of
U.S. dollars

1999

1998

1999

¥ 198,093
40,172¥ 238,265¥204,814
34,438¥239,252$1,643,243
333,239$1,976,482¥ 82,601
15,00010,00010,00010,00010,00010,00020,00010,0008,573
9,105
17,118
9,974
9,609
8,977

¥ 76,304
15,00010,00010,00010,00010,00010,00017,9608,573
9,105
17,118
9,974
9,642
9,812

$ 685,202
124,430
82,953
82,953
82,953
82,953
82,953
165,906
82,953
71,11675,529141,999
82,73779,71074,467

7,978
248,935(40,172)¥208,763

9,085
232,573(34,438)¥198,135

66,1802,064,994(333,239)$1,731,755

The convertible bonds due 2001 through 2011 as of March 31, 1999 were convertible into 136,908,609 shares of common stock at the optionof the holders at a price of ¥459 ($3.81) or ¥598 ($4.96) per share. The conversion prices are subject to adjustments under specified conditions.
As of March 31, 1999 and 1998, the following assets were pledged as collateral for short-term borrowing and long-term debt:
Millions of yen

Time deposits
Marketable securities
Trade receivables
Inventories
Property, plant and equipment (at net book value)
Total

1999
63
180
5,091
11,517¥16,851
¥

1998
¥ 157
20,526
3,773
12,439¥36,895

Thousands of
U.S. dollars

1999
523
1,493
42,231
95,537$139,784$

The aggregate annual maturities of long-term debt as of March 31, 1999 are as follows:
Years ending March 31

Millions of yen

Thousands of
U.S. dollars

2000
2001
2002
2003
2004 and thereafter
Total¥ 40,17233,31325,364
16,591
133,495¥248,935$ 333,239
276,342
210,402137,628
1,107,383$2,064,994

6. Shareholders’ equity(a) Capital surplus
The Commercial Code of Japan provides that the entire issue price of
new shares must be credited to common stock, provided that, byresolution of the Board of Directors, up to one-half of such issue price
may be credited to capital surplus so long as the common stock isequal to at least the aggregate par value of the shares issued.
(b) Legal reserve
In accordance with the new disclosure requirements effective fromthe year ended March 31, 1999, legal reserve is included in retained
earnings for 1 9 9 9. Previously it was presented as a separate
co mp onent of the sto ckho ld ers’ eq uity. The acco mp anyi ng
consolidated financial statements for the years ended March 31, 1997
and 1998 have been reclassified to conform to the 1999 presentation.

(c) Dividends
The maximum amount that the Company can distribute as dividends
is calculated based on the unconsolidated financial statements of theCompany in accordance with the Commercial Code of Japan.
(d) Restrictions on dividends
Under the terms of indentures for certain notes and convertible bonds
due through 2 0 0 6, cumulative cash dividends payments by theCompany are not to exceed an amount equivalent to accumulated net
income of the Company earned during the years such securities areoutstanding plus ¥10,000 million (for certain indentures ¥10,100
million).

7. Other income (expenses): other, net
Other income (expenses): other, net in the consolidated statements of operations is comprised as follows:
Thousands of
U.S. dollars

Millions of yen

Gain (loss) on disposal of property, plant and equipment
Gain (loss) on sales of marketable securities and investments in securities
Foreign exchange gain (loss), net
Other, net
Total

1999
¥ (1,382)(1,077)(11,411)(1,853)¥ (15,723)

1998¥ (993)799(1,654)(1,967)¥ (3,815)1997¥ 1,064442(1,971)(4,683)¥ (5,148)

1999$ (11,464)(8,934)(94,658)(15,371)$(130,427)

39

8. Income taxes
Income taxes in Japan applicable to the Company and its domestic consolidated subsidiaries consist of corporation tax (national tax) andenterprise tax and inhabitants taxes (local taxes) which, in the aggregate, result in normal statutory tax rate of approximately 47.5 percent for
the year ended March 31, 1999 and 50 percent for prior year.
The following table summarizes the significant differences between the statutory tax rate and effective tax rate in the consolidated financial
statements for the year ended March 31, 1999:

40

Statutory tax rate
Current operating losses of subsidiaries
Non-deductible expenses
Effect of tax rate change

47.5 %
494.2
137.8
70.9

Other

(124.3)578.6(531.1)%

Effective tax rateSignificant components of deferred tax assets and liabilities as of March 31, 1999 are as follows:
Millions of yen

Thousands of
U.S. dollars

Deferred tax assets
Excess bonuses accrued
Retirement benefits
Estimated loss on uncompleted contracts
Inventory - intercompany profits
Fixed assets - intercompany profits
Accrued enterprise tax
Net operating loss carryforwards
Other
Gross deferred tax assets
Less - valuation allowances
Total deferred tax assets¥ 1,471
2,684
3,692
2,563
1,127
1,020
3,262
6,197
22,016(7,193)
14,823$ 12,202
22,26530,626
21,261
9,349
8,461
27,05951,406
182,629(59,668)
122,961

Deferred tax liabilities
Deferral of gain on sale of fixed assets
Unrealized gain on uncompleted contracts
Other
Total deferred tax liabilities

2,028
7,565
4,502
14,095

16,82362,75437,345
116,922

728

6,039

Net deferred tax assets

9. Account balances with unconsolidated subsidiaries and affiliates
Account balances with unconsolidated subsidiaries and affiliates as of March 31, 1999 and 1998 are as follows:
Thousands of
U.S. dollars

Millions of yen

Investments in securities and other investments

1999¥ 24,570

1998¥24,354

1999$203,816

10. Contingent liabilities
Contingent liabilities as of March 31, 1999 and 1998 are as follows:
Thousands of
U.S. dollars

Millions of yen

As a drawer of trade notes discounted
As an endorser of trade notes
As a guarantor of indebtedness of employees, unconsolidated subsidiaries
and affiliates, and others

1999
¥ 721
60

1998
¥ 307
24

1999
$ 5,981498

46,64747,058386,951

11. Finance leases
Finance lease information, as required to be disclosed in Japan, for the respective years is as follows:(a) As lessee
The original cost of leased assets under non-capitalized finance leases and accumulated depreciation, assuming it is calculated on the straightline method over lease terms, as of March 31, 1999 is as follows:
Thousands of
U.S. dollars

Millions of yen

Property, plant and equipment
Accumulated depreciation¥ 13,582(6,309)¥ 7,273$112,667(52,335)$ 60,332

Intangible assets
Accumulated amortization

¥

$

438
(240)
198

¥

3,633
(1,991)$ 1,642

The present values of future minimum lease payments under non-capitalized finance leases as of March 31, 1999 and 1998 are as follows:
Millions of yen

