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 6, 2016
Dear Shareholders
Shigeru Murayama
President
Kawasaki Heavy Industries, Ltd.
1-1 Higashikawasaki-cho
3chome,Chuo-ku, Kobe
(Registered Office)
1-3 Higashikawasaki-cho
1chome,Chuo-ku, Kobe

NOTICE OFrd

THE 193 ORDINARY GENERAL MEETING OF SHAREHOLDERS
You are cordially invited to attend the 193rd Ordinary General Meeting of Shareholders of Kawasaki Heavy
Industries, Ltd. (the “Company” or “KHI”). The meeting will be held for the purposes as described below.
If you are unable to attend on the day of the meeting, we kindly ask you to review the“Reference Documents for the General Meeting of Shareholders” (described hereinafter),and exercise your voting right in writing or electronically (via the Internet, and so forth) by
5:00 p.m. on June 23, 2016.

1. Date and Time:

Friday, June 24, 2016 at 10:00 a.m. (Door opens at 9 a.m.)

2. Place:

Kokusai Hall at The Kobe International House, located at
1-6, Gokoudori 8-chome, Chuo-ku, Kobe

3. Meeting Agenda:
Matters to bereported:

1. The Business Report, Consolidated Financial Statements for theCompany’s 193rd Fiscal Year (April 1, 2015 - March 31, 2016) andresults of audits by the Accounting Auditor and the Board of Corporate
Auditors of the Consolidated Financial Statements
2. Non-Consolidated Financial Statements for the Company’s 193rd Fiscal
Year (April 1, 2015 - March 31, 2016)

Proposal No. 1: Appropriation of Retained Earnings
Proposal No. 2: Election of Twelve Directors
Proposal No. 3: Election of One Corporate Auditor(Please refer to the “Reference Documents for the General Meeting of Shareholders”
hereinafter for information on each of the proposals.)–1–４．Other decisions regarding the General Meeting of Shareholders:(1) Among the documents to be submitted when sending the Notice, “Consolidated Statement of
Changes in Net Assets” “Notes to the Consolidated Financial Statements” and “Non-consolidated
Statement of Changes in Net Assets” “Notes to the Non-consolidated Financial Statements” are postedon the Website (http://global.kawasaki.com/en/corp/ir/) according to laws and the Article 16 of the
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 Non-consolidated 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 Accounting
Auditor and the Board of Corporate Auditors.
(2) Any updates to the Appendix and the Reference Documents for the General Meeting of Shareholders,will be posted on the Company’s Website at the following URL: (http://global.kawasaki.com/en/corp/ir/).
(3) Please note that persons other than shareholders who are able to exercise voting rights, including
representatives and their companions who are not shareholders, are not permitted to enter the venue.

Exercise of Voting Rights in Writing
Please indicate your vote for or against the proposals on the enclosed Voting Rights Exercise Form, andreturn it so that it is delivered by the above-mentioned exercise date.
Exercise of Voting Rights via the Internet
Please exercise your voting right by logging on to the Internet website (http://www.web54.net) andentering the voting right exercise code and password stated on the enclosed Voting Rights Exercise
Form, and follow the online instructions to submit your vote.

Notes:
1. When voting rights have been exercised twice in writing or electronically, the latter vote received
shall be deemed valid, however when votes are received on the same day, the voting right exercised
electronically shall be deemed valid.
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 (3) days prior to the day of the General
Meeting of Shareholders.
3. When attending the meeting, please submit the enclosed Voting Rights Exercise Form at the reception
desk at the venue on the day of the meeting.

–2–

Reference Documents for the General Meeting of Shareholders
Proposals and References
Proposal No. 1: Appropriation of Retained Earnings
The Company considers the return of profits to shareholders as being an important management
issue. The Company aims to enhance shareholder value over the long term through continuous,
advanced research and development and innovative capital investment, which is necessary for future
growth. The Company’s basic policy is to maintain a medium- and long-term dividend payout ratio of
30% to the net income attributable to owners of parent and to distribute surplus twice a year as aninterim dividend and a year-end dividend, by fully taking into consideration future earnings trends andits financial position so as to keep a balance between enhancing shareholder value and returning profits
to shareholders.
Taking into consideration the strategic investment necessary to improve corporate value, earnings
trends, financial position, and so forth, in accordance with the said policy, the year-end dividend willamount to ¥7 per ordinary share for a total distribution of ¥11,694,034,296. As a result, annual
dividends will be ¥12 per share, including interim dividends.
In addition, the Company’s year-end dividend distribution is June 27, 2016.
Type of dividend property
Dividend per share
Total dividend
Date on which the dividends from surplus will take effect

Cash
7 yen
11,694,034,296 yen
June 27, 2016

Proposal No. 2: Election of Twelve Directors
The term of office of all twelve Directors will expire at the conclusion of this Ordinary General Meetingof Shareholders. Accordingly, we propose to elect twelve Directors (nine Directors to be reappointed(including an Outside Director) and three Directors to be newly appointed (including an Outside
Director)) to establish corporate governance at a higher level and further improve the Company’s
enterprise value. Candidates for Directors are elected by the Board of Directors in accordance with
"Qualifications Expected of Directors," which is described on page 10. The Company has obtained areport to the effect that this election is appropriate from the Nomination Advisory Committee, which
consists mainly of independent outside officers.
The candidates for Director are as follows:No.

Abridged Personal Records, Positions and Duties[Significant concurrent positions]Shares oftheCompany

Joined Kawasaki Heavy Industries, Ltd.
Senior Vice President
President, Aerospace Company
Jun. 2013
President(current position)[Significant concurrent position]
President(representative director), Commercial Airplane
Company
Chairman, The Shipbuilders’ Association of Japan
Reason for candidacy
Mr. Murayama has been mainly engaged in business related to technology
and development of the aerospace segment of the Company for many
years. He was appointed as its Senior Vice President in 2010 and has
served as its President since 2013. Presently, as President, he has been
demonstrating his outstanding leadership, thereby making a significant
contribution to the Company's business growth and enhancement of its
enterprise value. Considering these points, we have determined that he issuitable as a Director and nominated him again as a candidate for Director.

129,000
sharesName(Date of Birth)
Apr. 1974
Jun. 2010(Reappointed)
1

Shigeru Murayama(Feb. 27, 1950)

–3–

No.

Name
(Date of Birth)

Abridged Personal Records, Positions and Duties[Significant concurrent positions]Apr. 1977
Apr. 2009(Reappointed)
2

Joji Iki(Sep. 5, 1951)(Reappointed)
3

Yoshinori
Kanehana(Feb. 19, 1954)

Joined Kawasaki Heavy Industries, Ltd.
Executive Officer
General Manager, Machinery Division, Gas Turbine &Machinery Company
Apr. 2012Managing Executive Officer
President, Gas Turbine & Machinery Company
Jun. 2012
Senior Vice President
President, Gas Turbine & Machinery Company
Apr. 2015
Senior Executive Vice President
Assistant to the President, in charge of Technology, Sales
and Procurement department
Feb. 2016
Senior Executive Vice President
Assistant to the President, in charge of Technology, Sales
and Procurement department and in charge of Ship &Offshore Structure Company
Apr. 2016
Senior Executive Vice President
Assistant to the President, in charge of Technology andSales department and in charge of Ship & Offshore
Structure Company(current position)
Reason for candidacy
Mr. Iki has been mainly engaged in business related to technology anddevelopment of the gas turbine & machinery segment of the Company formany years. He was appointed as its Senior Vice President in 2012 and has
served as its Senior Executive Vice President since 2015. Presently, as
Senior Executive Vice President in charge of Technology and Sales
department and Ship & Offshore Structure Company, he has been
demonstrating his outstanding leadership, thereby making a significant
contribution to the Company's business growth and enhancement of its
enterprise value. Considering these points, we have determined that he issuitable as a Director and nominated him again as a candidate for Director.
Apr. 1976
Joined Kawasaki Heavy Industries, Ltd.
Apr. 2011
Managing Executive Officer
Vice President, Rolling Stock Company
Apr. 2012Managing Executive Officer
General Manager, Marketing DivisionJun. 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(current position)
Reason for candidacy
Mr. Kanehana has been mainly engaged in business related to technology
and development of the rolling stock segment of the Company and its
overseas business for many years. He was appointed as its Senior Vice
President in 2012 and has served as its Senior Executive Vice President
since 2016. Presently, as Senior Executive Vice President, he has been
demonstrating his outstanding leadership, thereby making a significant
contribution to the Company's business growth and enhancement of its
enterprise value. Considering these points, we have determined that he issuitable as a Director and nominated him again as a candidate for Director.

Shares oftheCompany–4–53,000shares65,000SharesNo.

Name(Date of Birth)

Abridged Personal Records, Positions and Duties[Significant concurrent positions]Apr. 1969(Reappointed)

4

Yoshihiko Morita(Mar. 7, 1947)(Outside Director Candidate)(Independent Director)(Reappointed)
5

Munenori Ishikawa(Feb. 26, 1953)

Joined Export-Import Bank of Japan (At present: Japan
Bank for International Cooperation)
Oct. 2008
Representative Director and Senior Managing Executive
Officer
Deputy CEO of Japan Bank for International Cooperation,
Japan Finance Corporation
Jun. 2011
Resigned Deputy CEO of Japan Bank for International
Cooperation, Japan Finance Corporation
Dec. 2011
Advisor, Sumitomo Mitsui Banking Corporation
Jun. 2012
President, Japan Institute for Overseas Investment
Outside Corporate Auditor, TOKYO GAS Co., Ltd.
Jun. 2013
Outside Director, Kawasaki Heavy Industries, Ltd.
Jun. 2013
Resigned Advisor, Sumitomo Mitsui Banking Corporation
Dec. 2014
Resigned President, Japan Institute for Overseas Investment(current position)[Significant concurrent position]
Outside Corporate Auditor, TOKYO GAS Co., Ltd.
Mr. Morita previously served as Deputy CEO of Japan Bank for International
Cooperation, Representative Director and Senior Managing Executive
Officer of Japan Finance Corporation and other important positions. Byutilizing his substantial overseas experience and expertise acquired inthose institutions, he has provided the Company with useful opinions andadvice in determining important matters of the Company’s managementfrom a position independent from the Company’s execution of duties.
Considering these points, we have nominated him again as a candidate for
Director as we have judged that he will be able to fully perform his roles as
an Outside Director in the supervision of execution of duties andenhancement of its enterprise value.
Apr. 1975
Joined Kawasaki Heavy Industries, Ltd.
Apr. 2009
General Manager, Manufacturing Division, Aerospace Company
Apr. 2012
Executive Officer
General Manager, Manufacturing Division, Aerospace Company
Apr. 2013
Executive Officer
Vice President, Aerospace Company
Jun. 2013
Managing Executive Officer
President, Aerospace Company
Jun. 2014
Senior Vice President
President, Aerospace Company
Apr. 2016
Assistant to the President, in charge of Production and
Procurement department and in charge of Aerospace
Company(current position)
Reason for candidacy
Mr. Ishikawa has been mainly engaged in business related to technology,
development and production of the aerospace segment of the Company formany years. He was appointed as its Senior Vice President in 2014 and has
served as its Senior Executive Vice President since 2016. Presently, as
Senior Executive Vice President in charge of Production and Procurement
department and Aerospace Company, he has been demonstrating hisoutstanding leadership, thereby making a significant contribution to theCompany's business growth and enhancement of its enterprise value.
Considering these points, we have determined that he is suitable as a
Director and nominated him again as a candidate for Director.

Shares oftheCompany–5–

2,000
Shares38,000SharesNo.