Current portion
Non-current portion
Total

1999
¥ 2,654
5,006¥ 7,660

1998¥2,5404,880¥7,420Thousands of
U.S. dollars

1999$22,016
41,526$63,542

Lease payments and “as if capitalized” depreciation and amortization and interest expense for non-capitalized finance leases are as follows:
Millions of yen

Lease payments
Depreciation and amortization
Interest

1999¥ 3,094
3,058
277

1998
¥3,419-Thousands of
U.S. dollars

1999$25,666
25,3672,298

41

(b) As lessor
The original cost of leased assets under finance leases and accumulated depreciation, as of March 31, 1999 is as follows:

Property, plant and equipment
Accumulated depreciation

Millions of yen

Thousands of
U.S. dollars¥ 2,069(1,025)¥1,044$17,163(8,503)$ 8,660

The present values of future minimum lease payments to be received under finance leases as of March 31, 1999 are as follows:
Millions of yen

42

Current portion
Non-current portion
Total

1999
¥ 288
811
¥1,099

1998
¥ 249
656
¥ 905

Thousands of
U.S. dollars

1999$2,3896,728$9,117

Lease payments received on finance leases for the years ended March 31, 1999 and 1998, depreciation and amortization and interest on financeleases for the year ended March 31, 1999 are as follows:
Thousands of
U.S. dollars

Millions of yen

Lease payments received
Depreciation and amortization
Interest

1999
¥ 325
276
50

1998
¥ 334
-

1999
$ 2,6962,290
415

12. Operating leases
The present value of future minimum lease payments under operating leases as of March 31, 1999 and 1998 is as follows:
Millions of yen

Current portion
Non-current portion
Total

13. Derivative transactions - the Company only
Since the Company operates internationally and has a substantial
volume of export and import transactions, it enters into foreign
currency exchange and option transactions in order to manage risk offluctuations in exchange rates in relation to foreign currency
denominated assets and liabilities.
The Co mpa ny also en ters into i nter est s wap a nd o ptio ntransactions to hedge against future fluctuations in interest rates onborrowings, primarily to fix, cap or collar interest rates on variable
rate debt.

1999
¥ 302
517
¥ 819

1998
¥ 306
965
¥1,271Thousands of
U.S. dollars

1999$ 2,505
4,289$ 6,794

The Company’s purpose for purchasing derivatives is to hedge
against risks of fluctuations in currency exchange rates and interest
rates rather to than be exposed to such risks through dealing or
speculation. In order to minimize credit risk, the Company uses only
highly-rated international financial institutions as counterparty toderivative transactions.
The Company has established policies that restrict the use ofderivative instruments, including limits as to the purpose, nature,
type and amount, and that require reporting and review in order tocontrol the use of derivatives and manage risk.

Outstanding positions and unrealized gains and losses at March 31, 1999 and 1998 are as follows:
Thousandsof U.S. dollars

Millions of yen

1999
Contract
amountCurrency related contracts:
Foreign exchange contracts
Sell
U.S. dollars
Other currencies
Purchase U.S. dollars
Swiss Francs
German Marks
Other currencies
Option contracts
Sell options
Call
U.S. dollars
Purchase options
Put
U.S. dollars
TotalInterest rate related contracts:
Option contracts
Cap
Purchase
CollarPurchase
Swap contracts
Receive fixed for variable rates
Receive variable for fixed rates
Total¥ 1,257
27
1,318
2,839
373
666

1998
Unrealized
gain (loss)

¥

¥

1999

Contract
amountUnrealized
gain (loss)

Unrealized
gain (loss)

3
68
(155)
(1)
1

¥10,984
1,255
1,676
185
2,003
-

¥ (779)
(26)
76
14
102
-

$

-

1,796

(196)

(84)

1,796

(13)
¥ (822)$$¥43,000¥(60)¥60,000
50,000¥3,000
74,00066(1,856)¥ (1,850)

3,000
55,000170(1,500)¥(1,352)

14. Segment information
Industry segments of the Company and its consolidated subsidiaries
are classified into Transportation equipment, Aerospace, Industrial
equipment and Other.
The Transportation equipment segment manufactures and sells
ships, rolling stock and consumer products such as motorcycles.
Operations within the Aerospace segment include the production andsale of airplanes, helicopters and airplane engines. Products
manufactured and sold by the Industrial equipment segment include
boilers, prime movers, gas turbines, hydraulic, crushing, construction

(28)
6

25
564
(1,286)
(8)
8

(697)

(498)

548
(15,396)$(15,346)

and factory automation machines, chemical and steel making plants,
steel bridges and hospital respiration equipment. Operations in the
Other segment involve trade, mediation of overseas sales and orders
and other activities.
For the purpose of industry segment classification, gas turbine
generator systems, hydraulic and construction machinery, which are
under the Consumer Products and Machinery product group in the
Company’s organizational structure, are included in the Industrial
equipment segment.

43

(a) Information by industry segment
Millions of yen

1999
External
sales

Transportation equipment
AerospaceIndustrial equipment
Other
Total
Eliminations and corporate
Consolidated total¥ 454,061
228,618
436,030
83,4801,202,189¥ 1,202,189

Intersegment
sales

Total
sales

Operatingexpenses

OperatingincomeTotal
assets¥6,960 ¥ 461,021 ¥ 460,481 ¥ 540 ¥ 369,719
6,152
234,770
216,392
18,378227,397
53,178489,208
488,522686
434,453
44,138
127,618
125,461
2,157
192,349
110,428
1,312,617
1,290,856
21,761
1,223,918(110,428)(110,428)(110,333)
95(19,061)¥- ¥ 1,202,189 ¥ 1,180,523 ¥ 21,666 ¥ 1,204,857

Depreciation
and amortization

Capitalexpenditures¥13,584
4,602
11,312
5,134
34,632(25)¥ 34,607¥ 21,263
4,596
8,239
8,046
42,144(1)¥ 42,143

Depreciation
and amortization

Capitalexpenditures¥12,347
4,695
10,592
4,810
32,444(28)¥ 32,416¥ 13,613
3,823
9,787
7,830
35,053(23)¥ 35,030

Millions of yen

44

1998
External
sales

Transportation equipment
AerospaceIndustrial equipment
Other
Total
Eliminations and corporate
Consolidated total¥ 472,525
255,328
485,353
84,006
1,297,212¥1,297,212