Name(Date of Birth)

Abridged Personal Records, Positions and Duties[Significant concurrent positions]Apr. 1978
Apr. 2011(Reappointed)
6Kazuo Hida
(Feb. 1, 1954)(Reappointed)
7

Kenji Tomida(Aug. 7, 1955)

Joined Kawasaki Heavy Industries, Ltd.
Executive Officer, Kawasaki Heavy Industries, Ltd.
Seconded to Kawasaki Precision Machinery (UK) Ltd.
Sep. 2011
Executive Officer
General Manager, Engineering Division, Precision Machinery
Company
Apr. 2013
Executive Officer
Vice President and General Manager, Engineering Division,
Precision Machinery Company
Apr. 2014
Managing Executive Officer
President, Precision Machinery Company
Jun. 2014
Senior Vice President
President, Precision Machinery Company(current position)
Reason for candidacy
Mr. Hida has been mainly engaged in business related to technology anddevelopment of the precision machinery segment of the Company and its
overseas business for many years. He has served as its Senior Vice
President since 2014. Presently, as President of Precision Machinery
Company, he has been demonstrating his outstanding leadership, thereby
making a significant contribution to the Company's business growth andenhancement of its enterprise value. Considering these points, we havedetermined that he is suitable as a Director and nominated him again as a
candidate for Director.
Apr. 1978
Joined Kawasaki Heavy Industries, Ltd.
Apr. 2010
Deputy General Manager, Corporate Planning Division
Apr. 2012
Executive Officer
Deputy General Manager, Corporate Planning DivisionMarketing Division
Apr. 2013
Executive Officer
General Manager, Planning & Control Division, Ship & Offshore
Structure Company
July. 2013
Executive Officer
General Manager, Corporate Planning Division
Apr. 2014
Managing Executive Officer
General Manager, Corporate Planning DivisionJun. 2014
Senior Vice President
General Manager, Corporate Planning Division
Apr. 2015
Senior Vice President
President, Motorcycle & Engine Company(current position)
Reason for candidacy
Mr. Tomida has been mainly engaged in business related to finance &accounting and corporate planning of the Company and its overseas
business for many years. He has served as its Senior Vice President since2014. Presently, as President of Motorcycle & Engine Company, he has
been demonstrating his outstanding leadership, thereby making asignificant contribution to the Company's business growth andenhancement of its enterprise value. Considering these points, we havedetermined that he is suitable as a Director and nominated him again as a
candidate for Director.

Shares oftheCompany–6–

34,000Shares

36,000SharesNo.

Name(Date of Birth)

Abridged Personal Records, Positions and Duties[Significant concurrent positions]Apr. 1980
Apr. 2009(Reappointed)
8

Toshiyuki Kuyama(Nov. 12, 1953)(Reappointed)
9Kazuo Ota
(Jan. 13, 1955)

Joined Kawasaki Heavy Industries, Ltd.
Deputy General Manager, Gas Turbine Division, Gas Turbine &Machinery Company
Apr. 2012
Executive Officer
General Manager, Gas Turbine Division, Gas Turbine &Machinery Company
Apr. 2015
Managing Executive Officer
President, Gas Turbine & Machinery Company
Jun. 2015
Senior Vice President
President, Gas Turbine & Machinery Company(current position)
Reason for candidacy
Mr. Kuyama has been mainly engaged in business related to technology
and development of the gas turbine & machinery segment of the Company
for many years. He has served as its Senior Vice President since 2015.
Presently, as President of Gas Turbine & Machinery Company, he has been
demonstrating his outstanding leadership, thereby making a significant
contribution to the Company's business growth and enhancement of its
enterprise value. Considering these points, we have determined that he issuitable as a Director and nominated him again as a candidate for Director.
Apr. 1978
Joined Kawasaki Heavy Industries, Ltd.
Jan. 2011
Deputy General Manager, Planning & Control Division and senior
manager, Control Department, Aerospace Company
Apr. 2012
General Manager, Planning & Control Division, Aerospace
Company
Apr. 2013
Executive Officer
General Manager, Planning & Control Division, Aerospace
Company
Apr. 2015
Managing Executive Officer
General Manager, Corporate Planning Division, in charge ofFinance & Accounting and Personnel & Labor Administration
department
Jun. 2015
Senior Vice President
General Manager, Corporate Planning Division, in charge ofFinance & Accounting and Personnel & Labor Administration
department(current position)
Reason for candidacy
Mr. Ota has been mainly engaged in business related to corporate planningand finance & accounting of the Company and its overseas business formany years. He has served as its Senior Vice President since 2015.
Presently, as General Manager of the Corporate Planning Division and an
officer in charge of Finance & Accounting department and Personnel
department, he exercises control over the operations including businessplanning, finance & accounting and personnel & labor administration,
thereby making a significant contribution to the Company's businessgrowth and enhancement of its enterprise value. Considering these points,
we have determined that he is suitable as a Director and nominated him
again as a candidate for Director.

Shares oftheCompany–7–

22,000Shares46,000SharesNo.

Name(Date of Birth)

Abridged Personal Records, Positions and Duties[Significant concurrent positions]Apr. 1978
Apr. 2011(Newly-appointed)
10

Makoto Ogawara(Apr. 10, 1955)(Newly-appointed)
11

Tatsuya Watanabe(Sep. 30, 1957)(Newly-appointed)

12Michio Yoneda(Jun. 14, 1949)(Outside Director Candidate)(Independent Director)

Joined Kawasaki Heavy Industries, Ltd.
Executive Officer
General Manager, Engineering Division, Rolling Stock
Company
Apr. 2012
Executive Officer
Vice President, Rolling Stock Company
Apr. 2016
Managing Executive Officer
President, Rolling Stock Company(current position)
Reason for candidacy
Mr. Ogawara has been mainly engaged in business related to technology
and development of the rolling stock segment of the Company for many
years. He was appointed as its Executive Officer in 2011 and has served as
its Executive Officer since 2016. Presently, as President of Rolling Stock
Company, he has been demonstrating his outstanding leadership, thereby
making a significant contribution to the Company's business growth andenhancement of its enterprise value. Considering these points, we havedetermined that he is suitable as a Director and newly nominated him as a
candidate for Director.
Apr. 1981
Joined Kawasaki Heavy Industries, Ltd.
Apr. 2011
Vice Senior Manager, Industrial Plant Engineering Division,
Plant & Infrastructure Company
Apr. 2013
Executive Officer
Senior Manager, Energy Plant Engineering Division, Plant &Infrastructure Company
Apr. 2015
Executive Officer
Vice President, Plant & Infrastructure Company
Apr. 2016
Managing Executive Officer
President, Plant & Infrastructure Company(current position)
Reason for candidacy
Mr. Watanabe has been mainly engaged in business related to technology
and development of the plant & infrastructure engineering segment of theCompany for many years. He was appointed as its Executive Officer in 2013and has served as Managing Executive Officer since 2016. Presently, as
President of Plant & Infrastructure Engineering Company, he has been
demonstrating his outstanding leadership, thereby making a significant
contribution to the Company's business growth and enhancement of its
enterprise value. Considering these points, we have determined that he issuitable as a Director and newly nominated him as a candidate for Director.
Apr. 1973
Joined Bank of Japan
May. 1998
General Manager, Sapporo Branch, Bank of Japan
Apr. 2000
Resigned General Manager, Sapporo Branch, Bank of Japan
Apr. 2000
Executive Director, Osaka Securities Exchange
Apr. 2001
Executive Director (Member of the Board), Osaka Securities
Exchange Co., Ltd.
Dec. 2003
President & CEO (Member of the Board), Osaka Securities
Exchange Co., Ltd.
Jan. 2013
Director & Representative Executive Officer, Group COO,
Japan Exchange Group, Inc.
Director, Tokyo Stock Exchange, Inc.
Jun. 2015
Resigned Director & Representative Executive Officer,
Group COO, Japan Exchange Group, Inc.
Resigned Director, Tokyo Stock Exchange, Inc.
(current position)[Significant concurrent position]
Outside Corporate Auditor, The Resolution and Collection
Corporation.
Reason for candidacy
Mr. Yoneda previously served as President & CEO (Member of the Board)of
Osaka Securities Exchange Co., Ltd., and Director& Representative
Executive Officer and Group COO of Japan Exchange Group, Inc., and otherimportant positions. He has abundant management experience and expert
knowledge of corporate governance. Considering these points, we have
newly nominated him as a candidate for Director as we have judged that hewill be able to fully perform his roles as an Outside Director in the
supervision of execution of duties and enhancement of its enterprise value.

Shares oftheCompany–8–46,000Shares

4,000
Shares0
Shares(Notes) 1. Mr. Shigeru Murayama also serves as President (representative director) of Commercial Airplane Co., Ltd.
which engages in the following transaction with the Company as well as a business that is the same type as
the Company’s Aerospace segment:- Sales, etc. of aircraft component parts for The Boeing Company.
2．There is no special interest relationship between the other candidates and the Company.
3. Contents of the matter stipulated regarding candidates for Outside Director pursuant to Article 74,
Paragraph 4 of the Ordinance for Enforcement of the Companies Act(1) Mr. Yoshihiko Morita and Mr. Michio Yoneda are candidates for Outside Director.
(2) Three year has passed since Mr. Yoshihiko Morita commenced his service as Outside Director of theCompany at the conclusion of this Ordinary General Meeting of Shareholders.
4. Mr. Yoshihiko Morita has entered into a limited liability agreement pursuant to the provisions of Article 427,
Paragraph 1 of the Companies Act, and the liability under said agreement shall be limited to either anamount of ¥10 million, or an amount specified by law and regulation, whichever is higher. Should theappointment of Mr. Yoshihiko Morita be approved, the Company will extend the above agreement withhim.
5. After the proposed election, Mr. Michio Yoneda will enter into a limited liability agreement pursuant to theprovisions of Article 427, Paragraph 1 of the Companies Act with the Company on condition that Proposal
No. 2 is approved in its original form. The liability for damages under said agreement shall be limited toeither an amount of ¥10 million, or an amount specified by law and regulation, whichever is higher.
6. Mr. Yoshihiko Morita and Mr. Michio Yoneda satisfy the requirements of independent Officer stipulated by
the Tokyo Stock Exchange, Inc. and Nagoya Stock Exchange, Inc.

Proposal No. 3: Election of One Corporate Auditor
The term of office of Corporate Auditor Mr. Yuji Murakami will expire at the close of this general
meeting of shareholders. Accordingly, we propose to elect one Corporate Auditor. A candidate for
Corporate Auditor is elected by the Board of Directors in accordance with "Qualifications Expected ofCorporate Auditors," which is described on page 10. The Company has obtained a report to the effectthat this election is appropriate from the Nomination Advisory Committee, which consists mainly of
independent outside officers.
We have obtained the prior approval of the Board of Corporate Auditors on this proposal.
The candidate for Corporate Auditor is as follows.
Name(Date of Birth)

Abridged Personal Records, Positions and Duties[Significant concurrent positions]Apr. 1981
Oct. 2010
Apr. 2014(Newly-appointed)
Katsuyoshi Fukuma(Dec. 5, 1957)

Shares oftheCompany

Joined Kawasaki Heavy Industries, Ltd.
Senior Manager, Subsidiaries & Affiliates Control
Department, Corporate Planning Division
Deputy General Manager, Corporate Planning
Division, and Senior Manager, Corporate Business
Planning Department(current position)

Reason for candidacy
Mr. Fukuma has been mainly engaged in business related tocorporate planning and finance & accounting. He has substantial
knowledge about finance and accounting matters. He is also familiar
with the Company's business partly because he has been engaged in
the planning and development on the Company's management andbusiness operations as Deputy General Manager of the Corporate
Planning Division. Considering these points, we have determinedthat he is suitable as a Corporate Auditor and newly nominated him
as a candidate for Corporate Auditor.

5,000
Shares(Note) There is no special conflict of interest between the Company and the candidate for Corporate Auditor.

–9–

(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 in the medium tolong term
3. Hold company-wide standpoints and have abundant and broad experience, deep insight andexpertise to do so
4. Be able to supervise the execution of business operations and duties from an independent standpoint
as a member of the Board of Directors[Qualifications Expected of Corporate Auditors]
1. Be able to help ensure the soundness of the Group's management
2. Have the ability to make fair and appropriate judgment from an independent and objective
standpoint
3. Be able to exercise one's authority in an active and positive manner, and properly express one's
opinions to the Board of Directors or the management
4. Be familiar with the Company's business and corporate management or have abundant and broad
experience, deep insight and expertise
5. At least one Corporate Auditor must have substantial knowledge about finance and accounting[Independence Standards for Officers]
When the outside officer does not fall under all the following items, he/she is deemed to havesatisfied the independence requirements:
1. He/she presently serves or previously served in the last ten years as managing director, executive
officer, operating officer or other important employee of a firm (including major subsidiaries
designated by the Company) (hereinafter, the "Home Company") that has a business relationshipwith the KHI Group, where the average net sales from the said business for the last five fiscal years
exceeds 2% of that of the KHI Group and the Home Company.
2. He/she serves as a specialist or consultant of legal, accounting or tax affairs (corporation if it has
judicial personality) and the average remuneration directly received from the KHI Group (excluding
remuneration for the Company's officer) for the last five fiscal years exceeds 10 million yen.
3. He/she serves as executive officer of a non-profit organization and the average donations from theKHI Group to the organization for the last five fiscal years exceeds 10 million yen and exceeds 2% of
the total revenue or the current balance of the organization.
4. His/her Home Company is a major shareholder of the KHI as it holds 10% or more of outstanding
shares in KHI.
5. A relative of his/hers within the second degree falls under the preceding four items or serves as
managing director, executive officer, operating officer or other important employee of the KHI Group.

– 10 –

Business Report(April 1, 2015 - March 31, 2016)

1. Overview of the Company Group(1)

Business Progress and Results(i) General Conditions
The global economy continued to grow moderately especially in developed countries thanks to
the U.S. economic recovery. Meanwhile, close attention must be continuously paid to the U.S.
movement toward monetary policy normalization, the European debt issue, the fluctuation in oil
prices, and the economic slowdown of emerging countries and resource-rich countries.
The Japanese economy remained stagnant due to the effect of a worsening external
environment and so forth. It is expected to continue seeing mild growth owing to the steady
improvement in income and employment environment. Meanwhile, there is a concern about thebusiness downturn especially in exporting companies, and this is causing a decline in business
confidence because of the sharp appreciation of the yen since the beginning of the year.
Amid this operating environment, the overall orders received by the KHI Group for the fiscal
year under review amounted to ¥1,693.6 billion, 1% lower than the previous fiscal year. This was
because of decreases in the Ship & Offshore Structure segment, while orders increased in the
Aerospace segment and the Gas Turbine & Machinery segment. Net sales were ¥1,541.0 billion,
4% higher than the previous fiscal year due to increased sales in some segments including the
Aerospace segment and the Rolling Stock segment.
In terms of profit, the Aerospace segment reported a profit increase, resulting in an operating
income of ¥95.9 billion, 10% higher than the previous fiscal year. Recurring profit was ¥93.2 billion,
11% higher than the previous fiscal year. However, net income attributable to owners of parent
was ¥46.0 billion, 11% lower than the previous fiscal year, mainly because of a loss on overseas
business in extraordinary losses.
(ii)Operating conditions by business segment
Ship & Offshore Structure segment
The Ship & Offshore Structure segment received orders amounting to ¥98.3 billion, a decreaseby ¥80.8 billion from the previous fiscal year in which orders for submarines from Japan's Ministryof Defense and deep submergence rescue vehicles were received.
Net sales were ¥94.8 billion, an increase of ¥4.5 billion from the previous fiscal year. This was
attributable to an increase in the construction of LPG carriers.
Operating income decreased ¥10.6 billion from the previous fiscal year, resulting in an
operating loss of ¥7.9 billion partly due to reversal of a provision for losses on construction
contracts.
Rolling Stock segment
The Rolling Stock segment saw orders received at ¥132.1 billion, remaining at the same level asin the previous fiscal year as there was no significant change for both domestic and overseas
customers.
Net sales increased ¥25.1 billion from the previous fiscal year to ¥146.6 billion due to increased
sales for overseas countries including Singapore and Taiwan.
Operating income increased ¥3.2 billion from the previous fiscal year to ¥9.2 billion mainly due
to increased sales.
Aerospace segment
At the Aerospace segment, orders received were ¥464.2 billion, an increase of ¥107.2 billion
from the previous fiscal year, mainly due to an increase in orders from Japan’s Ministry of Defense.
Net sales increased ¥26.7 billion from the previous fiscal year to ¥351.8 billion. This was partly
because of an increase in sales to Japan’s Ministry of Defense and the high level of component
parts for commercial airplanes as well as the impact of the depreciation of the yen.
Operating income increased ¥9.3 billion from the previous fiscal year to ¥45.6 billion, mainly
due to increased sales.

– 11 –

Gas Turbine & Machinery segment
At the Gas Turbine & Machinery segment, orders received were ¥288.9 billion, an increase of¥53.1 billion from the previous fiscal year. This was mainly attributable to an increase in orders forsuch products as component parts of commercial aircraft jet engines and gas engines.
Net sales increased ¥17.6 billion from the previous fiscal year to ¥236.4 billion, mainly due to anincrease in sales of component parts of commercial aircraft jet engines.
Operating income increased ¥5.6 billion from the previous fiscal year to ¥16.9 billion partly due
to increased sales.
Plant & Infrastructure segment
In the Plant & Infrastructure segment, orders received were ¥138.7 billion, a decrease of ¥64.6
billion from the previous fiscal year in which large orders were received for plants from overseas
customers.
Net sales increased ¥14.5 billion from the previous fiscal year to ¥135.6 billion, mainly due toincreased sales of large-scale plants to overseas customers.
Operating income increased ¥1.9 billion from the previous fiscal year to ¥8.5 billion partly due
to increased sales.
Motorcycle & Engine segment
Net sales of the Motorcycle & Engine segment increased ¥4.3 billion from the previous fiscal
year to ¥333.5 billion. This was attributable to increased sales of motorcycles and utility vehicles
in developed countries, while sales of motorcycles in Indonesia and other emerging markets
decreased.
Operating income increased ¥0.8 billion from the previous fiscal year to ¥15.7 billion partly due
to increased sales.
(Note) The net sales figure for the Motorcycle & Engine segment is also used as the figure for orders
received.

Precision Machinery segment
In the Precision Machinery segment, orders received were ¥133.1 billion, a decrease of ¥3.0
billion from the previous fiscal year due to decreased orders for hydraulic components.
Net sales decreased ¥2.6 billion from the previous fiscal year to ¥133.1 billion, mainly due todecreased sales of hydraulic components.
Operating income decreased ¥2.3 billion from the previous fiscal year to ¥8.5 billion partly due
to decreased sales and profitability of hydraulic components.
Others segment
In the Others segment, net sales decreased ¥35.4 billion from the previous fiscal year to ¥108.8
billion partly because of the transfer of the construction machinery business.
Operating income decreased ¥1.0 billion from the previous fiscal year to ¥2.8 billion partly due
to the transfer of the construction machinery business.
[Major businesses]
Kawasaki Trading Co., Ltd.
(Sale of various types of industrial machinery, petroleum, steel stock and air conditioning
equipment, etc.)
Kawasaki Life Corporation(Sale, rental and management of real estate, insurance agency business, and building
management)– 12 –

(ⅲ)Referencei)Orders Received, Net Sales and Operating Income/Loss by Segment

Unit: 100 million yen

Orders Received
Segment

Net Sales

Year-on-Year
ChangeAmountOperating Income/Loss

Year-on-Year
ChangeAmountYear-on-Year
ChangeAmount

983

(808)

948

45

(79)

(106)

Rolling Stock

1,321

7

1,466

251

92

32

Aerospace

4,642

1,072

3,518

267

456

93

Gas Turbine & Machinery

2,889

531

2,364

176

169

56

Plant & Infrastructure

1,387

(646)

1,356

145

85

19

Motorcycle & Engine

3,335

43

3,335

43

157

8

Precision Machinery

1,331

(30)

1,331

(26)

85

(23)

Others segment

1,044

(361)

1,088

(354)

28

(10)

－

－

－

－

(37)

17

16,936(192)

15,410

549

959

87

Ship & Offshore Structure

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

ii)

ROIC and ROE
FY2014 (192nd fiscal)

FY2015 (193rd fiscal)

ROIC

10.4%

9.4%

ROE

12.9%

10.6%

(Notes) ・ ROIC (return on invested capital)) = EBIT (income before income taxes + interest expense) ÷ Invested
capital at the end of the period (debt obligation + shareholders' equity)
・ ROE (return on equity) = Net income attributable to owners of the parent ÷ {(shareholders' equity at theend of the previous period + shareholders' equity at the end of the current period) ÷ 2}iii) Cash flows
FY2014 (192nd fiscal)

FY2015 (193rd fiscal)

Cash flows from sales activities

1,276

860

Cash flows from investing activities

(673)

(741)

Cash flows from financing activities

(571)

(234)

– 13 –

(2)Capital Investments, etc.
In the KHI Group, capital investments were made predominantly for the development offacilities to increase the production capacity in the Aerospace segment, and the development offacilities to handle new models and products and the streamlining of production in the Gas Turbine& Machinery segment and the Motorcycle & Engine segment. As a result, the KHI Group spent a
total of ¥76.3 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:
Unit: 100 million yen

Segment

Major investments

Investment
amounts in the
consolidated fiscal
year under review

Ship & Offshore Structure

Facilities for streamlining ship construction, etc.

26

Rolling Stock

Facilities for streamlining rolling stock production, etc.

25

Aerospace

Facilities for increasing aircraft production capacity, etc.

287

Gas Turbine & Machinery

Facilities for handling new models and products of jet engines,
etc. and facilities for streamlining production, etc.

79

Plant & Infrastructure

Facilities for streamlining production of industrial machinery, etc.

14

Motorcycle & Engine
Precision Machinery
Others segment

Facilities for handling new models and products of motorcycles
and facilities for streamlining production, etc.
Facilities for streamlining production of hydraulic components
and facilities for increasing industrial robot production capacity,etc.
Facilities for research and development and welfare facilities,
etc.

Total

150
81
98
763

(3)

FinancingFunds of ¥19.6 billion from long-term debt, ¥20.0 billion from domestic unsecured straightbonds and short-term borrowings and other funds from various sources were raised in the current
consolidated fiscal year. The funds were allocated to such items as long-term loan repayments,
capital investments and working capital.

(4)

Assignment of businesses, absorption-type splits and incorporation-type corporate
splitsNot applicable.

(5)

Transfer of business from other companies
Not applicable.

(6)

Succession of rights and obligations pertaining to the business of another juridical
person, etc., due to absorption-type merger or absorption-type company split
Not applicable.

(7)

Acquisition or disposal of another company’s stocks or other holdings, or share options,etc.
Previously, KCM Corporation was a subsidiary of the Company and 66% of its shares were held by
the Company. Effective October 1, 2015, the Company transferred the shares to Hitachi Construction
Machinery Co., Ltd. In addition, effective the said date, the Company transferred the businesses of
KCMJ Corporation, which was a wholly-owned subsidiary of KCM Corporation, to Hitachi Construction
Machinery Japan Co., Ltd.