Intersegment
sales

Total
sales

Operatingexpenses

OperatingincomeTotal
assets¥5,318 ¥ 477,843 ¥ 466,977 ¥ 10,866 ¥ 362,189
6,173
261,501
240,962
20,539218,618
53,608538,961
521,358
17,603444,083
43,341
127,347
125,346
2,001
196,322
108,440
1,405,652
1,354,643
51,0091,221,212(108,440)(108,440)(108,510)
70
1,694
¥
- ¥1,297,212 ¥1,246,133 ¥ 51,079 ¥ 1,222,906

The effects of the accounting change for long-term contracts, as explained in Note 2 (g), for the year ended March 31, 1998 are
included above in the following amounts:

Transportation equipment
Industrial equipment
Total

External
sales

Millions of yen
Total
sales

Operatingincome¥ 54,037
25,553¥ 79,590¥54,037
25,553¥79,590¥10,087
5,116¥15,203
Millions of yen

1997
External
sales

Transportation equipment
AerospaceIndustrial equipment
Other
Total
Eliminations and corporate
Consolidated total¥ 407,977
194,973
541,030
80,2791,224,259¥1,224,259

Intersegment
sales

Total
sales

Operatingexpenses

Depreciation
and amortization

Capitalexpenditures¥12,088
4,775
9,984
4,429
31,276(31)¥31,245¥ 15,093
3,784
13,2884,836
37,001(9)¥ 36,992

Depreciation
and amortization

Capitalexpenditures$ 57,735 $3,824,313 $ 3,819,834 $ 4,479 $ 3,066,935 $ 112,684
51,033
1,947,491
1,795,040 152,451
1,886,329
38,175441,128
4,058,133
4,052,443
5,690
3,603,924
93,836366,139
1,058,632
1,040,738
17,894
1,595,595
42,588916,035
10,888,569 10,708,055 180,514 10,152,783
287,283(916,035)(916,035)(915,247)(788)(158,117)(207)$- $9,972,534 $ 9,792,808 $179,726 $ 9,994,666 $287,076$176,383
38,12568,34566,744
349,597(8)$349,589¥

Operatingincome4,599 ¥ 412,576 ¥ 396,967
5,951
200,924
185,308
44,694
585,724556,760
38,745
119,024
117,045
93,9891,318,248
1,256,080(93,989)(93,989)(94,032)¥- ¥1,224,259 ¥1,162,048

Total
assets¥15,609 ¥ 360,894
15,616
246,440
28,964
476,867
1,979
184,143
62,1681,268,344
43
34,824¥62,211 ¥1,303,168

Thousands of U.S. dollars

1999
External
sales

Transportation equipment
AerospaceIndustrial equipment
Other
Total
Eliminations and corporate
Consolidated total$ 3,766,578
1,896,458
3,617,005
692,493
9,972,534$ 9,972,534

Intersegment
sales

Total
sales

Operatingexpenses

OperatingincomeTotal
assets(b) Information by geographic area
Segment information by geographic area, as required to be disclosed in Japan, for the respective years is as follows:
Millions of yen

1999
External
sales

Japan
North America
EuropeAsia
Other Areas
Total
Eliminations and corporate
Consolidated total¥ 982,857
155,635
46,287
12,8814,529
1,202,189¥ 1,202,189

Intersegment
sales

Total
sales

Operatingexpenses

OperatingincomeTotal
assets¥ 154,699 ¥ 1,137,556 ¥ 1,110,276 ¥ 27,280 ¥ 1,106,765
11,869167,504
172,780(5,276)112,105
6,252
52,53951,224
1,315
25,7362,855
15,736
16,611(875)
17,036
4,529
4,482
47
1,777
175,675
1,377,864
1,355,373
22,491
1,263,419(175,675)(175,675)(174,850)(825)(58,562)¥- ¥ 1,202,189 ¥ 1,180,523 ¥ 21,666 ¥ 1,204,857

45
Millions of yen

1998
External
sales

Japan
North America
EuropeAsia
Other Areas
Total
Eliminations and corporate
Consolidated total¥ 1,105,123
127,61336,922
23,056
4,498
1,297,212¥ 1,297,212

Intersegment
sales

Total
sales

Operatingexpenses

OperatingincomeTotal
assets¥ 125,662 ¥ 1,230,785 ¥ 1,183,543 ¥ 47,242 ¥ 1,096,854
9,830
137,443
136,519924
120,853
6,194
43,116
41,8101,306
20,830682
23,73821,398
2,340
5,987
4,498
4,353
145
1,669
142,368
1,439,580
1,387,623
51,957
1,246,193(142,368)(142,368)(141,490)(878)(23,287)¥- ¥ 1,297,212 ¥ 1,246,133 ¥ 51,079 ¥ 1,222,906

The effects of the accounting change for long-term contracts, as explained in Note 2 (g), for the year ended
March 31, 1998 are included above in the following amounts:

Japan
Total

External
sales

Millions of yen
Total
sales

Operatingincome¥79,590¥79,590¥79,590¥79,590¥ 15,203¥ 15,203
Millions of yen

1997
Japan
Overseas Areas
Total
Eliminations and corporate
Consolidated total

External
sales

Intersegment
sales

Total
sales

Operatingexpenses¥1,059,821
164,438
1,224,259¥1,224,259¥ 110,163
11,351
121,514(121,514)¥-¥1,169,984
175,789
1,345,773(121,514)¥1,224,259

OperatingincomeTotal
assets¥1,109,940 ¥60,044 ¥1,157,328
171,455
4,334
131,054
1,281,395
64,3781,288,382(119,347)(2,167)
14,786¥1,162,048 ¥62,211 ¥1,303,168

Thousands of U.S. dollars

1999
External
sales

Japan
North America
EuropeAsia
Other Areas
Total
Eliminations and corporate
Consolidated total

Intersegment
sales

Total
sales

Operatingexpenses

OperatingincomeTotal
assets$8,153,107 $1,283,277 $ 9,436,384 $ 9,210,087 $226,297 $ 9,180,962
1,291,041
98,457
1,389,498
1,433,264 (43,766)
929,946
383,965
51,862435,827424,919
10,908
213,488
106,852
23,683
130,535
137,793(7,258)141,319
37,56937,56937,180389
14,741
9,972,534
1,457,279 11,429,813 11,243,243 186,570 10,480,456- (1,457,279) (1,457,279) (1,450,435)(6,844)(485,790)$9,972,534 $- $ 9,972,534 $ 9,792,808 $179,726 $ 9,994,666