(8)

Corporate Management Strategies in the Medium to Long Term and Issues to be
Addressed
The business environment surrounding the KHI Group is becoming tougher due to greater
uncertainties about the future global economy and a shift toward the appreciation of the yen. Under– 14 –

such circumstances, KHI has formulated a new medium-term business plan for fiscal years 2016 to2018 (hereinafter, "MTBP2016") to attain the ideal model (KHI's vision, quantitative image about the
future in the next ten years).
The basic policy in MTBP2016 is to further deepen ROIC Management. We seek to improve ourenterprise value for the future by enhancing core competence (source of profitability and competitive
superiority). We will make aggressive investments in growing areas (air transportation, robots,energy) and differentiate ourselves in terms of technologies with an eye toward future new products
and businesses by increasing synergies with the combined use of our internal technologies.
Furthermore, we will focus on new service businesses by utilizing our information andcommunications technology.
(i) Improvement of enterprise value by further deepening ROIC Management
By asking ourselves "what and which actions will lead to improve our enterprise value?" we candetermine indicators that help us focus on links with daily operations. In this way, we will get a better
understanding of KHI's employees, in accordance with the business characteristics of the respective
segments. In order to satisfy those indicators, we will carry out ROIC Management in which all the
Officers and employees participate. We will also utilize those indicators for risk management,
thereby leading to a further improved enterprise value.
(ii) Cash flow-oriented management
In order to improve our enterprise value, we aim to boost our earnings power and create free cash
flows, while steadily making developments and capital investments toward future growth. For
FY2016, we have outlined the challenge of acquiring cash flows especially from operating activities.
We will implement concrete policies to enhance the efficiency of working capital, such as byimproving conditions on money reception and reduction of assets by enhancing efficiency of our
supply chain.
(iii) Thorough risk management
In the short term, we will understand the impact of fluctuations in exchange rates and economic
conditions in a timely manner to conduct efficient risk management. In the medium to long term,
we will make such efforts as reviewing prices and production bases and developing products withhigh added value that are less prone to being affected by the external environment, as well as
improving capital adequacy. We will also monitor balance sheets and cash flows for major projects
to ensure thorough risk management after the projects start.
(iv) Enhancement of corporate governance system and emphasis on engagement
Based on the intent of the Corporate Governance Code and Stewardship Code, we will continue
to review our corporate governance system that is appropriate for KHI, striving to improveenterprise value through continuous high-quality dialogue with capital markets.
(Note) 1. Corporate Governance Code: Principles for companies to establish a structure to makedecisions in a transparent, fair, speedy and decisive manner from the standpoint ofdifferent parties such as shareholders and customers, employees and local
communities
2. Stewardship Code: Principles for institutional investors to be responsible as a trustee
to enhance the company's medium- to long-term growth through dialogue(v) Human resource development and respect for diversity
We concentrate our energy on the globalization of human resources, and on such measures as
securing, developing and strengthening human resources who have substantial knowledge andexperience, while handing down engineering and skills to the young generation. We also
encourage more women to pursue a career and provide support for child-rearing, etc. in order toimprove our employees’ work-life balance, and secure a comfortable workplace and employmentof people with disabilities through establishing a special subsidiary to develop workplaces in which
diversity is respected.

– 15 –

The initiatives to be undertaken by each business segment are as follows.
i) Ship & Offshore Structure: Optimize profitability through integrated operations with
Sakaide Works, NACKS and DACKS, perform steady business operations in Kobe Works
including submarine-related operations, and scale down the offshore vessel businessii) Rolling Stock: Rolling Stock: Enhance competitiveness through technologies andproducts that meet customer needs including cutting-edge technological development andnew rolling stock, further enhance system integration capability through strengthening of
human resources, expand stock-type business for maintenance and remodeling, andconstruct a global optimal business execution system including adoption of overseas
production and procurement and effective use of partnershipsiii) Aerospace: Establish a mass production system and develop derivative products for P-1
patrol aircraft and C-2 transport aircraft including repair and component support, boost
production of component parts for the Boeing 787 and respond to needs for derivative
products, and develop and start mass-producing 777-Xiv) Gas Turbine & Machinery: Develop the energy solution business based onhigh-efficiency industrial gas turbines and gas engines, promote overseas operations, andpromote the development of new models of jet engines for commercial aircraft and respondto needs for mass-production of these modelsv) Plant & Infrastructure: Enhance competitiveness through sophistication of existingproducts and achieve early commercialization of new products and technologies, expand theoverseas business to emerging countries and resource-rich countries through strengtheningof overseas partnerships, further enhance engineering capability by strengthening humanresources development, and fully complete the large projectsvi) Motorcycle & Engine: Continue to launch strong, attractive models as expected with the"Kawasaki" brand, achieve the development of strong brands that are rooted in customer
value, further improve our presence in the markets of developed countries which are showing
signs of recovery, further boost the brand power and develop new markets in emerging
countries, and thoroughly enhance the efficiency of consolidation-based managementvii) Precision Machinery: Maintain and increase a high market share in the area of hydraulicexcavation systems while expanding sales of other construction/agricultural machinery
products, enhance our ability to make system proposals and develop and expand overseas
production systems in the robot business, and make continuous efforts toward the future insuch new fields as the medical robot business– 16 –

(9)Trends in Assets and Income(i) Company Group Assets and Income
Unit: billions of yen
Item

The 190th fiscal
year

The 191st fiscal
year

The 192nd fiscal
year

The 193rd fiscal
year (under review)

Orders received

1,369.5

1,455.4

1,712.9

1,693.6

Net sales

1,288.8

1,385.4

1,486.1

1,541.0

Operating income

42.0

72.3

87.2

95.9

Recurring profit

39.3

60.6

84.2

93.2

Net income attributable toowners of parent

30.8

38.6

51.6

46.0

Net income per share (yen)¥18.46¥23.09¥30.89¥27.56

Total assets

1,466.2

1,554.4

1,662.2

1,620.4

Net assets

349.8

376.6

447.9

445.6

(ii) Company Assets and Income
Unit: billions of yen
Item

The 190th fiscal
year

The 191st fiscal
year

The 192nd fiscal
year

The 193rd fiscal
year (under review)

Orders received

1,086.2

1,089.5

1,344.5

1,309.0

Net sales

983.9

1,011.6

1,098.0

1,161.0

Operating income

12.5

36.1

46.4

56.8

Recurring profit

19.4

35.9

55.5

68.5

Net income attributable toowners of parent

17.1

32.0

36.4

30.7

Net income per share (yen)¥10.26¥19.20¥21.81

18.43

Total assets

1,195.1

1,243.5

1,301.1

1,300.7

Net assets

258.4

273.1

294.0

306.8

– 17 –

(10) Major Parent Companies and Subsidiaries(i) Parent Companies
Not applicable.
(ii) Major Subsidiaries

Company name

CapitalThe
Company’s
percentageof equity
participation

Main business

Kawasaki Trading Co., Ltd.

¥600 million

70%

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

Kawasaki Machine Systems, Ltd.

¥350 million

100%

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

NIPPI Corporation¥6,048 million

100%

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

Kawasaki Thermal Engineering
Co., Ltd.

¥1,460 million

83%

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

100%

Design, manufacture, and sale of crushers,
grinders, castings, and other equipment;
design, execution and supervision ofengineering, construction, installation ofmachinery and appliances

EarthTechnica Co., Ltd.

¥1,200 million

Kawasaki Motors Corporation
Japan¥100 million

100%

Sole distributor of motorcycles, personal
water craft ("JET SKI®"), general-purpose
gasoline engines and engine components inJapan

Kawasaki Life Corporation¥400 million

100%

Sale, rental and management of real estate,
insurance agency business and building
management

100%

Sales of motorcycles, ATV, RUV, utility
vehicles, personal water craft "JET SKI®"
and general-purpose gasoline engines in the
U.S and South and Central Americas

U.S.$170 million

100%

Manufacture of ATV, RUV, utility vehicles,
personal water craft "JET SKI®" andgeneral-purpose gasoline engines;
manufacture, servicing and engineering ofrolling stock

Kawasaki Rail Car, Inc.

U.S.$60 million

Note 2

Manufacture, sale, servicing and engineeringof rolling stock

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

U.S.$1 million

Note 3

Sale and service of industrial robots in North
America€64 million

100%

Sales of motorcycles, ATV, RUV, utility
vehicles, personal water craft "JET SKI®"
and general-purpose gasoline engines in
EuropeKawasaki Motors Enterprise(Thailand) Co., Ltd.

1,900 million baht

100%

Manufacture and sale of motorcycles inThailandPT. Kawasaki Motor Indonesia

U.S.$40 million

83%

Manufacture and sale of motorcycles inIndonesia

Kawasaki Motors (Phils.)
Corporation

101 million peso

50%

Manufacture and sale of motorcycles in thePhilippines

Kawasaki Motors Corp., U.S.A.

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

Kawasaki Motors Europe N.V.

U.S.$165 million– 18 –

Company name

Flutek, Ltd.

CapitalThe
Company’s
percentageof equity
participation

Main business

1,310 million won

50%

Manufacture, sale and servicing of hydraulicequipment products for construction
machinery in South Korea(Notes)1.
From this current consolidated fiscal year, the following changes were made in relation to companies classified
as major subsidiaries:
Four companies (KCM Corporation, KCMJ Corporation, Canadian Kawasaki Motors Inc., and Kawasaki Precision
Machinery (UK) Ltd.) were excluded.
2.
Kawasaki Rail Car, Inc. is a wholly-owned subsidiary of Kawasaki Motors Manufacturing Corp., U.S.A.
3.
Kawasaki Robotics (U.S.A.), Inc. is a wholly-owned subsidiary of Kawasaki Motors Corp., U.S.A.
4.
There are 99 consolidated subsidiaries, including 16 companies as major subsidiaries, and there are 20
companies which are accounted for using the equity method.

(iii) Status of Business Combinations
Not applicable.
(11) Company Group’s Main Business and Number of Employees
Segment

Main Business

Number of Employees

Ship & Offshore Structure

Manufacture and sale of ships, etc.

2,569

Rolling Stock

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

3,237

Aerospace

Manufacture and sale of aircraft, etc.

6,161

Gas Turbine & Machinery

Manufacture and sale of jet engines, industrial gas
turbines, prime movers, etc.

4,207

Plant & Infrastructure

Manufacture and sale of industrial machinery,
boilers, environmental equipment, steel structuresand crushing machines, etc.

3,074

Motorcycle & Engine

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

8,669

Precision Machinery

Manufacture and sale of hydraulic components andindustrial robots, etc.

2,873

Others segment

Commerce, brokerage and mediation for sale andorder reception and administration of welfare
facilities, etc.

2,765Company-wide common areas(Head Office Administration Department, Research &Development Department, etc.)

1,050

Total

-

34,605
Japan
25,897
Overseas 8,708(Note) The Company has 15,911 employees (average age: 38.3 years; average years of service: 13.4 years)– 19 –

(12) Company Group’s Principal Offices and Plants(i) The Company
Name and location
Principal
officesHead office

Kobe Head Office, Tokyo Head Office 2 Head Offices

Branches

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

Plants, etc.

(ii) Material Subsidiariesi) Domestic
Company name
Kawasaki Trading Co., Ltd.

Location of principal offices

Location of plants

Kobe / Chiyoda-ku, Tokyo

-

Osaka

-

Kawasaki Machine Systems, Ltd.
NIPPI Corporation

Yokohama

Yokohama / Yamato

Kusatsu / Osaka / Koto-ku, Tokyo

Kusatsu

Chiyoda-ku, Tokyo

YachiyoKawasaki Motors Corporation Japan

Akashi-

Kawasaki Life Corporation

Kobe

-

Kawasaki Thermal Engineering Co., Ltd.
EarthTechnica Co., Ltd.

ii) Overseas
Company nameLocation

Kawasaki Motors Corp., U.S.A.

U.S.

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

U.S.

Kawasaki Rail Car, Inc.

U.S.

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

U.S.

Kawasaki Motors Europe N.V.

The Netherlands

Kawasaki Motors Enterprise (Thailand) Co., Ltd.

ThailandPT. Kawasaki Motor Indonesia

Indonesia

Kawasaki Motors (Phils.) Corporation

Philippines

Flutek, Ltd.

Korea

(13) Principal lenders(Unit: 100 million yen)
Balance of Loans

Lenders

Long term

Short term

Total

Mizuho Bank, Ltd.

40

341

381

Sumitomo Mitsui Banking Corporation

90

124

214

Development Bank of Japan Inc.

163

30

194

Sumitomo Mitsui Trust Bank, Ltd.

150

33

183

Bank of Tokyo-Mitsubishi UFJ, Ltd.

25

99

124

(14) Other important issues concerning the current situation of corporate groups
Not applicable.

– 20 –

2. Status of Shares (as of March 31, 2016)(1) Total number of shares authorized to be issued 3,360,000,000 shares(2) Total number of shares issued

1,670,805,320 shares(including 228,992 shares of treasury stock)(3) Number of shareholders

132,729 persons(4) Major shareholders (top 10)
Shareholders’ investment in the Company
Shareholder name

Number of shares
held

Shareholding ratio

thousand shares%

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

74,6084.4

Mizuho Bank, Ltd.

59,207

3.5

Nippon Life Insurance Company

57,516

3.4

JP Morgan Chaise Bank 380055

57,474

3.4

JFE Steel Corporation

56,174

3.3

Japan Trustee Services Bank, Ltd. (Trust Account)

54,203

3.2

Kawasaki Heavy Industries, Ltd. Kyoueikai

33,9962.0

Sompo Japan Nipponkoa Insurance Inc.

30,577

1.8

Japan Trustee Services Bank, Ltd. (Trust Account 9)30,4101.8

Tokio Marine & Nichido Fire Insurance Co., Ltd.

27,8381.6(Note) The shareholding ratio is calculated after subtracting treasury stock (228,992 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 under review
Not applicable.
(3)

Other important matters concerning share options, etc.
Not applicable.

– 21 –

4. Company Officers(1)

Directors and Corporate Auditors (As of March 31, 2016)
Position

Name

Areas of Responsibility within the Company and othersignificant concurrent positions
President (representative director), Commercial Airplane
Company,
Chairman of The Shipbuilders' Association of Japan
Assistant to the President, in charge of Technology, Sales
and Procurement department, in charge of Ship & Offshore
Structure Company*

President

Shigeru Murayama*

Senior Executive
Vice President

Joji Iki*

Senior Vice
President

Eiji Inoue

President, Plant & Infrastructure Company*

Senior Vice
President

Yoshinori Kanehana

President, Rolling Stock Company*

Senior Vice
President

Munenori Ishikawa

President, Aerospace Company*

Senior Vice
President

Kazuo Hida

President, Precision Machinery Company*

Senior Vice
President

Kenji Tomida

President, Motorcycle & Engine Company*

Senior Vice
President

Toshiyuki Kuyama

President, Gas Turbine & Machinery Company

Senior Vice
President

Kazuo Ota

General Manager, Corporate Planning Division, in chargeof Finance & Accounting and Personnel & Labor
Administration Department

Director

Akio Murakami

Director, ENSEADA INDÚSTRIA NAVAL S.A.

Director (Outside)

Yoshihiko Morita

Outside Corporate Auditor, TOKYO GAS Co., Ltd.

Director (Outside)

Hideki Fukuda

Outside Corporate Auditor, The Senshu Ikeda Bank, Ltd.

Full-Time Corporate
AuditorYuji Murakami

Full-Time Corporate
AuditorTakafumi Shibahara

Corporate Auditor(Outside)

Nobuyuki Fujikake

Corporate Auditor(Outside)

Takashi Torizumi

Attorney at law(Notes) 1. * means a Representative Director.
2. Directors Yoshihiko Morita and Hideki Fukuda and Corporate Auditors Nobuyuki Fujikake andTakashi Torizumi are Independent Officers stipulated by the Tokyo Stock Exchange, Inc. andNagoya Stock Exchange, Inc.
3. Mr. Toshikazu Hayashi, formerly Senior Vice President of KHI, has been appointed as Outside
Corporate Auditor of Kawasaki Kisen Kaisha, Ltd. (“Kawasaki Kisen”), to which Mr. Takashi
Torizumi belonged. Kawasaki Kisen owns a total of 1.03% of the outstanding shares in KHI.
Meanwhile, KHI owns a total of 3.50% of the voting rights of the outstanding shares in Kawasaki
Kisen, which are held by Trust & Custody Services Bank, Ltd. (Kawasaki Heavy Industries, Ltd.
retirement benefit trust account re-entrusted by Mizuho Trust and Banking Co., Ltd.). However,Kawasaki Kisen is not a company of KHI Group. In addition, although Kawasaki Kisen is a business
partner of KHI mainly in ship-related transactions, the annual average transactions between the
Kawasaki Kisen Group and KHI Group for the most recent five fiscal years account for less than 2%of the total annual average sales each for the Kawasaki Kisen Group and KHI Group over thecorresponding period. Consequently, we have determined that there is no issue as regards to the
independence of Mr. Takashi Torizumi and he is therefore suitable as an independent officer.
4. Kyohei Matsuoka, Hiroshi Takata, Minoru Makimura, Shigehiko Kiyama, Directors, and Michio Oka,
Corporate Auditor, resigned during the relevant business year with the conclusion of the 192nd
Ordinary General Meeting of Shareholders.
5. As of April 1, 2016, the Director positions have changed:
Eiji Inoue, formerly Senior Vice President (Representative Director), has become Director,– 22 –

and Yoshinori Kanehana and Munenori Ishikawa, formerly Senior Vice President(Representative Director), have become Senior Executive Vice President (Representative
Director).
6. Yuji Murakami, Corporate Auditor, who has many years of experience with administration andaccounting operations at our company, has substantial knowledge about finance and accounting
matters.

(2)

Executive Officers (as of April 1, 2016)
Position

Name

Areas of Responsibility within the Company

President

Shigeru Murayama

Senior Executive Vice
President

Joji Iki

Assistant to the President, in charge of Technology andSales Department, in charge of Ship & Offshore
Structure Company

Senior Executive Vice
President

Munenori Ishikawa

Assistant to the President, in charge of Production and
Procurement Department, in charge of Aerospace
Company

Senior Executive Vice
President

Yoshinori Kanehana

Assistant to the President

Senior Vice President

Kazuo Hida

President, Precision Machinery Company

Senior Vice President

Kenji Tomida

President, Motorcycle & Engine Company

Toshiyuki Kuyama

President, Gas Turbine & Machinery Company

Kazuo Ota

General Manager, Corporate Planning Division, in chargeof Finance & Accounting and Personnel & Labor
Administration Department

Managing Executive Officer

Ikuhiro Narimatsu

In charge of CSR Division, Legal Division and General
Administration Department, and in charge of outside
activities for Kansai region

Managing Executive Officer

Koji Kadota

General Manager, Corporate Technology Division

Managing Executive Officer

Yoshinori Mochida

President, Ship & Offshore Structure Company

Managing Executive Officer

Makoto Ogawara

President, Rolling Stock Company

Managing Executive Officer

Sukeyuki Namiki

President, Aerospace Company

Managing Executive Officer

Yasuhiko Hashimoto

In charge of promoting automation, General Manager,
Robot Division, Precision Machinery Company

Managing Executive Officer

Tatsuya Watanabe

President, Plant & Infrastructure Company

Executive Officer

Hiroji Iwasaki

General Manager, Business Planning & Control Division,
Rolling Stock Company

Executive Officer

Takeshi Ohata

General Manager, Machinery Division, Gas Turbine &Machinery Company

Executive Officer

Takeshi Asano

General Manager, Marketing & Sales Division andManager, Sales Department 2, Motorcycle & Engine
Company

Executive Officer

Toshiyuki Mimura

General Manager, Planning & Control Division, Plant &Infrastructure Company

Executive Officer

Akio Nekoshima

General Manager, Marketing Division

Executive Officer

Katsuhisa Yamada

General Manager, Gas Turbine Division, Gas Turbine &Machinery Company

Executive Officer

Kenichi Fukushima

General Manager, Personnel & Labor Administration
Division

Executive Officer

Hisashi Yamaji

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

Senior Vice President

Senior Vice President– 23 –

Position

Name

Areas of Responsibility within the Company

Executive Officer

Katsuya Yamamoto

General Manager, Planning & Control Division, Precision
Machinery Company

Executive Officer

Eiichi Harada

Deputy General Manager, Corporate Technology Divisionand Hydrogen Project Development Center

Executive Officer

Kazutoshi Honkawa

Vice President, Aerospace Company and General
Manager, Planning & Control Division

Executive Officer

Yuji Horiuchi

General Manager, Technology Division and staff officer toCorporate Planning Division, Motorcycle & Engine
Company

Executive Officer

Keiji Matsumura

Deputy General Manager, Marketing Division

Executive Officer

Yoshihiro Uetake

General Manager, Manufacturing Division, Aerospace
Company

Executive Officer

Ichiro Kono

Vice President, Ship & Offshore Structure Company

Executive Officer

Akihisa Yamamoto

In charge of technology department, Plant &Infrastructure Company

Executive Officer

Akira MatsufujiVice President, Rolling Stock Company

Executive Officer

Hiroshi Nakatani

Deputy General Manager, Corporate Technology Division
and General Manager, Technical Institute(3)

Compensation to Directors and Corporate Auditors
Directors 16 persons¥663,348 thousand

Corporate Auditors 5 persons¥89,280 thousand

Total 21 persons(Note)(4)¥752,628 thousand (of which ¥39,480 thousand to five Outside
Directors/Corporate Auditors)

The maximum amount of remuneration for the Directors is ¥1,200 million per year (as resolved at the189th Ordinary General Meeting of Shareholders held on June 27, 2012). The maximum amount of
remuneration for the Corporate Auditors is ¥8 million per month (which was resolved at the 170thOrdinary General Meeting of Shareholders held on June 29, 1993).

Outside Officers(i) Concurrent Director positions at other companies and the relationship between
our company and said companies
Not applicable.
(ii)

Concurrent positions held as Outside Officer at other companies and therelationship between our company and said companies
Director Yoshihiko Morita concurrently holds a position as Outside Corporate Auditor of TOKYOGAS Co., Ltd. Our company does not have any important dealing or other special relationship withthe said company.
Director Hideki Fukuda concurrently holds a position as Outside Corporate Auditor of The
Senshu Ikeda Bank, Ltd. Our company does not have any important dealing or other special
relationship with the said company.
(iii) Family relationships with managing officers or executive officers, of the Company
or of specific related business operators of the Company
Not applicable.
(iv) Main activities during the business year
Attendance and comments at Board of Directors Meetings and Board of Corporate
Auditors meetings
Director Yoshihiko Morita attended all of the 16 Board of Directors Meetings held during thebusiness year, and made comments based on his substantial overseas experience and knowledge
as a specialist, acquired in the Japan Bank for International Cooperation and other institutions.