(c) Corporate assets
Included in eliminations and corporate in (a) and (b) above under total assets are corporate assets of ¥34,540 million ($286,520 thousand),¥59,245 million and ¥ 77,896 million at March 31, 1999, 1998 and 1997, respectively, which are mainly comprised of cash and time deposits of
the Company.
(d) Overseas sales
Overseas sales consist of the total sales of the Company and its consolidated subsidiaries made outside of Japan. Overseas sales information, as
required to be disclosed in Japan, for the respective years is as follows:
Millionsof yen%Millionsof yen%Millionsof yenOverseassales% against
net sales

Overseassales% against
net sales¥ 231,159
87,68370,84581,453¥ 471,140

19.2%
7.3%
5.9%
6.8%
39.2%

¥179,235
66,806
99,413
102,599¥448,053

13.8%
5.1%
7.7%
7.9%
34.5%

1999

46
North America
EuropeAsia
Other Areas
Total

%

Thousands of
U.S. dollars

Overseassales% against
net sales

Overseas
sales

¥ N/A
N/A
N/A
N/A
¥401,472

N/A
N/A
N/A
N/A
32.7%

$1,917,536
727,358
587,682
675,678$3,908,254

1998

1997

1999

The effects of the accounting change for long-term contracts, as explained in Note 2 (g), for the year ended March 31, 1998 are included above inthe following amounts:
Millionsof yenIncrease inoverseas sales

North America
Asia
Other Areas
Total¥ 7,244
4,823
10,405¥22,472

15. Subsequent events(a) On June 29, 1999, the following appropriations of retained earnings were approved at the general meeting of shareholders of the Company:

Cash dividends (¥3 per share)
Directors’ and statutory auditors’ bonuses

Millionsof yenThousands of
U.S. dollars¥4,172
110$34,608912(b) On April 28, 1999, the Company issued ¥ 20,000 million notes in Japan due April 30, 2002 and April 28, 2005 in accordance with a resolution
made by the Board of Directors on January 28, 1999.

Report of Independent Public Accountants
To the Shareholders and the Board of Directors of Kawasaki Heavy Industries, Ltd.:We have audited the accompanying consolidated balance sheets of Kawasaki Heavy Industries, Ltd. (a Japanese corporation) andsubsidiaries as of March 31, 1999 and 1998, and the related consolidated statements of operations, shareholders' equity and cash flows
for each of the three years in the period ended March 31, 1999, expressed in Japanese yen. Our audits were made in accordance withgenerally accepted auditing standards in Japan and, accordingly, included such tests of the accounting records and such other auditing
procedures as we considered necessary in the circumstances.

47
In our opinion, the consolidated financial statements referred to above present fairly the consolidated financial position of Kawasaki
Heavy Industries, Ltd. and subsidiaries as of March 31, 1999 and 1998, and the consolidated results of their operations and their cash
flows for each of the three years in the period ended March 31, 1999 in conformity with accounting principles generally accepted in Japan
which, except for the change in the method of accounting for revenue referred to in Note 2 (g), effective April 1, 1997, were applied on aconsistent basis.
Also, in our opinion, the U.S. dollar amounts in the accompanying consolidated financial statements have been translated from Japanese
yen on the basis set forth in Note 1.

Asahi & Co.
(Member Firm of Anderson Worldwide SC)

Kobe, Japan
June 29, 1999

Statement on Accounting Principles and Auditing Standards
This statement is to remind users that accounting principles and auditing standards and their application in practice may vary among
nations and therefore could affect, possibly materially, the reported financial position and results of operations. The accompanying
financial statements are prepared based on accounting principles generally accepted in Japan, and the auditing standards and theirapplication in practice are those generally accepted in Japan. Accordingly, the accompanying financial statements and the auditors' reportpresented above are for users familiar with Japanese accounting principles auditing standards and their application in practice.

Board of Directors

48

Kenjiro Ogata

Shuzo Susei

Yasuhiko Ono

Executive Vice President

Executive Vice President

Executive Vice President

Junji Hayashi

Hiroshi Ohba

Toshio Kamei

Vice Chairman

Chairman and CEO

PresidentChairman and CEO

Hiroshi Ohba *Managing Directors

Tadao Katoh

Tadashi Nishimura

Senior Manager of General Administration
Department

Deputy Senior General Manager of Consumer
Products & Machinery Group

Vice Chairman

Shuichi Tadokoro

Junji Hayashi *Toru Ohmae

President

Deputy Senior General Manager of Consumer
Products & Machinery Group
General Manager of Consumer Products Division

Toshio Kamei *General Manager of Ship Division

Kosuke Sakano
Deputy Senior General Manager of Plant
Engineering Group

Masaru Ohira
Executive Vice Presidents

Senior Manager of Corporate Planning Office

Shuzo Susei *Senior General Manager of Technology Group

Takashi Sugoh
Deputy Senior General Manager of Aerospace Group

Kenjiro Ogata *Overall Administration of Market Development
Department, International Operations Department,
Domestic and Overseas Offices and Plant
Engineering Group

Yasuhiko Ono *Koumei Kawaji
General Manager of Aerospace Division

Hironobu Hashiguchi

Yousuke Fujii
Deputy General Manager of Consumer Products
Division

Deputy Senior General Manager of Technology Group

Corporate Auditors
Directors

Akio Sera

Takehiko Saeki

Toshiaki Tatsuki

Minoru Sakasai

Rokuro Kitayama

Senior General Manager of Ship & Rolling
Stock Group

Takeshi Miyakoshi
General Manager of Plant Sales Division

Executive Managing Directors

Masayuki Yokoyama *Overall Administration of Subsidiary Company
Control Office , Legal Department, Finance
Department and Accounting Department

Masamoto Tazaki *Senior General Manager of Consumer Products &Machinery Group

Kazuo Nishino
Deputy Senior General Manager of Ship & Rolling
Stock Group

Kosaku Kuwata
General Manager of Power Plant Division

Shinzaburo Ani

Hiromichi Takawa *Senior Manager of Public Relations Department

Senior General Manager of Plant Engineering Group

Yoshimasa Tanaka

Yoshiro Inoue *Overall Administration of General Administration
Department, Personnel Department, Labor
Department, Procurement Department andEnvironmental Management Department

Deputy Senior General Manager of Ship & Rolling
Stock Group

Kazuo Mizuno
General Manager of Steel Structure & Industrial
Equipment Division

Shigeji Yamada *Senior General Manager of Machinery & Steel
Structure Group

Toshiaki Ouchida *Senior General Manager of Aerospace Group* Representative Director

Toshio Atsuta
Deputy Senior General Manager of Technology Group

Takuya Maeda
General Manager of Industrial Plant Engineering
Division(As of June 29, 1999)49

Consolidated Subsidiaries
Name

K-GES Co., Ltd.