– 24 –

Director Hideki Fukuda attended 13 of 14 Board of Directors Meetings held following his
appointment as Director on June 25, 2015, and mainly made comments based on his substantial
experience in the management of a university corporation and his extensive knowledge andexperience in the manufacturing industry.
Corporate Auditor Nobuyuki Fujikake attended all of the 16 Board of Directors Meetings, and allof the 17 Board of Corporate Auditors meetings held during the business year, and mainly madecomments based on his expert standpoint as an attorney at law.
Corporate Auditor Takashi Torizumi attended all of the 14 Board of Directors Meetings, and allof the 13 Board of Corporate Auditors Meetings held following his appointment as Corporate
Auditor on June 25, 2015. He mainly made comments based on his experience as a corporate
manager.
(v) Overview of provisions in contracts for limitation of liability
The Company has concluded contracts for limitation of liability with Directors Yoshihiko Morita
and Hideki Fukuda and Corporate Auditors Nobuyuki Fujikake and Takashi Torizumi, pursuant to
the provisions of Article 427 Paragraph 1 of the Companies Act. The liability under said contract
shall be limited to either an amount of ¥10 million, or an amount specified by law, whichever ishigher.

5. Accounting Auditor(1)

Accounting Auditor’s Name
KPMG AZSA LLC(2)Accounting Auditors’ Compensation, etc., for the fiscal year under review(i) Compensation, etc. as an accounting auditor for the fiscal year under review¥180,300 thousand(ii) Cash and Other Profits Payable by the Company or its Subsidiaries to the
Accounting Auditors¥226,380 thousand(Notes) 1. The Board of Corporate Auditors verifies the reasonableness of audit plans, audit performance andprogress, and estimate and calculation of compensation regarding its Accounting Auditor inaccordance with the "Practical Guidelines for Cooperation with Accounting Auditors” issued by Japan
Audit & Supervisory Board Members Association. Following such verification, the Board of Corporate
Auditors determines whether it agrees to the amount of compensation and other related costs
payable to the Accounting Auditor.
2. Under the audit agreement between the Company and its Accounting Auditor, compensation foraudits pursuant to the Companies Act and audits pursuant to the Financial Instruments andExchange Act are not separated, and they cannot be separated in a practical way. Consequently,
the above amounts reflect total compensation.
3. Of the Company's material subsidiaries, some overseas subsidiaries have been audited by certified
public accountants or audit corporations (including those who possess equivalent qualifications inforeign countries) other than the Company's Accounting Auditor.

(3)

Details of Non-audit Services
Procedures relating to the confirmation of balances of certain accounts submitted to theauthorities concerned to proceed liquidation of receivables and so forth.

(4)

Policy Regarding Determination of Termination or Nonrenewal of Appointment of
Accounting Auditors
The Board of Corporate Auditors determines matters related to the termination or nonrenewalof appointment of Accounting Auditors by fully taking into consideration the independence orderedby laws and standards etc., and reliability and other conditions regarding the performance of
duties of Accounting Auditors.
When the Board of Corporate Auditors recognizes that the Accounting Auditor faces a difficultyin executing his/her duties or deems it necessary to do so for other reasons, it shall prepare and– 25 –

submit a proposal of termination or nonrenewal of appointment of the Accounting Auditor at a
General Meeting of Shareholders. Moreover, when it judges that the Accounting Auditor has
performed an activity falling under any of the items set forth in Article 340, Paragraph 1 of theCompanies Act, it shall consider whether to terminate the Accounting Auditor's appointment basedon the facts. As a result, if the termination is deemed to be reasonable, it shall terminate the
Accounting Auditor's appointment with the consent of all the Corporate Auditors. In this case, aCorporate Auditor, who is selected by the Board of Corporate Auditors, shall report the said
termination and the reason therefor at the first General Meeting of Shareholders convened after
the termination.
When the Board of Directors recognizes that the Accounting Auditor faces a difficulty in
executing his/her duties or deems it necessary to do so for other reasons, it shall request the Boardof Corporate Auditors to add a proposal of termination or nonrenewal of appointment of the
Accounting Auditor at a General Meeting of Shareholders. The Board of Corporate Auditors shallthen judge the appropriateness of said action and determine the contents of the proposal which is
submitted to the General Meeting of Shareholders.

6. System to ensure that Directors’ execution of duties complies withlaws and the Articles of Incorporation, other systems to ensure proper
execution of business and overview of operation status of such
systems
At the Board of Directors Meeting of May 24, 2006, the Company made a resolution regarding thebasic policies on the establishment of internal control systems pursuant to the Companies Act andconfirmed the status of established internal control systems. Henceforth, whenever there areorganizational changes or changes to internal regulations, resolutions are made at Board of Directors
Meetings with regard to the revision of the basic policies. The details of resolutions regarding the basic
policies as of the end of the fiscal year under review and an overview of the operation status of internal
control systems for the fiscal year under review are as follows:
I. Basic policy for developing a system for internal controls
The KHI Group develops and maintains systems for internal controls to establish systems to ensure
formation of proper organizational structures, development of company rules and regulations,dissemination of information and proper execution of operations. KHI’s management philosophy isindicated in the Group Mission (missions and roles which must be carried out) “Kawasaki, working as
one for the good of the planet” (Enriching lifestyles and helping safeguard the environment: Global
Kawasaki), “Kawasaki Value,” the “The Kawasaki Group Management Principles” and “The Kawasaki
Group Code of Conduct.” KHI strives to improve its internal controls by constantly reviewing them,and in doing so improves the efficiency and lawfulness of company systems which contribute to theGroup’s sound and sustained growth.
More specifically, a resolution was made at the Board of Directors Meeting with respect to theCompany's efforts to establish the following internal control systems and to streamline, maintain, andimprove them based on the above basic policies. Going forward, the Company will continue to review
the details of the said resolution as necessary, taking into account such factors as changes in the
Company’s operating environment.
1. Necessary systems to ensure proper execution of business of the Company(1) Systems to ensure that execution of duties by the Company's Directors and employees arecompliant with laws and the Articles of Incorporation
1) We are thoroughgoing in ensuring compliance with laws and the Articles of Incorporationand other KHI regulations and policies, and bind KHI’s officers (directors and corporate
auditors are collectively called "Officers") and employees: “put an ethics into practice asbusiness person,” “respect individuals and individual rights and prohibit discrimination,”“promote protection of the environment,” “comply with laws and social rules,” and “useproper accounting practices and ensure reliability of financial reports” (hereinafter,“Fundamental Principles of Corporate Ethics") as stipulated in KHI Code of Corporate Ethics.
2) We establish a system to promote measures, with President as the chief executive ofinternal controls and General Manager of each division as the manager in charge of internal
controls, and deliberate and make decisions on policies and measures at the Management– 26 –

Committee and manage the internal control systems in a unified way. We do so based on theroles and responsibilities given to Officers and employees, in order to ensure theappropriateness of business operations by achieving objectives such as effective andefficient business operations, reliable financial reporting, compliance with laws, andsafeguarding of assets.
3) We deliberate and make decisions on policies and measures, under the governance ofPresident, for the Company-wide CSR Committee and the CSR Committee for Business
Divisions (consisting of Officers and other employees) to comply with the "Fundamental
Principles of Corporate Ethics" and to take thoroughgoing compliance initiatives for the KHI
Group (which means the corporate group consisting of the Company and its subsidiaries).
We continue to improve understanding and awareness of compliance through ongoingeducation and training activities for various types of legal compliance and also monitor
operational status.
4) We work to enhance compliance systems by establishing the internal whistleblower system
to report information regarding compliance breaches.
5) Executive Officers who are delegated to execute business operations within an appropriate
scope are appointed at Board of Directors Meetings. And by appointing outside directors(independent officers stipulated in the Regulations of the Tokyo Stock Exchange) who are
independent from the execution of business operations and are not likely to have any
conflict of interest with any general shareholder, the Company enhances the supervisory
and monitoring functions of the Board of Directors for overall management. In addition, by
appointing outside auditors who are not likely to have any conflict of interest with any
general shareholder (independent officers stipulated in the Regulations of the Tokyo Stock
Exchange), the Company ensures the objectivity and neutrality of the managementmonitoring function, and enhances the monitoring function.
6) The Internal Audit Department establishes internal controls over KHI's business audits andfinancial reporting, and carries out evaluation/assessment and reporting thereof to ensure
the execution of duties and the reliability of financial reporting.
(2)

Systems for storage and management of information related to execution of duties by
the Company's Directors
1) Information pertaining to execution of duties by the Company's Directors (meeting minutes,
decision making records and appurtenant materials, account books, account invoices andother information) shall be appropriately stored and managed in accordance with applicableinternal regulations. The information shall be made accessible at any time to Officers andemployees nominated thereby.
2) Confidential information and personal information shall be appropriately stored andmanaged in accordance with internal regulations and enforcement thereof shall be ensured
through such measures as business audits.

(3)
Systems for management of risk of loss of the Company
1) With President as the chief executive of risk management and General Manager of eachdivision as manager in charge of risk management, we grasp the assumed risk in detail, andestablish a risk management system, which is designed to avoid or minimize risk or losses
caused by such risk.
2) With respect to risks pertaining to management strategies, risk analysis and considerationof countermeasures shall be conducted in advance by the concerned divisions in accordancewith applicable internal regulations. Then, deliberations and decision making regarding
those risks shall be carried out at Board of Directors Meetings. In particular, we implement
risk management individually for major projects that have a significant impact on business
operations.
3) As a measure to be taken when a risk becomes evident, we set forth codes of conduct in theevent of emergencies, and also appoint persons in charge of crisis management at eachplace of business to establish the system, which is designed to minimize losses.
4) When a material risk becomes evident, reports are immediately given to President, who isthe chief executive of risk management, in accordance with the reporting route specified inadvance.
5) In particular, in anticipation of the occurrence of disasters, including large-scale
earthquakes and pandemic diseases, we predetermine important operations to which– 27 –

priority should be given to ensure the continuation or recovery of the operations in order tominimize the impact on KHI's business. We also formulate a business continuity plan toshorten the length of time until recovery.
(4)
Systems to ensure efficient execution of duties by the Company's Directors
1) Based on the KHI Group’s role and objectives as articulated in the Kawasaki Group Mission
Statement, we share final goals for the future by setting forth a long-term vision for thewhole group and each business division.
2) To attain the goals set forth in the long-term vision, we have formulated specific actionplans, including the Medium-Term Business Plan and Short-Term Business Plan, and havedetermined goals for each organization, Officer and employee. Furthermore, by conducting
regular reviews of these respective plans and goals, we aim to secure a system that enables
more appropriate and efficient execution of business operations.
3) We have stipulated matters such as division of roles and approval authority in internal
regulations. We have also appointed Executive Officers based on a resolution passed at
Board of Directors Meetings to clarify the Systems for Execution of Business Operations. As
a result of establishing these systems, we aim to efficiently execute business operations ineach business and function area.
4) We have established the Management Committee, which acts as a deliberative organ tosupport the Board of Directors Meetings’ resolutions and President’s decision making, toensure efficient execution of duties by Board Members through discussions at Management
Committees. Furthermore, we hold meetings of Executive Officers Committee, which
consists of all Executive Officers, to ensure familiarity and a common understanding ofmanagement strategies and plans.
5) According to the in-house company system, each business division makes decisions on its
own under delegated authority and responsibility, and executes flexible business operations
to adapt to changes in the environment. We have also established the Company
Management Committee in each Company, and it is led by the Company President who
assumes the ultimate responsibility for execution of duties of company's business
operations.
2. Necessary systems to ensure proper execution of business of KHI Group Companies
We ensure proper execution of business of the KHI Group through efforts to establish thefollowing systems according to business contents, size, region and significance of eachsubsidiary and affiliate (hereinafter, "Group Companies").
(1)
Systems to ensure that execution of duties by Directors and employees of Group
Companies are compliant with laws and the Articles of Incorporation
1) The Company governs internal controls of Group Companies from the perspective of theparent company and establishes a system to ensure the appropriateness of business
operations. It does so by achieving objectives regarding matters such as the effectivenessand efficiency of business operations, reliability of financial reporting, compliance with laws
and safeguarding of assets as a whole group.
2) The Company establishes a system to have the Company-wide CSR Committee deliberate
strategies and policies and measures concerning the "Fundamental Principles of Corporate
Ethics" and compliance as the entire KHI Group, and check operational status.
3) The Company implements controls as shareholders of Group Companies through theexecution of voting rights at the General Meeting of Shareholders, and also carries out
management supervision and monitoring over the operation thereof by dispatching
non-full-time Directors or non-full-time Corporate Auditors, or both (collectively referred toas "Non-Full-Time Officer"), to Group Companies, on an as-needed basis. In addition, we
secure appropriate Group business management systems by establishing a department
which presides over subsidiaries' operation.
4) The Auditing Department, which presides over the Group’s internal audits, ensures theappropriateness of operations and reliability of financial reports through business audits
and assessment of internal controls over financial reporting at Group Companies.
(2)