Paid-In Capital

Equity(Millions of yen,unless otherwise noted)(% ownership by KHI,
unless otherwise noted)

100

100.00Principal Businesses

Domestic wholesale of small gasoline engines(20.00% owned by Kawasaki Motors Corporation Japan)

50

Ishihara Dockyard Co., Ltd.

96

97.11

Manufacture and sale of various ships for
public agency/gov’t use and rescue boats;repair of small-sized ships

Uji Kanko Co., Ltd.

240

100.00Management of a golf course

Kawasaki Helicopter System Ltd.

200

100.00Transportation of passengers or cargo byhelicopter; maintenance and repair ofhelicopters and flight training services;
research, design and construction of heliports

Osaka Power Engineering Co., Ltd.

90

100.00Design, production, installation andconstruction of boilers and refuse
incineration plants; sale of crushingmachinery

Kawasaki Prime Mover Engineering Co., Ltd.

20

100.00Installation, inspection and repair ofprime mover products; importing andsale of air compressors

Kawasaki Motors Corporation Japan560

100.00

Domestic wholesale of motorcycles and
Jet Ski® watercraft

Kawasaki Environmental Plant Engineering Co., Ltd.

30

100.00Operation and maintenance of waste
treatment facilities

Kawaju Yachiyo Engineering Ltd.

30

100.00Installation of crushing machinery andvarious pulverization testing

Kawasaki Hydraulic Co., Ltd.

70

100.00Inspection and repair of hydraulicproducts; manufacture and sale ofcommercial fishing boat machinery

Kawasaki Akashi Engineering Co., Ltd.

60

100.00Design and production of machinery andtools; overhaul of engines and turbines

Kawaju Gifu Engineering Co., Ltd.

70

100.00Design and production of parts andequipment for aircraft; technical testing andassistanceKawasaki Construction Co., Ltd.

300

100.00Installation of steel structures

Kawajyu Steel Works & Engineering Co., Ltd.

80

80.00

Manufacture and installment of steel
structures and bridges(40.00% owned by Kawasaki Construction Co., Ltd.)

Kawasaki Plant Assistance & Service Co., Ltd.

20

100.00

Procurement, packaging and transportationof parts and components for plant
construction

Kawaju Real Estate Co., Ltd.

300

100.00Administration of Company welfare
facilities; real estate sales, leasing andconstruction

Kawasaki Rolling Stock Engineering Co., Ltd.

140

100.00

Manufacture and repair of parts andcomponents for rolling stock; design ofrolling stock

Kawaju Kobe Support Co., Ltd.

50

100.00

Repair and maintenance services for plantand office buildings; construction andprocessing of parts for shipbuilding;security services

Kawasaki Industrial Co., Ltd.

125

98.71

Construction of arcades; manufacture andinspection of high-pressure containers;
maintenance and repair of rolling stock

600

70.00

Trading

1,708

74.06

Manufacture, sale and installation of
hospital respiration, fire-extinguishingand medical equipment

Kawaju Shoji Co., Ltd.
Kawasaki Safety Service Industries, Ltd.

Kawasaki Inspection Service Co., Ltd.

50

100.00Inspection and measuring

Kawaju Marine Engineering Co., Ltd.

40

100.00

Ship design; design, construction, and saleof steel rigging for large vessels

Kawaju Techno Service Corporation60

100.00Chemical analysis; environmental
measurement; materials testingNamePaid-In Capital

Equity(Millions of yen,unless otherwise noted)(% ownership by KHI,
unless otherwise noted)

1,461

83.01

Manufacture, sale and installation of general
purpose boilers and air-conditioning
equipment

Kawasaki Engineering Co., Ltd.

100

100.00Design and engineering of plant facilities;
manufacture and sale of pool and highpressure oxygen medical equipment

Kawasaki Kosan Co., Ltd.

300

100.00Insurance representation; real estateleasing, administration and maintenance;leasing and provision of loans

Kawasaki Foods Co., Ltd.

160

100.00Food supply to Company facilities;
operation of dining facilities

Kawasaki Metal Industries, Ltd.

350

100.00

Manufacture, processing and assembly ofvarious steel products

Kawasaki Hydromechanics Corporation

272

99.71

Manufacture, sale and installation of
hydraulic presses and various hydraulicequipment

KHI JPS Co., Ltd.

30

100.00Parts supply, repairs and overhaul of gas
turbines for high speed vessels such as theJetfoil and Jet Piercer

Kawasaki Construction Machinery, Kanto Ltd.

68

68.68

Sale and repair of construction machinery

Kawasaki Gas Turbine Research Center

30

100.00Research and testing of gas turbine
generator sets; sale of surplus electric power

Kawasaki Gasturbine Technologies Co., Ltd.

50

100.00Inspection and repair of cogenerationand standby systems and industrial gas
turbines

Kawasaki Construction Machinery,
Kyushu Ltd.

50

100.00

Sale and repair of construction machinery

Kawaju Gifu Manufacturing Co., Ltd.

70

100.00

Processing and assembly of parts andcomponents for aircraft and themaintenance of tools and equipment

Kawaju Harima Tech Inc.

50

100.00

Manufacture, maintenance and inspectionof machinery, equipment and watergates

Kawasaki Construction Machinery,
Nishi-Nihon Ltd.

54

100.00

Sale and repair of construction machinery

Kawaju Tomakomai Kanko Kaihatsu Co., Ltd.

300

100.00Management of a golf course

Kawasaki Construction Machinery,
Tohoku Ltd.

57

54.39

Sale and repair of construction machinery

Nichijo Manufacturing Co., Ltd.

120

50.04

Manufacture and sale of snow
removal equipment

Kawasaki Construction Machinery,
Kinki Ltd.

70

88.57

Sale and repair of construction machinery

Kawasaki Construction Machinery,
Chubu Ltd.

60

95.00

Sale and repair of construction machinery

Union Precision Die Co., Ltd.

50

100.00

Manufacture, sale and repair of
die-casting parts

US$65,900*

100.00Distribution of motorcycles, all-terrain
vehicles (ATVs), Jet Ski® watercraft
and small gasoline engines in
the United States

Kawasaki Motors (UK) Ltd.

£2,000*100.00Distribution of motorcycles, all-terrain
vehicles (ATVs) and Jet Ski® watercraftin the United Kingdom

Kawasaki Motoren GmbH

DM12,300*

100.00Distribution of motorcycles, all-terrain
vehicles (ATVs) and Jet Ski® watercraftin Germany

Kawasaki Motors Pty. Ltd.

A$2,000*

100.00Distribution of motorcycles, all-terrain
vehicles (ATVs) and Jet Ski® watercraftin Australia

Kawasaki Thermal Engineering Co., Ltd.

Kawasaki Motors Corp., U.S.A.

Principal Businesses

51

Name

Paid-In Capital

Equity(Millions of yen,unless otherwise noted)(% ownership by KHI,
unless otherwise noted)£5,000*100.00

Manufacture and sale of hydraulic products

P.T. Kawasaki Motor Indonesia

US$10,000*

51.00

Manufacture and distribution of
motorcycles in Indonesia

Kawasaki Heavy Industries (H.K.) Ltd.

HK$2,820*

100.00

Product sales, mediation of orders andprocurement of materials in Southeast Asiaand Oceania

Kawasaki Heavy Industries (Europe) B.V.

DGL500*100.00

Product sales, mediation of orders andprocurement of materials in Europe (mainly
Benelux countries), the Middle East, and Africa

Kawasaki Heavy Industries (U.S.A.), Inc.

US$600*100.00

Product sales, mediation of orders andprovision of various engineering support
services in North America

Kawasaki Motors (Phils.) Corporation

P101,430*

50.001

Manufacture and distribution of
motorcycles in the Philippines

Kawasaki Motors Manufacturing
Corp., U.S.A.

US$30,000*

100.00

Manufacture of motorcycles, all-terrain
vehicles (ATVs), Jet Ski® watercraft, small
gasoline engines and industrial robots

Kawasaki Construction Machinery
Corp. of America

US$8,000*

100.00

Manufacture and sale of construction
machinery in the United States

Kawasaki Motors Enterprise (Thailand) Co., Ltd.

ß1,202,816*

Kawasaki Precision Machinery (UK) Limited

52

KM Receivables Corporation(owned by Kawasaki Motors Corp., U.S.A.)

US$100*Principal Businesses

71.48

Manufacture and distribution of motorcycles
in Thailand

100.00Management of accounts receivables ofKawasaki Motors Finance Corporation(owned by KMFC)

Canadian Kawasaki Motors Inc.

C$2,000*

100.00Distribution of motorcycles, all-terrain
vehicles (ATVs) and Jet Ski® watercraftin Canada

Kawasaki Engines Europe N.V.

BF2,500*

100.00

Sale of electricity generators andall-purpose gasoline engines in Europe(owned by Kawasaki Motors Netherlands N.V.)

Green River Insurance Company

US$100*100.00Insurance services in the United States(owned by Kawasaki Motors Corp., U.S.A.)

Kawasaki Motors Netherlands N.V.

DGL1,000*

100.00Wholesale of Jet Ski® watercraft in Europe;
distribution of motorcycles in the Netherlands

Kawasaki Motors Finance Corporation

US$10,000*

100.00Inventory financing for dealers of
Kawasaki Motors Corp., U.S.A.

(owned by Kawasaki Motors Corp., U.S.A.)

Kawasaki Rail Car, Inc.

US$60,600*

100.00Engineering, manufacture, sales andafter-sales service of rolling stock in the
United States

Kawasaki Robotics (U.S.A.), Inc.

US$1,000*

100.00

Sales and after-sales service of industrial
robots in the United States(owned by Kawasaki Motors Corp., U.S.A.)*Monetary unit in thousands(As of March 31, 1999)

Network
Kobe Head Office
Kobe Crystal Tower
1-3, Higashikawasaki-cho 1-chome
Chuo-ku, Kobe 650-8680, Japan
Phone: 81-78-371-9530
Fax: 81-78-371-9568

Sydney Officec/o Kawasaki Motors Pty. Ltd.
Unit Q, 10-16 South Street
Rydalmere, N.S.W. 2116, Australia
Phone: 61-2-9684-2585
Fax: 61-2-9684-4580

Tokyo Head OfficeWorld Trade Center Bldg.
4-1, Hamamatsu-cho 2-chome
Minato-ku, Tokyo 105-6116, Japan
Phone: 81-3-3435-2111
Fax: 81-3-3436-3037

OVERSEAS SUBSIDIARIESOVERSEAS OFFICES
Seoul Office2302 Changgyo Bldg.
1 Changgyo-Dong, Chung-Gu
Seoul, Korea
Phone: 82-2-778-6637
Fax: 82-2-778-6638
Beijing Office
Room No. 2602, China World Tower
China World Trade Center
No.1, Jian Guo Men Wai Avenue
Beijing 100004
People’s Republic of China
Phone: 86-10-6505-1350
Fax: 86-10-6505-1351
Shanghai Office
13th Floor, Shanghai Senmao
International Building
101, Yin Cheng East Road
Pudong New Area
Shanghai, 200120
People’s Republic of China
Phone: 86-21-6841-3377
Fax: 86-21-6841-2266
Taipei Office
15th Floor, Fu-key Bldg.
99 Jen-Ai Road, Section 2
Taipei, Taiwan
Phone: 886-2-2322-1752
Fax: 886-2-2322-5009
Bangkok Office
17th Floor, Ramaland Building
952 Rama IV Road, Bangrak
Bangkok 10500, Thailand
Phone: 66-2-632-9511
Fax: 66-2-632-9515
Manila Office
20th Floor, Metrobank Plaza Bldg.
Gil J. Puyat Avenue, Makati
Metro Manila
The Philippines
Phone: 63-2-818-2786
Fax: 63-2-818-2787
Kuala Lumpur Office
Letter Box No. 162
6th Floor, UBN Tower
10 Jalan P. Ramlee
50250 Kuala Lumpur, Malaysia
Phone: 60-3-230-5141
Fax: 60-3-230-5148
Jakarta Office
9th Floor, Skyline Bldg.
Jl. M.H. Thamrin 9
Jakarta 10340, Indonesia
Phone: 62-21-314-0737
Fax: 62-21-314-1049