Systems with regard to reporting to the Company on execution of duties by Directors
and employees of Group Companies– 28 –

1) The Company receives reports regarding the status of execution of duties by Directors ofGroup Companies through a Non-Full-Time Officer who is dispatched thereto.
2) Group Companies regularly report on the status of business operation as a management
report and have discussions in advance with the relevant department of the Company withregard to important matters subject to decision-making on corporate management inaccordance with applicable internal regulations.
(3)Regulations for management of risk of loss of Group Companies and other systems
1) The Company promotes group-wide risk management, striving to prevent or minimize risk
or losses caused by such risk.
2) As a measure to be taken when a risk becomes evident at Group Companies, the Company
instructs Group Companies to formulate crisis handling measures and policies to establish
the crisis management system.
3) When a material risk becomes evident, reports are immediately given to the Company, in
accordance with the reporting route specified in advance.
(4)
Systems to ensure efficient execution of duties by Directors of Group Companies
1) With respect to the management at each Group Company, while respecting the autonomy
thereof, the Company establishes a system in which execution of duties is ensured in a fairand efficient manner by sharing the basic philosophy and vision indicated in the Kawasaki
Group Mission Statement, long-term vision, the Medium-Term Business Plan, and so forth,and clarifying group-wide final goals.
2) The Company instructs Group Companies to establish Approval Regulations to ensure
efficient execution of duties.
3. Necessary matters for the Company's Corporate Auditors to execute duties(1) Policies regarding employees in cases where the Company's Corporate Auditor requests
appointment of employees to assist with his/her duties
We allocate the required staff according to the Corporate Auditors’ requests.
(2) Policies regarding independence of employees who assist with the duties of the Company's
Corporate Auditors from the Company's Directors and matters regarding ensuring efficiency indirections given to employees who assist with the duties of the Company's Corporate Auditors
The employee who assists with the duties of the Corporate Auditor shall follow the
Corporate Auditor’s directions and orders. For personal transfer, personnel performance
evaluation and disciplinary punishment, prior consent of the Board of Corporate Auditors is
required.
(3) Systems for the Company's Directors and employees to report to the Company's Corporate
Auditors and systems for those who receive reports from Directors and employees of Group
Companies to give reports to the Company's Corporate Auditors
1) The Company's Corporate Auditors attend Board of Directors Meetings, the Management
Committee, Executive Officers Committee and company-wide meetings, including
Company-wide CSR Committees and Company-wide Risk Management Committees. At
these meetings, the Company's Directors and employees shall provide the Company's
Board of Corporate Auditors with reports concerning important matters about groupmanagement and business operations, including matters regarding compliance, risk
management and internal controls, and the status of execution of duties.
2) The Company's Directors and employees shall immediately report to the Company's Boardof Corporate Auditors when discovering that there is a risk of the KHI Group sufferingsignificant damage.
3) Directors and employees of Group Companies shall immediately report to the relevant
department of the Company when discovering that there is a risk of the KHI Group sufferingsignificant damage. Upon receiving reports, the said department shall report the details to
the Company's Board of Corporate Auditors.
4) The Company's employees shall, in accordance with applicable internal regulations, reportto the Company's Board of Corporate Auditors regarding the execution of business
operations of the KHI Group by circulation of internal memos.
5) The Company's Auditing Department and Accounting Auditors from time to time report to,and exchange information with the Company's Board of Corporate Auditors regarding thestatus of audits on the KHI Group.

– 29 –

(4) System to ensure that those who give reports described in the preceding Item (3) will not betreated disadvantageously for reason of having made such report
The Company stipulates a provision regarding the prohibition of unfair and unfavorable
treatment of those who give reports described in the preceding Item (3). The Company
also instructs Group Companies to stipulate a provision of the same contents in theircompany regulations.
(5) Policies on prepaid expenses for the execution of the duties of the Company's Corporate
Auditors, or expenses for procedures for repayment and the execution of other relevant duties,
or on debt processing
When the Company's Corporate Auditors request the Company to make prepayment on
execution of duties pursuant to the Companies Act, the Company shall promptly proceedwith payment of appropriate expenses and debt settlement, except where the expense or
debt whose payment is requested is deemed unnecessary to execute their duties.
(6) Other systems to ensure the effective conduct of audits by the Company's Corporate Auditors
1) The Company's Directors and Corporate Auditors regularly hold meetings to ensure mutual
understanding, and the Company's Corporate Auditors also attend important meetings suchas Board of Directors Meeting and Management Committee meeting, and directly express
their opinion regarding execution of duties by the Company's Directors.
2) The Company's Directors and Group Companies' Directors promote collaboration between
the Company's Corporate Auditors, the Company's Auditing Department and Group
Companies' Corporate Auditors, and cooperate to establish systems which enable greater
effectiveness in the conduct of audits.
3) The Company and Group Companies obtain the consent of the Board of Corporate Auditors
or approval of the Board of Corporate Auditors with regard to the election of Corporate
Auditors and their remuneration, and so forth, in accordance with laws and the Articles ofIncorporation.
4) Of Corporate Auditors appointed by the Company, one or more shall have substantial
knowledge about finance and accounting.
4. System regarding expulsion of anti-social forces
Because our Group resolutely refuses to comply with any unreasonable demands fromanti-social forces, and works to cut off all relations with anti-social forces, we distribute the“Compliance Guidebook” to all Officers and employees. The Guidebook explains theprohibition of “giving favors to anti-social forces” by listing specific examples of prohibited
acts. We work to ensure that Officers and employees are thoroughly familiar with the matters
contained in the Compliance Guidebook by conducting training, and so forth, and do not
merely distribute the guidebook.
Furthermore, with respect to internal systems, we have established a department in theheadquarters which is responsible for overseeing handling of expulsion of anti-social forces,
established close cooperation with external specialized organizations such as the police force,and in collaboration with the concerned departments, we systematically handle unreasonable
requests from anti-social forces.
II.

Overview of the operation status of internal control systems
An overview of the operation status of internal control systems for the fiscal year under review is asfollows. The said operating status is assessed at the end of every fiscal period and the assessment
results are reported to the Board of Directors Meeting.
1. Efforts on internal control systems in general
1) We set forth the "Fundamental Principles of Corporate Ethics" in KHI Code of Corporate Ethics,
distribute guidebooks that describe the contents of the principles, and conduct various training
programs to ensure that the said principles are thoroughly disseminated.
2) The Company's Audit Department carries out evaluation/assessment of internal controls overbusiness audits and financial reporting for the KHI Group to ensure effectiveness and efficiencyof business operations and reliability of financial reporting.

– 30 –

2. Efforts on compliance1) We establish the Company-wide CSR Committee, which is responsible for deliberating andmaking decisions on policies and measures to promote compliance at a group-wide level andmonitoring the compliance status thereof (performed three times during the fiscal period underreview). The said committee also plays the leading role in the establishment of related internal
regulations, preparation and distribution of the “Compliance Guidebook” (hereinafter, the"Guidebook"), provision of various training programs, and operation of the whistle-blowing
system. In addition, we establish the CSR Committee for Business Divisions and therewith
implement appropriate measures for each business environment through compliance activities
performed by each business division.
2) In an effort to eliminate anti-social forces, we distribute the Guidebook to all Officers andemployees. The Guidebook lists specific examples of prohibited acts. We work to ensure that
Officers and employees are thoroughly familiar with the contents thereof. We also offer training
and education to ensure thorough dissemination.
3. Efforts on risk management
1) We build a risk management system on a company-wide level based on the Risk Management
Regulations. We also prepare a manual to explain the procedures of specific risk management
practices and exhaustively grasp the assumed risks on a scale common to the Group to preventand minimize risk or losses caused by such risk. In addition, we hold Risk Management
Committee meetings on an as-needed basis at both the company-wide level and divisional
level to report and deliberate on determination of material risks, designation of risks to beaddressed, results of risk monitoring and other important matters.
2) For major projects that have a significant impact on business operations, a head office division
conducts risk assessment and considers risk control measures before accepting orders.
Furthermore, upon completion of projects, the said division assesses profitability and conductscausal analysis if the profitability of projects significantly worsens.
In order to respond to drastic changes in the external environment more speedily and properly,
we will strive to further strengthen the risk management system by setting "enhancement ofthorough risk management" as one of the priority measures of "MTBP2016."
3) In anticipation of the occurrence of large-scale disasters and pandemic diseases, we
proactively formulate a business continuity plan for each business division, and conduct annual
assessment and review thereof. We also establish and build a system to minimize losses in casewe suffer damage in disasters.
During the fiscal period under review, we reviewed estimates of damage by disasters in major
areas in Japan, performed disaster prevention drills and BCP drills, and conducted safety
confirmation drills for all the employees.
4. Efforts to ensure efficient execution of duties
1) Based on the company-wide policies and strategies determined with reference to the contentsof the Kawasaki Group Mission Statement, which stipulates the KHI Group’s role and objectives,
we determine the ideal way to be in each business area as well as the medium-term businessplan and the short-term business plan to clearly show our final goals. We also strive to shareobjectives by holding a brief meeting in each business division.
2) We articulate division of roles and approval authority to enhance efficiency of execution ofduties in each business and function area. We also give various types of guidance to Group
Companies to enhance efficiency of execution of duties.
3) We strive to form a common understanding among Directors through thorough deliberation ofimportant management policies, management strategies and management issues at
Management Committee meetings (held 30 times during the fiscal period under review) toensure that Directors efficiently execute duties.
5. Efforts on management of Group Companies
1) We exert group-wide efforts to work on compliance and risk management and successively
develop these systems to overseas Group Companies. In order to ensure further disseminationand familiarization, we will establish and operate the systems according to business contents,
size, region and significance of each Group Company.

– 31 –

2) We carry out management supervision and monitoring over the operation of Group Companies
by dispatching Non-Full-Time Officers to Group Companies to attend meetings of the Board of
Directors thereof. We regularly receive reports on the status of business operation from Group
Companies and have discussions in advance with the relevant department of the Company withregard to important matters subject to decision-making on corporate management inaccordance with applicable internal regulations.
6. Efforts on ensuring appropriateness of audits performed by Corporate Auditors
1) We assign two employees who are dedicated to assist with the duties of the Company's
Corporate Auditor. For personnel transfer, personnel performance evaluation and disciplinary
punishment of these employees, we obtain prior consent of the Board of Corporate Auditors.
2) The Company's Corporate Auditor attends the Company's important meetings. The Company's
Directors and employees provide the Company's Board of Corporate Auditors with reports
concerning important matters about corporate management and business operations as wellas the status of execution of duties through the said meetings, and report to the Company's
Board of Corporate Auditors regarding the execution of business operations by circulation ofinternal memos.
3) We establish regulations that prohibit unfair and unfavorable treatment of those who cooperatewith a Corporate Auditor to perform audits and give reports to a Corporate Auditor pursuant to
the "Basic Policy for the Establishment of Internal Control System." We also instruct Group
Companies to stipulate regulations similar thereto.
4) The Company's Auditing Department and Accounting Auditor regularly hold liaison meetings or
discussions with the Company's Corporate Auditor to exchange information and opinions withhim/her so as to ensure close communication.
During the fiscal period under review, we held liaison meetings/discussions four times with the
Auditing Department and five times with the Accounting Auditor to communicate with theCompany's Corporate Auditor.
5) We establish regulations regarding requests for prepaid expenses incurred for the execution of
the duties of the Company's Corporate Auditor, and so forth.
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~(Note) Amounts in this Business Report are rounded down to the nearest unit.