Kawasaki Heavy Industries (U.S.A.), Inc.
599 Lexington Avenue, Suite 3901
New York, NY 10022, U.S.A.
Phone: 1-212-759-4950
Fax: 1-212-759-6421
Houston Branch
333 Clay Street, Suite 4480
Houston, TX 77002-4103, U.S.A.
Phone: 1-713-654-8981
Fax: 1-713-654-8187
Kawasaki Rail Car, Inc.
1 Larkin Plaza
Yonkers, NY 10701, U.S.A.
Phone: 1-914-376-4700
Fax: 1-914-376-4779
Kawasaki Robotics (U.S.A.), Inc.
28059 Center Oaks Court
Wixom, MI 48393, U.S.A.
Phone: 1-248-305-7610
Fax: 1-248-305-7618
Kawasaki Motors Corp., U.S.A.
9950 Jeronimo Road
Irvine, CA 92618-2084, U.S.A.
Phone: 1-949-770-0400
Fax: 1-949-460-5600
Grand Rapids Office5080 36th Street S.E.
Grand Rapids, MI 49512, U.S.A.
Phone: 1-616-949-6500
Fax: 1-616-954-3031
Green River Insurance Company
7 Burlington Square, #600
Burlington, VT 05402, U.S.A.
Phone: 1-802-860-0444
Fax: 1-802-860-0440
Kawasaki Motors Finance Corporation
9950 Jeronimo Road
Irvine, CA 92618-2084, U.S.A.
Phone: 1-949-770-0400
Fax: 1-949-460-5600
KM Receivables Corporation
9950 Jeronimo Road, Suite 203
Irvine, CA 92618-2084, U.S.A.
Phone: 1-949-770-0400
Fax: 1-949-460-5600
Kawasaki Motors Manufacturing Corp., U.S.A.
6600 Northwest 27th Street
Lincoln, NE 68524, U.S.A.
Phone: 1-402-476-6600
Fax: 1-402-476-6672
Maryville Plant
Highway 71 South
Maryville, MO 64468, U.S.A.
Phone:1-660-582-5829
Fax: 1-660-582-5826
Kawasaki Construction Machinery Corp. of America
2140 Barrett Park Drive, Suite 101
Kennesaw, GA 30144, U.S.A.
Phone: 1-770-499-7000
Fax: 1-770-421-6842

Canadian Kawasaki Motors Inc.
25 Lesmill Road, Don Mills, Toronto
Ontario M3B 2T3, Canada
Phone: 1-416-445-7775
Fax: 1-416-445-5389
Kawasaki do Brazil Indústria e Comércio Ltda.
Avenida Paulista, 542-6 Andar
Bela Vista, 01310-000, São Paulo, S.P., Brazil
Phone: 55-11-289-2388
Fax: 55-11-289-2788
Kawasaki Heavy Industries (UK) Ltd.
4th Floor, 3 St. Helen’s Place
London EC3A 6AB, U.K.
Phone: 44-171-588-5222
Fax: 44-171-588-5333
Kawasaki Precision Machinery (UK) Ltd.
Ernesettle Lane, Ernesettle, Plymouth
Devon PL5 2SA, U.K.
Phone: 44-1752-364394
Fax: 44-1752-364816
Kawasaki Robotics (UK) Ltd.
Greengate, Middleton
Manchester M24 1SA, U.K.
Phone: 44-161-956-5400
Fax: 44-161-956-5404
Kawasaki Motors (UK) Ltd.
1 Dukes Meadow
Millboard Road, Bourne End
Buckinghamshire SL8 5XF, U.K.
Phone: 44-1628-851000
Fax: 44-1628-856799
Kawasaki Heavy Industries GmbH
5th Floor, Wehrhahn Center
Oststrasse 10, 40211 Düsseldorf, Germany
Phone: 49-211-1792340
Fax: 49-211-161844
Kawasaki Gas Turbine Europe GmbH
Max-Planck-Strasse 21A
61381 Friedrichsdorf, Germany
Phone: 49-6172-7363
Fax: 49-6172-736355
Kawasaki Robotics GmbH
29 Sperberweg 41468 Neuss, Germany
Phone: 49-2131-34260
Fax: 49-2131-930973
Kawasaki Motoren GmbH
Max-Planck-Strasse 26
61381 Friedrichsdorf, Germany
Phone: 49-6172-7340
Fax: 49-6172-734160
Kawasaki Heavy Industries (Europe) B.V.
7th Floor, Riverstaete
Amsteldijk 1661079 LH Amsterdam
The Netherlands
Phone: 31-20-6446869
Fax: 31-20-6425725
KHI Europe Finance B.V.
Hoekenrode 61102 BR Amsterdam
The Netherlands
Phone: 31-20-6293800
Fax: 31-20-6294661
Kawasaki Motors Netherlands N.V.
Diamantlaan 142132 WV Hoofddorp
The Netherlands
Phone: 31-23-5670500
Fax: 31-23-5670583

53

KHI (Dalian) Computer Technology Co., Ltd.
Building Foreign Specialistof the Dalian Maritime University
Ling Shui Qiao, Dalian
People’s Republic of China
Phone: 86-411-467-2507
Fax: 86-411-467-2459

54

Wuhan Kawasaki Marine Machinery Co., Ltd.
No. 43 Wudong Street
Qingshan, Wuhan
People’s Republic of China
Phone: 86-27-6590626
Fax: 86-27-6590627
Kawasaki Heavy Industries (H.K.) Ltd.
Room 1619, Jardine House
Connaught Road, Central, Hong Kong
Phone: 852-2522-3560
Fax: 852-2845-2905
Kawasaki Motors Enterprise (Thailand) Co., Ltd
119/10 Moo 4, Tambol Pluakdaeng
Amphur Pluakdaeng, Rayong 21140, Thailand
Phone: 66-38-955050~58
Fax: 66-38-955059
KHI Design & Technical Service Inc.
Unit 7A&7B The Island Plaza, 105 Alfaro Street
Salcedo Village, Makati, Metro Manila
The Philippines
Phone: 63-2-810-9213
Fax: 63-2-816-1222
Kawasaki Motors (Phils.) Corporation
Km. 24 East Service Road, Bo. Cupang, Alabang
Muntinlupa, Metro Manila, The Philippines
Phone: 63-2-842-3140
Fax: 63-2-842-2730
Kawasaki Heavy Industries (Singapore) Pte. Ltd.
6 Battery Road, #18-04
Singapore 049909
Phone: 65-2255133~4
Fax: 65-2249029
P.T. Kawasaki Motor Indonesia
Jl. Perintis Kemerdekaan, Kelapa Gading
Jakarta Utara 14250, Indonesia
Phone: 62-21-452-3322
Fax: 62-21-452-3566
Kawasaki Motors Pty. Ltd.
Unit Q, 10-16 South Street
Rydalmere, N.S.W. 2116, Australia
Phone: 61-2-9684-2585
Fax: 61-2-9684-4580

Nantong Ocean Ship Engineering Co., Ltd.
Ren Gang Nanshou, Nantong City, 226005
Jiangsu Province, People’s Republic of China
Phone: 86-513-351-4770
Fax: 86-513-351-4349

Sodegaura Works
50-1, Minamisode, Sodegaura
Chiba 299-0268, Japan
Phone: 81-438-62-7127
Fax: 81-438-62-7129

Nantong Cosco KHI Ship Engineering Co., Ltd.
117, Linjiang Road, Nantong City
Jiangsu Province, People’s Republic of China
Phone: 86-513-350-0666
Fax: 86-513-351-4349