– 32 –

Consolidated Balance Sheet(As of March 31, 2016)(Unit: million yen)
Description

Amount(Assets)
Current assets

Description

Amount(Liabilities)
1,017,903

Current liabilities

767,711

Cash on hand and in banks

42,157

Trade payables

233,979

Trade receivables

381,339

Electronically recorded obligations

87,798Merchandise and finished products

57,092

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

105,891
10,000Work in process

324,915

Current portion of bonds

Raw materials and supplies

110,956

Current portion of lease obligations

Deferred tax assets

27,275

Income taxes payable

10,889Other current assets

76,743

Deferred tax liabilities

979

Allowance for doubtful receivables(2,578)Advances from customers

170,454

Accrued bonuses

25,138Provision for product warranties

12,642

156

Provision for losses on construction
contracts
Other current liabilities
Fixed assets

7,926
101,854602,554

Net property, plant and equipment

436,557

Buildings and structures

166,345

Long-term liabilities

407,120

Machinery and equipment

128,814

Bonds payable

120,000

Land

64,237Long-term debt, less current portion

160,809

Leased assets

2,192

Lease obligations

1,566

Construction in progress

17,772

Deferred tax liabilities

8,439

Other

57,195

Provision for environmental measures

1,693

Intangible assets

15,475

Liabilities for retirement benefits

90,789Investments and other assets

150,521

Asset retirement obligations

Investments in securities

13,781Other

Long-term loans

337

Total liabilities

650
23,1701,174,832

Deferred tax assets

43,842(Net assets)

Other investments and other assets

102,462

Shareholders’ equity

438,419

Allowance for doubtful receivables(9,902)

Common stock

104,484

Capital surplus

54,394Retained earnings

279,627

Treasury stock
Accumulated other comprehensive income
Net unrealized gains on securities, net tax
Deferred gains (losses) on hedges
Foreign currency translation adjustments(86)(7,051)
2,705
692
8,990

Accumulated adjustment for retirement
benefits
Non-controlling interests
Total net assets
Total assets

1,620,458

Total liabilities and net assets– 33 –(19,439)
14,257445,625
1,620,458

Consolidated Statement of Income(April 1, 2015 - March 31, 2016)(Unit: million yen)
Description

AmountNet sales

1,541,096

Cost of sales

1,253,691

Gross profit

287,405

Selling, general and administrative expenses

191,408

Operating income

95,996

Non-operating income

15,111

Interest income

748

Dividend income

415

Equity in income of non-consolidated subsidiaries andaffiliates

2,876

Gain on sales of fixed assets

3,155

Subsidy income

2,345

Other non-operating income

5,569

Non-operating expenses

17,878Interest expense

3,637

Foreign exchange losses, net

6,532

Other non-operating expenses

7,708

Recurring profit

93,229Extraordinary income

901

Gain on transfer of business

901

Extraordinary losses

19,298Loss on overseas business

19,298

Income before income taxes

74,832

Income taxes-current

20,153

Income taxes-deferred

7,000

Net income

27,15347,678Net income attributable to non-controlling interests
Net income attributable to owners of parent

1,635
46,043– 34 –

Non-consolidated Balance Sheet(As of March 31, 2016)

Description(Assets)
Current assets
Cash on hand and in banks
Notes receivable-trade
Accounts receivable-trade
Raw materials and supplies
Work in process
Advance payments

AmountDescription

783,650
19,2157,227
300,995
83,581
268,972(Liabilities)
Current liabilities
Notes payable-trade
Electronically recorded obligations
Accounts payable-trade
Short-term debt
Current portion of long-term debt

50,560Current portion of bonds

Prepaid expenses

1,423

Deferred tax assets

16,812
11,77018,470
3,762
1,402
(544)

Notes payable-facilities
Electronically recorded
obligations-facilities
Accounts payable-otherAccrued expenses
Income taxes payable
Advances from customers
Deposits received
Accrued bonuses
Provision for product warranties
Provision for losses on construction
contracts
Derivatives liabilities
Other current liabilities

Short-term loans
Accounts receivable-other
Derivatives
Other current assets
Allowance for doubtful receivables

Fixed assets
Net property, plant and equipment
Buildings
Structures
Docks and building berths
Machinery and equipment
Vessels
Aircraft
VehiclesTools, Furniture and fixtures
Land

517,142
311,988
95,586
16,877520
94,768190
51,751
51,17037,305

Leased assets

2,067

Construction in progress

11,745Intangible assets
SoftwareLicense production and licensee’s
execution right
Other intangible assets

Investments and other assets
Investments in securities
Stock of affiliates
Investments in capital of affiliates
Long-term loans

Noncurrent liabilities
Bonds payable, less current portionLong-term debt, less current portion
Lease obligations
Long-term accounts payable-other
Provision for environmental
measures
Employees’ retirement andseverance benefits
Asset retirement obligations
Other long-term liabilities
Total liabilities

11,448
8,407
118
2,922

193,705
11,86999,42137,034
9,663

Deferred tax assets

24,995Long-term prepaid expenses
Long-term derivatives
Other investments and other assets

1,315
1,874
18,530Allowance for doubtful receivables(10,998)

Net assets
Shareholders’ equity
Common stock
Capital surplus
Legal capital surplus
Other capital surplus
Retained earnings
Other retained earnings
Provision for special depreciation
Provision for advanced
depreciation of fixed assets
Retained earnings brought
forwardTreasury stock
Valuation and translation adjustments
Net unrealized gains on securities,
net tax
Deferred gains (losses) on hedges
Total net assets

Total assets

1,300,792

Total liabilities and net assets– 35 –(Unit: million yen)Amount658,362
18,27075,971
187,769
89,14917,421
10,000584
7,859
15,79237,445
5,475
142,144
13,372
17,58010,003
6,479
1,552
1,487

335,531
120,000
160,363
1,552
17,2091,404
34,413552
35993,893304,308
104,484
52,21052,2100147,700
147,700
162
7,674
139,863
(86)
2,590
1,957
633
306,899
1,300,792

Non-consolidated Statement of Income(April 1, 2015 - March 31, 2016)(Unit: million yen)
Description

AmountNet sales

1,161,065

Cost of sales

1,003,694

Gross profit

157,370

Selling, general and administrative expenses

100,550

Operating income

56,819Non-operating income

27,093

Interest income

446

Dividend income

21,583

Subsidy income

2,345

Other non-operating income

2,718

Non-operating expenses

15,396

Interest expense

1,533Interest on bonds

1,076

Foreign exchange losses

5,850

Loss on disposal of fixed assets

1,373

Other non-operating expenses

5,563

Recurring profit

68,517Extraordinary income

1,109Gain on transfer of shares of subsidiaries

1,109

Extraordinary losses

25,220Loss on overseas business

25,220

Income before income taxes

44,406

Income taxes-current

8,012

Income taxes-deferred

5,597

Net income

13,60930,796– 36 –

Board of Corporate Auditors’ audit report (duplicated copy)

Audit Report(English Translation)
Regarding the performance of duties by the Directors for the 193rd fiscal year from April 1, 2015 toMarch 31, 2016, the Board of Corporate Auditors hereby submits its audit report, which has been
prepared upon careful consideration based on the audit report prepared by each Corporate Auditor.
1. Summary of Auditing Methods by the Corporate Auditors and Board of Corporate
Auditors(1) The Board of Corporate Auditors established auditing policies, allocation of duties, and otherrelevant matters, and received reports from each Corporate Auditor regarding his audits and results
thereof, as well as received reports from the Directors, other relevant personnel, and the
Accounting Auditor regarding performance of their duties, and sought explanations as necessary.
(2) Each Corporate Auditor complied with the auditing standards of the Corporate Auditors
established by the Board of Corporate Auditors, followed the auditing policies, allocation of duties,
and other relevant matters, communicated with the Directors, internal control development division,
Auditing Department (internal audit dept.) and other employees, and any other relevant personnel,
as well as making efforts to prepare the environment for information collection and audit, andconducted an audit by the following methods.
i)

Participated in meetings of the Board of Directors and other important meetings, received
reports from the Directors, Executive Officers, employees, and other relevant personnel
regarding performance of their duties, sought explanations as necessary, examined important
authorized documents and associated information, and studied the operations and financial
positions at the head office and principal business offices.
As for subsidiaries, each Corporate Auditor communicated and exchanged information with
Directors, Corporate Auditors, 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 thestructure and operation status of the system for ensuring that the performance of duties by the
Directors, described in the Business Report, conforms to the related laws and regulations andArticles of Incorporation, and the system prepared based on the contents of the resolutions of
the Board of Directors and such resolutions regarding preparation of the system stipulated in
Article 100, Paragraphs 1 and 3, of the Ordinance for Enforcement of the Companies Act(internal control system), which system is necessary for 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 Corporate Auditor received reports from the Directors andother relevant personnel as well as KPMG AZSA LLC regarding the assessment of the internal
controls concerned and the status of auditing thereof, and sought explanations as necessary.
iii) Audited whether the Accounting Auditor maintained their independence and implemented
appropriate audits, as well as received reports from the Accounting Auditor regarding theperformance of their duties and sought explanations as necessary. Also, each Corporate Auditor
received notice from the Accounting Auditor that “the system for ensuring that duties are
performed properly” (matters set forth in each item of Article 131 of the Ordinance for
Corporate Accounting) has been prepared in accordance with 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 other relevant documents, thenon-consolidated financial statements (non-consolidated balance sheet, non-consolidated statement of– 37 –

income, non-consolidated statement of changes in net assets, and non-consolidated notes) and theirannexed specifications, as well as consolidated financial statements (consolidated balance sheet,consolidated statement of income, consolidated statement of changes in net assets, and consolidated
notes) 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 in accordancewith the related laws and regulations and Articles of Incorporation, and fairly represent theCompany’s condition.
(ii) We have found no evidence of wrongful action or material violation of related laws andregulations, nor of any violation with respect to the Articles of Incorporation, related toperformance of duties by the Directors.
(iii) In our opinion, the contents of the resolutions of the Board of Directors related to theinternal controls system are fair and reasonable. In addition, we have found no matters on
which to remark regarding the information contained in this Business Report and theperformance of duties by the Directors related to such internal controls system. In addition,with respect to internal controls over financial reporting, at the time of preparation of thisaudit report, we received report from the directors and other relevant personnel that statesthat the said controls were effective, and also received report from KPMG AZSA LLC thatstates that no material weakness in the said controls.

(2) Results of Audit of Non-consolidated Financial Statements and Supplementary Schedules
In our opinion, the methods and results employed and rendered by KPMG AZSA LLC are fair andreasonable.
(3) Results of Audit of Consolidated Financial Statements
In our opinion, the methods and results employed and rendered by KPMG AZSA LLC are fair andreasonable.

May 20, 2016

Board of Corporate Auditors, Kawasaki Heavy Industries, Ltd.
Full-Time Corporate Auditor
Full-Time Corporate Auditor
Outside Corporate Auditor
Outside Corporate Auditor– 38 –

Yuji Murakami
Takafumi Shibahara
Nobuyuki Fujikake
Takashi Torizumi