Gifu Works
1, Kawasaki-cho, Kakamigahara
Gifu 504-8710, Japan
Phone: 81-583-82-5712
Fax: 81-583-82-2981

Shanghai Cosco Kawasaki Heavy Industries Steel
Structure Co., Ltd.
5198 Hutai Road, Baoshan District
Shanghai, People’s Republic of China
Phone: 86-21-5602-8888
Fax: 86-21-5602-5198

Nagoya Works 1
3-11, Oaza Kusunoki, Yatomi-cho
Ama-gun, Aichi 498-0066, Japan
Phone: 81-567-68-5117
Fax: 81-567-68-5090

Hainan Sundiro-Kawasaki Engine Co., Ltd.
Lingui Dadao No.3
Guilinyang Economic Development Area
Qiongshan City, Hainan Province
People’s Republic of China
Phone: 86-898-5711586
Fax: 86-898-6715518
Glory Kawasaki Motors Co., Ltd.
221/1 Rama IX Road, Huay Kwang
Bangkok 10320, Thailand
Phone: 66-2-246-1510
Fax: 66-2-246-1517
KHITKAN Co., Ltd.
119/18 Moo 4, G.K. Land Industrial Park
Pluakdaeng-Wangtaphin
Sapansi Road, Tambon Pluakdaeng
Amphur Pluakdaeng, Rayong 21140, Thailand
Phone: 66-38-955062~66
Fax: 66-38-955067

Tiesse Robot S.p.A.
Via Isorella 24
25010 Visano (Brescia), Italy
Phone: 39-30-9958621
Fax: 39-30-9958677
Robots International Limited
21, Archbishop Street
Valetta, Malta
Phone: 356-320897
Fax: 356-346041

Kobe Works
1-1, Higashikawasaki-cho 3-chome
Chuo-ku, Kobe 650-8670, Japan
Phone: 81-78-682-5001
Fax: 81-78-682-5500
Hyogo Works
1-18, Wadayama-dori 2-chome
Hyogo-ku, Kobe 652-0884, Japan
Phone: 81-78-682-3111
Fax: 81-78-671-5784
Nishi-Kobe Works
234, Matsumoto, Hazetani-cho
Nishi-ku, Kobe 651-2239, Japan
Phone: 81-78-991-1133
Fax: 81-78-991-3186

Kawasaki Motors Holding (Malaysia) Sdn. Bhd.
Room 401, 4th Floor, Wisma
Kwong Siew, 149, Jalan Tun
H.S. Lee, Kuala Lumpur, Malaysia
Phone: 60-3-621-2591
Fax: 60-3-621-2688

Seishin Works
8-1, Takatsukadai 2-chome
Nishi-ku, Kobe 651-2271, Japan
Phone: 81-78-992-1911
Fax: 81-78-992-1910

Kawasaki Motors Service Co., Ltd.
129 Rama IX Road, Kwaeng Huaykwang
Khet Huaykwang, Bangkok 10320, Thailand
Phone: 66-2-246-1510

Akashi Works
1-1, Kawasaki-cho, Akashi
Hyogo 673-8666, Japan
Phone: 81-78-921-1301
Fax: 81-78-913-1366

KMPC Realty Corporation
Km.24 East Service Road, Bo. Cupang, Alabang
Muntinlupa, Metro Manila, The Philippines
Phone: 63-2-842-3140
Fax: 63-2-842-2730

Banshu Works
2680, Oka, Inami-cho
Kako-gun, Hyogo 675-1113, Japan
Phone: 81-794-95-1211
Fax: 81-794-95-1226

OVERSEAS JOINT VENTURES
Kawasaki Motors N.V.
Marconiweg 54131 PD Vianen ZH
The Netherlands
Phone: 31-347-324949
Fax: 31-347-324955

Nagoya Works 2
7-4, Kanaoka, Tobishima-muraAma-gun, Aichi 490-1445, Japan
Phone: 81-5675-5-0800
Fax: 81-5675-5-0803

DOMESTIC WORKS
Noda Works
118, Futatsuzuka, Noda
Chiba 278-8585, Japan
Phone: 81-471-24-1121
Fax: 81-471-24-7645
Yachiyo Works
1780, Kamikoya, Yachiyo
Chiba 276-0022, Japan
Phone: 81-474-83-1111
Fax: 81-474-82-3227
Chiba Works
1, Niihama-cho, Chuo-ku
Chiba 260-0826, Japan
Phone: 81-43-263-2211
Fax: 81-43-263-5525

Harima Works
8, Niijima, Harima-cho
Kako-gun, Hyogo 675-0155, Japan
Phone: 81-794-35-2131
Fax: 81-794-35-2132
Sakaide Works
1, Kawasaki-cho, Sakaide
Kagawa 762-8507, Japan
Phone: 81-877-46-1473
Fax: 81-877-45-0556

Kawasaki Corporate Data
(As of March 31, 1999)

Kawasaki Heavy Industries, Ltd.
Head Office:
Kobe Crystal Tower
1-3, Higashikawasaki-cho 1-chome
Chuo-ku, Kobe 650-8680, JapanFounded: 1878
Incorporated: 1896
Paid-in Capital:¥81,426,590,792
Number of Shares Outstanding:
1,390,595,964 shares
Number of Shareholders:
118,367
Number of Employees:
26,486
Stock Exchange Listings:
Tokyo, Osaka, Nagoya, Kyoto,
Hiroshima, Fukuoka, Niigata, Sapporo
Newspapers in which public notices are made:The Nihon Keizai Shimbun
The Kobe Shimbun
Transfer Agent:
The Chuo Trust & Banking Company, Limited
7-1, Kyobashi 1-chome
Chuo-ku, Tokyo 104-0031, Japan
Handling Office
The Chuo Trust & Banking Company, Limited
Osaka Branch Office
6-26, Kitahama 2-chome
Chuo-ku, Osaka 541-0041, Japan
Independent Auditors:
Asahi & Co.
Kobe Crystal Tower
1-3, Higashikawasaki-cho 1-chome
Chuo-ku, Kobe 650-8680, JapanADR Facility:
KHI has a sponsored American Depository Receipt (ADR) facility. ADRs
are traded in the over-the-counter (OTC) market in the United States
under cusip number 486 359 20 1 with each ADR representing fourordinary shares.
ADR Depository:
The Bank of New York
101 Barclay St., 22 West
New York, NY 10286, U.S.A.
Phone: 1-212-815-2042
U.S. Toll Free:888-269-2377(888-BNY-ADRS)
http://www.bankofny.com/adr
KHI Home Page at:
http://www.khi.co.jp

55